Monday, April 25, 2016

Spring Has Sprung?

In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

April 25, 2016

We’re seeing it in our home town, where multi-family construction is going like gangbusters, and the numbers nationwide affirm it: Builders are confident as we move deeper into Q2 of 2016. The National Association of Home Builders’ closely-watched Confidence index, which focuses on single-family construction, was 58 for the third straight month. (Any reading over 50 signals improvement.) Midwest numbers mirror the national averages, holding steady in the 50s for nearly a year now.                                                                                                                                        

“Builder confidence has held firm at 58 for three consecutive months, showing that the single-family housing sector continues to recover at a slow but consistent pace,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.  “As we enter the spring home buying season, we should see the market move forward.” 

At the same time, NAR announced on April 20 that existing home sales sprung ahead in March, “bolstered by big gains in the Northeast and Midwest.” That was the good regional news. Here comes the bad. 

Those of  us who live in Illinois know that things are a bit depressing at the moment as our governor and legislature grapple during a budget crisis with no foreseeable end in sight. I just returned from the ILTA lobby day in Springfield where we had a chance to meet with our legislators about issues that concern the real estate business and get a feel for the general state of affairs in Illinois government. Needless to say, there’s a lot of tension in the air. 

Whichever side of the political divide you’re on — or even if you’re sick of them all — I urge you to get involved individually, in your neighborhoods and through your business associations to help move the needle in Springfield. Until and unless the decision makers feel some real heat from the citizenry they have little incentive on either side to compromise.

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

Other stories we’re following:

Cybercrime on the Rise.                                              TRID Having an Effect on Jumbo MBS?     

Finally Easier to get a Mortgage.                                 Builder MSAs Here to Stay?

Friday, March 25, 2016

Cybersecurity Keeping Us Up At Night

In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO

March 25, 2016

Cybersecurity is a buzzword, no doubt, but nothing is more important to running a business today than making sure what that buzzword represents is firmly implanted in your company’s day-to-day operations. As a business that is based on information — providing title services has always been all about information — securing that information is essential for us, and it has never been more difficult. Throughout the real estate and lending industries we have grave challenges in front of us: protecting not only internal information, but also our clients’ information. 

Our businesses are subject to destructive viruses, attempts to steal data and even demands for ransom to keep a cyber attack from occurring. Ransomware is a relatively new term to me, but it is one of the lurking dangers out there that is most pressing.Source: FFIEC

Late last year, the Federal Financial Institutions Examination Council released a chilling statement about cyber attacks including extortion: “Cyber attacks against financial institutions to extort payment in return for the release of sensitive information are increasing. Financial institutions should address this threat by conducting ongoing cybersecurity risk assessments and monitoring of controls and information systems.”

FFIEC Recommended Actions:
·         Conduct ongoing information security risk assessments and review business continuity plans.
·         Securely configure systems and services.
·         Protect against unauthorized access.
·         Update information security awareness and training programs to include ransomware attacks.
·         Perform security monitoring, prevention, and risk mitigation.
·         Implement and regularly test controls around critical systems.

I can’t tell you exactly what to do to protect your individual business, except always be vigilant and follow the recommendations of your industry association and respected cyber crime experts. There is no 100 percent guarantee that your business will not be a victim of cyber crime at some point, but taking precautions now to help prevent these crimes can help you protect your business.

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

Other stories we’re following:

DS News: Title Pros Well Positioned to Face Challenges.
TRID’s First Five Months.
GSE Reform Moves Slowly, but moves.
Economic Conditions and Housing.           .     

Monday, February 29, 2016

In the News

Presented by Prairie Title        

Commentary by Frank Pellegrini, Prairie Title CEO  

February 29, 2016

Happy leap day everyone! Let’s all make this extra business day in February count as we align our calendar with the earth’s 365.25-day revolution around the sun.

A funny thing happened this long February on the way to higher interest rates. The Fed raised the its benchmark short-term interest rate two months ago and there was a brief rise in mortgage interest rates, but since then rates have been falling. Quoting CNBC:

“Who knew? The Federal Reserve raised its funds rate barely two months ago, and all that worry about higher interest rates for mortgage borrowers ended up being positively unwarranted. The average rate on the popular 30-year fixed mortgage began a free fall, reacting to financial markets overseas rather than monetary policy here at home.”

                                           Here’s a positive: The groundhog saw
                                           his shadow earlier this month.
                                           Let’s hope he’s right about spring
                                           arriving soon with home buyers in tow!

What happens to the real estate market if rates keep falling? No one can be sure, of course. Amidst falling rates, January was a decent month for housing. The NAR recap of January activity is titled: “Existing-Home Sales Inch Forward in January, Price Growth Accelerates.” I think the key word in that headline in “Inch.” That’s how I view the real estate market in 2016. Moving forward, but inch by inch. Unless and until we break out of the economic doldrums, we seem likely to keep treading water but not quite reaching the life raft.

NAR chief economist Laurence Yun put it this way in their Feb. 23 press release: “The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” he said. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.”

Avoiding a recession is certainly desirable. If we navigate the shoals of ’16 successfully, perhaps we’ll be rewarded with a stronger market later in the decade.

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

Other stories we’re following:
CFPB Pledges Leeway in Early TRID Exams.
MBA: Commercial to Grow.
Yellen not Writing off Negative Rates.
Can Homeowners Crack the Credit Box?

Monday, January 25, 2016

In The News

In the News   Presented by Prairie Title            

Commentary by Frank Pellegrini, Prairie Title CEO  

January 25, 2016

Winter is here in full force, the stock market is gyrating and we’re in the midst of an annual lull in the real estate business. So why be optimistic? Two reasons:

1)      Home buying season is just around the corner!

2)      Commercial real estate is in good shape for 2016 and the years beyond.

On the housing front, while it’s true that things are a bit slow for the moment, as is typical in January (complicated this year by TRID implementation), the trends look promising. As reported by the MBA, total mortgage application activityfor refinancings and home purchases combined — posted strong numbers the last three weeks, climbing 21.3 percent on a seasonally adjusted basis the week ending Jan. 8, and a further 9 percent following week.

“The good news for the new year is that following the holidays, application activity resumed at levels just exceeding those observed during early December, suggesting that the purchase market has picked up right where it left off,” noted Lynn Fisher, the MBA’s vice president of research and economics. Meanwhile Interest rates have trended lower the last two weeks, also a good sign that activity is poised to pick up.  

Commercial: Last month, Congress passed a tax bill that includes a number of provisions favorable to commercial real estate, including one that analysts say could spur some $30 billion in annual foreign investment in U.S. commercial real estate starting this year. The provision eases 1980s tax requirements imposed on foreign investors to curb their appetite for U.S. commercial real estate.

Meanwhile, the Daily Real Estate News reported on Jan. 14: “Over the next three years, developers are expected to construct nearly 1 million apartments nationwide, hoping to snag wider profits from soaring rents.”

Need another reason for optimism? Baseball’s Spring Training starts in less than a month.

Let’s keep the discussion going. Call me, email me, or post a comment.

Other stories we’re following:

Chicago Housing Market saw Solid 2015 Improvement.
Home Construction up Last Year.
Big Banks Pulling Back from Mortgages.
Cybercriminals Targeting Mortgage Industry.

Thursday, December 17, 2015

In the News

December 17, 2015 

Well, the Fed has acted, at long last. Yesterday, Fed governors voted to
raise interest rates for the first time since before the financial crisis began in late 2008. It was a modest increase, just 0.25 percentage points, but monumental in the sense that it was so long in coming. The New York Times called it, "a vote of confidence in the strength of the American economy at a time when much of the rest of the global economy is struggling."

The Fed announcement emphasized that any additional increases will come slowly. "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."

Just before the announcement, a
column published in the Washington Post even questioned whether the Fed would quickly end up back where it started. Wonkblog author Matt O’Brien states: "The simple story is that central bankers, who pride themselves on choosing the hard right over the easy inflationary wrong, tend to look for any excuse to end zero interest rates, even if they have to invent one. But raising rates before the economy is ready means you will have to cut them back down to zero in rather short order — which has been the case in Europe, Japan, Sweden and Israel."

What will the news mean for the real estate market? No one knows for sure, of course, but I suspect that it will be something of a non-event. The market has been churning through its own recovery in fits and starts over a number of years, and it’s hard to imagine this one event, or even a series of small increases, will have a great impact.

From my perspective, we head into 2016 in generally good shape. Builders are
confident, loans are being processed despite some TRID headaches and the commercial outlook is good. We are in a much better place than we were just a few years ago, and for that we should all be grateful.

This is our final In The News of the year. Happy Holiday Season to all. See you in 2016!

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

Other stories we’re following:

Construction Spending Near
8-year High.

TRID and Lending.

Mortgages for Underserved Markets?

Economic Headwinds won’t Stop Growth.

Wednesday, December 9, 2015

Are Boomers In The Way?

Ken Harney, one of my favorite real estate writers, wrote an intriguing column last week asking whether Baby Boomers are getting in the way of a prosperous real estate market. Harney starts the column with this paragraph:

“They rocked at Woodstock, marched in protest on campus, distrusted authority, and then as adults, took out mortgages and bought lots of real estate. But now, say some economists, baby boomers aren't selling their houses as earlier generations did — they're not downsizing fast enough as they approach and pass traditional retirement ages — and that's contributing to inventory shortages of homes for sale as well as rising prices.”

There are so many factors at play in the residential real estate market that I hesitate lay blame at any particular group’s feet. (Full disclosure here: Mary and I are smack dab in the middle of the demographic, and still in our home). Sure, Boomers are staying in their homes longer, but there are many reasons: 

·         Some are waiting for their individual markets to improve so they can realize the promise of using equity from their homes in their retirement years.

·         Some are frustrated because the housing market where they want to live doesn’t have enough inventory of available, affordable homes to move into.

·         Some just like living where they live.

Movement at the “more mature” end of the housing demographic is intertwined with all other elements of the residential market. If couples that have raised their families stay put, then younger families have a hard time finding homes to raise their families in. As a result, Millennials have a harder time finding their first home. On the other hand, if Boomer couples leave their family homes, they are often competing with Millennials for smaller single family home and condos. And the loop goes round and round.

But changes are coming, Harney asserts. He quotes Fannie Mae's Simmons: “Boomers will not inhabit this vast inventory (32 million homes) forever,” and when their circumstances change — which they inevitably will with age — watch out. “Their actions will reverberate through the housing market.”

What do you think?

Wednesday, December 2, 2015

E-Closings: Coming soon to a Lender near You?

I read with interest an article published in National Mortgage News just the other day titled, "What the GSE Plan to Collect TRID Documents Means for E-Closings." The article got me to thinking about the future of closings and how the technological revolution we live in every day will affect the future of the business I hold dear.

The thesis of the article, as written by Bonnie Sinnock, is: "A plan by the government-sponsored enterprises to begin electronically collecting the new Closing Disclosure data is designed to promote Fannie Mae and Freddie Mac's loan quality and risk management goals. But the initiative may also prompt broader use of electronic signatures and paperless processing in the mortgage industry."

Couple that with Quicken Loans’ announcement last week that it now officially offers a fully online mortgage through its new end-to-end online product, Rocket Mortgage, and it’s enough to make a mortgage industry veteran run for cover.

So much needs to shake out yet before we know what final form e-closings will take – and how deeply they will take root in our business – but without a doubt we are moving in that direction. What can we do now to prepare?

Above all else, make cybersecurity a top priority in your office. Study it, implement changes, bring in a consultant to help you get it right — do what you need to do but make it happen. Make no mistake, any company that has problems keeping information secure won’t be in business very long.

Earlier this year, Kelly Adkisson, a managing director at Accenture Credit Services, explained to HousingWire that: "Millennials are expecting different services and capabilities from lenders." Accenture’s research suggests the emergence of a new high value customer segment – "Generation D," people who are deeply digital, integrating online and social media into the fabric of their lives.

Because they have grown up online, they are comfortable living in that world day to day, but they also understand better than my generation the risks inherent online. They’re willing to transact business (including real estate closings) online, but their sensitive information must be kept secure.

What do you think?