The CFPB Continues Striving For Transparency in Mortgage Market Practices

The Consumer Financial Protection Bureau (CFPB) strives to empower consumers by providing them with the information they need to make prudent decisions about their finances. Part of that mission involves simplifying the industry jargon and legalese associated with contracts and most financial documents. Their primary purpose is to educate consumers about abusive practices. They also

actively supervise the conduct of lending institutions and other financial service companies. The CFPB analyzes market information and consumer data to determine the best policies for protecting consumers. The CFPB has just updated rules for loan disclosure and mortgage market practices.

The Integrated Disclosure Rule Rollout

There were vocal critics of the Integrated Disclosure Rule when details were first released in 2013. Combining the Truth in Lending Act (TILA) with the Real Estate Settlement Practices Act (RESPA), it became known as Integrated Disclosure, or TRID. Despite approximately two years to prepare for the implementation, the rollout was not as smooth as the CFPB had hoped. The rule was delayed by two months because the CFPB felt the lending industry needed more time to prepare. There remains some uncertainty of how to best lock interest rates for borrowers on closings that may be delayed to comply with the integrated disclosure rule. Historically, most rate locks were for 30 days and at not cost to the borrower. To meet with the "Know Before You Owe" requirements, some closings are delayed and require rate locks of 45 and 60 days. For a borrower to lock an interest rate for that term, they may incur hundreds or thousands of dollars in additional fees.

Prior to the integrated disclosures rule, many lenders were accused of bumping up interest rates on home loans just prior to closing and tacking on additional fees like prepayment penalties. TRID prevents any last-minute changes by giving borrowers three days to review all loan documents prior to signing. Consumers can also walk away from transactions without penalty, under some circumstances.

The CFPB has just updated rules about lending practices and understands that TRID is the biggest change the mortgage industry has had in the past 40 years. Full implementation requires updates to existing software and changes in how vendors supply market data interest rate information to banks and other lending institutions. The CFPB is expected to re-evaluate implementation and report on progress of adapting the TRID rule later in 2016.

Updates to the Home Mortgage Disclosure Act

The CFPB has just updated rules regarding the Home Mortgage Disclosure Act (HMDA). The rule was enacted over 40 years ago by Congress in response to the allegation that banks were not properly servicing some communities. The HMDA addresses this concern in three ways:

It shows whether or not lenders are properly serving the housing needs of their community.

Provides information to public officials so they can make informed decisions on policies for the local area.

Reveals any lending patterns that may be considered discriminatory.
The CFPB has just updated rules to the HMDA that should improve lending data for local, regional and national housing markets. Lenders will be required to report property value, loan terms, an prepayment penalties, and the specifics of any introductory interest rates or teasers. Additionally, lenders mus provide more information than they did previously on underwriting policies. The new data requirements will be effective on January 1, 2018. The compiled data, edited to maintain privacy of applicants and borrowers, will be available to the public in 2019.

When individuals apply for a loan, they will be asked to provide their race, ethnicity, sex, and income. This information is used by consumer groups, researchers, and regulators to ensure all people are receiving fair treatment and an equal opportunity to realize the American dream of home ownership.

Recent Report Provides Some Insights on Smart Home Technology

Despite technical glitches and privacy concerns, more Americans are embracing smart home technology. The likelihood of installing such products increase by about 93 percent when people see what the advanced electronics and automation can do for them first-had, according to the Icontrol Networks State of the Smart Home Report for 2015. The report also finds that protection of personal property and security for family are the main reasons 90 percent of North Americans said they purchase any connected products for their home.

Not surprising, millennials are the largest group of smart home device purchasers, with their parents coming in second. Icontrol Networks reports that about half of the general population is excited about emerging technologies for the home. Most want simple devices that make their day-to-day lives easier.
Bob Hagerty is CEO of Icontrol Networks. His company has been in the smart home sector for over ten years. He says interest in smart home technology and devices has increased dramatically over the past two years. Most interest is in security features and devices that allow home owners to monitor their property while away. Consumers are also looking for products that help them save energy like connected thermostats and programmable lights. When asked about which devices excited them the most, 72 percent of home owners checked self-adjusting thermostats on their questionnaire. Seventy-one percent selected doors capable of being locked remotely. Indoor lights that can be programmed to adjust themselves were of interest to 69 percent of respondents. Sixty-five percent said they are excited about self-adjusting outdoor lights. Sixty-five percent of home owners responded they were very excited about cameras for monitoring their house.

Who is buying smart home products?

The report finds that the vast majority of home owners want some help with the installation and programming of their smart home equipment (74 percent). A little over half of respondents (52 percent) said they wanted a professional to handle all of the installation and programming for them. Half of the people responding to the Icontrol Networks' survey felt smart home products in their elderly parent's home would provide them peace of mind. Over 70 percent of the respondents between the ages of 25 and 34, who also identified themselves as parents, felt this way about having smart home technology in their parent's home.

Perhaps surprisingly, only about 25 percent said they would be most likely to install smart home equipment when purchasing a new home or moving, compared with 42 percent of people saying they would be more inclined to purchase such technology when renovating their current home or updating rooms.

Interest by region

Home owners in the Northeast are the most excited about capabilities of smart home equipment. This same area of the country also has the highest number of respondents who know someone with a connected home. This confirms the primary finding of the 2015 State of the Smart Home Report that seeing smart home products in person increases the probability of that individual installing smart devices in their own home. It was Southerners who said they were most interested in having a connected thermostat for their home (77 percent). Half of all respondents from the Midwest said they were most excited about the possibility of having smart devices in their kitchen. Home owners in western states like California were 100 percent more likely than people from other areas of the U.S. to name sprinklers as the device they would most want to be capable of reading the home owner's mind and operating autonomously.

As Realtors know from working with home buyers, the comfort and security of family members and care for aging parents remain the top priorities for all home buyers and home owners. If smart home devices are going to help them with these things, home owners are more likely to incorporate them into their daily lives, regardless of any concerns they may have about new technology in general.