Truth-in-lending (TIL) New Guidelines Effective July 30, 2009

The Federal Reserve Board revised the disclosure requirements for mortgage loans under Regulation Z (Truth in Lending). The revisions implement the Mortgage Disclosure Improvement Act (MDIA), which was enacted in July 2008 as an amendment to the Truth in Lending Act (TILA).

So what does this mean for you? The new guidelines seek to ensure that consumers receive cost disclosures earlier in the mortgage process and have time to understand any changes before a loan closes. The new guidelines require lenders to give good faith estimates of mortgage loan costs ("early disclosures") within three business days after receiving a consumer's application for a mortgage loan and before any fees are collected from the consumer, other than a reasonable fee for obtaining the consumer's credit history.

The revised TIL (Truth in Lending) disclosure requirements take effect July 30, 2009. Under the new rules, lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z).

The new requirements apply to loan applications filed on or after July 30, 2009. For lenders, the new rules are complex and make compliance difficult. While REALTORS® do not have to understand the full law, they should understand the basics so they can advise clients of potential delays under the new procedures.

Key highlights of the revised guidelines include:

• Lenders and buyers must wait seven business days (waiting period) after the lender provides the early disclosures before closing the loan.
• The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinances. Investor loans continue to be exempt.
• The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.
• If the annual percentage rate (APR) increases by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional three business days before closing the loan.
• The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TIL disclosure.
• The consumer may modify or waive both waiting periods for a documented personal financial emergency, but must receive the disclosures no later than the time of the modification or waiver.

So, what does all this mean? Most lenders will not know the real issues until we have worked with the new guidelines for a while. But, here are two scenarios that may present a challenge, first:

• A buyer applies for a new mortgage at 5.50% and decides to float the interest rate.If interest rates increase and the buyer and loan officer forget to talk and the closing is now within three days, then everyone may have to wait, because according to the new rules, a new disclosure will have to be made and the buyer and lender will have to wait three additional days; 

second:

• A buyer finds a home and wants to close fast…well “not so fast”, because according to the new rules the buyer and lender have a “waiting period” of seven days from disclosure to closing.

I wouldn’t be too concerned at this point, just make sure you are working with a seasoned professional and stay in touch with your lender during the process, especially if interest rates are changing.

Free Help "Surviving the Recession" August 15th

Struggling homeowners can get advice from reputable experts to help them stay afloat in today's tough economy at a free "Surviving the Recession" event on Saturday, August 15th, from 8:30 am to 1:30 pm at the DuPage County Administration Building, 421 N. County Farm Road in Wheaton.

We all know someone who is struggling in today's tough economy -- job losses and foreclosures are hitting every community.  "Surviving the Recession" will offer free workshops and information to help with foreclosure prevention, job searches, health care and much more.

"Surviving the Recession" is sponsored by the DuPage Homeownership Center, a HUD-certified housing counseling agency, DuPage County and the DuPage Federation on Human Services Reform.  For more information, call the DuPage Homeownership Center at (630) 260-2500 or visit www.dhoc.org.

View Your Home Through a Buyer's Eyes

Imagine walking into a seller's home and being assailed by overstuffed closets and cabinets, a basement packed floor to ceiling with bins and boxes, and a garage too full for a car to fit. What's so bad about a few full closets, you ask? Well, "full" rooms, closets and cabinets make a home look smaller and short on storage space, make it difficult for a buyer to envision their things in the home, and make the home look unkempt. In contrast, de-cluttered, neat and orderly areas make a great first impression; they make the home appear more spacious with adequate storage for the buyer's belongings, make the home look well cared for, and help improve the value and saleability of the home.

Sellers also benefit from de-cluttering and organizing their homes because it helps them stay ready for showings and minimizes the possibility of packing and moving things they don't need. I advise my clients to de-clutter and organize in this order of priority: entryway, kitchen, bathrooms, bedrooms, closets, garage and basement. I enter their home with them as if we were potential buyers to see what catches our eye and detracts from the attractiveness of their home. To remedy any problem areas, we pare down the excess, pack up items they want to keep but that detract from the appearance of the home, and organize the remaining items neatly and attractively.

The most important step in the process is paring down the excess. This can be especially difficult for homeowners who lived in a home for a long time and view each item in it as a memory of the life they enjoyed there. It can be helpful to have an impartial yet compassionate person guiding the seller through the de-cluttering process. When I fill this role, I let people tell their story and relive the memories their items provide. Then I remind them that it's time to look towards the future to determine what things will enhance the new life upon which they're embarking.

As difficult and overwhelming as de-cluttering and organizing ones home may seem, it's well worth it because it will help command a higher selling price and potentially speed up the sales process. If you find it too challenging to go it along, ask for help from friends, family members or a trained professional.

Economic Impact of Real Estate Activity in Illinois

As I was surfing the web to find useful information I felt you, the consumer, might be interested in reading, I stumbled upon an Economic Page within the National Association of REALTORS® website. I find the following information very interesting. Of course I may be biased as I've been in the real estate business for 11 years now but let me know what you think about these facts!

• The Real Estate Industry accounted for $100,006 million or 16.4% of the Gross State Product (Illinois) in 2007.
  
• When a home is sold in Illinois, income generated from real estate related industries is $16,731. Additional expenditure on consumer items such as furniture, appliances and paint service is $5,331.
  

• When a home is sold in Illinois, it generates economic multiplier impact. You are probably asking yourself what in the heck is that?? There is greater spending at restaurants, sports games, and charity events. The size of this "multiplier" effect is estimated to be $10,590.

• Lastly, additional home sales induce additional home product. Typically, one new home is constructed for every 8 existing home sales. Therefore, for each existing home sale, 1/8 of new home value is added to the economy. The estimate for Illinois is $23,238

• According to statistics provided by the National Association of REALTORS®, the total income derived from the sale of a home in Illinois is $55,889 which uses a median sales price of $185,900. The median in our Chicagoland area is higher than this so expect the total income to be higher than I am reporting.

Pretty interesting stats don't you think? Let me know your thoughts!

The "So What?" about Certified Green Homes - Part 2

In my previous post I outlined the similarities and differences between the most popular third-party certified green home standards.  This post follows up with the all-important question, "So what?"

For a home buyer, there are many advantages to purchasing a certified green home.  First, it gives you the confidence that the home really was built to be green, and is not just a marketing claim made by the builder.  (There are stories out there about homes with a few ENERGY STAR appliances being advertised as "green".)  And when it comes to resale, it gives you something concrete to pass on to your buyers to assist in the marketing of your home, and most likely earn you a higher sales price.

For additional insights into the benefits for a certified green home, I asked the builders of the two new green homes in Elmhurst.

The LEED-candidate home was built by Linda Marick of LINDAM PROPERTY GROUP.  She explained that she opted to build a certified green home because it helped her create a better product.  "Green building is the future," she explains.  "LEED's position was not to wait for local building department to set green standards and then play catch-up.  They decided to define those standards."  Using the checklist gave Marick a jump-start on best practices for construction that she was able to incorporate into the home.  "It really is a state-of-the-art home," she says."LEED inspired me to lead."

The NAHB home was designed and built by Styczynski Walker & Associates.  Bill Styczynski is president of the firm and was the lead architect on the project.  He is also a trained verifier for NAHB projects outside his firm.  He explains that both the LEED and NAHB standards take a wholistic approach to green building.  They both require a unified focus on how water and energy efficiency conservation, lot planning and indoor air quaility come together to create a green home.  "You really have to have all of these to be 'green,'" he explains.  He finds that the wholistic approach to certification is especially useful for consumers.  "Homebuyers often just focus on part of the picture, like indoor air quality or energy efficiency," says Styczynski.  The certification tells a homeowner that every aspect was addressed, even if they pay most attention to just one part of it.

A third-party green certification is a useful tool for homebuyers to find the right home, as well as to explain important features when it comes time to sell the home.  Be sure to ask your home builder about certification details if you are shopping for a new green home.  

Foreclosure Intervention Day - Get a Handle on Your Mortgage

For one day only, Family Counseling Service and Regional Fair Housing Center, sponsored by HomeFree-USA, will be hosting a Foreclosure Intervention Day at College of DuPage K-West Commons, Glen Ellyn, IL.

Saturday, July 18, 2009
9 a.m. to 1 p.m.

To register, call 1-800-349-1451or visit www.aurorafcs.org to register for your one-on-one Foreclosure Intervention Consultation. Licensed Financial Counselors will be present to provide:

• Lender solutions to bring you relief
• Fast foreclosure prevention tips
• An affordable mortgage payment
  

Please bring the following with you on July 18th:

• A copy of your mortgage agreement
• Pay stubs (for employment and income verification)
• Late notices or mortgage statements from your lender
• $25 to run a credit report (or bring your own copies)

HomeFree-USA is a HUD-approved nonprofit, public benefit, homeownership and foreclosure prevention organization. The HomeFree-USA network of 82 community based nonprofit partners represents 1.5 million homeowners and homebuyers nationwide. In 2008, 10,000 homeowners were assisted with their loan modification needs. Today, HomeFree-USA enjoys a remarkable 0% foreclosure rate among families that participate in the pre and post purchase couseling activities.

Understanding Certified Green Homes - Part 1

Green building has been around for some time for commercial buildings.  Now we are starting to see it take off on the residential side.  For example, in my local market of Elmhurst two green homes just a few blocks from each other popped up on the market almost simultaneously.  They each were built using a different residential green building standard.  It sort of begs the question...what are these green standards all about, and what's the difference to me as a home buyer?

Part 1:  An overview of the most popular certifications

• The US Green Building Council offers the Leadership in Energy and Environmental Design standard, known as LEED for short.  The LEED for Homes webpageprovides details on the program.   
• The National Association of Home Builders (NAHB) offers the National Green Building Program.  More details are available on their What Goes Into a Green Home? page.
• The US Environmental Protection Agency/US Department of Energy offer the ENERGY STAR Qualified Home program.  Details can be found on their Energy Efficient Home Features page.
• Cities around the country are offering their own programs as well.  For example, The City of Chicago offers Chicago Green Homes certification. 

The programs each work a bit differently.  For the most part, LEED and NAHB are fairly similar.  They both define a green home through some common concepts.  Then the builder has to set a plan in terms of how the house will be both designed and built to achieve required and optional points in available categories.  The labels are a bit different for each, but LEED and NAHB share several common categories.  For both, projects must address water and energy conservation.  They both require attention on ventilation as well as the materials brought into the home to encourage healthy indoor air quality.  And they both require a thoughtful process around how the specific home is planned and built on its site to reduce the amount of resources required to build it, protect existing vegetation and rain runoff and encourage energy efficiency.   

For both LEED and NAHB homes, the builder must work with a trained, third-party verifier.  The role of the verifier is to review project plans or the building itself to confirm that the green steps the builder says he or she took were actually put into place.  Both programs offer different levels of certification.  And in both cases, certification comes after the house is complete.  Sometimes verification can take up to a year.  It is also possible, and not entirely uncommon, for a house to not earn enough points to actually earn a certification. 

In Elmhurst, the new green homes include a custom home built to achieve NAHB Gold certification, and a spec home built to LEED Silver certification. The family of the custom home moved in on Earth Day.  The home earned it's NAHB Gold certification the next day.  Both homes were recently featured on Chicago Magazine's "Deal Estate" real estate blog.

The City of Chicago green home certification uses similar categories to LEED and NAHB and relies on City staff to verify certification.

ENERGY STAR Qualified homes go through an entirely different certification process.  The program looks exclusively at the energy efficiency of the home as well as the quality of this aspect of the build.  The key difference is that these homes are evaluated primarily based on a third-party energy audit which provides measurable stats on how efficient the home is.  While ENERGY STAR is different from the other certifications it is still closely linked to them.  The other standards either require or provide points for an energy audit, and many homes built to one of the other standards also apply to earn ENERGY STAR certification. 

To offer a more complete solution, the EPA has recently rolled out a sister certification to ENERGY STAR Qualified homes. Now new homes can also earn the Indoor Air Plus certification which address indoor air quality.

The number of certified green homes is growing.  Information about the certification can be a valuable tool for home-buyers as it means an independent party can back up the claims by the builder that the home was built green.  More information on how a green certification can help home buyers in my next post.

Has the Tide Finally Turned?????

Since August 2008, Mainstreet Organization of REALTORS has been tracking the number of houses going under contract/contract pendings on a monthly basis. These were some informative numbers that we hadn't had before. The only tracking information up until that point was the number of closed transactions, average sales price and the median sales prices.

The tracking of contract pendings gave MORe and our members a better picture of what was happening in the marketplace. The number of pending transactions has steadily increased and were on the positive side since August 08'. The disturbing numbers in conjunction with that was the fact that the number of closed transactions were still on the negative side. That meant that homes were getting contracts on them but were't getting to the closing table.

There are probably a ga-gillion reasons why this was happening from financing issues to appraisals to job losses to unforeseen problems that arise from home inspections. Maybe, just maybe the playing field is leveling out and some of the problems are disappearing so we can get the contract pendings to the closing table.

For the first time in maybe 18-24 months we have very positive numbers. Contract pendings for June 09 vs. June 08 are up an astonishing 40.8%. Out of the 125 communities we look at, 112 communities had a greater number of transactions for June 09 versus June 08. Even better is the fact that our number of closed transactions for June 09 is up 1% over the number of closed properties for June 08. Soooo, maybe the tide has finally turned.

REALTORS Confidence Index

I typically review the National Association of REALTORS website, looking for interesting information that consumers would think was worth reading. I stumbled upon the REALTORS Confidence Index. The data I found was collected in May, 2009, from 2625 REALTORS throughout the entire U.S. It looks like the data is compiled every month and new data will be released late in July so check back to get the latest scoop on the pulse of the market!

• When REALTORS were asked what the expectations were for home prices in the area they service, 55.7% predicted home prices would rise 0-5%
• 38% percent of the REALTORS surveyed participated in a transaction during the month of May and 62% had not
• Of those that had a transaction, buyer purchased a vacant home 38%; buyer purchased an occupied home 24%; buyer purchased a foreclosed home 21%; buyer purchased a short-sale home 12%, buyer was a first-time home buyer 29%; and buyer used an FHA loan 22%
• Of those agents that participated in a short sale or foreclosure transaction, 23% rated the condition of the house as above average and 41% rated it as average (reading between the lines...great deals are to be had!)