[David] Alice, let’s get over to you and get update. I’m really interested in some of the topics we talked about you covering. Take it away.
[Alice] I guess to just kick off from a legislative standpoint, when we were talking a little bit before the show one of those agencies that has a lot of money coming towards them and wondering what would happen for them in these round of budget cuts is the CFPB and so that yin and yang with CFPB that they have is all of the financial penalties that they issue and so people look at that number that they bring in and maybe their budget. I’m not sure how closely that’s watched. So, we’ll be talking about that in a minute. But year to date already CFPB has issued finalized their orders against Equifax for 15 million, Draper Kramer, I don’t have an amount there. American HMDA, Block Capital One and Capital One Financial, all of these entities already in 2025 are faced with some kind of financial penalty from CFPB and the numbers I was able to pull up were that they have approximately 5 billion, issued 5 billion in civil money penalties since their inception. If we want to segue into, we were having that discussion on their budget and how much money they have spent and that each year they get this cap each year. They started out eons ago in the 400-500 million dollar range and now they’re up to the $800 million range. They really increase their cap each year, but then they don’t actually use it all and there is this amount that can vary from 50 some odd million, one year million, 14 million and yeah, million we’re in, these are millions and then 70 million last year that they didn’t use and essentially, that money they don’t use can either be carried forward they could give it back, which I don’t think happens just as a side thought, People don’t usually give stuff like budget money back or it can go to financial literacy or things that would benefit the consumer. So, when they talk about this, there’s over 700 million sitting in there. Their war chest or their extra money that I think that has to be accounted for. Absolutely and of the 5 billion in civil money penalties. It looks like there’s several billion that are still there and hasn’t been dispersed. So, what’s going on with that money? Where is that supposed to go? So I do think this effort of taking a look at agencies and seeing where they stand. Those are some questions I have for CFPB. So, if they’re listening, they could call us and tell us.
[David] They could. Yeah. I’m going to say, I was forwarded an email early this morning from that Russell Voigt, the acting director. Sent to Jerome Powell on Saturday, February 8th and he’s saying we’re not going to need the money. And that’s what I forwarded that over to you all for your perspective. It’s really interesting to see that they got the message real quickly. Don’t come knocking on our door to look inside of us, we’re not going to be taking any more money. Look elsewhere, but they’re still taking more than they need, exactly what’s happening. Yeah. Yeah. Yeah. It’s still one year, right? Yeah. Except for that one year. There’s a bill that did the analysis on that. I was, where was he? You, Alice, I did that when we were looking at it. When we were,
[Alice] I have a separate table that I can send out to you guys that does the comparison of the cap that they had issued for the year and then what they actually used for that year and those are the numbers I was quoting earlier.
[David] There’s so much around this. What is it going to mean for all? Yes.
[Bill] I found the letter of power very enlightening, right? When he says in there, during the review of the finances, I have learned the Bureau has a balance of 711 million. And they talk about that’s supposed to be reviewed quarterly. So, my immediate question is, so what is that balance quarter by quarter going back the last five years, let’s say, number one, number two, the public view is all of the CFPBs budget has been slashed to zero. If they still have 711 million, that means they’re effectively slashed to zero a year from now and the other piece is stepping back and how the CFPB is funded, which is out of the Fed, which because of the mismatch on their holdings between low rate, long term securities, short security at higher rates, the Fed is taking money from the treasury every month. So, the CFPB is sitting on a pile of 711 million while the treasury is taking billions. I’m sorry, the Fed’s taking billions from the treasury. Like it’s just, and this is obviously near and dear to us because of our industry, but this is just one example of what’s going on in Canada. In fact, we probably in every government building in these and if you want to understand a level of angst and why they’re so focused on this. Take this stuff times 100 or 1000 and it starts to be real money in a hurry.
[David] It does.
[Alice] Lot of money. As a matter of fact, it’s more than their annual budget was in 2024 and 2023. What they asked for they actually went over their allotments. I want to correct what I said. two years 2023 and 2024. So there’s a lot there. They’ve got a whole year. How many people have a whole year of state of their annual income in millions sitting on the side? or how many departments? Is that really where we want the government, a government entity to sit? Knowing that money Has limitations on how it can be actually, I’m going to take that back. That money can be used any way they want the way it’s laid out. They can use it for going forward. They can like I said, use it for consumer programs. So, if I’m a consumer, I’m going to use it for me. Get something for me out of that 700 million.
[David] Yeah, that’s a great point.
[Alice]Is the more concise way to describe that they can use it any way they want, or they slush fund? Yeah. And I say that because they’re allowed to carry it forward, which would mean then you can use it any way you want if you can just carry it forward.
[Marc] I feel I have to chime in here since I’ve heard so much. I think that and I’m going to not a contrarian approach, but just a comment approach. We do need oversight in financial services. We do not need egregious oversight, which is what CFPB has been doing. We’ve got to have it. If we don’t for financial institutions, mortgage bankers, banks will all run amok and do what they want to and we know we don’t need that and we need it. But I want to give you an example of something that I experienced as a consultant recently. I want you to think about this. Had a client who is a, it’s just another example, it’s government junk we deal with. Had a client who was late reporting something, and I won’t go into what it was to HUD. What was reported was a matter of public record, so HUD could have seen it somewhere else, but it wasn’t physically sent to HUD. It wasn’t a major item in my book, okay? HUD messed around with it for over two months and finally came back to the lender and said we’ve come up and we’re gonna let you off, but we’re gonna fine you $12,000. Where they come up with $12,000 is beyond me. They then turned around and had to go to the Inspector General’s office to get approval of the settlement and saying we won’t penalize the lender if they pay the $12,000. Do you know how much administration went into collecting that 12,000. And now that 12,000 penalty is out there on that lender and they technically have to disclose that for a one time error to everybody they do business with in the financial services arena, based on most companies contracts. So we don’t have just overreach and CFPB. We have it inside our agencies we do business with. There was an example where we have it inside HUD. what I’m concerned about is how much effort went in for the agency to collect. It was all about the money to collect the 12,000. It was a joke. It was a joke.
[David] Yeah. Great point. Great point, Marc. Some of this, a lot of this inequities are going to be fixed and it’s just we’re gonna have to be patient. Is it gonna be a smooth road? No, it’s gonna be a challenging road. Alice, thank you so much. Anything else you have for us, Alice? I just wanted to from Mark, I’m usually the one on the show that’s going to be, no, we need oversight. We need a regulator because the agent, like you said, people still need guardrails, but they have to be smart about it. It’s not just trying to find those little things right that IRS auditor that’s going to come in. They feel like they got to find something. It’ll be this little thing. Go after the real big problems. Not so much focusing on the small stuff and the small guys because they did have an initiative at one point CFPB did a few years ago where they we’re going after smaller title companies you’re, why are you doing that? They’re just trying to prove a point that everybody’s on their radar. And I don’t think that benefits consumers, to Marc’s point. What were we just hearing? That it costs three cents to make a penny? That’s where
[David] Why do we have pennies in our pocket? It cost me way more to go try and track down that. 300 percent of what the value is. Yep. Yeah. Crazy. Really crazy. Alice, any thoughts about some of the programs? Title one. Some of the loan FHA programs, HUD’s programs out there.
[Alice] Yes, so new topic listeners we, Mark was commenting also, which is really terrific thoughts on ways to get better as an industry, how can we improve home ownership, and he mentioned last week, I believe, on the show about Title one, which is FHAs, a lot of people aren’t aware at all of Title one as a matter of fact, they could be looking through the FHA 4000 guide and be reading something about a manufactured home and going, Oh, my gosh, I didn’t know I had to do that, right? I didn’t know that was a rule. And I’ll have to tell them you wandered off into the Title I section of the guide standard FHA stuff is Title 2, right? Stay in the Title 2 section of the guide. You didn’t do anything wrong. So Title I is really designed For some home improvement, you can get up to 7,000 for home improvement, and it’s really for financing manufactured homes that are on a lot. It does have a component to do by a manufactured home and land, but its maximum loan amount is 25,000, so it’s very difficult to use and it’s also you have to because you’re trying to get these loans to Ginnie Mae if possible, Ginnie’s got a 1 million dollar pool size. So you got to do a lot of them a lot of them You know if you need to have security so for mortgage lenders this product is not an option but for banks credit unions to get this program modified I think would be a great thing to talk about how and where so Marc i’d love to hear your thoughts You were an advocate of title 1 expanding and how you think it could best expand. I just wanted to give our listeners a little background on it.
[Marc] About six or seven years ago, I was working in helping a friend of mine who was a home improvement type lender in Dallas, Texas, and we went to visit a warehouse bank. I won’t mention that name, but to try to get warehouse finding on funding on potential title 1 loans. But the problem was the take out on the back. It wasn’t a really good place to put it, because has had that initiative. It’s been out there forever to develop title 1 securities and because of the small volume of it, nobody’s really focused on it and whatnot and I’m beginning to wonder what’s going to happen to that because that was supposed to roll out this year and the biggest problem we have with the title 1 lending is, this company I’m working with now in Alabama is a major manufactured housing and chattel lending company besides being a fully agent, agenized mortgage banking entity and the problem with what they have, the market’s real restrictive to who it will invest in manufactured housing financing and it’s mainly a conglomerate of credit unions and then there’s some talk that there’s going to be some securitization work done, but if we had the title 1, at least for the title, 1 manufactured on a lot manufactured housing loans, at least that could end up going in Ginnie Mae if we got this thing squared away for the future. So that’s what I’m really looking forward to see some movement in that. Because since we got all our approvals, we can put it in Ginnie Mae and most of the lenders that do title 1 lending don’t have Ginnie approval, I got to find a subordinate type investor relationship to fund their long term product after they originated in a form of a investor security or whatever so I think this is something that’s been beat around for a long time. And nothing’s really been done within many years. And it should become a focus because. In many areas of the country, even though some of the manufactured housing is 300,000 dollars a pop, but it’s on a lot. It’s still, especially in the Western states in Arizona and Utah and Nevada. It’s affordable housing out there. It really is. We need to get some focus on that. So that’s that had been my focus there and I’m sure you bumped into that some before Alice. Some of the things I’ve talked about.
[Alice] I think, yes, and I think what happens is within FHA, they’ll say, we’ll go Title II, then just use the 203b program that is very friendly for some. You have to know what you’re doing for manufactured home. They’re very doable. And so that’s why I think we don’t get a lot of movement from FHA to perhaps increase loan amounts. I agree with you. Jenny May has to be easier to maybe some. And you can mix all of Title I together in that million dollar pool today, but I don’t know if they have it in them to accept a lower pool size. So you do need some kind of exit strategy to get to a lender that will pull these together to try and create that pool for you.
[Marc] I think there will be some investors for those smaller pool sizes because right now you get a security like that guaranteed by the technically with the guarantee, but the government is going to be a lot better than you being private investor buying them out there and we found that we have to go through all kind of rigmarole to get private investors to step up. Like doing reserve accounts and all kinds of things, because they don’t want the losses associated because you are in many cases on chattel, at least you’re financing a depreciating product. And for the most part, we can fool ourselves and say, it’s not, but even when you put a piece of manufactured housing on a lot and have a foundation, some a qualifiable foundation under, you can still have depreciation asset less it’s in a community or a a park that’s been developed as such. They can get moved, as lend0ers, you get a little nervous because when the chattel world I actually, we actually had that a customer who, they called us to refinance a new lot and they had a new address. Fortunately we had the old loan unfor, fortunately, unfortunately, however you wanna look at it. They had picked up that house and moved it to a new one, . So I, the other loan I got three or four, just had a lot on it, and they moved the house, got three or four days. You can handle it for me now, . Yeah. The performance numbers are old data. We don’t have good data today on that type of chattel because of we do, that’s, I think you gotta show the performance and the ability to collect is a key factor.
[David] Yeah. We got. Got a lot more things coming through HUD right now. Scott Turner’s in there to make some changes, mostly in efficiencies initially, and then we’ll be hopefully updating the systems. Dear God, we’re still in cobalt inside of HUD. It’s just shocking.
Alice Alvey, Master CMB
She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.
Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.
She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.
Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!