11/17/2015

Closing Efficiency Drives Consumer Satisfaction, Study Finds

Mortgage customer satisfaction has increased this year as lenders have focused on developing functional digital channels and improving operational efficiency, according to J.D. Power’s 2015 U.S. Primary Mortgage Origination Satisfaction Study. Consumer satisfaction improves significantly when transactions close earlier than promised or when it was scheduled, the study found.

JDPower satisfaction snapshot

Despite the increase in satisfaction, mortgage lenders are under increased pressure from new loan disclosure regulations that could increase the time it takes to get a home loan while also facing increased competition from non-traditional lenders.

 

“While a lot of effort has been placed on ensuring compliance with new regulations, it is imperative that lenders improve their education and communication about the impact of these changes or risk losing customers,” said Craig Martin, director of the mortgage practice at J.D. Power. “Effective communication remains one of the most important aspects of a satisfying mortgage experience, especially if the process is taking longer than it has historically. As the number of Millennial home buyers continues to rise, lenders must be ready to meet their expectations. This generation is highly digitally connected, so ongoing communication and transparency via the channels they prefer, particularly mobile, are vital.”

The J.D. Power 2015 U.S. Primary Mortgage Origination Satisfaction Study examines customer satisfaction with the origination experience among the largest mortgage lenders in the United States. The study provides a broad understanding of how firms can improve mortgage customer satisfaction, loyalty, and advocacy across six key factors:

  • loan offerings
  • application/approval process
  • interaction
  • closing
  • onboarding
  • problem resolution

Satisfaction is calculated on a 1,000-point scale. Overall customer satisfaction with mortgage origination averages 793 in 2015, an increase of seven points from 2014. The increase in satisfaction is driven by a 22 point gain in the application and approval process factor, influenced by improved perceptions of the speed of the loan process. When loans close earlier than promised, satisfaction is significantly higher (866), compared to when loans close as expected (821) and when it takes longer than expected (658).

The study also finds that overall satisfaction with several mortgage application-related activities, such as completing an application (799), submitting documents (804) and receiving status updates (811) is markedly higher among customers who used digital communication channels versus those who communicated via mail and fax (753, 766, and 770, respectively).

The links between the perception of mortgage processing speed and efficiency and overall customer satisfaction are particularly noteworthy in light of new Know Before You Owe (TILA-RESPA Integrated Disclosures) regulation, which went into effect Oct. 3. This law has the potential to increase the mortgage timeline, according to J.D. Power, which poses a significant challenge for lenders when serving home buyers across all generations. This could be particularly challenging when dealing with Millennials (ages 18-34) who are technically savvy and connected to the Internet.

Here are some key findings in this year’s study:

  • Communication Impacts Satisfaction: Communication throughout the loan process mitigates dissatisfaction with a longer timeline. When the loan process takes more than two months, satisfaction is 686. However, when an accurate time frame estimate and proactive updates are provided in that same scenario, satisfaction is 859.
  • Millennials Seek Guidance: With Millennials now accounting for the largest share of loan originations over the last two years (according to the National Association of Realtors), it is notable that nearly 4 in 10 (37%) millennial customers indicate that the origination process was not completely explained to them, and 58% indicate their options, terms and fees were not completely explained.
  • Effective Loan Representatives are Vital: Those loan reps who engage customers, build trust and ensure that borrowers understand each step of the process can mitigate the negative impact on satisfaction due to missing closing dates (764 missed date/effective representative vs. 511 missed date/ineffective representative).
  • Loans are Closing Sooner: The percentage of applications and approvals that close earlier than promised has increased to 35% in 2015 from 31% in 2014.
  • Satisfying Experience Leads to Recommendations and Loyalty: Providing an outstanding mortgage origination experience can generate high levels of advocacy and retention. The study finds that 71% of highly satisfied customers (overall satisfaction scores of 900 or higher) say they “definitely will” recommend their lender, and 76% say they “definitely will” consider reusing the same lender for their next home purchase. In comparison, only 5% of dissatisfied customers (scores of 699 or less) say they “definitely will” recommend and 8% say they “definitely will” consider reusing the lender.

Company Rankings

Quicken Loans ranked highest in primary mortgage origination satisfaction for a sixth consecutive year, with a score of 850, an increase of 15 points from 2014. J.D. Power reported that Quicken Loans performs particularly well in all six factors. Fifth Third Mortgage ranks second with a score of 812, followed by Bank of America and BB&T (Branch Banking & Trust Co.) in a tie at 811 each.

The 2015 U.S. Primary Mortgage Origination Satisfaction Study is based on responses from 4,666 customers who originated a new mortgage or refinanced within the past 12 months. The study was fielded in two waves: February – March and July – August 2015.

JDPower 2015 Survey

GSE Conforming Loan Limit Expected to Increase 3 Percent in 2016

Measuring inflation

By Mark Fleming

Since the financial crisis began, any conversation about housing policy has inevitably included a discussion of GSE reform.  The Protecting American Taxpayers and Homeowners (PATH) Act, Johnson/Crapo reform bill and Administrative reform have all been discussed. Yet, one of the least discussed and most important features of the GSE relationship to the housing market is the conforming loan limit that restricts GSE lending based on the loan amount. The Federal Housing Finance Agency (FHFA) sets the loan limit for the upcoming year in late November. This year, the announcement is likely to be more important than in most recent years because it will likely be the first time in almost a decade that the conforming loan limit will be increased.

The Housing and Economic Recovery Act of 2008 (HERA) established the current formula for the calculation of loan limits to be administered by the FHFA. Under the HERA formula loan limits can only adjust upward with house price appreciation based on an index chosen by the FHFA.  In other words, the GSE conforming loan limit can rise with house price inflation, but cannot fall in the event of any house price depreciation.  This means that GSE market coverage effectively expands in times of stress (when prices are falling), and is inflation-adjusted in times of rising house prices.

Since 2008, FHFA has been using their standard FHFA purchase-only house price index that uses only GSE data.  Keep in mind that the GSEs are only allowed to securitize loans at or below the conforming limit, so the data from the GSE’s doesn’t reflect all of the transactions in the market.  Economists call this a sample selection bias.  Earlier this year, the FHFA proposed changing the index they use to calculate the conforming loan limit to a broader “expanded-data” index that includes public record sale transactions, as well as GSE data in an effort to address sample selection bias. The industry overwhelming supported the proposed index switch.  A better assessment of price changes can only unambiguously improve the important task of inflation-adjusting the GSEs’ allowable market coverage.

The conforming loan limit has been $417,000 since 2006 and, as prices fell dramatically in many markets throughout the country, has remained at this limit ever since.  In the figure, one can see that the distinction of index is realistically much less important than the simple fact that house price inflation has been consistent since 2012.  In fact, prices have recovered so much that, based on either of these indices, all that was lost has finally been regained this year.  In other words, it is time to inflation-adjust the conforming loan limit upward.

Using the proposed “expanded-data” FHFA house price index, year-over-year appreciation from the third quarter of 2014 to the third quarter of this year of approximately 2 percent would have been sufficient to surpass the price level used to set the current loan limit of $417,000.  We estimate that the index will likely report a 5.5 percent increase year-over-year in the third quarter.  Based on the HERA mandated formula, the conforming loan limit will increase almost 3 percent to a new overall limit of $429,000.

While the debate continues about reducing the role and market share of the GSEs in the housing market, my expectation is that we will increase the market share of the GSE with an inflation-adjustment to the loan limit of almost 3 percent next year.  Without the inflation-adjustment, over time the market share would decline without any further legislative action required.  Has the housing market recovered? Having to adjust the FHFA loan limit for inflation is one very strong sign that it has.

11/12/2015

Lender Requirements for ALTA Best Practices

To prove compliance with third-party oversight required by the Consumer Financial Protection Bureau (CFPB), several lenders have announced their requirements to prove implementation of ALTA’s “Title Insurance and Settlement Company Best Practices."

ALTA has compiled information it has received to help title and settlement agents understand the various lender expectations. If you are aware of other lender requirements regarding Best Practices, please share the information here on our blog. ALTA will update the list as it receives more information.

ALTA has developed several tools to help title professionals document Best Practice policies and procedures.

Download Chart With Lender Requirements

 

10/29/2015

How to Disclose Simultaneous Issue Rate for Know Before You Owe

Several ALTA members have reported that lenders are unsure how to calculate the owner’s title insurance premium when issued simultaneously with a lender’s policy under the CFPB’s Know Before You Owe (TILA-RESPA Integrated Disclosures) rule.

The premium for an owner's title insurance policy for which a special rate may be available based on the simultaneous issuance of a lender's and an owner's policy is calculated and disclosed pursuant to § 1026.37(g)(4) as follows:

  1. The title insurance premium for a lender's title policy is based on the full premium rate, consistent with § 1026.37(f)(2) or (f)(3).
  2. The owner's title insurance premium is calculated by taking the full owner's title insurance premium, adding the simultaneous issuance premium for the lender's coverage, and then deducting the full premium for lender's coverage.” § 1026.37(g)(4)-2.

ALTA has pointed out that in the majority of states the cost of a homebuyer’s title insurance premiums will be inaccurate on the Closing Disclosure due to the CFPB’s mandatory calculation method when where the lender’s and owner’s title insurance policies are simultaneously issued. Many state regulators require settlement agents to disclose the actual costs for each fee the homebuyer is responsible for paying. ALTA developed model Settlement Statements to help settlement agents disclose the accurate costs to homebuyers.

The CFPB realizes that its calculation method will render inaccurate disclosures of the lender’s and owner’s title insurance premiums on the disclosure forms. However, the bureau feared that by disclosing the discounted rate of the lender’s policy and showing the owner’s policy at the full premium, consumers would not understand the incremental cost of purchasing an owner’s title insurance policy. Additionally, if the consumer opted not to purchase an owner’s title insurance policy, the cost of the lender’s policy would then increase substantially, resulting in a higher cost to close than anticipated by the lender and the consumer. However, despite the inaccurate disclosures of the individual costs of the premiums, the sum of the premiums under the rule’s mandated calculation will equal the sum actually charged to the consumer when the consumer pays for both the owner’s and lender’s title insurance policies.

The CFPB recognized that in situations in which the seller pays for the owner’s title insurance policy on behalf of the buyer, the Cash-to-Close figure on the Loan Estimate and Closing Disclosure will be inaccurate. In a seller-pay situation, the bureau indicated in a webinar that there are at least three ways in which the additional credit between the seller and the consumer may be disclosed on the Closing Disclosure:

  1. The remaining credit could be applied to any other title insurance cost, including the lender’s title insurance cost. (See § 1026.38(f)&(g))
  2. The remaining credit can be considered to be a general seller credit and disclosed as such in the Summaries of Transactions table on page 3 of the Closing Disclosure. (See § 1026.38(k)(2)(vii))
  3. Use of a credit specifying the remaining amount for the owner’s title insurance cost in the Summaries of Transactions table on page 3 of the Closing Disclosure. (See § 1026.38(k)(2)(viii)). This credit could be disclosed as a “simultaneous issue credit” in the Summaries of Transactions.

It is important to note that this information does not represent legal interpretation, guidance or advice of the bureau, and should not be used as a substitute for the rule. Only the rule and its Official Interpretations can provide complete and definitive information regarding requirements.

it is important to note that this presentation does not represent legal interpretation, guidance or advice of the bureau, and should not be used as a substitute for the rule. Only the rule and its Official Interpretations can provide complete and definitive information regarding requirements. - See more at: http://blog.alta.org/page/2/#sthash.pTpnZLe8.dpuf

TRID Q&A: How to Handle Recording Fees

Question: I have a question about recording fees on the CD. It is my understanding that recording fees are required to be “rolled up” so to speak in line E 01 since the only two items that the regulations allow to be itemized are for the deed and mortgage and that we are not permitted to add lines for other recording fees (for example the recording fee for a municipal lien certificate or a discharge of mortgage or an assignment of mortgage). So for example, in the CFPB sample CD for a purchase transaction, if there are other recording fees other than for the deed and mortgage, those fees must be added to the box where the figure $85 is represented in the sample form.

Answer: This is a precise understanding of the rule’s requirements on disclosing recording fees. Specifically, the rule requires that all recording fees and other government fees and taxes, outside of transfer taxes, must be added together and labeled “Recording Fees and Other Taxes” under the subheading “Taxes and Other Government Fees.” § 1026.37(g)(1)(i). The bureau clearly states within the Official Interpretations of the rule that no lines can be added or deleted under the “Taxes and Other Government Fees” subheading. Official Interpretation 37(g)(1)-6.

The bureau has also specifically stated that you cannot use an addendum to itemize fees that are required to be disclosed under the “Taxes and Other Government Fees” subheading. § 1026.37(g)(8). If you are required by state law, or simply would like, to make additional disclosures for recording fees or other government fees or taxes, you may disclose those fees in a separate document, such as the ALTA Settlement Statement.

Have questions or issues about TRID that you need answered? Send an email to tridhelp@alta.org. ALTA will address common questions/issues here on its blog.

 

10/01/2015

Is Borrower Required to Sign Updated Version of Closing Disclosure?

The short answer is that it depends on the lender. So, settlement agents should read their closing instructions carefully. Generally, when a disclosure becomes inaccurate within three days before consummation and a new three day period is not required, TRID requires the lender to correct the disclosure and ensure the consumers receives the disclosure at or before closing. 12 CFR 1026.19(f)(2)(i).

Each lender will have different requirements for how they will want to correct disclosures, the timing for sending them to consumers and the documentation they will require for compliance purposes.

It is a safe bet that if the lender requires some documentation of receipt for the original Closing Disclosure, they will likely require the same protocol for corrected disclosures.

09/22/2015

CFPB Spotlights Mortgages in Monthly Complaint Snapshot

Consumers continue to face problems with mortgage servicing, particularly when they apply for a loan modification to avoid foreclosure, according to the Consumer Financial Protection Bureau’s latest monthly complaint report.

Some of the findings in the snapshot include:

  • Continued problems preventing foreclosure: Over 50 percent of mortgage complaints have to do with problems consumers face when they are unable to make payments. Consumers complain of delays and a lack of information when applying for a loan modification.
  • Lack of information when loans are transferred: Consumers report experiencing confusion and frustration about where to make payments when loans are transferred. When the loan transfers occur, consumers complain that payments often increase unexpectedly.
  • Trouble making payments: Nearly a third of mortgage complaints came from consumers saying that they have trouble making the proper payments on their mortgage loans. Consumers describe companies not accepting payments of anything less than the full balance owed, or finding that their payments were not properly applied despite instructions from the consumer.

“Despite strong protections that have been put in place to protect homeowners, this month’s complaint report shows consumers are still having problems when dealing with their mortgages,” said CFPB Director Richard Cordray. “The Bureau will continue to work to make sure that consumers are being treated fairly on their mortgage issues.”

As of Sept. 1, 2015 the Bureau has handled about 192,500 mortgage-related complaints. Overall, the bureau has received more than 702,900 complaints across all products.

The Bureau expects companies to respond to complaints and to describe the steps they have taken or plan to take to resolve the complaint within 15 days of receipt. The CFPB expects companies to close all but the most complicated complaints within 60 days.

Complaint Volume by Product

Complaint volume

Monthly Product Trends

  Complaint products

Complaint Volume by State

Complaint by state

09/18/2015

Rep. Hill: We Can't Defend Bureaucratic Intransigence at the Expense of our Home-Buying Public

During a hearing Sept. 14 before the House Financial Services Committee, U.S. Rep. French Hill encouraged Congress to pass legislation that would provide for limited liability for those who in good faith attempt to comply with the new TILA-RESPA Integrated Disclosure (TRID) requirements that go into effect Oct. 3.

On July 9, the House Financial Services Committee passed legislation introduced by Hill that would extend the hold-harmless period until Feb. 1, 2016. The Homebuyers Assistance Act (H.R. 3192) also says that no lawsuit may be filed against a person for a violation of the TRID rule occurring before such date, so long as the person has made a good faith effort to comply with the rule.

During the hearing, Hill said that some 230,000 Americans refinance or buy a new home every month and “they’re going to be the ones who are victimized by this confusing rule that doesn’t get implemented properly due to a technology reason or a misunderstanding at a real estate brokerage, or a title company, or a bank.”

“I hope we can (pass H.R. 3192) before October 3, so that our title (companies), commercial banks, mortgage bankers, real estate agents all have some confidence that they can go into this new closing regime and not be penalized, either by the federal government or through civil liability,” Hill added. “We can't defend bureaucratic intransigence at the expense of our home-buying public.”

ALTA has joined 17 other industry groups urging federal regulators to provide formal guidance on how regulators plan to enforce TRID for the initial months following implementation on Oct. 3.

The letter asks the Federal Financial Institutions Examination Council (FFIEC) “to implement a clearly articulated transition period that addresses how regulators will oversee and examine regulated institutions for TRID compliance during this transition period.”

Without clear guidance, it’s expected access to mortgage credit will be constrained due to fear of enforcement actions for errors committed in good faith. The Consumer Financial Protection Bureau has said it will be sensitive to those making good-faith efforts to comply.

“Transitioning to the new TRID regulatory framework is a sea change for every participant in the mortgage lending,” the letter stated. “Industry stakeholders have undertaken extensive efforts to comply with these rules, but, even now, they are discovering significant compliance issues. These discoveries raise liability concerns that cannot be realistically resolved before the October 3 deadline, as many will require formal authoritative guidance.”

The letter also asked the FFIEC to recognize the severe penalties that can arise under these new rules. Because of this, the groups asked that the FFIEC announce guidelines that would provide institutions making a good-faith effort to comply relief from enforcement for a reasonable period following Oct. 3.

Joining ALTA on the letter were American Bankers Association, American Escrow Association, The Appraisal Firm Coalition, Appraisal Institute, Collateral Risk Network, Consumer Bankers Association, Community Home Lenders Association, Consumer Mortgage Coalition, Community Mortgage Lenders, Credit Union National Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, National Association of Home Builders, National Association of Mortgage Brokers, National Association of Realtors and Real Estate Services Providers Council.

The Title Action Network has asked members to take action and urge their representatives to co-sponsor and vote yes on H.R. 3192.

09/17/2015

Webinar Recording: TRID Ready? This Is What It Looks Like

If you’re looking for last minute tips to help get your operation ready for the Oct. 3 implementation of TRID, check out a recording of ALTA’s Title Topics webinar for advice from lenders, title/settlement agents and technology experts. The webinar also addresses what your real estate partners and consumers should know about the new closing process.

Webinar handouts:

 

09/03/2015

Realtors Confident in Title Companies’ TRID Preparedness

Realtors have a high degree of confidence that the title companies they work with are prepared for implementation of the TILA-RESPA Integrated Disclosures (TRID), which go into effect Oct. 3.

Realtorsurveycover

According to a survey by the National Association of Realtors, 75 percent of the 1,432 Realtors surveyed are confident that title companies will avoid issues that trigger a delay under the new TRID rules. Those surveyed rated confidence on a scale from one to five. Realtors’ confidence in lenders was 65 percent.

The distribution for title companies was skewed more toward a five rating, or high degree of confidence, for title companies with 41 percent of respondents giving their title partners this rating. Meanwhile, only 27 percent of Realtors gave the highest rating to lenders, according to the survey.

“Results of this survey reinforce the dedication to quality service that title professionals provide to their business partners and consumers every day,” said Michelle Korsmo, ALTA’s chief executive officer. “For more than two years, we have encouraged our members to initiate conversations and collaborate with their Realtor and mortgage lender partners to ensure the implementation of the new forms is seamless. ALTA and its members have been engaged in the conversation and attending conventions, forums and webinars to learn how TRID will change the closing process. It will take a collaborative effort from all of the stakeholders who participate in the transaction to help consumers better understand their terms when they buy a home or refinance their mortgage.”

When asked about their own preparedness, Realtors only 23 percent gave themselves a five rating, while 71 percent rated their readiness a three or better.

When asked about their plans to deal with TRID, 56 percent of Realtors indicated they plan to alter purchase agreements to reflect a longer timeline, while 31 percent will add contingencies to the contract. Additionally, 37 percent indicated they have developed plans with their lenders and title company to help smooth the process.

According to the survey, a quarter of Realtors plan to complete inspections earlier in the process while 31 percent plan to share contracts and amendments earlier in the process with lenders, title insurers and closing agents. This is something ALTA members have encouraged leading up to implementation.