Sep. 12: CFPB’s VA lender settlements & other compliance notes; Saturday Spotlight: Academy Mortgage

Political news isn’t confined to the presidential candidates, of course, or even Washington DC. Out in California, Gavin Newsome’s (D) real estate and mortgage moves are attracting scrutiny. Three thousand miles, and one political party, away, Maryland’s Larry Hogan (R) has raised some eyebrows with certain dealings. Even decades ago, my Mom would wonder, “Who in their right mind would want to run for public office?” Many who enter politics have a legal background. Thursday, which trying to scoot Myrtle out of the bathroom sink, I broke a mirror in my house and got seven years of bad luck. But my lawyer thinks she can get me five. There’s a chunk of legal, compliance, URLA, and RESPA news below.

Saturday Company Spotlight

This week we highlight Academy Mortgage, “where Purpose and People will always be as important as our ability to produce profit.”

   

Describe your company. Academy Mortgage has been serving the home financing needs of homebuyers and real estate partners nationwide since 1988. In 2020, we are on target to help a record number of individuals and families achieve homeownership—which is our true measure of success—thanks to the hard work, sacrifice, and dedication of Academy’s 2,000+ team members across the United States. Innovative technology developments and the addition of hundreds of new team members have contributed to our growth.

 

Academy was built on a vision to Inspire Hope, Deliver Dreams, and Build Prosperity. It’s our company’s mission to serve and lift others, whether by helping families achieve homeownership or by donating our time, talents, and resources to assist those in need. 

 

What type of volunteer work are employees encouraged to engage in? Through a unique employee benefit, full-time employees receive 30 hours and part-time employees receive 15 hours for volunteer work in their communities. Team members have logged more than 5,000 hours serving causes and organizations that are important to them.

Our President’s Club qualifiers (highest-producing Loan Officers and managers) are rewarded with Cultural and Service Expeditions to expand their worldview and offer help to communities in need. In addition, all Academy team members may participate in employee-sponsored Service Expeditions through The Academy Corps. More than 1,200 Academy volunteers and their families have participated in community-enhancing projects in Guatemala, Hungary, Peru, South Africa, and Ecuador.

When the COVID-19 pandemic hit, Academy looked for ways to serve amidst the hardships and uncertainty. The Help Inspire Hope Campaign was launched as an opportunity for Academy teams to make a difference in our communities by boosting morale, uplifting spirits, and spreading positivity.

 

For one delicious campaign initiative, team members baked and shared 50,000+ cookies among neighbors, friends, and people most impacted by the COVID-19 pandemic, like healthcare workers and homeless shelters. The “Caring Is Sharing” Campaign united team members who were working remotely and maintained Academy’s culture of service.

 

What does your company do to help elevate your employees’ growth? Academy invests significant time, energy, and financial resources into our People to help them reach their Potential in their personal and professional lives.

 

To supplement daily coaching and mentoring, Academy has furthered the careers of thousands of team members through our professional development programs, including: Leadership Academy, an MBA-style 12-month certificate program to develop the mortgage leaders of tomorrow; the Torch Bearer Productivity Program, a 3-month course of individual and group coaching which has resulted in nearly half of the participants more than doubling their production; and our annual Leadership Summit, where company leaders attend educational workshops and learn from inspirational speakers of various professional backgrounds.

 

Fun fact about Academy Mortgage? With our President’s Club, we’ve scaled the Great Wall of China, toured the Colosseum in Rome, explored Machu Picchu in Peru, and if not for COVID-19, we would have checked the Taj Mahal in India off the 7 New Wonders of the World list.

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

Lest I forget…

Congratulations to the former CEO of The Money Source, Darius Mirshahzadeh and the worldwide release of his new book, The Core Value Equation.  As Mirshahzadeh puts it, “Sorry, this is not about a book about culture. This is a best practices book on high growth scale.” Mirshahzadeh has major endorsements from Tony Hsieh of Zappos.com fame, Chip Conley, as well as a glowing book review from Kirkus. Who knew a mortgage CEO could actually write! The book is a playbook for high growth organizations who want to operationalize their values and supercharge their strategy and results. Most notably The Core Value Equation teaches leaders how to leverage their core values for three high values takeaways: To create the ultimate decision making engine for their company; to create an “invisible manager” that sits at the desk of every team member of the organization; and lastly to create a magnet for top talent in which companies are able to attract people to their organization that they typically would not be able to hire. The Core Value Equation’s worldwide release is September 15th, 2020 and it is available at the following link for purchase.

Fraud prevention, compliance in processing, RESPA… are we having fun yet?

Attorney Brian Levy writes, “As I have noted in previous Musings, the courts (specifically the DC Circuit in the PHH case) have already been crystal clear that the CFPB’s RESPA interpretations were wrong.” (To subscribe to Brian’s monthly piece on compliance, and legal issues, click here.)

Despite fraud risk having decreased 22.6% year over year in Q2 2020, according to the CoreLogic Mortgage Fraud Trends Report, mortgage firms are facing a whole new cycle of mortgage fraud activity in light of the COVID-19 pandemic.

Matchbox LLC reminded the industry, “In the midst of the chaos that has been 2019-2020, you may have missed that the conversion of the mortgage application process is finally happening in 2021. Although it has been kicked down the road twice already, we believe that this time URLA is coming for real, and we are only a few short months away from its debut.

“We know many of you have been ‘heads down’ focusing on the myriad challenges that this year has posed, but it is time to add yet another item to the list because we believe that URLA’s entrance has the potential to be more impactful than all of 2020’s headwinds. On the surface, it may not appear to be a large-scale change, but when you dig deeper, it is one that affects your clients, members, and each part of your supply chain.

“In working with many clients on this prescient transition, we have found a lack of true understanding when it comes to the complexity and breadth of the upcoming changes. For example, a new application process requires borrower education, updating your POS, full conversion of your LOS, AUS, and disclosures, and up-front borrower interaction. And that is just the beginning – your Processing, Underwriting, Closing, Post-Closing, Secondary, Compliance, and IT departments all will be affected by this change.

“There is also a misconception that the URLA launch will be fully supported by technology vendors, and while some of it will be, there are multiple layers to ensuring your tech stack is updated and tested, your staff is adequately trained amidst supporting a pre-URLA and post-URLA pipeline. matchbox has been diligently preparing for the URLA conversion for over a year, and we have dedicated team members that are focused on supporting clients through this transition. If you have put URLA on the back burner, it is time to re-arrange your stovetop.”

Lenders Compliance Group recently published some insight into how financial institutions should evaluate management oversight from a self-assessment point of view (https://mortgage-faqs.blogspot.com/2020/09/management-oversight-evaluation-methods.html). The piece focused on two main points: what evaluation of management oversight should consider, and what questions should be asked as part of a self-assessment.

 

The first point has been a problem since the start of civilization: how to control persons in positions of power whose actions may lead to abuse of authority. Management oversight is how a financial institution determines that strategic policies and objectives are being met through an evaluation of policies, plans, programs, and projects carried out by people charged with the authority to achieve expected results. Some important considerations include the extent of board oversight and involvement in assuring compliance with consumer protection and fair lending laws and regulations, training of directors and senior management regarding compliance and fair lending issues, rationale for implementing new policies or procedures or modifying existing ones, consideration of new loan or deposit products, new software or software vendors, and third parties for compliance audits.

 

Regarding the second point, asking the right questions is the key to getting useful answers when it comes to a self-assessment. Compliance should be the cornerstone of the review. Consider some of the following questions. What is the business strategy, and the compliance implications of that strategy? What particular compliance-related area(s) does management feel are weak or in need of review? Has management allocated the appropriate level of resources to compliance? Has management ensured that the compliance officer(s) and/or compliance committee has/have the level of authority and accountability to effectively administer the institution’s compliance management program?

Mortgage Quality Management and Research recently released blog posts on several compliance hot topics, from everything from FHA waivers to HUD third-party relationships, and borrower authorization forms. I’ll summarize some below, most of which is a pay grade above my simple capital markets background.

 

The FHA issued a temporary waiver of its loan-level quality control (QC) requirements for early payment defaults (EPDs). The waiver suspends a mortgage lender’s requirement to select and perform QC reviews of all EPDs for May, June, and July 2020 QC selections. FHA explained that it observed a significant increase in EPDs nationwide and believes that they are likely caused by loss of employment and/or income due to the public health emergency, rather than a result of non-compliance with FHA Single Family origination and underwriting requirements. Additionally, FHA noted that the federal CARES Act authorizes forbearance relief regardless of delinquency status, which may also cause EPDs.

 

HUD cited some FHA Approved Mortgagees for the use of a Borrower’s Authorization form with an expiration date. HUD has cited many lenders recently for the Borrower Certification expiring ninety (90) days after its execution. HUD requires a Borrower’s Authorization for Use of Information Protected under the Privacy Act with the required FHA consent language, signed and dated as indicated in Chapter II A D 1 (a) of the HUD Handbook 4000.1. It appears to be HUD’s position that a Borrower’s Authorization form with a specific expiration date (e.g. 90 days) is not aligned with the intended use of the document, which should not have an expiration date. Rather, the required consent language must survive past the origination and closing of the loan.

 

It’s been a busy time for HUD. The agency made it clear its requirement for Approved Mortgagees to periodically monitor its “affiliates” does include vendors and other third parties. “Affiliates” includes contractors, agents, vendors, sub-servicers, and sponsored third party originators (“TPOs”) who participate in FHA programs on behalf of the FHA-approved Mortgagee. This may include, but is not necessarily limited to, appraisers, appraisal management companies, closing/settlement agents, title insurance companies, and marketing companies producing FHA advertisements.

The Handbook indicates a Mortgagee must ensure its “affiliates” are eligible and properly trained to participate in FHA programs and that they adhere to FHA requirements when performing activities related to the Mortgagee’s FHA business. At a minimum, affiliate monitoring must ensure that affiliates are not ineligible from participating in FHA programs by reviewing affiliates against the (i) Excluded Parties List using the System for Award Management (SAM) website and (ii) the Limited Denial of Participation List. Additionally, at a semi-annual basis, an approved mortgagee must re-verify its affiliates’ compliance with all applicable laws related to licensing, qualification, eligibility, or approval to originate or subservice FHA mortgages. A mortgagee must document the methodology used to review its affiliates, the results of each review, and any corrective actions taken as a result of the review findings. Affiliate review requirements and the procedures adopted to monitor affiliates should also be documented in a mortgagee’s Quality Control Plan.

 

In another Compliance Hot Topic, MQMR addressed how the OCC differentiate between “high risk” and “low risk” third-party relationships, and how the risk management process differs between those two categories. OCC Bulletin 2013-29 defines “high risk” third-party relationships as “critical activities [that] include significant bank functions (e.g., payments, clearing, settlements, and custody) or significant shared services (e.g., information technology) or other activities that: Could cause a bank to face significant risk if the third party fails to meet expectations; Could have significant customer impacts; Require significant investment in resources to implement the third-party relationship and manage the risk; and/or Could have a major impact on bank operations if the bank needs to find an alternate third party or if the outsourced activity has to be brought in-house.”

It is the responsibility of bank management to evaluate the level of risk and complexity of each of its third-party relationships on a continual basis and adjust its risk management practices for each relationship in accordance with this assessment. While the OCC expects banks to perform due diligence and ongoing monitoring for all third-party relationships, the level of this review may differ between “high-risk” and “low-risk” third-party relationships. For low-risk relationships, bank management should follow previously established policies and procedures developed by its Board of Directors for due diligence and ongoing monitoring.

The CFPB announced settlements (see here, here, and here) with three mortgage lenders for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. FCM will never make false claims about offering or providing VA guaranteed mortgage loans, nor will we send out false, misleading, and inaccurate direct-mail advertisements to service members and veterans in violation published rules and regulations.

These companies were alleged to have skirted the rules regarding advertising, credit terms, skipping payments, and claims about being affiliated with the government. Two of the lenders also allegedly used the name of the consumer’s current lender in a misleading way, and misrepresented that consumers would receive specific escrow refund amounts if they refinanced their mortgages, even though the advertised amounts “were calculated using a methodology that had no bearing on the actual escrow refund amount,” and consumers were often required to fund new escrow accounts upon generating new loans.

First world problems (Part 4 of 4)

I can’t find a reason to buy an iPad, I just want one.

My country club makes me wear a mask on the way to the locker room.

I left my Tiffany beer mug in the other room.

The guy at the fast food drive through is starting to recognize me.

Mike C. writes, “I lease a $50k car because I cannot afford to buy a $50k car.”

I’m not busy or important enough to take advantage of all the features on my smartphone.

I ran out of things to look at on the internet, and now I have to do work.

My car lost its new car smell.

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, “The Agency Finance Fee: Delayed but not Forgotten.”

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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 designed 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 2020 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