Ask Your Title Officer

Title Officer: Chuck Bishop | California Title | San Diego, CA

Q: The property is a Single Family Dwelling. However Title is calling it a Condominium. Which is correct?
A. Both may be correct. It is important to understand that in terms of our profession “condominium” does not describe an architectural type of construction. The condominium process is just another way to divide real estate. Regarding a typical tract or subdivision, ownership is limited on the sides by the lot lines shown on the recorded map, but the center of the earth is the lower lot limit and there is no upper limit. When property is divided through the condominium process, a condominium plan is recorded and there is typically a “unit” shown on the plan; however, unlike the lot in a subdivision, the “unit” has both upper and lower limits as well as the side lines. Basically, a condominium unit is a “box,” which could be located ten stories up in a high-rise, or on the ground. Contained in that box, there may be a single family home, a mobile home, or just about any other type of improvement.

Here are some examples of common TRID errors

Range from simple to egregious

Original article | April 1, 2016 | Brena Swanson

Regardless of how minor or major a mistake is, it still is one. A recent letter from the Association of Mortgage Investors gave an inside look at some of the mistakes that have come from the new TRID rule.

AMI wrote a letter to Consumer Financial Protection Bureau Director Richard Cordray to express the mortgage investor community’s concerns over the bureau’s “Know Before You Owe” mortgage disclosure rule, including specific examples of issues that are cropping up.

The errors mentioned in the letter are broken up into three categories.

Here are a few samples from each one, and given the minute details of the examples, be sure to check the full letter here. The examples are included in the appendix at the end.

Frequent loan estimate defects

• Numerical computation errors on the Loan Estimate (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Loan Estimate, Loan Costs and Other Costs do not total Estimated Closing Costs in the Costs at Closing table on page one of the Loan Estimate).
• The Estimated Closing Costs are not calculated in the same manner as the Total Closing Costs disclosed on page 2 of the Loan Estimate.
• Prepaids table does not include the applicable time period covered by the amount to be paid by the borrower and the total amount paid.

Frequent closing disclosure defects

• Calculating Cash to Close table does not reflect “Yes” when amount changed from Loan Estimate to Final. When the answer to the question is “Yes”, there is no indication where the consumer can find the amounts that have changed on the Loan Estimate.
• Numerical computation errors (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Closing Disclosure, Loan Costs and Other Costs do not total Closing Costs in the Costs at Closing table on page one of the Closing Disclosure).
• Loans closed prior to three day waiting period.

Examples of technical and minor errors frequently cited as TRID violations

• TRID: Loan Estimate disclosed the Courier, wire, and storage fees on the same line in the closing costs section. Each fee should be disclosed on its own line.
• TRID: LE Loan Costs/Other Costs Deficiency – The “Title – CPL” Fee is not labeled correctly on the Loan estimates. CPL is not an Acceptable abbreviation and should reflect “Closing Protection Letter”.

While the CFPB has continuously said yes, there inevitably will be inadvertent errors in the early days, but that is why the bureau and the other regulators have made clear that the initial examination for compliance with the new rule will be sensitive to the progress industry has made.

Reviews over TRID will come down to whether companies have made good faith efforts to come into compliance with the rule.

However, this answer hasn’t satisfied the industry, leaving both investors and lenders still afraid to partake in the new TRID world.

These errors are small but not unproblematic. “It is not simply the probability of a lawsuit or potential legal costs – although those are certainly factors – there is reputational risk; increased transaction and operational costs; and, post-crisis, there is little corporate tolerance for any legal or regulatory risks,” AMI said in its letter.

In the meantime, a bill designed to give the mortgage industry more defined security on TRID implementation is stuck in limbo after a series of attempts to get it passed.

Why 20% of Homebuyers May Not Sleep Tonight

Each year, approximately 20% of homebuyers fail to protect themselves by not getting owner’s title insurance. Unfortunately, this leaves them exposed to serious financial risk—causing endless worry and regret.

If you’re thinking of buying a home, here’s what you need to know to protect yourself and your property rights, so you can rest assured once you’ve purchased your home.

 

Looking For Potential Threats

During the home-closing process, your title professional will help transition the home from the seller to you, the homebuyer, by examining public records. Generally, if a problem is discovered, the title professional works to resolve them before you purchase the home.

 

However, even after a title search is performed and you purchase your home, problems could arise that threaten your ownership rights. Examples include:

 

• Undiscovered tax liens
• Forged signatures in the chain of title
• Recording errors
• Undisclosed easements
• Title claims by missing heirs* or ex-spouses

 

Getting owner’s title insurance protects your 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 separate $419,000 loan on the property. But 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.

Soon, the family faced foreclosure because someone else had claim against their title. Fortunately, the family had owner’s title insurance. So 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.

 

Protect Yourself

There are two types of title insurance: lender’s title insurance and owner’s title insurance.

Lender’s title insurance is required by most lenders and banks because it protects their loan investments. Usually, you purchase this policy as the homebuyer. If you only have a lender’s policy, where the outstanding loan is covered, your equity is not protected. Therefore, you could have your property rights taken away if someone else has claim to your home.

Owner’s title insurance is the policy that protects your property rights from legal and financial threats like those mentioned in the story you just read. That’s why millions of homebuyers each year make the smart decision to get owner’s title insurance. It’s a low, one-time fee that provides the peace of mind that every homebuyer deserves, for as long as you or your family* own your home. In many areas, the seller purchases the policy for you. Ask your title professional how it’s handled in your area.

 

Support and Free Information

To buy your home with confidence, you need to work with a trusted title professional. They’re the experts who will help you throughout the home closing process. They will also advise you on how to protect your property rights and avoid costly problems by getting owner’s title insurance.

For more information, ask an ALTA member or visit www.homeclosing101.org.

*This advertising offers a brief description of insurance coverages, products and services and is meant for informational purposes only. Actual coverages may vary by state, company or locality. You may not be eligible for all of the insurance products, coverages or services described in this advertising. For exact terms, conditions, exclusions, and limitations, please contact a title insurance company authorized to do business in your location.

CFPB Rule Broadens QM Coverage for Lenders in Rural, Underserved Areas

Original Article | March 22, 2016

The Consumer Financial Protection Bureau today issued an interim final rule broadening the availability of certain special provisions for small creditors operating in rural or underserved areas. The rule implements a regulatory relief measure, long advocated by ABA, that Congress passed in December.

Under the interim rule, small creditors — or banks that made no more than 2,000 first-lien covered transactions and have less than $2 billion in assets — will be eligible for special Qualified Mortgage provisions if they originate at least one covered mortgage loan on a property located in a rural or underserved area in the prior calendar year. Specifically, it allows small creditors to make certain balloon payments, which are otherwise not allowed under the QM rules.

Previously, small creditors were only eligible for these provisions if they operated predominantly in rural or underserved areas. This new rule significantly enlarges that rural and underserved carve-out.

“We commend the bureau for this rulemaking and for its quick actions to immediately implement these important provisions,” said ABA President and CEO Rob Nichols. The interim final rule is the second rule this year the CFPB has issued to address the rural and underserved measures included in the December legislation.

Earlier this month, the bureau issued an ABA-advocated rule establishing a process by which businesses and individuals could appeal the bureau’s designation of a rural area. The CFPB will accept comments on the interim rule for 30 days after its publication in the final register. For more information, contact ABA’s Rod Alba.

 

TRID’s First Five Months

How builders and bankers are handling the Consumer Financial Protection Bureau’s new loan regulations.

Original article | By Brian Croce | March 18, 2016

It’s been more than five months since the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure (TRID) went into effect with the main goal of simplifying the home closing process for consumers. The provisions, known as “Know Before You Owe,” stem from the Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law in 2010.

TRID consolidated four existing disclosures into two forms: “A Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation,” according to the CFPB.

Since there are a lot of moving parts when closing on a home and plenty of new information for industry professionals to learn, we spoke to Tawn Kelley, president of Taylor Morrison’s Home Funding and Mortgage Funding Direct Ventures, and Rod Alba, SVP and Sr. Counsel, Mortgage Markets Division, of the American Bankers Association, to hear their initial impressions on how the regulations are going thus far.

Kelley says she was prepared for a “ tremendous undertaking” when the regulations were first announced. So far, she adds, her team has adjusted well, although the first couple weeks it felt like “we were moving in slow motion” when getting a loan closed.

“It did slow initially just to make sure things were done correctly, but we’re not seeing a significant slowdown,” she says. “Even in that first month, Taylor Morrison sold homes in October” and closed on them in the same month.

“It hasn’t been as cataclysmic as many would have wanted you to believe it was going to be,” she adds.

Alba was in favor of simplifying the process since disclosures can be confusing and have massive liabilities for lenders, but after the first few months he’s not certain that’s happening. “We’re not sure that it has actually improved the process visa vie the consumer, it certainly hasn’t improved the process for purposes of clarity in compliance and efficiency,” he says. “In that sense the final regulations have been disappointing.”

The missed opportunities, he adds, originate from the planning process. “[The CFPB] took all of RESPA, then they took all of TILA, they put one pack on top of the other pack and then they slapped a cover sheet on it and they called that simplification,” Alba says. “They actually managed to add a page to the voluminous disclosures we had before.”

The ABA put out a survey earlier this month with 548 bankers participating. When asked if TRID has caused delays in loan closings, 77% of respondents said “yes.” “As we anticipated, our bankers are struggling to comply in part because the systems being provided by vendors are incomplete or inaccurate,” said Bob Davis, ABA executive vice president, mortgage markets, financial management and public policy, in a release. “The causes of many of these systems problems are ambiguities in the TRID rule that require resolution.”

The American Bankers Association surveyed 548 bankers about TRID. More than three-quarters said the new regulations delayed loan closings.

Two-third responded that they’ve increased their legal/regulatory costs, while 75% said they’ve eliminated products, including construction and home equity loans. “Construction lending has become extremely complex, so there are various products that don’t fit the mold,” Alba notes.

From a builder perspective, Kelley says, the biggest change is a heightened sense of processes and procedures. The new regulations can present a problem when unforeseen things occur, she adds, like bad weather, untimely inspections, or a buyer’s previous home not being able to close as scheduled.

But it’s not all bad, she says. “There are also opportunities that you can sell a home and be able to close on the transaction very quickly if the consumer, and the lender, and the builder are all able to coordinate…in a very short period of time,” she says.

On Wednesday, Ellie Mae, which provides loan software to the mortgage industry, released its latest Origination Insight Report. The highlight: Time to close all loans decreased to 46 days, the shortest time-to-close since May 2015 – five months before the new regulations went into effect.

“For the first time since October 2015, we’re seeing a substantial decrease in days to close from 50 days in January to 46 days in February,” said Jonathan Corr, president and CEO of Ellie Mae, in a release. “This could be due to lenders becoming more familiar with the new loan estimate and closing disclosure forms and business process around Know Before You Owe.”

Both Kelley and Alba say that as industry professionals become more accustomed to TRID, the process will get faster. “Once we get to know the regulations better, once the CFPB clarifies certain areas that are still extremely hazy, and once we can create new flows…I think we’ll be able to improve on the speed,” Alba says. “Whether it’s ever going to come back to where it used to be, I don’t know.”

 

U.S. Mortgage Bankers Brace For A Wave of Refinancings

Original Article | BLOOMBERG NEWS | 3/10/2016

With U.S. mortgage rates near their lowest level since April and showing signs of falling further, some lenders are preparing for another refinancing wave, an unexpected development after the Federal Reserve began hiking short-term interest rates in December.

Borrowing costs on home loans, which are closely linked to longer-term bond yields, could fall after U.S. Treasury prices jumped on Tuesday. Last week, a 30-year mortgage cost 3.68%, up a touch from the week before but are down slightly from a year ago, when it was 3.86%.

If rates edge a bit lower, about half of the more than $5 trillion of home loans that get bundled into government-backed securities could be eligible for refinancing, according to Sarah Hu, a senior mortgage strategist at BNP Paribas.

Few expected another refinancing boom after the Fed started lifting short-term borrowing costs in December. But longer-term yields in the bond market have been plunging this year as money managers seek shelter from sinking stock markets and from slowing growth in China, underscoring the limits of the central bank’s power as it tries to normalize lending costs.

“It’s incredible that mortgage rates are plummeting,” said Ted Tozer, president of Ginnie Mae, a government-backed housing company that guarantees $1.6 trillion of mortgage securities. He added that he wouldn’t be surprised if 2016 beat Ginnie Mae’s 2013 record volume of $464 billion for overall loans guaranteed.

More mortgage refinancings could be a boon to earnings at lenders including big banks but could hurt investors in securities backed by home loans.

On Tuesday, the 10-year Treasury yield fell 0.08 percentage point to 1.83%. If mortgage rates fall to around 3.5%, another 2.1 million borrowers would be able to refinance. That would bring the total number of loans eligible to around 8.8 million, or nearly 20% of loans, a report from data company Black Knight said on Tuesday. There haven’t been that many loans eligible for refinancing since 2012-13, when rates were at historic lows.

The Mortgage Bankers Association, a trade group, has increased its projections for refinancing. In the middle of December, it expected $415 billion of loans to be refinanced this year, but in mid-February, its forecast was 25% higher, at $520 billion.

Lenders Gear Up

Private lenders are also gearing up for more business.

“It’s clear, we’re seeing a high level of refinancings beyond what initial projections were,” said Sean Grzebin, head of retail mortgage banking for JPMorgan Chase (JPM).

“This could be a near-term boon,” said Chris Abate, chief financial offer of mortgage company Redwood Trust (RWT), which focuses on loans to homeowners with strong credit that are too big to be backed by government programs. “We’ll have to see how it impacts our volumes, but it’s a good sign.”

Refinancing activity tends to be the most sensitive to shifts in rates, but purchase volume may also increase as rates fall.

Forecasting rates is notoriously difficult, and mortgage costs may not fall much from here, or may drop below 3.5% only briefly. Many borrowers already refinanced when rates were low in prior years, including 2012 and 2013, which could damp the current wave.

While refinancings are a positive for borrowers, they threaten to wallop investors managing mortgage bonds, which suffer when rates lurch unexpectedly.

Few money managers have protected themselves for rates heading downward. “Low rates certainly puts us at risk” of faster prepayments, said David Finkelstein, chief investment officer for agency and residential mortgage bonds at Annaly Capital Management (NLY), which calls itself the world’s largest mortgage real estate investment trust with some $75 billion in assets under management.

As long as mortgage rates remain above 3.5%, refinancing activity will probably stay muted, said Scott Buchta, head of fixed-income strategy for brokerage Brean Capital.

Still there’s a good chance that average 30-year rates will fall below that threshold, he added. “We are so close to that level, you can taste it,” he said.

Related:

Mortgage Applications Show Home Buying Demand Pick Up

Refinancing’s Death Has Been Greatly Exaggerated

Tips for a Timely Closing – For the Buyer

Purchasing a home can be a very rewarding experience. Having an understanding of what may be required at closing will help you to plan accordingly. Download our flyer with specific tips to assist in guiding you through that process.

CFPB corrects error in TRID rule

Falls victim to the dreaded ‘typographical’ error

Original Article | Ben Lane | February 9, 2016

It’s been four months since the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule in October shook up the housing industry, and many in the industry are still getting used to the new normal.

But, starting Wednesday, there’s a small portion of the TRID rule that will be changing, thanks to a “typographical error” in the supplementary information provided by the CFPB.

The change was spotted via TheHill.com, which listed several changes to the Federal Register that will be published on Wednesday.

One of those changes is to the CFPB’s TRID rule.

According to the CFPB’s addendum, the supplementary information to the TILA-RESPA Final Rule, which was released in 2013, contained a typographical error.

The addendum to the Federal Register and the TRID supplementary information corrects the error, which deals with the application of tolerances to property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees.

According to the CFPB’s addendum, which can be read here, on page 79829 of Volume 78 of the Federal Register, the supplementary information states that “property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees” are “subject to tolerances,” when it should read that those fees are “not subject to tolerances.”

The CFPB’s addendum states that the error, listing the fees as “subject to tolerances,” is inconsistent with the sentence that precedes it, which reads: “Property insurance premiums are included in the category of settlement charges not subject to a tolerance, whether or not the insurance provider is a lender affiliate”

Additionally, the CFPB addendum states that on page 79829 of the Federal Register, several lines will be revised from “are subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account” to read “are not subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account”.

Click here to read the CFPB addendum in full.

The changes go into effect upon publication in the Federal Register, which is scheduled to take place on Wednesday.

CoreLogic: 5 predictions for housing in 2016

Origination volume likely to drop

Brena Swanson | December 7, 2015 | Original Article

It’s looking like next year will bring more of the same in housing. According to CoreLogic, the U.S. will enter an eighth consecutive year of expansion in the second half of next year. One noteworthy, negative point however is that dollar volume of single-family mortgage originations is estimated to drop.

It’s looking like next year will bring more of the same in housing, according to CoreLogic’s (CLGX) 2016 Outlook for Housing.

“As we approach the start of 2016, the consensus view among economists is that economic growth will continue, and the U.S. will enter an eighth consecutive year of expansion in the second half of next year. Most forecasts place growth at 2 and 3 percent during 2016, creating enough jobs to exert downward pressure on the national unemployment rate,” said Frank Nothaft, senior vice president and chief economist at CoreLogic.

Nothaft predicts that housing can expect to see these five features next year:

1. Interest rates will increase

Homeowners who have adjustable-rate mortgages or home-equity loans will most likely see a rise in their interest rate because the Federal Reserve is expected to raise short-term interest rates approximately one percentage point between now and the end of 2016.

Fixed-rate mortgages will also rise, perhaps up one-half of a percentage point between now and the end of 2016, reaching 4.5% for 30-year loans. Despite this increase in interest rates, mortgage rates will remain historically low.

2. Household formations will significantly add to housing demand

More than 1.25 million new households will be formed in 2016 due to improvements in the labor market and lower unemployment rates. These new household formations will increase housing demand, specifically in the rental market.

3. Rental homes will continue to be in high demand

Rental vacancy rates are at or near their lowest levels in 20 years, and rents are rising faster than inflation. High demand for rental homes—both apartments and houses—will likely continue in 2016, especially from new, young households.

4. Home sales and home prices will likely increase

Not only is the rental market hot, but overall purchase demand may lift 2016 home sales to the best year since 2007. Nationally, home prices will likely rise at a quicker rate than inflation, but not at the same rate as last year. The CoreLogic Home Price Index showed a year-over-year increase of 6% in the last 12 months; however, 2016 is only expected to see increases of 4%-5%. This increase in home sales and home prices can be attributed to the improved economy, which has enhanced homeowners’ feelings of financial security.

5. The dollar volume of single-family mortgage originations will fall around 10%

The single-family mortgage origination decline will occur even though home equity lending is expected to rise and originations of home purchase loans will likely rise about 10% in volume next year. The growth in those two areas will be offset by a 34% drop in refinance, reflecting the higher mortgage rates and dwindling pool of borrowers with a strong financial incentive to refinance. While single-family mortgage originations are expected to fall, multifamily originations will likely rise. This gain reflects the higher property values and new construction that adds to permanent mortgage usage.

House members try end run for TRID grace period bill

Tying it to appropriations bill to avoid veto

Brena Swanson | December 4, 2015 | Original Article

The Homebuyers Assistance Act, H.R. 3192, which passed the House in October by a vote of 303-121, has yet to make its way to the Senate and the president has threatened to veto it if it gets to his desk.

The bill provides a four-month grace period for businesses that are working in good faith to comply with the TILA-RESPA Integrated Disclosure rule from the Consumer Financial Protection Bureau that went into effect Oct. 3.

Rep. French Hill, R-Ark., sponsored the bill, which passed the Financial Services Committee on July 29 on a bipartisan vote of 45-13, with several prominent Democrats also championing it.

The industry, including the National Association of Realtors, the Mortgage Bankers Association, and more than a score of other trade associations, have been pushing the government to pass the Homebuyers Assistance Act.

In order to move the bill along, Hill and 21 other members of Congress sent a letter to Speaker of the House Paul Ryan, Majority Leader Kevin McCarthy and House Appropriations Committee Chairman Hal Rogers urging them to add the provisions of H.R. 3192, the Homebuyers Assistance Act, to any year-end spending legislation.

Here’s a brief clip from the letter:

The provisions in H.R. 3192 no way delay the implementation of TRID or shield any wrongdoers from legal recourse or penalties—it simply provides a temporary safe harbor for those making a good-faith effort to comply with a very complex rule.

We respectfully request that the financial regulatory relief language, such as that included in the FY 2016 Senate Financial Services and General Government Appropriations Act, be modified to reflect the provisions of H.R. 3192 and included in any year-end legislation to provide certainty to the real estate industry and help prevent further costly market disruptions and delays for American homebuyers.”

Check here for the full letter.

By adding it to any year-end spending legislation, it gives the bill a greater chance of passing since the White House already said that it would veto the Homebuyers Assistance Act.

“The CFPB has already clearly stated that initial examinations will evaluate good faith efforts by lenders. The Administration strongly opposes [the bill], as it would unnecessarily delay implementation of important consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages, hurt homeowners by removing the private right of action for violations, and undercut the nation’s financial stability,” the White House said in its release.

“If the President were presented with H.R. 3192, his senior advisors would recommend that he veto the bill,” the statement says.