Upbeat Commercial Real Estate

In the News   Presented by Prairie Title  

February 22, 2018

         

Can CRE Lead the Way?

Last year’s federal tax legislation has begun to sink in, with employers adjusting withholding levels to match the new IRS charts and many employees seeing larger paychecks as a result. It’s hard to tell what effect the tax changes will have on the economy overall, and the real estate market in particular, but there is hope that changes affecting real estate LLCs will boost commercial real estate this year.

In a slideshow posted on nreionline.com, six economists give their generally positive views on the state of CRE in 2018. For instance, Ryan Severino, chief economist at JLL asserts: “The recent tax cuts are likely to benefit real estate significantly and should have a far more substantial impact than either changes to immigration policy or infrastructure policy."

We may need commercial to lead the way this year as housing continues to be a puzzle despite January housing construction news termed “terrific” by NAR Chief Economist Laurence Yun. “This rise in single-family housing construction will help tame home price growth,” Yun said.

As Reuters reported: “Housing starts jumped 9.7 percent to a seasonally adjusted annual rate of 1.326 million units in January. …Economists polled by Reuters had forecast housing starts rising to a pace of 1.234 million units last month after a previously reported rate of 1.192 million units. Building permits surged 7.4 percent to a rate of 1.396 million units in January.”

Will January’s construction numbers provide a push for housing? We hope so, but continued lack of inventory and high prices are keeping the overall housing market flat at best. And it remains to be seen if the elimination of federal deductibility of state and local taxes will negatively impact housing.

Good news out of Washington: The House recently passed bipartisan ALTA-supported legislation that corrects the inaccurate disclosure of title insurance premiums on the TILA-RESPA Integrated Disclosures (TRID) form and will help consumers understand the true cost of their real estate transaction. Here’s hoping the Senate follows suit and the fix becomes law.

A final thought. We’re moving more and more toward a digital mortgage/closing process from start to finish. It won’t happen overnight but there are signs of movement. Just last month Chase announced its intention to soon offer digital mortgages on smartphones. Also, I found this article on operationalizing the digital mortgage process in Housing Wire to be an interesting read.

Finally, finally. I recently authored an article in an Illinois State Bar publication titled, “The Bond that’s not: How to convey real estate in an unprobated estate.” For those interested in the subject matter, or others who might suffer from insomnia, I thought you might find it helpful.

Let’s close out the first quarter strong!

So Long 2017

In the News   Presented by Prairie Title  

December 21, 2017

         

Closing a Volatile Year

As 2017 comes to a close, I am hard pressed to think of a year in my lifetime that witnessed so much Washington-based controvery since Vietnam coupled with Watergate. Front and center on my mind at the end of a tumultuous year is that state of the real estate economy and just how much real estate impacts the U.S. economy as a whole. 

An interesting piece in Mortgage Professional America recently spoke of the benefits to the real estate economy if a home purchase tax credit were adopted, and a statistical note in the article really stood out to me: “According to the Bureau of Economic Analysis, the GDP reached $18.6 trillion in 2016. Of this amount, real estate chipped in $2.48 trillion, or 13.3 percent. In comparison, manufacturing was worth $2.18 trillion, retail contributed $1.1 trillion, and lawyers produced services worth $245 billion."

Clearly, the need to promote real estate transactions through the tax code is imperative. Thankfuly, the tax bill just passed in Congress ended up being less unfavorable to real estate than previous versions. Some deductibility for property taxes was maintained and the mortgage interest deduction was largely preserved, while capital gains treatment on the sale of a primary residence was  preserved. Commercial real estate also should benefit as pass-through entities such as LLCs will be treated more favorably in the new tax environment.

For my part, I am keeping an open mind on the possibilities for the real estate market as the new tax laws come into greater focus during 2018. 

CFPB Follies. There’s no need to discuss the spectacle of the agency temporarily having two diretors, but there has been movement onTRID disclosures since we last published.

On Dec. 6, CFPB issued an updated version of the TRID Guide to the Loan Estimate and Closing Disclosure forms, which did not really help solve disclosure issues. More hopefully, there is some momentum behind a bipartisan effort in Congress to legislate needed changes to the disclosure rule. We hope the new year will bring good news in this arena.

Finally, We recently saw Mudbound, an early 2017 movie release set in post World War II Mississippi. While I enjoyed the entire movie, one scene struck me as it unfolded: A family arrives at a home they believe they have rented (and indeed put $100 down on, quite a sum in those days) only to find that the homeowner has sold the home in the interim and they are out their money. The renter had made the deal on a handshake, with no paperwork, and unfortunately paid the price for that mistake.

To me, the scene was a reminder that real estate fraud has always been and always will be with us, and the need for vigilance to guard against fraud and theft remains and grows greater every day.

Taxes, TRID, and Cyber Threats

In the News   Presented by Prairie Title  

November 13, 2017

         

The Tax Plan Cometh

We have to address the elephant in the room: tax code changes and their effect on housing in 2018 and beyond. First, NAR reports that next year could see an increase in existing home sales due to an improving economy, job growth and rising confidence; however, it will be limited by continued supply shortages. NAR forecasts home sales will grow to 5.67 million in 2018, the highest point since 2006.

But, and this is a big but,  NAR also predicts that if the House tax bill or a similar version becomes law, it could act as a disincentive to homeownership and hold back strong sales activity.

NAR explains that the House tax bill could affect home sales and even home prices in 2018 and beyond, claiming that in its current form, the bill is a direct tax hike on homeowners. NAR’s analysis of the bill estimates it would cause home values to drop 10% and raise taxes on middle-income earners by an average of $815

On the bright side, Senate Republicans last week weighed in with a tax plan that would preserve the mortgage interest deduction.

We’ll see what happens over the next few months. I am very skeptical that slashing the mortgage interest deduction will have anything but a negative effect on the housing market. Let’s hope that doesn’t happen. I encourage all you to contact your representative in Congress and push to preserve the deduction.

Automation will fix TRID? The CFPB has published its final TRID amendments which, as expected, did nothing to fix the issues with fee disclosures (particularly title insurance) on the Closing Disclosure form. Beyond that, we don’t know what the future holds for CFPB as the court case challenging its constitutionality (PHH vs. CFPB) continues, the Republican Congress seems determined to de-fang if not eliminate it and Director Cordray’s term expires in June.

There is some bipartisan movement on the issue in Congress that is worth watching, but a tantalizing question is whether technology will help cure the problems in the long run regardless of what happens in Washington. A technology expert recently made just that case in Scotsman Guide. On related note, NAR recently published a good explanation of blockchain technology and its coming impact on the real estate market.

The scamming crisis. Hackers continue to scam homebuyers out of millions and it’s getting worse. I urge you to read this excellent summary of the situation by real estate writer Ken Harney, and pass the warning along to your staff and customers.

What’s your point of view? Call or email me, or write a comment here. Let’s keep the conversation going.

Revisions to TRID Rule?

In the News   Presented by Prairie Title  

June 27, 2016

         

TRID Changes Coming in July?

 

By Frank Pellegrini, Prairie Title CEO   

 

I know it seems like we’re beating a dead horse (apologies to our dearly departed equine friends), but TRID is the subject matter that just won’t go away. On April 28, CFPB Director Cordray wrote to industry trade groups that, “We believe that there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”

 

Cordray expressed hope that action would be taken by late July without specifying the issues the agency would address. In the title business, we have been in conversations with CFPB about changing the rule to ensure consumers receive accurate, clear information about title insurance costs.

“ALTA appreciates Director Cordray and the CFPB stepping up to the plate and committing to provide more clarity on TRID,” said Michelle Korsmo, CEO of ALTA. “We value their openness in this process moving forward. We are committed to continuing our conversation with Director Cordray and the CFPB staff to correct the calculation of title insurance policy premiums.”

Since the Cordray letter, a bipartisan coalition has emerged in the U.S. House that is urging the CFPB to “ensure that your new forms serve as a credible source of accurate information about the true costs of buying a home for consumers.”

In other D.C. news, ALTA has joined a group of the nation’s largest real estate trade associations to push for cuts to Fannie Mae and Freddie Mac fees. In a June letter to the Federal Housing Finance Agency, the group said the fees that Fannie and Freddie charge lenders to guarantee mortgage loans serve as a tax on consumers, preventing some potential borrowers from becoming actual borrowers.

I agree that it’s time to eliminate the fees that were instituted in 2008 in the wake of the housing crisis and subsequent major financial troubles faced by Fannie and Freddie. The two agencies have been stabilized and the fees have become an obstacle to homeownership.

I urge you to to contact your representives in Washington to ask them to get behind these critical  initiatives to improve the home buying process.

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

Other stories we’re following:

Storm brewing in commercial real estate?                        Dems join house push to recapitalize GSEs.

 

Homebuilders can get loans, but where to build?                                    New home sales reverse course.      

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.