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

Friends & Colleagues,

Saturday Cup of Joe #50. 50! (originally sent out Saturday, April 22) I think I’ll save the milestone (?) thoughts for one year of this project. So, there’s that to look forward to. Haha. Until then, we’ve had a busy week in the mortgage business. There are rate fluctuations, regulatory rumors, the standard spring home buying panic in certain parts of the country and, of course, conferences/events/golf tournaments right around the corner. I have been busy with HMDA both requests stemming from our 2016 filing and the preparation for the new rule next year. CFPB continues to issue updates and requests for comments. Doesn’t help with implementation plans made months ago under a different set of requirements, but oh well.


This week we look at:

  • CFPB is known for controversy if nothing else (Of Interest)
  • A government database about the government (Got Me Thinking)
  • Crowd-funded capitalism is the future (A Look Ahead)
  • Wall Street Journal profiles Detroit (This week in Detroit)
  • A couple of good articles worth a read (Walk the Walk)
  • How to craft a valuable career (Hard work)
  • Thoughts, bonus and quote (all the way at the end)

Of Interest: The trouble with the CFPB is…controversy. Hard to build authentic trust of all sides when there is so much disagreement and controversy. Since the Dodd-Frank Act and the creation of the CFPB, I’ve worked hard to understand where the proper balance is or should be. On one hand, it is true there was a massive crisis predicated on irresponsible behavior that leveraged the entire American economy on individual borrowing power and home values. On the other hand, entire swaths of the American economy are successfully regulated without engineering company autonomy and prescribing the behavior of market actors. When Senator Warren was Professor Warren writing an article describing that consumer financial products need the same oversight as other consumer products like toaster ovens and space heaters, it was not an unreasonable idea. It made sense. I wonder if anyone would suggest today that the CFPB has struck the proper balance of the Consumer Products Safety Commission?

I’ve written before that nuance is not our strong suit. Not the media’s. Not the government’s. Not the consumer’s. So, it’s not surprising that most articles about the CFPB are completely one-sided. The competing narratives are “CFPB is an evil, government overreach that needs to get out of the way of American small business owners and stop stifling lending and innovation forever” OR “CFPB is the only thing standing between big banks lifting up the American consumer by the ankles and forcibly shaking money out of our pockets while we look the other way.”

To wit, check out the image that accompanied a recent New York Times article:

Photo along side article in NYT

The article titled “The Bureau of Resistance” is a masterpiece of perspective. It’s all about perspective. Certain incentive or compensation models that, we all admit, contributed to the incentive to steer consumers during the mortgage crisis is also not without rational. These were not irrational policies, but there is no value in revisiting how they evolved or devolved, rather. I get that.

At the same time, it’s not always articulated or clearly presented for the American people and, more importantly, politicians to consider — are we ok with a structure that always places the harshest interpretation on the company (even when it’s inconsistent taken as a whole?)

We are ok with telecom, wireless or rental car companies attempting to layer in the fees, add-ons and most expensive options/products because, apparently as consumers, “we’re on to them.” But banks or mortgage companies incentivizing sales forces around products with the most revenue flowing from DC and Wall Street investors seems unfair to consumers. Perhaps because of the size of the financial investment or the complexity (or presumed complexity) of a mortgage loan. I’m not suggesting it should be otherwise, but it’s a classic case of wanting to have our cake and eat it to. When consumers are perceived savvy, we bristle at regulating a free market. Where consumers cry foul, we demand regulation, penalties and sanctions. It’s a retroactive approach. It’s ok with me as long as we’re all willing to acknowledge it. Difficult to complain about regulation and bureaucracy on one day and then demand help from DC the next…especially, if you intend to maintain the moral high ground.

For instance, the author extols the CFPB’s consumer complaint database because, “Other than big-dollar fines, nothing seems to irritate lenders large and small more than the public shaming that comes with showing up on this forum meant for all those customers who have spent countless hours on the phone fighting with giant student-loan servicers or credit-card companies.” As someone that loathes wasting time and useless activity, I’m not in favor of allowing companies to run rough shod over the customer. At the same time, neither the author nor CFPB acknowledge something the rest of all quickly admit — people be crazy. Come on. You have a crazy aunt. Crazy uncle. Wild brother. Unreasonable neighbor. Confusing parent in the carpool group. etc. etc.

But when someone complains to a government entity, it’s assumed they are the most rational, reasonable consumer. It’s the law school “reasonable person” test every time. Yet, during a regulatory exam with, say, a state regulator, consumers are framed as hapless and helpless against the sophisticated and conniving corporation. Again, it’s difficult for consumers to be reasonable and rational victims in one context and simple, confused nabobs in another if you intend to maintain the moral high ground. If it’s an acknowledged double standard, than ok. If that’s the price of being a company in this economy in 2017, then ok. That’s fine. But voters/consumers like to (publicly) eschew the double standard framework all the while expecting it. But I digress. Back to the article.

Shockingly, the author declares the SEC and Federal Election Commissions to not only be equal to each other but to be equally useless. Not sure that is common knowledge at the SEC. He writes, if the current Senate bill or the House’s Financial Choice Act pass Congress, “the bureau could join all those other dysfunctional bodies — just look at the Securities and Exchange and Federal Election Commissions — whose structure waylays all but the mildest of rule changes.” The author then highlights the “bill [that] would switch the C.F.P.B.’s funding model, forcing it to go hat-in-hand to Congress every year.” As if that’s an unreasonable way for a federal agency to be funded and managed. Congress, mind you, the body that is not only supposed to represent the people but carries the Constiutional “power of the purse” as well.

Before you declare me an industry shill, keep in mind that my career has been built on Dodd-Frank. Consumer protection is ultimately a legal practice in reasonableness, in my opinion. Yet, you might never know it today. I took exception in this article to the complete lack of any attempt to provide a reasonable approach. It was not an opinion piece either. It was a column in the NYT magazine segment called “On Money” where “economics explains the news.” Perhaps my expectations are a bit too high. Could you please pass the cake? It’s time to eat it.

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Got Me Thinking: We’re only about a week removed from Tax Day and so I’ve often wondered why I’ve never been given a receipt or a pie chart of where my taxes went in a particular year. There are some high level numbers but nothing specific. I understand that’s partly because you cannot trace a single dollar from any one taxpayer to any one program but its always been kinda a missed opportunity on the part of the government. You want folks to feel connected to social programs then here’s your chance.

Unexpectedly, billionaire ex-CEO of Microsoft and current owner of the LA Clippers, Steve Ballmer, revealed a database aimed to report, record and track government spending. In fact, it’s more than just spending, it also factors in deductions or lack of revenue. According to a NYT Dealbook piece, the project involves a small army of economists, professors and other professionals have been assembling as part of a stealth start-up over the last three years called USAFacts. The database is perhaps the first nonpartisan effort to create a fully integrated look at revenue and spending across federal, state and local governments.”

Did you know that 24 million people work for the government? Makes me wonder if the size of the government is ever, in fact, reduced as some politicians have suggested, what are we gonna do to re-allocate those jobs? Nevertheless, this is a fascinating development in the world of public policy, tech philanthropy and just plain old nerdy facts. For instance, the database measured the average mortgage-interest deduction to a middle class family ($100/year savings) but cannot show the total number of firearms manufactured, licensed or inspected because the NRA lobbied to prohibit the government from having that data. Looking forward to digging into this more as time allows. Link to the article here. See screenshot below.

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A Look Ahead: NYU professor Arun Sundararajan predicts “Crowd-based capitalism will usurp the corporation now at the center of the economy.” I like this on a lot of levels. First, it demands attention and demands innovation. If true, we are all responsible for our value and our contribution. How can I be valuable enough to enough people/companies/organizations to make the compensation needed to sustain the lifestyle I want? That’s the personal side. Second, and perhaps more immediately interesting, is the professional ramifications. If the gig economy or crowd-based capitalism is the next evolution of the economy, everything from the tax code to mortgage underwriting is going to have to adapt as well. Professor Sundararajan celebrates leverage a car or a home into a money-making tool. However, those sources of income can be difficult for traditional underwriting calculations to measure. Lastly, if the model of full time employment is out, the social contract — housing, health care and retirement — are going to fundamentally change. Nevertheless, Sundararajan is “pretty optimistic about the potential for sharing to be a force for good in the economy: It could make it easier for independent workers to operate as small-scale entrepreneurs and so democratize economic opportunity.” Do you buy this framing of the future? If so, what decisions will you make differently or what direction will you steer your company tomorrow?

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This week in Detroit: 2 articles of note. Conde Nast’s Traveler added Detroit and one other #NextBelt city, Milwaukee, to the list of the 6 cities to watch in 2017.

Second, Wall Street Journal noted how many #NextBelt cities are trying creative solutions to rebrand, rethink or reestablish young residents.

Microapartments. Tiny houses. Urban farming. All come to mind and are all mentioned in the profile. It’s also has a nice list and we all know how much everyone loves lists. Here are the 5 items the author mentioned in defense of Detroit:

  1. Entice new residents to stick around — housing options
  2. Landscape empty lots into gardens/greenspace — aesthetics matter
  3. Do serious agriculture — controversial here in the D, from what I heard
  4. Match empty stores to entrepreneurs — Motor City Match is awesome and has helped several friends of mine, big fan
  5. Offer children something to stay for — “place based education” is not a term I was familiar with but I like it.

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Walk the Walk: This week I thought I would just throw out a couple of quick hits that I found interesting or are worth your time. Enjoy.

1. Being the cool boss never works out. This author found it impossible to find balance as the leader in her office and eventually went back to being a staffer.

2. The human capacity for self-justification is overwhelming. Literally, it can rationalize away facts in order to find a narrative that approves of a decision, a judgment or a feeling. In fact, speaking candidly about mistakes is the best way for us, as leaders, to avoid distorting facts and encourage honesty in our organizations. It’s hard, as we are built to adapt and survive, part of which is finding a way to live with our mistakes and failures.

3. Best way to encourage your leaders to rely on each other might be physical and psychological risk. This article suggests that many companies are training executives the way some might pledge a fraternity or compete in a Tough Mudder. My take is that any corporate training or team building experience must be consistent with the tone and culture of your organization. If you are building a business and cannot figure out an effective corporate training theme, it could indicate a larger issue — your organization might not be clear on what it is. Clarity is key and then leadership, activities and team building should all flow from that.

4. Morning person or night owl? The struggle continues. I found another article this week that helps create a morning routine by adopting minimalist strategies. This is one area of my life that I cannot decide whether I should embrace that I’m a night owl and lean in or try to change my routine to be more productive in the morning (i.e. a run or journaling) and save those things from having to be wedged into my afternoons and evenings.

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Hard work: Be difficult to replace. For me it takes two forms. First, as I wrote last week, is my personal reminder — Answer well — that ensures I take each task, each request with the same passion and attention. Second, it means adding value whenever and however I can. I was encouraged to see a short but articulate post on Medium that laid out this line of thinking with a useful parable and catchy style. Meredith, my wife, sent me this one and she’s been providing some great articles, editing and insight on the Saturday Cup of Joe. Thanks, Mer. Meredith has always been my partner in life and more specifically in my career. We met in college before I was qualified for much of anything beyond following instructions literally (like the older son in the parable). She has always been an advocate for going and doing. Anytime I had an idea about my career it was — “yes, go do it” — and then “have you thought about x, y, z” or “don’t forget about this or that.” I’ve always responded well because it puts the pressure right back on me to actually decide if it’s something I really want or if I’m just looking for greener (i.e. easier) grass. Have you ever heard of the trick when having trouble making a decision, flip a coin and your immediate reaction to the outcome (relief or disappointment) will indicate your true feelings? I kinda employ that trick in life. I’ll throw something out and see how it feels to say it or defend it. Then I’ll know my true feelings. Fortunately or unfortunately, Meredith has been the recipient more than anyone else in my life of these “experiments.” So, again I say, thank you, Mer.

I think what resonated with me here was this short, oft-repeated but spot on advice: “Being successful requires being proactive and not waiting for life to come to you. It means you’re on offense, not defense. You’re active, not passive.

At work lately, I’ve been thinking a lot about what makes a valuable employee. Can we, should we do a better job evaluating and rating contribution? If you looked at your organization like a sports team, a baseball team for instance, what would be the stats that you value? Who is your home run hitter? Who is your utility infielder? What would the top 5 employee “stats” be for your company?

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Today’s Thought: Might as well. The subtle threat of this phrase cannot be understated. We might as well… Have you ever heard this? Hopefully not in your organizations or on your team. It’s the perfect combination of resignation and/or desperation with a high likelihood of carelessness. Feels a little like the unwritten suffix to the phrase might as well is “screw it.” Admittedly, it’s not always so dark. Sometimes it takes this shape: “well, we’ve exhausted all other options or reasonable attempts so we might as well give it a try.” It’s an improvement from the screw-it mentality though still flawed. Might as well give it a try is a half-hearted attempt to do something which might be better than nothing (though sometimes nothing is the most prudential option). I’ve often said a half-hearted attempt can be worse than doing nothing. How often has a half-hearted attempt turned out to be a valuable, productive activity? Rarely. My advice is that we might as well remove ‘might as well’ from our repertoire in favor of both getting more creative and digging deeper more often.

Quote: “People glorify all sorts of bravery except the bravery they might show on behalf of their nearest neighbors.” — George Eliot

Pick a lane.

Bonus Content: On writing. Be ready for pain but be patient. Be desperate but don’t press. Above all, be yourself.

Bonus Content revisited: On living out your “why.” I couldn’t resist offering up this conversation between Gary Vee and Simon Sinek. You’ve seen me pass along videos from each before. Here’s them chatting about work/life motivations and challenges. My advice (if you don’t have 25 mins) is to skip to 7:00 minute mark and watch till 11:15.

Continued success,

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