June 3: Insurance woes; compliance topics & the CFPB finds that different lenders have different rates! Saturday Spotlight: LendingOne

Lenders always have a lot on their plates. In the compliance world (much more below), Attorney Brian Levy is at it again with another Mortgage Musing, this time discussing fair lending enforcement and interpretation in light of a recent Supreme Court decision. How that relates to a baby in a puddle only Levy can explain. In the interest rate world, inflation is still the focus of the Federal Reserve, which is expected to raise rates another .25 percent later this month. Everyone is dealing with narrow margins, but we’re not the only ones. The beef business is operating on tight margins right now, with the price of ground beef up over 20 percent since 2020 to $5.33 a pound. A drought has pushed the price of supplemental feeds like alfalfa and hay up 20 percent year over year, so right now ranchers in the wet parts of the country are doing okay while ranchers in Nebraska, Kansas, Oklahoma, and Texas aren’t. For perspective, in 2022, it cost $698 in operating costs to raise a cow, over $100 more than in 2021, while the profit margin for ranchers is down to a razor-thin $12 per animal. As recently as 2015, that profit margin was nearly $400. Sound familiar?

Saturday Spotlight: LendingOne

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“Thousands of Real Estate Investors and Mortgage Brokers Trust Us Each Year”

In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).

LendingOne was founded in 2014 to help serve the unique needs of real estate investors, mortgage professionals, landlords, developers, and real estate funds. The company is one of the country’s largest and fastest growing national direct private lenders and uses its own capital as well as its extensive real estate experience to provide quick and reliable funding for clients. LendingOne offers a range of loans including DSCR Rental, Fix and Flip, SFR Portfolio, and Fix to Rent.

With the expansion of its Third-Party Originations channel, LendingOne offers mortgage brokers opportunities to increase their revenue and grow their bottom line in the DSCR market. Brokers will have access to fast and reliable funding, flexible loan solutions, competitive compensation and pricing, and an operations team of industry experts dedicated to the wholesale channel.

Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.

Based on LendingOne’s interest and dedication to supporting initiatives focused on affordable housing in Palm Beach County, we actively support Adopt a Family of the Palm Beaches, a nonprofit in South Florida that provides sustainable living to families with children in transition.

Additionally, we engage in quarterly initiatives to give back to our community including the City of Boca Raton Toy Drive and the Boca Helping Hands Food Drive.

What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?

LendingOne offers robust onboarding programs designed to ensure employees’ success from the start. We have a company-wide rotational training program that will allow teams to learn more formally about what other teams are doing across the organization, so everyone can work more effectively together. We also encourage our employees’ personal growth by offering them financial support for those interested in seeking degrees or continuing education opportunities.

Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable.

Company culture is very important at LendingOne. We offer a hybrid working model with the majority of our time being spent in the office together. We developed daily in-person touch-point meetings and encouraged in-person communication as much as possible rather than just relying on tech. When we are remote, we stay in touch using a variety of communication tools and by also maintaining our daily team meetings.

Things you are most proud of that don’t have to do with sales.

LendingOne is proud of how much it has grown over the past decade in business, both for our clients and our employees. Despite the pandemic, we never lost sight of our core company values. Our team remained flexible and adapted in response to market changes. We continued to be loyal and knowledgeable partners committed to providing loans with speed and ease to our customers for an overall successful lending experience.

(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)

Insurance: ugh

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Friday’s Commentary noted that State Farm Insurance had cut off insuring properties in California. “Three thousand miles away, I wonder if Florida home owners should be happy of even having insurance despite it being four times cost of the national average. And good luck insuring anything built near the coast prior to 1992’s Hurricane Andrew.”

The mention prompted Louisiana’s Joe Uzee, President of the Mortgage Lending Division at Gulf Coast Bank & Trust Co., to write, “State Farm hasn’t written new HOI polices in Louisiana for years. What makes the most sense, and I’ve been saying this for years, is to implement a national disaster insurance. If every policy across the USA was assessed $300-$500/year, then that would solve the problem. Regular premiums would go down since natural disasters would be eliminated from regular coverage. Talk about every American helping their fellow man!!! Why didn’t FEMA think of something like this instead of their disastrous Risk Rating 2.0?

“Affordability? 49 percent of the USA cannot afford a mortgage over $250K, yet the average cost to build a new home is $425K. Does anybody in DC understand this? Yet banks are mandated to come up with products to assist LMI borrowers and create products that are not prudent lending. Examples – 100% products over the past several years with potential declining values if we enter into any recession, and now those loans are underwater. Approving borrowers with high DTIs by the skin of their teeth, and now this year are receiving their insurance renewals at 60% increases and now they cannot afford this new escrow payment.”

Compliance notes & CFPB… observation?

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Pete Mills, SVP of Residential Policy and Strategic Industry Engagement with the MBA, shot over a note. “I wanted to add some context to MQMR’s excellent commentary on Saturday about how several state data security/privacy laws have had the GLBA exemptions added to their framework. (Gramm-Leach-Bliley Act.)

“It’s important to note that this provision does not happen ‘naturally.’ Ever since California enacted its first-in-the-nation data privacy/security law, which certainly did not consider the way the industry needs to collect and share consumer information in order to originate and service mortgages, the MBA has led industry efforts to advocate for a model ‘GLBA exemption’ provision to be added to any future state bills that attempt to clone CA’s law.

“The GLBA exemption ensures greater alignment with existing federal standards and across states as they enact their own privacy measures. As with most of our multistate campaigns, we provided the tools to our members and our state and local association partners, and they have been successful in getting these clauses (or language very similar) inserted into these bills. Kudos to our state association partners and MBA members for their on-the-ground work to secure these provisions in the states that MQMR mentioned in its piece. And please, everyone, join your state associations… That’s where this work gets done!”

My cat Myrtle is no fan of the Consumer Finance Protection Bureau. The latest example of why… On May 24, the CFPB reported price dispersion trends in the mortgage industry, finding that, wait for it… borrowers could save at least $100 per month by choosing cheaper lenders. Really? After who knows how much was spent studying this, the CFPB tells us that price dispersion (the difference in interest rates charged by different lenders for the same loan product) is significant in the mortgage market. The CFPB noted several potential factors contributing to price dispersion such as lender differences, competition, and increased demand.

Different prices of gasoline at the same intersection? Different prices of the same refrigerator at different stores? Tell me more! Is it news to anyone that various options provided by lenders may account for different costs and choices made by consumers who may not select the cheapest option due to other factors that outweigh price differences. Data also suggested that competition in the mortgage market does not always translate into lower prices, the Bureau reported, noting that a recent study administered by the Bureau and the FHFA revealed that “most borrowers who recently took out a mortgage responded that they believe they would pay the same price regardless of which lender they choose” and that few borrowers consider more than two options. The data also found that lenders who choose to take on riskier loans may compensate for the risk by charging higher prices.

Switching gears to something relevant, it is critical for mortgage lenders to continuously train staff on the detection and prevention of mortgage fraud. Employees should be familiar with the types of red flags they are likely to encounter when fulfilling their position responsibilities and understand that suspicion of mortgage fraud must always be reported to the Compliance Officer or other designated individuals within the company. MQMR recently wrote a Compliance Hot Topic on useful resources and job aids mortgage lenders can share with their employees to assist in training on how to identify and prevent mortgage fraud.

MQMR went on. There is a wealth of resources mortgage lenders can utilize to assist in training employees in this area. Two key resources include Fannie Mae and Freddie Mac. It would be considered a best practice recommendation for mortgage lenders to require employees to review and familiarize themselves with the following: Fannie Mae Mortgage Fraud Prevention webpage includes a fraud alerts section sharing potential and active mortgage fraud scenarios, as well as a common red flags list and fraud schemes section.  The webpage also provides an explanation of Desktop Underwriter’s potential red flag messages and anti-fraud tutorials. Freddie Mac Fraud Prevention webpage includes a fraud prevention spotlight highlighting specific and current fraud scenarios, as well as a fraud prevention and best practices page.

Jonathan Foxx of Lenders Compliance Group recently wrote on how comparison platforms can cause mortgage advertising, RESPA, and UDAAP violations, as well as what scenario involving a “warm handoff” can impact RESPA section 8. A digital mortgage comparison-shopping platform operator violates RESPA section 8 if its platform provides enhanced placement or otherwise steers consumers to platform participants based on compensation that the platform operator receives from those participants rather than based on neutral criteria. Regarding the warm handoff, the sequence is designed to establish direct contact between a consumer and a particular lender. Through its enforcement activity, the CFPB has identified examples of so-called warm handoff or live transfer activities that lead to RESPA section 8 violations.

MQMR recently wrote a Compliance Hot Topic on lending on a property, and/or to an individual or company that is affiliated with a marijuana operation. It is considered a red flag for your Anti-Money Laundering Program, and potentially requires the filing of a Suspicious Activity Report (SAR) unless the lender incorporates policies, procedures, and internal controls based upon the loan or finance company’s assessment of the money laundering and terrorist financing risks associated with its products and services.

MQMR noted that separately, even though Independent Mortgage Banks (IMBs) don’t handle cash transactions like depositories, that doesn’t mean that they’re not required to file SARs and have an independent audit of their AML program. Known or suspected criminal activity, such as mortgage fraud, may require a SAR filing. IMBs must maintain an anti-money laundering program that designates a compliance officer, provides for on-going training of appropriate persons concerning their responsibilities under the program, and provides for independent testing to monitor and maintain an adequate program, including testing to determine compliance of the company’s agents and brokers with their obligations under the program.

(Warning: PG. Adult subject matter. No complaints please.)

The husband leans over and asks his wife, “Do you remember the first time we had sex together over fifty years ago? We went behind the village tavern where you leaned against the back fence, and I made love to you.”

“Yes,” she replies, “I remember it well.”

“OK,” he says, “How about taking a stroll around there again and we can do it for old time’s sake?”

“Oh Jim, you old devil, that sounds like a crazy, but good idea!”

A police officer sitting in the next booth heard their conversation and, having a chuckle to himself, he thinks to himself, I’ve got to see these two old-timers having sex against a fence.

I’ll just keep an eye on them so there’s no trouble. So, he follows them.

The elderly couple walks haltingly along, leaning on each other for support aided by walking sticks.

Finally, they get to the back of the tavern and make their way to the fence. The old lady lifts her skirt, and the old man drops his trousers.

As she leans against the fence, the old man moves in.

Then suddenly they erupt into the most furious sex that the policeman has ever seen.

This goes on for about ten minutes while both are making loud noises and moaning and screaming.

Finally, they both collapse, panting on the ground.

The policeman is amazed. He thinks he has learned something about life and old age that he didn’t know.

After about half an hour of lying on the ground recovering, the old couple struggles to their feet and puts their clothes back on.

The policeman is still watching and thinks to himself, this is truly amazing, I’ve got to ask them what their secret is.

So, as the couple passes, he says to them, “Excuse me, but that was something else. You must’ve had a fantastic sex life together. Is there some sort of secret to this?”

Shaking, the old man is barely able to reply, “Fifty years ago that wasn’t an electric fence.”

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. STRATMOR’s current blog is titled, “Doing Business with the Agencies: The Golden Ticket?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2023 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)

 

Rob Chrisman