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

Friends & Colleagues,

SCJ58. Big week. Not sure if I returned to my desk with a renewed energy and focus from vacation or this week just happened to be hitting on all cylinders for our industry and other sites, in general. I found more resources than I could include. I did my best to hyperlink everything and fit in as much as I could. There have been interesting regulatory and legislative actions on personal liability for financial services officers. There has been a renewed momentum to the NextBelt themes that I’m constantly writing about. And on Monday evening, US Treasury issued their report to the President on the regulatory landscape in the financial services industry.

Interestingly, there is always a good list out there in the real estate community. This time it was the best states for first time home buyers. Michigan came in #3 for first time home buyers on a list that included states as wide spread as New York, New Mexico and Alaska.

As you are driving around looking for a house to buy, here’s an obscure, in-depth article about something we see every day — highway food & gas signage.

As usual, I also included some thoughtful pieces on leadership and self-awareness. Thanks, as always, for reading.

This week we look at:

  • Where is the line between professional and personal liability? (Of Interest)
  • US Treasury report to POTUS (Of Additional Interest)
  • The delicate balance of household wealth and homeownership (Got Me Thinking)
  • 3 stories on the city (This week in Detroit)
  • Micro-industry support in small communities (NextBelt)
  • Habits toward happiness (Walk the Talk)
  • Financial literary (Millennial Minute)
  • Thoughts, other stuff and quote (all the way at the end)
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As seen on social media this week

Of Interest: Personal liability & regulatory creativity. I heard recently about a bill proposed by the Connecticut Department of Banking in the Connecticut General Assembly that would extend personal liability to unlicensed employees of mortgage companies and non-banks in Connecticut. CT 7141, if it had passed, would have created personal liability for sales managers, business development roles and, yes, compliance officers. According to industry experts in CT, the DoB did not believe they had sufficient tools to “go after” the folks inside mortgage companies who don’t hold licenses. My response, after I got down off my soapbox, was to question why the DoB isn’t using its authority or creativity in these cases.

For instance, state regulators (of any state) have coordinated efforts with the Attorneys General in their state, the consumer protection units (if applicable in a particular state) and the offices of economic development and/or taxation. Depending on what state you are in, state regulators do have myriad of options to enforce the law. They just have to use them. I thought it a cop out to try to pass a law that simply made compliance officers subject to personal liability instead of using all the tools in the enforcement toolbox more effectively first. In the case of CT, it doesn’t really matter since that law did not pass this session or so it appears from the state website.

At the same time, Wendy Bernard, a colleague and friend, in Connecticut did send me a link this week where federal enforcement officials did bring a personal sanction against a compliance officer. FinCEN (the federal financial services enforcement authority) found that an in-house compliance official knew or should have known about a pattern of fraud that allowed other individuals in the company to continue inappropriate behavior.

Here’s what the Acting Director of FinCEN, Jamal El-Hindi had to say: “FinCEN relies on compliance professionals from every corner of the financial industry. FinCEN and our law enforcement partners need their judgment and their skills to effectively fight money laundering, fraud, and terrorist financing. Compliance professionals occupy unique positions of trust in our financial system. When that trust is broken, it is important that we take action so that the reputations of thousands of talented compliance officers are not diminished by any one individual’s outlying egregious actions. Here, despite being presented with various ways to address clearly illicit use of the financial institution, the individual failed to take required actions designed to guard the very system he was charged with protecting, undermining the purposes of the BSA. Holding him personally accountable strengthens the compliance profession by demonstrating that behavior like this is not tolerated within the ranks of compliance professionals.”

Of Additional Interest: Two quick links to interesting topics this week — Remote Electronic Notarization (REN) in Texas and the US Treasury report to the President of the United States.

Last week, Texas passed a law allowing for the practice of remote, electronic notarization in real estate transactions if the notary is duly licensed under Texas law.

Treasury report to POTUS: To sum it up, limited regulation will “unlease” industry and revising the existing regulation is sufficient without additional burdens on companies.

Two highlights:

1. The CRA statute is in need of modernization, regulatory oversight must be harmonized, and greater clarity in remediating deficiencies is called for. It is very important to better align the benefits arising from banks’ CRA investments with the interest and needs of the communities that they serve and to improve the current supervisory and regulatory framework for CRA. Treasury expects to comprehensively assess how the CRA could be improved to achieve these goals, which will include soliciting input from individual consumer advocates and other stakeholders. Aligning the regulatory oversight of CRA activities with a heightened focus on community investments is a high priority for the Secretary.

2. Treasury’s recommendations relating to the reform of the banking sector regulatory framework, as set forth within this Report, can be summarized as follows:

· Improving regulatory efficiency and effectiveness by critically evaluating mandates and regulatory fragmentation, overlap, and duplication across regulatory agencies;

· Aligning the financial system to help support the U.S. economy;

· Reducing regulatory burden by decreasing unnecessary complexity;

· Tailoring the regulatory approach based on size and complexity of regulated firms & requiring greater regulatory cooperation and coordination; and

· Aligning regulations to support market liquidity, investment, and lending in the U.S. economy.

***

Got Me Thinking: New homebuyers are not sure about “the deal with homeownership,” or so says an index from Florida Atlantic University. The economist and academic behind the analysis found the rent versus buy math is starting to lean toward rent. Home prices are rising and mortgage rates may rise making rent the better investment. The index calculates wealth accumulated from home ownership against renting and investing the down payment and other costs into alternatives.

Fannie Mae’s Doug Duncan weighed in, “…we continue to see a lack of housing supply as many potential sellers are unwilling or unable to put their homes on the market, perhaps due in part to concerns over finding an affordable replacement home. Prospective homebuyers are likely to face continued home price increases as long as housing supply remains tight.”

Similarly, a Wall Street Journal article noted household wealth increased by $2.3 trillion in 2017 and now totals $94.8 trillion according to the FED’s Flow of Funds report. The increase was due to stock market & home price increases (i.e. somewhat on paper).

The widening gap of those with wealth and those without seems like an increasing specter on the horizon. Made worse if the barriers to entry continue to mount. The real issue is doubly difficult. The wealth gap between the haves and have-nots continues to widen making it harder for some to have the hope of homeownership at all. The additional complexity of those with the wealth being unable to pursue their dreams (even though they are in the already rare group who can afford it) is a(n economic) double whammy.

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Chrysler House, Griswold St, Detroit, MI, USA

This week in Detroit: 3 stories.

Laura Granneman, a senior project manager at QL/Rock Ventures, who works on our community development and “Detroit” projects made the case on Fox News this week that Detroit offers the best opportunity for millennials. Laura makes the case, much more eloquently, that I’ve been trying to make each Saturday about the NextBelt. Detroit, Cleveland, Pittsburgh, Louisville/Cincinnati, and Milwaukee fit the mold of the high quality of life in a place where everybody knows your name. Check out the video and themes applicable to Detroit, Cleveland, Pittsburgh, etc.

Everyone is a real estate developer in Detroit. Or could be, according to the author. One recipient of the Knight Foundation’s recent grants was a real estate developer who wants all Detroiters to take part in the city’s residential rehab. Other than a reference to the Rust Belt, the article did a good job balancing perception and reality. The big obstacle here is the ability to fix-up or rehab something juxtaposed with the willingness of owners or tenants to live there. No question there are amazing real estate opportunities here. Everyone I talk to has a house or neighborhood that they are watching to try to buy. Detroiters want to be a part of the rebirth and the renewal. Any access to capital or programs is helpful but will take a concerted effort across public, private, and individual efforts to see this through.

The realities of manufacturing in the US and then selling to a US customer: a Detroit version of the larger story. During the most recent Presidential election, the story about Carrier keeping manufacturing jobs in the US (or not) became a focal point for the conversation around globalization. The question I kept asking was — if you are getting fired up about Carrier, will you make the commitment to spend the extra $80–100 the next time you have to buy an air conditioner for your kid’s college apartment or when you want to upgrade your HVAC system? Similarly here, a few people might purchase a US-made bicycle and that’s good. Certainly we have to start somewhere. But given the stories (even within this week’s Cup of Joe) about tightening housing markets and household debt numbers, are we creating an economic environment where we feel comfortable paying more for American manufacturing products, even if we wanted to? I don’t know.

***

NextBelt: Micro-industries can support small or medium-sized communities. In this Curbed article, a case is made on how niche or artisan industries can sustain small or medium sized communities. Whether or not the craft beer market has more room in it, the idea goes beyond just craft beer. If micro-industries can create a market and/or create jobs, smaller towns particularly those nearby to other cities can create mini-markets. Interesting thought for the future especially as our collective interest in food, beer/wine and spirits continues to get more sophisticated.

As the smaller industries and remote communities become more connected with technological advances and reliance on data, cities & community groups can provide a better connection to place than ever before. Here’s a quick example from a well named publication about Detroit. (Also, notable use of ‘Rust Belt’ in the first sentence, unfortunately).

***

Walk the Talk: This week I’ve been thinking a lot about how to interrupt a routine. Whether it’s getting more sleep & getting up early or working out more, I found an article that pointed to habits as the best way to influence change. According to the article, habits make up 40% of our waking hours. These, often minuscule actions, add up to make who we are. But isn’t the whole idea of being happy simply becoming comfortable with who we are? So, the change in habits is to ultimately influence happiness.

For a really interesting look at happiness: Professor Daniel Gilbert provides 6 minutes on misconceptions of time & specifically why we make decisions that our future self views as a mistake. “In his book, Stumbling on Happiness, Gilbert argues that ‘the mistakes we make when we try to imagine our personal futures are also lawful, regular, and systematic,’ explores the sometimes subtle, sometimes radical changes we can make in our everyday cognitive strategies in order to avoid ending up unhappy and disappointed by unlearning because we set goals for the people we are when we set them rather than the people we become when we reach them.”

***

Millennial Minute: Financial advice in three acts, today:

By a Millennial to a Millennial. Takeaway — there are tools to help but it requires time/energy to do this right.

&

By a Non-Millennial to everyone. Takeaway — be active because information, discipline and results are only possible when you are actively engaged in financial goals.

Act three: What’s money for anyway? Takeaway — not happiness.

***

Quirky story of the week: Bank REO properties can be a valuable bargain but come with complications. In Boston, it’s a castle and in Oakland, it’s anarchist squatters. Isn’t this industry great? (WSJ, subscription required)

***

Valuable lessons in unexpected places: Here’s an interesting article in the Washington Post about a survey conducted by the National Diary Council. Apparently 7% of Americans actually believe chocolate milk comes from brown cows. Sidenote: USDA included potato chips on the chart of vegetables. Pot & kettle and all that.

***

Quote: “Ease is a greater threat to progress than hardship.” — Denzel Washington

Bonus Content: Why warnings matter by someone who has seen it all. Here is a fascinating podcast (though, long) with RP Eddy a former intelligence official and all around wise person. Just listen.

Continued success,

Written by

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

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