The Consumer Financial Protection Bureau has Expanded Coverage for Rural Lending

The Consumer Financial Protection Bureau (CFPB) recently began implementation of the Helping Expand Lending Practices in Rural Communities (HELP Act). This act helps small creditors that operate in rural locations and areas with few lenders to provide home loans. It expands the definition of "small creditors" and enables more lending institutions to take full advantage of the special lending provisions of home loan rules that took effect in January of 2014.

HELP Act

Known as H.R. 1259, the Helping Expand Lending Practices in Rural Communities Act provides guidelines for the Consumer Financial Protection Bureau to designate some counties as rural areas. This allows the Bureau to enact regulations under its authority. As such, the Bureau has authority to spend money from the Federal Reserve without appropriation. It is estimated that the HELP Act will increase CFPB direct spending by about $3 million over the ten year period from 2014 to 2024. Under this circumstance, pay-as-you-go procedures are applicable.

The term "rural" is based on Urban Influence Codes (UIC). These codes, set by the Department of Agriculture, make a distinction between what is a metropolitan location and what qualifies for rural development home loans from the USDA. Under the HELP Act, the CFPB is directed to develop a process by which areas that do not currently meet the UIC standards for rural areas be given an opportunity to receive rural designation. The HELP Act lists the criteria the Bureau should use when evaluating an application for a county to be designated as rural. All applications must also be made publicly available for comments. The Bureau must then make a decision as to whether or not the application is approved within 90 days of the end of the public comment period.

New rule takes effect March 31, 2016

The rule begins March 31 and the period for public comments is 30 days. It will allow more lenders to qualify for the small and rural credit provisions. The CFPB established special lending provisions for small lending institutions in January of 2014. The Bureau has taken several steps since that time to expand the definitions of both "small creditors" and what fits the definition of "rural area". Previously, these small lending institutions qualified for special provisions only if over half of its loans were for rural areas or areas classified as under-served. Beginning March 31, creditors can qualify for special provisions when they originate one home loan for a property located in a rural or under-served area during the previous calendar year. The Bureau plans to monitor how these changes effect lending and make any necessary adjustments as it sees fit.

Balloon payments

A controversial aspect of the HELP Act is that it allows these newly designated rural lenders to make Qualified Mortgages that have balloon payments. This runs contrary to the current Ability-to-Repay rule established by the CFPB. The rule does not allow balloon payments or other features that are considered risky on Qualified Loans. Additionally, lending institutions that meet the new standard for small lenders may originate loans of high value that have a balloon payment. These high value loans do not have to have an escrow account.

CFPB partners with Zillow

The CFPB also announced recently that it will partner with Zillow to collect information about home buyers. The CFPB will pay individuals to participate in surveys about their experience of searching for homes, obtaining a home loan, and the buying process of their primary residence. The Bureau says it will use information gathered to create more resources for educating future home purchasers and provide them with knowledge necessary to make more informed decisions about their personal finances.

Technology, Walkability, and Resilience are the Key Housing Words for 2016

As building companies get back to the business of constructing houses, they find the housing landscape has changed significantly. While the economy and housing market has been sluggish, technology has surged right along. Young people embrace technology and are less inclined to seek employment working with their hands. To remain competitive, builders must not only attract young buyers, but also find ways to attract them as workers to help build homes. To do both, construction companies and builders must learn to utilize technology to their advantage. A top feature young buyers want is walkability. Another issue that is always a major concern for every home owner is how well their house can withstand inclement weather. Builders and REALTORS  must understand the issues currently relevant to home buyers and those issues that will continue being important in future years.

Technology

According to the National Association of REALTORS report "Real Estate in a Digital Age," 68 percent of first-time home buyers are Millennials. Thirty-two percent of all home buyers are between the ages of 25 and 34. These buyers begin their search online and are connected to the internet 24/7. Many older generations also rely on technology to find homes and research things like title insurance and mortgages. Even old marketing techniques like open houses that were near extinction a few years ago are finding new life thanks to technology. Savvy builders and REALTORS use Twitter and Facebook to post live updates and promotions that will entice all potential buyers in the nearby area to stop by. The QR code has little worthwhile use in many industries, but it provides a wealth of information about a home for sale to interested buyers. Every real estate agent and builder who has filled one of those little plastic information boxes with flyers, only to get an angry caller the following day complaining it is again empty, understands the value of providing pertinent information on-site at all hours of the day. Technology can do that in a variety of ways. Increasingly, buyers are expecting builders to use technology for communication and showing things like elevations, floor plans, and site maps.

Walkability

The American Institute of Architects (AIA) conducted a Home Design Trends Survey in the third quarter of 2015. Their survey found more buyers seeking a sense of community and opting to located in or near one of the many expanding metro areas across the United States. Some of the community design trends that are currently gaining strength and expected to remain popular for the foreseeable future include walkable neighborhoods, access to public transportation, multi-generational housing,  and mixed-use buildings. AIA Chief Economist Kermit Baker said there has been a significant change in driving habits of the population in recent years. More people use public transportation and want to be near their employment and other commercial activities. For single family homes, these buyers look for contemporary-style with low-maintenance features. Some traditional wants like single-story layouts and front porches remain popular. Regardless, owners still need quality title insurance to protect their investment. A growing number of households are single adults with or without children. They like smaller, simple spaces with an emphasis on aesthetics.


Resilience

Presenters at the recent BUILDER Sustainability Summit emphasized the need for community leaders to think about resiliency before disasters occur. Threats like hurricanes, tornadoes, flooding, and heavy snow can affect people in all parts of the United States. Regardless of where a home is located, it needs title insurance and must be able to withstand one or more of these natural disasters. Alex Wilson is an architect who believes resilient design doesn't have to be expensive. Wilson listed ways builders can construct houses that are better able to withstand disasters:

• Include timber framing and hurricane straps on houses in storm-prone areas.
• Improve living conditions of homes that lose power with better insulation and passive solar features.
• Limit the need for mechanical cooling by orienting homes on an east/west axis, install better windows with some shading, attach awnings, use larger overhangs, reflective roofs, and natural ventilation.
• Have flood barriers along driveways in low-lying areas.

Walkable communities are more resilient. When disaster strikes, it is much easier to provide needed services in areas that are pedestrian friendly. Just as home owners must protect their investment with title insurance, community leaders must protect their local area through resiliency planning before the natural disaster occurs.

How a Land Survey Protects Home Buyers

Purchasing a home involves a lot of different processes all taking place during the same time frame. Once a contract is executed, it puts in motion several actions that must be completed prior to the closing. All of these things take time and require professionals who are knowledgeable and experienced in their particular field. The typical home buyer is a novice to all of this. That is why they need expert counsel by a caring REALTOR who will guide them through the process and explain the importance of things like title insurance and land surveys. Without understanding the purpose of having these things, many home buyers will feel overwhelmed and opt to skip some items to save a little money upfront. Here are a few basics about land surveys and how having one done will help prevent future costs and headaches for home buyers.

What is a survey?

A survey is the official and documented opinion of a certified surveyor on the location of a property's boundaries, buildings, structures, easements, right of way and encroachments. It records projections, variations, easements, boundary lines and is a legal representation of what the home buyer is actually purchasing. A survey is crucial when purchasing title insurance to protect the home buyer.

Why do home buyers need a survey?

The housing market collapse resulted in banks, lending companies, and property management companies receiving a huge volume of properties that they never intended to own and were not prepared to handle. Attorneys and courts were overwhelmed by the number of foreclosures they had to process. For paralegals and and other people in the process, it created mountains of paperwork and massive tangles of red tape (both digital and hard copy) that they had to work through quickly and under ongoing stress. To reduce costs, many essential aspects of proper land transfer were eliminated. These led to many properties being put back on the market with encroachments and other discrepancies in the legal description. Some properties that fell into foreclosure were situated on parcels that were part of large family-owned properties. Banks that made loans to construct homes on these parcels did not always make sure there was proper legal access in place. As a result, the people who purchased the homes from the bank had a costly and tiresome legal process to set things right and have legal access.
Differences between tax maps and survey lines is also a possibility. The property taxes a home owner pays are based on the the size of the property and what is included within the property boundaries. Too often, home buyers pull up tax maps or, even worse, some other online aerial view of property to determine property lines based on fences, trees, the amount of lawn mowed, or driveway locations. This method and taking the word of home sellers, agents, or neighbors is unreliable and will almost certainly lead to confusion and disputes at some time in the future. The only way for a home buyer to know what they are really buying and to protect their purchase is to have a survey done by a certified surveyor and have their own title insurance policy that is in addition to the policy required by lenders.

The cost of a survey

Surveyors typically charge based on how much time it takes to do the survey. Factors like terrain of the property, access to records and size of the parcel all influence the cost. Some surveys do not need a printed map of the property. It reduces costs if all the buyer needs is flags and corner markers. If the buyer uses the same surveyor who did the previous survey, it is typically less costly than hiring someone unfamiliar with the property. Buyers can also reduce the amount of time a surveyor will spend doing their field work by making sure property lines are clear. Much like title insurance, the initial cost is minimal compared to the value of the protection and peace of mind a survey provides.