[David] Alice is here to give us the latest of what’s going on in the regulatory world.
[Alice] Hi, everybody. So today you heard MBA talk about FHA releasing its five new mortgagee letters. Just to give you a perspective on that’s a lot, because they’ve only issued five year to date, and so we just got five additional ones last week. All good stuff we’d been talking about on this show several times. FHA did have this on their drafting table to increase the way that we can do draws for 203ks and increase the limit to 75,000 for the limited K, give us more time on the limited K, up to nine months. It’d be… It’s still two draws, but you can have four disbursements, so that’s helpful for, multiple contractors. The other letters that they finally resent the form that made no sense to the consumer, that we all just said, “Here, sign here and don’t read it,” ’cause it makes no sense. Anyway, so it’s glad that the important notice to home buyer disclosure is finally gone. And a few, changes to QC, especially the main one is, the field review change, getting rid of that. That’ll save lenders some money in QC, which will be nice. But the main thing that’s been moving a little bit this week is this VA bill. There are about, I think the last count I saw was 62 bills were combined into, one VA bill. And, I’m sorry, yeah, one bill, Take Care of American Veterans Act, so we have both a Senate and, get this, surprise, matching Senate bill. Not any big differences to compare. So it’s House Bill 9237 and Senate Bill 4744, both were expected to move to, the House bill especially was expected to move today to voting, or this week, I’m sorry. But now it’s getting some opposition, ’cause people are reading the fine print, and those of us in the mortgage industry are a little concerned, or quite concerned, I would be, for the funding fee change that’s proposed. They’re changing the funding fee on VA loans from it, for its IRRRLs, right? The interest rate reduction refinance loan is just a real nice .5%, concept being that, I’ve got a VA loan already. We’re just rolling over the VA, guarantee on that. And so those are the thinnest loan in mortgage banking, right? They’re super easy to do. And increasing that from .5 to 1.42% so this is a big increase in that funding fee that money is gonna be needed to pay for other things. We’ve heard this before, folks, in housing where they try and make a change. Someone proposes an FHA change to MIP, for example, and the money’s not going to the program. It’s going out to, some other, something completely unrelated. In this case, at least, it would be money staying within the Veterans Administration scope, but completely unrelated to housing. It’s starting to get some pushback, the bill, because of some rating changes that the VFW is saying that the rating change could, change compen- disability compensation, could reduce it by 57 billion over 10 years and affect up to 1.5 million veterans. So there’s a lot to still digest because of it being so many components. So there are some good things in here definitely that would increase coverage for veterans in various categories from different types of injure- injuries, different types of mental health, and, other, challenges for on the medical side. But also money for a big facility out in Manchester, New Hampshire. There’s money moving all over the place in this bill, so we will watch it closely to see where it lands and hopefully remove this VA funding piece and– VA funding fee piece and gets on it quick to say- Yeah … “Hey, find some place else to pay for your program.” We’re talking about affordable housing, not making it more expensive.
[David] Yeah. Yeah, so overall modernization effort is a good thing, but it’s watching… The devil’s always in the details is what I think you’re basically saying. In light of the MBA talking about the AI governance is becoming more important and the what the word, the framework, the frame that they’re putting out, which is the frame, framework for AI governance, we’re finding a lot more things, Alice, within companies. For example, this isn’t exactly necessary. It would have fallen in your area, I think, when you were, with the various companies that you’ve been with. But we’re seeing more and more, branches, developing or using AI, going outside of the company’s systems to develop solutions for perceived needs that their branch has. And what it’s coming into is a governance. Who should be overseeing that? And I’ve received several calls recently because of our AI update that we do with Pavan. We just recorded another one where they’re going, “We’re finding… Are you hearing that other companies are having what we’re having, is where our branches are using, Claude Cowork and they literally have a separate computer outside of the company computer that’s got a, that’s a Mac Mini that’s running cycles on the company data, and it acts and logs into their company data with this other outside system. And what is the governance of something like that? Alice, there’s, some concerns that are coming out as a result of some of these new technologies, namely Claude Cowork and having another computer on the outside. I’m finding more people are saying, I ask people a question, “How many of your originators have two computers sitting on their desk?” The company computer, which is locked down, which can’t do a lot of things, wherein you have a private computer sitting there and they’re doing things, and the information is creeping across.
[Alice] So I’m probably thinking the same thing y’all are thinking. I have a policy that says don’t do stuff like that, and someone who’s doing it, you’re fired. You’re fired. There you go. It’s as simple as that. You’re stealing information from the company and putting it in a private environment.
[David] And the person that, that they were arguing, they were asking me, “Do we need to fire these people? Should we, do what, how should we handle this?” I said bring it up with the radio. We’ll get Alice’s take on it.” But I’d love to have the discussion, but I think everyone’s afraid of losing their loan officers. When you see loan officer, then when they went in and looked at it, we dug into this a little bit, there was nothing nefarious being done. They weren’t stealing it out of the system to give it away to do something outside the company. They were trying to solve a solution that the lockdown of their current systems had, that they were trying to get that.
[Alice] Can I just say one security? They need to, you need, this is a drip campaign training of security issues that come with doing something like that, and you issue something every single week that they pay attention to- on the extreme security risks in doing things like that. Yeah. Sorry. Good point.
[Bill] The acceptable, not acceptable meter, as soon as you say, they set up a computer outside of the network, like ding. Of course. The only reason you’re doing that is to get around security. So either have the conversation about how you incorporate- newer technology in a secure way, or you don’t do it. Doing it outside bringing that data into an outside of the network, it’s not right. No I bring this up because I want our listeners to be aware that this is going on. It may not be something you’re aware of going on in your organization, but I would encourage our listeners to go, if you’re running a company, be aware of it. If you’re an originator and you just happen to have brought your Mac computer to work so you could get answers to questions that your company computer is not allowing you to get answers to, at least or so you think, you may be having a problem and I think it’s best to bring this up, and bring it up instead of getting caught with two computers on your desk. Because some companies will take that as, “Yep, you’re fired.” And that’s the thing. Yet some companies are generally looking for solutions. That’s why they’re reaching out to me, because of our podcast and covering on these topics. And I think, David, to your point there are companies where you will be immediately terminated before… they won’t even have the conversation about what you were trying to do acceptable. It’s just so blatantly- That’s only interesting . Went outside of the system, they’re- There is no acceptable explanation So It’s not two-part. It doesn’t have to be you’re outside of the system and it was nefarious. Yeah. If you’re outside of the system, you may never even get a chance to explain why what you’re doing was not nefarious.
[David] We were having this conversation with this, the CEO, and there were several other people on the call. I didn’t realize there was that many people on the call that they… But they conferenced me in on a conference call they were already having, and I thought I was having a conversation with just the CEO. Then I started hearing other voices chiming in, and they said I don’t have a computer, but every one of our employees has an iPhone or a smartphone.” The smartphones are as smart as, and can do as much with a search on Siri or Google or anything else than they have with a laptop sitting there. I think this is… What I’m trying to bring out for our listeners, if you’re a producer, you’re looking for solutions, be very careful if you’re going outside your company’s solutio- systems to get answers or try to create solutions. One lone… They caught one guy, and I caught him is a bad characterization. He was literally building and creating his own software company. He had a software idea that he thought was so unique. He didn’t check the employment agreement that everything that he creates while he’s working there- is the property of that company. That was a little oversight, convenient oversight, that here he’s being entrepreneurial, and he’s really “Dang, I’m creating something, and it’s now the property of the company that I’m working with. That’s created the frustration where I had to go outside to do this.” Anyway, I just raise this for our listeners because there’s a lot more of this going on than probably many of us realize, and we need to be cognizant of it. I love what you said, Alice. Do a drip campaign saying, “This is what acceptable, this is what’s not acceptable,” because it’s so important that we rein this in so we don’t have to fire people we need. We’re out recruiting, and then we go in and whack… It’s still whack-a-mole. You know when they come up with a new idea, and we whack ’em, and you’re fired because you came out, went outside of our systems. Anyway, there’s wonderful new things happening and tools that are available to us, but make sure you’re doing it in concert with your corporate policy. That’s all I’m advising people. And then there’s one guy said, “That’s why I left the big company, so I could go do this,” and now he’s got other… He’s crossing that chasm and it’s really interesting some of the dynamics of the conversations that are coming in. It’s a result of people listening to our podcast. We’re doing the AI updates, and Alan does a great job. Unfortunately, he’s not with us today. He’s on vacation.
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!