Why is a 43% DTI, a line many view as “drawn in the sand,” so critical to the ability of a borrower to repay a loan? What about reserves or utility bill payment? If the borrower is already paying $2,000 a month in rent and their mortgage payment would be $1,800, shouldn’t that count for something? More thinking about credit, and its reporting, below.

Lender Products and Services

For lenders evaluating digital mortgage platforms who believe in empowering their loan officers with powerful technology to grow their referral business, delight their borrowers, and let their expertise shine throughout the experience, there is no better platform than Maxwell. Maxwell’s platform with powerful personalization features and integrations designed to make the loan officer the hero is having a big impact for lenders across the country, closing over $2.5B in volume every month. To learn more about Maxwell, request your personalized demo by visiting www.himaxwell.com.

As fast as technology and consumer demands change, the core principle of putting your customers’ needs first will always be a priority. CMOs are tasked with building new strategies, partnerships and technologies to future-proof their business and stay ahead of consumer expectations. Read this whitepaper from Total Expert, The Changing Role of the Financial Services CMO, for a five-part overview to become a more modern marketing leader and create customers for life.

Background on Lawsuit against HUD over Mortgagee Letter 2019-06: Part 6 in Series on DPA. As explained in the original press release, CBC Mortgage Agency sued HUD on grounds that the agency failed to follow rulemaking processes required by federal law. HUD also failed to follow an executive order and its own policy, which requires federal agencies consult with tribes before making policy or rule changes which affect Native Americans. Additionally, HUD didn’t notify Congress before issuing its new rules, nor weigh the social costs of its discriminatory new policy. Regardless of one’s position on the merits of down payment assistance, it’s clear that HUD erred in issuing Mortgagee Letter 2019-06. Secretary Ben Carson admitted before the House Committee on Financial Services that HUD should collect data before moving forward with new policy. (See video at 2:21:30). We welcome rescission of ML 2019-06, and seek a constructive dialogue on DPA.

Do you have a vendor contract up for review in the coming months? Given the critical and comprehensive nature of these documents, contract reviews can feel like a bit of a crap shoot because it can be difficult to account for all the variables that make for a successful vendor relationship. If one or two crucial components are overlooked, lenders could be rolling snake eyes instead of sevens in regard to their vendor relationships. Learn more about the 14 most critical vendor contract provisions in MQMR’s free white paper, “Rolling Sevens: The Top 14 Provisions Every Lender Should Examine When Reviewing Vendor Contracts.”

Webinars This Week

ATTENTION EXECUTIVES: XINNIX will host a live Leadership Lessons webinar, The Engagement Dilemma: An Executive Wake Up Call on Wednesday, August 21 at 2:00 PM. Studies show that more than three quarters of today’s employees are not engaged in their workplace. They’re non-productive, apathetic toward their work, team, manager, and organization, and they don’t feel that they have a strong incentive to give their best effort in their job. Here’s the good news: the majority of employees are actually ready to fully engage. They’re just waiting for the opportunity to do so. In this webinar, XINNIX CEO and Founder Casey Cunningham will speak to top executives from four of the nation’s leading mortgage companies about the strategies and best practices they have put into place to engage their workforce and how this culture shift has transformed the way they do business. Register today!

How effective is your leadership style? Your team's productivity quickly answers this question. Everything rises and falls on the impact of your leadership. Whether your team is winning or failing, there's a good chance you're the reason. If you want to strengthen your leadership skills, register for Todd Duncan's FREE Webinar, The Purpose Driven Leader: 4 Decisions to Radically Impact Your Leadership Effectiveness. Join Todd on Thursday, August 22nd to learn how trust impacts every phase of the business cycle, how to positively impact your employees, empower your team through delegation, and exceed your goals by driving hyper-productivity across your organization. The best leadership decision you can make is to commit in helping your team win! Equip yourself to lead them effectively, now! Register to learn how to become a Purpose Driven Leader today!

What happens after you've been found? How easy is it for a customer to connect with your business? Customers demand convenience and businesses that don’t adapt will be left behind. Register for MBA Compliance Essentials Update on State-Level Litigation and Emerging Trends Webinar on Wednesday, August 21, 2-3PM ET. Join the discussion with a panel of legal experts on recent major state-level litigation, including the latest developments and trends, and what you should be on the lookout for in the coming year.

Join the MCPAOA on August 21, at 10am PT for a discussion on Limited English Proficiency (LEP): the Challenges and Opportunities in the Mortgage Industry.  The guest speaker will be Joshua Weinberg, EVP Compliance for First Choice Loan Services Inc and President of Firstline Compliance LLC.

Credit

Last week the FHFA, as overseer of Freddie and Fannie, set out criteria on credit scoring models. The Federal Housing Finance Agency issued a final rule on validation and approval of third-party credit score models that Fannie Mae and Freddie Mac use in deciding whether to purchase residential mortgage loans. Each GSE must publish its description of its validation and approval process for evaluating applications from credit score model developers, consistent with the FHFA’s framework. VantageScore LLC is eligible to apply for consideration by the GSEs.

As law firm Morrison Foerster points out, “The FHFA’s framework is a four-phase process for the validation and approval of credit score models, and it specifies the criteria to be used and the timeframes for each phase. In the first and second phases, a GSE must publicly solicit submissions from credit score model developers and evaluate those submissions using established criteria. In the third phase, the GSE would evaluate a credit score model for accuracy, reliability, and integrity. In phase four, the GSE would evaluate the credit score model’s potential impact on the GSE’s own business and on the mortgage finance industry as a whole. The GSE must submit its proposal to approve or disapprove each submission to the FHFA for a final decision.”

A while back Michael Lewis, the author of Moneyball and The Big Short, launched a new podcast and discussed similar issues with the credit bureaus in the second episode. His main point being that it is the consumer’s problem when a fraudster rips off a bank or credit bureau information. Why should it be the consumer’s problem that a bank accepted a fraudulent application? This is even before you get to whether credit scores are inherently discriminatory. Shifting this responsibility to a consumer finance regulatory, the CFPB, however has its own risks. And costs.

Jeremy Potter points out, “It is true that access to credit means access to equal opportunity in this country. We have a collective interest in making better risk decisions in how we allocate credit. Failure to build wealth early in one’s career/life or inability to build wealth by an entire segment of society will have lasting impact on the long-term economic health of the country. I wonder if the private market won’t innovate faster and solve this, but if not, it will definitely be an area the government will look to get more involved. For better or worse.”

After the data breach Equifax was rumored to have hired lobbyists at Akin Gump to push legislation that would lessen its exposure in class actions alleging it violated federal fair credit reporting laws. The legislation in question, which is sure to draw closer scrutiny now, was before a House committee the same day last week that the company disclosed the breach. It’s a safe bet the bill will get a bit more scrutiny now.

It is a common assumption that too many accounts will hurt your credit score, and consequently you must close excess accounts. Actually a full 15% of your score is based on the average of the accounts. The more accounts that you have that are older in age, the better the average age of the accounts will be, which will positively affect your scores. And 30% of a borrower’s score is based on the utilization rate. If your client has more accounts not being used, many LOs will advise keeping them active will help the score because the overall utilization rate will have a lower average. In fact LOs I have spoken to tell clients to never close accounts as that will hurt a credit score. Borrowers should not open 30 accounts, however: whatever accounts they have now (3-4 is the magic number) keep them open. There is no reason to close them.

Capital Markets

U.S. Treasuries pulled back to open the week, including the 10-year closing +6 bps to 1.60 percent, amid a risk-on trade in the stock market and the continued sentiment that Treasuries are overbought. The 10-year sits 7 bps above the 2-year Treasury. There was more of the same recent news: President Trump repeated that U.S. is not ready to make a trade deal with China, which released details for lowering a corporate borrowing rate, but talks are continuing. He also tweeted that the Fed should cut rates by 100 bps over a short period and perhaps start quantitative easing again. A leaked internal report by UK government discussed various disruptions in event of no-deal Brexit on October 31. German Finance Minister Olaf Scholz suggested Germany could spend EUR 50 billion if there are economic issues. And Argentina Finance Minister Nicolas Dujovne steps down and presidential candidate Alberto Fernandez suggests country cannot repay IMF loan. Finally, markets received disappointing Trade Balance data out of Japan and disappointing Eurozone CPI figures.

Today's economic calendar just began with the Philadelphia Fed Nonmanufacturing Business Outlook Survey for August. The only other release today is Redbook same-store sales for the week ending August 17. Oh, and after the close, Fed Governor Quarles will speak. We begin the day with Agency MBS prices better by .125 and the 10-year yielding 1.57%.

Employment

“Caliber Home Loans, Inc. is having an awesome 2019, and we have the numbers to prove it! As of July 1st, we reported being 13% ahead of our sales plan, and we ended the same month with record-breaking monthly volume that exceeded $6 billion overall. But Caliber is more than loan volume – we’re a great place to build a career too. There are numerous reasons to be a producer here, but we’ve summed them up to the top 5: technology, support, products, servicing, and a retail focus. Individually, these can help you stand out in a competitive marketplace, but combined they can make you unstoppable. Click here to read the top 5 reasons we’re attracting top producers from around the country and understand all the ways a career at Caliber can help YOU reach new levels of success.”

“Stop Losing Money in 2019! With the mortgage industry becoming increasingly difficult to survive let alone thrive, companies are in search of new marketing strategies to compete in this new era of credit. The Decision Science team at BBM has created an advanced suite of propensity data models that help professional origination marketers identify homeowners who are actively in the market for FHA, VA, Jumbo and Non-Agency loan options. Our average loan amount for active FHA/VA and Non-Agency applications exceed $350K and gross top line revenue of nearly $15,000. If you’re marketing is not reaching these levels of performance than let BBM show you how a targeted marketing strategy focused on propensity modeling and targeted revenue opportunity can change the trajectory of your company. For more information about BBM Marketing Services and about becoming an approved origination partner; please contact Bill Senteno and visit www.bbm.company.”