Saturday, April 11, 2015
No, it’s not but the Closing process is going to dramatically change and we still don’t know if it will be for the better. We don’t know what we don’t know, and we probably won’t know until we work with it for a while. But why go through all of these changes? The hope is that by making these changes we can avoid the conditions that led to what we painfully remember as the Great Recession.
I was speaking with the Mortgage Sales Manager for Santander Bank and she listed what she says are the stated goals of the ‘New Rule’, also being called the TILA-RESPA Integrated Disclosure (TRID) rule, which is supposed to:
1) Make it easier to use mortgage disclosure forms.
2) Improve Customer understanding – “Know Before You Owe”.
3) Aid in comparison shopping.
4) Prevent surprises at the Closing table.
The bottom line is increased consumer protection.
We’ve all heard of the Dodd–Frank Wall Street Reform and Consumer Protection Act which requires combining the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures together.
What has been termed the “Rush Closing” will be long gone. No longer will you receive a Good Faith Estimate (GFE) or a Truth in Lending disclosure. Those two forms have been combined into one Loan Estimate (LE) form. Here is one of the problems lenders will be faced with: although this is called an “estimate”, lenders will be accountable for the exact charges outlined on the LE and they must be within 10% on many others, or lenders will incur huge fines.
Most of us have seen a HUD-1 Settlement Statement that discloses where the money goes and who gets what in a purchase and sale transaction. The HUD is prepared by the closing attorney and the buyer gets to review it one day before they close on their new home. The HUD is going to be replaced by the Closing Disclosure (CD). Although the CD will be similar to the LE, the most important and challenging change will be that the CD must be presented to the buyer a full three days before the closing, and if there are changes during that three day period, you guessed it – the closing could be delayed an additional three days or more. Attorneys will also be required to provide costs much earlier in the process than before.
The new Rules will place the burden on all partners at the Closing table – buyers, sellers, real estate licensees, bankers and attorneys. As you can imagine, any delay in the closing could be very costly to all parties. Imagine what it could mean if during a delay the buyer’s loan rate lock expires? Or a moving company has to wait to deliver furniture to the buyer’s new home? Or the seller’s payoff will no longer be any good because it has expired.
In the short run, what does this all mean to you as a potential buyer? It means, if you are considering making a purchase in 2015 and you will require a mortgage, make your purchase decision now and apply for a mortgage before August 1 or be prepared for the process to take a lot longer (~15+ days). Rest assured there will be bumps in the road while everyone involved in the process goes through OJT while sorting out the bugs in the new “Know before You Owe” package.
Sunday, March 08, 2015
What’s new this week? Well, not much as we, and most of New England, have been in a deep freeze holding pattern for what seems like an eternity. Once again we got hammered by another snow storm. This time the forecast for 3-6” of snow ended up being 8-10” on Martha’s Vineyard. Snow is piling up everywhere and we are running out of places to put it.
When the snow begins to melt that is when the problems will also begin. I’ve already seen disaster cleanup company trucks in front of a number of properties around the Island. With the warmup we will see flooded roads, flooded basements and crawl spaces and burst pipes that have been held together by the frigid temperatures. Dirt roads will look like a war zone. It is going to take quite a while to clean up Paradise Island. Landscapers are going to be very busy this spring cleaning up properties battered by the elements and rough snow plowing. Gardens decimated by the deep snow load will most likely take a big hit and have to be replanted, but we are New England and we’ll get over it. I can’t wait to be over it.
I was speaking to a listing aggregator yesterday – if you don’t know what that is don’t ask, and he was telling me he is hearing from real estate companies throughout New England that the market has been set back significantly due to the weather, and seller agents are very frustrated. The general consensus is that what now would normally be an early spring market has been pushed back about two months due to the weather. Actually, I don’t think we will even have a spring market this year. The National Association of REALTORS® recently reported that the top 10 dates sellers listed their homes in 2014 all fell in April, May or June.
Only serious buyers are out there right now and only motivated sellers have their properties on the market ready to strike a deal. But, as you can see from this week’s report, properties are starting to come back onto the market, both new and retreads. You can also see that price changes are not happening. Why? Because the market seems to feel that the time has come and a rebound has begun. For now I will say they are right, so as I said last week --- don’t be greedy. Strike a fair deal and move on with your life. Of course that goes for both buyers and sellers. You are still going to find those sellers who are really not motivated and are just fishing or those sellers who are examples of the ‘endowment effect’. They think their property is special and worth a whole lot more than comparable property sales would suggest.
I know buyers are frustrated and uncomfortable about getting into the market until all the goods are out on the shelves. Sure they can find out which properties are off the market ‘taking a winter nap’, but many of them believe waking one of those properties to make an offer puts them at an unfair advantage, unless of course they don’t care and just want to buy it now. That is why I say it is so foolish for sellers to remove properties from the active market if the post script is that they are still available for sale.