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

Friends & Colleagues,

Saturday Cup of Joe #49. Happy Easter weekend to anyone celebrating this weekend. The weather is getting warm in Detroit. Tessa is flying toy airplanes. I’m jogging on the riverfront. The hopefulness of Spring in the heart of the #NextBelt rings anew. The next few weeks are likely to be spent in the office working to build several projects including HMDA implementation.

I will be attending and speaking at MBA’s Legal Issues conference in Miami during the second week of May. If you are going, let me know so that we can meet up to catch up for a panel, dinner or drink. I’ll be looking for insight on the nuances of the new HMDA rule, the future of the CFPB and some newer issues like remote electronic notarization and limited English proficiency customers. What will you be trying to accomplish in Miami?

This week we look at:

· Persuasion is showing not telling (see graphic)

· CFPB in flux (Of Interest)

· Millennial homebuyers but not why they think (Got Me Thinking)

· Millennial homebuyers want a story (Walk the Walk)

· Be notorious (A Look Ahead)

· Be bold (Efficiency)

· Be positive (Hard work)

· Thoughts, bonus and quote (all the way at the end)

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One minute on the Internet in a graphic:

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Opinions are self-serving, conclusory statements which can be debated. Facts that led to opinions or that derived from a process are much more persuasive. We can argue over “hot” but it is much harder to argue 118 degrees. (Thanks to Ruth Dillingham for the writing wisdom)

Of Interest: CFPB grab bag. Last week, we looked at what’s going on across the industry. This week I’m selecting simply what CFPB is saying, doing or causing (at least according to Jaime Dimon). With the exception of this, which for me, was hard to resist. While touring a public housing facility in Miami, Secretary Carson was stuck in the elevator for about 20 mins. I know it’s just a coincidence but it’s the type of thing that usually happens to politicians in TV shows. Not real life. In 2017, however, this is real life.

Preview of coming attractions. (WSJ subscription required). Rep. Jeb Hensarling (R-TX) is moving forward with his alternative to Dodd-Frank. Here are some highlights from WSJ:

· Banks receive regulatory relief for meeting capital requirements.

· Removal of CFPB Director and Deputy Director at the will of the president.

· Removal of CFPB’s UDAAP authority

· Clarify lender communications to SEC on IPOs

· Prohibit SEC from giving activist investors more power over board of directors

Vendor management is risk management. CFPB has always had the authority to examine the service providers that support the top financial institutions. Recently, CFPB began actively supervising these service providers. In theory, the vulnerability of the nation’s top financial institutions is, in part, related to critical vendors. It’s an extension of authority and power but it is important to recognize the reality that CFPB is looking into MSAs, service providers and the relationship between business partners.

HMDA implementation brings new ECOA liability. According to CFPB Monitor, CFPB may be relying on employment discrimination cases to support ECOA cases; in particular, gender identity and sexual orientation discrimination. When implementing the new HMDA rule, effective January 1, 2018, one of the issues lenders must decide is whether consumers can select both male and female or an option of both when identifying gender on a standard loan application. Another way the CFPB has visibility into gender identity and sexual orientation is in the loan underwriting process. Document submissions and the request/submission of conditions also provide lenders indicators of gender identity and sexual orientation. Depending on how the CFPB authority and leadership turns in the next 3–4 months, lender need to keep an eye on policies and procedures ensuring new rules do not open up new liability.

All this compliance is costing some people their loan…or so says Jaime Dimon. According to those who listened in on the call, JPMorgan analysts claim that “[c]urrent rules have made lenders so cautious that they have not funded an additional $300 billion to $500 billion of loans for home purchases in each of the last five years.” Bottom line is that Dimon is referencing a complex web of reasons why lending has tightened. The residual fear from the mortgage crisis, increased regulatory risk, rising cost of compliance per loan, stagnate, overall economic climate and tepid employment outlook over the last 10 years or so have all played a part. Regardless of the headline number, $500 B or $100 B or something less, the point is that there has been some limiting and its worth looking into.


Got Me Thinking: With the arrival of the official first day of spring and Opening Day, the unofficial first day of spring, comes the inevitable articles about the home buying season. This is especially true in the parts of the country where winter hampers home sales — New England, Mid Atlantic, and Midwest. This year the home buying stories are largely focusing on new or first time home buyers which easily fall into another category beloved by traditional media — millennials. On cue Wednesday, The Christian Science Monitor published this article about the likelihood of millennials to proceed with a home purchase despite lower inventory and higher debt levels than previous generations. The author touched on several overlapping themes. I’ll highlight a few: millennials want to buy homes, millennials are tech savvy but will still use a real estate agent for help and millennials with debt are still good/qualified home buyers. Let’s take these in order (if you are a regular reader, it’s not surprising why this article got me thinking).

Millennials want to buy homes. I don’t necessary disagree but as I’ve written before, I think the reason why Millennials want to buy homes is different than many people realize. It’s no longer a trustworthy investment. Millennials that experience the mortgage crisis and have seen the The Big Short don’t necessary believe homeownership pays off in big gains. Many of us, instead, want the story, the stability and the security that comes with the home. Some of us do it for family. Some of us do it for community. Some of us do it for ego. It feels good to own land. But I just don’t see our generation being compelled to buy into the financial wisdom until we start to see some nationwide economic and job numbers that tell a different story. I believe we’re in a transition period between constant growth/profit to one where segments of the population can grow at existing rates but not necessary moving the needle for all working adults in society.

Millennials are tech savvy but will still use a real estate agent. I’m still not sure I buy this. I know the National Association of Realtors (NAR), quoted in the article, has a vested interested in keeping this notion alive. I question why real estate agents will survive where travel agents, stock brokers and taxi drivers have failed. When I write about this, I’m not predicting extinction at least in the near future, but rather decline followed by irrelevance followed but minor, small pockets of niche customers. That’s not to say some real estate companies are not trying. Century21 has a website called Adulting 101 that covers not only buying a home but a bunch of other seemingly adult activities. At the same time, if Betterment is investing $100,000 a client and managing to successful returns using algorithms, how long will it be before we’re buying and selling homes through similar services?

Millennials with debt are still good buyers. Here, I totally agree. It’s all relative. Credit scores. Risk. Amount of debt. The factors evaluated are relative to the standards set forth by investors. Standards determined by likelihood of success and success as determined by repayment. The fact is that most of our measures are relative to each other. Having debt and a credit score reflecting debt is only important if you are an outlier. If you are in line with the majority of your peers, you are simply average. Debt’s not a deal breaker if everyone’s got it.

Bottom line — the lending standards will bend toward the generational norms. Takes time. But its all relative.


A Look Ahead: Millennials in greater Boston are buying houses! Or, at least, millennials in greater Boston are trying to buy houses. Look out. I’ve become increasingly interested in the power of expectations and there might be no better example right now than millennials homebuyers. “Fixer-uppers with lower prices and less space did not appeal, even after Andrew Martini, their millennial realtor, had them meet with a contractor. Heartfelt letters to sellers explaining why they wanted the house had no effect. The Bieleckis were looking for a home within walking distance of coffee shops, stores, and restaurants. But they soon realized they would need to compromise.

Though, if you ask me, first time homebuyers of almost any generation want more than they can afford and often, some generations even find limits to the inventory of certain markets at certain times. The other interesting aspect to this quote is the attempted heartfelt letter. For millennials, it makes perfect sense. Tell your story. Appeal to the seller person-to-person. Traditional sellers are told to protect themselves, insulate themselves and maintain the contractual negotiation with buyers. Sellers demand preapproved buyers whose assets have been seen, reviewed and evaluated by a trusted mortgage lender. Sellers do not care about the story. At least they used to…not care. What if sellers began to care about the story?

What if buyers wanted to buy into a story instead of just own a home?

How would our industry change if the American Dream was no longer about merely owning a home and doing better than our parents but about a story, our story?

Right now sellers do not have a real avenue for storytelling, probably because that can be a euphemism for lying, but in reality, isn’t that life? Gather information, review data, evaluate people, select risk and live a life.

In an evolving purchase market, in a post-mortgage crisis world, and in a socially connected networked community, (some) sellers may actually care what happens to their home and (some) buyers might actually want to buy, to participate in, a larger story. How can we support that? How will our industry evolve? Will we help our clients tell their stories…or will it remain just a transaction…?


Walk the Walk: The first time I was asked to think about my own performance evaluation in 360 degrees, I was not even sure what that meant. The truth is that I had given a lot of thought about whether people liked me but I know idea what people said about me behind my back. I was blind to how others described me even though I had thought a lot about whether people liked me. Since then, I’ve learned to both be aware but unaffected by reputation. An article this week reminded and reinforced my thought process. It is important to be aware because it is information. Anyone looking to succeed in an organization or trying to build an ambitious career needs to be aware of reputation because it is data that feeds into decision-making. At the same time, it is critical to avoid bending or caving to the pressure associated with maintaining or building a reputation. Trying to force a reputation will generally mean conforming, limiting or toning-down much of what makes us successful.

We’ve all heard that trying to make everyone happy won’t make anyone happy. I feel the same way about trying not to make anyone unhappy. In the New Testament, God is writing to St. John and says “because you are lukewarm — neither hot nor cold — I am about to spit you out of my mouth.” I’ve always taken that to mean the same thing as trying to make everyone happy. Being lukewarm is worse than being cold/wrong.

Being palatable is not the way to success. The article goes on: “What most people think of as their “reputation” is really just a narrow bounds of permissible behavior that the people around them will tolerate.

To quote Rumi, “Destroy your reputation. Be notorious.”

These articles are generally vague and abstractly encouraging. Here, the author identifies some strong advice and delivers it relatively quickly without a ton of the usual rah-rah fanfare. The best perspective buried in the piece was how difficult, but important, it is to release the need to worry about what everyone thinks and instead make bold decisions. Bold can lead to reckless but better to push the envelope than never act. (or so they say). What do you think?


Efficiency: Burger King took a beating this week after airing a commercial that attempts to trigger Google Home by asking “Ok Google, what is the Whopper burger?” Everyone from the Washington Post to bloggers on LinkedIn declared TV advertisers “morons.” I tend to disagree. For whatever reason, even though it failed, it feels like an interesting effort. Granted we’re talking about strategies to sell more burgers but it’s a valuable lesson on “worth a try.” In fact, I love that writers/bloggers/experts think that people will buy what tastes the best or is the best product. As if quality alone carries the day. As if. People don’t go with quality and people don’t pay for quality. Familiarity is the key.

The same bloggers writing about getting outside comfort zones and carpe diem and all that are the same ones quick to judge on new and perhaps innovative attempts. Being first and being wrong feels the same. It can be hard to tell. The best response is not to care and move on.

I’m persuaded somewhat by the argument that an advertiser on your television intentionally triggers your voice-activated home speaker. Perhaps it’s too soon. At the same time, it is not reasonable to do nothing (i.e. not advertise) at the same time boring advertising might be worse. I don’t watch many commercials anymore and we don’t have a Google Home or Amazon Echo yet. It seems like an interesting attempt and a failure that no one will really remember. Plus if it had worked, the value might have been greater than the risk.

One thing that does make me wonder is whether this type of gimmick makes sense given Burger King’s ideal customer. The whole idea of social media and targeted advertising is to better isolate those most likely to buy the product or service. If the failure was worth the risk that assumes Burger King knows that a). Their customers own Google Home and b). Would find it interesting and not off-putting that the commercial trigger the device. The advertisement should not be a failure because it did not successfully trigger Google Home devices. It should only be a failure if Burger King targeted the wrong potential customers. The valuable lesson is know your tribe (and then the creative failure doesn’t look so bad).


Hard work: Is it hard being positive? There are A LOT of articles out there about mindset, positivity and energy. You can imagine it is with some hesitation that I would wade into the world of positive mindset and motivational messaging. The articles are all the same and the motivational memes are as vague as they are original. Every now and then, though, there is a list that revisits a few wise “sound bytes.” The New York Times published such a list under the headline “Turning Negative Thinkers into Positive Ones” but it’s the list at the end of the piece that is a valuable reminder. The idea being that small actions can make a big difference in overall emotional health. Here are my top 3 — develop & bolster relationships, learn something new and accept yourself with confidence flaws and all. There is something about investing in other people, remaining curious about the world and being comfortable with who you are that pop up most often on all these lists and in all these so-called self-help articles. This article was a short but good reminder about some of the things that make life interesting. Which one will you be working on today?


Today’s Thought: I’ve written about my reminder to myself — answer well. It’s a way to remember that no matter the question whether big or small I’ve committed to answer with the same intent and energy. Someone was generous enough to help me create a logo out of it. So I thought I’d include it here.

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Quote: “The absence of disease is not health.” — Shawn Achor

Bonus Content: Games to keep your brain young or at least active.

Continued success,

Written by

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

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