Monday, August 24, 2015

TRID, of course.

In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO         

August 24, 2015 – TRID. What else? As we move toward implementation of the new TILA-RESPA integrated disclosure rule in six short weeks it’s a challenge to focus on anything else. On Oct. 3 our world will change dramatically. Rarely does such a drastic, externally-imposed change in the way business is transacted occur in an industry, but occur it will.

TRID is a direct descendant of the Dodd-Frank act, passed into law in 2010 in the wake of the financial calamity that roiled the world beginning in late 2008. At more than 2,300 pages, Dodd-Frank is a behemoth. Among its offspring is the Consumer Financial Protection Bureau which is charged with creating and then enforcing hundreds of rules like TRID that will govern how financial services businesses will interact with consumers.
CFPB’s advice to consumers before they enter the home buying process is: Know before you owe. On the industry side, we had all better “know” long before we get the closing table.  Dodd-Frank enforcement penalties are steep. Even one violation can cost you $5,000 and it goes up sharply from there. 

It is unclear at this point exactly how stringent CFPB enforcement policies will be in the early months of the TRID era. Directory Cordray stated in a June 3 letter to members of Congress that the CFPB’s “oversight of the implementation of the Rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.” Clearly, the key term is “good-faith efforts.” We will all make mistakes, but it seems if we prepare properly and make every effort to comply with the new rule the Bureau will be tolerant of those mistakes in the early going.

If you’re looking for more information as you continue to prepare, there are resources aplenty, including:
·         CFPB’s Know Before You Owe page

·         TRID questions answered during ALTA town hall

·         Mortgage Bankers Association guidance

·         Realtor.org’s TRID page

Let’s keep the discussion going. Call or email me, or write a comment on my blog.

Other stories we’re following:    

NAR: Home Prices Rise in Nearly all U.S. Metros.                      

Cook County Opens e-Recording of Deeds.              

REITs up 5 Percent in July.

Q2 Loan Originations up 22 percent.

Monday, August 17, 2015

Educating the Consumer

 
For a long time I’ve been perplexed by the self-imposed silence the title industry practices when it comes to home buyers and sellers. In our business, virtually all of our outreach efforts have been aimed at intermediaries (attorney, lenders and brokers) rather than the people whose lives are actually affected by the real estate transactions we process for them.

We let others do our talking for us – typically we don’t talk to consumers until they are across the closing table from us – yet we offer products and services that are invaluable to those very consumers even if they don’t realize it. With TRID implementation around the corner, we have a great opportunity to change that dynamic.

 To quote an article by author by Nancy Tarr posted on Housing Wire.com, "Consumers have always looked to real estate professionals for help understanding how to buy and sell a home. Traditionally, real estate agents and brokers have led consumer education efforts, and they will continue to play a leading role. But, it’s clear that lenders, as well as title insurance and settlement service providers, will need to play a larger role in helping home buyers and sellers understand the new residential real estate environment."

The American Land Title Association just released a revised, expanded and updated Closing 101 web site specifically created to offer consumers in-depth information about the home buying/selling process. And with electronic closings coming, it is even more imperative that we ramp up our efforts to educate consumers.

I’ve given a great deal of thought to this idea over time and I believe that now is the time to move toward a new communications model for the industry. We’ve been using web sites and social media to provide information directly to consumers with some success, but we need to couple our social media efforts with direct outreach to consumers through new and traditional media as well as other means of connecting.

What do you think?

Post a comment and let’s discuss the future of communications in the real estate industry.



 

 

 

Monday, August 10, 2015

Navigating through Stormy Weather


Navigating through Stormy Weather

Times are interesting in the real estate business. As whole, we’re in much better shape than five or six years ago on both the residential and commercial sides of the industry. Though we are not seeing tremendous growth on the financial side of our businesses, real estate activity is good and, broadly speaking, we are holding our own as a rising tide has lifted us all.

Meanwhile, strong winds are brewing that will buffet us in the coming months. In less than 60 days, we will all be dealing with the day-to-day implementation of the new TILA-RESPA rule. While lenders will be hit hardest by the new regulatory requirements, title and settlement companies also will be scrambling to find their way in our new closing environment.

As we batten down the hatches for the incoming regulatory storm, in the title industry we are also facing self-imposed pressure as we continue to implement an industry-wide Best Practices initiative. Together, these twin challenges will have a major effect on how we do business. The headwinds we are facing come close to creating a perfect storm of external and internal pressure that will make for a daunting fall and winter.

We’ll get through it, no doubt, and emerge in 2016 as stronger businesses that offer even greater protection to home buyers and commercial real estate investors. As the proverb goes, “We cannot direct the wind, but we can adjust our sails.”

While we do just that, bear with us as we navigate through some rough weather.

Questions? Comments?

Frank

 

 

 

Monday, August 3, 2015

Two Months to Go: TRID Adjustments Needed


In June, something very surprising happened in the our industry when the Consumer Financial Protection Bureau proposed delaying by two months implementation of the New TILA-RESPA Integrated Disclosure (TRID) rule. If the original date had held firm we would already be working under the new rule.

The delay from the original Aug. 1 date is welcome because it gives us all additional time to prepare. It could also turn out to be a real blessing in disguise if the CFPB takes action on several vital fronts before the new Oct 3 deadline.

First, the real estate industry has been clamoring for a hold-harmless period of up to six months once the new rule goes live. The penalties for inadvertent mistakes made by lenders and title and settlement companies are very steep, and once TRID takes effect we will all be prone to mistakes as this huge changeover occurs.

CFPB also should use this time to fix the inaccurate disclosure of title insurance premiums for consumers. State law and regulation in the majority of the country dictates that consumers must pay title insurance rates that are different than how the CFPB requires the industry to inaccurately disclose these fees. Every homebuyer should be well-informed about the accurate costs of homeownership — including what they pay for each service during the real estate closing process.

Lastly, CFPB now has more time to act upon an important flaw in the wording of TRID documentation by removing the “optional” label attached to title insurance. Telling a consumer that owner’s title insurance is “optional” will mean that homebuyers may be dissuaded from purchasing the same protection that lenders receive from a title insurance policy.

I believe the new TRID rule will benefit consumers and industry alike. In urging government officials to make the vital adjustments noted above, those of us in the front lines are making prudent suggestions that clearly will benefit the settlement process and the consumers who rely on us to make their home-buying dreams come true.

What do you think?

 

Monday, July 27, 2015

2nd-Half 2015


In the News     Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

July 27, 2015 – Are millenials ready to jump into the real estate market? Some interesting research shows they just might be. According to a realtor.com ® consumer behavior survey of more than 12,000 respondents, millennials are primed to gain market share in the second half of 2015 as more take the plunge into home ownership.

“This year, we’re seeing an increase in millennial demand that points to a strengthening first-time buyer demographic,” said Jonathan Smoke, realtor.com®'s chief economist. “As the economy continues to grow over the next few years, we can expect first-timers to return to a healthy level of 40 percent of the market.”

Last week, DS News published an article noting that the share of first-time purchasers (many of them millenials) was up through the second quarter, noting: “The first-time buyer share in April, May, and June was launched to new highs, supported by improvements in the labor market, riskier mortgage lending, and continuing low mortgage rates.”

That’s two pieces of good news as we move into the second half of 2015. There are many other hopeful signs and I believe the arrow is pointing up. I’m particularly encouraged by the commentary of Lawrence Yun, NAR’s widely respected chief economist. His material is always worth reading.

In a recent column, Yun rejects the idea of an imminent housing bubble. “After running various scenarios, I expect home prices to rise continuously as long as mortgage rates remain under 6 percent….Going forward, keep in mind that robust job creation and meaningful increases in income levels will help propel home prices. For now, though, no bubble or impending crash is in sight.”

Need more encouragement? Take a look at these numbers from NAR’s second half forecast:
·         Residential construction spending increased 6 percent in the first quarter. Housing starts are rising and therefore this component will pick up even at a faster pace in the second half.
  • Builders will construct more homes. By 1.1 million in 2015 and 1.4 million in 2016. 
  • All in all, existing and new home sales will be rising. Combined, there will be 5.8 million home sales in 2015, up 7 percent from last year.
Though we’ll all be wrestling with implementation of the new TRID rule the last quarter of the year, I feel very good about the direction real estate is headed as we move into 2015’s last five months.

Do you agree? Let’s keep the discussion going. Call or email me, or write a post on my blog.

Other stories we’re following:
Builder Confidence is Rising.                                 Managing Unintended TRID Consequences.                

Buying Two Title Policies is essential.                    Home Prices Reach all-time High.

Wednesday, June 24, 2015

RESPA Anti-Inducement Regs


In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

June 24, 2015 – There was a real estate-related article in the Jacksonville (FL) Daily Record recently that caught my attention. It discussed the illegal practice of agents being paid to refer business to title companies. It’s a practice that has become more widespread in Illinois recently and plagued other areas of the country as well.

To quote the article: “When a TV ad shows a man in a lab coat promoting a new prescription drug, viewers realize the ‘doctor’ is being paid to recommend it. But, when a Realtor recommends a lender or title company to their client, the client likely assumes the Realtor isn’t being paid to give that advice. Sometimes he or she is, and the consumer is often the one paying for it. The Consumer Financial Protection Bureau is pursuing title, mortgage and real estate companies that give or receive incentives for customer referrals. The practice is illegal under Section 8 of the Real Estate Settlement Procedures Act.”

In New York State recently, Gov. Andrew Cuomo sparked quite a bit of discussion as he led the charge to impose new “anti-inducement” regulation upon the real estate business in his state.

As the Insurance Journal reported: The regulation outlines categories of expenditures which — when provided as an inducement for title insurance business — are improper and violative of the New York Insurance Law. These expenditures include meals, entertainment, vacations and gifts that are provided to attorneys, real estate professionals, and others, who represent consumers and order title insurance on their behalf.” In other words, title professionals will not be able to use “inducements” to secure business.

In my opinion, these developments are overdue. I have long been perplexed by the lax enforcement of Section 8 rules at the federal and state level. Section 8 exists for a reason – to keep kickbacks from determining who gets real estate business. When Section 8 is violated, it creates a bad situation for real estate professionals and does consumers no favors.

As an aside, when you’re faced with customers who have questions about the value of title insurance, show them Title Insurance: A Friend in Deed, published in the Wall Street Journal. It’s one of the best independent articles on the subject that I’ve read.

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

Other stories we’re following:

Beige Book: Housing Continues to Expand.              Lenders, Title Professionals Prepare for TRID. 

Most economists say no Housing Bubble.                Largest Monthly Home Price Gain in two years.           

Thursday, June 18, 2015

CFPB Delays TRID until Oct. 1


In the News

By Frank Pellegrini, Prairie Title CEO           

June 18, 2015 – The Consumer Financial Protection Bureau announced late yesterday that it is proposing a two-month delay in enforcing the new TILA-RESPA Integrated Disclosure (TRID) process due to an “administrative error.

While we felt confident we would be fully prepared for the August 1 implementation date, we welcome this news which gives the entire real estate industry additional time to get ready for this major change in the way we all do business.

The American Land Title Association published a statement today on the delay which you can read here. For my part, I would emphasize three ways in which the delay in enforcement could help.

·         CFPB now has more time to act upon a serious flaw in the wording of TRID docu-mentation by removing the “optional” label attached to owner’s title insurance. Telling a consumer that owner’s title insurance is “optional” will mean that homebuyers may be dissuaded from purchasing the same protection that lenders receive from a title insurance policy. The CFPB’s disregard of the protection afforded by an owner’s title insurance policy is a disservice to the consumers they represent. It should be removed.

·         Director Cordray and the CFPB staff should use this additional time to fix the inaccurate disclosure of title insurance premiums for consumers. State laws, customs and regulations in the majority of the United States dictate the amounts that consumers must pay for title insurance. The CFPB Rule creates a “one-size-fits-all” formula to calculate title charges. In most areas, use of this formula results in erroneous disclosure.  All homebuyers should be well-informed about the accurate costs of homeownership — including what they pay for each service during the real estate closing process. The Rule should encourage disclosure of the actual charges, not the product of a faulty formula.

·         The change not only gives the industry more time to prepare, it also moves the enforcement date beyond the beginning of the school year, typically a very busy time for consumers. As CFPB Director Richard Cordray said in his statement about the delay: “We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.”

Yesterday’s announcement is good news for real estate services providers and, most importantly, for consumers. Regular readers of In The News know that I do not oppose the changes our industry is undergoing, and the extra time will help smooth the transition process. That’s good news for all.

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