Oct. 22: Notes on HR 2121, appraiser trainees; IRS delays Secure Access and tells us what defines being “married”

Lenders are always concerned about risk, and given that it is football season, attorney David Stein helped me remember a pretty clever quote. “During the MBA Risk Conference, when discussing board governance and risk controls, it came up to ‘make the decisions that Woody Hayes would make. He said that when you throw the ball, three things can happen and two of them are bad. That’s why he always ran it up the middle.’ A risk adverse Board should be engaging in that very thought process.” Thanks David!


The appraisal issues that some parts of the nation are having may subside if volumes drop, but some systemic issues will remain unless fixed. Anthony Blackburn, the CEO of Apple Appraisal, Inc., sent, “Lenders and Investors are part of the solution, but in large part, are not interested in the easiest way, which would be to allow Trainee Appraisers to sign reports without the Supervisor inspecting. FNMA, USPAP, and State Licensing agencies allow this already, but the vast majority of Lenders do not.”


There isn’t much happening with HR 2121 (“SAFE Transitional Licensing Act of 2015”) right now, although there is talk of working toward possible movement in the Senate during the lame duck session with the Banking Committee & other engaged individual senators. Heck, the fact that the title contains “2015” and we’re wrapping up 2016 should tell you something. The MBA supports the bill, but universal backing of all aspects by residential lenders is lacking.


This note from Texas. “I will give my 2 cents on the HR2121. The idea of the bill is good, however, it has many holes that are not addressed. I personally know three loan officers who are working for an FDIC lender that cannot get licensed in TX, and I personally do not think there anyone trying to take advantage of the consumer during this time. I have no issues with a loan officers originating loans during this period. But here is my biggest issue with the NMLS system and processes. I am a licensed RMLO and just made a lateral move as did my staff.  During the time it took for the state to re-approve the loan officers to work at the new company they are not allowed to originate loans and most companies do not give them access to email/systems to enforce this. I cannot speak for all other states, but TX can run 48 hours to 15 days depending on time of year. This is putting an originator in position not originate any business.”


From Missouri came, “I have written about this before and am a bit irritated by anyone who thinks that this bill is a shortcut for the large mortgage bankers that want to burn and churn through originations. As a bank employee, I did become, in fact, licensed in the state of MO/KS, as I was interested in moving to a ‘non’ bank entity. After further consideration, I chose not to make the change to the non-bank entity. Therefore, the state would not issue me a license even though I paid for and completed the required education, and passed the test.


“It makes no sense to me why an MLO that works for a company that is owned by a bank cannot take the education, pass the test, and become licensed. I paid the price for the courses as well as the tests and passed. On the flip side, I ‘save” many deals from large banks as those types of ‘bank employees’ sometimes do not provide the level of service as most because many are paid a salary and seem to have an, ‘I don’t care attitude.’ This has nothing to do with the fact that they are not ‘licensed.’


“The test required for licensing has nothing to do with the knowledge of getting a home loan from origination to close. It is based on the ins and outs of HMDA, RESPA, REG B, C, the SAFE Act, and so on. True, this is knowledge every MLO should have and will I assure anyone who thinks otherwise that the 20 hours of courses and testing the bank owned companies require is all about these regulations. But it still doesn’t mean that MLO from a depository bank can get the deal closed because they didn’t realize, ‘hey take the husband off title, refinance the truck in his name only, and BOOM we can close the loan in the wife’s name.’


“I would suggest that the level of service and responsibility from a state regulated licensee is much higher than an employee of a bank, mostly due to the requirements of being a licensee. If we truly want to even the playing field, the MLOs in the bank should be fully licensed and regulated as are the state licensees. Licensed MLOs use their licensure as a sales pitch, which is really irrelevant, because I bet if you asked any licensed MLO when the SAFE Act went into effect, or what Reg. X is, they would not know the answer. And by the way…these are questions on the test! And I assure you 50% of them would not know how to analyze a self-employed borrower.”


And I received this note from Mark K. “Having joined the circus (aka ‘mortgage industry’) in 1985 I’ve seen quite a few changes over the years. Texas born, reared, and stayed….my career includes the time period when Texas began licensing mortgage brokers and LOs in 1999. (Well, they used to be call that anyway until the SAFE Act passed in 2008). I migrated out of retail origination in 2000, as I thought the grass to be greener in the TPO & correspondent lending sector.


“I witnessed first-hand the apathy – and yes, that’s the kindest word to apply here – of the retail mortgage broker community as the feeding frenzy of 2002-2007 took place. Texas required 15 hours of CE every 2 years, and that was it. The vast majority of states, however, had zero licensing requirements whatsoever, with the exception being the ‘pilot program’ that was underway by 12-13 states (in the Northeast primarily) where all members of the CSBS/AARMR were sharing licensing information amongst themselves. That pilot ultimately became the NMLSR when Congress passed the SAFE Act of 2008, did away with the term ‘mortgage broker,’ and segregated the industry into ‘Federally registered’ or ‘State licensed.’


“I referred to ‘apathy’ above. The mortgage broker community nationwide chose (?) to ignore the most fundamental rule of politics: ‘You either act or you are acted upon.’ And yes, I know there were those few that tried valiantly to sound the alarms (NAMB). Yet their pleas fell on deaf ears. Apathy, ignorance…or, more likely, greed was driving the bus. Education? Contribute to a PAC? Join the association?  Seriously? ‘Excuse me, but I’ve got a refi to get closed and 106.00 to make on this deal. I ain’t got time for no advocacy!’


“And now, here we are. Education, testing and CE hours annually are the law for state-licensed originators. Federally registered RMLOs have zero such requirements. And yes, I work for a state chartered, FDIC insured community bank. Therefore, our RMLOs are registered, along with a number of other personnel that have nothing to do with mortgage originations. But as Bill Kidwell pointed out recently, it’s relatively inexpensive to register said personnel – especially when compared to possibly violating the law by helping a bank customer spell ‘mortgage.’


“Personally, I have to agree with the assessment that the idea that small shop owners and originators support the aspect of the bill that allows federally registered MLOs to conduct business prior to proving they have met the same education and financial requirements of the SAFE Act that over 135,000 others have is simply not representative of the broader section of the segment. If anything, this is an attempt by the larger (i.e., deep pocketed) lenders to alter the existing law to their benefit, and immediately bring on board registered originators and have them immediately be able to produce. But the SAFE Act doesn’t allow the registered originator(s) to jump ship, land, and produce immediately.


“So, why the need/desire to water down the existing legislation? It makes no sense and doesn’t pass the smell test any more than saying the CFPB is here to protect consumers. H.R. 2121 is simply special interest legislation and clearly important to the larger entities. If anyone is serious about advancing the education standards, professionalism and overall public perception of its members, they should propose or support legislation that makes the Federally Registered MLOs adhere to the testing and education requirements of the state-licensed originators. Wouldn’t that accomplish the same outcome as H.R. 2121, and ultimately provide lower barriers to those poor, starving Fed LOs that can’t come over to ‘the dark side’ without someone/some entity greasing the skids for them?”


Shifting gears entirely to everyone’s friend the Internal Revenue Service, the IRS has issued final regulations clarifying the definitions of “spouse,” “husband,” “wife,” and “husband and wife” for federal tax purposes. The final regulations now define “spouse,” “husband” and “wife” as any individual lawfully married to another individual, and “husband and wife” as any two individuals lawfully married to each other, regardless of the individuals’ sex.


Late last week the IRS announced a delay to its pending changes to the Secure Access program, which governs the process by which tax transcripts are provided to the mortgage industry. The changes had been scheduled to take effect on October 24, but no new implementation date has been announced. MBA welcomes this delay to permit time for industry to collaborate with the IRS on the proposed changes.


Prior to that, the changes slated for October 24 were attracting a lot of attention worth noting here, and worth seeing the reason for the delay. For example, NCS had sent a memo out to clients. “The IRS is making changes again to the IVES program, used to access IRS tax transcripts with a 4506-T. As a reminder, in late June, the IRS introduced a three step security initiative with deadlines ranging from immediate to 45 days. After significant pressure was applied to the IRS by industry participants such as NCS, two of the three provisions were delayed. ‘Many of the IRS’ objectives within that initiative were laudable,’ said NCS’ Executive Vice President, Curtis Knuth.  ‘It was the timelines that were unreasonable. The shortness of the enactment period placed significant stress and cost to enact upon the mortgage lending community.’


(Remember, this was prior to the announcement of the delay so one can see the reasons for the delay.) “Unfortunately, IVES participants and lenders are right back in the same position. On September 22nd, and in a late response to a two year old Executive Order from President Obama, the IRS is again instituting a policy with huge impact upon IVES participants and lenders. And again, it has established an unreasonable 30-day enactment period. There is a significant risk that a disruption in retrieving tax transcripts from the IRS will occur beginning October 24th. So what is exactly happening?  The IRS is inserting their Secure Access protocol into the interface IVES participants use to retrieve tax transcripts.  As part of a multi-factor credentialing process, IVES participants must re-register their e-Services account and provide their cell phone number.  When re-accessing e-Services, a SMS text message is sent to the cell phone, which then is entered as part of the login process.  This occurs with each e-Services login attempt.


“The underlying issue is that the IVES program is engineered by the IRS for individuals accessing tax transcript data. This is not, however, how IVES participants use it. They access e-Services as part of a system-to-system interface. SMS text messaging doesn’t work for a system-to-system transaction. It’s a typical round peg, square hole dilemma, and the worst part is that the IRS has no budget to redesign and implement a new program.” Rollout delayed.



Why the English Language is hard to learn: The bandage was wound around the wound. The farm was used to produce produce. The dump was so full that it had to refuse more refuse. We must polish the Polish furniture. He could lead if he could get the lead out. The soldier decided to desert his dessert in the desert. Since there is no time like the present, he thought it was time to present the present. The bass was painted on the head of the bass drum. When shot at, the dove dove into the bushes. I did not object to the object. The insurance was invalid for the invalid. There was a row among the oarsman about how to row. They were too close to the door to close it. The buck does certain things when does are present.   



(Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job 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