Mar. 25: Legal opinion on LO comp & lead source; vendor news; thoughts on improving revenue; Saturday Spotlight: BEACON
I regret that I didn’t keep the rotary telephone I grew up with, as I suppose they’re collector’s items now. Mortgages aside, technology in other parts of our lives is crazy. Hungry for a bread bowl, but forgot your wallet at home? Panera Bread has you covered. The café chain is piloting Amazon’s palm-scanning technology in St. Louis and hopes to expand the trial to a dozen or more locations over the next few months. Amazon One biometric scanners will be linked to Panera loyalty program accounts and are already in use at Amazon-owned Whole Foods and Amazon Go stores, as well as some stadiums and arenas. How about this: This woman left her Air Pods on a plane. She tracked them to an airport worker’s home. There’s an amazing new tool for voice dictation called Voice In. This is an extension for Google Chrome, so installing it is extremely easy, and it’ll work on Mac, Windows, Linux, etc., as long as you have Chrome. Dictate into pretty much any web page. If you don’t have Word or Office or Open Office or Gmail, you can just dictate into the built-in notepad, and then copy and paste what you’ve dictated into another program. It will understand anyone’s voice, and has the capability to accept voice dictation in 50 languages. Here’s an interesting story about how a TikTok video highlights how to breach a car’s security system and steal it. Lastly, anyone working from home must work at it if you’re going to keep your computer safe. Here are a couple articles from PC Magazine and Microsoft to peruse.
Saturday Spotlight: BEACON PDC
“Property Data Collection, or PDC, represents the future of the valuation industry.”
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).
BEACON is a premier Property Data Collection Service Company. We offer state-of-the-art property data collection for mortgage companies, AMCs, investors, and portfolio needs. We have a nationwide panel of highly skilled and licensed inspectors that have completed their requisite training based on industry-leading requirements, plus all our Property Data Collectors have yearly background checks done. With solutions designed for lenders large and small, from your neighborhood credit unions and your local bank, all the up to large national banks, BEACON is here to support our client’s needs with a deep bench, cutting-edge technology, and a team to bring efficiency and savings to today’s vast array of valuation products.
Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.
We encourage our team members to stay closely connected to their communities. Whether it be through youth sports, volunteering their time (or donations) at local food banks, or supporting their local chapter of the ASPCA, BEACON members are challenged to find ways to help those in need. Even the smallest of gifts can light the way for others to follow.
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?
BEACON is a big advocate in promoting from within. While we’re always looking for new, outside talent, we believe in providing opportunities for growth to existing employees. That’s why we continually sponsor educational opportunities and support attending industry conferences that could benefit our employees, BEACON, and our industry as a whole.
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.
By the very nature of the work BEACON team-members perform, our PDC’ers must be local to their assignments. ‘Remote’ will always be our normal. We do stay connected with video meetings and daily calls. We’re no strangers in utilizing the most up-to-date technology in communicating. Whether home or in the field, we’re always connected … and always communicating.
Things you are most proud of that don’t have to do with sales.
Creating and growing a national panel of highly skilled and motivated PDC’ers with exclusive training in general property data collection as well as specific training on utilizing our property data collection mobile applications. Being in the vanguard as an agent of change that will help elevate the industry’s ability to better serve the public.
Fun fact about BEACON.
“The Lighthouse kept intrepid sailors and mariners safe, for without these BEACONS, the ships would founder.” This is the same motto we live by at BEACON; we are here to help all our AMCs and Lender friends navigate the turbulent waters in the appraisal industry. You can count on BEACON to shine a light on the way forward.
Is there anything else you’d like to share along these lines?
Socrates said: “The secret of change is to focus all of your energy not on fighting the old, but on building the new.” Join us in the fight.
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
Does your perception of your customer’s experience differ from their reality? Secret shopping could give you that answer. In the March issue of STRATMOR Group’s Insights Report, Senior Advisor Brett McCracken explains secret shopping for mortgage lenders in his article, “What a Top-Notch Burger Chain Can Teach the Mortgage Industry About Secret Shopping.” McCracken explores how lenders can implement a secret shopper strategy to build a superior customer experience, and he shares the results of his secret shopping of several mortgage lenders on two common borrower experiences — contact forms and online applications. To find out what mortgage lenders need to know about secret shopping, check out STRATMOR’s March Insights Report by clicking here.
Frank Fiore, President of matchbox LLC, writes, “They say a picture says a thousand words, or 99 BPS based on a recent MBA chart. Based on the latest MBA Profitability report, Independent Mortgage Bankers (IMBs) operated at a loss of $2,812 per loan or 99 basis points in the fourth quarter of 2022. The combination of reduced volume, margin erosion, and production costs pushed IMBs to the highest per loan loss since 2011. The 99 basis points were the highest loss since 2011 and while production costs were the highest since the inception of this report. This is a stark contrast from a recent profit high of $5,500 or 200 bps in the third quarter of 2020. That is a 300-bps swing in profitability per loan.
“How did we get here and what to do in response? There are two sides to the equation. Let’s start with the expense side of the business. This has ramped up over time due to the increased cost of compliance, technology, Labor, marketing, and of course, Loan Office Compensation. Firms have made the difficult choices of cutting hard costs in all areas, including staffing, and eliminating origination channels. But these are not immediate savings; there is a level of short term pain to get long term gain before they hit the bottom line. Contract buy outs, lease buy outs, severance pay all take some time for them to take effect. This process is not easy and a balancing act for a few reasons, but ultimately there are hard costs that can be cut or eliminated to decrease the expense side of the ledger.
“What has not been touched for the most part, is Loan Officer Compensation. This is the highest cost on the expense side and yet rarely ever changed in fear of losing more volume. A few years ago, the talks about there being the time to reduce LO Compensation grew louder and louder, but the reductions were rarely made; and then volume picked up during Covid and those discussions were put on the back burner. They are starting to resurface, and it will be interesting to see if these are the conditions that will actually force the market to change.
“As with any market, there will be outliers who will over pay for market share. These have to be understood in light of the possible risks incurred by matching. Some will justify that it will cost more to replace so it is best to match to keep what you have. This has varied levels of success and some companies regret the match, and others who do not match are able to bring people/teams back for same or less. (Matchbox has assisted many companies with evaluating their current technology expense and compensation landscape and advising on how to manage and adjust in a down market.”
Frank’s note went on. “The income side is a bit more challenging as there are more options, all of which point to your business model, Secondary department, and view on the market. Some are looking to grow their sales force by number of originators, and this is going to come at a cost, even in the short term. Others are looking at various other options for product and margin growth. Most clients are looking to use this time to implement new product offerings: HELOCs, HELOANS, Construction, Rehab, Bridge, Lot, and Non-QM are just some of the new product offerings. Some are utilizing this time to implement new processes such as eClosing and others are looking to build small origination channels, such as Wholesale or Non-Delegated Correspondent with known counterparties.
“Diversification is the most important aspect of income growth in this market. There is no magic formula for an increase in volume or increase in margin in the near future without some new revenue streams added to the mix. You can grow the pie (at a cost) or diversify the pie (and take time to educate, train, and implement), both of which you should be planning or in the process of. (Matchbox is helping many clients by implementing new products both on the Technology, Secondary, Workflow, and Training arenas.)”
Let’s take a random gander at who’s doing what.
LoanCare, LLC, a top U.S. mortgage subservicer, announced the launch of Velocity Servicing™, an independently managed division dedicated to delivering one-stop resolution for credit sensitive mortgage loans by carefully managing the borrower relationship and providing transparency into servicing performance. Utilizing advanced data analytics, Velocity Servicing puts distressed mortgage loans on the path to resolution significantly faster than traditional servicing. By analyzing an intelligent network of triggers, exceptions, and conditions at the loan level, it achieves a consistent return on investment earlier in the process. In addition, the division works with clients on establishing portfolio goals and executing on a loan-by-loan disposition plan. Velocity Servicing can uniquely structure a solution tailored to a homeowner’s situation, helping them understand their options and make decisions at a pace that puts both the homeowner and client at ease. For more information about Velocity Servicing, visit velocity.loancare.com.
Realfinity.io is now offering its white-label platform, HomeDashboard, to lenders, allowing them to deliver property data and mortgage products throughout the entire real estate lifecycle. Homeowners and home buyers need insights into financial property data to manage their real estate and prospect properties to build lifelong wealth. “HomeDashboard leads to higher deal certainty, repeat business and more referrals. Empower your clients to make data-driven decisions using your brand’s HomeDashboard. Let’s chat about what Realfinity can do for you!”
docutech Compliance commonly receive questions regarding the definitions for a citizen, permanent resident and non-permanent resident. In a recent article, docutech Compliance discusses two instances when citizenship is an important factor in the mortgage documentation process, a specific section on the 1003 and when deciding if the buyer should be using a W-9 or a W-8BEN.
MISMO®, the real estate finance industry’s standards organization, released the Implementation Guide for the SMART Doc® Version 3 Verifiable Profile, outlining the requirements needed to create MISMO SMART Docs in PDF format.
Indecomm significantly expanded its eRecording Capability to 1900+ Jurisdictions, announced in a press release. Enhanced eRecording capabilities drastically reduced document recording turnaround times significantly reducing human error, lost documents, and manual paper handling. In some jurisdictions, documents are processing in as little as 12 days. Clients get the added benefit of fixed pricing. Indecomm recording services are available as a standalone solution for lenders or as part of a packaged, comprehensive post-closing service offering, comprising tech-enabled post-closing audits, post-closing package preparation, and trailing document management.
SimpleNexus’ announced that independent retail mortgage banker, Penrith Home Loans, implemented its core product suite to support a single sign-on digital homebuying environment from point-of-thought to post-close. Penrith Home Loans reconfigured its technology infrastructure to better support its production team and its increasingly tech-savvy customers with the help of SimpleNexus. Together, SimpleNexus’ mobile lead engagement toolset, Nexus Engagement™, its ‘from-anywhere’ point-of-sale (POS) product, Nexus Origination™ and its eClosing solution, Nexus Closing™, foster a collaborative, end-to-end digital homebuying experience. A native integration with Penrith Home Loans’ loan origination system (LOS) enables mortgage consultants to manage loans from a single environment rather than having to swap browsers or visit third-party vendors to complete the mortgage process.
LO comp and lead source matters
In loan originator compensation news, I was forwarded this from an MBA member. “The MBA has been contacted by several members recently regarding concerns and confusion about the ability to change a loan’s ‘lead source’ and how that works with the Loan Originator Compensation rule. In some instances, it has been suggested that this is being done in response to competitive market pressures after an application for a loan that has come from a particular channel or lead source.
“We reached out to outside counsel at Orrick to confirm that while there are legitimate instances where a loan’s lead source can change under the rule, changing the lead source solely to meet a competitive offer is likely a violation of the Loan Originator Compensation rule. We recognize that different fact patterns may alter conclusions. The Orrick letter addresses a specific set of circumstances that we understand is creating confusion in the market.”
Jeff Naimon, a Partner at Orrick, Herrington & Sutcliffe LLP sent a letter addressing the “Changing Loan Originator Compensation Due to Pricing Concessions.” “On behalf of the members of the Mortgage Bankers Association, you have asked us to provide an analysis of the permissibility of changing the lead source of a loan after beginning work on the application in order to make a competitive pricing concession. The short answer is that this is not permissible… Various stakeholders have made the CFPB aware, both through formal and informal communication efforts, that the LO Comp Rule could be improved to better address this business concern… The CFPB has not proposed to change the rule or issue new guidance that would allow the loan originator to share with the lender the cost of a pricing concession.”
Attorney Brian Levy noted, “I often get asked about using lead source as a basis for adjusting originator compensation. While that is permissible, it should be done carefully and properly. Simply letting a loan officer choose the lead source to enable pricing concessions through commission reduction is a recipe for problems. This is because the LO Comp Rule not only requires substantive compliance, but its recordkeeping requirements mean the failure to maintain written records demonstrating compliance can also result in a violation.
“So, a mortgage company will need to have records that the lead source of the loan was different from the originator’s usual lead sources if lead source is the basis for changing compensation. Unfortunately, the failure to maintain that evidence can be used to identify an LO Comp violation just as if the lead source was not different.”
(Warning: Trading desk humor.)
I looked out of my living room window yesterday in horror to see a crowd gathered round a crashed motorcyclist.
So, I quickly put on my coat and shoes and rushed outside.
I pushed through the crowds, shouting, “Let me through, let me through!”
I finally managed to reach the front of the crowd.
A woman turned to me and said, “Oh thank goodness, are you a doctor?”
I replied, “No, but that’s my pizza!”
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