[David] I want to move on to Alice. She spoke last week. She came out of retirement because of all the friends that she has and the demand for in the Ohio area. And she spoke not once, but I think three times. Alice, I’m interested in your report. Twice, you spoke twice. I heard it was three times with someone I was talking to said that you were very active on the platform up there. But it’s good to have you back, and want to get your report from Ohio as well as what’s going on in the legislative update.
[Alice] Thank you, Dave. Yes, I was moderator, right? So when I’m in retirement, I prefer to be the one asking the questions. Okay. Especially with, even with this group, ’cause you all are amazing. Yes, the Ohio Mortgage Bankers Conference had triple the attendance it had. So big shout-out to Rich and- I heard that … Lisa for pulling all that together. And really the association itself is doing amazing. It was a fantastic event. And so the one session that I’d like to talk about for this segment is the one that we talked through credit scoring and the new models that are coming up, and Marc already a little, alluded a little bit to that. We had Julie May from FICO who was on the panel. So for those of you who don’t know Julie she’s the vice president and general manager of B2B scores at FICO, and she is amazing. She’s their global product manager. So is in business development, delivery, support. She is she’s up there- A sharp lady there at the top. So of course she’s very passionate that FICO is the best way to go and it, and she’s very brilliant in her messaging and, but definitely out there a lot. So you can find different recordings to hear how Julie speaks about this. VantageScore, we’ve had them on the show many times in the past too. Yes. And they have quite a few pluses and benefits. So I think the topic of lender choice we really moved into this era of that there is a lender choice for a credit bureau, or a credit scoring model. We are so far from that right now that it’s we really don’t have the answers to that. So in the audience was one lender who had looked at doing, who had done a few loans. We think all total, Julie was saying that there are something like only eight loans that have even been done with the FICO score and made it through the pipelines yet. So that’s how much in the infancy stage we are of being able to get any adoption with the VantageScore. There were so many things brought up about will it increase the default rates because of the different sauce that VantageScore essentially uses, different recipe versus what FICO does. They are a different recipe. There could be times that you get a better score with the VantageScore. So as a lender, we really settled on right now that you’ve got to have your LOs understand where this is today, and whether you as a company are going to consider a lender choice or two-score model. I will share with you that in the audience, very informal survey, was that lenders do not feel they’re equipped to develop a shared a dual score model or a lender choice model because- Interesting … for starters, they’re smaller companies that were in the audience at the time. They don’t have the volume, right? We don’t have the secondary market execution worked out yet for, can I do mixed pools or do I have to have a pool all with VantageScore? Does that equate to a zero no score in my pool and so I’ll be capped on how many of them I can blend into a pool? So it’s really a challenging on the execution stage right now, and no one has really settled on what the messaging will be for their loan officers. So that was really number one is try and at least as a company determine for now are you going to go down that road. Fair lending concerns were raised. There’s lots of discussion out there about how do I pick the score, and then ultimately if you’re a servicer, what is going to happen to my default rates because there is a report out there that FICO talks about that there could be as, anywhere from a 30%-plus higher default rate with the VantageScores. But none of that’s been proven out yet, right? All that is just, is math.
[David] Yeah. I think the key word is could be. And it’s a speculation, and is that a steering mechanism by which they get everyone back into- Exactly … the old way? That’s yeah. Yeah. Create a little fear. So I don’t want to blast VantageScore- Create a few questions and then
[Alice] I just wanna make sure that’s clear, right? That there’s definitely some benefits- Yeah … that we should look at in the market, but there’s some compelling points right now that make it very difficult to be a two-score model company.
[David] Yep. Very good. Very good point. Anything going on legislative that we should be paying close attention to this calendar year that’s coming up that didn’t.
[Alice] There wasn’t any new legislation that was moving the needle. Oh. But you heard MBA bring up that they filed their comment letter on the Basel III and- Yeah … I’m sorry, I don’t have my date in front of me of when they filed it. Which I thought it was spot on, by the way. Spot on. Yeah. The commentary was spot on. But, and so I always like to go in, see what MBA filed, and sometimes that’s the easiest way you can get your voice heard, is just go, “Ditto to what the MBA said.”
[David] Yeah. Put in a vote. Put an MBA- And and we do that through Mortgage Action Alliance. And that’s where we- Yeah … we all sign up for Mortgage Action Alliance, and we’ve been a proponent of that for some time, that support what they’re doing. I think what’s really interesting is one thing that’s shaping things is now that the trigger leads are taking going into place it is reshaping how the originators are working to a degree. So that’s a change that’s been around, but it’s now coming in. The Homeowner Privacy Protection Act is now. But is that fully engaged, or is that yet coming up, Alice? I can’t remember. It’s, I know that’s a big… Do you recall when is that, the implementation of that is? Let me have my notes in front of me.
[Alice] I don’t wanna shoot from the hip. I’ll have to look it up on the 15th.
[David] Yeah. Yeah. Let’s all look at that up because I know we’re taking a look at some of the things that are moving the needle for some. Good stuff. And Mr. Cantrell, I wanna give you another thanks so much for having Barrett on, introducing us to VantageScore some time ago. I love some things that he was talking about back then because it did seem that it was gonna open up the… It’s not opening up the risk box, but the credit box to a certain degree to be, allow another group of people to come in and buy homes. But then you hear what Mark’s saying is if they’re buying homes in the Southeast and Alabama because of the regulations, it’s limiting the number of new homes. We’re seeing prices skyrocketing. What I’m consistent hearing when I’m talking to different ones is that we are finding that the biggest issue that remains, because our new podcast will be releasing here in the weeks ahead is coming up, is that it’s home price appreciation that is the biggest, the headwind for most of the markets we’re in.
[Kittle] Yes. What we’re dealing with here in, in Louisville and in Kentucky, probably all over the country, but continuing the way the tax structure is set up here, property taxes are increasing. They use 64% of the property taxes here in Louisville to fund our public school system, and- 64%? 64% of the property taxes collected go to the schools. And so I just got a reassessment, and, knocked me down. So my taxes are gonna go up substantially because they need the money And so property taxes are an issue. With affordability, I’ll still go back and say it again, not a whole lot of traction at this point. Have to do something about homeowners insurance. That’s not something that- It is a real big issue … nobody, MBA’s not taking a position on it, and there’s no position being taken on title insurance.
[David] Yeah. We met with Terry and I met with our homeowners insurance, and we’re looking at the jump, the spike that many are happening, and it’s painful. You told the story a couple weeks ago what, Gail your wife was experiencing in her home back in California. Thank God she sold it and was able to get out. More on all that. By the way, thank you, Alice. The trigger bill she just put in. Why don’t you go ahead and tell us March went into effect. Oh. March 5th, right?
[Alice] So the trigger lead bill went into March 5th of this year. As of this date, the Fair Credit Reporting Act was amended to prohibit consumer reporting agencies from furnishing mortgage trigger leads. So essentially that was a big revenue stream that got cut off for them. Yeah. And then there are some exceptions. So when the creditor has a financial relationship, for example, if you’re the servicer or you have a banking relationship, or if the consumer has firmly opted in, which I wanna meet that person who firmly opts into that and ask them why. Yeah. They would do that. Yeah, why? Why? Where- Unless it’s in the fine print somewhere and I didn’t know I did it.
[David] Yeah. Yeah. I think that’s a lot of that, Alice, is if you opted in it’s probably because of a fine print opt-in than anything else. Yeah. Anyway, but we’re looking at what is driving costs down. Was there any talk at the Ohio conference about the cost to originate and what others are doing, Alice, on that specifically? Was there any panel discussions on that?
[Alice] It was interesting. At the end of this panel session on credit scores, we did get into the do we want the one bureau, the two bureau or three bureau concept to help lower costs, and the costs in general. And of course we were conveniently running out of time for them to answer those questions. Yeah. But there was a lot of side conversations about that, that, we wanna hear more as an industry on that, ’cause it does not make sense. It’s got to come down.
[David] Yeah. I had a client call earlier before we got on the, did the recording podcast today, and we’re talking and more, and I was advising them, be aware of this. There is more focus and almost, I’m now gonna say it’s healthy that we are looking at our cost per widget. We need to look at it. It’s still way too high. But when that becomes an obsession where the number, the numbers are driving the business rather than are using the numbers to, for us to drive the business by our numbers, manage by the numbers versus letting the numbers manage our business and drive certain things. That we’re seeing some companies turning into a dysfunctional, They’re adopting the cost reduction initiative to a point where it’s becoming almost dysfunctional. I’m telling you, we’re gonna try to get some more discussion on that. We’re gonna have some more hot topic interviews. But it’s something I want everyone to be aware of. You’ve got to manage your business by the numbers, but in that effort, make sure you’re being cautious and not letting it drive the business. Marc, you’ve watched this happen as you’ve managed businesses, again, most recently. Your thoughts?
[Marc] It’s interesting you bring that up because been working with a title company recently that has figured out that you don’t need to kill people in cost to make money. And what they’ve done is they basically have developed a set of states it’s up to about seven or eight states right now, and as they grow in other areas, they’re getting to where they don’t charge anything except the cost for the title policy. They don’t charge any- So they’re gonna save the buyer and the seller probably $800 to $1,200 each on closing for the cost they usually pay, and they’re absorbing that cost to do business. And it’s nice to see something changing in the other direction to take costs down, and I wish them a lot of luck. I’m sure some other people will jump into that doing the same thing. They’re gonna have to be competitive. But I thought that was a real innovative thing. Do a good job for somebody and reduce their cost in doing it, and you can get, business. But look at what happened, David, to the credit scores since you and I started in the business, and what it- Oh, gosh. Yeah. My, my first credit reports were it- little independent deals in the same town where my savings loan branch was, and I paid $15 to $17 a credit report. And my God, look at what they are now. Yeah, I know. That’s not inflation. That’s not inflation. That’s highway robbery when you consider- Yeah … how much of it’s done through technology today, and it’s not really human beings creating that score, each of those scores. Yeah. It used to be that when we started, it was human beings going in and checking all the person’s credit. Remember that? At the risk- And now- Yeah, I remember that. Yeah. It’s systematically and 50 times higher. Unbelievable.
[David] Yep. Yeah. But- Yeah, I remember we used to do business with Credco. It was a couple of Bowie engineers that started Credco way, way back in the ’70s, and I remember that from yesterday. It’s just so interesting. All right, I’d have to say, but unless we sound like a couple of old men talking about the way we had to walk through five miles through snow to go to school,
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!