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.

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?

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?

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:  

• Title SNAFUs and You.
• First Time Buyers 29 percent in September.
• Home Purchases Predicted to Rise in ’16
• Last Fed Rate Hike? Before the iPhone.

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.

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.
 

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 homeclosing101.org 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. 


Frank
 

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?

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.

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.

Referrals and Inducements

Shedding Light on Inducements

I am struggling to understand what constitutes an illegal inducement —and what to do about it — and I seek your input. As we all know, the Real Estate Settlement Procedures Act (12 USC §2607) specifically prohibits the exchange of anything of value for referral of business related to a federally insured mortgage transaction.

We all agree that under RESPA payments tied to numbers of referrals are not allowed. Recently, a number of agreements through which payments are made to “business partners” (generally considered compliant in the past) have been scrutinized by the CFPB and found to be illegal inducements under RESPA. These cases have resulted in crippling fines and other onerous consequences for the participants.

So, what about an instance where a branch manager of a title insurer entices an attorney agent away from a competitor with the offer of a more generous agent split? Or when a service company for attorney agents offers searches and support services for a nominal amount (or free for that matter) to secure an attorney’s membership in its attorney-agent program? What about when referrals of clients are predicated upon required use of an affiliate? Are these practices the natural flow of a briskly competitive free market? Do they constitute questionable market conduct, at best? Or are they simply illegal inducements?

Traditional free market practices (such as these) may not be suitable where the selection of the provider is not made by those who ultimately foot the bill. Because of the state’s inability to adequately enforce RESPA (significantly exacerbated by the current budget crisis in Illinois), we do not receive much guidance through local enforcement. That’s where the consumer comes in.

I wonder how consumers might react if they were made aware of sweet deals among referral sources? Are the costs to consumers higher as a result? With the new CFPB consumer complaint portal we may have an opportunity to see how they react. Educating and engaging consumers about questionable practices may be just the way to get some sunshine on a very shadowy corner of the business. As Justice Louis Brandeis said, “Sunlight is said to be the best of disinfectants.”

What do you think? Let’s talk about it. 

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.

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.

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.

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

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?

2nd-Half of 2015

In the News    

Presented by Prairie Title         

Commentary by Frank Pellegrini, Prairie Title CEO  

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 comment.

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.

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.          

CFPB Delays TRID until Oct. 1

In the News

By Frank Pellegrini, Prairie Title CEO           

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.

Private Property Matters

In the News  


Presented by Prairie Title           
Commentary by Frank Pellegrini, Prairie Title CEO  

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.

In the News  

 

Presented by Prairie Title            
Commentary by Frank Pellegrini, Prairie Title CEO  

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.

 

Watching Millenials

In the News  

Presented by Prairie Title            
Commentary by Frank Pellegrini, Prairie Title CEO  

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.
On the commercial front.
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.

 

Experts Bullish on 2015

In the News  

Presented by Prairie Title            
Commentary by Frank Pellegrini, Prairie Title CEO  
   
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