Dec. 7: Saturday Spotlight: TransUnion; F&F conjecturing; economic morsels; you've been hacked: now what? Caitlin Clark's sponsors pony up

First, the news. On this 83rd anniversary of the Japanese attack on Pearl Harbor, there are apparently 16 veterans still alive. Next, the potential bad news. Senate Amendment 2358, heavily supported by much of our industry and the MBA, aimed to cut back abusive mortgage trigger leads, is likely to be pulled from the NDAA FY 2025. (It was attached to the National Defense Authorization Act.) If that happens, it would not be good news; there was a lot of weight put into that. “We’ll get ‘em next time” right? For some good news, the largest producer of diamonds in the world by value, De Beers, has taken the significant step of slashing its prices on most mined gems by 10 percent to 15 percent. Is the company on the ropes? It has been known for many years that diamonds aren’t all that scarce, and that De Beers controls the market. But De Beers has been struggling to win over millennials who don’t have a problem with lab-grown diamonds. De Beers wants profits of $1.5 billion by 2028. Generally, they make between $500 million to $1.5 billion in profits in a given year. Last year was a disaster, with profits of only $72 million.

Saturday Spotlight: TransUnion.com

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“Build trust and engage with your consumers more confidently.”

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).

Established in 1968 as a railroad leasing company based out of Chicago, decades of investments in technology, strategic growth and acquisitions (and ongoing expansions into new areas like fraud, marketing and customer-driven analytics) have drastically broadened our capabilities and transformed us into the leading credit reporting agency you know today.

TransUnion offers thousands of B2B solutions designed to address the unique needs of businesses across multiple industries. Mortgage lenders choose TransUnion for our identity-focused, data-driven mortgage insights and solutions, enabling them to achieve more desirable lending outcomes in a volatile housing market.

Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.

We strongly encourage our associates to volunteer their time and give back to the communities where we operate, providing paid time off to those who participate (in 2023, employees recorded 6,675 volunteer hours). In addition, TransUnion has an established corporate giving program through which we donated nearly $4M in 2023 to community organizations focused on the advancement of economic inclusion, education, racial equity and others — on top of matching $525K in associate donations to eligible non-profits.

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?

Our ongoing aim is to build a culture where everyone feels they’re in the right place and empowered to succeed. This includes offering tuition reimbursement, enterprise inclusion programs, and promoting participation in business resource groups. Our internal learning hub connects associates with a variety of educational programs and opportunities, in addition to offering career coaching, self-service mentoring guides and development resources.

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.

TransUnion operates as a hybrid-first workplace, and we regularly run (and action inputs from) company-wide surveys that encourage employee feedback. In the most recent survey, 86% of respondents reported being satisfied with the flexibility TransUnion offers.

Things you are most proud of that don’t have to do with sales:

TransUnion’s commitment to expanding financial inclusion is a big reason many of us are proud to work here. Our partnerships with credit unions like VyStar and non-profits like HomeFree-USA help further our goal of expanding mortgage access and education to underserved consumers. For instance, we provide credit education tools (such as our CreditViewTM Dashboard) to HomeFree-USA which aims to help people of color on their homebuying journeys. And collaborations with organizations like FinLocker and MoCaFi support efforts to empower Black Americans building credit and wealth through homeownership.

Is there anything else you’d like to share along these lines?

We always aim to meet our customers where they are, and in a mortgage market that remains tumultuous and unpredictable, helping lenders meet financial goals is a high priority. One current area of focus is preapprovals. When mortgage lenders determine consumers’ creditworthiness earlier in the approval process, they can more easily ensure their time and resources are being invested for the right buyers. This customer-centric focus plays a large role in why lenders choose TransUnion, and we aim to continue delivering on their high expectations in the years to come.

(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.) 

Economic snapshots: commissions, bonuses, and jobs

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I bet that you were expecting dry mortgage news here, weren’t you? Caitlin Clark made the most of any WNBA player ever last year at $11.1 million, but only 1 percent of that came from her WNBA salary, which after bonuses came out to $100,000. The real money came in the form of an estimated $11 million in endorsement revenue after cutting deals with Nike, Gatorade, State Farm, Wilson, Hy-Vee, Xfinity, Gainbridge, Lilly and Panini. Most of that comes from Nike who put in place an eight-year deal worth over $3 million a year. But Ms. Clark is not alone: Simone Biles earns 99 percent of her money from sponsors, and freeskier Eileen Gu made only 0.3 percent of her $22.1 million in earnings from direct compensation.

More appropriate to the readership of this Commentary, Elliot F. Eisenberg, Ph.D., writes, “While it’s still very early and the existing housing market is profoundly weak, preliminary evidence shows real estate agent commissions declining since new rules went into effect in mid-August following a landmark legal settlement. From mid-August through early October, average commissions received by buyer agents were 2.28% compared to 2.65% over the prior year. Interestingly, seller agent commissions also declined, going from 2.98% to 2.69%. These declines follow economic theory.”

The U.S. economy is driven by jobs and housing, and yesterday we had news on jobs. The MBA’s Michael Fratantoni, Ph.D., MBA's Chief Economist and SVP of Research and Business Development, had some thoughts.

“Although payroll employment rebounded in November with a gain of 227,000 jobs, and the prior months were revised upwards by a cumulative 56,000 jobs, the report overall shows more softening in the labor market. The unemployment rate is now above 4.2%, the household survey again showed a large drop in employment, and more households reported spells of long-term unemployment. Per the JOLTS results from October, the hiring rate continues to decline. While we are not seeing a pickup in layoffs, new entrants and individuals who lose jobs are having a more difficult time regaining employment.

“The payroll gains continue to be concentrated in just a few sectors, government, health care, and leisure and hospitality. The rebound followed a net loss of private sector jobs in October with the impact of the hurricanes. Wage growth remained steady at 4% on an annual basis.

“Fed officials have pointed to their ‘data dependence’ when it comes to decisions about future rate cuts. These data support a cut at the December meeting, and MBA forecasts that the Fed will continue to reduce short-term rates in 2025, although it is likely to slow the pace of cuts.”

Everyone’s talking “what if’s” about Freddie & Fannie

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The latest parlor game at mortgage gatherings is discussing the ramifications of ending the conservatorship of F&F. (This Tuesday’s Capital Markets Wrap at noon PT, presented by Polly, focuses on that. Earlier this week Institutional Risk Analyst’s Chris Whalen spoke to Robbie Chrisman about what might happen with a private Fannie and Freddie and the latest on capital requirements: found here, click on previous episodes, 12/4; sponsored by Richey May.

The industry is divided about whether Agency rates will go up or not, or if LLPAs and gfees will go up or not. But given the prospect of ending conservatorship, MBA President and CEO Bob Broeksmit published a blog post “welcoming the opportunity, should efforts renew, to work with policymakers on a path to end the conservatorships of Fannie Mae and Freddie Mac. Importantly, Broeksmit explains why the most critical issue to address before releasing the GSEs is the establishment of an explicit federal backstop for mortgage-backed securities.”

“Releasing the GSEs from conservatorship will require locking in many of the administrative reforms MBA has successfully secured over the last 15 years, e.g., a level playing field for all sellers with respect to G-fees and variances, the uniform mortgage-backed security (UMBS), representation and warranty reforms, and a transparent ‘new activity’ rule. In addition to codifying these reforms, Congress and the incoming Trump administration will need to come to terms on many other issues, including how to restructure Preferred Stock Purchase Agreements (PSPA) implemented during the Obama Administration. For MBA, the most critical issue to address before releasing the GSEs is the establishment of an explicit federal backstop for mortgage-backed securities.

“The explicit federal guarantee is essential for maintaining stability and liquidity in the secondary market. The backstop undergirds global investors’ confidence in holding and selling mortgage-backed securities, which in turn enables homebuyers to access credit even as market conditions and interest rates fluctuate. Our 2017 white paper lays out specific ideas for promoting a vibrant and sustainable secondary market.”

A view of mortgage servicing rights

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Robbie Chrisman writes, “Like my Grandpa Bob would say, ‘You can't go broke taking a profit.’ The recent IMN Forum in New York reflected a mix of caution and strategic forward-thinking, with attendees focused on leveraging innovation and adaptability to tackle industry headwinds while capitalizing on emerging opportunities.

“Among the most talked-about topics is the shifting landscape of MSRs. Valuation and liquidity of MSRs remain focal points, with market participants grappling with the complexities of pricing these assets in a volatile rate environment. The rising cost of financing MSR portfolios has added to the difficulty, compelling servicers to rethink their strategies and explore creative securitization approaches. While MSRs continue to be viewed as attractive in the long term, near-term volatility has amplified risk.

“Regulatory pressures have been another dominant theme, with attendees expressing concern over tightening compliance requirements. These include stricter fair lending standards, consumer protection mandates, and emerging state-level regulations that vary widely. Industry leaders are emphasizing the need for robust compliance frameworks to manage the heightened scrutiny while maintaining operational efficiency.

“Technology and innovation are being hailed as essential tools for navigating these challenges. The adoption of artificial intelligence and machine learning to streamline servicing operations, improve borrower communications, and reduce costs is gaining traction. Lenders and servicers recognize that leveraging advanced technology will be critical to meeting both regulatory expectations and borrower needs in an increasingly competitive landscape.

“Finally, the macroeconomic backdrop of high interest rates and low housing inventory continues to influence borrower behavior and loan performance. Discussions have centered around how these trends will shape the future of servicing, from managing delinquency rates to maintaining profitability in a constrained market.”

The CFPB, scams, and protecting your network

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I bring this up because I continue to receive emails about it. In response to scam attempts by “bad actors” pretending to be with the Consumer Financial Protection Bureau (CFPB), earlier this year the agency published a notice warning consumers to "Beware of new CFPB impostor scams." The bureau said it has confirmed that scammers have been using CFPB employees’ names to try to defraud people, specifically older adults, by phone or video calls.

How are systems hacked? Two of the primary ways are embedding malware in an e-mail attachment or using stolen passwords to log in to the remote desktops that workers use to connect to company networks. Hackers will usually target combinations of lax security and a low tolerance for disruption. Think accounting firms during tax season, or schools right before students return.

So, you or your company has been hacked. Now what? There are companies out there like GroupSense that specialize in ransomware situations. Ransomware notes usually include a link to a site on the dark Web, which often include a ticking clock and a chat box: ominous. There’s cybersecurity firm Palo Alto Networks.

There is the Federal Cybersecurity and Infrastructure Security Agency. Companies like Kaspersky. The FBI advises victims to avoid negotiating with hackers, arguing that paying ransoms incentivizes criminal behavior. There is the Nonprofit Institute for Security and Technology. Companies often spend months rebuilding their systems, pay fines by regulators, or bogged down in a class action lawsuit. It is estimated that more than half pay their hackers to try to avoid the leak of personal information after the hacker has (typically) encrypted files with a private key and demanding a fee to unlock them.

Did someone say, “Pay the ransom!”? Bitcoin allows the receipt of digital payments without revealing the payee’s identity. There’s CipherTrace or Coveware. Insurance: Control Risks.

Ransomware groups like DarkSide or REvil are often involved, or criminal syndicates. Larger groups actually employ call centers to talk victims through the confusing process of obtaining cryptocurrency and offer discounts for timely ransom payments!

If you’re interested in cyber-insurance there’s Resilience; there’s Triad Consulting Group to negotiate. Also check out MonsterCloud.

But the question remains, do ransomware negotiation specialists abet crime by facilitating payments to hackers to obtain the decryption key? The Treasury Department’s Office of Foreign Assets Control watch payments to criminals. The money often goes to venture capital for this dark-Web Silicon Valley in Russia, Belarus, or Ukraine. Veteran negotiators will tell you to avoid making counteroffers in round numbers which can seem arbitrary. Admit that you’re paying them for being a talented hacker. But not what they’re demanding.

A city boy, Jamie, moved to the country and bought a donkey from an old farmer for $100. The farmer agreed to deliver the donkey the next day.

The next day the farmer drove up and said: "Sorry son, but I have some bad news. The donkey died."

Jamie replied, "Well then, just give me my money back."

The farmer said, "Can't do that. I went and spent it already."

Jamie said, "OK, then just unload the donkey."

The farmer asked, "What ya gonna do with him?"

Jamie: "I'm going to raffle him off."

Farmer: "You can't raffle off a dead donkey!"

Jamie: "Sure I can. Watch me. I just won't tell anybody he is dead."

A month later the farmer met up with Jamie and asked, "What happened with that dead donkey?"

Jamie: "I raffled him off. I sold 500 tickets at $2 apiece and made a profit of $998.00."

Farmer: "Didn't anyone complain?"

Jamie: "Just the guy who won. So, I gave him his $2 back."

Jamie grew up and eventually went to work for a large financial institution...

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. The current STRATMOR blog is “A Lender’s Personal Touch Can Help After a Disaster.” 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.)