You’ll get the most out of this book if you understand enough about mortgage industry to not need players in value chain explained to you. It’s a book by and for insiders; assumes good familiarity with e.g. securitization as a concept.
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Book claims that regulations no longer allow what were previously considered “common sense” loans or documentation of same, like “A graduating lawyer whose last 3 years show 0 income does not have a predicted income of $0” or “A med student with a signed offer of employment....”
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For want of workflow automation the war was lost, with the author’s explanation being a cultural impedance between front-end, back-end, and software vendors coming from one background or the other.
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Manifest issues with software competence are handled with “human spackle” otherwise described as “checkers checking the checkers” (both times said with disdain by the author).
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There’s an extended digression about Lean manufacturing and statistical process control, both written by and for an audience who understands neither. I am aware that statement is uncharacteristically robust from me. I stand by it.
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“Blockchain technology is the future, albeit not the immediate future.” <— Did I mention technical competence was not the industry’s defining strength?
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Apparently the author had lunch at IBM which explained to him how Blockchain means he’ll never have to doubt the authenticity of a bank statement ever again, in case you wondered who pays IBM money or why.
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Total cost of writing a mortgage averages $8.8k, which (if you express costs in basis points of the total loan value) allocates 6bps to software and 200 to employee compensation, with about half of that going to the originator (sales rep).
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Quote: One seasoned and cynical executive defined mortgage banking as “the systematic transfer of loan revenue and shareholder capital from shareholders to loan officers [sales reps], who bear no risk with respect to repurchase, prepayment, or regulatory actions.”
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I could seriously quote this book to you all day, but the mortgage needs paying, so: just go read it.
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End of conversation
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