Time to Buy and Refinance is Now!

Are you wondering what the rates on mortgages are hovering around these days? Data released on Thursday by Freddie Mac indicates that the 30-year fixed-rate average ticked down to 3.79 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.82 percent a week ago and 3.92 percent a year ago. The 30-year fixed-rate average has remained below 4 percent for three months.

The 15-year fixed-rate average dropped to 2.98 percent with an average 0.5 point, falling below 3 percent for the second time in three weeks. It was 3.03 percent a week ago and 3.08 percent a year ago.

Hybrid adjustable rate mortgages moved higher. The five-year ARM average edged up to 2.89 percent with an average 0.4 point. It was 2.88 percent a week ago and 2.91 percent a year ago.

The one-year ARM average jumped to 2.62 percent with an average 0.2 point. It was 2.54 percent a week ago.

Now, really is the time to buy and refinance!

New Mortgage Disclosures Expected to Delay Real Estate Closings

Our sincerest apologies for not having provided you with new content in such a long time, but we have been working tirelessly on becoming prepared for the changes ahead! In just a few short days, federal laws will be implemented that will affect the way homebuyers finance their mortgages in real estate transactions. The Consumer Financial Protection Bureau created “TILA RESPA Integrated Disclosure,” known in the industry as TRID, and TRID implementation begins on Saturday, October 3, 2015. Most, if not all, of the experts in our industry agree that these changes could increase the time to close on purchases by at least double. Take note, these changes do NOT affect all-cash or commercial transactions. Furthermore, the implementation of TRID will only affect loan applications that are taken on residential purchases that are financed ON or AFTER Saturday, October 3rd. So, if you are able to squeeze in a loan application before that date, you will avoid being subject to these changes. Our local colleague, Gary M. Singer, outlines all these changes and we have reposted his article originally published in the Sun Sentinel, below:

Sept. 25, 2015

By GARY M. SINGER Sun Sentinel – Tribune News Service

Big changes are planned for how homebuyers finance their mortgages, and that almost certainly means that closings will take longer. In some cases, closings that now speed through in 30 days probably will require at least 60 days.

The changes had been expected to begin in August, but the effective date was pushed back to Oct. 3.

After the housing crash, Congress felt that we needed a better system of mortgage disclosures and procedures so that Americans can better protect themselves and make the best choices when getting home loans.

The Consumer Financial Protection Bureau was created and charged with accomplishing this.

The bureau decided that the four existing disclosure forms required under federal law would be changed into two new, more comprehensive documents — a Loan Estimate and a Closing Disclosure.

These forms are known as the “TILA RESPA Integrated Disclosure,” or more commonly, TRID.

In addition, the closing process was unified so that all 50 states use the same forms and procedures.

Who Do These New Rules Apply To?
They apply to residential properties that include a mortgage as part of the transaction — both sales and refinances.

The rules are designed to protect the buyer/borrower, but they will affect all parties to the transaction.

Lenders are bearing the brunt of ensuring compliance with the new rules, making the lender responsible for getting all of the other parties on board. The rules do not apply to commercial transactions or all-cash deals.

What is Changing?
Buyers applying for loans will get a Loan Estimate (instead of the current Good Faith Estimate) within three days of applying for the loans.

The new form is designed to highlight key terms to enable borrowers to shop around for the best deals. It’s supposed to be user-friendly and almost certainly will be, considering how confusing the current form is.

The Closing Disclosure must be received by the borrower three business days before the closing. If the form is mailed, couriered or emailed, the lender must allow an extra three business days on top of that.

This means that the closing can’t occur for at least six business days after the lender sends out the completed Closing Disclosure.

This is a massive change from the way it is now, when some of the information is still being filled in on the closing day, sometimes even while the parties are sitting at the closing table.

The biggest issue I have with these new forms is that they significantly downplay the importance of getting owner’s title insurance policies, which is money well spent. I can’t think of any situation in which not getting this very important coverage would be a good idea. And I’ve seen many instances in which not having title insurance costs a buyer the home.

K&A note: There are many ways a person can lose their home as a result of not having an Owner’s Policy for Title Insurance. Should you wish to learn what they are, contact us and we’ll share that information with you. It’s certainly not a short list and being uninsured can definitely result in the loss of property.

What do Buyers and Sellers Need to Do?
Closing agents — used to finalizing the process at the last minute to accomplish everyones’ rush to close — now will need to get the final closing information to the mortgage lender at least 10 days before the closing date so that the lender can complete the Closing Disclosure in time to get it out six days before the scheduled closing.

Realistically, to accomplish this, buyers and sellers will need to add three to four weeks to their closing time lines.

To make matters even more confusing, all of the standard purchase contract forms have been recently changed to address the new rules.

That’s causing real estate professionals to learn the new forms.

K&A note: If you are a real estate professional, please reach out to us for guidance on the new forms. We are all in this together and are looking forward to making all future transactions go as smoothly as possible.

Be sure your real estate agents and others on your team are aware of the new information and have been trained on how to deal with it.

Fortunately, the industry seems ready for this change, and there is plenty of training available for those in the business.

About the Writer
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

This article, originally dated 9/25/15, was re-posted from the Sun-Sentinel, distributed by Tribune News Service.

Mortgage Credit Availability Increases

BenjaminsAccording to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) indicates that February resulted in a slight increase in mortgage credit availability.

The MCAI increased 0.7 percent to 118.6 in February. This slight increase in the index indicates that credit is loosening, while a decrease would indicate that lending standards would tighten.

The MBA’s Chief Economist stated, “Credit availability improved marginally in February, led by further increases in jumbo loan programs, and additional take-up of Fannie Mae’s 97 LTV program. More than half of investors are now offering a 97 LTV program, and Freddie Mac announced that their program will be available in mid-March. In terms of conforming credit, this was offset by somewhat tighter constraints on cash-out loans and investors with multiple financed properties.”

It’s good news for consumers seeking to borrow money in order to buy real estate and that’s good news for everyone!

Millennials Consider Love, Marriage and Real Estate, Oh My!

First comes love, then comes marriage, then comes a mortgage in the baby carriage! While we have traditionally heard that old ditty a different way over the years, traditions change and for many Millennials (ages 18-34) the family expansion has to wait. Not only does the baby have to wait, but for many Millennials, even marriage has to take a proverbial number. Many Millennials are holding off on marriage to save up for a down payment on residential real estate. A recent survey shows that 38 percent of American Millennials said that they would, or have, put off a wedding or honeymoon in order to afford to buy a home. This statistic isn’t very surprising considering that the average American wedding can cost around $30,000. This figure doesn’t even include the honeymoon.

Unfortunately, the decision to hold off marriage before getting a mortgage might be more complicated than the Millennials may have first thought. Take note, I wrote this article to inform, not admonish the reader. I want you to have all the information about making one of the largest investments you’ll probably ever make in your lifetime. Initially, it sounds like it makes more financial sense to put the mortgage ahead of the marriage, but if the relationship goes south between these unmarried Millennials, be sure that divorce is much easier than breaking up real estate encumbered by a mortgage held between two unmarried people. In other words, think before you ink.

Rather than go into the details of how incurring the debt makes financial sense before marriage, if you expect a return on your real estate investment, ensure that your relationship with this significant other can withstand the financial commitment. Here’s an interesting statistic, according to the CDCP, 27.4 percent of couples who co-habitate before marriage break up by the third year of living together. In other words, think before you ink.

UPDATE on 2/20/15:

On 2/19/15, we posted this article about the risks of investing with someone you are romantically involved with before getting married.  On 2/20/15, less than a day after posting the article, our office was presented with a legal situation that clearly exposed the pitfalls associated with couples buying residential real estate before marriage.  Below are the facts:

In 2012, Boyfriend and Girlfriend purchase a home. They finance the purchase and both are considered borrowers (read: jointly and severally liable for the debt).  In other words, both are on the hook for the debt separately and as a couple.  Boyfriend and Girlfriend break up and Girlfriend moves out. Boyfriend continues to make payments on the debt and some years later, Girlfriend transfers her interest. The transfer is made to Boyfriend without any money exchanging hands, via Quit Claim Deed, to Boyfriend. Minimum documentary stamp tax was paid upon recording, not documentary stamp tax based upon half the balance of the principal amount remaining on the mortgage, as would be required by the Department of Revenue. There was no refinance or change in liability on the debt.

Fast-forward to 2015, where the Department of Revenue does an audit of the transfer referenced above. The Department of Revenue questions the Boyfriend about the minimum documentary stamp tax and now wants him to pay taxes based on half the balance of the principal amount remaining on the mortgage. This figure requested by the Department of Revenue most probably includes penalties for not paying the correct documentary stamp tax upon transfer. Now, here is a real life situation that probably could have been avoided by being informed of the risks before taking on the mortgage. Technically, it is our opinion that the Department of Revenue is entitled to collect on the unpaid balance of documentary stamp tax, but however you look at it, there is a problem that needs to be addressed. Think before you ink.

Goodbye 2014 and Hello 2015 – Residential Real Estate Predictions

Rather than rehash, review and regurgitate 2014, we’ll do something that might be more productive and useful to you. Let’s predict the future and see what we all might anticipate for the residential real estate market in 2015. As most everyone has seen, the real estate market has shown improvement which has been catapulted forward by improvements in the economy, low mortgage rates and reduced inventory. The analysts out there are predicting that this will translate into larger gains for 2015. Everyone has tons of questions, like “What should we expect next? Will there be another real estate boom? Will the real estate market recovery be consistently steadier?” What we can tell you is that the trends from 2014 indicate a better 2015. Here are a few indicators:

1. Low Mortgage Rates: The Federal Reserve did take steps to ease lending, but despite doing this, mortgage rates continue to decline and assisted the home buyers with lowered borrowing costs. The borrower benefits continue with the 30-year fixed-rate mortgage remaining below 4 percent.

2. Economy Improvement: The beginning of the year brought the nation’s harshest winter, but despite this, the economy improved steadily and new jobs were created, resulting in a higher GDP and stronger consumer confidence.

3. Foreclosures and Short Sales Decline: To everyone’s delight, distressed sales that include foreclosures and short sales have significantly declined. The numbers don’t matter, but should you care to know, foreclosures are expected to be reduced by at least 30 percent by 2014’s close.

4. Investors Retreat From the Market: In conjunction with the reduction in distressed sales and increased median home prices, those large scale investors in the single-family market have significantly decreased. This reduction results in less competition from investors, allowing for first-time home buyers to dip their feet into the real estate market.

5. Home Prices Level Out: In 2012 and 2013, we saw some unusually high levels of home prices appreciating and it wasn’t until 2014 that we saw a leveling out of these increases. The present increases in the residential home market are more consistent with “healthy” long-term growth.

With these positive predictions for 2015, there are factors that may interfere to prevent a truly strong recovery:

1. First-Time Buyers Fear: According to the National Association REALTORS®, first-time buyers dropped to the lowest level in nearly 30 years. As we have continued to report over the past few months, however, there are signs of improvement. While these improvements are modest, the next largest home buying market, The Millennials, are starting to think about the residential real estate market. Federal policies for lenders implemented in December resulted in revised lending regulations and lower down-payments from lenders have greatly assisted in first-time home buying confidence.

2. Credit Requirement Inflexibility: Even though the mortgage rates have been historically low, homeowners have seen an inability to borrow on their homes because of lender qualification standards. Therefore, 2014 saw mortgage credit availability come to a screeching halt and did not improve.

3. Inventory is Low: Despite the small increase in inventory of residential real estate, supply did not outweigh demand. As has been reported throughout 2014, the supply of new and existing residential real estate continues to remain below “normal” expected levels.

4. New Home Startups Don’t Increase: 2014 saw that new home sales were still at the levels they were in 2013. Despite this lack of growth, new home prices continued to rise substantially in 2014. The rise in prices might indicate that the increased home prices actually put a wall up on demand.

5. Renting Rules: There continues to be record levels of renting, which seems like a likely result when home ownership continues to remain at low levels. As long as this continues, rental prices will continue to increase.

This will be the last post for the year 2014. All of us at Khani & Auerbach wish you a wonderful New Year and may 2015 bring you everything you hope for in health, happiness and peace.

Khila L. Khani, Esq.