Sep. 16: Notes on tracking originations, closing doc scam; Equifax nightmare – sites to freeze your credit

“I got my shades on, top back, rollin’ with the music jacked…” So sang Cole Swindell, possibly about someone of college age. I don’t think that I, in the present, would have rented to me, in the past, in college. And I was relatively responsible! Now that college kids are pretty much back at school, here is a story on the most expensive towns for college student renters.

Disaster ramifications upstream

David Allen Wind contributes, “Dodd Frank may have added more systematic risk than anyone had previously considered, and the latest disasters in Florida and Texas bring that to light. Think about catastrophe bonds, PE firm investment wipeouts, and the mortgage finance business, i.e. Amerihome and Athene. Could catastrophe bond investors be wiped out?

Tracking originations is important

Mat Ishbia, President and CEO, United Shore, sent a note regarding the difference between retail, wholesale, and correspondent originations, and the problem with double counting. (As an example, occasionally people will point out that NAR’s real estate stats appear to count sales AND purchases, thus double counting. The MBA, in its weekly application data, counts only retail applications – the source of the loan.) Explaining the concept that “correspondent” isn’t really a channel or any different than MSR buyers is something that many people may not realize.

“When I see numbers of production for lenders & investors with multiple channels, I always think ‘they didn’t do that many loans’ and it is reported that they do $X Billions which includes retail, wholesale, and correspondent.

“Publications report the numbers as ‘total originations.’ The MBA and others not counting wholesale wouldn’t be correct either, as that is about 15% of the market from my numbers that I use. Your readers should some investors are merely an individual MSR (mortgage servicing rights) buyer, not a huge ‘originator’ in America. Companies that ‘do’ several billion every month through their correspondent channel and much less of retail business are not really gigantic originators.

“The basic concept is that ‘Mortgage Originations’ should not include correspondent loans. (Not that it can’t be tracked, but it is just not relevant for originations.) A correspondent Lender just ‘buys’ a closed loan from a retail or wholesale lender. They often didn’t underwrite, or close the file, or even originate it or fund it. They are the exact same as MSR purchases, but just on a 1 by 1 basis.

Many sell all our originations to Fannie, Freddie, or issue GNMA securities. But many of our smaller competitor lenders will close a loan in retail or wholesale and then sell to an investor such as Penny Mac, Stearns, Freedom, etc. When this happens, that lender receives the credit for the loan in retail or wholesale, and the larger investor receives credit for the same loan in correspondent. This means those loans are counted twice on all the stats. In this example, Penny Mac, Stearns, or Freedom didn’t originate the loan, the smaller lender did and the larger investor is basically just selling it to Fannie on their behalf and servicing it.

“When a loan is eventually funded, it is important to remember who does what in terms of originating & processing the loan, underwriting it, preparing the closing docs and closing the loan, funding the loan, and then servicing the loan. These vary depending on if the institution is a retail lender, wholesale mortgage broker, or correspondent lender/investor. There is very little (or actually nothing) origination-wise that a correspondent lender does, they just buy a closed loan. Correspondent investors still count a loan in their origination numbers, but they didn’t originate the loan. They just bought it from someone that originated it.

“The basic concept is that we are ‘double counting’ many loans in the nationwide production numbers and many lenders are getting credit for big production numbers, that they aren’t really doing anything. Should a big servicing buyer, like NRZ, be receiving the same credit as Penny Mac or Wells Fargo, as they do the same thing but just buy it in bulk a few months later?”

Legal news and Equifax

A recent court ruling said that a law professor’s raise of $666 wasn’t an unconstitutional sign of the devil. The professor alleged Ohio’s Cleveland-Marshall College of Law illegally retaliated against him and his wife because Gelman spearheaded a successful union-organizing campaign among law faculty. They both got “symbolic” $666 raises the following spring – lower than they allegedly should have received based on merit – and Lifter’s employment was terminated a year later. No retaliation, and nothing symbolic, ruled the court.

The employees of Equifax, and 143 million consumers, have had better weeks. The hack is fast turning into a case study about things that can go wrong. Yes, Equifax is a big deal. Rumors of its bankruptcy are premature, but there is fallout. Equifax’s chief information officer, David Webb, and chief security officer, Susan Mauldin, are “retiring,” effective immediately, the company said in a statement Friday evening. The sudden departures come as Equifax has been the target of intense criticism over the lapses in security that led to the hack and the way the company has handled the aftermath. Richard F. Smith, Equifax’s chief executive, apologized for the breach in an op-ed published by USA Today earlier this week. “This is the most humbling moment in our 118-year history,” he said. Do ya think?

The FTC announced an investigation into Equifax’s security breach, an unusual move for the agency since it is a comment on an ongoing investigation. Elizabeth Warren (more on her below) introduced a bill to require credit reporting agencies to freeze a person’s credit for free and would restrict their ability to profitably use that data during the freeze. Chuck Schumer called the security breach “one of the most egregious cases of corporate malfeasance since Enron.” He further said that “the company’s chief executive and board of directors should step down unless they take five steps to correct their mishandling: notify affected consumers, provide free credit monitoring to them for at least 10 years, offer to freeze their credit for up to 10 years, remove forced arbitration clauses from their terms of use, and comply with fines or new standards that come out of investigations.”

It’s not like there’s any suspense – hundreds of lawsuits have been or will be filed. We all know what follows last week’s revelations of a cyber breach at the credit reporting agency Equifax—and that’s lawsuits. Ben Meiselas of L.A.-based Geragos & Geragos, who’s already filed a suit in Oregon, said he anticipates “hundreds of lawsuits” in the wake of a data breach that could affect almost half the U.S. population. Equifax’s handling of the incident, including its delay in disclosing the breach, may compound its exposure, reports Amanda Bronstad. For a moment it even looked like the company was trying to force arbitration agreements on frightened customers who flocked to its site for more information, though Equifax has since insisted the agreement wouldn’t apply to suits over the breach.

Equifax’ ever-growing list of legal problems resulting from a July data breach that exposed over 143 million people’s sensitive personal information. It’s latest legal nightmare might just be this “chatbot” that will help consumers sue the company for up to $25,000.

In the months before revealing a data breach that potentially exposed the personal information of nearly half the adult U.S. population, Equifax lobbied legislators to limit class-action damages.

The credit bureau’s leakage and widely reported missteps in its assessment tool could proffer a cautionary tale for other organizations about incident response.

Senator Elizabeth Warren, Wall Street’s most relentless critic in Congress, wasn’t going to let a good scandal involving a financial company go to waste. She introduced legislation Friday aimed at cracking down on Equifax and giving consumers more control over the data credit companies collect, she said in a statement. The bill, also sponsored by Brian Schatz from Hawaii, would require Equifax and its competitors to freeze consumers’ credit reports free of charge, and restrict their ability to profit from data during the freeze. Consumers would be able to access their credit reports for free, according to the bill.

Warren also sent letters to the Consumer Financial Protection Bureau and the Federal Trade Commission demanding more information about how the regulators are investigating the breach. Warren also wrote to the three main credit reporting companies (Equifax, TransUnion and Experian — seeking answers on how the industry is responding. But with Republicans in control of Congress, Warren’s bill may not go anywhere.

Equifax Inc. has turned to King & Spalding partner Phyllis Sumner to serve as lead defense counsel in more than 70 class actions brought over its massive data breach. Sumner, who’s head of the firm’s data security and privacy practice as well as its in-house chief privacy officer, has defended Equifax in other class actions, Amanda Bronstad reports. The former federal prosecutor has also represented Home Depot Inc. in settlements over its 2014 data breach.

Loan officers, I am sure many of which had their identity stolen, are trying to keep their clients up to date. Clients look to you for help, right? Here are some tips if you or your clients were affected.

In the wake of their hacking attack, Equifax is waiving fees for people who want to put a lock on their credit report. Basically, this allows you to prevent potential lenders from pulling your credit, unless you specifically authorize it. This will help prevent identity theft, however it won’t be completely effective unless you do the same thing at the other two credit reporting agencies: Transunion and Experian. The stock is down 31% since announcing the hack.

How to freeze your credit in a state like California? Here you go:

Dan Stone of The Mortgage Fee Coach writes: “Courts are siding with banks and making homeowners responsible for ANY loan against your property. Credit reporting won’t protect you. Credit locks won’t protect you. Lifelock is NOT enough. Who knows, Equifax might be bankrupt after this breach given their liabilities. A security freeze offers the maximum protection available:

This is a race measured in minutes, it’s you against hackers and their auto bots.”

Switching legal story gears, the U.S. Attorney filed a civil damage complaint against former Deutsche Bank subprime executive Paul Mangione, accusing the trader of fraud regarding the sale of two subprime MBS deals dating back to 2007. According to the complaint, Mangione misled investors as part of a scheme to sell a $1 billion MBS deal and then a $400 million one by providing misleading information about the quality of the collateral.

Regarding this development, Mark W. raises some questions in a note about the Deutsche Bank trader article. below. “I don’t know the guy, but let’s say the guy did what he is accused of. What about the due diligence firms? What about the underwriters and QC firm executives? What about the originators and managers of the loans originated? What about the mortgage insurance executives if some of the loans were insured? The loans had to pass through many hands; and as you know, the loans are on an excel spreadsheet with the loan data. I guess somebody must be the fall guy? And ten years later? How many executives currently in charge of loan portfolios will resign after seeing a civil suit like this? When does the government stop looking backwards? Is there a statute of limitations on anything mortgage related? It sure makes you think twice about doing mandatory bulk loan sales in the secondary market!”

For some reason I, and apparently others, are receiving more and more “legal and closing documents” which are a scam despite not being involved in any transactions involving legal and closing documents. Kevin K. with BiCoastal Consulting sent, “With recent headlines on Equifax, I have noticed emails to me from ‘Title’ companies, with PDF attachments regarding closing statements for review. FYI, I am not an originator, although I once was. Also, the email address is not correct. It is my thought that I am not alone, and word should get out to LOs and operation staff. I know we do not need one more thing to watch out for, but given the PII data, we are prime targets.”

During the wedding rehearsal, the groom approached the pastor with an unusual offer. “Look, I’ll give you $100 if you’ll change the wedding vows. When you get to me and the part where I’m to promise to ‘love, honor and obey’ and ‘forsaking all others, be faithful to her forever,’ I’d appreciate it if you’d just leave that part out.”

He passed the clergyman the cash and walked away satisfied. The wedding day arrives, and the bride and groom have moved to that part of the ceremony where the vows are exchanged. When it comes time for the groom’s vows, the pastor looks the young man in the eye and says, “Will you promise to obey her every command and wish, serve her breakfast in bed every morning of your life, as long as you both shall live?”

The groom gulped and looked around, and said in a tiny voice, “Yes.”

The groom leaned toward the pastor and hissed, “I thought we had a deal.”

The pastor put the $100 into his hand and whispered back, “She made me a much better offer.”

Visit 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, “Will User Names and Passwords Go the Way of Thermal Fax Paper?” If you have both the time and 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.


(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to Copyright 2017 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