ALTA Testified on CFPB Draft Mortgage Disclosures
At a three hour hearing on mortgage origination issues, ALTA President Anne Anastasi testified to the House Financial Services Housing and Insurance Subcommittee that, "as we seek to improve the mortgage origination process, we need to fundamentally rethink a key part of the architecture of the current process: federal mortgage disclosure laws." You can click here to watch Anne's testimony, and read her shorter, spoken testimony and longer, written testimony.
The highlight of the hearing occurred when Anne deftly hijacked a question intended for another witness to reemphasize ALTA's belief that a title insurance search and policy should be part of the Qualified Risk Retention rule, to which Chairwoman Judy Biggert (R-IL) agreed saying, "That just amazes me as a former real estate attorney, but not having an owner's policy is a scary thing."
Also testifying at the hearing were Kelly Cochrane of the CFPB who said that in the coming months the Bureau will be developing new RESPA regulations and a new closing stage disclosure (HUD-1) and Teresa Payne from HUD who, when asked by Rep. Robert Hurt (R-VA) about the success of the 2010 RESPA reform in light of a report from Ken Harney that nobody is using the forms to shop said, "it really changed the culture surrounding the new GFE and settlement forms . . . The RESPA Rule has taken a good first step." The entire hearing can be seen here.
H.R. 1309 - the Flood Insurance Reform Act of 2011 passed the House last Tuesday by a vote of 406-22. The bill now heads to the Senate where efforts are already underway in the Senate Banking Committee to pass legislation before authorization for the program lapses on September 30th.
A controversial amendment by Rep. Candice Miller (R-MI) that would have privatized the National Flood Insurance Program failed, only garnering 38 votes in the House. This resounding defeat was in no small part due to the help of ALTA's 127 grassroots activists who sent 377 messages to Members of Congress in advance of the vote. Thank you for your help. In addition to our grassroots effort, ALTA successfully focused press attention on the need for reauthorization of the NFIP and against the Miller amendment.
Kaptur Bill on Federal Land Titling Study
ALTA grassroots activists also sprung into action this week to protest the reintroduction of Rep. Marcy Kaptur's proposal to ask HUD to study the efficacy of a federal land titling system. 429 title professionals responded to our Call to Action sending 1,273 messages in opposition to the proposal to Members of Congress. This is a great showing and we are hopeful that it will cause members of congress to take a long hard look at the bill before deciding to co-sponsor. I understand from some of you that there were bugs in our grassroots system that resulted in some ALTA activists receiving multiple emails, while others had difficulty sending their message to Congress. We apologize. We are working on the problem with our service provider and will have it resolved before we send out another action alert.
Obama Nominates Cordray as CFPB Director
With the Consumer Financial Protection Bureau set to open in three days; President Obama has nominated former Ohio Attorney General Richard Cordray to lead the nascent consumer agency. The move is a recognition by the President, that Harvard Law professor and CFPB architect Elizabeth Warren is too controversial to win a confirmation battle in the Senate. Cordray, currently serves as the Bureau's director of enforcement.
However, Cordray's confirmation as CFPB Director is far from a sure thing, as Senate Republicans have stated that they will block any nomination until significant changes are made to the agency's structure and funding. Cordray already has the support of Warren, Barney Frank and consumer groups. Besides serving as the Ohio Attorney General, Cordray attended the University of Chicago Law School, serving as editor in chief of its law review and clerked for moderate Supreme Court Justices Byron R. White and Anthony M. Kennedy. He is also a former Jeopardy! champion.
With the President passing over Professor Warren, rumors are running rampant that she will challenge former title agent and current Republican Senator from Massachusetts, Scott Brown (R-MA) in 2012.
Barney Frank Defends QRM
In advance of the one year anniversary of his namesake law, Representative Barney Frank (D-MA) in remarks at the National Press Club, defended the new risk retention rules required by Dodd-Frank. Opponents of the 20% down payment requirement assert that the rules will be costly and needlessly bar otherwise qualified borrowers from obtaining a mortgage. Frank agreed that down payments of 20 percent are too high but said that it is crucial to keep the QRM rule narrow so that it serves as the "exception and not the rule" for mortgage finance. Comments to the QRM proposal are due by August 1. ALTA is currently drafting comments that reinforce the sentiment expressed by Chairwoman Biggert and others that a gold standard mortgage should include a title insurance search and policy.
Second Round of GSE Bills Approved by Subcommittee
The House Financial Services subcommittee on Capital Markets and GSEs marked up another six bills to whittle away Fannie Mae and Freddie Mac, including one to abolish the Housing Trust Fund.
Despite success in reporting the bills out of Subcommittee, full committee Chairman Spencer Bachus (R-AL) schedule no hearings or markups on the legislation. At this point, the full Committee lacks consensus on how to best reform Fannie and Freddie. Subcommittee Chairman Scott Garrett favors passing a series of smaller, targeted reforms, while others, including Reps. Jeb Hensarling (R-TX), John Campbell (R-CA), and Gary Miller (R-CA), favor passing a comprehensive reform.
Senate Bill to Help Refinance Underwater Mortgages
Senator Johnny Isakson (R-GA) recently joined Senator Barbara Boxer (D-CA) as a co-sponsor on The Helping Responsible Homeowners Act (S. 170). The bill follows a proposal by PIMCO guru Bill Gross to abolish refinancing limits on underwater mortgages at Fannie and Freddie, allowing these homeowners to take advantage of the current exceptionally low interest rates.
2011 Bankrate Study on Closing Costs
Bankrate (the online mortgage information website) released its annual report on closing costs across the country showing an 8.8% increase in closing costs in 2011. The report attributes the rise to lender costs and lists New York, Texas, Utah and California as the most expensive states with Arkansas, North Carolina and Indiana at the bottom of the list. Regarding title insurance, the study says costs changed little compared to last year.
Nevertheless, some states have informed ALTA that Bankrate's numbers are inaccurate and causing problems with regulators. ALTA has begun discussions with Bankrate to figure out how to get more accurate numbers in their report. Currently, "Bankrate conducts the closing costs survey by obtaining online good faith estimates for a $200,000 mortgage in a major city in each state, plus Washington, D.C. In California, San Francisco and Los Angeles are surveyed. The estimates are based on a borrower with excellent credit buying a $250,000 home."
Last week ALTA lobbyists met with Speaker John Boehner (R-OH), Reps. Jim Himes (D-CT), John Carney (D-DE), Spencer Bachus (R-AL), Jeb Hensarling (R-TX), Judy Biggert (R-IL), David Schweikert (R-AZ), Kevin McCarthy (R-CA), Michael Grimm (R-NY), Billy Long (R-MO), Buck McKeon (R-CA), Tim Murphy (R-PA), Tom Price (R-GA), Bill Shuster (R-PA), Adrian Smith (R-NE), John Sullivan (R-OK), Lee Terry (R-NE), Joe Heck (R-NV), Steve Fincher (R-TN) and Gwen Moore (D-WI). ALTA lobbyists also met with staff from Rep. Ed Royce (R-CA), Shelley Moore Capito (R-WV), Gary Miller (R-CA), Brad Sherman (D-CA), and Steve Stivers (R-OH), and Sen. Richard Shelby (R-AL), and Mike Crapo (R-ID).
Housing Policy & Data
Rates for 30-year fixed-rate conventional mortgages fell 9 basis points last week to 4.51%.
Low interest rates are driving high-end home buyers to supersized mortgages at a pace unseen since the housing boom. Jumbo loans accounted for almost one in six new mortgages, including new-home purchases and refinances, in the first quarter as people are trying to lock in a government-backed jumbo loans ahead of the October planned reduction of high-cost conforming loan limits from $729,750 to $625,500. The average rate on a 30-year jumbo mortgage is 5.15%, down from 6.41% two years ago. The spread between smaller "conforming" loans backed by Fannie Mae, Freddie Mac and federal agencies and these rates is just 0.43%, the narrowest spread since 2007.
Despite a lackluster spring selling season, two main indicators of the health of the housing market are on the uptick. Sales of existing homes rose 2.9 percent in June while the National Association of Homebuilders homebuilder confidence index improved modestly in July from a nine-month low.
The real bright spot in the market continues to be in multi-family housing as construction of new units is up nearly 50%. Meanwhile, outside of the multi-family market builders are marketing their "green" building techniques and technology to stand out and get an edge in the foreclosure-filled market.
Fannie and Freddie recently updated their Selling Guidelines to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction. The move should help bring more buyers to the market because cash investors will be able to get their equity out much faster.
S&P warned Fannie Mae and Freddie Mac on Friday that they may lose their top credit ratings if lawmakers don't raise the U.S. government's borrowing limit in time to avoid a default (The GSEs, which are themselves still losing money, nevertheless have top credit ratings because they enjoy the full faith, credit and backing of the U.S. government.). A lower credit rating for the GSEs would result in higher borrowing costs for consumers.
Another consequence of the debt debate could be a glut of federal land going on the market. The White House suggested the government could raise $12 billion by selling unneeded federal land, with as much as $5 billion coming from one Los Angeles property.
ALTA's GAC committee held a call on Tuesday to discuss Anne's testimony, the latest on the QRM rule and GSE reform. During the call, staff asked for any empirical data ALTA members may have to prove that the presence of a title insurance search and policy reduces the risk of default on a mortgage. This data would greatly aid our efforts to get a title requirement included in the QRM. If you have any useful information, please contact ALTA Legislative and Regulatory Counsel Steve Gottheim at email@example.com.
State leaders met last week for their monthly advocacy call. Mark Monacelli joined this month's call to discuss the value of joining state PREP chapters (Property Records Education Partners). PREP chapters serve as a forum for the title industry and recorders to discuss issues and solutions facing the recording industry and to better work together in the legislative process. Reach out to firstname.lastname@example.org for more information about joining your state's PREP chapter. The committee also discussed required short sale addendums and legislative solutions to payoff statement requests, deed correction instruments and strengthening PTF laws. To join these monthly calls please contact, Nick Hacker at email@example.com.
The ALTA® Board approved recommendations to adopt 3 new endorsements during a meeting on June 23, 2011. The new forms are the ALTA® Endorsement Form 29.2-06 (Interest Rate Swap Endorsement - Direct Obligation - Defined Amount), the ALTA® Endorsement Form 29.3-06 (Interest Rate Swap Endorsement - Additional Interest - Defined Amount), and the ALTA® Endorsement 34-06 (Identified Risk Coverage). These forms are now in a 30-day comment period which will conclude on Monday, July 25th. Comments must be submitted in writing and will be reviewed by the Forms Committee before final publication. The forms will be effective as of 08-01-11, after the comments are reviewed. You may download and review the subject forms in the "Recently Approved Forms - For Comment" section on the Policy Forms page at www.alta.org/forms/.
In related news, the Forms Committee has issued a technical correction to the ALTA® Short Form Expanded Coverage Residential Loan Policy (Revised 7-26-10). The changes are intended to improve readability and clarity. The Technical Correction is effective immediately. Visit the Policy Forms News page at www.alta.org/forms/formsnews.cfm to learn more about the new forms and the technical correction.
TIPAC has passed the $200K mark! Currently, TIPAC has received $201,500 from 299 contributors. Our goal this year is $300,000. If you have any questions about TIPAC, please contact Kelley Williams at firstname.lastname@example.org.
Last week, I reported on an article in the Washington Post about D.C.'s new foreclosure mediation law. Following the article (and some deft lobbying by the DCLTA) the D.C. City Council backed down and amended a controversial clause that voided any foreclosure if there was a violation of the mediation law. The change is a positive outcome for the industry and recognition by the Council of the need to remove uncertainty if we are going to improve the housing market.