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

Friends & Colleagues:

This week I thought I’d provide some quick notes from the Mortgage Bankers Association (MBA) Annual Convention in Boston, MA. Hopefully there are some takeaways that help your business. All in all, it was a positive and productive conference.

This week we look at:

· MBA highlights — URLA, LEP, and CII (Of Interest)

· CFPB issues HMDA warning (Have You Heard?)

· Historical view on PHH v CFPB (Got Me Thinking)

· Slideshow of some cool empty buildings (Quick Hit)

Of Interest: FannieMae presented a few updates on the new URLA (1003). The new URLA was extensively consumer tested, intentionally consistent with the look & feel of the LE/CD and special attention was paid to the REO section. The January 1, 2018 is no longer the effective date. Fannie Mae and Freddie Mac will be reaching out to industry to set a new date. Secretly I’m of the opinion that the AUS was not ready to accept the new forms or the dynamic nature of the web form, so they are delaying the dates.

The issue of whether the government should require lenders to ask clients about their language of preference came up in several meetings. Director Watt mentioned it as an ongoing area of interest for the GSEs. The incoming chair of MBA’s Legal Issues committee, Josh Weinberg, brought up some fair lending concerns around whether lenders could charge for translation or related services. Beyond that, limited English proficiency (LEP) remains a hot button as lenders race to reach more customers and regulators try to ensure the brought balance between carrot and stick. Unfortunately the technological and practical complications are many and even those that have the resources are struggling to iron out the many complexities.

The CFPB just closed a comment period on being allowed to share confidential supervisory information (CSI) and confidential investigative information (CII) with any agency it deems necessary. Currently, CII does not have a mechanism for sharing. The Proposed Rule would eliminate the lenders ability to share CID/CII which might have constitutional implications. One lawyer anticipated 1st amendment issues if companies cannot go to the press, Congress or trade groups without fearing sanctions. Also, if CFPB begins sharing all CSI and CII with enforcement agencies or state agencies, it would be a blatant expansion of power and leverage in negotiation.

Director Cordray spoke to Tuesday’s General Session but did not say much, in my opinion. I did note a few things: foreclosure starts are lowest in 16 years, CFPB received their millionth complaint, and Bureau estimates lenders will save $30–60M collectively because of HMDA’s new web-based submission portal. A few folks have written that Director Cordray “put servicers on notice” about upcoming enforcement attention, but what I heard was an opportunity. “We would expect to see servicers utilizing technology including making technology investments that benefit consumers.” (JDP paraphrase). Director Cordray ended by maintaining his position on MSAs and specifically mentioning the RESPA risk.

Sidenote: Interesting story from a CEO I spoke with. The company’s CFO had his cell phone hacked (not stolen) and the hacker was able to change the password on his Verizon account, get into the Chase app, move money around within the company accounts (to make it look routine) and transfer $30K out to an external account. Chase discovered and locked it down, but had to absorb the $30K loss. Also, it created chaos because Verizon would not allow company employees back into their phones for a period of 5–6 hours because no one knew who to trust to reset passwords. To make matters worse once the phone was discovered and addressed, the hackers immediately moved to the CEO’s phone and locked him out of his own Verizon account but the company was able to address it before anything further occurred. All this happened while their phones were still in their pockets.

Have you heard?: CFPB sent out a form letter to 44 lenders warning each institution about the failure to properly file HMDA data. Previous to this announcement, there was a concern that CFPB wouldn’t be able to tell if a lender failed to file. For example, the lender files in 2013 and again in 2015. It was not clear that HUD, the Fed or CFPB had a way to tell the lender should have filed in 2014 (until perhaps an onsite exam, if one ever occurs). It is not entirely clear whether there was any pattern to the letters — small lenders that float above and below the threshold depending on business in a given year, lenders who had technical difficulties and thought they were in compliance, or those who are simply out of compliance.

Got Me Thinking: In talking about the recently decided court case, PHH v. CFPB, with fellow lawyers, executives and compliance folks at the MBA Annual Convention, I discovered one aspect that made the case more interesting. One of the lead litigators on the case said that the political environment around this case is a valuable history lesson. The CFPB was created in large part due to efforts by Senator Elizabeth Warren, both in her research & writing as a Harvard Law School professor and as US Senator, under the Obama Administration. President Obama appointed Richard Cordray the Executive Director and the law stated the Executive Director could only be removed “for cause” and not at the will of the President. Ever since, Congressional Democrats have objected to amending the leadership position to be a commission or panel of appointed leaders and/or to make the Executive Director an appointee removable by the President under certain conditions. The Supreme Court precedent for that decision dates back to a case called Humphrey’s Executor v United States where Congress passed a law limiting the President’s ability to remove the head of an agency. At that time, President Roosevelt was taking advantage of executive whim and Congress was moving to protect newly formed, so-called “independent” agencies like the Federal Trade Commission and Federal Reserve. (Now it’s the Dems fighting to keep the position outside Presidential control.) How CFPB’s leader is appointed and removed is directly related to the President’s Article II power and will be a key factor in whether the Department of Justice joins the appeal (which would either go back to the DC Circuit or to the US Supreme Court depending on what issues CFPB chooses to bring).

A Look Ahead: Life after HAMP. One of the MBA panels covered the proposal to provide a loan product or solution called One Mod that will assist consumers with “meaningful payment relief.” Quicken Loan’s Alex McGillis spoke with several other industry experts on the framework for how this loan modification program could improve (and take the place of) HAMP.

Quick Hit: Coolest empty buildings in America.

Today’s Thought: A half-eaten steak in the eye of the beholder. The little things matter. The perception matters. We might not want to admit it but people make assumptions all day long. I was talking with Norcom’s JimmyMac, James Morin, this week about how easy it is for someone (a business partner, a vendor, a mentor) to make assumptions or misunderstand the smallest thing in a meeting, business dinner or other interaction. Many of us spent several days at an industry conference where there were many opportunities for observations and therefore assumptions (positive or negative). We went to speaker panels and sessions, we attended receptions, we had business dinners and we ran into colleagues walking through the convention center. As much as we might hate to admit it, perception matters.

Here’s a quick example that illustrates the danger in making assumptions but should help illuminate my point. At one meal, we were seated at a large table with approximately 12 people and I only knew about half the table. I was seated next to a widely respected and influenced partner from a national law firm. We hit it off and talked all things from M&A war stories to national politics to family histories. During the main course, the partner finished his salmon well before I finished my steak and began picking up the lively conversation right where we left off before the food had arrived. It was a back-and-forth discussion, very interesting to me, and I did not have a chance to continue eating my steak. To avoid talking with my mouth full, I just stopped my meal. I’m not proud to admit I left half a steak. Now, to anyone at the table that doesn’t know me, this could go both ways. Some people would see that half eaten steak and make the assumption that I was wasteful or, worse, unwilling to stand up for myself (and finish the steak). Essentially a weak(er) person. Others might see someone who is willing to sacrifice physical satisfaction or forgo a short term treat in favor of a professional opportunity such as connecting with this person and (hopefully) making a positive impression on this experienced professional. Deference to the situation in favor of the possibility of future value/success. Essentially a thoughtful value judgment.

In my case, it is not likely anyone even noticed. But because we never know what might influence someone to our advantage, many leaders are constantly making these types of observations. How do you operate in a world where everyone might be making judgments all the time? We have to be comfortable with the idea that there’s no one way to succeed. Being consistent and true to our strengths over time means you can trust that a reputation will develop to reinforce perceptions. That way, we do not have to worry about half eaten steaks because we’re playing the long game and will form a reputation for only dealing with serious people who do not make assumptions but instead prefer thoughtful, consistent leaders.

Quote: “Your mind will take the shape of what you frequently hold in thought, for the human spirit is colored by such impressions.” — Marcus Aurelius

Bonus article: As many of you know, I repost all my newsletters to under so that there is an archive of all previous newsletters. One of the authors that I keep an eye on is Benjamin Hardy. With any of these motivational, coach-types, you have to take posts with a grain of salt. Nevertheless, I read this post that he wrote about author Napoleon Hill and it sparked a few thoughts. To me it sounded like the quality Hardy recognizes in Hill is desperation. It reminded me of a quote by Tony Robbins, “In life, you need either inspiration or desperation.” Here, desperation prompted Hill to stop (overly) worrying about consequences or what others might think or whether something would work out. Instead, he could just take action and more often than not, action leads to productivity (and ultimately success).

Continued Success,

Written by

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

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