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

Friends & Colleagues,

SCJ54. I heard from many loyal Saturday Cup of Joe readers over the last few weeks celebrating the year anniversary or asking some additional questions on Zillow and RESPA. On that, I think things have gotten more interesting but the Zillow news leaked several weeks ago during a CFPB exam. Nothing has changed since except for more concrete confirmation from Zillow’s SEC filings. In general, it will be interesting to see how this plays out. Zillow seemed to imply their role in bringing together agents and lenders could be problematic. While potentially true, my interest is whether there is a referral issue when the consumer is so clearly shopping when browsing Zillow. The CFPB’s main tenet since its inception has been the consumer’s access to information and ability to shop. I was just thinking this week that Zillow is an easy platform to click or not and submit information or not. If ever the power was in the hands of the consumer, it’s on real estate sites like Zillow. That hasn’t necessarily stopped CFPB enforcement before, but this one will be closely watched by everyone as was made clear on all the industry websites this week.

Thanks for all the great feedback and I love getting questions. Keep ’em coming.

One note from two former Pentagon officials recommended an update the Walk the Walk & Talk the Talk sections. In the Pentagon and Armed Forces, the phrase was always Walk the Talk. So, that’s what it is. It’s perfect for Saturday Cup of Joe and I like leadership implications. There’s no better place to look for leadership than our men and women in uniform. Thanks for the upgrade!

This week we look at:

  • What’s the deal with the MID? (Of Interest)
  • You can fire the FBI Director but not the CFPB Director. Come again? (Got Me Thinking)
  • A unique view of Detroit and leadership (This week in Detroit)
  • Avocado toast is delicious! (A Look Ahead)
  • Be creative. On Purpose. (Walk the Talk)
  • What we can learn from Lonzo Ball (Brand Camp)
  • Thoughts, bonus and quote (all the way at the end)
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Of Interest: How do we feel about the mortgage interest deduction (MID)? Seriously, do we care? Is it style or substance or a little of both? Certainly the belief or perception that it’s an incentive helps encourage homeownership. The facts, though, make it harder to fight for purely on its face. For instance, according to The Atlantic’s Derek Thompson, “Federal housing policy transfers lots of money to rich homeowners, a bit less to middle-class homeowners, and practically nothing to poor renters.”

In reviewing Trump’s proposal, Thompson wrote, “President Donald Trump’s tax-reform plan…would be radical and transformational. But it wouldn’t radically transform the MID. Instead, it would double the standard deduction, making the MID useless for all but the wealthiest households, exposing it as merely ‘a generous public-housing program for the rich,’ as Desmond wrote (Harvard scholar).”

The article goes on to suggest that capping the MID would still allow the lower half of those who benefit to continue to benefit while using the revenue raised above the cap to fund public housing, housing assistance and other forms of wealth creation.

I often write about transforming the purchase market sales pitch from one of shrewd financial investment to one of commitment to the narrative, commitment to the story. The removal or reduction of the MID does not really play into that either way. According to Bloomberg reporting this week, the MID already only benefits homeowners with over $322,000 in housing debt and costs the federal government over $64B annually. Trump’s plan would publicly protect the MID but render it useless. So adding a cap as Thompson suggested would likely make the financial wisdom piece a little less compelling for some and allows those over the cap to feel like there is some larger plan here, I suppose. Neither really moves the needle for anyone really. Of all the issues on the table in Washington, is this one likely to get a rigorous defense or vocal support?

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Got Me Thinking: There was an op-ed in the Los Angeles Times this week that questioned whether bank regulation is as burdensome as the bank lobby implies. First, let me say that nothing is (probably) as ever intense or serious as any industry’s lobby implies. Second, the column would not be worth including, at least for the first 90%, until I got to this section:

“For consumers, perhaps the single greatest insult of the Financial CHOICE Act is the harm it would do to the CFPB…the act would allow the president to sack the bureau’s director at any time for any reason. It also would greatly limit the bureau’s ability to oversee and enforce rules pertaining to financial firms, even though the bill cynically would rename the bureau the Consumer Law Enforcement Agency.”

In light of recent events, how is it that the Director of the FBI can be fired at well but that the Director of the CFPB cannot or, at least according to the column, should not be? Former Director Comey said as much in his letter to his staff. Seems to me if the FBI can enforce the law with a Director that can be fired at any time. CFPB should have no trouble doing the same.

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This week in Detroit: Last week I mentioned the opening of our new streetcar, QLine, and this week I came across an interesting profile in one of the streetcar’s key leaders, Roger Penske. This both gives background on Detroit and provides insight into the levers of leadership. Penske notes commercial development is critical but community development in housing and education are the lynchpin of long term, sustained health:

“You’re just seeing the tip of the iceberg right now,” he said. “[Dan] Gilbert’s talking about building the tallest building in Michigan, and all of the stores. These old, very nice buildings where the cores are so strong are now being re-engineered for business purposes and also to live in. If we get people living downtown it’s going to change everything.”

“We need a safe city, we need a clean city. And that’s going to take some time. There was a time when we had 80,000 homes and derelict buildings that needed to be attended to…The other area is trying to figure out how to get these kids an education that is meaningful to them. I’m not sure I have the answer, but that’s something we all have to take into consideration now. Because if we don’t have schools for the city of Detroit, all these millennials who are moving into town and have kids, if they have no place to send them, they’ll move out.”

Takeaway: The power of personality in persuasion can be a game changer in the right hands.

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A Look Ahead: Avocado toast took center stage this week after an Australian millionaire decided to “chastise” millennials for choosing avocado toast over homeownership. It’s not clear to me that millennials were confused on this issue. But thanks for clearing it up, dude. For my money, I never met anyone who was driving a newly leased car, eating at the new, trendy gastropub each weekend and wondering why they couldn’t afford a home. My bet is that millennials understand the trade off and are ok with it. I think what bothers this guy is that a younger generation is making different choices than he did. What’s somewhat ironic is that his broad generalization can be returned in kind — his generation did all the “right” things regarding homeownership (at least according to them) and then participated in the housing market that caused the crisis. I’m not suggesting everyone who isn’t a millennial is somehow responsible but rather that he ought to think a bit more broadly before chastising millennials about being lifestyle conscious (!).

The truth is that millennials are making different choices about their housing. I’m not yet ready to say whether that’s just a cultural perspective or a response to the mortgage crisis and the role institutionalized banking played in it. Either way, a Wall Street Journal article this week interviewed PMGx a building in Chicago that allows millennials to rent a room rather than a full apartment. Rent is as law as $1,000 a month which is more than half the going rent for an entire apartment. Basically saves you from finding a roommate but requires a much higher comfort level on common areas, that’s for sure.

Difficult, new choices around homeownership is not limited to millennials either. Many established homeownership cannot buy larger homes and are choosing to remain in existing homes and renovate instead. For some lenders, this is just a switch from purchase loans to home equity lines of credit. For others, it could drastically change expected volumes moving forward. Certainly economic factors play a big role in these types of decisions. What’s interesting is that even while employers are more and more likely to allow flexible work-from-home schedules or full-time remote positions, economic instability (and/or political instability) will detract from consumers’ willingness to upgrade or invest in larger homes.

It’s just interesting, I suppose, that the avocado-toast-hating millionaire was so critical of millennials when many existing homeowners are not able and/or confident enough to invest in new homes either. The market is still kinda out of whack in many areas and perhaps the time of instability will be helpful in righting the ship. We’ll see.

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Walk the Talk: Be Creative. On Purpose. Forced deadlines. This takes many forms. I promised an email with articles and thoughts every Saturday morning as a way to keep my creativity active. Recently I heard about dietbet.com where users can send in money to compel discipline that might otherwise be illusive. I’m curious how people tap into creativity or try to maintain creativity (even when their job requires it).

One blogger posted advice on creativity this week. While much of it is cliché, I did find one thing that rang true for me but that I don’t necessarily hear articulated this way — forge a deep respect for your ideas. It’s obvious that this must be true. Listen to any podcast, read any author and watch any television show where the main character is also the producer/writer/director (Louis, Inside Amy Schumer, Master of None) and it will become clear. These creative people have a deep respect and pride for their own ideas, their own message. It’s a fine line between respect/pride and arrogance/insolence but isn’t it better to be on the daring, risk-taking side of that fine line? If you don’t believe in your ideas, no one else will.

Some of these inspirational and motivational posts are all over the place in terms of advice and recommendations. I try to sift away the excess and take away 1 or 2 valuable lessons from each. If for nothing else, it serves as a reminder for that day or that moment. For me this week, it was solidifying a deep respect for my ideas and confirming my willingness to share them.

Here’s the case for all jobs requiring storytelling moving forward. (with videos)

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Brand camp: I’ve said many times that I try to look everywhere for valuable lessons. This week that includes the wide world of sports. Since the NCAA tournament, the story and future of UCLA star Lonzo Ball has captivated even casual sports fans. Whether it’s his flashy and impressive skills or his father proudly claiming his 3 sons are worth a combined $1B (with a B!) in branding, Ball stands to be a top 5 pick in this year’s NBA draft. What makes his brand, Big Baller Brand (BBB), interesting is not the word play with his last name but his family’s attempt to take back the ownership and management of the entire process. Like Louis CK full funding and producing his own comedy specials or Chance the Rapper independently producing his music, Lavar Ball (Lonzo’s father) is now attempting the same type of shoe and brand deal in professional sports. I think this is different than LeBron’s brand management company / agency orchestrating shoe deals and signing other athletes. The Ball family intends to be its own product beyond just a label. Particularly bold when you realize Lonzo is the oldest of three and the only one to have achieved at the highest levels (so far). There is a lot that has to happen before we can begin to call this a success. But the disruption and pure aggressiveness associated with a move like this is, on one hand, admirable and, on the other, treacherous. First one through the door takes all the bullets right? As we decentralize brand and power to command an audience (and therefore, sales), we should all be thinking about consumer products, including consumer finance, in new and interesting ways. Check out the link if you are looking for more insight into how marketers and brand managers think these days (even the amateur ones like Lavar Ball).

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Footnote: I’ve started eating RxBars for lunch and I’m hooked. I was always struck by the packaging but just assumed they were too expensive (the way the decent protein or energy bars tend to be). Mer bought some and my loyalty to Clif bar is waning. Check out this article this week on how the packaging transformed the brand and the business. Kinda interesting. I can vouch for chocolate coconut and peanut butter in particular.

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Moment of non-business:

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Today’s Thought: HQHB. It stands for high quality human being. I heard a colleague in our community development group talking about how one of the most important factors in a child’s development is 2–3 meaningful relationships with high quality human beings. I used to introduce friends to each other as “one of our people” as a way to communicate that same sentiment. “One of our people” is a bit more cryptic and clubby, high quality human being is more complimentary though board line pretentious. I’m not sure whether it will stick. But for now, I’m going to consider and see how it feels.

Quote: “The most common way people give up their power is by thinking they don’t have any.” — Alice Walker (novelist and poet)

Bonus Content: A history lesson in power and cooperation. This blog post recounts how 4 sisters outside royalty became 4 sitting Queens in 13th Century Europe.

Continued success,

Written by

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

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