The New HMDA Rule from the CFPB

In an effort to improve the information reported by lending institutions on residential mortgages, the Consumer Financial Protection Bureau (CFPB) finalized a new rule for the Home Mortgage Disclosure Act (HMDA) in October of 2015. The Bureau hopes this will simplify the process of reporting this vital information for banks and other lenders. In addition to working with other federal agencies to better assemble and organize information from financial institutions, the Bureau has requested public feedback on the submission process, error thresholds, consequences for exceeding these thresholds, and how the process may be improved with technology.

Changes to HMDA data reporting

Improved monitoring of fair lending: Banks and other lenders are now required to further detail the underwriting practices and how these practices affect a borrower's interest rate and other fees. The rule requires more information on how lenders analyze an applicant's deb-to-income ratio. Ensuring fair lending practices to all people in every community is one of the primary reasons the CFPB was formed after the collapse of the housing market. The new rule stipulates that lenders must report, with a few exceptions, applicant information on any loan that uses the applicant's dwelling as collateral. That includes home purchase loans, reverse mortgages, and open lines of credit.

Data lenders are required to report is updated: The new information that now must be reported includes loan duration, the duration of any incentive teasers or introductory interest rates, the details of any prepayment penalty and the property value. The additional data will improve the analysis of area market conditions and help regulatory agencies and the public identify any possible discriminatory lending.

Streamlining the reporting process

Aligning data requirements with industry standards: Banks and other financial institutions were previously collecting the same data required for HMDA compliance for their own internal processing and to prepare the loans for sale on the secondary market. The new rule updates data requirements to align with recognized and common industry standards. The CFPB hopes this will make data reporting easier for lenders by using definitions recognized by practically all financial institutions and people in the mortgage sector.

Lighten reporting burden on small banks: The new rule also eases the reporting burden for credit unions and small banks that operate outside the market of a large metropolitan area. Additionally, small depository corporations with a low volume are no longer required to report HMDA data. It is estimated that this one change alone reduces the total number of financial institutions required to report HMDA data by 22 percent. It also helps lower compliance costs for these small organizations that have few people on staff.

The CFPB is primarily focused on protecting consumers and making sure they have all the information needed to make informed financial decisions in all areas of their life. The CFPB provides consumers with resources free of charge at the CFPB site. Financial institutions will be required to collect data according to the new rule on January 1, 2018. After necessary modifications are made to protect borrower privacy, the data will be made available to the public in 2019.

Public participation is a part of how the HMDA protects all consumers. The information collected under the HMDA is analyzed by consumer groups, regulators, research organizations, educational institutions, and more. For the HMDA to remain effective, it requires quality data on home loans and the individuals who are applying for credit. In an ongoing effort to improve the function of the CFPB, the Bureau recently announced that it is accepting applications for 23 seats on the Advisory Board and Councils that will become available later in 2016.

Older Homes Have Hidden Value Along With Hidden Costs

 When the housing market is discussed in the news, the new home start numbers and building permit numbers are used to indicate the strength or weakness of the market. Fannie Mae predicts a strong housing market for 2016 and the increase in housing starts that many Realtors have been hoping for since the United States began pulling out of the Great Recession.

Title insurance for old and new homes

Many buyers don't understand the need for Title Insurance on new constructions. Even though they are the original owner of the home, they still need Title Insurance to protect against possible hidden problems with the land or existing liens. With older homes, the need for title insurance is more clear. These homes have had many owners and possibly fell into foreclosure at some time. But these older homes can be hidden gems that still have many benefits for buyers of every age group.

Quality construction of older homes

Someone is going to say it anytime a Realtor is showing an older home to potential buyers: "They don't build them like this anymore." It is true. Homes constructed 50 or more years ago were built with old growth trees. That wood is not in ample supply these days, and the vast majority of new homes have wood from hemlock fir hybrid trees. These trees are scientifically engineered to grow quickly. However, the wood lacks the character of the wood used in older homes and does not have the same durability. A lot of wood used in new homes is what's called "construction grade." It is designed to be covered by paint.
Construction has improved in many areas over the years. Builders began incorporating features like energy-efficient windows during the energy crisis of the 1970s. Modern windows save homeowners thousands of dollars each year in energy costs and are virtually maintenance free. These multi-pane windows are metal or vinyl clad, easy to keep clean, and easy to repair if broken.
It is possible to get the best of both worlds in an older home that has been upgraded. But, potential buyers should know that most tax credits that were available for making energy-efficient improvements to existing homes have expired.

Other difficulties with existing homes

Older homes have those tiny bathrooms and small kitchens. People like being comfortable in every room of their home these days. Even mobile homes and homes in the lower prices ranges have luxurious bathrooms and kitchens with islands, plenty of counter space and outlets for small appliances. Buyers need to consider possible structural limitations to remodeling older homes. And a complete upgrade of the electrical system is often necessary.

Some things that can't be changed

Many millennials prefer being located near the city and are willing to trade having a spacious yard for having the convenient location. The municipal parks are enough recreational space for them. For home buyers who have a large lot with existing shade trees as a top priority, older homes are probably their only option. Homes that are more than 40 years old have trees in the yard that are over 40 years old. These stately trees are a mixed blessing. They do provide a canopy of shade to keep the house cool and enhance the enjoyment of outdoor activities, but they produce a large quantity of gutter-clogging leaves and the large limbs can be a liability. Each year these old trees damage homes (and neighbor's homes) when they succumb to high winds or loose limbs due to disease. Like people, trees are more prone to disease as they get older.

Upfront savings can cost a lot over time

Many first-time buyers are anxious to get as much house as they can possibly afford. A new construction will cost about 15 percent to 30 percent more than an older home with comparable square footage. But, the new home comes with adequate insulation and a new, highly efficient HVAC system to save on monthly bills. It will have vinyl exterior that does not require painting and new appliances.
Novice buyers often take on more than they can handle when they buy an older home with the intention of doing much of the needed work themselves. According to the NAR report Real Estate in a Digital Age, 68 percent of first-time buyers are millennials and 32 percent of all home buyers are between the ages of 25 and 34. With the vast majority of first-time home buyers being young professionals with busy lives, older homes are typically the right choice for just a small percentage of buyers who understand the costs and responsibilities that come with them.

What Is Title Insurance And Why Do I Need It Anyway?

Most home buyers are focused on whether or not they will be able to meet their financial obligations of home-ownership. They take for granted that the property title is in good order and suitable for legal transfer of ownership. But title issues and unknown liens on your home can be more stressful and problematic than the potential stress associated with paying your household bills. What you do know, you can deal with. But what is title insurance for? The things you don't know about.


Potential title problems

The housing market collapse resulted in a lot of titles being sold in bulk, transferred to companies that went under, and being part of some hurried legal processing. The opportunity for clerical mistakes, unknown liens, mistakes in record examination, or home titles being used in some fraud is rampant.  There is also the possibility of undisclosed heirs and other omissions in the deed. By some accounts of real estate law firms, one out of every three title searches finds some defect in the record that must be corrected prior to closing. Title insurance protects you in the event some problem occurs that was not found in the public record or was overlooked in the process of searching the title.


Your title insurance policy

The Owner's Policy is typically in the amount of the purchase price of your home. You get it by paying a one-time fee on the day of closing. This policy insures you for as long as you own the home and it passes to any heirs who may inherit the property from you. It protects you financially and will sometimes provide legal defense in the event of forgery, undisclosed heirs, mistakes made during the title examination process, errors or omissions on the deed, and other covered problems that may occur. The Owner's Policy is not automatically provided and you need to make sure that you request the policy and know who will be responsible for paying. It is always a one-time fee that will protect you and your heirs who hold some interest in the subject property.


The loan company's policy

Practically all lenders will require a Lender's Title Policy when making a home loan. This policy does not protect the home buyer in any way. Many buyers wonder, "What is title insurance for the lender when I already have a policy?" It is for the dollar amount of the loan and decreases in coverage as the loan is paid down. It protects the lender financially in the event some unforeseen problem with the title arises and you are no longer making loan payments to them or, due to some title issue, they are unable to sell the property after foreclosure to recoup the loan amount. The Lender's Title Policy goes away when the loan is paid in full.


Title insurance when refinancing

Even if you refinance with the same bank that originally made the home loan, they will most likely require another title search and Lender's Title Policy. You will still be protected by the original Owner's Policy that was purchased when you closed on your sales transaction. You may ask, "What is title insurance covering when I refinance?" It is possible that you had some work done on the house and incurred a mechanic's lien or had a judgement placed against you for child support or unpaid taxes after your home purchase. In case any of those things occurred, the lender will need a new policy when you refinance.


Additional things to remember

Who pays for the policy may vary by state. Regardless, you have the right to choose the title company when you are paying for the policy. You can research title companies online to see what previous customers have to say about them. To know what is title insurance protected and what is not covered, contact the underwriter for a copy of your policy. Standard Owner's Policies will protect you from the most common and frequent title issues. For an additional fee, expanded coverage is available to protect you in such situations as your home construction not complying with home owner's association restrictions.

What is Title Insurance? Fundamental Facts Every Home Buyer Must Know

Have you ever thought you lost something important?

Maybe it was your car keys, a precious photo or an important document.
Remember the sick feeling in the pit of your stomach when you realized it wasn't where it was supposed to be and you couldn't immediately find it.

Remember the sweaty hands and racing pulse as you tore the house apart, searching anxiously for the missing item?

What if the object you lost was your house?

Consider the following scenario:  You found your dream home in the neighborhood you have been wanting to move into.  The home is being sold For Sale by Owner and the owner is willing to give you a great deal for a speedy closing.  Hurriedly you put together a closing and forgo getting title insurance and other documents.  Shortly after you move in, the real owners of the home (who had been traveling through Europe for the past month) show up and demand you move out of their house.
If this scenario were real, all of the money that you had spent on the transaction would be lost unless you were able to catch the crooks who impersonated the real homeowners.  The thing that could have prevented this terrible crime would have been title insurance.
What is title insurance? Simply put, Title Insurance is insurance put on a piece of property during the sale of the property to protect the buyer of the property in the event there is a defect in the title.  Defects include fraud, erroneous boundaries and possibly forgotten easements that suddenly come into play. It is estimated by the American Land Title Association that one out of every three titles has some type of defect.

Types of Title Insurance
There are three main types of title insurance, Lender’s policy, Owners Policy and Enhanced Policies.
Lenders Policies are typically required by lenders when there is a mortgage on the property.  These policies typically only cover the lender and their investment should any type of claim be issued against the property.
Owners Policies cover the new owner of the property and their heirs for as long as they own the property.  While the lenders policy only covers the lender for the amount of the loan on the property, the owners policy covers the purchaser for purchase price of the property.  The owners policy covers title defects that occurred and are in place pre-closing.
Enhanced Policies protect the new owner of the property against all of the things that the basic owners policy does, but it often adds post closing elements to the coverage.  Post closing elements may include: building permit violations, restrictive covenant violations, mineral extraction coverage and easements.  For a complete list of possible coverages, make sure to check with the title company in the area you are purchasing the property.

Basic Facts about Title Insurance
While each state may require different types or coverages based on their needs, there are basic elements that are consistent in every state.
The first consideration is that paying for title insurance is a one time event. Rates for title insurance may vary from state to state, but it only needs to be purchased once and the policy will last as long as the owned by the policy holder.  The cost for the policy can be paid for by the buyer or seller of a property and is often a negotiation item during the transaction.
The second item that is consistent in all transactions is that the buyer has the right to select the company to purchase the title insurance from.  The Real Estate Settlement Procedures Act gives home buyer the right to choose whom they want to provide their settlement services. This can be a negotiation item during the transaction as well.

Protecting Your Investment
For many people their home is their biggest investment and it makes sense to do everything they can to protect it.  Title insurance of one of the best low cost purchases that can be made that provides years of protection.
Choosing the right policy is as simple as speaking with your local title company representative about what is common in your area and getting either their basic or enhanced policy.  Often the difference between the two policies is minimal and worth considering the additional expense.
Like other types of insurance, Title Insurance gives you the piece of mind to keep that sick feeling out of the pit of your stomach should something turn up and challenge your ownership.