Saturday Cup of Joe: a lending and tech(ish) newsletter

Saturday Cup of Joe #38. Last week I wrote about my friend Brad. On Sunday, January 22, he passed away. It has been tough getting used to life without him but, at the same time, I was able to talk about his story and my story with friends and co-workers which helped with the grief. On Wednesday, we attended the Red Wings — Maple Leafs game at Joe Louis Arena. It was my Christmas present to Meredith. This is the last season the Red Wings will play in the Joe before moving to Little Caesar’s Arena next season. Despite a 4–0 loss, we enjoyed being able to attend a game at the Joe before it closes. The mortgage industry is heating up. This week alone, we have policy issues in Washington, industry conferences in Palm Springs and all the usual activities that accompany the new year. We use the winter in Detroit to roll out new procedures and test some of our processes. I have a project going live next week and a year-long project getting underway. It’s a busy time and we look forward to what the next few weeks and months hold.

This week we look at:

  • Real estate organizations launching mortgage operations (Of Interest)
  • Trump and FHA MIP (Got Me Thinking)
  • New regulatory freeze (Have You Heard?)
  • Trump and America’s CEOs (A Look Ahead)
  • Trump and the White House (Sidenote)
  • Valuable lessons from Etsy’s COO (Viewpoint)
  • Valuable lessons from Amazon (Quick Hit)
Red Wings v Maple Leafs

Of Interest: Curiously, two real estate companies have joined the mortgage business recently. First, Re/Max, the large real estate brokerage, launched Motto Mortgage which purports to be a mortgage broker company but also claims to be able to skirt licensing requirements. Not sure how that’s gonna happen but according to a related article, the company boosts the ability to offer consumers mortgage broker services without the usual burden of cost and licensing. Sound too good to be true?

Second, RedFin, the online real estate database, plans to actual underwrite mortgage applications and lend money. They correctly note that some of the home buying process is “cumbersome and lengthy” and also note that they’ve been known for discounted commissions on the real estate side. What’s interesting here is that the CFPB has been skeptical of insulated consumers going so far as to make a rule that requires shopping (even if the consumer doesn’t want to). CFPB has also taken a hard line stand on RESPA and affiliated relationships that benefit multiple settlement providers. To me both of these arrangement hint of potential regulatory issues.

At the same time, it might be no coincidence that each company timed these new ventures to launch at the end of the Obama administration. It is not yet clear what position the CFPB will take toward these types of affiliations and RESPA issues because it is not yet clear who will be leading CFPB or how much influence the agency will have in the current climate.

The Takeaway: Imagine in the next few years that we could see the intersection of a more pro-business regulatory environment, the future of Fannie and Freddie decided (or in progress), technology changes or advances that change our industry and the challenge of outside players like real estate companies and fintech companies who specialize in getting customers. I’ve written before about how the real estate industry skirted by on lobbying strength over the last 8–10 years but that it may have left some with the false impression that they can do this better. I guess we’ll see.

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Got Me Thinking: In the first indication of how Trump will play with the DC establishment, the administration reversed the annual MIP reduction that the Obama administration announced a few weeks ago. According to some, it was not well received among realtors, consumer advocates and Democratic Senators. For Trump that might not be a big deal but it could set the tone for later in the year. One analyst is quoted as saying we won’t know for sure how the industry will fare until Trump selects a FHA Commissioner. At the same time, the article floats 4 names — one of which has experience within the government but all of whom know FHA extremely well. HUD has always seen themselves as the DC housing experts (since housing is in the title, it’s always given them a leg up), but it’s not clear how much leverage Dr. Carson will have in this administration. Sometimes that’s a practical benefit because the HUD Secretary can operate without catching the attention of the White House. Other times, it limits the ability to get anything done in a town that thrives on influence.

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Have You Heard?: President Trump ordered a regulatory freeze on all actions taken by departments or agency heads. It is a slightly dramatic move, but what does it mean? First, departments and agencies may not send new regulations to the Office of the Federal Register (OFR) without the President’s approval. Second, agencies are instructed to withdraw any regulations that have been sent to OFR but not yet published. Third, agencies who have submitted regulations but have not had their regulations published will temporarily delay the effective date for 60 days. The freeze does not directly impact CFPB though depending on what happens between the Trump administration and Director Cordray; it is possible that a new director (if appointed) would abide by the freeze. Otherwise, it is probably temporary. It’s likely that once appointees and the business of government settles in that the freeze will be lifted. At the same time, the campaign and the first week has been more aggressive than many expected so anything is possible. Again, I say, we’ll see.

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A Look Ahead: Over the next few months and perhaps a year or so, corporate America is trying to figure out how to handle the new Trump administration. CEOs need to tread carefully to navigate their companies toward the opportunities created by President Trump and a Republican Congress. The New York Times has shifted recently framing stories that appeal to the new political class. For instance, this week Dealbook described how delicate corporate leadership should be with the new President.

As corporate executives around the globe try to understand the implications of the Trump administration on their businesses, they seem to be having an almost bipolar reaction: a euphoric sense that regulations and taxes could soon be lowered — which would likely increase their profits and paychecks — yet a simultaneous anxiety that they could become a target of one of the president’s Twitter tirades, which could undo their businesses or possibly their careers.

Along the same times, the news site Ozy published a list of industries/companies likely to thrive under President Trump. Surprisingly, the author ranked banks in the top 5 but did not think both large banks and community banks could both win. It’s likely that easing in regulations, generally, would benefit large banks but that community banks might find themselves the beneficiary of regulatory compromise where certain laws are “reformed” to ease the burden on smaller entities but not the Wall Street power brokers.

Downtown Detroit

Sidenote: An article caught my eye this week about Trump’s first few nights in the White House. I always appreciate either behind-the-scenes or “inside the machine” type stories whether about the President, ESPN or some other rarely seen institution. This New York Times piece wouldn’t have caught my attention except for 2 curiosities particularly in light of the tone of the 2016 election. First, Trump maintains his old, Android phone with, apparently, a new found confidence in unsecured devices or personal data. Second, the First Lady and Barron Trump will fly back and forth to New York each Sunday evening and Thursday evening. I could go on about petty complaints that are often lobbed at former Presidents for golfing or what have you, but neither golf or these trips really bother me, just thought it was worth pointing out.

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Viewpoint: “The COO role is entirely defined by its relationship to the CEO.” FirstRound.com profiled Linda Kozlowski, the COO of Etsy and highlighted several valuable insights. First and foremost, a CEO must have self-awareness and even conduct a self assessment if necessary. A good COO will counteract or offset the strengths and weaknesses of the CEO. Certainly chemistry is key but fitting together with the company and CEO functionally is best. In fact, it is critical. The two traits that stood out to me were the ability to execute and healthy perspective on ego. Whether you are deciding whether a COO is necessary, how a COO should operate or evaluating your current COO, this article offers a ton of valuable lessons.

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Quick Hit: Really interesting observation about the role Amazon could play in the coming years. Like General Motors in the 1960s and 1970s, The Ringer predicts that Amazon could be redefining, not only work in America, but the economy writ large. Worth a look.

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Today’s Thought: Dan Gilbert did not invent the Internet. He simply understood its reach and power. In 1998, Gilbert saw the power of the Internet and shut down all his brick-and-mortar retail branches to centralize operations around the web. It was a game changer. Yes, it was a big decision but it was the combination of timing, personal intuition, experience and luck. The idea that you do not have invent the life-changing technology but simply harness it has been a reminder and encouragement to me this week. You can simply understand the power of new or existing technology (or service) and use it to be successful. For me, remembering that Dan Gilbert leveraged the Internet, he didn’t build it, takes away the pressure of feeling like you need to reinvent life as we know it to be a successful founder, leader or CEO. Of course, if you have an idea for the personal computer or Facebook or SHAM-WOW, then you can change the way people live, but you can also just make something that already exists better. Relax, keep an open mind and then be sure to pounce when you see a new idea that you know could be even better.

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Bonus Content: Warren Buffett on HBO talking about Sausage McMuffins.

Quote: “Live the life you wanna live.” — Bradford J. Frost

Continued Success,