Saturday Cup of Joe: a lending and tech(ish) newsletter
Friends & Colleagues,
SCOJ80. We had an extremely productive week. Things are moving fast around the office. Whether its strategic planning for next year or tactical moves to prepare for the 2018 market, we are embracing the speed of the game and getting comfortable being uncomfortable. One of the biggest things leaders talk about when assuming a new role is how uncertainty exists in every area of the business. Leaders must be ok with uncertainty. Decisions must be made and when you are on the cutting edge, there is no precedent.
On Wednesday I attended the Housing America’s Family Forum at the RenCen hosted by the J. Terwilliger Foundation. Bill Emerson spoke about housing finance in Detroit and the revitalization of Detroit. Many leaders in housing finance and housing policy attended and presented. Then, midday Wednesday, news broke that Richard Cordray had resigned as the Executive Director of CFPB.
This was relatively big news. First, Cordray is the only Director the Bureau’s ever had. Second, Cordray was instrumental in all the big regulatory and enforcement actions in the Bureau’s history. Lastly, Cordray is a Democrat and, while he would ended his term in July 2018 anyway, his vacancy allows Trump the opportunity to nominate his pick early. Our industry was looking for clarifications on RESPA, HMDA’s publicly disclosed data and Ability-to-Repay/Qualified Mortgage “tweaks.” We wait to see if Trump’s pick, Mick Mulvaney, sets a specific vision for the Bureau and in the meantime, it will be interesting to see how the industry responds. On one hand, some will celebrate the deregulation that Trump promised in his campaign. On the other hand, companies just spent millions and billions of dollars implementing the Dodd-Frank framework in our businesses. So while some adjustment is welcome, we cannot simply remove everything and expect stability. It will be important for our industry to do this right.
Valuable lessons: Have you ever thought about your peak potential? I had an exciting conversation this week with one of my colleagues about the secret dream everyone has to accomplish something that you either have never told anyone or don’t even fully embrace yourself. She inspired me to start writing a story that had only been in my head until now. I encouraged her to actually write down her top 3 career goals that she “never thought possible.” After that conversation I happened upon an article on Medium.com by Nicolas Cole about what it takes to be in the top 1% of your dream/profession/goal. Cole and I agree that nothing is out of reach if you are willing to put creativity, determination and sacrifice into achieving it. Cole has a valuable perspective on how devoted he needed to be to achieve his first “professional” goal. Don’t be distracted by the fact that his goal was a video game champion.
His path and his advice frame up valuable lessons about what’s possible if you 1). devote all your energy toward your goal, 2). observe and adapt as you gain more experience and 3). get “creative” about the rules & assumptions others will place on your decisions and your goals. Cole was told to quit for a lot of good reasons but he followed his view of the world and created wild success for himself. What do you dream of doing that others have told you is crazy? What haven’t you ever told anyone you wanna do but that you know in your heart you are capable?
Included this week:
- Of Interest — Developments in the industry
- Inside Baseball — Senate bill 2155 revises Dodd-Frank
- Next Belt — Detroit expands its agrihood
- Walk the Talk — Mark Zuckerberg is learning about small businesses one state at a time
- Quirky Story — Products aren’t that different than drinks
- Today’s Thought, the Quote and bonus
Of Interest: This week I wanted to look a few quick innovative ideas that are either already in play or about to spark next level steps in our industry.
Virtual reality. Period. That’s it. How are we not already using this to conduct home tours? Meet with mortgage bankers? Or in the case of this home builder, view a model home while the builder begins building the real thing? Between virtual reality and artificial intelligence machines, consumers will be able to tour houses from anywhere in the country, meet with an industry professional and get a predictive, accurate, personalized approval from Rocket Mortgage all in a matter of minutes. How is your business built for this reality? Yes, you may think its 10 years away. But how quickly did travel agents and taxi drivers need to respond to travel search sites and ride-sharing platforms? How quickly did they actually respond? The speed of the game is changing. What are you doing to keep up?
I had heard recently there’s a bubble of commercial mortgage backed securities (CMBS) bursting because the shopping malls or large shopping centers that anchored the CMBS are underwater. Americans are shopping more online and in smaller, more personnel retail spaces. As a result, we have and are about to have empty shopping malls throughout the country. At MBA Annual recently I mentioned this to James Morin and Rick Roque because I “pitched” the idea of turning these malls in apartment complexes complete with beer gardens, coffee shops, barber shop, dog park and indoor track. Yes, it would take hundreds of millions in renovations but converting a mall into a place where pod-style apartments could share resources, share space and yet bet centrally located (generally speaking) could have an economic, cultural and environmental upside. Sure enough, Rick found an example already underway in Providence, Rhode Island. I was reminded of this again this week when I read a concise and sharp prediction of this issue on Huffington Post. The Executive Director of Columbia University’s Earth Institute cited two major trends that our industry must be ready for — sharing economy and urban density. I write often about the gig economy and how my generation is changing the way we look at work and work-life balance. These are social changes that will have dramatic impact on real estate and consumer finance. Read the article for the full flavor. Something I’ll be keeping an eye on each week with the Saturday Cup of Joe.
Inside baseball: The Senate proposed a financial services reform bill, for the first time in years, that would revise Dodd-Frank. The bill, S.2155, distills the regulatory reforms first announced by President Trump have a real chance of passing the House and being signed by the President. The bill has 3 notable advances. First, the bill includes “no wait for lower rate,” which is a provision that allows the lender to waive the 3 day waiting period between Closing Disclosure (CD) and closing if the APR decreases. Second, the bill includes a codification of the transitional licensing concept. If a mortgage banker leaves a bank to join a non-bank (independent mortgage company), the individual can continue to originate loans while the state approval of MLO license comes through. Transitional licensing has been a major priority that levels the playing field between banks and nonbanks. Third, the Senate bill limits the PACE loan programs by subjecting PACE lending to CFPB Regulation. Even though bill does not direct CFPB in a certain direct, any regulation is likely to bring PACE lending into the CFPB standard which is likely to help mortgage lenders.
Overall S.2155 is the best mortgage reform bill we’ve seen in quite some time. There’s a lot to the legislation and I’ve only highlighted the 3 most interesting pieces for our businesses (non-bank mortgage lenders). The bill includes protections for community banks and rural properties. What’s more, being that it was proposed by Sen. Crapo without the support of Senate Banking Committee Chairman Sherrod Brown (D-OH) which means it may still be possible to find (some) bipartisan support. Certainly this one has more than any previous bill since Dodd-Frank. One example of compromise is the provision allowing community banks (under $10B in assets) to portfolio loans and create QM loans after 3 years (of risk) on the balance sheet.
The bill doesn’t address QM’s points and fees threshold (3%) or clarify CFPB’s Appendix Q. The bill may evolve as it develops with the input of industry and other stakeholders but, right now, it seems acceptable to about 61 Senators. If true, this is as likely as any bill to reach the House. Once past the House, it would be presented to the President. Of all the financial reform over the last decade, S.2155 is the first real adjustment to Dodd-Frank. How would you reform Dodd-Frank? Would you prioritize points and fees threshold or the 3-day waiting period in the TRID rule? How much would regulatory adjustments affect your business?
Next Belt: From time to time, I get questions about what Detroit is really like? It’s videos like this that make it both easier and harder to answer that question. While it’s impossible to keep track of all the interesting projects happening all over Detroit, we have several sites that publish the most ambitious and unique examples we have to offer. In this Curbed article, Detroit’s first agrihood exemplifies what’s possible #InTheD.
Walk the Talk: Zuckerberg’s national tour comes to an end this week. In case you missed it, Mark Zuckerberg visited all 50 states this year. What did he learn? Did he see the real thing? One possible sign that he is willing to turn his experience into action, he is interested in prompting small businesses and entrepreneurship. Almost every founder-turned-CEO mentions how we need more people innovating more ideas to drive the entire economy to the next level. Zuckerberg may be joining that group. Reminded me of the following Mark Twain quote: “Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one’s lifetime.”
Quirky Story: Simple but solid reminder of why we buy things (and why we drink). A part-time bartender and part-time digital marketer (gig economy, am I right?) explains in 3 easy steps what your customers want.
1). It’s not about your product. Everything is about identity.
2). People want you to make the decision except they don’t want to feel like you made the decision. (“I want you to want to do the dishes.”)
3). The same but new. The best experience is familiar enough with a little wrinkle.
Today’s Thought: Hate losing more than you love winning. I heard this twice this week. And so, I’ve been thinking about it a lot. When asked what made him a star, Alex Rodriguez pointed to his disgust for losing and suggested it is the single defining characteristic of successful people. The other reference to this same idea was Gary Vee who his daily video blog (vlog) referenced the same thing. Interestingly, this has been a question of mine for some time. Thinking back on my own experience, what has been more motivational? The ambition to be great or the fear of losing. More often than not I focus on greatness but it is clear that fear of losing is the more powerful feeling. When you think about your next week, next year and next career, do you love winning or hate losing? How will the answer to that question shape your approach?
Quote: “Formula for failure: Try to please everybody.” — Herbert Bayard Swope