Mortgage Banking Newsletter – August, 2018

In this newsletter we cover the following:

James Brody / Johnston & Associates quoted in Wall Street Journal
Complimentary Information Available from Loan Officer Compensation Webinar
The legal services we offer at Johnston & Associates
Upcoming conferences that Johnston & Associates will be attending

James Brody, Chairman of Johnston & Associates’s Mortgage Banking Practice Group, Quoted in Wall Street Journal

We were gratified and honored to have James Brody quoted in the August 1 issue of the Wall Street Journal, in the article by Robyn A. Friedman, entitled “When Your Mortgage Lender Wants to be Pen Pals – Borrowers may be asked to clarify questions about income, employment and other matters, but ‘comfort letters’ generally aren’t legally binding.”

Here are some excerpts:

In applying for a mortgage, few home-buyers expect to become pen pals with their lender. But when the underwriting department has specific questions that aren’t answered by asset, credit or employment documentation already in the file, borrowers may be asked to write a letter of explanation, sometimes called a “comfort letter.”

“We try to connect the dots using data, and we think that makes the application process more robust,” says Bill Banfield, executive vice president of capital markets for Quicken Loans in Detroit. “But when you need a little help from the client to connect those dots, letters of explanation are a way to help an underwriter interpret something.” For example, a borrower planning to purchase a new home far away from his current place of employment may be asked to explain if he has a new job or intends to telecommute. This assures the lender that the applicant’s income will continue after the move.

Letters of explanation help lenders cover themselves if a mortgage application is ever audited, either by internal bank auditors or federal examiners, who periodically audit mortgage files to ensure that the lender did its due diligence during the application process. But experts say the epistles are generally not enforceable and that the letter-writer can’t be sued if the explanation later turns out to be inaccurate.

“It’s all about the borrower’s intent at the time of underwriting,” says Allen White, senior vice president of mortgage lending at South State Bank in Seneca, S.C. “It’s not something we trace back.”
The letters are just a way for lenders to “tighten up their underwriting,” says attorney James W. Brody, chairman of the mortgage-banking practice group at Johnston & Associates in Santa Rosa, Calif. “I don’t see anything enforceable about these letters,” he says. “Certainly there is a need to provide honest and truthful information, but you can’t guarantee you’re going to remain employed, for example.”

Complimentary Recording and Other Information Available from the July 26 Loan Officer Compensation Webinar

On July 26, Johnston & Associates hosted its complimentary webinar, entitled “Loan Officer Compensation Tips and Trends: How to Gain a Competitive Edge While Remaining Compliant”, which was very well attended and overall a great success. For all those who attended this webinar, as well as those who were not able to attend due to space or otherwise, we have received a large number of requests for a copy of the webinar recording which we are happy to make available. We are also making available the slide presentation (converted to pdf), as well as an additional Q&A document (pdf) that addresses a number of questions that were posed to us during the webinar.

To access the recording or the documents from the Loan Officer Compensation webinar, please click here.

Webinar details:

Recruiting and retaining consumer-oriented, high-performing mortgage loan originators has always been difficult. This complimentary webinar, which was hosted by Johnston & Associates, discussed a topic that can be crucial to companies in gaining and compensating sought after, high performing mortgage loan originators. James Brody, Chairman of Mortgage Banking Practice Group for Johnston & Associates provided critical insights for a rule that when some principals seem to just become clear others seem to be murkier than ever before. Some of the many issues that were discussed during this comprehensive webinar included the following:

Stated Purpose of the Rule: Preventing Steering and Protecting the Consumer
Nuances of the Rule Continue to Trouble Lenders
Utilizing all Tools Available
Pooled Compensation
LOs that Work as a Team Compensation
“Pick a Plan” Structures
Can I pay my LO as an Independent Contractor?
Splitting Comp Between LO’s
Awards of Merchandise, Services, Trips, or Similar Prizes to LOs
Mistakes by Our LO’s are Costing us Money-Can We Hold Originators Responsible for Controlling Costs? Are EPO/EPD Clawbacks Permissible? Loan Originator Paying for Unanticipated Cost Increases
Quality Loan Factor in LO Comp Plans
Non-Producing Managers and Sales Executives
Bonuses and Retirement Plans. Bonuses Based on Volume
Current LO Comp Regulation and Enforcement

Moderator and Speaker:

James Brody, Esq., Chairman of Mortgage Banking Practice Group

Johnston & Associates, Attorneys at Law, P.C.

Legal Services Offered by Johnston & Associates in the Mortgage Banking Industry

Johnston & Associates is a full suite boutique law firm, which amongst other practices such as real estate and commercial litigation, has a nationally recognized Mortgage Banking Practice Group. With an experienced team of mortgage banking lawyers (including senior litigation attorneys, former in-house General Counsel and in-house Compliance Counsel from a well-known bank and mortgage company, etc.), certified fraud examiner and forensic underwriters, and an extremely competent support staff, all of whom are dedicated to aggressively and competently serving the needs of our valued clientele, Johnston & Associates’ Mortgage Banking Practice Group is known all across the country for the experience and results that it brings to the areas of regulatory compliance, mortgage banking litigation, and a broad range of mitigation services.

Amongst the many legal services Johnston & Associates offers the mortgage banking industry (e.g., brokers, lenders, servicers, vendors and more), such include, but are in no way limited to, as follows:

Mortgage Repurchase and Make-Whole Indemnification Litigation and Mitigation (e.g., Secondary Market Investors, Agencies, etc.)
Mortgage Industry Litigation (e.g., Servicer and Sub-Servicer Disputes, 3rd Party Fraud Recovery, CPL and Title Policy Actions, Appraiser E&O Claims, Loan Officer Actions, etc.
Mortgage Repurchase and Make-Whole Alternative Dispute Resolution (e.g., Arbitration, Mediation, etc.)
Regulatory Compliance, Administrative and Business Services (e.g., Mock Audits, LO Compensation, MSAs, Licensing, CA Dep’t of Business Oversight, HUD Review Board, etc.)
Transactional Matters (e.g., Drafting and Negotiating Broker and Correspondent Loan Purchase Agreements, Mergers & Acquisitions, etc.)

Should you have any questions regarding how Johnston & Associates’ Mortgage Banking Practice Group can be of assistance to you and/or your company, please contact its Chairman James Brody and/or its Co-Chair Ingrid Peterson.

Conference Attendance by Johnston & Associates

Johnston & Associates will have a number of its attorneys in attendance and/or speaking at the following upcoming conferences:

August 18-21, 2018: Mr. Brody will be in Chicago, IL, to meet with clients. If you are located in Chicago and/or will be there to attend The Mortgage Collaborative’s Summer Conference, please feel free to reach out to schedule a meeting with Mr. Brody directly.
September 12-14, 2018: Mr. Brody will be speaking as an expert panelist at the annual New England Mortgage Bankers Conference (“NEMBC”) in Newport, Rhode Island.• September 16-18, 2018: Mr. Brody and certain of his colleagues will be in attendance at the MBA’s Regulatory Compliance Conference in Washington, DC.
October 22-24, 2018: Mr. Brody will be speaking as an expert panelist at the American Conference Institute’s 25th Residential Mortgage Litigation & Regulatory Enforcement Conference in Dallas, Texas.

If you or someone from your company will also be in attendance at the foregoing conferences and would like to set up a complimentary appointment to meet with Johnston & Associates’ Mortgage Banking Practice Group, please contact its Chairman, James Brody, to schedule a date and time. We hope to see you there!

Although this communication may contain or possibly be considered attorney advertising, it is meant to be for informational and commentary purposes only. As such, it is not intended as legal advice and does not create an attorney-client relationship. Because of the generality of this update, the information and opinions provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. All opinions expressed herein are solely the opinion of the individual author and do not necessarily reflect the opinions of Johnston & Associates Law Firm, its attorneys, or any other individual.

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