Saturday Cup of Joe: a lending and techish newsletter

Friends & Colleagues,

Good Morning (originally sent to recipients via email on Saturday, 9/3)! Happy Labor Day Weekend. Hopefully wherever you are reading this has beautiful weather and/or you are on your way to somewhere that does. I’m going to be enjoying the extra day off, that’s for sure. We have random combination of things today. Hopefully length isn’t an issue given the long weekend. Looking forward to crossing paths with everyone soon.

This week we look at:

· A proposal for a Housing Policy Director (Have you heard?)

· eMortgages are in the news again (A Look Ahead)

· Apple’s big tax bill (Quick Hit)

· A video on happiness and a quote on success

Of Interest: The Wall Street Journal published a story this week describing the difficulty lenders have in classifying Airbnb income in a loan application. A subscription is required for WSJ so I’ll highlight some of the main points. Big banks like BoA and Wells have excluded rental income or put borrowers through additional scrutiny because the consumer elected to put income from Airbnb on a loan application. The issue in classifying loan type is principal residence versus investment property. As you know, principal residence loans comes with lower rates and fees, typically. Risks associated with rental income and the treatment of the property often cause investment property loans to come with higher rates.

Another downside of classifying these homes as investments is that some banks, like BoA, do not allow home equity loans on investment properties. All in all there seems to be confusion about how to classify the home of Airbnb hosts, what products are available to these folks and whether the income is reliable.

The Takeaways: My point in including this is simply to highlight how changes in technology or culture can outpace regulators and companies alike. Ideally, companies would be quick to adapt and address customer service issues that benefit consumers and the market. In this risk-adverse lending environment that is not always the case. Nonbank lenders are often restricted from offering a wide variety of loan products. Typically that is based on the investors willingness to buy loans made by nonbanks outside of those with standard collateral and risk-based pricing. This article highlights the opportunity that still exists in our industry to come up with loan products that fit a niche in the market as a way to stand out and drum up business — car loans to uber drivers, student loan-home equity refis, and mortgages to Airbnb hosts. I can’t wait to see what’s next.

Have you heard?: I wonder who President Clinton (seems inevitable, right?) will appoint as the first Housing Policy Director? MBA President & CEO, David Stevens, encouraged the next President to establish a senior staff position who will report directly to her and advocate one policy position: “Access to safe, affordable housing, whether owned or rented, is critical to the economic success of every American.” Stevens argues persuasively for the need for a healthy housing market. Not only because housing is equivalent to 1/5 of the American economy but also because it is the cornerstone of stability and “positive social outcomes.” I couldn’t agree more. Our industry touches so many others driving economic activity in a variety of tangential markets including retail sales (Home Depot, Target) and other financial services products like insurance. If we lose faith in homeownership or trend toward less economic stability the reverberations would be felt in every city and town in America.

As it stands, there are already active conversations going on nationwide about millennials’ views on homeownership, whether average Americans can afford homeownership and the future of 30 fixed mortgage based on the future of Fannie Mae and Freddie Mac. It’s only natural for the next President to confronted with serious housing questions as part of a plan to build the economy of the future.

Got Me Thinking: We have heard a lot about technologies, platforms or apps that will put some members of our industry out of work. Whether that’s realtors, mortgage loan originators or appraisers, it is no longer controversial to say that technology companies are aiming to take out some or all of the humans in the lending industry (except, of course, the customers). I read a blog post this week that brought out some really interesting principals about the intersection of automation, wealth creation, work and jobs. Assuming I’m not going to find somewhere to pay me more to work less (the post mentions a proposal for the 21 hour work week), I want to be adaptable to technology advances without losing focus on what really matters in our businesses and in our lives. Here are the 3 key points the author identified that I thought were important to pass along as we consider this important moment in the history of our businesses.

1. We have to be able to identify some job losses as good for us.

2. We need to think more creatively about our definition of employment and how/when someone can contribute to our organizations

3. We need to re-think how we measure productivity and wealth

You have heard me touch on these themes in the past. I won’t go on-and-on here. But cutting out inefficiencies and unnecessary bureaucracy will help people devote more time and energy to progress than simply to success. Instead of building up wealth (vertical imagery), we should be focusing on driving productivity forward (linear imagery). The upside is a shift from me to we. The more we all start using technology / creativity / efficiencies to make progress, the stability and success will follow, but our focus will ensure that what we’re working on is better for the whole. Yes, it requires letting go of the fear of the unknown / change (will this new technology ultimately render me irrelevant?) and embracing a life that says if I’m active and contributing value I’ll never be irrelevant.

Quick Hit: This week the European Union (EU) determined that Apple structured its European business in a way that allowed Apple to avoid certain EU taxes to the tune of $14.5 billion, with a B. It is a decision that even the Irish political leadership did not necessarily agree with. Besides being the highest amount ever sought by the EU, this is a move that reflects the state of government regulation of industry today. In our industry we talk about the CFPB pushing the boundaries of traditional regulatory norms, the EU has also been a progressive force in data privacy, cybersecurity and now taxes as well. In response, Apple wrote that this “will have a profound and harmful effect on investment and job creation in Europe.” Essentially tying the tax structure to the likelihood of a global employer to create/move/retain jobs in that market. This is a global version of what many of you are experiencing in a state or regional way here in the States.

A Look Ahead: Everyone is trying to get to a true eMortgage as quickly as possible. One of the biggest hurdles has been getting approvals from investors, warehouse banks and collateral custodians to accept/store eNotes. One lender made it somewhat easier this week announcing they’ll buy closed loans that include an eNote. Mid America Mortgage has been in the news recently for eMortgage already and this is just another step. We expect eMortgage to happen quickly but many have heard that for 10 years and aren’t quick to believe it this time around. Even when the private actors in the process get comfortable with eNotes, state regulators and local recording offices will also need to sign off or have the capability to service eMortgages/eNotes as well. 1 year? 10 years? Only time will tell.

Sidenote: This week, in thinking about relationships, I found a TEDx talk from December that dives into the longest running study of happiness ever conducted. This video describes both the study and the findings. What keeps you happier, longer? Healthy relationships. Our connection to others is the single strongest characteristic of happiness. Loneliness, on the other hand, was found to be harmful and actually shortened life span. So, identify the good, close relationships in your life and invest! It’s good for your physical and mental health (as is proven by this study). Get in there and make it happen.

Presented without comment: “Realtors and Ethics” published Friday in The New York Times. Check it out here.

Today’s Thought: Important to balance depth and breadth. Some positions within an organization require depth and certain positions require breadth. By depth, I mean someone who knows your specific company (or team) inside and out perhaps even better than they know the industry as a whole. By breadth, I mean someone who knows the larger organization, industry and customer service implications of your organization (and therefore is an expert on proposed changes or enhancements). There is no way to find someone who is both, deep and wide, for each piece of your business. It is better to be thoughtful about where you need depth and where you need breadth and try to marry employees’ strengths to what you are asking them to do.

Someone with 5, 10, 20 years experience watching your business grow and develop is invaluable when trying to apply consistency or negotiate a change in the business. Whether it’s outside legal counsel, a consultant, or a long time manager in your company, there is no substitute for familiarity and experience.

Unfortunately the side effect could be to overlook issues by being too familiar with the process or product. A fresh pair of eyes (without a subconscious bias) to know how the multiple stakeholders, including regulators, the media, and potential business partners, will view a process or product is also critical to your success. This employee might not have the experience or institutional knowledge but will bring a different perspective that is important, particularly when troubleshooting a deal or an issue.

Since it’s impossible to find the perfect hire that is both deep and wide, it is important to build a team that has both.

Quote: “Success is not doing what you love or what you want to do; it is not doing what you hate or do not want to do.” — Casey Neistat

For Your Consideration: Ever felt a little overwhelmed by e-mail or just wanted a better way to keep track of critical items? I’ve heard about a new service recently called SaneBox that helps organize your email. Over the first few days, you enter some “rules” and move emails around per the purpose or importance and the service learns your habits. One fascinating example is by entering 1 day, 3 days or 7 days in the BCC line, SaneBox will remind you if you did not receive a response within that timeframe. I have not signed up yet but I’m planning to take it for a test drive and I’ll report back on whether it works.

Bonus article: 20 years ago Hartford and Worchester were in the Top 20 cities for real estate value. Now 9 of the Top 10 are West Coast cities.

Continued Success,


Written by

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

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