(Thanks to Ken S. for this
one.)
A father told his three sons
when he sent them to the university: "I feel it's my duty to provide you
with the best possible education, and you do not owe me anything for that. However,
I want you to appreciate it; as a token, please each put $1,000 into my coffin
when I die."
And so it happened. The sons
became a doctor, a lawyer, and a financial planner, each very successful
financially.
When they saw their father in
the coffin one day, they remembered his wish.
First it was the doctor who put
ten $100 bills onto the chest of the deceased.
Then came the financial planner
who also put a $1,000 bill there.
Finally, it was the heartbroken
lawyer's turn. He dipped into his pocket, took out his checkbook, wrote a check
for $3,000.
He put it into his father's
coffin, and took the $2,000 cash.
I'd recently heard of an
English teacher in high school who preached, "Practice safe text, use
commas...and never miss a period." (Hey, I just report it - I don't make
these things up.) How about never miss a cyberattack? Thank you to Sue W. who
sent along this hypnotic map of cyberattacks in real time. (Don't ask
me if it is real; I think it was part of a Mathew Broderick movie.) On topic,
Gartner research finds on average it takes 32 days to detect an insider threat
and it takes 17 days for companies to respond. The research also finds the top
insider threats are related to data leaks (63%); inadvertent data breach (57%);
malicious data breach (53%); fraud (36%); intellectual property theft (29%);
espionage (23%) and sabotage (20%). Lastly, cybersecurity policies will be a
top examination priority according to this week's guidance from the Securities and Exchange
Commission's Office of Compliance Inspections and Examinations
Stearns Lending recently
released its top TRID deficiencies in order to ensure efficiency of purchase
transactions. The list includes the closing disclosure was not disclosed to the
borrower within 3 businesses days of the closing date, loan estimate not
disclosed to the borrower within 3 days of the application date, borrowers not
receiving the loan estimate within 4 days of the closing date, loan estimate
reflects a pre-payment penalty, origination charge increased from loan estimate
to final closing disclosure, lender needing to provide escrow waiver, lender
needing to provide a fully executed copy of the final closing disclosure, and
the lender needing to provide a valid change of circumstance for all subsequent
loan estimates.
Earlier in the week this
commentary published a list of recent changes in lender requirements regarding
credit scores, along with a bill introduced in Congress about having Fannie
& Freddie move away from Fair Isaac's calculations. Coincidentally the Wall
Street Journal published a story about how the industry is questioning FICO's
reign on all underwriting decisions.
Sure enough news broke
that one well-publicized lender is indeed doing away with FICO - investor
reliance on the number be damned - much to the glee of real estate agents,
builders, and NAR who see the credit box expanding. "Following a
successful pilot program that began in the fall of 2015, leading online
lender SoFi announced that it no longer factors FICO scores into
its loan qualification process. Instead, the company considers three
criteria - employment history, track record of meeting financial obligations
and monthly cash flow minus expenses - to determine if an applicant is
qualified for its loan products, which include student loan refinancing,
mortgages and personal loans.
"Banishing
traditional credit scores stems from SoFi's belief that the FICO model is
flawed and outdated; it's less of an indicator of how a borrower will behave in
the future, but rather, a reflection of past behavior. While the industry is
moving toward evaluating non-traditional factors during the application
process, most lenders still incorporate FICO scores into their proprietary
algorithms and underwriting models. Having now funded more than $6 billion in
loans, SoFi is the first large lender to become an entirely 'FICO-Free
Zone.'"
"'Our approach to
underwriting is based on transparency and balancing the needs of our members
and investors, and we found that the FICO score was anything but transparent.
So we threw it out,' says CEO and co-founder Mike Cagney. "We're proud to
be the only major lender that does not use the score for any lending. Instead
of relying on a three digit number to tell us who's qualified, we look for
applicants who have historically paid their bills on time and make more money
than they spend. It's that simple.'"
A recent survey
commissioned by Bankrate and compiled by Princeton Survey Research Associates
International found that 63 percent of Millennials - ages 18 to 29 - don't have
a credit card, showing that credit scores are becoming less relevant for this
generation. The industry at large is also examining the accuracy of FICO; if
passed, the Credit Score Competition Act of 2015 will allow Fannie Mae and
Freddie Mac to use credit scoring models other than FICO.
(While we're talking
changes in credit, Nationstar Mortgage most recent seller guide update
has been posted. To download the complete update, please click here.Updates
include: credit policy and program updates, clarifications and reminders.)
Yes, the majority of
Millennials don't have credit cards, may never have them, and plenty of
Millennials pay rent. Kristin Messerli sent me a note saying, "I think
mortgage lenders should be aware of a few things as this generation's home
buying surge will eventually hit the market. First, while there is
significant growth already in the Millennial homebuyer segment, now comprising
the largest share of home buyers according to NAR, that does not translate to
the same growth across the industry. Millennials, unlike any previous
generation, approach purchasing decisions with seemingly limitless access to
information about all options on the table. Having grown up with access to
information at our fingertips at all times, we have developed a natural method
of fairly extensive research prior to making any purchasing decision, which relies
heavily on peer reviews and assessment of value. Millennials hope to find a
loan officer with whom we can trust and who will bring the greatest expertise,
and we won't settle until we find the best 'value' for us.
"The problem I have
found in the mortgage industry is that many loan officers may have these
traits, but that message is often not being conveyed to their prospective
consumers. In order to reach a greater share of Millennials, loan officers
must learn how to convey their message of quality and trust to us before we
pass you over for another lender. In order to do this effectively, loan
officers should be aware of the cultural differences among the generations, how
to create a service experience their consumers want to share with their peers,
and how to market that service experience in a language Millennials
understand.
"As Millennials and
multicultural segments make up the majority of household growth, it is more
critical than ever that companies engage in culturally specific training. For
example, and as a bit of a sales pitch, my company, Cultural Outreach
Solutions, has developed a new training platform called Culture MAP (Market Access Plan), designed to empower loan officers with
the information and tools to increase production with Millennial and
multicultural consumers."
Turning to the bond
markets, how about these rates! Of course, as I've mentioned a number of times,
a change in Fed Funds doesn't mean a change in mortgage rates, and look how
much lower long-term rates are now versus mid-December when the Fed raised
rates. Although mortgage-backed securities lagged a little, we had a nice
improvement in rates Wednesday as falling oil and stock prices as well as a
well-subscribed $21 billion 10-year note auction generated strong demand for
fixed-income assets. And the Fed's Beige Book for January showed expanding
economic activity in 9 of 12 regions - fine here, but overseas news continues
to drive our markets.
Today we've had Initial
Jobless Claims for the week ending 1/9 (+7k to 284k, stronger than expected),
and December's Import Prices ex-oil (-1.2%) & export prices (-1.1%). Ahead
we'll have a $13 billion 30-year Treasury auction, so if you have some spare
change step right up! We closed Wednesday with the 10-year sitting at 2.07% and
this morning, after the news, we're at 2.09% but agency MBS prices haven't
budged much yet since yesterday's close.
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