It did not take long after the Silicon Valley Bank failure for politicians in Washington to rush to the next available microphone and lament the “loosening of bank regulations”. Instinctively the finger pointing began, and in many quarters ended up in the direction of the prior administration’s policy to generally roll back stringent business regulations and allow free market decisions to govern various industries. Chief among the complainants (no pun intended) was Sen Elizabeth Warren, who emerged out of the 2008 crisis as an architect and advocate for the Wall Street Reform Act and the creation of the vaunted Consumer Financial Protection Bureau ( CFPB), which she briefly directed. Just yesterday in DC’s The Hill publication, Sen Warren was reported as blaming the the collapse of Silicon Valley Bank on Republicans in Congress, which in 2018 helped pass a law to ease bank regulations put in place following the 2008 financial crisis. “No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” Warren is quoted as saying. According to The Hill piece, Warren, who voted against the 2018 bank deregulation bill, said that the crises would have been avoided if the banks were required to hold more liquid assets because the bill exempted banks with less than $250 billion in assets from rigorous Fed stress tests. Warren and other Democrats say the old rules could have caught the issues at SVB sooner. Given that politicians generally “never let a crisis go to waste,” many now suspect that the banking industry is about to be slammed with heightened regulatory scrutiny, tighter operational rules, more audits and exams, and larger and very public fines, penalties and consent orders. What does this mean for independent mortgage bankers (IMBs)? It means that they have to get back to the compliance mindset they were frightened into adopting between 2008 and 2018, and before the bottoming out of interest rates led everyone to believe that easy money was here to stay and that self-regulation meant hiring more loan officers. Keep those risk management officers and compliance directors close by folks, we are all in for a bumpy ride on the regulatory
Spring is in the air, and for sports enthusiasts like me that means one thing: Spring training and the start of yet another baseball season. As I check out the Florida box scores, I can’t help but find some parallels between the National Pastime and the current state of the mortgage industry.
- With the current down market many lenders have thrown in the towel and instead are saying “wait ‘til next year!” As the Brooklyn Dodgers found out time and time again (except for 1955) a team that is focused on the future and not the present usually ends up on the losing side of the scoreboard. The Yankees beat the Dodgers nearly every year from 1947-1956 because their focus was “This IS next year!” Lenders who are focused on growth and success despite a down market are finding it; those who are just waiting it out until next season may find that when the time comes they will not be fielding a team.
- Casey Stengel, who led the Yankees to 10 pennants and who was saddled with managing the famously inept 1962 Mets, was known for his muddled language. Reporters often scratched their heads trying to understand his point, and as a result Casey became the story which often took the heat off of his players. The regulators in Washington appear to be speaking in “Stengelese” these days. Thousands of pages of regulatory requirements that meander from topic to topic and leave lenders who now are responsible for implementing them thinking: “What in the world does that mean?”
- Attitude is everything in life. Cub star Ernie Banks loved baseball. He knew he was privileged to be paid doing something he really enjoyed, and when he arrived at Wrigley Field for a day game would often say “let’s play two!” I’ve noticed that those MLOs who really love what they do, who see their role as consumer-oriented not just another way to make money, find success no matter how tight the market might be. They show up for work every day and instead of saying “how am I going to get business “say “I’m going to close two!”
- Stan Musial was one of the most gifted and respected players of his time. When he arrived at the ballpark he would say “I think I’ll get three hits today,” however he was not a stat hog. Near the end of his a career he had to be told by a fan that he was approaching 3000 hits. Musial was a team player first. He had a notorious work out regime (rare for that time), supported his teammates, and encouraged preparation. Today lenders need to encourage more teamwork and to take appropriate steps to prepare for a new consumer and compliance focused marketplace.
With the Spring season here and everyone thawed from Winter’s deep freeze, the industry is poised to see higher originations and closed loan volume. As volume increases in a risky purchase market, it will benefit forward-thinking lenders to incorporate more risk management and quality control steps to avoid the type of fraud and defective loans that marked the last purchase boom from 2002-2008. As Yogi Berra reportedly said, “It’s like deja vu all over again!”