Sep. 7: Letters about new LO training, changes in circumstance, float downs; bank mergers & acquisitions continue

“Rob, I have an anecdote for your column. I was in London recently and the Sunday Times Magazine had an advertisement for a mortgage lender on the back page…the ad had a disclaimer that read: ‘Warning: If you fail to make your monthly payments you may lose your home to a loan default.’ Given the nature and extent of the recent foreclosure boom and its resulting litigation, I wonder whether the CFPB may start requiring warning labels for consumers in all US mortgage advertising.”


Whether it is real estate, appraisals, or lending, we have an aging population, with people working well into their 60’s or 70’s. How is a kid going to get a break? “Hi Rob, in past newsletters you mentioned we have an aging industry. I feel our industry fails at being accessible for new talent. Most schools barely teach how to spell ‘mortgage’, and business schools barely mention anything beyond the 2008 debacle. Any graduates who wander into an interview enter an industry filled with acronyms, jargon and regulations even our attorneys can’t agree upon. Even the almighty Google is no help for most of their basic or ‘why’ questions.”


There are some companies (of course I can’t list every one of them) that are doing what they can. And the MBA, of course, has a robust education program. For example, I received this note from Michael Metz with V.I.P. Mortgage in Scottsdale: “Here at VIP Mortgage, we started a training/integration program that takes recent college graduates and trains them ‘on the floor’ towards operations or sales. We find the mortgage industry is a great fit for the various marketing/communication majors who don’t want to Tweet or slave away at SEO all day. Other companies I talk to have little more beyond, ‘You have 30 days to get your license and hit the streets’ for any new sales prospects. While constructing our training program, I found very few resources for people new to the industry. Most schools barely touch upon mortgages, so younger applicants are hesitant to enter an industry they know so little about. Their attempts to Google background information before coming onboard don’t glean much useful information, and we’ve ended up creating all of our own training material because there’s so little out there. I feel our training graduates have been excellent finds; they’re eager and do great work after they receive the training. Do you know of any other companies out there that have a program aiming for new graduates?” (One can contact Mr. Metz at


Other companies, such as RPM Mortgage in Northern California, have training groups that go through an extensive learning process. In Colorado, Limetree Lending ( specializes in taking raw recruits and turning them into LOs without legacy issues. And in California and Nevada, International City Mortgage has an active college recruiting plan – usually the domain of the big banks. Who would a millennial rather deal with: someone near their own age, or someone who remembers what rates were during the Kennedy Administration? Keep it up!


One thing they sure don’t teach in school is why loans fund at the end of the month. A while back this commentary addressed the topic of the month-end rush for closings. Colleen B observed, “On a refinance, the only loan type that benefits from closing at the end of the month is FHA because the interest is paid monthly. Closing early in the month means you are paying interest on the old and new loan for several days. On conventional and VA loans, closing at the end of the month gives you a lower per diem interest, but the amount of interest on the payoff increases. Chances are the interest that you are paying on the current loan is higher than the new loan, so you are actually losing money the longer you wait to close. Of course, borrowers see it as ‘skipping two payments’, but really all you are doing is FINANCING 2 payments.  You know what they say about free lunches!”


Rules and regulations are unavoidable. J.P. from Newport Beach, CA, muses, “Rob, regarding your article on Disclosures and Applications; isn’t the intended mission of the CFPB to protect the consumer?  The Change in Circumstance regulations and resulting waiting periods that are imposed do not discriminate between those changes that benefit a borrower, and the ones that hurt a borrower.  The intent was to eliminate the ‘bait and switch’ tactics of unscrupulous lenders by imposing a ‘cooling off’ period wherein the borrower could back out but the result is not always helpful.  We had loan documents signed and back to our funder on an important purchase when the escrow officer informed us there was a seller credit to be added to the HUD!  Everyone hates these last-minute changes but we did everything we could do to accommodate the agents.  Problem was that this new credit changed the APR by more than .125% to the buyer’s benefit but we still had to issue a new TIL, wait three business days, produce a complete new set of loan documents and get them signed and delay the COE by almost a week. The borrower called me the evening this debacle unfolded and he was furious!  ‘You mean to say that I have to go through all of this because of a seller credit?  This is ridiculous…if the bank can’t figure out a way to handle this change we need to get another bank’.  I carefully explained that getting another government might be more beneficial because no lender would be able to do this deal with the original loan documents.  So why doesn’t Reg Z recognize a consumer benefit and treat it differently?  Just saying!”


And another note: “I am glad that we have the CFPB to tell us if we’re in good shape or not. Recently the agency du jour issued a proposal to conduct a new information collection titled Development of Metrics to Measure Financial Well-being of Working-age and Older American Consumers,.….I’ll wait for some to re-read that title, because I had to…..the proposed collection is intended to provide merit for the CFPB’s financial literacy campaign. They intend to study working age (defined as 18–61) and older American (62 and older) consumers. According to Ballard Spahr’s CFPB Monitor, ‘The data will be used to develop and refine surveys that the CFPB can use to measure adult consumers’ financial well-being and develop measures of financial well-being that provide a standardized basis for setting goals and evaluating financial education strategies and programs.’ Comments on the proposal are due by October 7, 2013.


Capital markets folks know that production folks clamor for 180 day locks any time rates go up. Unfortunately the options traders working for the broker dealers know that, and I received this note: “As a long-time cap markets person, I bristle when I see Lock and Shop and Float Down programs advertised (especially when they are combined!) Anybody who knows anything about hedging knows that the only honest way to hedge a float down is to use options and that those options can cost 3/4 to 1 point to cover 45 to 60 days.  And a lock and shop makes estimating pull through extremely difficult which generally ends up littering a hedger’s P&L with red ink. The devil is always in the details and, when one looks at the rules behind these programs, they find all kinds of caveats and exceptions that render the programs worthless and misleading. They may prove to be valuable marketing offerings – but ‘buyer beware’ if they think that the protection they are counting on will work the way they think it will.  They should read the agreements closely.”


Every conference you attend, people talk about volumes – it is so easy, right? But vets know that margin is what matters, and I received this note from Ed Conarchy, faculty member with Vantage Production and an originator with Cherry Creek Mortgage: “Thanks for talking about margin. I wish more people were talking about it. I am amazed talking to originators across the country how many are focused on volume and not on margin, income. They are doing huge volume but making nothing on their loans. I blame the company’s, managers, seminars and Todd Duncan. All the praise in this industry is thrown at the top producers. And in every case that is measured by volume. Number of loans and volume closed are always the two categories. I have always said it should be on net profit. The goal should be low overhead and high margin. It requires originators to bring huge value to the table to overcome a shopping consumer. But I am proof it can be done. Yes I bring huge value to the client and my reward is an average margin to me of 240 basis points. I see ‘top producing’ originators doing double my volume, with double my overhead, working more than me and making a net number less than me. It blows me away. I think people in our industry just think it’s just supposed to be that way. I completely disagree with that logic.”


Affiliated relationships (no one uses the term “joint venture” anymore!) are a concern to many, especially in the builder/realtor/lender arena. A few weeks ago this commentary addressed the possible shuttering of builder/lender offices. I received two e-mails from highly placed folks. “I have no idea where this notion that CFPB will require all builders to close their lending divisions is coming from – I have never heard of it.” And the second wrote, “The CFPB won’t be shutting builder or realtor owned mortgage companies. There are affiliate fee caps and disclosures, but it is less of an issue for mortgage lending and more for title.” And a reader from Wisconsin wrote, “I would chime in to say that the CFBP wouldn’t necessarily ‘shut down’ realtor / builder owned lenders, it would just be that their affiliation would require the realtor’s / builder’s retained fees (revenue minus expenses) to be included in the QM fee cap.  The CFPB won’t ‘shut you down’, you would just be originating mostly NON-QM loans and therefore have one heck of a time selling said loans off in the market.”


Let’s move into some relatively recent investor, vendor, and bank updates – they keep piling up!


Bank mergers and acquisitions continue on. In the last week or so we’ve learned that the Gratz Bank ($188mm, PA) will buy Liberty Savings Bank ($28mm, PA) for cash equal to adjusted book value. Merchants Bank ($1.3B, MN) will buy a few branches in MN, along with $47mm in deposits and loans from Associated Bank ($23B, WI) for an undisclosed sum. Geneva State Bank ($260mm, NE) will acquire State Bank of Riverdale ($91mm, NE) for an undisclosed sum. After the merger, the organization’s name will be changed to Heartland Bank. In Georgia Community & Southern Bank ($2.6B) will acquire Verity Bank ($169mm) for $11.80 per common share. In Maine, the Bank of Maine ($785mm) will sell 6 branches to Machias Savings Bank ($971mm) for an unknown sum. Five Star Credit Union ($256mm, AL) will buy Flint River National Bank ($23mm, GA) for an undisclosed sum. Hamilton State Bank ($1.4B, GA) will buy Cherokee Bank ($167mm, GA) for $8.5mm in cash. In North Carolina First-Citizens Bank & Trust Co. ($21B) will acquire Mountain 1st Bank & Trust Co. ($698mm) for $10mm ($8mm will be used to pay off TARP and $2mm will go to shareholders). In Florida Stonegate Bank ($1.1B) will buy Florida Shores Bank Southeast ($178mm) and Southwest ($376mm) for $48.8mm.


ISGN is presenting a webinar titled, “How to Structure Controls for Strong Management: Governance of CFPB Compliance.” It will be held Tuesday September 17th at 1PM EDT. “ISGN’s CFPB Compliance / Governance webinar is an opportunity for you to learn about what is needed to establish rigorous compliance governance and oversight within your organization.”

More information and sign up at:


Brokers on U.S. Bank’s distribution list received this note yesterday from an AE: “Announcement concerning down payment assistance programs. Effective immediately – the master servicer of the programs for TDHCA (Texas Department of Housing and Community Affairs) PROGRAM 79; TSAHC (Texas State Affordable Housing) AND SETH (Southeast Texas Housing) have announced they will no longer accept third party originated loans. NTFN will no longer close Third Party Originations under these programs.  We will only do these programs for Retail Only.  The MCC (Mortgage Credit Certificate) programs are not affected by this announcement. If you have a loan that we have already approved under one of these programs, I need the loan name and number by 3:30 today. Sorry for the short notice, but I have to have the list to US Bank by 4pm or the loan will not close and fund.” (A broker from Texas opined, “US Bank, the master seller/servicer of bond programs developed for low to moderate income consumers, has decided they will no longer accept TPO loans. This new policy will possibly leave thousands of low to moderate income families in their quest to achieve the “American Dream” of homeownership unable to utilize programs which assist with down payment and closing cost. The end result, coupled with forthcoming regulations such as QM, will only leave these families stuck in a permanent class of renters.”)



Okay… 44 years ago we were able to talk to men on the moon, and they to us. Yet when I am walking from my hall into the living room, my cell phone fails. Don’t ask me how. There are marvelous things out there, to be sure, and I will skip the joke today and present a video of a flying object that is controlled by the user’s mind – just what you want your ex-spouse to have:



Rob Copyright 2013 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