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May 2015

In this month's Rumor Mill you are going to hear more exciting acronyms than you have since the middle school locker room -- along with crucially important information if there is any chance you will buy or sell a house in the future anywhere in the country, and why you may want to do so before July 31st 2015. Technically an acronym is a neologism; interestingly, neologism (the invention of new words) is regarded as a symptom of certain psychotic disorders, such as schizophrenia. This will make a lot of sense once you hear more about the soon-to-be-unleashed IMDR (Integrated Mortgage Disclosure Rule.)

Now you are going to need to hold firm and actually read this. This is going to affect you even though it's the most boring subject on earth. So read on!

It all began when the CFPB (Consumer Fraud Protection Board) was born out of the Dodd-Frank Act, which was born out of the 2008 financial crisis. (If this sounds like committees creating sub-committees, don't be so cynical.)

To make a very long and no doubt fascinating in certain circles story short, the upshot is that the CFPB thought long and hard, and then in 2013 released their 1888 page ruling on how to help mortgage consumers.

Note: Truly, I don't mind so much the final 400 some-odd pages, which actually outline their conclusions on practical applications and questions/answers.  It's the first 1400+ pages where they endlessly justify their existence that causes me to raise a sardonic eyebrow.  As my dad would have said, "stop milking it."

But back to our story.  The CFPB released their report and then climaxed with....wait, wait... get ready for it.... the TRID. TRID is actually itself an acronym! Standing for TILA-RESPA Integrated Disclosure. It's like acronym squared! I'm telling you, I want to party with these guys.

The TRID, besides sounding vaguely sci-fi, is supposed to address leading consumer complaints regarding the mortgage process:

#1:  They don't understand the closing documents/HUD
#2:  They don't have enough time to review the documents before a pen is shoved in their hands

Important Point: Recent home buyers around the Bay Area may be thinking "What?  I had plenty of time!" but you need to remember that these are new NATIONAL guidelines. So-called "customary practices" vary widely between states and even counties, from who pays for Title/Escrow, to who is present at loan signing. In some areas of the mid-west, for example, it's customary practice to get both buyer and seller at the same table to sign immediately together and then hand over the keys right there (horrors!) Honestly, it's not hard to imagine that buyers sitting down with the sellers at the same table for closing felt pressured. It's also not hard to imagine that the mid-west has screwed everything up for the rest of us. Just think of those deep fried cheese curds.

TRID will affect ALL loans originated on or after August 1 2015. So if you get into escrow on July 31, you will not be affected by TRID. Anything after, you will.

So What Does TRID Really Do And Why Do You Care?

1)  TRID will make loan closings take a lot longer. You almost certainly can kiss 21 and even 30 day escrows good-bye, at least for quite awhile (until the bureaucratic kerfluffle has fluff-led.) Literally, whether you are buying or selling, expect 40-45 day escrows to be the new routine.

2)  The disclosure and re-disclosure processes will have set mandatory 3-business-day review times each time. Along with set mandatory definition of delivery times of up to 3 business days. Along with all kinds of confirmation of receipts needed by all parties.  Bottom line? See what I just said above regarding escrow close times.

3)  The new CD (Closing Document) is my favorite part of the whole thing. It's clean, it's clear, and my 11-year old could understand it. Despite the fact that they allowed the IRS to help participate in creating the form, it looks like they did a really great job. It lays out very plainly all of the terms, including all changes that will occur in the future of the loan. The new CD is a total win in my book.

4)  The TRID imposes very severe fines to lenders (ranging from $5k to $1m per day) for "unknowing violations", "reckless violations", & "knowing violations."  For this reason, lenders will be very, very careful to comply. Isn't this great news? Well yes and no. Yes of course, for the rare dirt-bags who intentionally pillage little old ladies. But no, not when you are trying to get on a plane for your 3-week trip to Moscow immediately after watching the new Star Wars movie and want to sign loan docs a day early, and they flat out cannot possibly let you. Uh... Anyone know a good notary at the Kremlin?

So What Can You Do To Mitigate The Pain Of TRID, Even As You Appreciate The Actual Benefit Of The New CD?

1) BUYERS -- Respond to your lender's requests immediately.  You should anyway, but let's face it, sometimes you get busy. You really can't do that with this TRID stuff. Respond and reply if you want your loan to close promptly so that the Seller doesn't get mad and start issuing huffy ominous things like Notices to Perform and Demands to Close Escrow.

2) SELLERS -- The highest offer might not be the best offer if those buyers' agents don't have their act together.  Make sure you are choosing a buyer with a reputable realtor and lender, who are going to handle their side of the TRID bargain like pros, or else you may get a migraine after the 45 days instead of cash in your bank account.

3) REALTORS -- Are going to need to be extremely organized and on it, not only with reminding their clients of all of the above, but with other things too like last minute "Seller Credits" at close of escrow and billing items (like inspections) out of escrow. Not only will those now need to be dialed down a whopping 10-14 days in advance, but guess what else? Because of ECOA (Equal Credit Opportunity Act) rules, the lender may now need to go back to the Appraiser and ask them how the Credit now affects the value of the house.  *long suffering sigh*

At the end of the day, the new CD will certainly be an advantage to consumers even if the value of the rest of it is arguable. But I can tell you one thing for certain, I expect that the first few months at least will be tortuously frustrating and painful for everyone involved as the entire United States groans under the unfamiliar requirements as new territory, exceptions, and unforeseen problems are identified and ironed out. Will loans still close this fall? Of course they will. But if you have a choice and you are thinking of selling or buying, I'd get on it right now so that you are in escrow before July 31st. That way you are not only avoiding being a CFPB TRID GP (guinea pig), but you are also getting current interest rates before the predicted 5%+ by year end.


p.s. In college I once read a list of "Top Ten Reasons You Should Not Date A Girl" and #1 was "She knows what CHUD stands for." Of course that's ridiculous. Everyone knows what CHUD stands for.

Some Good Deals I See

This Townhouse is not perfect, but the price for Lafayette is. It comes with a brand new HVAC, a startlingly large master bedroom suite, and a private deck to call your own.  Extremely reasonable HOA dues of $385 gets you a pool (like anyone cares about the "greenbelt".) Most importantly, two dedicated covered parking spots and no rental restrictions. It's quite clean but not updated at all -- vinyl counters, cheap carpet, single pane windows. Guess what? Those things can be fixed. This thing is such a screamin' deal, there is no question in my mind it will go over asking. How much? Let's get serious about writing an offer and find out.
Lafayette real estate agentJust because you and only you (and the other 720 Rumor Mill subscribers) are in my inner circle of trust, I am giving you a sneak peek at my not-yet-perfect website soon to be unleashed. An archive of previous Rumor Mills will be there (gasp!) along with other tidbits as I see fit.  Check it out now, but perfection is just around the corner.
The thing that makes this house a stand out as a good deal in my book is the easy to miss in-law -- aka au-pair, aka RENTAL that is located above the garage. It is a perfectly adorable, self contained, compact studio and presently renting for $1600/mo. (note: yes, the rental market around here is even crazier than the purchase market.) With a large, entertainer friendly, gorgeous house that includes a yard, landscaping, and a chicken coop -- and a rental that can offset 20-25% of your mortgage -- I consider this house worth a strong look if you are in this price range.

I already told you Horse People about this listing last month. Well I've got two big pieces of news:
One, the price just dropped $76k.
Two, the listing agent just asked me to host the Open House this coming Sunday so I can geekily hob nob about egg-butt snaffles* and thrush treatments* with all of the would-be buyers.
So come visit me this Sunday 5/31 from 1-4pm at 1075 Bear Creek Road!!! I can't promise that I will be wearing breeches*, but I can promise that I will at least be wearing custom paddock boots* and we can always discuss the selenium* content of certain roughage* along with this years' alfalfa* prices.
*If you don't understand, we horse people can't explain.

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