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

Friends & Colleagues:

Good Morning! (originally sent out 9/24) #20! Today is the 20th week of the Saturday Cup of Joe. Thank you for all the great feedback and hundreds of email addresses to share this with your friends and colleagues. It means a lot and I’m thrilled to be a part of your week. Just a reminder, the previous newsletters are archived at .

We are making Detroit our home and looking forward to your visit.

​I had one quick article and no where to put it, so I’ll put it here. With the MacArthur Foundation grants awarded this week, it was interesting to see the geographic distribution of winners.

This week we look at:

· Importance of protecting the brand (Of Interest)

· HUD released guidance on limited English proficiency customers (Have You Heard?)

· Quick notes on HMDA

Of Interest: A quick thought on corporate image, specifically how two incidents have tarnished previously strong reputations of two companies. Wells Fargo and Chipotle. It is difficult to write about both together since Wells’ case offers direct violations of law and policy; whereas Chipotle’s failure to maintain certain health standards is better categorized as indirect or inadvertent. Yet, each case highlights how delicate corporate reputation can be. Business Insider noted that despite free food and a variety of ancillary strategies, Chipotle has been unable to move customer perception (i.e. brand perception) and sales have plateaued. The company was able to stabilize the losses suffered in the midst of the E. coli scare but cannot get regain prior levels. Note: loyalists have returned but casual customers have not.

On Tuesday, the CEO of Wells Fargo spent several hours with the Senate Banking Committee explaining his company’s actions and attempting to predict the Board’s response. (Click link for some highlights). It didn’t go well, but I would suggest it went better than people thought. He stayed calm, did not fuel the fire and did not give politicians or the media much in the way of a story. The bank had a stellar reputation (even after the mortgage crisis) because of a strong position relative to other national banks and high levels of customer service historically. Yet, those inside and outside our industry are questioning how something like this could occur anywhere, let alone Wells. It will take a long time to rebuild trust and certainly have an impact on the bank’s image inside the Beltway. (Not to mention the decades long litigation that is certain to flow from this.) Footnote: Here’s the House of Representatives Financial Services committee perspective, if you are interested.

The Takeaway: There is no substitute for doing the right thing. A reputation is the most valuable and delicate asset a company can have. Do everything you can to cultivate and protect yours. As leaders, we cannot be hesitant to confront any issue that is inconsistent with our values head-on. Even if it’s too late to correct an error or mistake, it will be better should you ever have to speak to the press or a Senator about your company’s actions.

Standard Industry-Article-of-the-Week: There are some mixed reviews out there about home values and average homeowner equity. Apparently, household wealth is up and so is debt. The Fed reported nationwide wealth at $89.1 trillion. Mortgage debt rose 2.5 percent in the second quarter at a seasonally adjusted annual rate, the biggest quarterly gain in more than eight years. Economists among us, unite. Not sure what to do with that information but if you are a loan officer and looking for something to tweet, perhaps this could work for you.

Have you heard?: We have been keeping track of the debate over including a question about language preference on the new Uniform Residential Loan Application (URLA). All signs point to the fact that FHFA will not be recommending/including the question on the new URLA. The attention, though, caused HUD to release guidance on Limited English Proficiency (LEP) customers. HUD did not change the federal policy toward discrimination but did emphasize that lenders be aware that LEP is a proxy for national origin. This type of approach can cause many of the same issues that would have developed by including the question on the new URLA. It is too soon to tell whether this was an attempt to simply end the debate (and show support for consumer groups) or whether it is the first move in a long-term strategy to change federal policy.

Got Me Thinking: Director Richard Cordray spoke to a conference of federal credit unions this week insulating them from the reputation of the financial crisis and treating them as the gold standard for customer service. While we may all agree that credit unions were not the driving force or even a strong factor in irresponsible lending, I disagree with the broad generalization that because credit unions have a commitment to members that it means superior compliance. In my experience, commitment to the customer/member does not determine CU’s decisions on referrals, settlement services or marketing/advertising agreements. Many CUs have trouble keeping up current interpretations of LO Comp and RESPA not to mention TRID. Cordray describes a “levelling of a playing field” when in reality, it is a pass to credit unions to avoid much of the examination risk associated with TRID.

As Cordray and others make assumptions about a credit union’s willingness to comply, the truth is the opportunity for credit unions has never been better. Millennials, shop local / shop small, distrust for establishment banks (think Bernie fans) and dedicated personal brands should give credit unions a leg up in the coming months and years. Some credit unions already get it.

A Look Ahead: If you had the choice between borrowing against the equity in your home or selling the equity in your home, which would you choose? That decision might be closer than you think. A Silicon Valley startup called Point will buy a stake in your home betting on homes to appreciate and consumers to prefer a silent partner to a loan servicer. It is not exactly like selling a part of a company or asset, because Point owns an option on a portion of the property. As an investor, they can initiate a sale in the case of default but are bound to the sale price even if it comes in lower than their original valuation. The company boasts 50 customers already and a “no regrets” guarantee. Would you do it?

Quick Hit: According to newly released Home Mortgage Disclosure Act (HMDA) data, 4400 banks report HMDA versus 900 nonbanks. Despite the disparity in raw numbers, nonbanks originate 45.6% of the loans. Banks account for many more institutions but only originated 49.2% of the reported loans. Credit unions accounted for the remainder.

Sidenote: Shout out to John Haring at Ellie Mae for bringing this to our attention at the MBA conference. John is one of the country’s leading experts on the new HMDA rule and mortgage data compliance. An interesting HMDA scenario — a home owned free and clear, where a client takes out a loan to buy another property. Some companies and many of us might consider this a cash-out refi but (there’s no lien being satisfied as part of the transaction) so it’s actually a home purchase loan under HMDA.

Today’s Thought: Don’t be a Jersey Turnpike driver. I spent some time on the New Jersey turnpike last weekend and found a way to turn that time into thinking about how to handle conflict within our organizations. I’m sure we’ve all had the experience when there is a slow driver in the fast lane and several cars begin lining up behind the slow car. I happened to be the first car behind a car going approximately 10–15 miles per hour (slower than I’d prefer) with only open road ahead of it. As cars came up quickly on my tail, I noticed the approaching driver’s impatience and frustration believing I was the driver causing the delay. Inevitably the flashing lights and/or weaving would begin but, unfortunately, the cars in the line would have the opportunity to move to the right and pass before I could. In almost every case, I would get the dirty stare until the driver realized it was another car, ahead of ours, that was really causing the issue. The point is we cannot always see far enough down the road. I’m not one to make excuses for folks that cannot understand the rules of the road, so to speak, but I know a leader can quickly lose a lot of credibility by making the wrong assumption about who is causing delays in our businesses. Waving and flashing our proverbial headlights at the wrong person can be much harder to fix than simply speeding down the road. We leave lasting impressions based on how we react. If we overreact to each left lane driver, we will not only risk misidentifying the problem but drive other people crazy in the process.

Quote: “Courage is what it takes to stand up and speak; courage is also what it takes to sit down and listen.” — Winston Churchill

Nothing to see here: A realtor’s perspective. Some things never change.

Continued Success,

Written by

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

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