Dec. 21: The CFPB and Zelle, dead & divorced borrowers, PACE, HMDA... Saturday Spotlight: Foundation Mortgage; a clever poem
The Winter Solstice! People in Anchorage (sunset 3:41) and Minneapolis (sunset 4:34) are happy to know that, due to the earth’s tilt, from here on out a few minutes more of sun are ahead of them every day due to seasonality. How do your underwriters view seasonal or side hustle income? Of course, no one knows what Jesus Christ exactly looked like; our impression comes from artists hundreds or thousands of years later. (People in that region at that time generally had honey/olive-brown skin, brown eyes, and brown or black hair.) In some areas, namely Utah, people who look like what people think “Christ looked like” are picking up $200 an hour posing in family’s Christmas cards! (“Okay Frank, put on this robe, stand over there, and gaze into the sky.”) People back then traveled on foot or donkey, unlike now: Nearly three million people travel by air every day in the United States and as we are in the busy holiday travel season, it’s good to know who manages the nation’s public airports and how they’re funded. According to the Census of Governments, there are 435 independent special districts operating as airport authorities, airport commissions, or port authorities across the United States. In addition, local governments such as counties and municipalities, and state governments, may also operate airport authorities. They are all responsible for the behind-the-scenes operations at public airports. Dang… and you think originating a mortgage is complicated!
Saturday Spotlight: Foundation Mortgage Corporation
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“Our mortgage solutions go beyond normal industry offerings.”
In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).
Foundation Mortgage Corporation, an independently owned mortgage bank, was founded in 1998 and is headquartered in Miami Beach, FL. In October 2022, a new owner and executive management team joined, introducing a Wholesale channel in January 2023 and a Correspondent channel in April 2024. Leveraging the new leadership’s extensive experience in secondary markets, credit, and operations, the company transitioned from a retail mortgage banker to a rapidly expanding Non-QM Wholesale and Correspondent Lender. Over the past two years, Foundation has strategically refined its business model, achieving better execution and accelerated growth. In 2024, the company expanded its product offerings, including a portfolio Second Lien product developed through an agreement with one of the top 20 banks worldwide.
Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.
Foundation Mortgage is deeply committed to the belief that education can transform lives. Over the years, the company has supported numerous educational initiatives, including helping gifted individuals access higher education and sponsoring schools in underprivileged areas of Central America to keep their facilities open during COVID. Additionally, Foundation sponsors children through Compassion International, actively promotes and supports foster homes and adoption services, and contributes to The Miami Project to Cure Paralysis. These efforts reflect the company’s dedication to creating opportunities and improving lives through education, healthcare, and community support.
What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?
Foundation Mortgage values its employees as the cornerstone of its success and is dedicated to their growth and development. Each employee is paired with a senior mentor, independent of their manager, to provide personalized guidance and professional development opportunities. This mentorship program fosters skill enhancement, career advancement, and a supportive environment for employees to thrive.
Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable.
Foundation Mortgage operates as a 98% remote company with no plans to require employees to return to the office. The company believes exceptional talent often lies beyond its geographical boundaries and values enabling employees to remain rooted in their communities, where they have established lives, schools, and social connections. To maintain a strong culture, Foundation fosters online engagement through activities like virtual bingo, where numbers are emailed during the workday. The company thrives with self-starters and self-motivated employees, who often perform more efficiently in a remote environment.
Things you are most proud of that don’t have to do with sales.
At Foundation Mortgage, we take immense pride in our people, culture, and strong sense of community. Our "can-do" attitude and the way we support each other go beyond being colleagues—we truly operate as friends and family. This supportive environment is fostered from the top down, with senior leadership deeply committed to preserving this culture as we continue to grow.
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
The CFPB: go big or go home
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Is Congress going to do away with Dodd Frank and the CFPB? No. Residential lenders may not be big fans of the Consumer Finance Protection Bureau’s methods at times, but keen observers will tell you that despite the tone and some enforcement cases, Rohit Chopra, the current director, hasn’t actually done a lot in mortgage. PACE was the one mortgage related rule, some advisory opinions, and of course a few enforcement cases (servicing is proposed but not finalized). Much recent CFPB activity is oriented toward banking (overdraft fees, open banking, digital wallets, sports betting, and student loans) and credit reporting (medical debt, the data broker proposal).
For example, just this week…
On December 17, the CFPB released an Issue Spotlight reporting on challenges that homeowners often face with mortgage servicing companies after a divorce or the death of a loved one which may cause them to become homeowners. The report detailed consumer complaints that mortgage servicers often pressure successor homeowners to refinance at higher interest rates, rather than provide the new homeowner options for managing the existing mortgage. The CFPB also asserted that servicers delay borrower requests frequently to process assumptions of mortgages, sometimes for months or years, leading to some borrowers facing legal issues, missing out on lower cost refinance opportunities, or becoming delinquent on the mortgage.
Similarly, the report alleged that some servicers have refused to release the original borrower from liability, even when the successor homeowner can pay the loan. Additionally, the report highlighted specific risks to domestic violence survivors who assume a mortgage loan after divorce, noting that domestic violence survivors face risks to both their safety and their home when servicers send account information to their abusers and require the abuser’s consent for account changes.
Orrick notes that, “The CFPB urged investors and servicers to protect successor homeowners by ensuring compliance with applicable laws, avoiding unnecessary refinancing, examining underwriting requirements, and developing policies to assist domestic violence survivors. The CFPB noted specifically that investors of mortgages can play a critical oversight role regarding these issues, ensuring that servicers comply with applicable laws and guidance by evaluating their own policies to ensure that successor homeowners are protected from negative consequences when assuming a mortgage loan. The CFPB also noted that its rules require servicers to have policies to verify promptly the legal status of successor homeowners and that federal mortgage program guidelines also provide additional protections for successor homeowners.”
This week the CFPB finalized a rule (yes, 317 pages of fun) concerning Property Assessed Clean Energy (PACE) financing. The final rule integrated existing residential mortgage protections to PACE loans providing TILA and RESPA disclosure requirements in connection with PACE loans. The final rule mandated that creditors consider pre-existing PACE transactions as mortgage-related obligations when originating new mortgage loans. As noted by Orrick, the rule implemented Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which directed the CFPB to establish ability-to-repay rules for PACE financing and apply the civil liability provisions of TILA for violations related to PACE financing.
On December 18, the CFPB issued a circular titled “Consumer Financial Protection Circular 2024-07,” which provided an analysis of whether credit card issuers and their partners may violate federal consumer protection law by devaluing or obstructing access to credit card rewards.
On December 13, the CFPB published a 98 page report based on HMDA data collected from financial institutions, highlighting trends and changes in 2023 residential mortgage lending. Based on the HMDA data, the CFPB observed a decline in both total mortgage loan applications and originations across all loan types for 2023, with applications dropping by 30.3 percent and originations dropping by 32.2 percent. Further, the report found that originations for refinance loans for single-family homes dropped by 64.2 percent, while originations for home purchase loans dropped by 21.3 percent from 2022. The CFPB attributed the decline in applications and originations to rising interest rates, which the report noted rose further in 2023; rates increased from about 6 percent in January 2023 to about 7 percent in December 2023.
The report also examined demographic disparities in mortgage outcomes. The CFPB’s report stated that Black and Hispanic white borrowers faced higher denial rates and experienced steeper increases in median total loan costs compared to non-Hispanic white and Asian borrowers, across loan types. Additionally, the report noted that non-depository institutions, particularly independent mortgage companies, continued to originate an increasing portion of home purchase and refinance loans.
The CFPB addresses plenty of areas besides lending. This week the CFPB sued the operator of Zelle and three of the nation’s largest banks for failing to protect consumers from widespread fraud on America’s most widely available peer-to-peer payment network. “Early Warning Services, which operates Zelle, along with three of its owner banks—Bank of America, JPMorgan Chase, and Wells Fargo—rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards. Customers of the three banks named in today’s lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures.
“The CFPB’s lawsuit describes how hundreds of thousands of consumers filed fraud complaints and were largely denied assistance, with some being told to contact the fraudsters directly to recover their money. Bank of America, JPMorgan Chase, and Wells Fargo also allegedly failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors. The CFPB is seeking to stop the alleged unlawful practices, secure redress and penalties, and obtain other relief.”
But the CFPB is not the only entity impacting the policies and procedures of lenders, servicers, and other financial institutions.
This week the Governor of New York signed into law AB 9686 which amends the New York State banking law by requiring the Superintendent of Financial Services to develop an informational pamphlet titled “What Mortgage Applicants Need to Know” and make the pamphlet available to residential mortgage applicants on the Department of Financial Services website. The legislation requires licensed lenders, mortgage bankers, and other banking organizations to provide the pamphlet to each applicant for a mortgage loan, specifying that lenders may provide the pamphlet by e-mail or by providing a link to the Department’s website.
AB 9686 requires the pamphlet to include 21 key pieces of information, which include specifying that applicants have the right to compare and negotiate loan charges, receive a clear explanation of loan terms, and obtain a loan estimate detailing all charges, including applicable fees, before agreeing to the loan and to file complaints with regulators if the applicant feels that a law was violated. The pamphlet will also remind applicants of their rights to credit counseling, appraisal by an independent professional, and the ability to cancel a refinancing loan within three days of closing.
In the Great State of Texas we’ve seen a plethora of mortgage law changes hitting originators and lenders.
This week Mike Metz, with Arizona’s V.I.P. Mortgage, decided to let his imagination run wild and penned a rate cut Christmas classic!
'Twas the week before Christmas when all through the States,
The market was slower, buyers wary of rates.
Santa Powell made an announcement along with The Fed,
With a 25BPS cut that had been dancing in his head.
Then out in wall street arose such a clatter,
And loan officers asked what could be the matter?
Away to the news sites they flew with comport,
And opened their blogs and Chrisman report.
With a little Q&A, so lively and quick,
Mr. Powell played a nasty commentary trick.
More rapid than eagles the markets they flew,
Our prospects for cuts next year were now down to two.
“Now PCE! Now CPI! Now inflation go to 2,
Now jobs, now ADP! Now unemployment's 4.2.”
Two rate cuts for 2025 the elves on wall street now guess,
For 50 BPS total, making bonds all a mess.
Those refis were a dream, woken with a pinch,
J Pow took off his Santa hat. He was really the Grinch!
Happy holidays to everyone, and see you next week!
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you're interested, visit my periodic blog at the STRATMOR Group web site. STRATMOR’s current blog is “Refis Help the Economy and the Industry is Ready to Help.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).
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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2024 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman. The views and opinions in this newsletter are mine alone unless otherwise specifically stated herein.)