Communicate Persuasively To Win The Deal

In the article “The 6 Best Techniques for Communicating Clearly and Persuasively, According to a Speechwriter for Top CEOs” by Scott Mautz, he says, “There’s no one in business who can’t benefit from being skilled at communicating clearly, crisply, and in a compelling fashion. Whether you’re giving a keynote to 9,000 people or presenting a recommendation to nine people, communication skills count.”

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And as we all know, relationships matter in the mortgage industry. Truly persuasive, impactful communication is a skill that’s learned and earned. And Simon Lancaster, one of the foremost speechwriters for politicians and CEOs in the world, has learned and helps others to do the same.

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His TEDx talk on clear and compelling communication (especially in speeches) is provocative, with smart advice for upping your verbal voracity. Here are six keys to persuasive communication that you need to know:

1. Use fast and furious sentences.

Lancaster cites the phenomenal acceptance speech that Barack Obama gave in 2008, where he was firing off sentences that were a mouthful, like “Even as we celebrate tonight, we know that the challenges tomorrow will bring are the greatest of our lifetime: two wars, a planet in peril, the worst financial crisis in a century.” The short, clipped sentences mimic how we communicate when we’re in a hurry and are helpful in stimulating a sense of urgency with the audience.

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2. Follow the “Rule of Three.”

The other compelling thing about the Obama example is that he names three challenges. We’re used to things in threes. Three supporting points for a recommendation, three selling points to convince us, death comes in threes…(notice I just used three points to make my argument).

3. Use the power of juxtaposition.

In one of my keynotes I use a line to grab leaders’ attention about the power their words and actions hold. Of this I say, “You can plant seeds of growth, or seeds of doubt.” Audience members always feed the line back to me afterwards. Lancaster calls this using “balanced statements” and says it triggers an underlying presumption that the thinking behind the statement must also be balanced, and our brain likes balanced things.

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4. Use metaphors.

Caveat: Make them simple and easy to understand. A good metaphor illuminates the point you’re trying to make in a way 1,000 words can’t match. In one of my keynotes, to illuminate the power of a leader choosing to be liberal in granting autonomy to employees, I compare it to the process by which power flows through a light bulb (a light bulb will flicker at best if you give it only a bit of power, as will a high-wattage employee).

5. Use exaggeration that’s clearly exaggeration.

Lancaster leaves the technique at just the power of exaggeration, but I think it’s critical to clarify that it must be understood that you’re exaggerating.

Over-the-top sentences echo how we speak in everyday life, says Lancaster, which makes them well accepted. He gives this example: We say we love pizza, but of course we don’t love it the way we love another human.

6. Try a rhyme.

Lancaster says audiences learn concepts through rhymes. He cites the famous case of Johnnie Cochran’s defense of O.J. Simpson, “If it doesn’t fit, you must acquit.” Lancaster calls this approach a “pleasing informational snack that sticks in memories like a musical earworm.”Whether you’re giving a State of the Union address or addressing five employees, clear, compelling communication counts.

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Charitable Giving: More Than Just Corporate Good

In addition to giving back, boosting morale and attracting talent, charitable giving can support a company’s marketing efforts, increase networking opportunities and help put the company’s brand in a positive light. Moreover, consumers, especially millennials, appreciate doing business with companies that are associated with a charity. 

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Consumers these days are more conscious of the businesses with which they work. People are quick to avoid companies that do not meet their social, political or general belief system. According toa 2018 Cone/PorterNovelli study, 78 percent of Americans believe companies must have a positive effect on society in addition to making money, and 77 percent feel a strong personal connection to purpose-driven companies compared to traditional companies. 

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Millennials, the largest growing population of potential housing consumers, are even more conscientious about the companies with which they associate. A 2018 study by Nonprofits Source found that 84 percent of millennials give to charities annually. 

Companies in the mortgage industry are not immune to this growing awareness about charitable efforts. There are many ways companies can make sure they select the right charitable entity. One thing to determine early on is whether you want to have more of an influence at the local or national level. After that, consider the steps below when selecting a corporate charity: 

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Identify potential organizations to support that align with your company’s vision, mission and values, and narrow to a short list of three.

Developa list of key internal decision makers who will approve the commitment.

Takethe temperature on how much your company may be able to commit and budget for that commitment level.

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Reach out to the organizations to gather details on sponsorship levels, marketing opportunities and gather any potential contracts for review. Communicate that your company is exploring the potential of supporting their organization. 

Develop a proposal to share with key decision makers. Provide details about the organization’s mission, available sponsorship levels, and proposed financial commitment.

Pitch to key decision makers. If the proposed organizations resonate, obtain consensus on ONE organization to support, and obtain agreement on the sponsorship level and financial commitment. 

Conduct a full due diligence review of the chosen company, including reviewing contracts and obtaining finance approvals, and fully research the company so there are no surprises about who the organization supports or how they do business. 

Share the finaldecision with all organizations you’ve been communicating with, and have a final contract drawn up and signed for the chosen charity. 

Establish a marketing, internal communication, employee engagement, and external public relations plan.

Launch the charitable giving program by announcing itinternally and externally and begin your commitment. 

Live your brand by beingsure to follow-through on your commitment.  

Any effort toward developing a corporate relationship with a charity will require a time and resource commitment. Ask yourself:  

When is our busiest season? 

How will the project work fit into our workload? 

Do we currently have the budget to roll this out? Aligning with a charity is a great way to give back and will improve corporate social responsibility status. For the relationship to be a success, it is important to approach the effort as informed as possible. 

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Disruptive Fintech: 3 Quick Take Insights

As I travel across the country meeting with top mortgage bankers, technology experts, and leading lenders discussing the current state of the mortgage industry I uncovered a number of trends and insights. In those travels I had the opportunity to speak to over a 100 thought leaders in the mortgage industry within the last twelve months. Here are three quick insights from those discussions.

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“There’s always this Nirvana view of the future, of ‘here’s how good this could be if we solved all these problems at once.’ That has two sorts of pitfalls to it that I think are worth thinking about for companies that are undergoing this journey. The first is not every problem has been solved by companies that are out there. There’s a long way to go. There’s a lot more to solve. And the industry is enormous. There are so many participants. There are so many parts of the process.

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Meaning, that having a clear roadmap of the customer experience, process, and workflow lets one deploy solutions to the most pressing issues now and then undergo continuous improvement to reach the ultimate destination. So many projects fail by attempting to implement segments that are just too large.

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If we waited for everybody to solve all these things before we released our product, we’d be having this conversation in 2030. It would be a long time before we solved it. But also, what that means for the organization is that even within the organization they don’t even need to use everything that we or others have to get started. So, by that I mean [some lenders] need everything integrated and everything perfect before I get started. But actually, the incremental value and the incremental benefit to your customers, if you’re a financial institution, of getting something up and running that allows [customers] to get that simplicity and transparency is big enough on its own.

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Said another way, it’s important to have the overall experience, process, and workflow documented, but to undertake implementation in steps.  Constant improvement towards the right vision, towards that perfect Nirvana world that everyone wants… but don’t wait for the Nirvana world before you make a move. It’s critically important that the overall experience, process, and workflow be understood and documented so that the highest value technology components can be implemented first.” Nima Ghamsari, CEO of Blend. 

2.) The future for the Mortgage Industry will involve more technology companies, Innovative Fintech companies will place tremendous pressure on fees related to residential real east sales and finance.   Since the majority of the cost of real estate brokerage, lender, title insurance and a variety of service providers in the residential real estate marketplace compensation.  More productivity will be required from employees and independent contractors. The constant mantra we hear in the industry: do more with less.

3.) Residential real estate and finance winners are focusing on data driven decision-making and adapting to technology, those who converge consumer choice in a transparent and efficient manner.  Winners at the same time will provide logistical excellence to allow a consumer to interact as they wish, when they wish, efficiently with a great experience. Convergence means movement towards true one stop shopping, similar to buying a car.  Logistical excellence will occur by providing customers an Amazon like experience, with speed, convenience and transparency.

All of these and many more insights can be found in my upcoming book, “Disruptive Fintech: The Coming Wave of Innovation in Financial Services.”The book provides the collective ideas of a hundred mortgage banking thought leaders and their insights on how to adapt to a rapidly changing mortgage environment, including comparing the way technology has revolutionized other industries. Thank you to the all of the Mavericks that made contribution to this book. To learn more about the book, check out our website:

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How Technology Lends To Sustainability And Pipeline Growth For Mortgage Lenders

Spurred by low mortgage rates, the current competitive landscape for mortgage lenders is intense. To remain viable in a saturated market, lenders must leverage automated borrower intelligence to not only attract top talent, but to also improve borrower loyalty and retention. 

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It is worth highlighting that the utilization of customer intelligence data has been in practice for well over a decade. However, the mortgage industry has been notoriously behind the technology adoption curve. Fortunately, we’ve seen an encouraging trendline of mortgage lenders embracing new tools and technology-enabled processes, especially surrounding artificial intelligence. 

Are You in the Top 40 Percent?

According to STRATMOR Group’s Originator Census study, “The top 40 percent of originators account for more than 80 percent of total volume, a measure which has not changed by more than one percent in any given year. That means that 60 percent of an average lender’s sales force produces only 17 percent of total volume. The bottom 60 percent close less than one-half of one loan monthly.” 

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This statistic is a perfect example of why utilizing an automated borrower intelligence system is an absolute business imperative for mortgage lenders to increase volume. And clearly, based on the information from STRATMOR Group, a large percentage of lenders need help with loan volume. Automated borrower intelligence is the solution. 

For an industry based on trusted, authentic relationships, artificial intelligence (AI) may sound intimidating. The truth? Systems that utilize AI manage the behind-the-scenes, freeing up time for mortgage lenders to build rapport with borrowers.

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Automated Borrower Intelligence Defined and Applied

Mortgage lenders know that borrowers are critical to maintaining a steady stream of business. Using automated borrower intelligence, loan officers can stay informed about when a pertinent event occurs, such as a change in credit score, qualification for a lower rate, or loan-impacting life events—with no manual labor required. Notifications are delivered directly to the loan officer and tasks are created to initiate appropriate follow-up actions based on the status of the lead, ensuring loan officers stay front and center with their customers through all stages of the customer life cycle. 

For example, a borrower that lists their home for sale, improves their FICO score, or undergoes a divorce, becomes eligible for a specific loan product. The loan officer is notified by the system of that change and can then reach-out to the borrower with timely, relevant information. Essentially, the use of automated borrower intelligence technology helps loan officers communicate with their customers at appropriate touchpoints, and this ensures that no opportunities are missed. 

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You’re Living on a Farm: The Smart Lender Approach

Let’s take a moment to think about your database as a farm and your loan officers as farmers. If as a farmer you work your land, harvest your crops, and retain seeds for the following year, you have become self-sustaining. Further, if you utilize machinery, you are also more efficient. 

Smart lenders are becoming experts at farming their database to make sure that when business slows down and the cost of producing one new good opportunity triples or quadruples, they have a steady stream of business coming from their own database. Smart lenders know that their database produces the most profitable deals, happier customers, and ultimately referrals. Incidentally, referrals are the least expensive source of new business. 

Borrower Intelligence is a Must for Smart Lenders

It’s essential for mortgage originators to think about how they plan to keep loan volumes up. Previously, monitoring the client database has been a manual and labor-intensive process that yielded mediocre results at best. With automated borrower intelligence, loan officers are often the first to know when it’s an ideal time for the consumer to enter the market, and because there is a previous relationship, connecting with the consumer is much easier than a typical lead. By replacing guesswork with data driven actions based on meaningful data, mortgage lenders can work smarter and more efficiently to keep their sales pipeline plentiful.

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Ensuring Compliant And Profitable VA Lending

Loans backed by the U.S. Department of Veterans Affairs (VA) represent approximately 10 percent of the mortgage market—making them a big part of many lenders’ origination mixes. These loans may become an even bigger part of the mix thanks to a recently signed law that enables veterans to use a VA loan to borrow above the 2019 conforming limit of $484,350 for most counties, without any down payment. The loan limit will be lifted for VA loans that are guaranteed or appraised on or after January 1, 2020.

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Of course, other VA loan limitations are still in place and lenders must strictly adhere to them or face the consequences. In 2017, the New York Department of Financial Services ordered a large mortgage lender to pay $1.1 million in penalties and restitution for overcharging on VA loans. And this past May, the Department of Veterans Affairs Office of Inspector General, in cooperation with the U.S. attorney in the Eastern District of New York, subpoenaed at least eight lenders to turn over hundreds of files on VA loans made between 2013 and 2017 to investigate if they overcharged borrowers. 

The VA’s One Percent Fee Rule

Under VA guidelines, a lender can charge a borrower a maximum of “reasonable and customary amounts for any or all of the ‘itemized fees and charges’ designated by VA.” Allowable third-party charges include appraisal and compliance inspections; recording fees; credit report; prepaid items, such as taxes and assessments; hazard insurance; flood zone determination; survey, if required by the lender or veteran; title examination and title insurance; special mailing fees for refinancing loans; and a Mortgage Electronic Registration System (MERS) fee. 

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In addition, a lender may charge a borrower a flat fee equal to one percent of the loan amount. This flat fee is intended to cover all origination, processing and underwriting costs which are not reimbursable as “itemized fees and charges.” Items that should be covered in the flat fee include lender’s appraisals and inspections, except in construction loan cases; loan closing or settlement fees; document preparation fees; attorney’s services other than for title work; interest rate lock-in fees; escrow fees or charges; notary fees; trustee’s fees or charges; loan application or processing fees; and tax service fees. While charging the flat fee is common, lenders also have the option to itemize these fees and charges. If a lender chooses to itemize these costs, the fees and charges still cannot total more than one percent of the loan amount. 

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What is the benefit of itemizing these unallowable fees and charges if they still cannot exceed the one percent threshold? Well, depending on the state the loan is being originated in, some of those “unallowable” fees might actually be allowable, and would not count against the one percent threshold.

State Exceptions to the Rule

Today, in 31 states, lenders are permitted to charge certain fees that would otherwise be capped at one percent for VA loans. Texas has the most exceptions at 11. Lenders that originate in The Lone Star State can recoup costs from the participation fee on Texas Veterans Housing Assistance Program (VHAP) loans, housing quality standards fee on VHAP loans, attorney fees for refinances, title policy recoupment fees, title policy guaranty fees, escrow fees on refinances, tax certificates, tax deletion fees, elevation certificates, environmental protection lien endorsement, and pest inspection fees. 

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Texas is followed by Arkansas, with eight exceptions, and New York, with six exceptions. Other states that allow fees and charges normally considered unallowable are: Alabama, Alaska, Arizona, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Louisiana, Massachusetts, Maine, Michigan, Minnesota, Mississippi, New Hampshire, New Jersey, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Virginia, Vermont and West Virginia. 

Leveraging Technology for Compliant and Profitable VA Lending

Lenders are often reluctant to take advantage of state exceptions on VA loans because it requires itemizing every fee and charge, as well as auditing the loan estimates and closing documents for compliance. This in itself can be costly and time consuming, and if done incorrectly, can lead to compliance violations, repurchase and reputational risk.

Leveraging automated compliance technology helps lenders quickly and cost-effectively audit their VA loans for all of the unique state charges and fee deviations published by the VA—ensuring lenders do not overcharge veterans and active military, while also recovering the maximum allowable costs under each jurisdiction. This helps to not only mitigate risk of compliance violations, but also make VA lending more efficient and profitable.

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Accounting Requirements Affect You Too

In February 2016, the Financial Accounting Standards Board (FASB) published a new standard on accounting for leases, Accounting Standards Codification (ASC) Topic 842, Leases. The new standards were effective for public companies after Dec. 15, 2018 and will be effective for private companies after Dec. 15, 2019. This new standard represents a complete overhaul of financial reporting in this area and the changes will affect all financial statement issuers, including mortgage companies. So, when your accounting office starts asking questions about your company’s building leases, you now know why and will provide the information in a timely fashion. 

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The goal of the new standard is to take operating leases, which have historically been omitted from the balance sheet, and present them as assets and liabilities through recognition and measurement. Additionally, the new leases standard is expected to increase transparency and comparability among companies that lease buildings, equipment and other assets by consistently recognizing the assets and liabilities that arise from lease transactions. In other words, current off-balance sheet leasing activities will be required to be reflected on balance sheets so that investors and other users of financial statements can more readily and accurately understand the rights and obligations associated with these transactions. 

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The guidance retains two types of leases and is consistent with the lessee accounting model under existing Generally Accepted Accounting Principles (GAAP). One type of lease (finance leases) will be accounted for in substantially the same manner as capital leases are accounted for under existing GAAP.  The other type of lease (operating leases) will be accounted for (both in the income statement and statement of cash flows) in a manner consistent with operating leases under existing GAAP. However, as it relates to the balance sheet, lessees will recognize lease liabilities based upon the present value of remaining lease payments and corresponding lease assets (right of use assets) for operating leases with limited exception.

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The new leases standard will require lessees and lessors to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.

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The new standard offers additional complexity as embedded components of lease agreements are to be separately stated after careful analysis.  This first step for any analysis by a lessee or lessor is to determine if a lease exists within the scope of the new guidance. If so, the lessee and the lessor must also analyze whether there are multiple lease components (i.e., more than one lease) that should be accounted for separately and whether there are non-lease components that should be accounted for under other appropriate GAAP.

In many respects, the final standard can be thought of as moving operating lease obligations from the footnotes to the balance sheet; basically, a change in display. The new standard is not industry-specific, so it will not necessarily affect one industry more than others. However, as mentioned earlier, the more significant the leasing activity, the greater the potential for a significant balance sheet impact.

FASB decided that a modified retrospective approach for transition, as opposed to a full retrospective approach, provides an appropriate balance between minimizing costs of transition and providing users of financial statements with comparable financial information. The regulation and guidances that govern the accounting industry have an effect on mortgage companies, and it is important to treat request in a timely, accurate manner in order not to create unnecessary problems with regulators. 

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A New End-To-End Choice

I just heard that Origence has announced the launch of the Origence mortgage lending platform. Designed from the ground up to handle all a company’s digital mortgage needs, the highly automated platform enables lenders to streamline the mortgage process, improve efficiency, increase sales opportunities and deliver a better borrower experience.

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One of very few new loan origination platforms built since 2010, the Origence platform is an end-to-end system that combines powerful point-of-sale and origination tools to accelerate a lender’s loan production and improve closing rates, while significantly reducing costs. The platform is highly automated, scalable and configurable to meet the evolving needs of any mortgage organization.

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 “For years, lenders have been searching for a new mortgage platform that is capable of doing much more than current loan origination system (LOS) offerings, most of which were created years ago,” said Roger Hull, president and chief product officer of Origence. “As a thriving fintech company with a team of hundreds, we’ve leveraged our considerable resources to create a platform that can power a lender’s business for years to come-one that delivers an optimal digital experience for both lenders and borrowers alike.”

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 By bringing digital automation front and center to the mortgage lending process, the Origence platform solves four common pain points lenders face – sub-optimal pull-through rates, decreased productivity, rising costs and increasing borrower demand for a better mortgage experience.

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 The platform provides everything lenders need to accelerate and enhance their customer experience, including tools that automate the borrower’s application process and overall lending journey. As a true, end-to-end solution, the platform also provides point-of-sale and fulfilment tools that empower lenders to reduce friction in the mortgage process. It includes automated file assignment, conditioning and tasking, as well as an open application programming interface (API) and microservices architecture for smoother integrations with third-party technologies and services. Meanwhile, the platform’s best-in-class marketing automation tools empower lenders to increase their sales opportunities and improve pull-through rates.

 “The lenders we are talking to are excited about the Origence platform’s automation features, such as its ability to automate orders from third parties and retrieve both data and documents, which reduces the need to rekey information manually,” Hull said.

I am anxious to see how the market reacts to this new end-to-end choice. I’ll keep you posted.

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Not If, But When: How Lenders Can Prepare for a Data Breach

Data breaches have been occurring more frequently over the last ten years (think: Marriott, Facebook, Target, Sony Pictures, Yahoo, Quest Diagnostics, Uber, etc.) and a significant number of records are exposed from each event. According to the 2019 Cost of a Data Breach Report, conducted by the Ponemon Institute, the chance of an organization experiencing a data breach within two years is now 29.4 percent, up from 22.6 percent in 2014. The study also found that data breaches, on average, cost a company $3.92 million—not including the cost of reputational damage—and exposed an average of 25,575 records. While the average cost per lost record was $150, certain industries faced substantially higher costs per lost record, including Health ($429), Finance ($210), Technology ($183) and Services ($178). 

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A New Age of Data Privacy and Security

To better protect consumers from data breaches, a number of states and the U.S. federal government, have either enacted new legislation or are in the process of doing so. Often the European Union’s (EU) General Data Protection Regulation (GDPR) is one of the models used for data privacy and security legislation. This large regulation, which was adopted in 2016 and went into effect in 2018, has set the stage for a new age of data privacy and security—reshaping the way organizations manage and protect data. If a company violates the GDPR, it could be liable for fines of up to $22.4 million, or 4 percent of the worldwide annual revenue from the prior financial year—whichever is higher. U.S. companies fall under GDPR when they offer goods or services to residents of the EU. While not all companies in the U.S. fall under the GDPR’s scope, they may fall under the scope of new data privacy and security legislations being established in several states.

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The other primary model for new state legislations is the California Consumer Privacy Act (CCPA), which goes into effect January 1, 2020. This law, sometimes dubbed GDPR-Lite, enhances privacy rights and consumer protections for residents of California, as well as imposes fines on companies that do not comply. Under CCPA, companies will be required to inform consumers what data is being collected about them, how that data will be used, and if that data will be sold or disclosed to any third-parties (and for what purposes). Consumers have the right to say no to the sale of their data and can request a company delete any data they may have collected. Additionally, companies may not discriminate against a consumer for opting out of data collection by changing pricing or services offered. 

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Since the beginning of 2019, a number of states—Hawaii, Maryland, Massachusetts, Mississippi, and New Mexico—have introduced stricter data privacy laws that mirror the CCPA. Other states, including New York, Washington State, and North Dakota, are considering bills that will enhance consumer data privacy for their residents. Add to that other initiatives, such as Senator Elizabeth Warren’s Corporate Executive Accountability Act, which aims to hold executive officers at large companies criminally responsible for negligent data privacy and security practices, and it is clear that we are in a new age of data privacy and security.

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Best Practices to Protect Borrowers and Lenders

Considering how much personal data is required from borrowers during the mortgage process, it is critical for lenders to develop data management processes that can help minimize their exposure in the event of a data breach and prepare for the new data security regulations. Some best practices to adopt include:

  • Creating and implementing an information security policy.
  • Developing an incident response plan and routinely test it.
  • Performing information security awareness training on a regular basis.
  • Interfacing with borrowers using secure channels only.
  • Using encryption technology for data transmission and storage.
  • Building dataflow diagrams to keep track of how data is collected, used and stored.
  • Implementing a data retention plan to limit exposure of unnecessary information.
  • Disposing of physical documents securely and regularly.
  • Restricting access to authorized parties.
  • Performing frequent reviews of third-party vendors, integrations and data exchanges.
  • Working closely with legal counsel, IT staff, and other resources to understand and mitigate potential risks.

The odds that a lender will experience a data breach are growing. With proper data management processes in place, lenders can safeguard sensitive borrower information, ensure compliance with applicable data privacy and security laws, mitigate risk for reputational damage and significant fines, and ultimately conduct business with greater confidence.

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Fearmongering And Artificial Intelligence

During the Democratic debates one of the candidates talked about the loss of jobs the nation will experience in the near future.  Other candidates mentioned that many of the automotive jobs previously held by autoworkers is now being done by “robots”.  While not mentioning it by name the issue was clearly about the use of artificial intelligence in today’s and future industries.  Is this statement justified or is it just fearmongering to justify the candidates’ proposals?   

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This advancement in the use of AI is not unique in the annals of national economies.  Beginning in the end of the 19thcentury and through most the 20th, the Industrial Revolution took place.  The impact from this revolution resulted in the “displacement” of workers and changes in the skills required to work in these new jobs.  With the emergence of the global economy, those industries in the U.S. that were hesitant to recognize these changes were hit the hardest, while those that were early adapters received the greatest reward. In fact, many of these companies and their workers are still suffering the effects today.  

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For example, Pittsburgh was the center for steel production for nearly a century and the population thrived on the jobs it created.  However, when other places were able to create cheaper, if not better, product, steel abandoned the city and left thousands of workers unemployed. Unfortunately, many of these workers believed that “steel would be back” and made no effort to learn any new type of job.  As a result, these people rarely found any type of work that supported them and their families.  Fortunately for Pittsburgh, technology found its way into the city and it is once again a vibrant city with multiple types of technology work to be found.  

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Because of these experiences is it any wonder that people are afraid of artificial intelligence, particularly as it has been hyped as a way to eliminate jobs and reduce costs. The reality is that while jobs will change, there will still be “work “to do. This new work will focus on the higher-level tasks while the routine and repetitive tasks will be done through the use of AI and supporting technology.  In their book Human + Machine, authors Paul Daugherty and James Wilson discuss what work humans will do, what work machines will perform and how the results will be better through this type of collaboration.

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The book describes what types of “work” is truly human based, in other words work that cannot be done by machines as well as what “work” is entirely AI based.  Human jobs include leadership skills that establish the vision for the company and directs the organization.  The jobs of “creating” and “judging” are also uniquely human and well as the ability to empathize with issues, whether they are personnel, production or marketing.  On the other end of the spectrum are those tasks best suited for machines. These tasks require large amounts of data and its manipulation for such things as spotting patterns in large databases. This task is extremely difficult, if not impossible, for humans to complete.  The ability to conduct transactions, iterate and predict from this data and independently adapt transactions, processes and results, based on this data is the best done through AI.  Much of the work necessary to do these tasks is currently done by multiple people, which many times does not provide the level of information needed and adds thousands of dollars to the cost of production.  

A great example of this is the current Quality Control process.  Today the cost of Quality Control is high and the results, without the ability to comprehend the statistical significance of the results, does not provide a lot of value.  In addition, companies are charged with conducting multiple reviews and an independent validation of information.  These results are then compiled into reports which require management to “explain” why a problem occurred and how the issue will be “fixed”.  Outside of the risk program I developed for automating questions in the review process and providing a correlation to potential performance problems, nothing has changed.  With the use of AI technology, this process could be conducted on every loan, while they are in process.  Revalidation can also occur electronically, and the results delivered in a way that management can understand which findings are random and which are systemic and require attention.  

Beside the strictly the “human” and “technical” jobs, there is are multiple jobs that are hybrids using both human and technology in their function.  Those that require training, explaining and interacting requires skills that encompass both sides.  Here is where the new “work” or job functions will grow.  These are defined by Daugherty and Wilson as “human and machine hybrid activities”.  Take our example of QC.  The use of AI in this function will first need to be trained by an “expert” on the methodology for answering each question.  Once finished, someone will need to ensure the AI process is sustained as well as an individual to explain the results of the reviews in a statistically valid approach.  While the use of AI as described above will eliminate the “work” associated with the current process, it does require a very different type of work for humans. The end result is that those who work in these new jobs, must recognize the need to become knowledgeable about these new jobs. Fearmongering is wrong; acquiring the skills necessary for working with AI is what is needed by both companies and individuals for both to be successful.  

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Is Everything Really Bigger in Texas? A Look at Closing Costs in the Lone Star State

They say everything’s bigger in Texas, but is that adage true when it comes to closing costs?

Before we attempt to answer that question, let’s take a look at the state of closing costs nationally. For purchasing a single-family property in the U.S., closing costs—which include lender’s title, owner’s title, appraisals, settlement service fees, recording fees, land surveys, and transfer taxes, where applicable—averaged $5,779 including taxes and $3,344 excluding taxes in 2018, according to the latest ClosingCorp Closing Costs Data Report. Broken down, this comes to $1,232 for lender’s title, $501 for owner’s title, $521 for appraisals, $891 for settlement service fees, $200 for recording fees, and $2,434 for transfer taxes. Total fees, including taxes, represented 1.96 percent of the average home sale price.

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To calculate average closing costs, ClosingCorp used home price data from CoreLogic, a leading global property information provider, to create a $100,000 home sale price range, and then compared real, market-specific rates and fees from the 1.5 million purchase transactions that went through its fee platform to get a sense of what is really happening at the national, state, and local level. 

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The states with the highest average closing costs, including taxes, were the District of Columbia ($24,613), followed by New York ($13,581), Delaware ($13,309), Washington ($12,667), and Maryland ($11,395). Excluding taxes, the District of Columbia ($5,694) and New York ($5,586) kept their top spots, followed by Hawaii ($5,318), California ($5,284), and Washington ($4,701).

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The states with the lowest average closing costs were Missouri ($1,887 including and excluding taxes), Indiana ($2,002 including and excluding taxes), South Dakota ($2,149 including taxes and $1,995 excluding taxes),Iowa ($2,248 including taxes and $2,011 excluding taxes), and Nebraska ($2,267 including taxes and $1,919 excluding taxes).

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So, where does Texas fall? Just as it does on a map of the United States—somewhere in the middle. Closing costs in the Lone Star State totaled, on average, $3,771, or 1.42 percent for homes with a sale price range between $200,000 and $300,000. This breaks down to $1,644 for lender’s title, $300 for owner’s title, $529 for appraisals, $677 for settlement service fees, $178 for recording fees, and $443 for land surveys. It should be noted that Texas is one of just two states that requires land surveys (the other is Florida).

A few core-based statistical areas (CBSAs) were above the state’s average. In Dallas-Fort Worth-Arlington, closing costs averaged $4,409 and, in Midland, they averaged $4,377. However, since home sale prices ranged between $300,000 and $400,000 in these CBSAs, those amounts still represent 1.42 percent of home sale price. And in Austin-Round Rock-Georgetown, where this month’s MBA Annual Convention & Expo is being held, closing costs totaled, on average, $4,267, or 1.19 percent for homes with a sale price range between $300,000 and $400,000.  

In the CBSAs where closing costs were below the state average, home sale prices ranged between $100,000 and $200,000. The three CBSAs in Texas with the lowest average closing costs were El Paso ($2,962, representing 1.70 percent of the average home sale price), Beaumont-Port Arthur ($3,089, representing 1.85 percent of the average home sale price), and Killeen-Temple ($3,089, representing 1.73 percent of the average home sale price).

Interestingly, there were a few CBSAs where closing costs represented more than two percent of the average home sale price. In McAllen-Edinburg-Mission, closing costs averaged $3,357, or 2.59 percent of the average home sale price of $129,811. In Brownsville-Harlingen, closing costs averaged $3,155, or 2.35 percent of the average home sale price of $134,396. In both of these areas, the average home price is well below the state average. While some of the closing costs are low as well, such as lender’s title and owner’s title, other costs, such as land surveys and recording fees, are actually well above average the state average. And in Waco, closing costs averaged $3,972, or 2.02 percent of the average home sale price. While some may blame the popular HGTV series Fixer Upper, which is filmed in Waco, for this, the uptick is actually due to land surveys, which average $1,137, approximately 157 percent more than the state average.

While closing costs in Texas appear to be below the national average, that could change. Various jurisdictions continually contemplate increases and adjustments. So, it’s critical for lenders, no matter what state they originate in, to educate their borrowers as early as possible on closing costs. This transparency helps set reasonable expectations and leads to a positive borrower experience.

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