Saturday Cup of Joe: a lending and tech(ish) newsletter
Friends & Colleagues:
Good Morning! A busy week for everyone. School, football, pumpkin spice and industry conferences are in full swing. If you are in the mortgage industry and haven’t traveled in the last two weeks, it is likely you are traveling in the next 2. For me, I’ll be headed to MBA’s Annual Convention in Boston next weekend. If you are attending, please let me know. I’d love to set up a meeting or meal to discuss our industry and what’s going on. I’m speaking to the convention on Tuesday afternoon at 1:30 on vendor management and third party due diligence issues if you are so inclined. It would be great to see you. Otherwise, have a great week.
This week we look at:
· A federal court decision limiting CFPB authority and commenting on structure (Of Interest)
· Several new services for recruiting and HR needs (A Look Ahead and Quick Hit)
· Buffalo, NY has a new plan to deal with vacancy (Have You Heard?)
· A new tool helps frame the commercial real estate market in Detroit (Sidenote)
· Thoughts and quotes and things
Of Interest: “We agree with PHH: the CFPB has violated the bedrock principles of due process.” That is my favorite line from the court’s opinion in PHH v. CFPB. For the record, I’m not gloating. It feels a little like some folks in our industry are but, for me, this is a case where common sense prevailed. For those not familiar with the mortgage industry, specifically, this case questioned whether CFPB could unilaterally penalize a company, retroactively, for a new interpretation of an old law (in this case, the Real Estate Settlement Procedures Act known as RESPA). Think Roger Goodell and the Patriots. That’s Richard Cordray and PHH.
At the same time, I did describe the opinion as a home run. It was not a grand slam given the possibilities but it was much better than expected. Perhaps a solo home run in the early innings? CFPB could still be able to go back, if they wish, follow the more formal procedures and issue the same decision (theoretically). Furthermore, there are some downsides to determine the CFPB Executive Director is removable “at will” by the President instead of the current (now unconstitutional) language “for cuase.” One downside is the CFPB head is subject to political whim. A small risk in light of the overwhelming and unchecked power the CFPB Executive Director currently wields, but worth noting here.
Overall, the decision was a win because the court took steps to limit CFPB’s power, standardize their enforcement process/procedure and even made a strong statement as to the proper interpretation of RESPA. The RESPA portion was stronger and more direct than many legal observers anticipated.
The Takeaway: Nothing clarifies like clarity. Even before the CFPB decides whether to appeal to the Supreme Court or begin the process against PHH all over again, this sends a message to the industry that the court will continue to view the CFPB and previous HUD precedent as a traditional federal agency with all the usual checks, balances and limitations (oversight by the President, funding through Congress, formal administrative law requirements). Lenders are not looking to take advantage of the Bureau or return to a pre-Dodd Frank environment. By and large, lenders are just looking for clear definitions and boundaries. This decision helps provide specificity and clarity. Huzzah.
Have you heard?: It was a pleasant surprise, this week, to see a city government using creativity to help stabilize the local community. Buffalo, NY sought and achieved statutory authority to work with a land corporation to retake vacant homes and lots throughout the city. The plan would allow the corporation to “win” the properties through bidding process, turn over the properties to the city, thereby allowing the city to pay off the county taxes and resell the houses to owners who have deeper connections to the property and the city. The city has set up priorities or criteria in selecting buyers ensuring the next round of owners will not abandoned their obligation (or their community). Hat’s off to a local government taking control of the situation and depending on the tax burden and sale price, the city could effective make this happen without a dramatic hit to taxpayer funds.
Presented with Context but without Comment: I was reading a few articles on NYTimes.com when I saw a banner from Wells Fargo offering to present what they are doing to rebuild the bank’s reputation. See the banner in the middle stating “We’re making changes to make things right”:
However, when I clicked:
A Look Ahead: Assessing value remains the hardest thing in business…and perhaps in life. I wrote and published my law school note on how law schools are assessed. Arguing that the assessment model is out of date, I found that we really didn’t know which law schools were best because we had no idea who was producing the best lawyers. (Which, in my opinion, would be the most valuable metric.) This week I found a professional networking site that claims to have a better algorithm for assessing candidates and matching employers with employees. TalentSky. Regardless of your opinion of LinkedIn or others, this should at least make us think twice about our assessment and hiring process. As one expert put it: “[P]rofessional networks like LinkedIn and TalentSky have their limitations. “Human beings are incredibly flawed in their assessment of skills,” says Jana Rich, a high-profile Valley recruiter. Plus, the nebulous category of “skills” can only say so much about a person. Interesting things happening in this area…
Quick Hit: If TalentSky is the way to the C-suite, WayUp is the site to get you in a position to be on TalentSky. Confused yet? All I’m trying to say, is that there was an interesting profile this week on CNBC (reposted on Yahoo!) of Liz Wessel. Her site, WayUp, is focused on helping college students and interns land entry level positions at major tech companies and high profile American companies. What makes Ms. Wessel interesting is her story. She was recruited as a marketing manager for Google in 2012 and gave her notice to leave Google at the 2 year mark before her first day! Not only did Google still hire her, she kept her word and left 2 years later to launch WayUp. Last week I wrote that success is more dependent on knowing yourself and trusting yourself than anything else. Here we have a real life example. As leaders, we can take something from her story but we can also think more critically about how we hire and where we find our talent. If our organizations are only as valuable as the people in them (especially true for mortgage companies whose product is based on service not price, generally), we need to be careful and use the most effective tools for locating new talent — whether that’s an addition to the C-suite or a new hire right out of college.
Got Me Thinking: One of the best developments coming out of the explosion of technology advances over the last decade or two has been the ability for industries to cross-pollinate ideas and tools. Prediction: there is even more of this to come. One example this week could be the intersection of social media monitoring tools and lending. As a result of SEC rules and increasingly to comply with mortgage advertising, marketing and licensing regulations, financial services companies are using tools like Smarsh to monitor the social media activity of their employees. The New York Times posted a story this week about a tech startup, Geofeedia, that sold services to law enforcement agencies allowing posts and pictures on Facebook, Twitter and Instagram to be identified by location instead of content. The service allows for gathering posts by a variety of identifiers. Since these posts are public, can/should lenders be considering them in making lending decisions? It is widely known that hiring managers and college admissions offices can sweep social media for more information. Why not lenders? Theoretically, the more information we know about a potential customer, the more informed ability to repay, rate and pricing decisions we can make. Last week I wrote about reframing the underwriting data to target better data not just more data and find those reliable borrowers that would otherwise be left out of the traditional credit box. One way to begin that process would be to use lifestyle and social media data to evaluate or verify what was submitted in the loan application. Obviously there are subjectivity and discretion issues that may pop up but it seems like when given a choice between more information or less information, most companies choose more information. Only a matter of time.
Sidenote: Property Praxis is a site devoted specifically to commercial real estate in Detroit. Check it out to see it in action. To illustrate the effect property speculation is having on Detroit, users can click on a property, find out which speculator purchased it, and then zoom out to see that speculator’s full property portfolio as it sprawls across the city. For example, I’ve included a photo of my neighborhood which I found that some of my favorite empty warehouse spaces are held by owners who are not utilizing the property but simply holding it.
For example, one owner on Franklin Street next door to our apartment has 168 properties throughout Detroit. This tool will, according to developers, help dispel commonly held myths about why Detroit has emptied out. “People think that these properties are abandoned, that people just left them behind,” said the founder. But in reality, “What has happened is the city has been willfully depopulated through a policy that prioritizes the interests of predatory speculators above the people who live in Detroit.”
Today’s Thought: Simplicity in leadership is underrated. As leaders, it can be tough to know how and when to drop into a meeting. We need to decide whether to observe, participate, conduct or skip meetings. For starters, we cannot be everywhere in the company all the time. So there is a practical component. There are also a lot of moving parts in the organization at any time. When and where we participate in certain meetings can send a strong message. At the same time, it is a complicated decision because each project, each employee and each team within the company is different. We cannot generalize across everyone.
Consider the impression you can make simply by showing up (or not). For example, just the presence of the CEO in the room can have an impact. Sometimes simply sitting quietly during someone else’s meeting can help articulate what is important to the company. Knowing when to not show up can be equally important. It just takes time and experience to determine which meeting is which.
Quote: “Make your arguments like an advocate; evaluate them as a skeptic.” — Kermit Roosevelt, In the Shadow of the Law
Bonus article: More from Larry Kim on success.