Saturday Cup of Joe: a lending and techish newsletter

Originally published as an email on June 11th.

Friends & Colleagues: Good Morning! Enjoy a late cup of coffee or several second cups. I hope everyone is enjoying the onset of summer. Have a great weekend.

Of Interest: TRID remains in the news. This week there were 2 pieces that caught my attention. First, if you have any interest in wholesale lending or mortgage broker business, this is a great interview with 4 professionals who discuss what the market looks like post-TRID. Very candid and a good indication, in my opinion, of how most brokers talk about their lenders these days. The President of a mortgage broker association in NY underscores something I’ve said many, many times on panels about the need for a “dream team” that you trust to get loans done on time. It’s less about rate and more about consistency and efficiency.

The Takeaway: A silver lining of TRID, if I ever heard one. There is also an interesting discussion of how valuable mortgage brokers could be or should be in the market. Not sure I completely buy it but worth future consideration.

Second, the conversation of assignee liability continues. Greg asked me to continue to cover this, so Greg, ask and you shall receive. (I’m hopeful John Levonick will agree to chat with me this week when he’s back in the office. Thanks, John!) Until then, this article points to CFPB’s catch-22. On one hand, they want to give more guidance to avoid freezing the secondary market and creating a real access to credit issue. On the other, they need to walk a fine line or risk rendering the Loan Estimate (LE) worthless by undermining the rule with exceptions for mistakes/errors. I think that’s a really good point.

The Takeaway: July’s comment period and whatever changes CFPB ultimately makes could have significant impact at the third party due diligence and investor levels. Yes, we hope it makes technical changes to ease some tension for originating entities and production staff, but the bigger issue is clarity around what the level of risk is on Loan Estimates and Closing Disclosures. Once we have that, law firms and due diligence firms can properly evaluate risk and the secondary market can price/react accordingly. Right now these firms and organizations are doing exactly what we’re paying them to do — avoid risk. Many originators believe investors (or the third parties representing them) are being too conservative as it relates to the likelihood of TILA liability on these loans, but having just paid billions in loan production settlements to the DoJ, it is understandable that these backers are still smarting and want to proceed cautiously.

Have you heard?: There is a serious issue brewing in Connecticut as it relates to crumbling foundations. I had a compliance officer from a large state bank approach me at a Christmas party warning me to keep an eye out for this issue. Didn’t hear much about it again until this week. The real problem for lenders (or at least this state bank, so far) was that when they reviewed the appraisals for these properties the photos of the basement showed cracks forming in the walls. I was not sure the seriousness or full scope of the problem several months ago. The New York Times published an article on Tuesday suggesting there is not much a solution for these folks outside state intervention. Keep in mind this is a state that just slashed the state funding across the board to attempt to balance the budget. There is very little room left for emergency measures. At the same time, the problem appears significant and growing.

Got Me Thinking: The Robb Report, a lifestyle magazine for extreme luxury and wealth, released a survey indicating a rise in luxury spending, even among millennials. As is already evident in my observations, I am keenly interested in the widening gap between educated-uneducated & upper-lower income classes and what that means for how consumer habits are changing. According an article about the Robb Report research, “Above all, respondents emphasized a focus on personal service. Seventy percent preferred craftsmanship over new technology, at only 30 percent. Understandably, millennials rated new technology higher than their older peers, but only at a rate of 38 percent.” To me, this brings up a key overlap with our businesses.

For example — there is a (somewhat) faulty assumption that everyone simply wants a mobile, tech solution to their problems. In fact, there is a widening group that wants a full service/concierge level of attention. They want to feel special. For these folks, it’s not about speed and convenience. It is about attention to detail, sophistication and perhaps the perception of luxury (read, a little bit of ego too). There are some brands like Uber who found a way to service both speed/convenience and luxury/service simultaneously with UberX and Uber BlackCar, respectively. For mortgage companies, it’s not that easy. “Concerige” is expensive and hard to manage on a big scale. Fast and convenient excludes some portion of high-end or luxury buyers which we’re seeing are the only ones left in the market as new homeowners. Could be interesting to see how companies respond over the next few years.

My colleague and friend, Jim (also known as JimmyMac) often says a company should be like a server at a restaurant. The server should sense whether the table wants to enjoy the meal with minimal interruptions or have constant attention to every need/want/desire from start to finish. Get the type of customer wrong (or disregard the distinction altogether) and risk not only the tip but a bad Yelp review too. Easier said than done…and puts a significant responsibility on the server. I have argued many restaurants try to solve this problem before anyone even walks in the door by setting the tone in price, menu and advertising so the management attracts only those diners who fit the bill (pun, intended).

In consumer lending & fintech, it can be difficult to have adaptable platforms (or the servers, to extend the analogy) that meet the needs of both concierge and speed-driven clients. Instead, we see specialization and focus to the exclusion of the other group. Obviously these are generalizations but it is a brand distinction that should be given significant consideration moving forward.

A Look Ahead: National Mortgage News profiled Darien Rowayton Bank in Darien, CT as a model example of a community bank taking on digital lenders. Thought it was worth a mention for those in CT or those interested in using traditional institutions to change new platforms.

A Look Waaaay Ahead: There is a company receiving some attention this week for unveiling a demonstration allowing researchers to move objects with their mind. That’s right. Jedi mind tricks for real. The company, Neurable, connected wearable brain sensors with a remote control car and these scientists were able to drive the car with their mind. Unsurprisingly, this thing is winning awards and competitions while gathering steam in the venture capital communities here in Detroit. Not sure there’s any direct or indirect impact on our business but amazing technologies like this and other virtual reality advances will affect all our businesses (and our lives) moving forward. Just had to share this one.

Sidenote: Shout out to Matt Tully at Essent US who created a chart showing Congressional activity leading up to a national election. Matt hosted an interesting webinar on politics and the mortgage business. In it, he used data from GovTrack.us to show that the 114th Congress has lowest productivity of any Congress going to back to Carter (when this was tracked). While the data doesn’t distinguish between “actual” legislation (appropriations, confirming judges, etc.) and “ceremonial” legislation (naming post offices and commemorating certain special days). His graphic is attached. (Thanks Matt for passing it along) Note the dips leading up to each election as well. This might be the perfect storm of inactivity.

Today’s Thought: “Have. Do. Be.”

People always say, “I need to have ______ so I can do ______ so that I can be ______.”

Completely the wrong mentality.

The right mentality is Be. Do. Have.

This mentality says: “I will be ________ to do _______ so I can have _______.”

For example — I will be a thoughtful, candid and articulate communicator so that I can add value to my organization and those I come in contact with so I can have my own organization/team someday (and provide the lifestyle for my family to enjoy.)

Who needs a mortgage? According to reports, professional boxer Floyd Mayweather Jr. bought a Miami mansion for $7.7 million…in cash. In actual $100 bills that would be 1.57 million pounds (which I think is 785.4 tons).

Song of the week: I have to admit this 12 year old took over the week. Watch it several times. Enjoy!

Have a great week and I look forward to writing again soon if we don’t cross paths in the meantime.

Continued Success,

Written by

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

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