Do you think your company’s computer system is immune from hacking? It’s not a matter of “if” but “when” – just ask Equifax about its data breaches hitting the press. Not only that, but one can buy practically anything on the internet: hackers are selling 117mm LinkedIn passwords on the web. Hackers will likely use such data to mine it and then gain access to email and bank accounts (because so many people reuse passwords for their various accounts). Change your passwords regularly (like from "Passwerd" to "abc1234") and don't use the same one for every account. The largest bank in Africa, Standard Bank Group Ltd., reports it has lost $19 million due to a sophisticated attack carried out in Japan: thieves forged 1,600 cards and withdrew money from 1,400 ATM machines all over Japan within two hours.
This week I have been discussing Section 342 of the Dodd Frank legislation. Section 342, part of the Dodd Frank legislation, continues to be a topic of conversation in some quarters of financial services. You can read the details here. CFPB's Office of Minority and Women Inclusion (OMWI) has spent the last several years ensuring that the Bureau conforms to inclusion policies mandated in 2010 by Dodd Frank. Now it says it is turning its attention to the entities regulated by the CFPB: "OMWI has begun work on plans related to the new standards, including creating processes and procedures for entities to voluntarily assess and report on their internal diversity and inclusion." So if your company is not taking extra steps to hire women- and minority-owned businesses, you should probably pay attention.
AnneMarie Allen, CEO and president of The Compliance Group, writes, "In my opinion 342 of Dodd Frank is hardly recognized...not totally surprising. I will say, though, that some of our bank clients do ask us if we are minority owned and also some of the Federal Home Loan Banks - mortgage lenders (non-banks) have not asked.
"Growing up with parents who immigrated to the United States taught me several character traits, but two that always stick in my mind and have sincerely helped me build a successful business: perseverance and honesty. My mom said never give up and my dad always said your word means everything. First and foremost, don't get caught up in the fantasy of having more personal and financial freedom any time soon...that doesn't come for many years. You gotta do the time - hence keeping perseverance close and when you start earning clients- remember, your word means everything. For The Compliance Group, our biggest challenge in the 17 years in business was surviving the financial housing crisis. Part of our survival was our ability to not overspend in the previous good years and operate conservatively - many startup businesses don't have a business plan and in particular don't save for a rainy day. Our industry requires a keen eye on the market and the ability to maneuver through many various cycles quickly.
"What did Benjamin Franklin always say? 'By failing to prepare, you are preparing to fail!' There are some specific areas to keep at the forefront of your mind. Secure outside legal counsel for contracts and human resources. Secure a good CPA firm (Taxes...taxes...taxes, don't be blind sighted). Make sure you set up the right corporation (S Corp, C Corp, LLC). Cash Flow, Cash Flow, Cash Flow (this really should be #1). Be strategic and thoughtful about who you are as a company and master it - you can't be everything to everyone. Hire smarter people than you. Your employees and your clients are your greatest assets. Marketing strategies are very important. Budgets are a work in progress and flexible but don't deviate significantly. No good deed goes unpunished - run your business like a business.
"For me some of the greatest benefits of owning a company have been creative independence, but remember, not everything ends up being a win so you either re-work it and try again or know when to fold it! In any industry, especially the financial services industry, relationships are key. It's a big industry but small...if you know what I mean. Take the time to cultivate your relationships, listen to your clients, care about your services, take care of your employees and...here it is again...your word means everything. Take the time to determine if a client is a good fit for your organization. Sometimes, we get caught up in the win but at the end of the day that win just turned into your greatest nightmare. Understanding a potential client's company culture and each other's differences are vital. It's important to know who you are doing business with and make sure it's a win-win for both organizations."
Do you think your company is too small to be on the CFPB's enforcement radar screen? Think again - individual loan officers are not immune from enforcement actions. The Consumer Financial Protection Bureau (CFPB) fined former Wells Fargo employee, and until recently Bank of America employee, David Eghbali $85,000 and banned him from working in the mortgage industry for a year for an illegal mortgage fee-shifting scheme. It seems that from late 2013 through early 2015 Eghbali had an arrangement with New Millennium Escrow Inc. that allowed him to manipulate the prices his customers would pay for escrow services.
New Millennium would reduce its fees for some of Eghbali's customers and make up for its loss by adding fees to loans for other customers. This, per the CFPB, ultimately increased the number of loans Eghbali closed, boosting his commissions at the consumer's expense. Eghbali, who served as a loan officer at the Wilshire Crescent branch in Beverly Hills, California, referred more than 100 loans to New Millennium, the consumer bureau said. Per his Linkedin profile, he worked for Wells for years, left a year ago and went to BofA, and then was terminated by BofA this month.
Does all this regulation cost money? Sure it does. A while back a study titled, "Government Regulation in the Price of a New Home" by Paul Emrath, Ph.D., VP of Survey and Housing Policy Research for the National Association of Home Builders (NAHB), estimates that 14 million households are "priced out" of the market due to regulation. The report showed that government regulations increase the new home price by an average of 24%, or an additional $84,561. Granted, the study was done for & by the home builder group, but this number is up significantly from 2011 when regulatory costs were $65,224. This phenomenon prices out households so they no longer qualify for a new home mortgage because of higher prices.
It noted that, "Regulations come in many forms and can be imposed by different levels of government. At the local level, jurisdictions may charge permit, hook-up, and impact fees and establish development and construction standards that either directly increase costs to builders and developers, or cause delays that translate to higher costs. State governments may be involved in this process directly or indirectly. Several states, for example, have adopted state- wide building codes. And although impact fees are imposed by local governments, such fees typically cannot be imposed without enabling legislation at the state level. The federal government can also impact the price of a home-for example, by requiring permits for storm water discharge on construction sites, which may lead to delays in addition to the hard cost of filing for a permit."
Certainly the regulation-related changes being made by lenders and investors don't stop.
A while back, due to the diverse interpretations of TRID regulations being applied by Rating Agencies, Due Diligence Firms and Investors, Caliber told its customers that it is "changing the process flow for all Caliber Portfolio Lending (CPL) products through our Correspondent Lending Division. It is offering the ability to close CPL products in your name, with your funds, while Caliber performs a Prior Review and issues the Closing Disclosure and Closing Documents on your behalf."
Mortgage Solutions Financial has made changes to its loan level price adjustments. Please review Announcement 18-16W for more information.
FAMC revised its Corrective Action/Cure requirements for loans that exceed the 3% origination cap on points and fees. Loans originated or purchased by FAMC must be in full compliance with Texas 50(a)(6) requirements. In cases where a loan exceeds the 3% origination cap, the violation may be cured by the lender refunding the amount that exceeds the 3% limitation within 60 days after the lender is notified or otherwise discovers the error. The refund must be documented following the cure provisions as outlined in the Truth in Lending Act (TILA) chapter of the manual. Failure to cure the loan within 60 days will result in a non-compliant loan.
Have your read PennyMac's most recent TRID announcement?
Plaza sent out a reminder requesting its clients to make sure its Loan Origination Software (LOS) is up to date with the current version to support all the "Know Before You Owe" elements. Plaza has identified that loans are still being submitted that were processed through LOS's that are not using the most current version, or have documents that are not updated to support TRID. Two of the most widely used mortgage software systems are Point and Encompass. Here is information about their current versions: In May, 2016 - Calyx Software recently announced Point Version 9.3 has been released. Also in May, Ellie Mae has announced an updated version of Encompass 188.8.131.52.
AmeriHome's TRID Quick Reference Guide has been extensively updated and clarified. The updated guide is now available on SellerWeb.
Switching gears to the bond markets, not that lock desks will be particularly busy today, rates...headed back down?! There's an early close today, but yesterday agency MBS (Fannie, Freddie, Ginnie) did well yesterday despite rallying treasuries on strong Fed and retail support, some of which was month end-related ahead of Friday's early close and long weekend. We also had a very strong Pending Home Sales Index (April) report that kept the string of much better than expected housing reports for the week going, growing 5.1% vs. expectations of just 0.6% following March's revised 1.6% (from 1.45%).
Yesterday the 10-year note ended the session nearly .5 higher in price, but of course mortgage prices lagged due to refinance fears. Just think of all the money being lost by companies that paid higher-than-market prices for servicing in the last six months!
Today, with our holiday-shortened economic calendar and holiday on Monday, began with another update on GDP for the 1st quarter. Expected to come in around +0.7% (versus +0.5% in the initial release), it was +.8%, the weakest showing in a year. Later, at 10AM, the University of Michigan Sentiment Index will be released. In the early going rates are about unchanged. The 10-year, which ended Thursday at 1.82%, is at 1.83%.
Jobs and Announcements
If you're a loan officer and live near San Diego, or want to live near San Diego, here's a post for a Senior Loan Officer. "Career Opportunity! Established 11 years ago, mortgage bank/broker MDC Groupis looking for experienced loan officers in the San Diego and Orange County area. Candidates will be considered to work within one of our high production Real Estate offices. You must possess professional business skills, CAL BRE, California NMLS license, should have a current pipeline, and have a minimum of 3 years in the banking/brokering industry." Please email resume to President Michael Dodt.
And ResMac, Inc. is pleased to announce the addition of three West Coast Business Development and Sales Executives to our team. Debbie Findlay, 20-year veteran, has come onboard to service the San Diego area. Tina Burke has sold loans and real estate in Orange County over the last 2 decades. Irene Borunda will cover Greater Los Angeles and has been enjoying the challenge of business-to-business sales in the mortgage industry for over 20 years and believes in making customer service a number one priority. Welcome aboard! ResMac, Inc., is an evolving and dynamic private mortgage bank that is quickly emerging as a primary mortgage lender in the Third Party Origination (TPO) marketplace, with focus on pushing innovative origination technologies to the next level of adaptation.ResMac, Inc. is a nationwide mortgage lender and an approved GNMA/FNMA/FHLMC Seller/Servicer, who is aggressively expanding its footprint across all business channels, and is ranked among the nation's fastest-growing private companies, as recognized by Inc. Magazine." For more information, please contact Greg Lutin, SVP - National Director of TPO Sales (877.855.7493).