Millennials - Rent, Jobs, & Diversity; Yes, Free DU, But There Are Compliance Tangles
Free DU? You bet - Fannie couldn't let Freddie offer LP at no charge and not respond. "Beginning June 1, Fannie Mae will align DU and Desktop Originator (DO) to the no-fee approach allowing more lenders and loan originators to access the value of DU and DO in their underwriting processes...press release. But the herd is spooked. The June DU bills won't reflect this change, obviously, and should be paid to Fannie just like always. July's will reflect the change - but what about DU fees on loans prior to the announcement where the borrower paid for it? Is it a "changed circumstance" with unintended consequences? It sure would have been easier to set the change date in the future. Under RESPA, underwriting fees are a zero tolerance item - do lenders break out the DU fee or not? Lenders have 3 business days to send new disclosures. What about refunds? What about the impact on the APR calculation, and tolerance...re-disclosure? Be sure to check with Fannie or your compliance department. Are we having fun yet?
Axiometrics finds the national apartment occupancy rate reached 95.3%, the highest level on record, as rental activity remains robust. There are plenty of Millennials still renting, and let's see what they're up to (and I won't make any jokes about many of them wanting a trophy for renting). But the mainstream media pointed out yesterday that rent is becoming a burden to anyone in the middle class as well - a big selling point for LOs who have good down payment assistance programs up their sleeves.
Do your kids think money grows on trees? If only it were true! Some kids (which for some mean Millennials) spend money thinking their parents have an unlimited supply; but do they really know what money means? The latest FDIC Consumer News features tips to teach young people about money. What can you as a parent do? You can discuss with your child what they are doing with financial decisions and why they are doing it. As we all know, special offers - at times- aren't really that special. Teaching your child about when a deal really is special is a good tip.
While on the topic of finances, how can you protect them from financial fraud? The FDIC Consumer News discusses security tips for bank customers so you aren't hurt by financial fraud. One of the most vital practices you can live by in terms of computer security is being careful of where and how you connect to the Internet. Social media can be fun, but it is also a place where, far too often, people reveal personal information that thieves can use to figure out and reset passwords.
The FDIC's link has plenty more, and has great information for LOs to pass on to borrowers. Besides your finances, what is one of the most important things you have control over? Your credit score. It could be boosted with the latest change that medical debts will not appear on credit reports until they are at least 180 days past due. And if you have a special needs child there are some new ways to save money. The Achieving a Better Life Experience Act (ABLE) would allow you to pay for some qualified expenses such as education, housing, transportation and health care tax-free as long as the disability is document before age 26.
The Collingwood Group's chairman, Tim Rood, explained in an interview with radio show host Jim Bohannon that although there has been a gain in new home sales, existing home sales have flattened due to a lack of inventory. Part of this problem can be contributed to the inability for homeowners to sell their home because they are underwater or the low equity they have is not worth the costs of selling and then buying another home. Rood explained that the surge in home start numbers was in part due to apartment construction in April, as developers begin to cater to Millennials. Rood pointed out that if Millennials begin to settle down and look to downsize, and baby boomers begin to move to urban areas, the demand for those residences will increase. This may result in Millennial's being priced out of the market or making lifestyle decisions that prevent them from buying a home. To read more about Tim Rood's interview, click here.
Accenture recently published a banking survey showing that Millennials switch banks twice as often as other consumers even though the survey found that millennials are satisfied with their online banking experience at their primary bank. About one in five millennials (18 percent) said within the last 12 months they switched banks compared to 10 percent of customers between 35-54 years old and only 3 percent of people 55 and older. Of those who switched banks, 17 percent of Millennials chose online-only banks and 31 percent of consumers between 35-39 years old switched to online-only banks within the last 12 months. Two-thirds (67 percent) of Millennials said the traditional and digital banking experience at their bank is somewhat or not at all seamless, 47 percent said they would like their bank provide ways to help them monitor their budget and 48 percent said they would like their banks to offer video chat on their website or mobile/tablet application compared to 30 percent of those over 55 years old.
Dan Cutaia writes, "My response to an article about the MBA doing outreach to Millennials to get them interested in mortgage banking as a career...One has to wonder that if an old industry full of old people that is old in its ways needs to "sell" itself to young people to add new-blood, then is that PR noise really just a death gasp? Back in 80s we did not need to "get educated" about mortgage banking to jump in any more than the Millennials need to get "sold" on the attractiveness of hi-tech jobs today. Way back then the mortgage banking business was new and booming and the opportunities were plentiful, exciting and blatantly apparent. What makes it attractive today? My point is that something structural needs to take place. It's going to take a lot more than PR to replace an aged mortgage banking work force of 2 million people."
Along these lines Kristin Messerli writes, "The final rule for Section 342 of the Dodd-Frank Act, issuing industry standards for diversity and inclusion, was recently released. While many companies have prepared for the rule or are simply in better positions to comply, the majority of companies have not sufficiently prepared for the regulated focus on diversity. The Joint Standards issued in the final rule are collectively developed and regulated by six of the federal financial agencies, including the Consumer Financial Protection Bureau (CFPB). The standards reflect best practices in diversity and inclusion in the following areas: Organizational Commitment, workforce profile and employment practices, supplier diversity and procurement practices, practices to promote transparency of diversity and inclusion, and self-assessment.
"Many companies are overwhelmed by the amount of information requested by the standards however compliance with the rule can begin with a few initial steps. First, begin with the self-assessment. This should include a foundational evaluation of the company's existing diversity and inclusion activities and a quantitative and qualitative analysis of the company's compliance in meeting the previous four standards mentioned previously.
"The second step for initial compliance is company-wide training on diversity and inclusion, as listed in the standard for organizational commitment. Before recruiting for a diverse workforce, it is critical that the entire staff is culturally competent and prepared for that shift. Take the opportunity here to leverage this training as an occasion to train loan officers and managers to diversify their business channels and better serve emerging market segments.
"The third step is simply preparation for implementation. Take the results of the assessment and identify what your objectives and priorities are as a company, and develop a strategic plan to meet those goals. This plan should include specific action steps to meet the objectives, who will be responsible for each action step, and the target launch date and reassessment date.
"Lastly, begin making your commitment to diversity and inclusion public. Structure your website so that your commitment is clear. Publish the strategic plan created in the previous step, list employment and procurement opportunities, and describe the company's commitment to diversity and inclusion. This is another opportunity to leverage compliance as a competitive advantage. Studies show that Millennials are more likely to work with companies that show an appreciation and value for diversity. Additionally, the majority of household formation in the United States is comprised of minorities. Companies that do not show a clear commitment to diversity are not only putting themselves at risk with regulators but they are putting their business at risk." Thanks Kristin!
Turning to the markets, Tuesday we had plenty of more news about our economy - once again showing a mixed bag. New home sales rose 546k in May, higher than the 523k expected and at its highest level in 7 years. But Durable Goods Orders fell 1.8% in May and April was revised downward from -0.5% to -1.5%. But wait - home prices rose 0.3% in April, according to the FHFA. The index is now roughly 2.3% below its March 2007 peak and corresponds to Feb 2006 prices. Note the FHFA index is narrower than the other indices like Case-Shiller in that it only looks at homes with a conforming mortgage.
But these monthly numbers continue to be overshadowed by what is happening with entire countries - like Greece. And on Tuesday we sold off again, with rates moving higher, after a renewed global appetite for risk left the U.S. fixed income markets without much buying interest. The authorities are ruminating on a Greece proposal to its official creditors (the IMF, European Commission, and ECB) that appears to make enough concessions to obtain more financing. The proposal raises VAT on many goods and services, raises pension contributions, and increases business taxes. Will Germany be happy?
This morning in an early report CNBC tells us that the MBA's application numbers showed apps rose 1.6 percent week-to-week on a seasonally adjusted basis in the week ending June 19 - still 11% higher than one year ago. Refis were +2% and are up 4 percent from a year ago whereas purchases rose 1% and are 18 percent higher than a year ago.
Mid-week economic news consists of mortgage applications (w/e 6/19) at 7 a.m., and final update on Q1 GDP at 8:30 a.m. which is expected to be upgraded to -0.2% from the preliminary -0.7%. Treasury will hold two auctions; $13 billion reopened 2-year floating rate notes and $35 billion of 5-year fixed rate notes. We ended Tuesday with the 10-yr sitting at a yield of 2.41% and in the early going we're at 2.39%.
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Congrats to Michael Barone. Lenders Compliance Group, Inc. (LCG), the nationwide risk management firm, announced that he has been appointed to the position of Executive Director of the firm. Mr. Barone will also remain as a Director of Legal & Regulatory Compliance for LCG. (LCG provides a suite of services to banks and nonbanks, residential mortgage lenders, servicers, investors, closing and title agents, and other vendors in all areas of mortgage banking.)