June 13: MISMO moves; Housing news; thoughts on BLM; current topics in the compliance world addressed

It has been nearly three months since we began sheltering in place. Fortunately for lenders, things have quieted down from March’s wild ride, both with rate volatility and in program fluctuations. (And hey, don’t forget that it’s Flag Day tomorrow.) Our industry continues to deal with unintended consequences. For example, I received this note from an LO in Virginia. “We had a loan this week: a VA IRRL on a veteran’s primary residence. The borrower’s ex had put a former joint property into forbearance (the ex received the property in the divorce). We couldn’t do the IRRL because the VA’s policy is that no properties are allowed to be in forbearance. I know that VA’s intent is not to hurt the Veteran!” This Circular addresses how going into forbearance works for the veteran’s current loan. FNMA and FHLMC stated as long as the borrower had made 3 consecutive payments since entering forbearance, lenders can do a new loan for the borrower. Does anyone out there know how the VA is looking at new loans for veterans in forbearance on existing or other properties they own?

Economic chatter

I am very skeptical of date-related predictions, but more than two-thirds of economists surveyed by The Wall Street Journal say U.S. economic recovery from the coronavirus pandemic will get underway in the third quarter. We have some catch-up to do. Households’ net worth dropped 5.6% in the first quarter compared with Q4 to a seasonally adjusted $110.79 trillion, according to the Federal Reserve. The drop, the sharpest quarterly one since the early 1950s, reflects the earliest signs of the economic impact of the coronavirus pandemic. A second wave of coronavirus infections would not justify shutting down the US economy again because the adverse consequences could exceed those of the pandemic, Treasury Secretary Steven Mnuchin says. Mnuchin also says improvement in testing and contact tracing, as well as better understanding of how to contain outbreaks, would make a shutdown unnecessary.

It appears that real estate agents have good news for us. Sports seasons have vanished, but there’s always the home buying season. Despite low inventory levels, words & statements like “resilient, “summer housing market will be better than expected,” “multiple offers for lower priced homes,” and “competitive buying market” are being uttered. Brent Nyitray reports, “Lawrence Yun, chief economist of the National Association of Realtors, said, ‘For lower-priced and medium-priced homes, multiple offers will be fairly common. On the luxury end, some price reduction will be required because there’s plentiful inventory.’”

And working from home is impacting builders who are already changing floorplans. And changing house design in general.

MISMO: Catch the Wave!

I saw the announcement from Bob Broeksmit at MBA about changes at MISMO recently and realized that I don’t know a lot about what MISMO does. I asked my cat Myrtle and she didn’t know either, so I reached out to learn more from Mike Fratantoni, who is the Chief Economist at MBA and also the President of MISMO. Dr. Fratantoni reminded me that MBA had invested $2 million in MISMO last year to accelerate the development of new standards. In the last year MISMO issued standards to help industry obtain taxpayer consent for the use of tax transcripts, standards for Remote Online Notarization that have been critical during the COVID crisis, and standards for the consistent drafting of closing instructions to improve communications between lenders and settlement agents. Going forward, MISMO will have the resources to move much more quickly enabling them to further accelerate the evolution of the digital mortgage. Read more about MISMO and the announcement here.

Current events

One interesting aspect of our residential lending business is that we touch, and are impacted by, nearly everything that touches our borrowers. Chrisman LLC’s Anjelica Nixt put it well, and succinctly. “Commentary readers should know that the tragic deaths of George Floyd, Ahmaud Arbery, and Breonna Taylor are heavy on our minds. These devastating calamities of their passing remind us that racism and inequality are still prevalent within our black community. Although we are feeling many different emotions, we know silence isn’t the answer and we will not be complacent. Black Lives Matter. They always have and they always will.”

From out in San Francisco, Bay Equity’s CEO Brett McGovern penned, “The events of the past few weeks are a resounding call for change. The tragic death of George Floyd has raised the consciousness of a nation. We continue to see protests in the streets of our cities, as Americans of all colors and backgrounds speak forcefully for the just cause of racial equality.

“As a company, as a Bay Equity family, it’s important we not be silent. For way too long our communities of color have suffered. Despite our declaration at the nation’s founding ‘that all men are created equal,’ discrimination, social and economic disparity and fear have been a fact of life for so many and for generations. It’s important corporate America be heard. While we do not condone any form of violence, we stand with those who peacefully protest to petition our governments for social justice. We respect, support, and embrace their message of equality for all.

“As a company we talk often of helping people achieve the American Dream of home ownership. Yet for too many in our communities, their elusive American Dream has yet to achieve the basics of dignity and respect. There is now momentum in this nation to make real progress. There’s a groundswell led in large part by young Americans calling for change in attitudes and actions. There are important conversations underway in communities and boardrooms. It’s important we initiate new conversations within our families and neighborhoods about ending the pervasiveness of racism. It’s vital we listen to those seeking justice and learn from their struggles.

Silence is not acceptable. It’s paramount we each find ways to be part of the solution. We must speak up and commit ourselves as a company and individuals to treat all people equally regardless of race, color, religion, national origin, citizenship, gender, sexual orientation, age, or disability. As always, your leadership team is here to listen to your thoughts. Respect. Dignity. Social Justice. In the words of Dr. Martin Luther King, ‘Injustice anywhere is a threat to justice everywhere.’”

And Now for Something Completely Different

Ginger Bell, Education Specialist and Expy Award Winner, sent, “During the past several months, we have come to understand the importance of home, support, family and friends. We have also come to know more about working and playing virtually. Esports is one of those ‘virtual’ sports and surprising to many, people actually get paid to play! So, what does esports and mortgages have in common? Well, a whole lot if you are Equity Prime Mortgage!

“Eddy Perez, the President & CEO of Equity Prime, agreed to sponsor the professional Sanguine Esports team as the official housing sponsor for its 2020/2021 season. The team arrived in the U.S. from Latin America in early March amidst the Coronavirus pandemic and because esports is played online, they have still been able to play and compete. The spring season and it was the Number One team in the league in the SMITE Professional Esports League. Other teams in the league are owned by the likes of the Pittsburgh Steelers, which Sanguine was able to defeat.

“The esports audience, and the first-time home buyer audience, are exactly who we are looking to target” says, EPM President & CEO Eddy Perez. “Plus, the team is LATAM, and based in Atlanta, so it absolutely made sense for us to partner with these talented young men as their housing sponsor.”

“In April alone, the Sanguine team had over one million impressions on Twitter, which opens awareness for homeownership amongst this huge audience,” reports Sanguine Owner, Blaine Bell. Esports has been an emerging market that many brands have been jumping into supporting and now with the coronavirus, it makes sense to look to it to reach potential homeowners. Thank you, Ginger!

Compliance? Yup!

The Compliance Group reminds us that the CFPB is alive and well. And the Consumer Finance Protection Bureau conducts regular audits to ensure that financial institutions come into and maintain compliance with the new mortgage rules. Those rules are according to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and amend several existing regulations, including Regulation Z, X, and B. Our CFPB Readiness Audit Services assist our clients in preparing for this review.

MQM Research provides answers to hot topics in the mortgage space. Recently, management addressed what a mortgage company should do if it issues initial disclosures electronically, but the applicant fails to e-consent and open the package by the 3rd business day following receipt of the application. The short answer is that mortgage companies must have consent from an applicant to issue initial disclosures electronically, per the Electronic Signatures in Global and National Commerce Act (“E-SIGN Act”). Without obtaining the applicant’s consent, then the mortgage company does not comply with the Loan Estimate or Good Faith Estimate delivery requirements, unless the mortgage company also provides the initial disclosures in a different manner that complies with the three (3) business day requirement. For a lengthier summary and tips on how to stay compliant, visit MQMR.


Lenders Compliance Group recently addressed some lender concerns with TRID’s waiting period requirement regarding the coronavirus pandemic being considered a personal financial emergency. Under TRID, creditors generally must deliver or place in the mail the Loan Estimate no later than seven business days before consummation. Consumers must receive the Closing Disclosure no later than three business days before consummation. In the Commentary to the TRID Rule modification and waiver provisions, “The consumer must have a bona fide personal financial emergency that necessitates consummating the credit transaction before the end of the waiting period.”


Lenders Compliance Group recently addressed the difference between a business interruption and pandemic challenges as part of a business continuity plan. LCG provides a free Checklist and Workbook as a way of providing clarity to preserve your business during this pandemic. With regards to clarifying the difference between business and pandemic disruption, there are distinct differences between pandemic planning and traditional business continuity planning.


Lenders Compliance Group provides many free answers to pertinent questions in the mortgage space. They were recently asked about transferring loan officers from their bank registration to become licensed loan officers, and if a transitioning loan officer is considered an employee? It is a little more nuanced than assuming a registered or state-licensed loan originator is given temporary authority to act as a loan originator in a different state if he or she: Has not had an application for a loan originator license denied or a loan originator license revoked or suspended; Has not been subjected to or served with a cease and desist order; Has not been convicted of a misdemeanor or felony that would preclude licensing in the new state; Has submitted an application to be a state-licensed loan originator in the new state; and, if applicable, was registered in the NMLSR as a loan originator during the 1-year period preceding the filing of the new application.


Lenders Compliance Group addressed the unit measurement for calculating APR on reverse mortgages, since many consumers believe it is being disclosed incorrectly. The explanations, equations, and instructions for determining the APR in accordance with the actuarial method are set forth in Appendix J to Regulation Z of the Truth-in-Lending-Act. Appendix J provides that the unit-period for a single advance, single payment transaction, for the purposes of determining the APR, must be the term of the transaction, not to exceed one year. In all other transactions, the unit-period must be the common period that occurs most frequently in the transaction unless an exception applies.


Lenders Compliance Group recently addressed business strategies for making employees feel safe in returning to the office amid the COVID-19 pandemic. The firm has been providing a free Business Continuity Plan Checklist & Workbook, which includes COVID-19 Pandemic Response tips to help you navigate business continuity and the COVID-19 pandemic. It offers numerous suggestions to encourage a safe office environment for returning employees, how provide a consistent, reliable, and sincere approach.

Under ECOA notification requirements, when should a mortgage lender issue a Notice of Incomplete Application? MQMR tells us that a mortgage lender must generally notify an applicant of action taken (i.e. denial, approval, etc.) within 30 days of receiving a completed application. If, however, the application is incomplete regarding matters that the applicant can complete, a mortgage lender has the option of providing a notice of incomplete application (“NOIA”) to the applicant rather than issuing a denial or providing a counteroffer. A mortgage lender must provide the NOIA to the applicant within 30 days of receiving the incomplete application. The NOIA must be written and must include the information needed from the applicant and inform the applicant that failure to provide the information requested within a reasonable provided timeframe will result in no further consideration being given to the application.

Democrats or Republicans… It doesn’t matter. Let’s have some patriotism for tomorrow’s Flag Day. This short video is worth watching, and worth forwarding to the kids or clients.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Reducing Friction”, focused on operations changes. If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.


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Rob Chrisman