Teresa Bryce Bazemore, who held a front-row seat during the bank liquidity crisis this year as president and CEO of the Federal Home Loan Bank of San Francisco, plans to retire when her term expires in 2024, citing personal reasons.
The San Francisco bank’s board chose not to renew Bazemore’s contract after she asked to retire in 2025, though her contract expires in 2024. The board instead initiated a search for a new CEO, said Simone Lagomarsino, the board’s chairman, who also is president and CEO at Luther Burbank Savings.
Bazemore “indicated that, due to personal and other considerations, she would like to retire in March 2025,” Lagomarsino said in a press release. “As a result, and in consultation with Teresa, the board has decided to move forward with a search to identify a new CEO who will deliver long-term continuity and engaged leadership.”
The decision followed “extensive deliberation and discussion” about the Home Loan bank’s long-term goals, including “the implementation and integration of strategic changes that may arise from the ‘FHLBank System at 100’ review currently being conducted by the Federal Housing Finance Agency,” Lagomarsino said in the release. “The board recognized the critical importance of a CEO who would be engaged for the next several years to lead the organization forward and implement a vision and strategy to align with the outcome of the FHFA’s review.”
The San Francisco Home Loan Bank played a central role in the bank liquidity crisis in March, when it served as lender of next-to-last-resort to Silicon Valley Bank, which was taken over by the Federal Deposit Insurance Corp. and ultimately sold to First Citizens BancShares in Raleigh, N.C. Other major borrowers of the San Francisco Home Loan bank this year included San Francisco-based First Republic Bank, which was sold to JPMorgan Chase in May, and Silvergate Bank of La Jolla, Calif., which self-liquidated in March.
Last year, Bazemore earned $2.4 million, which included a base salary of $910,000 and other incentive compensation. When she joined the San Francisco Home Loan bank in 2021, she received a $100,000 signing bonus. Her employment agreement provides for 12 months of severance pay, equal to her base salary, plus other awards, according to the Home Loan banks’ combined financial report for 2022.
Last year, the Federal Housing Finance Agency that oversees that Home Loan bank system, launched a holistic review of the government-sponsored enterprise, its first in 90 years. Critics have questioned the system’s hybrid public-private business model and whether the banks are engaged in the primary mission of supporting housing. FHFA Director Sandra Thompson is set to issue a report with policy and congressional recommendations sometime later this year.
Separately, Fitch Ratings on Thursday downgraded certain ratings of the Federal Home Loan banks of Atlanta and Des Moines citing the “high and growing general government debt burden,” of the U.S. government. The ratings actions followed the downgrade of the U.S. to ‘AA+,’ from ‘AAA.’
The Home Loan banks are bank cooperatives that provide low-cost funding to 6,500 members including banks, insurance companies and credit unions. Created in 1932 to bolster housing during the Depression, the system incentivizes banks to buy mortgage-backed securities and agency bonds that can be pledged as collateral in exchange for liquidity.
Mortgage and housing trade groups this week pushed back against a Financial Stability Oversight Council proposal aimed at reverting its review process to one in which it would be easier to designate nonbank servicers and others as systemically-important financial institutions.
Housing Policy Council President Ed DeMarco said in a letter that his group opposed the move away from the existing “activities-based approach,” in which other oversight agencies are the first line of defense before labeling an individual company a SIFI, because that has had demonstrable benefits.”
Since FSOC began raising concerns regarding nonbank mortgage lenders, various regulatory bodies and federal program agencies, including the Federal Housing Finance Agency, Ginnie Mae [and others] have taken steps to strengthen the capital rules, liquidity requirements, operational restrictions, mortgage servicing responsibilities, and consumer protection rules that apply to such companies,” said the former FHFA acting director.
In addition, when other oversight agencies potentially engage in counterproductive rulemaking from a risk management perspective, the existing approach is helpful, DeMarco said in his letter.”Another advantage of an activities-based approach is that it can address risks created or exacerbated by governmental policies,” the letter to FSOC said.
The HPC cites as an example the somewhat open-ended advancing risk in the large market for securitized government-guaranteed mortgages, which are backed by Ginnie Mae, an arm of the Department of Housing and Urban Development.
That risk, which is associated with servicers being able to cover payments delinquent borrowers aren’t making until the loan undergoes certain foreclosure procedures or engages in modification options, has been central in concerns about liquidity at nonbanks.
The HPC’s membership of mortgage companies, insurers and settlement service providers has long advocated for Ginnie to revise acknowledgement agreements that govern the rights of parties in financing agreements secured by servicing rights in ways that would encourage private corporate lenders to provide more liquidity. But efforts to do that to date have fallen short, it said.
“FSOC highlighted this issue in its 2022 annual report, but treated it as a liquidity concern with nonbank servicers, not as a consequence of Ginnie Mae policy. An activities-based approach could address this issue, to reduce or remove significant risk from the system,” DeMarco said in the letter. (Ginnie Mae has said it wants to have a permanent liquidity backstop for servicers.)
Members of another trade group made similar points in a letter to the Financial Stability Oversight Council, and noted in an emailed press statement that they “oppose a SIFI designation of any independent mortgage bank servicer.”
The scale of nonbank servicers should be kept in mind when it comes to SIFI designations, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in the letter.
“Even today’s largest nonbank servicer has balance sheet assets well below the original asset threshold Congress established for banks in 2010,” Broeksmit said in a footnote within the missive.
Those holdings also are “at least eight times smaller than the current asset threshold established by Congress in 2018, at least 20 times smaller than any of the nonbank entities FSOC has previously attempted to designate and at least 100 times smaller than the balance sheet assets of their largest counterparties,” he added.
A Financial Stability Oversight Council proposal aimed at reverting its review process to one in which it would be easier to designate nonbank servicers and others as systemically-important financial institutions.
Housing Policy Council President Ed DeMarco said in a letter that his group opposed the move away from the existing “activities-based approach,” in which other oversight agencies are the first line of defense before labeling an individual company a SIFI, because that has had demonstrable benefits.”
Since FSOC began raising concerns regarding nonbank mortgage lenders, various regulatory bodies and federal program agencies, including the Federal Housing Finance Agency, Ginnie Mae [and others] have taken steps to strengthen the capital rules, liquidity requirements, operational restrictions, mortgage servicing responsibilities, and consumer protection rules that apply to such companies,” said the former FHFA acting director.
In addition, when other oversight agencies potentially engage in counterproductive rulemaking from a risk management perspective, the existing approach is helpful, DeMarco said in his letter.”
Another advantage of an activities-based approach is that it can address risks created or exacerbated by governmental policies,” the letter to FSOC said.
The HPC cites as an example the somewhat open-ended advancing risk in the large market for securitized government-guaranteed mortgages, which are backed by Ginnie Mae, an arm of the Department of Housing and Urban Development.
That risk, which is associated with servicers being able to cover payments delinquent borrowers aren’t making until the loan undergoes certain foreclosure procedures or engages in modification options, has been central in concerns about liquidity at nonbanks.
The HPC’s membership of mortgage companies, insurers and settlement service providers has long advocated for Ginnie to revise acknowledgement agreements that govern the rights of parties in financing agreements secured by servicing rights in ways that would encourage private corporate lenders to provide more liquidity. But efforts to do that to date have fallen short, it said.
“FSOC highlighted this issue in its 2022 annual report, but treated it as a liquidity concern with nonbank servicers, not as a consequence of Ginnie Mae policy. An activities-based approach could address this issue, to reduce or remove significant risk from the system,” DeMarco said in the letter. (Ginnie Mae has said it wants to have a permanent liquidity backstop for servicers.)
Members of another trade group made similar points in a letter to the Financial Stability Oversight Council, and noted in an emailed press statement that they “oppose a SIFI designation of any independent mortgage bank servicer.”
The scale of nonbank servicers should be kept in mind when it comes to SIFI designations, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in the letter.
“Even today’s largest nonbank servicer has balance sheet assets well below the original asset threshold Congress established for banks in 2010,” Broeksmit said in a footnote within the missive.
Those holdings also are “at least eight times smaller than the current asset threshold established by Congress in 2018, at least 20 times smaller than any of the nonbank entities FSOC has previously attempted to designate and at least 100 times smaller than the balance sheet assets of their largest counterparties,” he added.
A multiple listing service settled a lawsuit challenging Realtor commission rules for $3 million, a possible harbinger for several ongoing actions by home sellers alleging listing requirements are anticompetitive.
The case, Nosalek v. MLS Property Information Network, had class action status and was filed in the U.S. District Court for Massachusetts. Only the MLS agreed to a settlement, according to a June 30 legal filing. Other defendants in the case, both franchisors and brokerages, were not part of the agreement.
Sellers, along with the Department of Justice, are pushing for a major change to the real estate industry’s compensation structure that both its proponents and opponents agree will affect every party involved in home buying.
“Life after all of this is gonna be quite different,” Dennis Norman, a real estate broker and owner of More, Realtors, said. “And I don’t know if NAR survives because we’re talking about massive, massive amounts of money.”
Rules by the National Association of Realtors and associated multiple listing services, which are databases real estate brokers use to list and search for properties, are at the crux of all three major lawsuits — Nosalek v. MLS PIN, Sitzer v. NAR and Moehrl v. NAR. All three cases cite the Sherman Antitrust Act.
The Nosalek plaintiffs didn’t sue NAR, although they did go after realty companies like Century 21, HomeServices of America and Keller Williams. Their initial complaint, filed in December 2020, cites MLS PIN rules on Realtor commissions that say listing brokers must include a fee for the buyer’s representation on each property.
This is because of a coupled compensation structure: most home sellers pay for both the buy-side and sell-side broker fees.
Sellers who don’t offer a fee on the MLS PIN can’t list their home on the service. The lawsuit says this complicates the selling process because buyer agents use the MLS to search for their clients and popular websites like Zillow also use it for their home listings.
Another complaint in the lawsuit says if sellers offer a lower-than-normal fee, buyer agents can see this on the MLS and will likely steer their clients away from the listing.
As part of the settlement, MLS PIN agreed to change its rules on the topic, eliminating the compensation listing requirement. They will also require brokers to inform buyers that they can negotiate the buyer-broker fee and inform sellers that they can elect not to pay it.
HomeServices of America and its affiliates recently filed for summary judgment on the case, arguing there’s no evidence the company conspired with the MLS PIN to inflate commissions.
Both the Sitzer and Moehrl cases contain similar complaints, but are focusing on the NAR as well because of its strong influence on listing service rules: 97% of regional MLSs are affiliated with the NAR and follow its code of ethics, according to by T3 Sixty, a real estate consultant firm.
If the Sitzer and Moehrl lawsuits compel NAR to uncouple with MLSs as some industry voices like Norman are expecting, on top of large damages, the organization and its local chapters would lose their major draw: member-only access.
“I think that’s almost the last bullet for the associations,” Norman said. “MLSs are gonna have their challenges too… but they still have what everybody wants and they’re good for the consumer.”
How Realtors get paid Coupled commissions have been around for a long time. With this system, home sellers pay their listing broker 5% to 6% of the final sale price after closing. That commission is then divvied up evenly between sell-side and buy-side agents, who interact with the customers, and their broker agencies. The majority of each half goes to the agent.
For example, after selling a $300,000 house, a seller pays $15,000 in Realtor fees. Agents receive $6,000 each and their brokers $1,500 each for the sale. The buyer doesn’t pay any fees.
“The whole compensation system doesn’t make a lot of sense,” Steve Brobeck, a senior fellow at the Consumer Federation of America and a self-described public interest advocate, said.
Why are Realtors compensated this way? It evolved from the original system used in 1908 when the first iteration of NAR, the National Association of Real Estate Exchanges, was founded, according to a report by T3 Sixty.
Back then, the industry relied on an exclusive representation system: sellers hired a single listing broker for a fee. Buying brokers were sub-agents of listing brokers, and both sides had a fiduciary duty to sellers. When property sold, listing agents gave their sub-agents a portion of the commission fee.
Eventually, the industry moved away from the subagency model to properly align fiduciary duties, but it didn’t move away from coupled compensations.
“It’s a weird system,” Ann Schnare, a former Freddie Mac executive who ran a study on the compensation structure, said. “Admittedly, it wouldn’t be the first to come to mind, but the fact is that’s what exists… changing it, I think, would be unnecessarily disruptive.”
The NAR has a similar outlook: it resists the lawsuits’ efforts to outlaw shared commissions because they say it’s optional and the rate is negotiable.
Critics of the system like Brobeck point to uniform commission rates despite this negotiability. Brobeck found that in 24 cities across the country, 88% or more of home sales had buy-side commission rates between 2.5% and 3% in a CFA report.
“This rate uniformity is striking evidence of the lack of price competition in the residential real estate industry,” Brobeck said in the report.
Other antitrust lawsuits Legal action over commission fees began in 2018, when a 10-year settlement between the DOJ and the NAR expired. Before crafting a new agreement, the DOJ and Federal Trade Commission held a joint workshop about competition in the real estate industry.
In 2020, the DOJ filed a new lawsuit against the NAR under the Sherman Antitrust Act and simultaneously settled with the association. The settlement required several changes to NAR’s code of ethics to provide “greater transparency to consumers about broker fees.”
The settlement banned buyer brokers from advertising their services as free unless they receive zero compensation from any source. It also prohibited these brokers from searching MLSs by filtering out properties with low commission fees and pushed for greater transparency on those sites.
Because of the settlement, many MLSs began to publicly post commission fees for each property. Redfin and Zillow followed suit. For the first time, homebuyers saw how much their agent would earn from each listing.
But then, the DOJ pulled out of the settlement in 2021 because it prevented them from investigating the association’s rules further.
The Moehrl and Sitzer lawsuits popped up around the same time as the DOJ’s initial workshop.
On March 6, 2019, Christopher Moehrl sued Realtor companies “for conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.”
Then, in April 2019, Joshua Sitzer and Amy Winger, Scott and Rhonda Burnett and Ryan Hendrickson filed a similar lawsuit in Missouri.
Both plaintiffs sued the NAR along with large national broker franchisors: Realogy (now Anywhere Real Estate), HomeServices of America, RE/MAX Holdings, and Keller Williams Realty, as well as HomeServices affiliates BHH Affiliates, HSF Affiliates and The Long & Foster Companies.
Real Estate Exchange, a real estate brokerage, also filed an antitrust lawsuit in 2021 against the NAR, Zillow and Trulia. The lawsuit alleges that Zillow’s search features prevent “transparent access to home inventory.”
Will cash-constrained homebuyers suffer? NAR argues in press releases about the lawsuits that the coupled compensation system fosters market competition because it frees up cash for buyers, allowing them to make a larger down payment.
A study funded by HomeServices of America, a defendant in all three suits, supports the claim. It declares that unless lending changes come in tandem with revisions to this commission structure, it would hurt “minorities, lower income households, and first-time home buyers” the most.
Consumer advocates argue that agent fees won’t hurt buyers because their cost is currently built into home prices. If sellers no longer pay both agent commissions, home prices will fall, and buyers will have the same net cost.
Schnare, one of the study’s authors, said because most finance their home with a mortgage, that’s not true.
“If everything was cash, it wouldn’t make a difference,” Schnare said. “What seems like a small adjustment can make a big adjustment on what they can afford to pay and, you know, potentially hurt the lower end of the market, but with ripple effects upwards.”
Brobeck says this concern is exaggerated, and that lenders will adapt accordingly: “the only reason that argument has any force at all is because the industry supports buyers not being able to finance their commission on the mortgage.”
But Schnare’s study found it’s not that simple.
In order to avoid hurting cash-constrained buyers, lenders would need to change underwriting standards, specifically the loan to value ratio, which represents the borrower’s equity position in the property. This is the most powerful measure of default, the study says, and including an “extraneous factor” like buyer agent fees in the ratio could decrease its predictive accuracy. Schnare says government-sponsored enterprises, the Federal Housing Administration and the Department of Veterans Affairs are unlikely to approve of this change.
Even if they did, it would “require regulatory approval and coordination across multiple parties along the mortgage supply chain,” so Schnare expects it to be a lengthy, expensive process. In the meantime, first time homebuyers would struggle to pay broker fees out of pocket.
“We have what we have, we’re not starting from scratch,” she said. “That’s a big ask for something where the benefits are not entirely certain.”
But the CFA and REX both dismissed the study, citing its funding and accusing it of a faulty premise.
Either way, the industry might be forced to change — both the Sitzer and Moehrl lawsuits are going to trial and many expect the plaintiffs to win. The Sitzer trial is scheduled for Oct. 16, and the Moehrl trial will likely begin early 2024.
“I would not be surprised if there was a settlement before them in both cases,” Brobeck said. “And then the question is, will this settlement really lead to effective price competition?”
Efforts to loosen zoning laws that would allow factory-built homes in more jurisdictions outside the rural U.S. is also another primary focus for affordable housing advocates.
“It’s absolutely critical that we do more urban infill, suburban new construction, subdivision development, even replacement of older homes in our cities with affordable stock,” Epperson said.
Vacant infill sites, particularly, present opportunities in many communities, thanks to existing infrastructure.
“We love doing infill sites, lots where potentially there was a house previously because oftentimes that means that the utilities are right there in the ground,” Stott said. “Land is kind of the great scarce resource, certainly around city areas.”
But while such opportunities already exist in some states, including California, which has rules preventing local municipalities from zoning out single-family manufactured housing, regulations and local resistance elsewhere around the country still present barriers to increasing the number of homes.
“What’s really a problem is that where there’s most opposition to new housing — tends to be infill housing in existing cities, where infrastructure is already present,” Loftin said.
And while it has the potential to provide a lower price point in many communities, there still are constraints on the extent of affordability modular and other manufactured homes can bring on large-scale projects, like subdivisions, compared to on-site, or stick-built, construction, according to Loftin.
The primary driver of costs up in some markets is transportation, particularly when located a long distance from the factory. “You have to move that house and get to a site and site it,” which can offset the cost reduction of construction.
“When I looked at if manufactured housing made sense in Santa Fe or Albuquerque, it never competed with stick building.”
Still, economic development is driving more cities to evaluate the possibilities of manufactured homes to serve their needs, particularly if they see potential disruption ahead in their housing markets requiring a quick boost to inventory, according to Epperson.
“We’ve had interest from some of the Rust Belt cities for infill, especially when they get a new announcement in jobs,” she said.
Any progress in changing local regulations should also likely lead to interest among developers to adding manufactured homes that can boost housing inventory. “Where we get interest tends to be from smaller cities, where developers can make that zoning change,” Epperson said.
Modular builders like Connect Homes are already creating strategies to tap into developer interest as it grows.
“We’ve spent the last couple years taking everything that we’ve learned from our previous experience building for single-family homeowners in order to create a system that’s more scalable, that provides less site work on site,” Stott said. Plans also include the creation of models that “can start as small as an ADU but can quickly scale up to kind of a townhome development.”
Factory-built construction appears to have support from the federal government, with the Biden administration regularly highlighting the role it can play in his affordable housing goals. Among the president’s stated housing aims are new financing mechanisms for manufactured homes as well as the expansion of construction-to-permanent loan options to reduce the housing shortage.
As more of this generation enters the workforce, lenders are finding new ways to attract young customers. Joe Welu, CEO of Total Expert, a customer relationship management software company, and Shashank Shekhar, CEO of InstaMortgage, a web-based lender partnering with Total Expert, discuss their strategies.
(Bloomberg) –Treasury Secretary Janet Yellen reiterated her optimism about the U.S. economy, saying inflation can slow down without a slump in employment, even if growth cools.
“Our economy has proven more resilient than many had thought,” amid forecasts of recession, Yellen said in excerpts of remarks due to be delivered later Friday in New Orleans. “I continue to believe that there is a path to reducing inflation while maintaining a healthy labor market. Without downplaying the significant risks ahead, the evidence that we’ve seen so far suggests that we are on that path.”
Yellen said in an interview last week that she sees diminishing risk for the U.S. to fall into recession, and suggested that a slowdown in consumer spending may be the price to pay for finishing the campaign to contain inflation.
“While there are parts of our economy that are slowing down, households are spending at a robust pace and businesses continue to invest,” Yellen said in the excerpts, released by the Treasury Department. “Going forward, I expect the current strength of the labor market and robust household and business balance sheets to serve as a source of economic strength, even if our economy does cool a bit more as inflation falls.”
Federal Reserve officials have raised interest rates by 500 basis points in little more than a year and have signaled more tightening will be needed to rein in an inflation rate that’s running higher than the Fed’s 2% target.
They’ve warned that returning inflation to the goal will likely require a period of below-trend growth and some softening of labor-market conditions.
Yellen touted President Joe Biden’s legislative achievements that stepped up investment in infrastructure, semiconductors and the green-energy transition.
She is the latest administration official to do so, two days after the president delivered what the White House called a “cornerstone” address on his economic policy, “Bidenomics,” with his office seeking to improve perceptions about his job performance before the 2024 election campaign gets into full swing.
Yellen said the policies of Bidenomics are rooted in what she laid out early last year as “modern supply-side economics.”
The idea is to “prioritize investments in our workforce and its productivity – in order to raise the ceiling for what our economy can produce,” Yellen said, highlighting how the Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act constitute “one of the most important economic investments” the U.S. has made to date.
Rey Katz’s birth name didn’t match their nonbinary gender identity. Too feminine. So they started the legal process to change it. They got an over $400 name-changing court order, a new Social Security card, a new passport, and eventually a new driver’s license.
Shortly after beginning the process, Katz began to fail credit checks.
“I show up as pre-approved for some of these cards and then, for a few years at least, I couldn’t get any of them,” Katz said.
It happened again and again, with a travel credit card that promised a deal on expensive plane tickets, with another that promised a discounted stove. Katz finalized the name change four years ago.
“As recently as last year, I was still failing credit checks,” Katz said.
And Katz isn’t the only one. Credit problems after name changes are a well-documented problem within the transgender and nonbinary communities. Katz even wrote a blog post on their website The Nonbinary Connection about it, warning others they’ll fail credit checks for a while.
Each of the consumer reporting agencies — Equifax, Experian, and TransUnion — deal with a name change differently.
Equifax files requests through its online myEquifax Dispute Center. After uploading documents that verify Social Security number, current address, new legal name and date of birth, Equifax says, you should file a dispute on your former legal name, which is called a deadname.
Experian’s policy requires similar documents: a copy of the court order, Social Security card and a utility, bank or insurance statement with your current address. They also request date of birth, all previous addresses for the past two years and a note clarifying that it’s a name change request, not a dispute over the name on a credit report.
TransUnion processed Katz’s name change the quickest, but it doesn’t have an online process and requires documentation sent by mail. They ask for a court order and a letter requesting the name change with an address, date of birth and Social Security number.
Experian promises to make this change in about 10 business days. The other two don’t provide a timeframe online.
In February last year, the Consumer Data Industry Association, which represents the credit reporting companies, published guidance for those changing their first or middle name.
A letter in response to that by a coalition of LGBTQ+ organizations called it an encouraging start, but asked credit reporting agencies to take further steps to make the process easier. They suggest suppressing deadnames from credit reports, as this can expose people as transgender to employers or landlords, and utilizing the full 9-digit Social Security number in credit check algorithms.
So far, only Experian actively suppresses deadnames from credit reports. TransUnion said in an emailed statement that they are introducing a similar process later this year, which will be voluntary instead of automatic.
Credit bureaus won’t likely implement the second suggestion to use a full Social Security number, though.
Eric Ellman, the senior vice president for public policy and legal affairs at CDIA, said the credit bureaus are cautious because of 2004 Federal Trade Commission guidance which stated that “matching on a full social will be worse for consumers” in the end. More digits, the guidance says, increases error, resulting in more “fragmented files” and making credit checking more expensive.
But still, without direct documentation of first and middle name changes from consumers, the credit reporting companies took years to update Katz’s information.
“It was an active thought in my mind that I’m glad that I’m not trying to buy a house or even rent a new place right now, because my credit check would fail at this moment,” Katz said.
The companies can, however, automatically update their information with last name changes after a person notifies their bank and creditors, the CDIA press release said. They don’t require direct requests. But after first and middle name changes, which transgender and nonbinary people commonly make, the companies require the “extra step” of notifying each of them separately.
“We’ve had over 50 years of experience changing last names for marriages, divorces, adoptions,” Ellman said. “It’s much more common.”
Luca Mauer, the executive director for the office of Student Equity, Inclusion and Belonging at Ithaca College says this logic makes it seem like transgender people “popped out of the blue a couple of years ago.”
“We just need to acknowledge and embrace the fact that trans and nonbinary people have existed throughout history,” Mauer said. “There’s a lot of ground to make up.”
Mauer changed his own name before advising students on it. Back then, he said, it was difficult to find any information about the process online. He advised students to reach out to the credit reporting companies by letter.
When Katz was going through the process in 2019, credit information was still widely unavailable. TransUnion and Experian published their guidelines early last year. Equifax published theirs in March 2021.
But Experian’s deadname suppression policy is a big sign of progress to Mauer.
“That was a source of pain for many of us older folks who have established credit,” he said. “So to find that information was just wonderful, and I can’t wait to share it with my students.”
As lenders become more desperate for leads, prospective homebuyers are increasingly bombarded with calls, texts and emails after applying for a mortgage. A recently proposed bill aims to fix that.
Rep. John Rose, R-Tenn., introduced the Protecting Consumers from Abusive Mortgage Leads Act to Congress June 16.
It’s the second bill on the subject that has been put forward this year. Rep. Ritchie Torres, D-N.Y., introduced the Trigger Leads Abatement Act in April, which is awaiting further action.
What makes the new bill different? The severity.
Rose’s allows the sale of consumer information about mortgage applicants, or trigger leads, in some cases. If buyers of leads have an existing relationship with the customer — if they finance a different loan, for example — or if customers opt in to receive unsolicited offers, trigger lead purchases are allowed.
Torres’ bill, on the other hand, is closer to outright banning the practice — it doesn’t include any allowance for lenders with existing relationships.
Currently, the Fair Credit Reporting Act allows consumer reporting agencies to sell all trigger leads unless customers opt out using the National Do Not Call Registry. Both bills would change the system from an opt-out to an opt-in model.
Trigger leads are sold by consumer rating agencies like TransUnion, Experian and Equifax, but plenty of companies like Zillow and LendingTree sell leads generated through online ads. Neither bill would not affect these.
The cost of trigger leads varies. None of the three major credit bureaus list prices online, but it can cost anywhere from $20 to $100 for a single lead, and many require a minimum deposit of $500 according to mortgage customer relationship management system Jungo.
Trade groups, like the National Association of Mortgage Brokers and the Mortgage Bankers Association, voiced support for trigger reform bills, but their stances differ. The NAMB lobbied for Rep. Torres’ bill, advocating for a more robust ban on trigger leads. The MBA lobbied for Rose’s, and said they support the sale of trigger leads when there’s already a relationship between the homebuyer and the lender.
Ernest Jones Jr., president of the NAMB, said they support the new bill as well, but the organization’s advocacy group is in a “holding pattern,” waiting to see what the representatives do with such similar bills.
“Anytime you can reach a compromise versus killing something, the likelihood of succeeding is — the probability is higher,” Jones said.
Both groups have been vocal critics of harmful trigger lead practices.
“We can’t support anything that would violate, in our opinion, the privacy of the consumer’s information and put them in a disadvantaged position,” Jones said. “Getting those calls does that.”
Chrissi Rhea, co-founder of Southeastern lender Mortgage Investors Group and MBA member, called the practice horrific: “I think the invasion someone feels of their private transaction is really the most appalling of all.”
Rhea knows the feeling herself. She once received 307 voicemail messages from mortgage lenders over eight days without ever applying for a mortgage.
She said her first thought was, “Oh goodness, they breached my bank!”
No breaching was necessary. A bank she worked with pulled a tri-merge credit report as part of its due diligence. This report is commonly used by mortgage lenders, so credit bureaus assumed she applied for a mortgage and sold her information to other lenders.
One of the callers told her about opting out. She registered for the Do Not Call list, but their system takes 30 days to process requests, so it did nothing to abate the flood of calls.
It’s not only customers that are negatively affected by an increased number of unsolicited calls, though. Lenders suffer undue damage to customer relationships.
Rhea has experience with this, too. A client of hers received 97 calls and 60 voicemails within 24 hours of submitting his loan application. He was convinced MIG either sold his information or gave it away for a discount on their credit reports. He threatened to sue.
This story is not unique in the mortgage industry. And it’s getting more common: Bill Killmer, senior vice president for legislative and political affairs at MBA, said because of slow market conditions, trigger leads have become a more intense issue.
“The volumes are down, so competition has become very, very fierce,” Killmer said.
Supporters of trigger leads say they promote competition between lenders and help customers get the best price for their loan. The Rose bill still allows for this competition without sacrificing customer experience, Rhea argued.
“I think the servicer of their current home actually truly has a right to say, ‘Can I give you an estimate of what our costs would be?'” she said. “Competition is not what we’re afraid of.”
TransUnion, whose trigger lead supply would be severely limited with the passing of this bill, said, “This legislation is an opportunity for a real conversation on how to improve the system while preserving a valuable service that helps save consumers money. We welcome that discussion and look forward to a thoughtful dialogue on the issue.”
Experian and Equifax did not respond to requests for comment by deadline.
The Consumer Financial Protection Agency hit ACI Worldwide and its subsidiary ACI Payments with a $25 million fine Tuesday for illegally initiating withdrawals from borrower bank accounts totaling over $2.3 billion in April 2021.
According to the government watchdog, the payment software company accidentally triggered “erroneous bill payment orders to be sent to consumers’ banks for processing,” while contractors conducted internal testing of Speedpay, a payment system ACI acquired from Western Union in 2019.
This snafu impacted close to 500,000 borrowers with mortgages serviced by Mr. Cooper. Roughly 100 of those impacted incurred non-sufficient funds fees from their banks as a result of ACI’s error, the mortgage servicer previously said.
This error stemmed from the company’s lack of security protocols and training and “caused substantial consumer harm including significant frustration, confusion, and monetary loss,” the government watchdog’s consent order read.
“The CFPB’s investigation found that ACI perpetrated the 2021 Mr. Cooper mortgage fiasco that impacted homeowners across the country,” said CFPB Director Rohit Chopra in a written statement Tuesday. “While borrower accounts have now been fixed, we are penalizing ACI for its unlawful actions that created headaches for hundreds of thousands of borrowers.”
Per the CFPB’s order, ACI contractors testing the company’s electronic payment platform used data containing sensitive consumer information, contrary to ACI policy.
Further, during its performance testing, ACI improperly sent several large files filled with Mr. Cooper’s customer data into the ACH network, unlawfully initiating electronic mortgage payment transactions from homeowners’ accounts. As a result, many borrowers unknowingly had multiple debits for monthly mortgage payments scheduled to hit their bank account on a single day.
The Elkhorn, Nebraska-based company responded to the consent order by highlighting that “Speedpay was a recently acquired addition to ACI’s portfolio, and the inadvertent transmission occurred shortly after the company assumed management of Speeday’s legacy data environment.”
The company noted that it “consented to the issuance of the consent order without admitting any wrongdoing to avoid the expenses and distraction of litigation.”
Apart from paying a penalty, the CFPB is requiring ACI to beef up its information security practices, while prohibiting the company from processing payments without obtaining authorization and using sensitive consumer information for software development for testing purposes without having a good reason for it.
California housing officials are urging households to take advantage of Homeowner Assistance Fund resources following recent changes to eligibility, including updated area median-income levels.
The new income thresholds will qualify more mortgage borrowers for up to $80,000 in financial assistance. Funding was originally made available in late 2021 under provisions of the American Rescue Plan Act in order to help households encountering economic distress due to economic impacts of COVID-19.
“Even now, too many homeowners are still struggling to recover from the financial toll of the pandemic. This adjustment could mean that more families will not only save their house, but their home,” said Rebecca Franklin, president of the CalHFA Homeowner Relief Corporation, in a press release.
The Golden State’s Homeowner Assistance Fund already expanded in February this year to make relief available to more borrowers, including reverse mortgage holders. It also opened up to support households who may have already received some form of pandemic-related loss mitigation, such as a partial-claim second mortgage or loan deferral if granted in or after January 2020.
Homeowners can qualify for federal relief if combined income comes in at or below 150% of their area’s median levels, as determined by the U.S. Department of Housing and Urban Development. Qualifying thresholds rose across most California counties from 2022 to 2023, and range from $99,000 to $223,000 for a household with two residents age 18 or older. But eligible income decreased in a few of California’s wealthier markets, including San Francisco and adjacent counties, where the amount shrank from to $223,000 from $223,700.
Los Angeles County saw the eligible-income total increase to $151,350 from $142,950. Meanwhile, the limit in Santa Clara County, which includes San Jose, also grew to $214,100 from $202,200.
Qualifying limits were also published for households of other sizes, with the range for single homeowners running from $96,200 to $195,100. For households with three adult residents, the upper threshold is now between $111,400 and $250,850.
Eligible homeowners may apply for funding online to catch up on late or missed mortgage and property tax payments, or to help pay partial-claim or deferred amounts. Struggling homeowners with reverse mortgages may also apply it to their insurance costs.
Focus on state HAF programs is currently growing as regulators underscore to the lending industry its responsibility to provide means available to help homeowners avoid foreclosure. Some states with remaining funds, which the Department of the Treasury meted out beginning in 2021, have amended their original terms to increase uptake of the programs and protect more borrowers.
Among those changes are extensions of original application deadlines and the addition of reverse liens to the pool of eligible loans. Earlier this month, Hawaii doubled the maximum amount available through its program and stated it could provide assistance for utility payments and selected other charges even to households without an existing home loan.
The Biden Administration made almost $10 billion in Homeowner Assistance Fund aid available nationwide through the American Rescue Plan Act, with $750 million granted to California. Each state took responsibility for their program’s administration, regulations and fund disbursement. CalHFA estimates it will allocate all of its funds by September 2025.
The range of different policies and campaigns are resulting in varied outcomes across the country. While a handful of states have already closed their programs, the majority remain open to new applicants. But some states, such as Pennsylvania, encountered problems with vendors used, leading the Keystone State to put some of its efforts on hold.