Where the heck did 40 years go? Call any person who underwrites loans or draws docs and ask if they'd like to do that for 40 straight years. The answer would probably be hearing a "click" when they hung up. On the other hand, on this exact date in 1975 at Hammersmith Odeon, London, Bruce Springsteen & The E Street Band played their first gig outside of the United States during the Born to Run tour. Yes, time flies. In fact it's already been seven years since Fannie & Freddie were placed into conservatorship (September 2008). A bill authored by Rep. Ed Royce, R-Calif., to cap annual pay at $600,000 for Fannie Mae and Freddie Mac CEOs has passed with bipartisan support. I think we all know plenty of LOs and AEs that will make more than that this year.

The CFPB has published its Fall 2015 Supervisory Highlights report. The CFPB indicates that while examiners have found supervised entities have, in general, effectively implemented and demonstrated compliance with rule changes including the ability-to-repay, appraisals and valuations, high-cost mortgages and others, there continue to be some instances of non-compliance. The report also includes a more detailed explanation of the methodologies the CFPB is using to identify possible fair lending violations including underwriting reviews, statistical analysis, and individual file review. Finally, the report includes a summary of the CFPB's revised appeals process.

From Ballard Spahr: "As we wrote last week, the CFPB recently published a Fall 2015 Supervisory Highlights which included a summary of changes that have been made to the CFPB's supervisory appeals process. The revised supervisory appeals process incorporates a number of changes. We believe the most important change is that the revised appeals process does not permit a supervised entity to appeal 'adverse [supervisory] findings. . . related to a recommended or pending investigation or public enforcement action until the enforcement investigation or action has been resolved (emphasis added)... it is now clear that a decision to resolve examination findings through a public enforcement action cannot be appealed." (The PARR letter is a notice of Potential Action and Request for Response.)

"In short, if examiners were not persuaded by the responses and arguments provided during the examination, the PARR letter response gives the supervised entity a second bite at the apple to make any relevant arguments as to why a heightened supervisory action or a public enforcement action should not be undertaken... the PARR letter response is a company's last chance to keep exam findings within the realm of a confidential, non-public, supervisory resolution. Companies should therefore carefully consider and prepare PARR letter responses with close guidance from counsel experienced in handling CFPB supervisory and enforcement matters to ensure the response is as thorough and strategically-sound as possible."

One key aspect of the appeals process in the policy is that CFPB managers who did not participate in the supervisory matter and whose knowledge and background enable them to meaningfully evaluate supervisory matters will be involved in reviewing appeals. Isn't that like letting the defense on a football team weigh in on a disputed call on their offensive squad?

A recent decision by the Minnesota Supreme Court (Quik Payday Inc. v. Stork) serves as a painful reminder that lenders can't ignore state laws and instead rely on Federal statutes. Ballard Spahr commented, "The perils faced by Internet lenders seeking to avoid application of a borrower's home state law also include the risk of a CFPB UDAAP enforcement action. Despite its lack of authority under the CFPB to regulate interest rates, the CFPB has brought two lawsuits against internet lenders in which it has claimed that the lenders engaged in UDAAP violations by making loans at rates that exceeded usury limits in the borrowers' home states.

"In December 2013, the CFPB filed a lawsuit in Massachusetts federal court against CashCall, several related companies and their principal.  The companies allegedly funded, purchased, serviced and collected online payday loans made by a tribally-affiliated lender the CFPB did not sue.  The CFPB charged the defendants with engaging in UDAAP violations by seeking to collect loans that were purportedly void in whole or in part under state law because the lender charged excessive interest and/or failed to obtain a required license.

"In July 2015, the CFPB filed a complaint in federal district court in New York against a group of commonly-controlled companies for allegedly engaging in unlawful conduct in connection with making payday loans over the Internet. (In its press release, the CFPB described the action as a suit against an "offshore payday lender.") According to the complaint, the defendants performed different functions such as purchasing leads from lead generation companies, brokering loans, originating loans, and collecting loans. The complaint alleged that the defendants made payday loans to residents of states in which the loans were void under state law because the defendants charged interest rates that exceeded state usury limits or the defendants failed to acquire required licenses. The CFPB claimed that the defendants engaged in UDAAP violations by actions that included misrepresenting that consumers were obligated to pay debts that were void under state law.

And for anyone who missed it remember that the CFPB issued non-binding guidance in the form of Bulletin 2015-05 on marketing service agreements (MSAs). Based on the CFPB's investigative efforts, "it appears that many MSAs are designed to evade RESPA's prohibition on the payment and acceptance of kickbacks and referral fees." The CFPB addressed the use of a third party to value services to be performed under an MSA in stating that "independently established market-rate compensation for marketing services, alone, does not suffice to ensure the legality of an MSA." The CFPB wrote, "The Bureau's experience in this area gives rise to grave concerns about the use of MSAs in ways that evade the requirements of RESPA. In consequence, the Bureau reiterates that a more careful consideration of legal and compliance risk arising from MSAs would be in order for mortgage industry participants generally."

As if preparing for TRID wasn't enough, a while back the CFPB announced a new final rule, modifying Relegation C, which implements HMDA. The 800 page rule will expand HMDA reporting requirements and include new information that will need to be gathered. For example, lenders will need to report on an applicant's DTI ratio, interest rate of the loan, and the discount points charged for the loan. The final rule is effective January 1, 2018.

The American Bankers Association issued a statement on the CFPB's Final Rule to expand data collection and reporting under the Home Mortgage Disclosure Act. Frank Keating, ABA president and CEO, wrote among other things, "...we continue to be concerned about the privacy of bank customers' data and ensuring that their information is properly protected. We look forward to commenting on these important issues. The rule also imposes significantly expanded data reporting and collection requirements, so we remain concerned about the appropriate balancing of costs and benefits in order to maintain consumer access to the full variety of mortgage products."

And vendors to financial services are still ruminating on Corday's remarks at the MBA's convention. He stated that the CFPB may need to look more closely at vendors of software and other tools used by lenders to comply with the TILA-RESPA Integrated Disclosure (TRID) Rule. Director Cordray stated that he was "disturbed" by reports that such vendors were creating obstacles for lenders attempting to comply with the TRID rule.  He indicated that not only the CFPB but all of the financial regulators might "need to devote greater attention to the unsatisfactory performance of these vendors and how they are affecting the financial marketplace."  (Under Dodd-Frank, the CFPB can examine "service providers" to entities that it supervises.)

Turning our collective attention to interest rates, not much happened (again) on Tuesday. At one point the bond market was down (worse) but then improved resulting in some lender price changes. Industrial production and home builder confidence missed estimates. Capacity utilization fell to 77.5% in October from an upwardly revised 77.7% in September. Of more import was the NAHB's housing index which fell to "62" in November from "65" in October (revised up from 64) - worse than forecast.

Today, as usual for a Wednesday, we've already seen the MBA's application numbers for last week (+6.2%, refis +2% and purchases +12%). We've also seen the October Housing Starts and Building Permits (-11% & +4%, respectively). Coming up later in the day are the October FOMC Minutes at high noon Mountain Standard Time. Looking at rate sheets we had a 2.26% close on the 10-year Tuesday and this morning it is sitting around 2.29% with 30-yr. agency MBA prices worse .125.

Jobs and Announcements

Bay Equity Home Loans continues its push to Paint the Nation Orange, having opened up new offices this month in both Downey and Whittier, CA in the Southern California market.  At Bay Equity, understanding the different communities it serves is a big part of the mission and has led to a new Strategic Markets division headed by Raul Espinoza, Senior Vice President of Sales and Strategic Markets.  Espinoza also serves on the corporate board of governors for NAHREP, The National Association of Hispanic Real Estate Professionals.  Bay Equity was a major sponsor of NAHREP's national conference in Chicago last month. "According to the most recent census report, between Q3 2014 and Q3 2015 Hispanics gained a net of 338,000 new owner households, during that same period of time the overall population lost 123,000 owner households." Espinoza said. "The data is solid and we see the Hispanic market being a big part of Bay Equity's growth in the years to come and our partnership with NAHREP has been invaluable in helping us better understand the needs of the Hispanic Community."  To learn more about Bay Equity's growth and opportunities please contact Raul Espinoza (415-820-4522).

Also on the retail side, a technology-enabled lender recently opened its doors and is seeking a few highly talented mortgage loan originators to help scale its inside sales operation in downtown San Francisco.  Backed by top-tier venture capital and industry investors, the fast-growing team of 30 brings together a unique mix of experience from Silicon Valley, the mortgage industry, financial services, and the federal government.  They have built a completely new way for borrowers to seamlessly interact with Loan Officers, so the company is looking for people who understand how technology can create efficiencies in the origination process and improve the borrower experience. Not an LO? The company is hiring across the board and looking for top mortgage talent to join the San Francisco team (exception: DE Underwriters can be remote). If you're interested in contributing to building a new kind of origination process, they'd like to talk with you: email resumes to rchrisman@robchrisman. com with the subject line "FinTech".

Lastly, "Regional recruiters and junior recruiters - looking for an attractive platform to recruit to, AND a great comp plan, AND support? AnnieMac Home Mortgage is looking to expand their already talented recruiting team for both branches and loan officers to bolster 2016 growth plans. A recruiter will have company support generating opportunities and advertising. "We are looking for folks great at relationship building posing an 'adding value' mindset". You will be part of an energetic, competitive, high achieving environment with coaching support. AnnieMac's retail platform can boast that it's not uncommon for a branch to double their production in their first 12-18 months upon joining. If you think that's something to boost your recruiting efforts and want to know the details then contact EVP of Production Ryan Kube at 856-252-1511.

Congrats to Tim Sloan: Wells Fargo promoted him to chief operating officer and president. Sloan, 55, has been with Wells for 28 years. Chairman and Chief Executive Officer John Stumpf is 62 and, like Kovacevich before him, will probably "be retired" at 65.

Ballard Spahr's Alan S. Kaplinsky ("Alan Kaplinsky" to friends) introduced the law firm's new colleague: James Kim. Mr. Kim recently served as a senior enforcement attorney with the CFPB. "While at the CFPB, James led nationwide investigations involving consumer credit, mobile financial services, emerging payment systems, mortgage origination, and debt collection.  He was lead counsel in the CFPB's first enforcement actions involving mobile payments and was a member of the credit card/prepaid card/emerging payments issue team that helped coordinate enforcement activity with other offices at the CFPB."