Monday, July 21, 2014

Title Topics: Title Insurance and Reverse Mortgages

What is a reverse mortgage?

The easiest way to understand the reverse mortgage is to immediately eliminate the concept that it is different than a traditional mortgage.
There are a few difference yes, but the same concepts remain true.
The homeowner is getting a loan, but they are only getting a loan on the equity available in the home. If there is equity in the home, the borrower will receive cash payouts. The borrower can pay down that loan if they choose, unlike a traditional mortgage where it’s a requirement. The homeowner must be over 62 years of age and must reside on the property as their primary residence to obtain a reverse mortgage.

Do I need title insurance for a reverse mortgage?

The Title Policy process is the same as with any traditional mortgage. The Owner’s Policy is valid during the entire time that the homeowner owns their property. However, the reverse mortgage lender will require a new Title Mortgage Policy during the loan transaction.

Any Questions or Comments?  Let us know!

Friday, July 11, 2014

Lost Opportunity? Find it in Detroit!

Being an intern with Title Source comes with many perks. Riding scooter’s down the hallways, slushies and snacks in the kitchen, and working with awesome team members are just to name a few. What some may not realize is the wealth of opportunity that surrounds us being in the heart of Detroit.

With six weeks of experience under my belt as a Title Source intern, I have already racked up 17 hours of community involvement volunteer time. I know that the company goal is to reach a total of 12,000 volunteer hours, and with 87 summer interns we can help put a dent in that number. Every volunteer event is unique, but there’s something more to it that’s hard to explain. I walk away knowing I helped Detroit take a small step towards reaching its full potential and becoming the vibrant city we all want it to become.

The first event I participated at was the Susan G. Komen Race for the Cure walk in Detroit. Not only did I join thousands of other supporters by walking for the fight against breast cancer, but I got to spend time getting to know my team members outside of the office. Our very own Title Source team even won the “Rookie of the Year” award from the Tiger’s Wives Foundation!

On June 27th,  I experienced what it was like to be a sous-chef in a kitchen. We went to the Salvation Army to prepare lunch, dinner, and sandwiches for hungry stomachs in struggling areas in Detroit. The Bed and Bread Program delivers over 5,000 meals to people every day. It also provides 400 people with shelter for the day and a place to rest safely at night.

Most recently I volunteered at Gleaners Community Food Bank. We were split up into teams, but all had the same goal- to put together as many pallets of food items and sundries as we could manage. Getting to meet new people and working as a team was an exciting and different experience that I was happy to be a part of. The team I was on proudly compiled an entire seven pallets of items weighing more than a couple thousand pounds!

The time I have spent volunteering in Detroit reminds me that the inches we need are everywhere around us. Every potato I chopped, box of food I packed, and step I walked will only help bring life back into the city. According to Robert F. Kennedy, “Few will have the greatness to bend history itself, but each of us can work to change a small portion of events.” Where will you volunteer to help make change happen?

By Paula Guzik, C.R.E.W. Intern

Paula is a Title Source intern and communication and media studies graduate of Eastern Michigan University. This is her second internship; her previous experience was at the American Red Cross.

For more information about Gleaners Food Bank, click here.

Thursday, July 3, 2014

First-time Buyers Re-emerge in Markets with Strongest Labor Gains

There's been a lot of talk through the first two quarters of 2014 about the relative absence of the first-time homebuyer. With sales activity down from a year ago and standards for mortgage credit approval still tight, concerns about sustaining momentum with a new wave of demand are legitimate.

A lot of the blame is placed on student loan debt, which undoubtedly hamstrings many would-be home shoppers who simply can't be approved because of unattractive DTI ratios. But labor growth has, is and probably always will be one of the primary determinants of consumer capabilities, and it's been modest, at best, so far this year. It should come as no surprise then, that recent upticks in demand from first-timers have been largely confined to metro areas where job growth has been strongest. Before displaying improved confidence, consumers need reassurance regarding not only their own finances but the state of the economy as a whole - both of which are gained when opportunities open up and wages rise.

A recent report from The Wall Street Journal noted the first-time-buyer resurgence in select markets, including Dallas, Denver and Orlando, Florida. Each of those cities has experienced job growth at a pace exceeding the national average, particularly over the past three months, and construction firm KB Home has reported a subsequent surge in inquiries from prospective homeowners.

Jeffrey Mezger, chief executive for KB Home, told The Journal that the increased demand will be evidenced by sales in the coming months, though he wouldn't attempt to quantify the impact.

"It is in those markets with their more traditional recovery where we are starting to see the re-emergence of the first-time buyer, a critical segment necessary to ensure a broad-based housing recovery," Mezger said.

A sign of things to come? 
Mezger did note that there's also been some easing in terms of mortgage qualification standards over the past few months, but the overriding theme in the aforementioned markets is renewed consumer confidence. That sort of "traditional recovery" has largely been lacking this year, which has seen an extended winter and a general dearth of investor purchases expose some of the market's previously masked weaknesses.

Without foreclosures and short sales boosting transaction rates, the all-cash buyers who supported the market and supported price appreciation are mostly gone, leaving a void that must be filled by way of more organic supply and demand. That's where the first-timers come in, and perhaps with more labor expansion, their collective absence will prove only temporary. 

Friday, June 20, 2014

Title Topics: What are Mortgage Backed Securities?

The housing crisis left many families facing great financial losses and financial institutions facing extreme losses. It can be accredited in large part to mortgage backed securities (MBS), which are shares of a home loan that are sold to investors. But to really understand an MBS, you need to know how they originate.

How a mortgage backed security is created
Jim wants to buy a home and is approved for a mortgage from the bank. The bank will give Jim the money to purchase his home if he agrees to pay them back on a regular basis.

Now the bank has two options. They can either:
  1. Collect the money that Jim’s repaying on his loan, plus interest over the next several years
  2. Or sell the loan to Company X, providing the bank with more cash to make more loans, and they can collect a fee before they pass the rest of Jim’s monthly payment to Company X

The bank chose the latter option. Conveniently, Company X purchased 999 other loans from different banks that have similar interest rates and terms to Jim’s loan, so they add his to the pool. The pool is now called a mortgage backed security. Company X then sells parts of the pool to investors, so they have new funds to purchase more mortgages, create more MBSs and sell parts of them off to investors.

To recap, when Jim makes his monthly mortgage payment to the bank, they keep a fee and send the rest of the money to Company X. Company X then collects a fee and passes what’s left of the mortgage to the investors who purchased the MBS. By the time the housing crisis of 2008 hit, home loans became so divided and spread around that it was possible a homeowner could unknowingly own shares in their own mortgage.

Where it failed
MBSs used to yield a high return, because they were based on quality mortgages made to a limited amount of dependable borrowers. To increase profits, banks lowered their standards and granted loans to subprime borrowers who had low credit ratings and a high risk of defaulting on their loan. That didn’t matter, because the bank no longer takes on the risk of a loan default with a MBS, they simply issue it to the borrower and quickly sell it to another company that will have to take on the risks. Standards were lowered so much that people who may have been unemployed as far as the lender knew received loans for hundreds of thousands of dollars.

When subprime borrowers stopped making payments on their mortgages, because they couldn’t afford the monthly payments, the nation saw a significant increase in home loan defaults. The ceased payments left MBS investments completely worthless or at best performing badly, exacerbating the financial devastation faced during the housing crisis.

Any Questions or Comments?  Please let us know!

Friday, June 13, 2014

Title Source Named "Rookie of the Year" at Race for the Cure!

On Saturday, June 7th, 2014, 70 Title Source team members rallied together to support the 23rd Annual Komen Race for the Cure in Detroit. There were thousands of other participants in attendance who also took part in the fight against breast cancer. The new location of the event at, Chene Park along the riverfront, was flooded in pink as walkers and runners made their way to the starting line at E. Jefferson Ave. after a survivor and memorial recognition ceremony.    

Local musicians, cheerleaders, volunteers, and on-lookers rooted for everyone on the race path. Volunteers were anxiously awaiting the runners and walkers at the half way mark to pass out small bottles of water to keep everybody hydrated. When the finish line was in sight, people were determined to go full force to complete the course.

Towards the end of the event, participants gathered in the Chene Park Amphitheater to attend the closing ceremony. Survivors, family, and friends watched an inspiring musical performance and the awards that were presented shortly after. Our very own Title Source team was given the “Rookie of the Year” award from the Tigers Wives Association. This award is given to the largest new team to register for the race. Way to go Title Source!

We are proud to support this great cause and already excited for next year!

For more information about Race for the Cure, click here.

Thursday, June 12, 2014

Title Topics: What is the Dodd-Frank Act? Part Two

The Dodd-Frank Act, signed into law in 2010, was the largest piece of legislation for financial reform passed since the Glass-Steagall Act in 1933. Dodd-Frank seeks to regulate financial markets and make economic crisis, like the one we experienced in 2008, less likely. Following up from our prior Dodd-Frank Title Topics, here are the major components of the Act and the agencies that will implement them.

1.  Regulate credit
The regulation of credit cards, loans and mortgages will be enforced by the Consumer Financial ProtectionBureau (CFPB), who will:
  • Oversee credit report agencies
  • Regulate credit fees, including credit, debit, mortgage underwriting and bank fees
  • Require homeowners in real estate transactions to understand risky mortgage loans
  • Require banks to verify a borrower’s income, credit history and job status

2.  Oversee Wall Street
The oversight of Wall Street actions that could affect the entire financial industry will be performed by the Financial Stability Oversight Council (FSOC), by:
  • Looking for risks that will affect the entire financial industry
  • Overseeing non-bank financial firms, like hedge funds
  • Recommending that the Federal Reserve increase the reserve requirement (that’s the minimum daily requirement of funds on hand) for commercial and savings banks, savings and loan institutions, credit unions, U.S. branches and agencies of foreign banks, Edge corporations and agreement corporations

3.  Stop gambling with depositors’ money
When banks that are too big to fail do actually fail, it devastates the economy and requires a taxpayer bailout. The Volcker Rule was designed to reduce these odds by:
  • Seeking to undo unfair competitive advantages that were brought about by the repeal of the Glass-Steagall Act in 1999
  • Reforming former investment banks who turned into commercial banks during the financial crisis, only to take advantage of taxpayer-funded bailouts
  • Prohibiting a bank from engaging in short-term investment of certain securities and derivatives for their own gain
  • Imposing limits on a banking entities’ investments in, and other relationships with, private equity funds or hedge funds

4.  Regulate risky derivatives
The riskiest derivatives (like credit default swaps) will be regulated by the Securities Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). This regulation will:
  • Identify excessive risk-taking before a major crisis occurs
  • Enforce derivative trades be made in public

5.  Expose hedge fund trades
Before the crisis, hedge funds and other financial advisers weren’t regulated, so no one knew how much they were investing in and how much was at stake. The Dodd-Frank Act now makes:
  • Hedge funds register with the Securities Exchange Commission (SEC) and provide data about their trades and portfolios
  • States more powerful in the regulation of investment advisers

6.  Oversee credit rating agencies
The creation of the Office of Credit Ratings will regulate credit rating agencies to prevent:
  • The over-rating of investments
  • Misguidance to investors

7.  Increase insurance company supervision
The Federal Insurance Office will identify insurance companies that create risk to the entire system by:
  • Making sure affordable insurance is available to minorities and other underserved communities
  • Representing the U.S. on insurance policies in international affairs
  • Working with states to streamline insurance regulation and reinsurance

8.  Reform the Federal Reserve
After the financial crisis, it was determined that the Fed must:
  • Not make a single loan to a single entity without Treasury Department approval
  • Make the banks that received loans or Troubled Asset Recovery Program (TARP) funds public knowledge
  • Allow the Government Accountability Office (GAO) to audit their emergency loans, when needed

 Any questions or comments?  Please let us know!

Friday, June 6, 2014

Title Source Continuing Education and the CFPB Disclosure Rule

Old Republic Comes to Detroit
Title Source welcomed Anne L. Anastasi, director of agent and lender education at Old Republic Title who spoke with our Title Source leaders on upcoming changes in the Title and Settlement industry two weeks ago. 
Title Source is the largest provider of Title Insurance nationwide and works with top underwriters, such as Old Republic. Our lasting relationship has created new opportunities for educating Title Source leaders to keep us up-to-date on the most current industry information. 
Anastasi is one of only a few people who hold the coveted National Title Professional (NTP) and the Certified Land Title Professional (CLTP) designations, proving her excellence in title knowledge, ability to educate others and services brought to the industry. Anastasi has been in the title insurance business for over 30 years. 

Explaining the CFPB Disclosure Rule
The most significant change requires the lender to provide the final closing statement to the borrower three business days in advance. This means that the closing operations will have to have all fees and per diems calculated, taxes adjusted, buyer/seller credits completed and communicated to the lender at least four days prior to the final closing. Communication between closing operations and lenders will be heightened to unprecedented levels if we are to serve the consumer and perform a closing in a timely manner.
Under the definition of delivery in the new Rule, the closing industry may need to complete the final numbers seven days in advance, depending on the method of delivery chosen.
The HUD-1 settlement statement will be replaced by a Closing Disclosure form causing massive software changes and a significant learning curve.
“It was an honor and a privilege to speak to the leadership team at Title Source and I sensed their total commitment to learn the new requirements of the Rule and implement the procedures necessary to meet and exceed the new standards. What a pleasure it will be for Old Republic to continue the dialogue and move forward with your team,” said Anastasi.

We can’t thank Anastasi enough for sharing her enthusiasm and 30 years of knowledge with us! We look forward to her future classes.