Lykken on Lending

[David] We got Alice Alvey here, Vice President of Partner Education and Training for Union Home Mortgage. Good to have you here, Alice, with the Legislative Update. Love your thoughts on all the things going on in the industry as well.

[Alice] Thanks, Dave and hi everybody. It is a slow legislative time of year as usual with the Congress, as you heard, only being in session for another three weeks. So, if you search under GovTrack.us, there are over 200 housing and community related bills, and none of them are going anywhere. So, for me to start calling out there’s this one about grandchildren, there’s this one about veterans, different titles. It’s just amazing as I was looking at the list, multiple ways that senators and representatives try and look at how do we try and do small things for housing? and all of them seem to zero in on small subgroups or a particular regional issue. Nothing is national to have any implications. So, right now it seems like both candidates are trying to put a little bit out there about housing policy that I’ll let each of you read and interpret yourselves, but from actual legislation, that’s going to get anywhere related to housing, that’s not happening at 2024, everything’s just going to sit. So, I just wanted to put that out there and it’s interesting to hear Allen when you mentioned having a property or properties in your neighborhood on the market for 30 days. I’m old school, right? Dave, you and I come from living in many markets for a long period of time where if it was only on the market for 30 days, you were happy. You’re like, wow, this is awesome. I’m 60 was normal and so I think trying to redefine what is normal for a house to be on the market and setting seller expectations is what when you said it right Allen, it’s crazy out there because we have to reset a lot of expectations.

[Allen] Yeah agreed.

[David] Yeah, Alice, any thoughts more on what you’re hearing as a result of the fallout of the NAR new rule.

[Alice] Yes, as a national lender, you’re hearing more and more what’s going on in the markets getting a chance to look at each of the agreements, making sure your underwriters understand all the different ways that these things can be shown. What’s super interesting to me is the number of markets that the realtors refuse to give a copy of the agreement to the lender and, yes, so part of me goes, my suspicion radar goes up and why don’t you want to share that. I don’t have an answer to that, but they don’t want to give the lender a copy of it. Thank goodness. And many of the states, the purchase contract has a reference to the seller broker agreement and uses the word total compensation. If that’s the case, I don’t need the buyer agent agreement. I can see that the purchase agreement itself is referencing total compensation. But when we have cases where it’s just sellers contributing and we have to make sure we’re setting the loan up properly, We’re making sure the buyer’s got enough funds for any portion they might pay for closing. We’re getting still and many markets push back that the realtors don’t want to give up that agreement. Our loan officers in some cases are faced with, okay, I’ll work with this number, but if the closing disclosure comes back and my buyer’s got to pay something, guess what’s going to happen? We’re going to be delayed in underwriting. We’re not asking for it because we want to get into the details of the agreement, but we just want to make sure we’ve got the right numbers for closing and we don’t have any back and forth. It’s just really interesting what’s going on and I’m curious if anyone has the answer to why a realtor doesn’t want to show us what’s on that agreement

[David] Yeah, it’s curious anytime someone doesn’t want to disclose something He always begs for deeper dive.

[Alice] Right? My broad radar goes up, someone got a side deal, and you like you can’t help that, right? and by the way a message out there to the real estate community. We’ve been hearing a lot about a side deals written agreement, we’re not here as the lending community to police what’s going on in the real estate world, you know what we are being told to put on the cd. That’s what we’ll charge, but I would just say we’re hearing some stuff and I’m sure that’s a tiny percentage and just the occasional situation out there, but sure everybody’s doing it above board. Most people are.

[Bill] And Alice to that point, because I’ve actually come across that a little bit and it’s typically not from the most the agents. Let’s put it that way, as you alluded to the explanation we’ve given is that, okay you understand we’re going to get the numbers and we’re going to put them on the CD. Are you willing to be responsible for the purchase transaction? blowing up based on information that we should have had on day one, and I’ve had it come up twice and just put that in an email. So, it’s well documented and they fold immediately, when they bear the downside risk of doing that, their tune changes quickly.

[Bill] The thing I found is there, the agent may have an agreement with the buyer to pay three percent on this particular house with this contract, the seller’s only willing to pay two. So, the realtor says, okay, I’ll take two on this deal, but they don’t want to renegotiate that first when a case the deal falls through, they’re trying to hedge their bet that I might still be able to get three percent in another contract. And, if this transaction falls through, I want to keep my three percent in my back pocket for the next deal. And so that’s going to cause problems on this deal if you don’t want to rewrite your agreement and make sure we’re going to stick with the 2, let’s all keep our fingers crossed basically, and the lender were not here to police you. We just want to get our deal.

[David] Great point. Good discussion around that one. I think it was Taylor Stork ran a survey this last week that said, how many of you feel that the realtor should not disclose it or provide that how many absolutely feel they should and are those that are neutral on it and it was overwhelming within the industry on this informal survey that they should. But you have a great strategy Bill on how to say, are you ready to bear the brunt and take the heat for the thing blowing up? That’s a great way to approach it.

[Alice] I like that line too.

[David] Yeah. That’s really good.

[Bill] So, Alice question that we’re back and forth earlier, but going now the other direction where  I’m seeing info coming from outside audit type folks that are now starting to say that buyer’s agreement has to be provided at application to be able to disclose the buyer’s commission, what the buyer is obligated to pay on the loan estimate,  and that seems like it’s going too far the other way. I’m curious as to the way you’re seeing or hearing from folks.

[Alice] I do want to recheck Reg Z because it’s a big one. But in my first time around of checking it with our compliance people. It’s definitely reference that real estate commission has to be on the closing disclosure the loan estimate is about what my buyer has to pay and what my buyer is going to be responsible for so I definitely want to know my borrower’s portion that they have to pay for the Ellie to get that right. So, I don’t have any kind of pattern or practice of under disclosing, but there wasn’t anything specific that I read and like I said, listeners, I will double check this that was specifically stated real estate commission had to be on the Ellie. It’s just my buyer’s fee. So is it reasonable for the loan officer to be looking like in a TBD and the buyers said, Nope, I’m working on an offer. We’re going to be negotiating that the seller pays all of this commission. That’s what my realtor and I are working for and we created an Ellie based on seller paying a hundred percent of it. So it’s not on the Ellie and then our deal actually closes that way, right? We actually end up getting, or maybe my buyer has to pay a small portion and then we’ll, in our world, again, that doesn’t trigger a change of circumstance where you’d have to redisclose if now my buyer has to pay a portion. In good faith, we like to reissue the Ellie so the borrower can see their new total funds to close. Strictly from a compliance standpoint, I will recheck, but I don’t believe it has to be on the Ellie. Only my buyer’s portion that they’re actually paying has to be on the Ellie. Does that make sense, Bill? Is that what you were looking for?

[Bill] Does make sense and because I also get nervous when you start requiring more documentation between completing an application and sending out a disclosure. Because that clock’s ticking pretty fast number one, and number two, it feels like it could make more sense if things flush out down the road where the standard becomes the buyer is paying and therefore, to your pattern and practice comment that starts to become relevant where if it’s still  95% the other way that it’s the sellers paying all of it, it just seems like it’s a little bit own risk somebody is just pulling out a rag and quoting it without putting it in a business context at all.

[Alice] Yeah, definitely some regional issues where in certain regions, the purchase agreements are well worded. Yeah. Anyway, I’ll send it back to you, Dave. We could keep going on different examples.

[David] This is one of those sides. We’ll continue to be talking about it in each one of the podcasts that we come up because it’s going to be going on. One thing I’m hearing more of is there are some talks about the lawyers, the plaintiff bar. Again, that’s part of the legal profession. That is seeking for opportunities to do class action lawsuits. I think we’re going to see a lot of this. What was the famous saying by the CFPB back in the old days? He says, we’ll figure out our policy based on how some of the case law comes out of  the cases settle so we’ll see. It could be interesting to see where this lands, but it’s a fluid issue. But I love what you guys are saying here, Marc, you were out of town or out of the country during that. Any thoughts you want to add in before we move over to Allen?

[Marc] We’re dealing with it firsthand right now because we have a flood of realtors that are coming to us wanting to be loan officers. Bunch of people leaving the real estate business because of the uncertainty with what’s going on and so we’re growing our loan officer base quite rapidly right now because of some turnover. It’s happening industry and that’s an effect I don’t think many people thought would be that dramatic, but I think it’s going to be more dramatic than we thought. That’s the biggest thing I’ve seen.

[Alice ] Interesting that you bring that up because the MBA did a seminar and it was titled about the NAR settlement and most of the conversation and Mitch Keiter was on that call and provide a great feedback ended up being about that exact topic, Marc, the idea that, is dual compensation allowed because they could see a lot of areas could see that change.

[David] Yeah, it’s interesting. Good stuff. Thank you both very much. Alice Alvey, your reports are always so helpful for all of our listeners. I was just talking to one of our listeners here at the open reception last night, and they commented, I run ops. This is the best podcast because I get so many tips and insights of what’s going on the outside of the business. So Bill, Alice, Mark, all y’all, thank you for your comments.

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Alice Alvey, Master CMB
Vice President Partner Education and Training at Union Home Mortgage
8241 Dow Circle
Strongsville, OH 44136
D: 440.420.4294
C: 248.941.1939

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!