[David] Alright, let’s get on over to Alice Alvey. She’s here with us with another legislative update. Alice, always good. Really thrilled about the trigger lead. That’s this great news. But dang, it’s March 5th thing. It’s kinda like we get some good news, then you have to wait. It’s like I got you a great Christmas gift, Alice, but it’s only September.
[Alice] Yeah. The usual wait period of 180 days, so that means it’s effective March 5th. And so a lot of times people are, okay how do you define effective? What is effective on that day? Is it, they’re my customer as of March 4th. And so that starts to be that, I originated their current residential mortgage. So anything I have in process or in servicing as of March 3rd is mine as of March 5th. Of course, any new business coming in is mine. At that point or so. I think some people will be weighing out different dates on what customers are in that bucket and what customers aren’t. But I’m really glad that the MBA report threw in that important sentence, which there is a requirement that the offering may not provide, or I’m sorry, the CRA may not provide the information unless the recipient will use it to make a firm offer of credit that’s always been out there. It’s really not been, not used, but not enforced as, with trigger leads. There are people, everybody is get buying the lead and making phone calls and maybe they’ve run a preliminary credit check. And so they’re saying, oh, I can offer a, make some kind of offer of credit because I know the score is above whatever their magic number is. But this does reinforce and you should make sure that you’re assessing that it is a firm offer of credit. So we have no idea if they’ll start bringing this back to the surface if it becomes a new playing field or if it’ll be the status quo on how firm offer of credit has always been applied in the market. So that’s just my heads up on that. Once any one aspect of the bill.
[David] Any prediction on that?
[Alice] Oh no, I don’t predict. I just write down y’all’s predictions.
[David] You don’t predict. Only Bill does that. Only Parker does that
[Alice] They learned that, there are some many wonderful economists out there who make sure don’t, I’m not gonna predict. I can say procedurally for a lot of companies, it’s just a welcome sense of relief that someone is not gonna be attacking your servicing portfolio anymore. The minute the customer makes an application out there. It does level the playing field a little bit but there’s still always gonna be work to be done. The one other thing I wanted to bring up since people brought up whether we’ll see Lisa Cook at the meeting or not in voting the one question I wondered, is mortgage fraud. I took a look at this. Of course, mortgage fraud and the idea of occupancy fraud has been in the news a little bit. And I wanted to thank the National Mortgage Professional Daily for pointing out the Philadelphia Fed study that had been done in 2023 on fraud investors. This was really interesting and I wanted to remind folks. Everybody on our side has an obligation to catch this as well. So yes. Who’s ultimately the first person who’s liable and responsible? That’s the borrower. But an originator still sits across from the person looking at their addresses and going. Interesting. Your job’s over here, but you’re gonna call this your primary residence. So that kind of misrepresentation, that goes on discussion, I should say and possible misrepresentation goes on every day for loan officers. You’ve gotta be upright on this. You’ve gotta make sure people understand that this is mortgage fraud because this Philly study pointed out that default by those investors borrowers is 75% higher for those types of people who are going to be borrowers, who are gonna be willing to mislead. And sometimes it’s a very strategic default. So don’t put your company at risk because it not only becomes a risk for repurchase, but it becomes a very big risk for default as well.
[David] Yeah. And asking an originator. To possibly turn down the loan, knowing the guy down the street is gonna probably do that and not step up to that. That’s where leadership comes in how you run your company. And if you’re a real leader, you’re gonna do what’s right and you can I tell you that. But yeah. But the guy that’s been doing it wrong has been down the street for the last 23 years and I’ve been competing against him and he gets my business when I do what’s right and he gets my business because I turn it down. That is an argument. I understand that. But at the end of the point, I think we have a new sheriff in town and I think we’re gonna start seeing some more. Especially when we look at some of the regulatory changes are coming and here’s the biggest thing, it’s happening at the state level. We’re having more changes, more focus is shifting to the state level. And I think that is gonna be an issue. Bill, it looks like you have a thought going on your mind.
[Bill] Yes. Two different thoughts on this. So the first is with Lisa Cook specifically. The facts as they existed at the point in time are actually relevant. And I say that because in 2021 with LTVs, I think it was below 80, there was no LLPA on second homes. So again, depending on her transaction if it qualified as a second or an investment based on LTV and there was no LLPA, I’m not really sure how you connect the dots to wind up with Fry. The second thing is, so ProPublica went out and did some digging and they found some examples on current cabinet members that have multiple primary residencies. Lee Alden, I know was one where he had a primary residence on Long Island, and then he has a primary residence now in DC. Again, whether it’s letter of the law, that’s become in my world, a fairly common underwriting judgment call. If you understand why somebody has multiple properties and you’ve got full transparency on the data, underwriters are making that decision. So you go back to, you know, in Lisa Koch’s case, it’s way more detailed than just an occupancy box that she checked. The second loan that she did. Was the first loan listed on that application. What did she say the occupancy was? Did she qualify carrying both. There’s a lot more to this that has to be laid out. And to your example, it’s like there’s a big difference withholding information to get a loan done and if as a loan officer and presenting all the facts and arguing passionately why you believe the transaction makes sense. And I think that’s getting lost in a lot of this dialogue that you can’t pick one data point and say, that’s right, that’s wrong. You gotta look at the, brought all that up.
[Alice] I’m so glad you brought all that up.
[Kittle] However, the other side to that would be if you’re like the Attorney General of New York, who has more than just two, I think it’s 3, 4, 5, or six. And that, that’s a tough call. Yeah. So that’s another aspect of what you’re saying. If it’s just two properties, okay. I agree, but with what Bill’s saying, but if you’ve listing four or five properties, like she’s got, and one of them is like multifamily, as I understand it, I could be wrong on that then, probably not.
[Alice] Yeah. Each case is gonna be very different, but that’s why to Bill’s point, you have to look at the details of the loan. You have to talk to everybody. Nothing is ever just a blanket statement where you can,
[Marc] Let me let me ask you a question here. Okay. I’m gonna use me as an example. I have three home. I don’t have a mortgage on them, but I have three homes and one’s in Alabama, one’s in Texas, and one’s in Florida. I spend four months roughly at each one of those locations a year. I travel back and forth between all those locations all year long for a day here or day there. But I don’t live in any residence for six months. If I decided to go finance two of those houses for whatever reason because I want to go buy something, just go do it. I would’ve a problem because I don’t meet the six month rule. they’re not close enough, they’re real close, to, but I have a job I’m doing in Alabama. I got a company I have in Texas and I have a vacation home in Florida. So I can see how people, some people get hung up on it. It’s the circumstances at all. But unfortunately, the regulations are real clear on this and we don’t have as much leeway. I’ve been looking at this really hard the last 90 days for a couple reasons, but you don’t really have, inside the regulations, you don’t have that much leeway of what you go, people need to be in that property six months. It’s gotta be a reasonable distance from the dwelling they have and some other rules like that. And it’s a lot tighter than you might think when you’re looking at it, especially for Freddy and Freddie and Fannie.
[Kittle] you can bypass all that minutia. Just go to your community bank and get a five, one portfolio, arm loan and not worry about it and disclose everything.
[Alice] I just wanted to clarify for our listeners what Mark was describing with the six months was the definition of a second home.
[David] Ah, yeah. very good point. there’s so much in this discussion, but I mean to the attorney general in New York, that seems to be clear of you. So there’s some others, but it’s also interesting how this is now coming up and rising up with Adam Schiff. And we, sometimes I get a little concerned we’re using mortgage fraud to go after political enemies at some point. And that’s the part that I’m going like, why we guys gotta, we have a responsibility here and so listen to Alice.
[Alice] I’m gonna apply it equally across the board.
[David] Whatever you do, apply it equally. Yeah. And if you have an and again, the con, I don’t love your thoughts on this, Alice, it’s kinda a whole lot more complicated, but it’s not now the CFPB in a centralized location in DC it’s all these different state regulatory Cfs now that cp little mini CFPBs that are existing across the state, it’s gotten a lot more complicated.
[Alice] I think the occupancy really, first of all and foremost, has a tendency to come in as David was bringing up with your loan sold to Fannie and Freddie and FHA and va, right? They’re the ones who would be first enforcing the definition of occupancy for their products, and then the money rolls downhill. But it’s usually Fannie and Freddie who then would say to the lender, you have a problem. You’ve gotta buy this loan back or you’ve gotta, they’ll work out some kind of restitution with it. Then the lender has to decide whether or not they’re going to turn around and go after the borrower based on the circumstances that they investigate and find for all of the onion that’s involved in this type of thing. Whether they had some fault, whether it’s all the borrower misleading them, every situation’s completely different and unique. But that’s the way the money normally falls. It doesn’t go FHFA reporting to the president who then says You’re fired.
[David] Yeah. Although knowing the dust up that happened between Besant and Pulte here, we gotta go into that just for a minute. We’ll shift topping Anything else more? Alice, you got on that?
[Alice] No, I just want, that was a heads up, was really just the trigger leads. Yeah. Watch your firm offer of credit.
[David] And very good point.
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!