Why Haven’t Loan Officers Been Told These Facts?
Sex Education from the Consumer Financial Protection Bureau and HUD

Coming up this month is the first anniversary (January 20, 2021) of an important yet under-the-radar administrative law, Executive Order 13988

Soon after entering office, President Biden acted swiftly to strengthen the rights of LGBTQ people. Based on the constitutional precept of equal protection, President Biden’s executive order 13988 extends the applicability of sex discrimination to the LBGTQ community.

Relative to mortgage lending, the order impacts two notable statutes, the Equal Credit Opportunity Act and the Fair Housing Act (Title VIII of the Civil Rights Act of 1968). When these legislative acts were passed in 1968, it is probable Congress viewed sex discrimination relative to the stereotypical biological sex roles of the times. However, in light of recent case law, the Biden administration believes it has the footing to redefine the term sex discrimination as used in those two legislative acts and any other legislation involving sex discrimination. The order requires sweeping changes to the administration and promulgation of laws prohibiting sex discrimination.

First, let’s take a look at President Biden’s executive order. Executive orders are a form of administrative law. From the American Bar Association – “An executive order is a signed, written, and published directive from the President of the United States that manages operations of the federal government.” Executive orders are similar to regulations in effect. Unless the executive order is rescinded by another President or effectively struck down by Congress or the Courts, the order is just as powerful as any federal law.

From President Biden’s executive order 13988

Section 1. Policy.
Every person should be treated with respect and dignity and should be able to live without fear, no matter who they are or whom they love. Children should be able to learn without worrying about whether they will be denied access to the restroom, the locker room, or school sports. Adults should be able to earn a living and pursue a vocation knowing that they will not be fired, demoted, or mistreated because of whom they go home to or because how they dress does not conform to sex-based stereotypes. People should be able to access healthcare and secure a roof over their heads without being subjected to sex discrimination. All persons should receive equal treatment under the law, no matter their gender identity or sexual orientation.

It is the policy of my Administration to prevent and combat discrimination on the basis of gender identity or sexual orientation, and to fully enforce Title VII and other laws that prohibit discrimination on the basis of gender identity or sexual orientation. It is also the policy of my Administration to address overlapping forms of discrimination.”

Sec. 2. Enforcing Prohibitions on Sex Discrimination on the Basis of Gender Identity or Sexual Orientation.

(a) The head of each agency shall, as soon as practicable and in consultation with the Attorney General, as appropriate, review all existing orders, regulations, guidance documents, policies, programs, or other agency actions (“agency actions”) that:

(i) Were promulgated or are administered by the agency under Title VII or any other statute or regulation that prohibits sex discrimination, including any that relate to the agency’s own compliance with such statutes or regulations; and

(ii) Are or may be inconsistent with the policy set forth in section 1 of this order.

(b) The head of each agency shall, as soon as practicable and as appropriate and consistent with applicable law, including the Administrative Procedure Act (5 U.S.C. 551 et seq.), consider whether to revise, suspend, or rescind such agency actions, or promulgate new agency actions, as necessary to fully implement statutes that prohibit sex discrimination and the policy set forth in section 1 of this order.

Next week, the Journal unpacks the responses of the CFPB and HUD to Executive Order 13988.


​Behind the Scenes

The Taper Tantrum
Watch Those Refinances, No On and Off Switch for Rate Changes

Leveraging a Blue Ocean Strategy to Grow Your Business

To Explore Strange New Worlds, to Seek Out New Life and New Civilizations, to Boldly go Where no Person has Gone Before :).

Leveraging Adverse Actions and Unqualified Prospects

Are you concerned about mortgage market contractions? If you aren’t, perhaps you should be. Foundationally, surviving or better yet, thriving during a prolonged market contraction may require you to do things differently than what you are doing today. Chiefly, you must expand your prospective customer base.

Would you enjoy getting paid handsomely to make a massive difference in people’s lives? Last week, the Journal floated the concept of providing a development program in response to failed applicants. A farm team of sorts with you as the coach. You get to develop the players from the High-A league on to Triple-A where their dreams of homeownership are insight. Then, the next stop. The Big League. Imagine kicking it with your homebuying proteges at their new house party.

Playing in the Big League for a slice of the American Pie. Can you envision the satisfaction of coaching your players to the Big League? Picture a young family or maybe a struggling move-down prospect, their dreams broken due to credit rejection. Discouraged and in despair. Then resurrected and restored. With you being the difference. Giving people hope and encouragement. Once broken, their objectives are now fulfilled under your leadership and guidance. If that doesn’t float your boat, maybe it’s time to binge-watch the Grinch :{)>!

Rarely does a momentary credit decision constitute a lifetime ban from mortgage financing. Is it in anyone’s interest to leave these folks broken or disillusioned? Left to their own devices, some of these folks may continue on a path that negates homeownership possibilities. No homeownership means diminished wealth-building opportunities. For most people, sustainable homeownership is a path to a better life.

Regrettably, one of the hardest parts of the Mortgage Loan Officer’s (MLOs) job is to communicate bad news to applicants. MLOs usually receive scant training in this area, a significant industry failure.

But consider this, are you throwing away future business by ignoring the grassroots marketing opportunities that exist with failed transactions? For example, could you profit from more eternally grateful, living advertisements for your services?

Can you dovetail more compliant ECOA practices with a remedial homebuying program? He who is forgiven little loves little – but the one who is forgiven much greatly loves the one who forgave him.

In most cases, these failed borrowers might be rehabilitated into future borrowers and, notably, raving fans. Contemplate the regular interactions and follow-ups with these folks, their friends, family, neighbors, and co-workers.

MLOs are solutions architects, amongst other things. If the answer today is no, that does not end the quest for homeownership. Instead, an adverse action becomes merely a boundary. Or a launching point. The MLO’s next step is to develop the solution necessary to get to yes. This engineering involves three primary elements.

1) Identify the primary obstacles to homeownership or financing

2) Diagram the workflow necessary to produce the deliverables needed to overcome the obstacles

3) Create a schedule with key milestones aligned with the deliverables from the workflow

Many MLO’s do a reasonable job of mapping the path to homeownership. Unfortunately, many more don’t do well when remedial workflow and revised schedule mapping become necessary on the heels of denial. Turndowns require leadership from the MLO. Your leadership of the necessary remediation involves sound communication, specificity, clarity, and accountability.

Additionally, lenders and MLOs mainly focus exclusively on their turndowns instead of prospecting failed applicants from other sources. Firstly, as many of you know, just because one lender says no, doesn’t mean you cannot resurrect the application and close the deal. But even if the deal is truly dead, there may still be value to develop. For example, suppose the failed applicant is not immediately viable. In that case, the failed applicant may be a viable buyer at some point in the not too distant future.

By facilitating the applicant’s involvement with a structured remediation program, you assist the referral source in preserving their relationship with the buyer. At the same time, you give a hurting prospect hope and another chance at homeownership.

Furthermore, your leadership during this challenging pivot gives you a grand opportunity to mine referrals well beyond the scope of the failed transaction. Consequently, your rewards do not hinge on whether or not the failed applicant completes their rehabilitation. Your success will transcend that of the applicant or referral source. This transcendent success is possible because you will leverage the rehabilitation process for countless referrals as part of the remedial efforts. See the Journal Blue Ocean Strategies in the LOSJ Volume 1 Issues 21 -24.

Next week, the Journal has a few more suggestions for your Farm Team Program.


Tip of the Week

Leadership – Taking Responsibility for Failures and Mistakes, the Asoh Approach

The Journal’s editor first discovered the wonderful folklore surrounding
the fabled story of Captain Asoh from a book by the late business school academic and consultant Jerry Harvey. Captain Asoh was a highly experienced pilot flying passenger aircraft for Japan Air Lines. And then, one ordinary day, he made an extraordinary mistake, resulting in a most profound and public failure.

On November 22, 1968, Captain Asoh was piloting a DC-8 from Tokyo to San Francisco. It was a foggy San Francisco morning with a low cloud ceiling.

“Breaking out of the overcast, I cannot see the runway light.” Asoh called out, ‘We are too low – Pull up, pull up!” Too late. Asoh applied power to the engines and started to rotate the aircraft when the plane’s landing gear hit the water. The plane settled gracefully into the mud under the shallow bay waters. No one was injured. The aircraft was salvageable. Captain Asoh had landed his DC-8 on the murky waters of San Francisco Bay, two miles short of the San Francisco International Airport runway.

At the National Transportation Safety Board hearing, Captain Asoh frankly admitted that the crash was his fault, reportedly stating, “As you Americans say, I f***** up.”

Captain Asoh was demoted to First Officer and banned from flying passengers but continued flying for Japan Air Lines. He eventually retired from JAL, pension, integrity, and honor intact.

It might not sound like a happy ending for Captain Asoh. However, with or without his frank admission of pilot error, the Board would have found Captain Asoh responsible for the crash. If Captain Asoh had argued mitigating circumstances or some other defense, his fate might have been worse. People look down on those that fail to take responsibility for failures on their watch.

Discussing the Asoh Defense is not to debate how pilots should defend their decisions before the NTSB. To be sure, there are other approaches to ameliorating leadership failures. But, realize that people are looking at how the Leader CONDUCTS themselves in light of a failure. The failure itself may be secondary in import. Why not make lemonade when dealt a lemon? Failure could be an opportunity for leaders to demonstrate they’ve got the right stuff.

The strength of the Asoh Defence is manifold.

1) Instead of focusing on fixing blame, attention is focused on impacts and objectives.

2) Taking ownership of mistakes is generally considered an admirable Leader trait. Accordingly, Captain Asoh effectively leveraged his error ownership to improve stakeholder buy-in. As a result, Captain Asoh kept his job by maintaining respect, rapport, and buy-in with key stakeholders.

3) By taking ownership of the failure, the Leader exerts command. They are demonstrating that the failure is understood. The Leader may then credibly reset expectations once the Leader has articulated the problem and its causality and taken steps to lessen negative impacts.

Don’t confuse ownership of errors and defects with unprofessional groveling. The stakeholders don’t want to hear about feelings of inferiority, defeatism, or blame. Keep that for the analysts’ couch. Next time you “mess up,” try the Asoh approach. Take the approach that demonstrates responsibility in the face of failure through excellent leadership.

Though Captain Asoh’s colorful language is memorable, the impacts of profanity are debatable. You might want to review the Journal’s series on communication and influence. For me, Captain Asoh couldn’t have said it better ;).