Wednesday, November 18, 2015

TRID Challenges

In the News

Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

November 18, 2015

I just returned from the National Association of Realtors Annual Convention where much of the talk was centered on prospects for the future, marketing to millennials and cybersecurity. I was invited to make a presentation to convention attendees about progress in implementing our new closing process in the TRID era. As I told the audience, we are experiencing broad differences in preparedness and processing, and refinance transactions have proceeded more smoothly than purchases. Challenges we have encountered include:

·         Loans through the Veterans Administration are made more complex due to the required allocation of credits and charges between buyers and sellers.

·         Implications of the notice period and having all the transactional details from all parties on time.

·         Calculating and agreeing upon the disclosure amount for title insurance in accordance with the formula prescribed in the Rule.

·         Accessing the “mid-ware” platform for uploading and downloading collaborative information with lenders.

By the time the traditional home-buying season is in full swing we’ll all be much better versed in the new lending and closing process, and transactions ought to be proceeding more smoothly for consumers and industry professionals alike. We’ll keep marching toward that goal.

Meanwhile, on the cybersecurity front, one of the NAR forums focused on how small real estate businesses, agents and their clients are fast becoming the targets of sophisticated cyber scammers. Melanie Wyne, NAR technology policy expert said that while we often hear in the news about large companies falling victim to hackers, small businesses, which often lack the vast technology and legal teams of larger businesses, actually account for the majority of attacks.

As we and our vendors continue to update our software and systems for the new closing environment, being extra vigilant about securing the information consumers entrust to us is more critical than ever.

Let’s keep the discussion going. Call or email me, or write a comment below.
Other stories we’re following:  

Tuesday, November 3, 2015

Government by (Default)

In Washington last week there was a changing of the guard in the U.S. House. As one Speaker departed and another took his place, simultaneous action occurred to keep the nation from defaulting on its prior obligations and sidetrack the endless, nauseating budget debate that has been going on for years in our nation’s capital. Feel how you will about the process and the outcome, but at the very least a budget framework is in place and our legislators can move onto other matters (such as the TRID grace period passed in the House and pending in the Senate?).

To an extent, change was the catalyst that made something happen in Washington. What will be the catalyst for action in Illinois? For months now our legislature and governor have been at loggerheads over the state budget and that is having real impact on people’s lives and the business climate. The stalemate in Springfield was ushered in by change in the form of the election of pro-business Governor Bruce Rauner, and it is highly unlikely that any of the main combatants will be leaving the scene voluntarily as former Speaker John Boehner did.

So where does that leave us, the taxpayers of Illinois? What action on whose part can bring about a resolution?

Legislative leaders and the governor are scheduled to meet this week for the first time in quite a while. Perhaps further talks will move them closer to a resolution. Until some undetermined pressure point is reached, however, it seems unlikely that an agreement will happen. Fiscal pressure might be the key at some point in time, but in my view pressure bubbling up from below, from those of us who go to the polls every two years, is the most likely change agent that will pave the way for a breakthrough.

For my friends on the Democratic side of the email, that means contacting your legislators and the leadership of both houses to stress the need to compromise and reach agreement soon. For my Republican friends, you’re not off the hook. Contact Gov. Rauner, absolutely, but also make it clear to Republican legislators that they need to help convince the governor that reaching a budget agreement is vital.

Of course, just like in Washington, most parties will not be delighted by many of the details of any budget agreement, but that’s how government in a democracy works. We need to move forward before Illinois becomes even more of a laughingstock nationally.

I urge all to be active, get in your legislator’s ear, and help create momentum to move toward resolution. Until the next round of elections a year from now, our only recourse is to contact legislators and the governor directly to clamor for an agreement. We are the agent for change. 

An easy and effective way to have your voice heard is through the Title Action Network.  You can join TAN in seconds and it costs nothing.  However, through TAN your voice is added to those of other concerned professionals for a strong and clear message to lawmakers, regulators, and policy makers.

Tuesday, October 27, 2015

The Claims Canard

You’ve probably heard some version of this refrain: "Why should I buy title insurance? It’s a scam. Title insurers never pay claims." That canard has been knocking around the real estate business for decades and is simply not true.
Following that type of thinking, each year, approximately 20 percent of homebuyers fail to protect their investment by not being certain they obtain an owner’s title insurance policy. Unfortunately, this leaves them exposed to serious financial risks. Title insurers do pay claims – millions of dollars worth each year – but the focus of title insurance is on preventing claims rather than assuming risk the way other types of insurance such as auto and homeowner’s do.
So our efforts are upfront. During the home-closing process, title professionals diligently examine public records, and if a problem is discovered the title professional works to resolve it before a purchase closes. In fact, during the title search, title companies find and fix problems with the title in more than 30 percent of transactions – usually unbeknownst to the consumer or lender.
While most problems can be located in a title search by skilled professionals, there can be hidden hazards that even the most thorough search will not reveal. Examples include:
  • Undiscovered tax liens
  • Forged signatures in the chain of title
  • Recording errors
  • Undisclosed easements
  • Title claims by missing heirs or ex-spouses
Owner’s title insurance protects property rights from threats like these. Here’s a real-life example of how it works.
True Story
A family in Missouri unknowingly purchased their home from a seller who had taken out a $419,000 loan on the property. This fact was not discovered during the closing process, and the family’s lender paid the seller directly instead of paying off the existing loan. The family eventually faced foreclosure because that other lender had a claim against their property. Fortunately, the family had owner’s title insurance. The title company paid the debt and the family kept their home—and peace of mind. 
This story has a positive ending, but without owner’s title insurance, the family could have faced serious costs, and even eviction.
The next time you hear that claims canard, assure the speaker there is no basis in fact for it. No home owner should ever be without title insurance.

Tuesday, October 13, 2015

Notes from Boston

Mary and I are just back from the annual American Land Title Association Convention, held in Boston this year. Two topics were top of mind for title insurance professionals as we gathered from across the country: TRID and outreach to homebuyers.

As far as TRID is concerned, we’re now a week past the implementation date, and new loans are being processed under the new rule. In the title business, most of us are still awaiting our first new Closing Disclosure Forms as lenders work their way through the new process. Most of the talk about TRID at the convention revolved around potential issues that title underwriters and agents feel might be coming down the pike and efforts in Congress to institute a formal grace period for those moments when good faith efforts fall a little short.

The House of Representatives passed the Homebuyer Assistance Act in veto-proof, bipartisan fashion last week, and we hope the Senate will follow suit soon. While the White House has threatened a veto, let’s hope that the President will relent when the bill reaches his desk, or at least the Senate also passes the bill with a veto-proof majority. Asking Washington to institute a grace period is not asking for special treatment. Lenders, attorneys and title industry members simply want to be able to implement the new rule as seamlessly as possible in the coming months without being overly concerned about daunting repercussions for honest mistakes. 

I urge you to contact your senators in support of this bill. As third in command of Democrats in the Senate, Illinois Sen. Dick Durbin is a particularly crucial leader to get on board.

Regarding consumer outreach efforts, ALTA is urging members to get more deeply committed to educating home buyers and sellers about the residential real estate process. There is growing awareness that consumers in the coming years will increasingly be making decisions regarding vendors throughout the transaction process. Arming them with comprehensive, easy-to-understand information is a first step in helping consumers make good choices.

Take a look at
ALTA’s web page and direct your customers to the page for more information about our industry. The Realtors’ and Mortgage Banking Association’s web sites also have consumer-oriented educational tools. Better consumer outreach is critical, I believe, as members of the home-buying public become more sophisticated in their approach to the residential real estate process. Let’s help them get there.

Questions, comments? Please post your thoughts for all to see and respond to. 


Monday, September 28, 2015

To Raise or Not To Raise - that is the question.

When the Fed decided not to raise interest rates, at least for now, at its mid-September meeting, the action left many experts as well as lenders and real estate professionals surprised and perhaps a little bit puzzled. Leading up to the meeting, it seemed likely that rates would rise but the Fed came to the conclusion that… “in light of the heightened uncertainties abroad and a slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market,” in the words of Fed Chair Janet Yellen.

Many economists argue that the time was right for the Fed to raise rates in September (or perhaps even before that). For instance, BMO Harris Chief Investment Strategist Brian Belski maintains that the next step for the Fed “
must be a rate hike.” next step for the Federal Reserve must be a rate hike.

Jeff Cox of CNBC argues that “The Federal Reserve may have missed its last, best chance to raise interest rates,” while Bill Gross of Janus urges the Fed to “
Get off Zero, now.” Gross argues that, “…zero destroys existing business models such as life insurance company balance sheets and pension funds, which in turn are expected to use the proceeds to pay benefits for an aging boomer society."

As it affects housing, rising interest rates may be viewed through two lenses. There are legitimate concerns that rising rates will severely damage our industry. At the same time, we all want the economy to prosper since a healthy economy typically stimulates activity and growth in the real estate sector.

In my view, the best outcome lies in achieving just the right balance. For now, current rates are advantageous for consumers looking to get into the market, move up to a bigger house, or simply refinance existing debt. However, we know they will rise at some point. We hope that policy-makers are deliberate, cautious, and prudent in searching for the perfect balance.

What do you think?

Tuesday, September 22, 2015

In The News - TRID and Rates

In the News
Presented by Prairie Title          
Commentary by Frank Pellegrini, Prairie Title CEO

September 22, 2015

In less than two weeks, our industry world will “change, change utterly” to paraphrase the Irish poet W.B. Yeats. Our industry changeover will be nothing like the upheaval Yeats wrote about in his tribute to Irish revolutionaries (a number of whom lost their lives) in 1916. Yeats went to say “A terrible beauty is born.” Perhaps that echoes our situation a little bit — with no lives at stake, of course.

Our business is undergoing a revolution, and while the forced change in the way we do business may seem “terrible,” recognizable “beauty” can come out of our implementation of TRID. Most importantly, the new TILA-RESPA Integrated Disclosure rule is intended to benefit consumers by making the residential real estate lending and closing process simpler and easier to understand. In my view, a more consumer-friendly process has been a long time in coming. We should be able to lend and close on residential real estate transactions in a manner that is not intimidating to the uninitiated while protecting consumers and industry interests alike. I see the beauty in that.

My best advice as we move forward? Keep calm, be prepared and keep you arms and legs in the car as the ride begins. Things may get a little wild but the payoff will be there.

When you get the inevitable questions from home buyers and sellers about TRID, there are great resources out there you can recommend. MBA, NAR and ALTA all have terrific consumer-oriented information on their sites, and the CFPB just released new consumer
TRID Tools.

In other news, on September 17 the Fed announced that it would not raise interest rates — for now. In the announcement, Fed Chief Janet Yellen said, “Recovery from the Great Recession has advanced sufficiently far, and domestic spending appears sufficiently robust, that an argument can be made for a rise in interest rates at this time,” Yellen said in her opening statement. “We discussed this possibility at our meeting. However, in light of the heightened uncertainties abroad and a slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2 percent in the medium term.”

Yellen affirmed that a rate increase could be in the works as soon as next month. In other words, stay tuned. What if rates do rise in the near term? NAR has
some thoughts.

Let’s keep the discussion going. Call or email me; or write a comment below.

Other stories we’re following:

Mortgage Bankers See
Seller’s Market in 2016.

Millennial Magnet: Transparency and Technology.

The Vitals on
Title Insurance.

Fannie: Economy to Grow in
Second Half.

Monday, September 14, 2015

TRID Enforcement

TRID Enforcement Remains a Big Question

An impressive coalition of nearly 20 trade groups representing lenders, banks, credit unions, title companies and others have banded together to urge federal regulators to provide guidance on how they plan to enforce the new mortgage disclosure regime that goes into effect Oct. 3.

The implementation of the CFPB’s new integrated disclosure rule (TRID) in less than 3 weeks poses significant "challenges" for mortgage lenders, according to a letter signed by the 18 groups. CFPB has indicated that regulators will be "sensitive to the good-faith efforts" of lenders to comply with what is known as TRID, but what constitutes a “good-faith effort” is rather subjective. We really need more specifics from regulators on what that means. (Though the CFPB wrote the rule, enforcement of the new disclosures is spread out among various regulators.)

In their letter of September 8, trade group leaders said: "We urge the Federal Financial Institutions Examination Council to provide needed certainty by articulating precise policies for examining and supervising financial institutions for the initial months after the TRID implementation. The FFIEC should formally implement a clearly articulated transition period that addresses how regulators will oversee and examine regulated institutions for TRID compliance during this transition period."

The signers rightly note that the TRID framework represents a "sea change for every participant in the mortgage lending process," including borrowers, lenders, appraisers, real estate agents, mortgage brokers, builders and other service providers. Not providing detailed guidance as to how regulators will judge “good-faith efforts” is clearly not fair to industry members who are working very hard to implement the new rule.

I urge you to contact your trade group to express your support for the industry-wide effort to get clarity on this important issue. The fall and early winter will be challenging enough without an undefined enforcement threat hanging over everyone’s head.