The FHFA has released a new set of financial rules for borrowing in the industry. Last week, I had the privilege of interviewing my friend and business partner Andy Schell to discuss the rulings. According to Andy, it appears that the main thrust of the ruling has to do with an organization's capital ratio--it's tangible net worth divided by it's total assets. According to the new guidelines, this ratio must be greater than six percent.
As of right now, this ruling is from the FHFA, so it only has to do with Fannie and Freddie. So, if that doesn't pertain to you, you might be asking, "What does this have to do with me?" Do you really need to pay attention to what's going on with regulations that aren't relevant to your particular aspect of the industry? Yes, I think you probably should.
Right now, these new guidelines is only for FHFA loans, but the CFPB will certainly be looking to incorporate the rules into the rest of the industry. As leaders in the industry, we need to be aware of everything that happens with various regulators. Rarely do such guidelines stay in a bubble. Often, they spread to other aspects of the industry. Knowing what's going on now will help you to be prepared for the near future. So, work on bolstering that net worth while you still can. You never know what it might be you facing the new regulation.
David Lykken is 40-year mortgage industry veteran who has been an owner operator in three mortgage banking companies and a software company. As a former business owner/operator, today David loves helping C-Level executives and business owners achieve extraordinary results via consulting, coaching and communications, with the objective of eliminating corporate dysfunction, establishing and communicating a clear corporate strategy while focusing on process improvement and operational efficiencies resulting in increased profitability. David has been a regular contributor on CNBC and Fox Business News and currently hosts a successful weekly radio program, “Lykken on Lending,” that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. He produces a daily one-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper Web sites across America. He may be reached by phone at (512) 501-2810 or by e-mail at [email protected].