“It’s the little tweaks that have driven the industry crazy,” says Calk, chairman/CEO of the Federal Savings Bank and Chicago Bancorp and an aspiring future regulator. “We are grossly overregulated.”
Calk, a former veteran who runs a large, family-run U.S. retail home loan business and bank still fails to understand why regulation has to be so complex. He has been an advocate of making documents far simpler than currently proposed but finds existing efforts to that end fall short.
“Those responsible for attempting to simplify the documentation have good intentions. I don’t doubt for a second that their intentions are pure,” he says. “Unfortunately, the end result still seems to be scaring lenders and confusing borrowers.”
“I just don’t understand why it can’t be three pages,” he says, noting that he has done his best to share his thoughts with regulatory officials. “I wrote my letters. I have received calls from folks at the highest levels of our government and I’ve offered my simple feedback. I don’t feel like we were listened to.”
Instead regulation has continued to necessitate day-to-day changes in the loan manufacturing process that Calk’s company has been able to handle thanks to what he describes as a seven-figure investment in technology during the refinancing boom.
“It’s done and paid for,” he says, adding that he finds it hard to envision how one could keep up with all the changes without such an investment.
The dwindling in refinancing as well as regulatory change has been tough on a lot of companies this year and it is likely to be awhile before this type of business rebounds again.
“So many [borrowers] have taken advantage of these incredibly low interest rates the last two years. They’re not going be coming back to refinance,” Freddie Mac chief economist Frank Nothaft recently noted.
Calk’s company has been able to weather the shift in market cycles as well at the regulatory onslaught because his more than 20 years of experience in the industry taught him to save for a rainy day during the good times, he says. “This is my fifth full economic cycle,” he notes.
The Federal Savings Bank is relatively large and has been able to manage the costs of regulatory and market change, but “the cost of manufacturing a loan has become almost prohibitive for a broker and a smaller mortgage banker.”
“There’s more concentration in the top three or four retail banks, doesn’t that create a massive threat to everything we’re concerned about?” he asks.
“It has become so burdensome for a homeowner to get a mortgage and the recourse is so litigious [for lenders], people are just saying it’s not worth the hassle,” says Calk. “The people that will get hurt the most are the ones that we need to help the most, like the FHA/VA borrower. That’s my greatest fear as a veteran-owned bank.”