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Homeownership

CFPB responds to TRID implementation, clears up some major confusion

The CFPB recently addressed the issue of TRID implementation in a letter that clears up some confusion. Know before you owe!

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The Consumer Financial Protection Bureau (CFPB) has addressed the issue of TILA/RESPA Integrated Disclosure Rule, or TRID, implementation. The CFPB issued a response to the Mortgage Bankers Association in an effort to clarify the current industry expectations concerning the new TRID (also known as Know Before You Owe) rule.

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Know before you owe

Since the rule’s integration on October 3, 2015, many industry professionals have struggled with the changes. The response from the CFPB to the Mortgage Bankers Association came in the form of a letter from the CFPB’s Director, Richard Corday, to the President and CEO of the Mortgage Bankers Association, David Stevens. In essence, this letter aimed to clarify that loans with minor technical errors should not hold up the mortgage process.

Minor errors to be expected

In an effort to sooth the minds of those fearing repercussions for violating TRID rules, the CFPB stated in their letter, “while complete and accurate use of the Regulation Z forms is the ultimate compliance goal, they recognize that a certain level of minor errors in the early days of implementation are to be expected.”

That is why the bureau and other regulators have made clear that our initial examinations will be squarely focused on whether companies have made good-faith efforts to comply with the rule.” This means loans with minor technical errors should not hold up the mortgage process. They also state the existing law allows lenders the right to cure mistakes after settlement.

Fixing mistakes after settlement

Also, the CFPB reiterates that the TILA itself contains provisions for the corrections of these errors, including the right to allow lenders to cure mistakes after settlement.

TILA has permitted creditors to cure violations, provided the creditor notifies the borrower of the error and makes appropriate adjustments to the account before the creditor receives notice of the violation from the borrower (15 U.S.C 16409b).

Another important thing to note: while the Know Before You Owe mortgage disclosure rule does integrate TILA disclosures with those disclosures required under the RESPA, it do not change the prior, fundamental principles of liability under either TILA or RESPA.

4 things to quell confusion

The letter from the CFPB points to four items directly aimed at clarifying non-high-cost mortgage confusion:

  • There is no general TILA assignee liability unless the violation is apparent on the face of the disclosure documents and the assignment is voluntary.
  • By statute, TILA limits statutory damages for mortgage disclosures.
  • Formatting errors and the like are unlikely to give rise to private liability unless the formatting interferes with the clear and conspicuous disclosure of one of the TILA disclosures listed as doing such.
  • The listed disclosures that give rise to statutory and class action damages do not include either the RESPA, or the new Dodd-Frank Act.

No additional liability

Finally, the CFPB also states that secondary market participants that buy loans from originating lenders wouldn’t take on additional liability. Fannie Mae, Freddie Mac, and FHA, which make up a large percentage of the market, have all acknowledged that they will not hold originators responsible for minor errors under TRID for the time being in order to ensure a smooth implementation.

Whether or not the new clarification will halt the call for Congress to pass TRID moratorium legislation has yet to be seen, but the clarification is certainly a very positive step in the right direction.

#KnowBeforeYouOweClarification

Jennifer Walpole is a Senior Staff Writer at The American Genius and holds a Master's degree in English from the University of Oklahoma. She is a science fiction fanatic and enjoys writing way more than she should. She dreams of being a screenwriter and seeing her work on the big screen in Hollywood one day.

Homeownership

Remodeling projects like these increase a home’s value the most

(HOMEOWNERSHIP) Knowing which remodeling projects to tackle when a home is being put on the market can save a lot of wasted effort and money.

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If you’re looking to help your clients to identify which projects to tackle before putting their home on the market, look no further: the National Association of Realtors surveyed thousands of real estate agents, industry professionals, and consumers on interior and exterior house remodeling projects, and these are the best projects for upping a home’s value before listing it on the market, ranked on the most value and cost recovery a homeowner can get.

  • Refinishing hardwood floors. Start from the bottom to earn top dollar. Refinishing floors transform a home from worn-out and aging to vibrant and inviting, and only costs about $2500 according to the National Association of the Remodeling Industry (NARI). The project also increases a home’s value by that same amount, meaning a homeowner can recover 100 percent of the costs. Pretty sweet deal.
  • Upgrading insulation. Because it’s what’s inside that counts. This project costs about $2100 based on NARI Remodeler’s estimate and increases a home’s value by $2000 according to Realtors surveyed. That’s a 95% cost recovery.
  • Adding new wood floors. If you don’t have wood floors to refinish, add them in! This costs about $5,500 according to NARI Remodelers, and the increased sales value is $5000. A homeowner can recover 91% of costs from a new wood floor addition.
  • Replacing HVAC system. A new HVAC system adds energy efficiency and refreshes the entire home, and NARI Remodelers estimate doing so costs $7000. The increased value for sellers is $5000 according to NAR REALTORS, meaning an easy breezy 71% cost recovery for homeowners.
  • Converting a basement into a living area. Not only is this cost and space-efficient, it’s also undeniably trendy. A basement makeover costs about $36,000 according to NARI Remodelers estimate and increases value for sellers by $25,000 according to Realtors surveyed. That comes out to a cost recovery of 69%.

Which projects are the most costly?

In case you’re curious, these are some of the most expensive remodeling projects:

  • New master suite. More like master $uite – this costs about $112,500 with a cost recovery of 53%. 
  • Converting an attic into a living area. Cute idea, but also a $65,000 one with a 61% cost recovery. One might say the price is through the roof.
  • Complete kitchen renovation. This project costs an estimated $60,000 with a 67% cost recovery. Even more if you want to throw in a brick oven, and you probably do.
  • New bathroom. With an estimated cost of $50,000 and a 52% cost recovery, make sure you aren’t flushing money down the drain with your bathroom addition!

These trends change over the years, so make sure your knowledge is up to date locally since we all know local trends trump national. Hopefully today you’ve garnered some ammo to help clients better understand how to improve their home’s value!

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Homeownership

Marriage is happening later in the US and the reason is not what you think

(HOMEOWNERSHIP) It’s seemingly later and later that Americans are getting married. You may have ideas as to why, but the reasoning is not what you think.

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As we know, homeownership is a cornerstone of American family life. Homes provide long-term financial stability as a major investment for homeowners. Furthermore, they also provide a strong environment in which to raise a family; so many of us have fond memories of running around our backyards or cozying up in the family room. So, it stands to reason that homeownership and marriage are tied together; many couples will buy a home soon before or soon after marriage.

With all that said, some of the following statistics may be alarming, as it points to a trend that may play into the delay of homeownership.

Lots of data gathered over the past few years shows Americans are marrying later and later, if at all, according to a report from The Guardian. Today, Half of American adults are married, compared to 75% in 1960. The disparities are mostly consistent with class divisions.

Per the Guardian article, “26% of poor adults are married, compared with 51% in 1990.” That same study found 39% of the modern working class of adults are married, but that number was 57% in the 90s.

Education is closely tied with financial status, so an education disparity is also present. Today, 50% of adults with a high school are married; that rate was over 60% 25 years ago.

As the Guardian puts it, “Young people are increasingly seeing marriage as a “capstone” rather than a “cornerstone” event, a crowning achievement once other goals have been reached, rather than a launchpad for adulthood.”

That achievement is financial stability, and many more Americans are feeling a financial crunch.

There’s data to back this up, too. For example, a poll found “nearly half of never-married adults with incomes under 30k say being financially insecure is a major reason” behind their lack of marital commitment to a partner.

Part of a steady income is a steady job, and past Pew Research found 78 of never-married women wanted a future partner to have a steady job.

A decline in manufacturing jobs is contributing to this as well, per some economic research on the subject, which may help to explain how the steepest drops in marriage rates come from the lower and middle class.

It’s not unreasonable to speculate that major living costs factor into that decision as well. For example, with real estate prices going up around the country, especially in major cities with strong job markets, the capstone that is owning a home is pushed farther away from the average American.

If marriage and homeownership are so closely tied together, the delay of one may also contribute to a delay in the other.

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Homeownership

How buyers are competing in a tight housing market

(HOMEOWNERSHIP) It’s a seller’s market with housing supply at an all-time low. Here’s what buyers are doing to increase their chances of buying a home.

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family in their living room with moving boxes during the competitive housing market

Home inventory is at an all-time low in most places around the country. Most people believe that the COVID-19 pandemic is responsible. Families are staying put in their homes, rather than looking for a new place to live. Sellers and realtors are winning in this highly competitive market, making us wonder how buyers are faring.

Cash is king

According to the NAR, cash sales are up by an average of 21%. Buyers are hoping that cash makes their offer more attractive. Closing without a loan has a lot of benefits to the seller. The sale is more likely to close, as it isn’t dependent on a loan. Plus, there are fewer costs involved in the closing. Since 2013, cash sales haven’t been trending upward, so this is an interesting turn for sellers. Buyers who make cash offers reduce the risk of getting rejected by the seller.

Buyers making larger down payments

Sellers also benefit when buyers make a 20% down payment or more. A higher down payment increases the chance of getting a loan. According to the NAR, almost 50% of buyers are making a down payment of at least 20%, which is up from 40% of buyers in 2011. Buyers avoid mortgage insurance premiums, which makes it a win-win for everyone.

Buyers aren’t even offering or negotiating

The third way buyers are coping in this market is to back off and not even make an offer when they know a home already has competition. Why get your hopes up, only to have them dashed when you can’t negotiate?

Will supply return?

The good news is that the housing supply outlook is on the increase. As vaccinations roll out and people feel safer to show their home, more homes should come on the market. Housing permits are up, too. This should help even out the market and give buyers a better chance to find a home.

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