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.