Thursday, May 14, 2015

Private Property Matters


In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

May 14, 2015 – I was recently thinking about an old “friend” of mine. I put that in quotes because I’ve never actually met him, though I’ve admired the man’s work for years. His name is Hernando de Soto. Mirroring the curiosity-driven nature of the famous Spanish explorer with whom he shares a name, our Hernando de Soto is an explorer in his own right. Rather than land itself, he explores land-oriented economic concepts. Today’s de Soto is a globally respected Peruvian economist whose advice is sought by heads of state and world leaders, including many U.S. politicians, economists and business leaders. So why should we, as real estate professionals, be interested in de Soto’s economic musings?

De Soto believes that a very important characteristic of capitalism is the ability to protect individual property rights through an established system based on “economic facts in which transactions are formally documented and recorded and ownership and other rights may be clearly determined. He argues strongly that a formal land title system empowers economically disadvantaged people by assuring them rights and assets that are critical to becoming economically self-sufficient.

 

“Until you have universal, well-protected, clear, and transferable private property rights, you cannot have a market economy in Peru … or anywhere else,” de Soto once told Reason magazine. His strong belief in private property rights reflects the long-established position of those of us who work in the U.S. real estate industry. Private ownership of real estate is a bedrock of our economy and the foundation upon which developed nations have been built.

 

We see reports in the mainstream and industry media every day about the real estate market —  interest rate movement, or lack thereof, price changes, home sales, new home construction, etc. Why is real estate such a popular subject? Because it matters. Real estate ownership and the transfer of ownership rights is one of the main engines that can drive our economy forward. In today’s market, with real estate helping lead the way back to a stable, growing national economy, ensuring that property rights are respected and enforced has never been more important

 

Real Estate agents, lenders, lawyers, appraisers and other professionals who work in our industry make vital contributions every day to our economy. In the title insurance industry, our focus is on protecting the integrity of vital land records and providing the assurances that make the ability to clearly establish formal property rights possible. We are proud to provide that service.

Let’s keep the conversation going. Call or email me: 708-386-7900; frank@prairietitle.com.

Other stories we’re following:            

Bankers Concerned about TILA-RESPA Impact.                       Commercial, Multi-Family Thriving.    

Realtors Ask for TRID Grace Period.            Prepared Remarks by CFPB Director Cordray at NAR.

Thursday, April 16, 2015


In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

April 16, 2015 – You’ve probably heard rumors here and there, some stronger than others, that the Consumer Financial Protection Bureau might delay the implementation of the new TILA-RESPA integrated mortgage disclosure process beyond August 1. My advice: Don’t believe them.

There was a mild kerfuffle on March 26 when Steve Antonokes, CFPB deputy director said, “To the extent there is new information or we’re hearing directly from vendors that folks aren’t going to be ready ... we should continue to talk about that. I can’t promise you [changes], but to the extent we will have a better understanding of the concerns, that is something we will consider.”

A bureau spokesperson later clarified the statement, saying: “We have no plans to delay the deadline on the new mortgage disclosure forms. The industry should be prepared to begin using the new forms for loans with an initial application submitted on or after August 1.”

Later, two Republican house chairs sent a letter to the CPFB asking that implementation be delayed until January 1, 2016. That too is very unlikely to happen. The pair asked CFPB Director Richard Cordray to respond by April 17 (tomorrow, if you’re reading this the day of publication). If CFPB responds by delaying implementation we’ll have a new edition of In the News out within hours, and I just might eat my hat.

Put all thoughts of delay aside and continue to prepare. Attorneys and lenders should be well on their way to implementing their processes around the new form and accompanying three-day rule.

The new TILA-RESPA process was adopted in the wake of the biggest financial meltdown that any of us has experienced in our lifetimes. The CFPB’s mandate is to create rules that will revolutionize the way lending is done and consumer information disseminated. The changes going into effect on August 1 are intended to help consumers become better informed about how the process works and what the costs are. The new form, generally, is a better form for the consumer. Though implementation will be challenging for the industry, we’ll get used to the new process and, ultimately, it will be a net positive for consumers and real estate professionals alike.

Let’s keep the conversation going.  Call or email me: 708-386-7900; frank@prairietitle.com.

 

Other stories we’re following:            

Fannie, Freddie to discount local blighted homes.                       House passes Mortgage Choice Act.

Housing market study: Best since 2001.                           Analysts still hold high hopes for housing.

Monday, March 23, 2015

Watching Millenials


In the News   Presented by Prairie Title            

 

Commentary by Frank Pellegrini, Prairie Title CEO  

March 24, 2015 – What’s the key word in real estate for 2015? Without a doubt, it has to be: millenials. The way forward in residential real estate, as it has been with generations before, is through potential buyers in their 20s and 30s who were on the sidelines for many reasons in recent years. But that trend is changing.

The 2015 National Association of REALTORS® Home Buyer and Seller Generational Trends study, released March 11, found that the millennial generation represented the largest share of recent buyers in 2014. This was the second consecutive year that NAR’s study found that the largest group of recent buyers was millenials, who comprised 32 percent of all buyers in 2014 and 31 percent in 2013. Millennial buyers represented more than double the amount of Baby Boomer buyers.

The sheer number of millenials (15 million more than baby boomers) dictates that we pay close attention to their preferences for doing business as they move strongly into the home purchase market.  And take heart, agents, surveys show that millenials used agents for 90 percent of their home purchases in 2014, the largest percentage among all age groups.                                                         Source: Goldman Sachs

Shifting gears, it was heartening to read the findings of Fannie Mae’s first quarter lender sentiment survey. In a nutshell, Fannie found that lenders are optimistic about 2015. The headline from Fannie’s press release said it all: “Mortgage Lender Sentiment Survey Results Show Optimistic Mortgage Demand and Profit Outlook with Gradual Credit Easing; Data Support Forecast for Modest Housing Expansion in 2015.” Sounds great to me! 

Other stories we’re following:        

Single family and multifamily spending increase?
Problems with new Mortgage Disclosure Forms.
Freddie: Best year for housing in eight years. 

Let’s keep the conversation going.  Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Tuesday, February 17, 2015

Experts Bullish on 2015



In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  
           
February 17, 2015 – What’s a forecast worth? As that question relates to the many positive expert forecasts we’ve read regarding the 2015 real estate market, we hope the answer is: A Lot.

NAR predicts a 7.4 percent increase in existing home sales, a rise in median home prices and a whopping 37 percent increase in new home sales. One factor that undoubtedly plays a role in the NAR forecast is their expectation that rents will rise 4 percent this year. Simply put, when rent costs go up, potential home buyers who have been sitting on the fence may be tempted to invest in owning a home rather than continuing to rent.          

Laurence Yun, NAR Chief Economist, explains their view further in his forecast for 2015: “Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current homeowners the ability to use their equity buildup as a down payment toward their next home purchase.

Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low down payments and private mortgage insurance.”

And NAR is not alone in predicting improvement in 2015. The National Association of Homebuilders corroborates NAR’s forecast with their twin predictions that new home starts will increase 26 percent and sales of new single family homes will rise nearly 30 percent.

All of this dovetails with predictions that millennials are poised to jump into the market, a subject we’ve discussed before. One interesting sidelight to this development, especially for real estate brokers and mortgage lenders, is the growing importance of attracting and catering to the younger demographic through technology. And all this in the year in which lenders, in particular, need to gear up for the implementation of the new Integrated Mortgage Disclosure rule on August 1. (Read more here about the changing role of lenders). Successful loan originators will rise to the challenges of the new market.

Let’s keep the conversation going. Call me at 708-386-7900, or email: frank@prairietitle.com.

Other stories we’re following:            
Moody’s Predicts 45,000 New Home Buyers from Rate Cut 
“Normal” House Price Growth?
FDIC Video re: Mortgage Disclosure Rule.
Fannie: Homebuyers and Lenders Excited about 2015

Monday, January 19, 2015


In the News   Presented by Prairie Title            

 

Commentary by Frank Pellegrini, Prairie Title CEO  

           

January 19, 2015  I’d like to split this edition of In the News  into two parts, the first covering  a hopeful sign for the marketplace in 2015, the second part focusing on repurchase agreements,  an oftentimes overlooked business risk for lenders.

 

There are many reasons for optimism in the real estate industry this year, none more important, I believe, than the hoped-for movement of renters into the homeowner category. The Motley Fool (an insightful voice about economic issues) recently ran a piece positing that millions of American renters may be poised to become homeowners following the FHA’s announcement that it will reduce its mortgage insurance premium from 1.35% of a loan's value per year to 0.85%. I think they are spot on in that analysis.

 

As the author notes, “A borrower with a $200,000 30-year FHA mortgage would see their annual premium drop from $2,700 to $1,700, which would save them about $83 per month on their mortgage payment.” That’s a significant impact on most prospective homeowner’s monthly budgets and really could make a big difference in the real estate economy this year.

An article on Realtor.com from last month titled, “Changes pave the way for more first-time buyers in 2015,” provides perspective on first time buyers. Bloomberg also has valuable insight about young home buyers returning to the market.


Item #2: With tighter regulation and increased scrutiny on loan documentation, the risk of lenders being forced to repurchase loans due to faulty paperwork is growing. It’s been my observation that many lenders and attorneys are not as well schooled in the risks as they should be. This Forbes article is from 2012 but is still worth reading. In it, Mark Greene asserts that, “Mortgage lenders have suffered staggering losses and gone out of business because of the dreaded loan repurchase.”

 

What’s the best way to minimize repurchase risks? Reviewing your loan-making process and making appropriate changes that work for your organization and fall clearly within regulatory guidelines is a great start. While you’re making your assessment, consider steps you can take to minimize risk through automation. For more information, read this Housing Wire article from last fall about how to take advantage of technology to reduce repurchase risk. And please feel free to contact me with any questions you have about this challenging issue.

 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Other stories we’re following:            

Wells Forecast: Full Steam Ahead for Housing                Freddie: Mortgage lending in 2015 vs. 2014

Fitch Gives REITs Thumbs Up for 2015                        Good signs in Housing Market

Monday, December 8, 2014

Grinding Toward Recovery?


In the News   Presented by Prairie Title

Commentary by Frank Pellegrini, Prairie Title CEO           

December 8, 2014  We are about to close the books on 2014, not exactly a banner year, but not a horrible one either. It says something about the economic straits we’ve found ourselves in for six years that results we would have considered poor a decade ago we now look upon as OK.
 
What’s keeping the housing market from reaching its full potential? That’s the question asked in a recent Los Angeles Times article by Lew Sichelman, a long-time real estate observer and writer. Sichelman touches on skittish demand, lack of inventory and other factors we have discussed before, but it was one number that really got my attention: Zillow reports that 32% of all adults are now living with someone (not as a couple). 

The article quotes Zillow Chief Economist Stan Humphries: “The rise in doubled-up households is a troubling sign of the times and starkly illustrates one of the prime drivers behind weak sales.” 

Doug Duncan, chief economist at Fannie Mae, noted the same issue when he spoke at the recent ALTA convention, telling his audience, “Today, demand weakness trumps credit tightness.” Duncan hit hopeful notes too. One of the main themes of his talk was, “Housing will continue its grind upwards. It’s in the right direction but it will be a struggle to get there.” I’d urge you to view Duncan’s excellent presentation here. His talk begins at the 1 hour, 6 minute mark. 

There is positive news that supports Duncan’s thesis, as home sales and prices improved in October. NAHB also cites an uptick in existing home sales for the second straight month in October, including a 5.1% increase in the Midwest from September. And Zillow sees millenials moving more strongly into the market next year. 

How should we view the current state of housing? I wish I knew the definitive answer, and that it was positive overall. I do believe that housing will continue the “grind upwards,” and that 2015 will be a better year in our industry than 2014.  We’ll all just have to keeping grinding along with the market, doing all we can every day to run our businesses efficiently, keep our clients happy, and prepare for the day when the grind brings us back to prosperity in our industry. 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Other stories we’re following: 

Housing market inches toward full recovery.
Economists see U.S. housing as steady in ‘15.
Part 1: Great overview of REPA-TILA  implementation.
Rising rates and the housing recovery.          

Wednesday, November 12, 2014

The Modern Communications Environment


In the News   Presented by Prairie Title       

Commentary by Frank Pellegrini, Prairie Title CEO  

November 12, 2014 –During last month’s American Land Title Association convention in Seattle, I participated in a panel discussion that focused on communication, especially our efforts to explain the value of our products and services. In our corner of the real estate world, I’m not convinced we have developed easy-to-understand messages and taken advantage of the best means to deliver those messages.
To keep pace in the modern communications environment, in which the expectation is that any information is available at anyone’s fingertips anytime, it’s essential that we utilize today’s media to provide accurate information about what we do and why our services are valuable. Primarily, that means building effective social media platforms while avoiding common social media mistakes. Perhaps Realtors® are more used to explaining their business because of their ongoing direct interaction with home buyers and sellers; most of the rest of us in the industry could probably use a little help with that.
One of the key takeaways in the ALTA panel discussion was provided by Michelle Korsmo, ALTA’s executive director. Michelle advised the title professionals assembled for the convention to “better educate our real estate partners about the value of our business.”
That really got me thinking. I’ve been in this business a long time and, collectively, I haven’t seen an overabundance of effort to reach out to our partners with the goal of better explaining the value of title insurance. Do you agree that we could do a better job? What aspect(s) of our business are we not good at explaining?  I’d really like to get your feedback via a personal note or a posting on our blog.
Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.
Other stories we’re following:            
Fannie Mae Home outlook for 2015               8 years later, inching toward the peak
Ingredients for recovery                                  Chicago housing picture brighter.
House price index up in August                      CFPB releases new rules Readiness Guide