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

Originally sent out Saturday, March 11.

Friends & Colleagues,

This week was busy at work and at home. It was International Women’s Day on Wednesday. I’ve included a picture and a story from something State Street did to raise the level of dialogue on this issue. It also reinforced the power of social media to direct narrative. I saw tributes, stories and photos that underscored the significance of the day for many of my friends, colleagues and loved ones. It was a proud day.

Along those same lines, I’ve also been playing around with Instagram for the past few weeks trying to figure out if it could be used for brand management or to build an audience. Instagram seems powerful for connecting with an existing audience. Whether it can be more than a personality tool remains to be seen.

Otherwise, I don’t have any travel coming up until April. Putting my head down on some key projects including HMDA Implementation. Each week poses new and interesting changes in Washington and with federal policymakers. We’ll be keeping an eye on that in the next few weeks and months too. (Cordray leaving to run for Governor of Ohio is still just a rumor?).

As far as this week’s newsletter, I highly recommend jumping around. I had several long sections that may or may not be relevant or interesting to everyone equally. For instance, I couldn’t resist taking a stab at explaining RESPA to those readers not in the real estate industry. But after almost 1,000 words, it wasn’t any clearer.

This week we look at:

  • Title II of Dodd-Frank giving regulators extra authority if a firm fails (Of Interest)
  • The future of employment and perhaps the economy, if not society, from the mind of James Altucher (Got Me Thinking)
  • The new role a Chief of Staff could play in your organization (A Look Ahead)
  • Looking to motivate your team, try pizza (Have You Heard?)
  • How 4 news stories this week tie together on the question of morality in decision making (Viewpoint)
  • The value of intellectual humility (Quick Hit)
  • Trying to explain Zillow’s issue with RESPA to non-mortgage audience (Sidenote)
  • Thoughts, bonus and quote (all the way at the end)
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Of Interest: Bernanke cites 3 reasons why in certain dire circumstances regulators, not judges, should liquidate a financial firm. First, regulators already have the granular knowledge of the balance sheets and operations of the largest firms. Second, market monitoring conducted by federal regulators provides a view of the whole system that is difficult to make available to a judge or panel of judges in real time. Third, most firms are international actors and coordination with foreign regulators, foreign central banks and other foreign stakeholders can be centralized with those most familiar with joint planning and collaboration already.

Presumably it is timed to correspond with Congress’s efforts to amend Dodd-Frank and ensure some aspects are not removed completely. The bottom line is this is not something that implicates taxpayer funds but instead offers an emergency rip cord, according to the piece. Whether Bernanke’s overtures are successful remains to be seen, but it was persuasive and worth a look.


Got Me Thinking: A new podcast entered my playlist recently, . It’s not a new show. I found it after about 200 episodes were already available on iTunes. James has interviewed people like Daymond John, Cass Sunstein and Tony Robbins. His crass and irreverent style keeps me on my toes. I cannot really recommend it yet as I’m still understanding his point and thesis in doing this, but I have been interested in James Altucher broadly. He’s an , investor and . Because I’ve been interested in his work, I was drawn to an article he published

Altucher kept to typical HuffPo style with “10 reasons you need…” blah blah blah. Yet, by reason #2, I was hooked. Reason 2 is 94% of all new jobs created in the past ten years are part-time or freelance. Last week I wrote about the gig economy and it makes sense that most of the jobs are still nibbling around the edges of long-term, sustained positions. What Altucher wrote that should be concerning to us was the claim that just one development — self-driving cars — could trigger downstream economic contraction. The founder of ZipCar, Robin Chase, is quoted as saying when self-driving cars are the norm, “90% of the auto industry will disappear.” If that’s true, the oil industry has to either change and “[t]he real estate industry will change. And so on.” It’s interesting Altucher implicated the real estate industry that quickly.

This is obviously an informal and unscientific assessment. But it’s fascinating to me the lack of research & development going on in our industry. We’re still trying to catch up with automation, cloud and (barely) blockchain technology. And that’s mostly for processing and underwriting functions. Is anyone thinking about the real estate industry with aging homes (built between 1940–1990) in an economy that’s not producing new jobs?

In case you think I’m being overly critical or hyperbolic on the real estate folks, there is plenty to go around. Altucher’s 4th reason is The Great Knowledge Handoff. Here, he supposes that artificial intelligence machines can handle much of the testing and analysis currently done by doctors, lawyers and researchers. Altucher writes “Goodbye 90% of lawyers, doctors, pharmacists, programmers.” Now what?

By the end of the piece, Altucher is imagining a world where we not only don’t have jobs, in the traditional sense, but we are happier sustaining an okay quality of life. It’s not the ‘every American can be a millionaire by working hard enough and wanting it badly enough’ story that has dominated the Internet since its inception (and late night infomercials before that). This view has massive implications for how we approach work, government, society and self-determination. Yes, it’s a little out there but, in my defense, the title of this for me was “Got Met Thinking.” It might be easy to dismiss because of his weird ideas and informal writing style but I think there’s something here. Not just in the way technology has already shifted our economy or the rise of a younger generation with fresh notions of fairness and accountability (see, Bernie rallies) but also we’re asking some fundamental questions about wealth, diversity and the role of government in society that could either end or ignite this seed of thought.


A Look Ahead: As leaders, it can be difficult to identify the right time to delegate, the right time for a new hire, the right time for an assistant and often times, the company can suffer until someone is brave enough to tell us or we figure it out on our own. . A Chief of Staff (CoS). Just like the President. In the article, Organ gives a nod to Reid Hoffman at LinkedIn who deployed this same strategy. For me, a light blub went off when I read this. It makes perfect sense for the mid-size to large, growing company. It’s not necessarily another C-level executive who is going to have to fit in with the team. It’s more of an air traffic controller meets devil’s advocate meets sidekick.

Another thing I found valuable about Mark’s perspective on a Chief of Staff was the lessons identified, ostensibly as managing the CoS, are actually applicable to managing anyone on your staff.

1. Write a roadmap for success

2. Structure the time intentionally

3. Present the role in a way that sets them up for success

4. Open up to your staff

5. Don’t be threatened

6. Listen to your instincts

Those are a few of the lessons in this structure and they are broadly applicable to all of us. CoS or not.

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Have You Heard?: Pizza might be the best way to bonus your team. I know, right? I mean, I love pizza. But I never thought of it as more valuable than cash. It’s almost as if employees come to expect money and/or do not appreciate it as much as connecting with a colleague or boss. Imagine that (!).

Here’s the most telling line from the article for me: “From the employer’s perspective, a cash bonus is worse than offering no incentive at all.”

Instead of simply trying to buy your way out, and offering genuine gratitude …and food.


Viewpoint: One thing I’ve been noticing lately is how activism and “support” have been changing. I get the sense there are competing theories on how much we should rely on “the market” to correct for inefficiencies or unfairness and how much we should assert a moral position into the conversation. Here are a few examples.

A group of students at Middlebury College, believing the speaker to have old notions of race and class, create such a disturbance that . On one hand, social disruption is an effective way to make a point. On the other hand, free speech demands the ability for conflicting ideas, even ugly ones, to be allowed time in the public square. .

when voting on new directors in companies where State Street holds a stake. Here is a private firm making a statement of values that goes to the heart of how it treats its capital and the companies it can influence. On Tuesday, State Street placed a bronze statue of a girl staring down the famous bull statute on Wall Street in New York City. By Friday, that image has made its way around most social media platforms and into the mainstream media as well.

floated the idea last week that President Trump’s economic plan could mean a tax on imports would raise consumer prices across the board — closing, shoes, electronics, food, . The question is whether Americans will gladly (or even begrudgingly) pay more for these items to ensure Americans retain jobs and/or American-made items compete? This would be an intentional inefficiency in the market to assert a moral view — Americans require an (uneven) advantage in job opportunities. You have to wonder what political constituency (at least in Washington) will try to claim the territory of the free market, laissez faire capitalist when the GOP moves forward with federal regulation that interferes with the market to benefit a subset of citizens/workers.

or investing in companies that support or reflect a certain set of values. (). I think we’re all familiar with this in terms of “green funds” for environmentally conscious companies. This new approach set off a round of stories in financial and liberal publications. Nevertheless we’ve all agreed at one time or another that decisions are made first emotionally and later rationalized with information (even if that “later” is mere moments). According to the post, 83% of Americans use values when making investment decisions. Not surprising.

Yet, this goes back to what ties these 4 stories together. On one hand, we’re making moral choices all day every day about free speech, the value of diversity, the distribution of resources in society and companies that deserve of investment or patronage. On the other hand, we’re pretending like we don’t. We’re avoiding, for the most part, the bold acknowledgement that these are moral choices, they are unavoidably moral and if we could just admit it, the conversation would be less about “who’s right” and more about what value we’re looking to honor or disregard on any particular issue. To claim a tariff on foreign goods or health care policy choice is not a moral decision hides behind a view of the market that’s no longer true.


Quick Hit: Often, the difficult thing is the valuable thing. It’s true in fitness, education and spirituality. It is not surprising, then, that research into the psychology of intelligence and learning found that intellectually humility is incredibly valuable and therefore difficult. . In fact, “People with intellectual humility are both and better able to engage in civil discourse. Google’s VP in charge of hiring, Laszlo Bock, has he looks for in a candidate: Without intellectual humility, he has said, ‘you are unable to learn’.” It can feel impossible especially in today’s political climate, but empathy, sincerity and civility will help break the “tug of war” between your head and heart leading to healthier interactions and decisions.


Sidenote: We heard on Sunday in the Garrett-McAuley newsletter that CFPB examiners were asking questions about whether a lender paying for leads or marketing on Zillow was a referral and therefore a RESPA violation. By Wednesday, the real estate and mortgage broker communities were .

Since RESPA is a wide-ranging statute and probably not widely known outside real estate finance, I thought I’d attempt a quick explanation of what’s going on here. prohibits exchanging “any fee, kickback, or thing of value” for the referral of specific settlement service(s) in connection with the closing of a mortgage transaction. You cannot pay for business. Mortgage loan originators/mortgage lenders cannot exchange or entice a “thing of value” with anyone in a position to refer the customer. Same goes for title agents/attorneys. Since it is generally real estate agents who find themselves in the best position to refer business much of RESPA section 8 activity has focused on real estate brokers, mortgage companies and title agents/companies. The tough part is the line between general marketing or business development functions and a “thing of value” in exchange for a referral of business. Referral, over the years, has come to mean “endorsement” because cover any activities “affirmatively influencing the selection.”

In practice, RESPA is extremely difficult to regulate. CFPB’s response has been to take an aggressive interpretation — more restrictive than the guidance published by HUD over the years — and “crack down” on any agreement between the parties mentioned above where money or services are exchanged for the marketing of customers, providing leads and other promotional activities.

Fast forward to this week’s debate over so-called Zillow leads. There are 2 RESPA-related activities around Zillow. Lenders can purchase leads from Zillow or real estate agents on Zillow. Lenders can pay Zillow or real estate agents on Zillow for a photo and contact info on the property page. Let’s start with the second version first.

Unless you work in the industry, you may not have even realized that mortgage lenders and mortgage brokers advertise on Zillow. Financing is relegated to the bottom of the property page. Nevertheless, real estate agents are given top billing and often included prominently to the left or below the property information. Zillow charges, not surprisingly, for this advertising. Real estate agents often find themselves with several offers from mortgage loan originators to pay for the cost, split the cost or otherwise share in the advertising. RESPA and CFPB see the deferment of a payment that someone would otherwise have had to make as a thing of value. So, by paying the real estate agent’s Zillow invoice, in exchange for customers (even, I suppose, potential ones), a mortgage loan originator could violate RESPA. In response, most companies that engage in this or allow their folks to do it on their own instruct employees to split the cost based on the amount of advertising — 1 agent and 1 loan officer would split 50/50. 1 agent and 3 loan officers may split it 25/25/25/25. You get the idea.

This week, someone implied that during a CFPB exam, the examiner took issue with the purchase of leads from Zillow. This would be the second type of activity mentioned earlier. It is not clear whether that means purchasing Zillow leads from Zillow or purchasing Zillow leads from a real estate agent. Either way, it is a further blurring of the line between sales & marketing activity (ok under RESPA) and paying for referrals of business (not ok under RESPA). The statute has always been vague, the regulations are not much better — though they do provide for “bona fide services” at “fair market value” which is some standard at least, and the regulator(s) have been unwilling to go on the record with a new rule or formal interpretation. Because its messy, most companies trying to steer clear of regulatory risk also steer clear of any agreement that moves toward the informal line in the sand. Unfortunately that decision puts the “good guys” at a disadvantage. Without know the rules of the road, companies trying to follow the rules start questioning any lead buying, sales activity that comes from a referral source even if it’s a giant, general website like Zillow. Any customer on Zillow knows enough to search the web for lending or settlement services. The mere fact that the consumer is on Zillow filling out their information or clicking on links to other services is an indication they are shopping and aware of their activity. Nevertheless, that any in-house compliance officer or attorney has to be warning their company that this broad interpretation implicates much more than just Zillow leads.

Honestly, for anyone outside our industry, this must feel like much ado about nothing. We’ve come pretty far afield from the original bad acts that RESPA section 8 set out to prohibit. Additionally, it was originally written before technology allowed for point-and-click ad sharing and/or sophisticated branding arrangements. Nevertheless until there is some certainty in this area, the market will continue to be all over the place from the good companies steering so clear of that informal line that normal, allowable business development might be prohibited to others deciding that confusion is a license to push or even cross the line. In the end, consumers are not served by this regulatory inefficiency and the only invoices being paid are those to outside legal counsel.

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Today’s Thought: Walk. Jog. Pass. My gym has an indoor track on the second level. I couldn’t help but think about the lanes as a nice metaphor for life. It’s all about choices. Joining the run (by joining the gym) is step one. Once you’re on the track, then you have to pick a lane. Ownership of choices and ownership of what you can control. Pick a lane and get to work. Life choices, generally, are similar to fitness/health choices, specifically; it can be a gym membership, it can be walking/running/biking/swimming, or it can be done entirely with diet. There’s no perfect formula to copy. It’s all about your life, your leadership style and your preferences. But don’t avoid it because its difficult and don’t avoid it because there are too many options. Those are excuses. Pick a lane and get after it. My goal this week was to #hustleharder. Next week, I’m going to try to “jog” when it comes to the intellectual humility that I wrote about earlier. And I’m going to try to “pass” when it comes to decision-making at work. What are you gonna work on this week?

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Bonus Content: . I don’t know why but whenever my wife binges a new season of this show, I always end up enthralled and smiling. I know, the title does not instantly scream “interesting” but it really is entertaining. Available on Netflix.


Quote: “The only thing that isn’t worthless: to live this life out truthfully and rightly. And be patient with those who don’t.” — Marcus Aurelius

Continued success,

Written by

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

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