"A man goes to his nearest zoo. He walks around the entire place and the only animal there is a dog. It was a shih tzu." In a similar vein, I guess, but not humorous in the least, New York's financial regulator is seeking authority to make criminal cases against compliance officers. The Securities and Exchange Commission has a more lenient approach, according to a speech on the issue by Andrew Ceresney, director of the SEC's Enforcement Division. He said the agency would take action against compliance officers "only when the conduct crossed a clear line." We'll see if this moves from investment banks into all financial services...

Last week I posted a notice that STRATMOR had launched a "STRATMOR Spotlight" survey entitled "4-Months of TRID - Impact and Experience." STRATMOR Senior Partner Dr. Matt Lind tells me that thus far they've received a strong response from lenders - not surprising since what lender wouldn't want to know the answer to such questions as: How well did the LOS vendors meet TRID requirements? What's been the overall experience thus far? What process changes have lenders implemented? What's worked well? What hasn't? What's TRID cost and how have these costs been absorbed? As I noted last week, taking this survey costs nothing. You pay a modest fee only if and when you choose to view and download survey results, which are expected to be available by mid-March. This way you know how large the survey response has been before purchasing. My view is that participating in this survey is a low cost way to compare your own TRID experience and implementation with that of your peers.

The creator of "Know Before You Owe" - the CFPB, had tongues wagging yesterday when it released a policy to "facilitate consumer-friendly innovation." On regular contributor tritely asked, "The headline suggests they are dismantling themselves?" Remember that this is a different division of the CFPB that rules by enforcement action! "The CFPB finalized a policy to facilitate consumer access to financial products and services that promise substantial benefit to consumers. The new policy establishes a process for companies to apply for a statement from Bureau staff that would reduce regulatory uncertainty for a new product or service that offers the potential for significant consumer-friendly innovation." The policy was proposed in October 2014 - 18 months ago! The policy is available here. "The new policy was created as part of CFPB's Project Catalyst initiative and is intended to enhance regulatory compliance in specific circumstances where a product holds the promise for significant consumer benefit and where there may be uncertainty around how the product fits within an existing regulatory scheme. For example, the policy could be appropriate in a case where an innovative product is being developed that involves technology that did not exist and may not have been contemplated at the time existing regulations were adopted."

"The new policy announced today creates a process for companies to apply for a statement from Bureau staff, known as a no-action letter. This letter would indicate that Bureau staff reviewed the company's application and have no present intention to recommend enforcement or supervisory action with respect to the particular aspects of the company's product and under the specifically-identified provisions and applications of statutes or regulations that are the subject of the no-action letter....When assessing applicants, Bureau staff will take into account the factors laid out in the policy, including the company's relevant government supervision and enforcement history. Under the policy, the letters are not binding and are also revocable at any time. If a no-action letter is issued, it will be posted on the Bureau's website along with a version or summary of the company's request.

And this week the CFPB published the Home Mortgage Disclosure Act (HMDA) file specifications for 2017 and 2018. Notice this is "next year" - which always seems to arrive faster and faster. "We want to highlight one change in particular for your attention: the file format is being changed from a fixed field file to a delimited file format. We are providing notice of the updated file format through these file specifications to provide as much time as possible for systems updates should any need to be made."

And last week law firm Ballard Spahr put out a summary regarding the CFPB and the FTC. "The FTC has sent its annual letter to the CFPB reporting on the FTC's activities related to compliance with the Equal Credit Opportunity Act and Regulation B. The FTC has authority to enforce the ECOA and Reg B as to nonbank providers within its jurisdiction...Like last year's letter on the FTC's 2014 ECOA activities, the letter on 2015 activities does not include any specific 2015 FTC ECOA enforcement activity and only contains information about some of the FTC's research and policy development efforts and educational initiatives. With respect to fair lending research and policy development, the FTC's efforts included hosting a public workshop on the growing use of online lead generation in various industries. The workshop was the subject of a series of three blog posts written by my colleagues Chris Willis and Teddy Flo.  The FTC also published a notice seeking comment on a proposed survey of consumers to learn about their experiences in buying and financing automobiles at dealerships. The FTC's consumer and business educational initiatives included updating its publication on mortgage discrimination and issuing information on its business blog about changes to its Business Center website.

Last month the Community Home Lenders Association (CHLA) sent a letter to the CFPB renewing its call for a universal SAFE Act test requirement for all mortgage loan originators. The letter also highlighted that 99 percent of banks (banks with assets less than $10 billion) are exempt from CFPB exams and that many registered bank loan officers failed the SAFE Act test. The CHLA also raised questions in the letter to the CFPB to see what steps they have taken to adopt the rule.

TransUnion survey revealed that 75% of lenders are finding it increasingly difficult to find and acquire new customers and many are turning to alternative data for the solution. TransUnion's survey confirms that while there were26 million additional personal, auto and credit card loans in 2015 compared to 2014, the number of U.S. consumers who are not able to access credit is still far greater - a staggering 45 million people according to the CFPB. Some key benefits derived from lender use of alternative data, according to survey respondents, include: 87% of lenders using alternative data do so to evaluate thin-file or no-file consumers. 83% of those using alternative data to score credit applicants report seeing tangible benefits. 67% use alternative data to evaluate non-prime borrowers. 66% of lenders using alternative data say it is helping them reach more creditworthy consumers in their current markets. 56% of lenders using alternative data say the data has opened up new markets.

Of course lenders and investors are still grappling with the issue. For example, here I produce a recent bulletin from Citi in its entirety to show the complexity of trying to adapt a system to replace one (GFE & TILs) that was developed over decades of use.

"To assist with the Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure Rule (TRID Rule), Citi updated its previously published TRID Best Practices. While all Loan disclosures and related documents, processes, and practices must be completed and performed per TRID Rule requirements, some key practices have been added or modified.

"Loan Estimate: Modified February 2016. 1. On all loans, the Contact Information section on page 3 under Additional Information must be completed in full, including NMLS # or State ID # where applicable.  First and last name of contacts should be completed.  If a phone number and/or email is not provided for the Lender's Loan Officer, then a general phone number and email is required, including third party originated loans. 2. A Loan Estimate cannot be created or re-issued on or after the date of the "initial" Closing Disclosure. Therefore, the issue date of the latest dated Loan Estimate must be at least one day prior to the issue date of the "initial" Closing Disclosure. Re-issuing a Loan Estimate is NOT an acceptable practice to resolve suspense issues.

"Closing Disclosure: Added February 2016. 1. The final disbursement Closing Disclosure must be identified as FINAL. 2. The spirit of the TRID Rule is to reduce documentation provided to borrowers by initially disclosing actual terms and costs on the Closing Disclosure. Correspondents must act in good faith and use due diligence in obtaining the best information reasonably available at the time of disclosure.  Only Closing Disclosures that are issued and delivered to the consumer should be put in the loan file. 3. The figures in Loan Estimate column of the Calculating Cash to Close table on the final Closing Disclosure must match the final Loan Estimate. 4. Additional/Addendum pages are allowed per the rule to be included with the Closing Disclosure if all of the existing allotted space is used up and no more information will fit in the allotted space.

"Miscellaneous Items: Modified February 2016. 1. Service Providers List - If there are any fees listed in Section C of the Loan Estimate then the Service Providers List must be present in the Loan file with all sections completed, including, but not limited to, the estimated charge(s).  Fees disclosed to the borrower as 'can shop' as documented by the Service Providers list must be located in section C of the LE.  If the borrower choses a provider from the lender's list, these fees must be disclosed in section B of the Closing Disclosure and are subject to the 10% tolerance. 2. Corrections - Corrections as permitted by the Rule must be clearly identified and itemized on a Letter of Explanation to the borrower and a copy in the Loan package.  Loan may not be purchasable if corrections are not completed within 60 days of consummation. Note: Not all Rule violations are correctable." Thank you Citi!

Turning to the secondary markets, a new post from Liberty Street Economics has been published on the Capital Markets page: Primary Dealer Participation in the Secondary U.S. Treasury Market. It turns out that primary dealers no longer account for most trading volume on the interdealer brokerage platforms, but do account for most trading activity in the secondary market for U.S. Treasury securities.

While we're yapping about the markets, agency MBS prices ended higher (rates lower) on Thursday. The yield on the 10-year risk-free T-note, which was down in the 1.50's recently, hit 1.83%. The U.S. economic data was just slightly better than expected with the Philly Fed index of manufacturing activity edging higher in February and initial jobless claims beating forecasts. By the time traders were on the subways heading home the new 10-year note ended about .5 better to yield 1.76%.

This morning we've already seen January's Consumer Price Index. Expected to show a slight decline, it was unchanged, core +.3%, slightly higher than expected. But after these initial pieces of information the 10-year is at 1.77% with agency MBS prices worse about .125.

Jobs and Announcements

In job news GMH Mortgage Services, LLC is aggressively looking to add top loan officers and producing branch managers to the Retail platform. Key target markets are PA, NJ, DE, MD, MA, CT, RI, and NH. "GMH has proven they have the infrastructure, culture, and value proposition to grow loan officers' business. Management believes that this is an excellent opportunity if you have an entrepreneurial spirit and truly want to have a voice in shaping the future of an organization, and like a flat management structure with a one team, customer-centric approach to business." Contact Brian Beale, VP of Recruiting & Corporate Initiatives, for a confidential conversation.

WashingtonFirst Mortgage Corporation is seeking a self-directed individual to manage the Secondary Marketing Lock Desk for a multi-branch Bank owned Freddie/Fannie approved Mortgage Company located in the DC/Northern Virginia market. The ideal candidate should have strong analytical skills and experience with both mandatory and best efforts platforms for conventional and government loans. Working knowledge of the Ellie Mae Encompass Processing system and the Optimal Blue Pricing engine preferred, and training is available for the right candidate with a background in processing/origination or a college degree or similar work experience. This position reports to the SVP/Secondary Marketing. WashingtonFirst Mortgage is also looking for exceptional processors, underwriters with agency and non-agency experience as well as a QC/Compliance Specialist and an Encompass administrator. Please direct all inquiries to SVP Thomas Naughton

Valuation Partners is searching for "a proven sales executive in southern California to help drive our growth in California and the western United States. As Vice President- West Region, a successful candidate should have mortgage sales experience in real estate valuation, mortgage or title insurance, correspondent and/or wholesale lending.  Valuation Partners is a leading national AMC and has been in business for over 30 years. The company has a solid organizational foundation, best in class quality, and robust technology." For confidential inquires or resumes, please contact HR Director Kathy Muneio (419-418-5252).