Saturday Cup of Joe: a lending and tech(ish) newsletter

Friends & Colleagues,

SCOJ93. What a week of conflicting emotions. From the casual fun of the Olympics to the abject horror of mass murder.

During the week, I traveled to Charlotte, NC to spend time with QLMS, our third party partner channels. I spent some time in Rocky Hill, CT with CATIC talking about the future of title insurance and settlement services. The travel also gave me some time to write, clean up my email inbox and spend some time with my former colleagues and law school friends. It was amazing to see everyone and I left inspired to be more productive and more candid as I returned to Detroit.


I heard something this week: stories beat spreadsheets. Initially, I got excited. That was it! That was the confirmation I was hoping for because it meant that crafting the way we communicate is most important. The narrative. The human things. Then I stopped. “Stories beat spreadsheets” can be a true statement and still not actually work in the way I was hoping. For instance, I have written before that people make decisions emotionally and then rationalize them later, even if the rationalization is mere seconds later. And I believe that’s true, especially when it comes to decisions with very little data. Human choices, like whether or not to send an email or pitch a new idea at work or tell someone you are interested in their work. In those cases, story wins because there’s very little in terms of data.

However, in most professional settings, I think story beats spreadsheet until someone talks themselves out of the story. I believe we constantly deny ourselves the story and convince ourselves the data must prevail or must dictate the decision. That’s wrong. In fact, that often leads to boring, less compelling outcomes. Chasing the story, on the other hand, while more difficult to explain (almost certainly more difficult to defend to shareholders or boards of directors), is actually more likely to change the world. Is the thing more likely to compel sales and win over customers.


Many companies, investors, and advisors jostle for position in the cryptocurrency market. Well, regulators are getting in the game too. According to PwC, the Commodity Futures Trading Commission (CFTC) is “talking about crypto assets all over town (and the country) these days.” The challenge is balancing regulation and innovation. CFTC Chairman addressed the Senate Agriculture Committee, emphasizing the “importance of keeping pace with technology and the limitations of the CFTC’s regulatory authority over cryptocurrency exchanges.” By week’s end, the CFTC had issued an advisory yesterday, warning customers to beware of virtual currency “pump-and-dump schemes” that are more common on “thinly-traded alternative virtual currencies that see sudden price spikes.”


Detroit riverfront

Included this week:

· Of Interest — Fintech’s power targets criminal networks

· Power of storytelling — Think different.

· Valuable Lesson — Competitive housing markets are changing real estate contracts and clauses

· For your consideration — Automation threatens some jobs but makes others more powerful

· NextBelt — Mortgage lending in the news again this week

· Today’s Thought & the Quote

A gift from Dana K. Benzinga. Thanks so much for the quiver!


Of Interest: Too often when reading about fintech or regtech, it is about startups, apps, and IPOs. These advances are also helping fight fraudsters and criminals. For instance, regtech has the potential to combat human trafficking. New technology is supporting the anti-money-laundering framework that can identify the sources and movement of funds.

This is just the beginning. More data improves the ability to follow transaction(s) and track activity. Ultimately, more and more transactions from cryptocurrency, land records, credit reports, and consumer financial services records are being tracked with unique identifiers, blockchain verification, and other pattern recognition software. The story of an asset, like a residential mortgage loan, sold into the secondary market and traded will be traceable throughout the entire “transaction lifecycle.”

Whether fintech innovation and data analytics are pointed at human trafficking or consumer credit records, the point is that these developments are significant and powerful. We have not understood all the implications of how fintech will change our industry and our ability to learn more about good guys and bad guys alike.


Power of storytelling: Different tasks require different modes of thinking.” Verbal thinking versus visual thinking. One thing I am going to try to implement after reading this article is a new way to approach a problem. Take writer’s block, for instance. Trying to visualize a word picture instead of just “write better” provides for a unique way out of the problem. I often use two questions to try this same technique — “have I considered everything?” or, as Tim Ferriss says, “what if I did the opposite?” Generally, this is how I try to reframe a problem. Seeing the problem and visualizing the picture instead of simply relying on words seems like another way to try to find solutions when difficult challenges present.


Valuable Lessons: Escalation clause. Apparently one response to highly competitive housing markets is a clause in the purchase offer that would automatically increase the offer until a maximum price. The typical offer must go back and forth between the seller and the potential buyers until only one offer remains. It is both labor intensive and inefficient. An offer that includes an escalation clause means the potential buyer will “pay X dollars for the house, but if another buyer submits a verifiable bid that’s higher, [the initial buyer] will raise the offer in increments of Y dollars to a maximum price of $Z.” These clauses are particularly useful in a competitive real-estate market where homes typically get multiple bids.

Interestingly, the escalation clause puts significant pressure on the listing agent to confirm verified bids and trigger the escalation clause. Given the close relationship many real estate agents have in most markets, I wonder if aggressive tactics by buyers will renew the need for a real estate attorney to prepare and negotiate these types of contracts. For instance, if the seller & agent both stand to benefit from a bidding war — real or exaggerated — who is looking out for the buyer and certifying the final price?


For your consideration: The mortgage industry has heard and read a lot about Rocket Mortgage and other digital lending platforms lately. Some in the mortgage industry saw this as a threat. The reality is much more complex. The key is finding ways to create jobs and make existing jobs (i.e. mortgage loan originators) more efficient with automation. According to the Harvard Business Review, “[p]eople will be augmented by increasingly capable machines acting as digital working partners and assistants, further requiring ongoing skills development and evolution.” The secret sauce for the future is not fully automated apps and artificial intelligence. The ideal relationship is personal service made more effective and efficient utilizing technology. A modern example from my current portfolio at work is remote online notarization. In developing a web-based, fully-remote closing experience, we’re not looking to eliminate people from the closing. Rather, we’re trying to give closing agents, attorneys, and notaries the tools to cater to the consumer’s preferences and schedule offering options for in-person, hybrid, and fully-online closings. It’s a great example of using technology to empower solutions that benefit the customer in many ways.

Automation also threatens workers, and PwC predicts 3 waves of disruption. The first, happening right now, is called “algorithmic.” We are improving the calculations and data processing & analysis for a wide variety of industries and tasks. Next comes augmentation, through the late 2020s, followed by the third wave rolling up to the mid-2030s, in which up to 30% of today’s jobs could be automatable. The first wave stands to put more women out of work in just about every sector, but by the time the third wave sweeps through, men’s jobs will be more vulnerable. The workers best positioned to continue to be valuable will have 2 key characteristics: a culture of adaptability and lifelong learning. PwC writes, “Improved STEM skills will be important in allowing people to take the high technology jobs that will arise out of AI and robotics, but soft skills will also be important in making people adaptable and employable throughout their working lives.”

Source: PwC


Millennial minute: What is your dream? Understanding millennials and connecting the dots between our work and our purpose is the key to harnessing the passion and talent this cohort has to offer. How does this translate to your brand and your company? According to Convercent, more than 81% of millennial consumers expect companies to publicly pledge to be good corporate citizens. 87% of consumers would purchase a product from a company that stood up for an issue the buyer cares about and, even more stunning, 78% would refuse to buy from a company that supported issues contrary to their beliefs. Convercent’s research also shows that employees are willing to accept lower pay for a company that stands up for shared beliefs.


Perfect writing assist on my Delta flight


Next Belt: PBS released a story in coordination with a data analysis project from the Center for Investigative Reporting that alleged significant racial disparity in modern day mortgage lending. Each public radio affiliate had a local version of the story. It sparked some thoughtful discussion within our industry. I had one discussion with one of the smartest attorneys in our industry who thought there were still significant fair lending issues in residential lending. Since I respect her opinion, I’ll be withholding my final conclusions until I can understand more. My initial reaction, however, was to cite to the ease of application for many mortgage lenders now. The online application process means fewer and fewer applicants are discouraged from applying. On top of that, many online application processes simply apply Fannie Mae and Freddie Mac underwriting guidelines. As a result, denials are less and less a function of lender discretion and more a function of the economic conditions of a particular market. If anyone can apply and Fannie Mae guidelines (not the individual lender) will not approve a loan application, is that really considered discrimination? If so, it seems like that it would be lending guidelines from Fannie & Freddie regulated by the Federal Housing Finance Authority more than any individual lender.

In addition to the conceptual questions I had, the other thing that is easily lost in these types of analysis is that the data is often far more complex than the reporting admits. For instance, the data in the national story did not specify whether loan denials were based on lender procedures or objective loan product guidelines. The Michigan Radio story, here in Detroit, did not identify whether they had properly categorized the metro area (Detroit is divided between 2 metropolitan statistical areas, but the story only contained 1).

The bottom line is there are important conversations to be had among lenders and consumer groups. Certainly not all lenders have the ability to offer an online application throughout their entire marketplace, not to mention the whole country. Either way, I look forward to finding out how I’m wrong in my analysis or what I’m missing here. Or to continue the effort to sharpen this analysis in the press and within the industry.


Today’s Thought: How do you use time effectively? What’s the line between utilizing downtime during a meeting (i.e. being on your phone) and appearing disengaged or rude? On one hand, I support the practice of not attending meetings that do not add value (or that you cannot add value too). On the other hand, it can be hard to identify those meetings before arriving. So if there’s some downtime or a way to maximize the time while remaining in a meeting, isn’t it acceptable to turn to a phone while remaining in the room? Is it better to either stay and avoid the phone or straight up leave? I’m working to identify goals with each meeting or cancel/skip meetings that do not move the ball or that others on my team can cover and then provide me a recap. What do you do?


Quote: “A life spent making mistakes is not only more honorable, but more useful than a life spent doing nothing.” — George Bernard Shaw


Bonus Content: Since the attack on Sandy Hook Elementary, there have been at least 239 school shootings nationwide. In those incidents, 438 people were shot, 138 of whom were killed (according to Gun Violence Archive). “The only way to successfully bring about gun reform is if a critical mass of us are willing to have honest, tough, civil conversations outside of our ideological bunkers. Gun reform will not happen unless the silent majority of gun owners who passionately disagree with the NRA’s divisive rhetoric and complete lack of respect for responsible gun culture speak out and take political and economic action.” — Brene Brown

Continued success,

Thinker, curious leader, once an attorney…always trying to answer well.