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Opinion, commentary, and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Lending

Monday Morning Cup of Coffee: Was TRID worth it?

Plus a window into the credit invisible

February 20, 2017

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

It's President's Day, which means that banks and stock markets are closed, but you can probably get a killer deal on mattresses and appliances. Ruminating on the current state of the presidency could make you super stressed, but maybe this Fortune article from last summer will help. It's titled, "Why Great Presidents Are Often Psychopaths."

Not helping? Check out this video of that crazy baby goat that backflips off other goats. It never gets old.

While not obvious if you consume a steady diet of news (from whatever source), Americans continue to be optimistic about the economy, according to a new survey published by The Hill on Sunday. The Harvard-Harris poll, conducted Feb. 11-13, found that overall, 61% of Americans rated the economy as strong, while 39% said it was weak. When asked if the country was on the right track, only 39% of respondents agreed, but that rose to 42% if the question was only about the economy.

From the Hill article:

"It's really a surprising turnaround given how negative voters have been about the economy since 2009," said Mark Penn, co-director of the Harvard-Harris poll. "But jobs remains the number one issue and a lot of the change in sentiment anticipates tax cuts and infrastructure programs."

For businesses in the mortgage space, the optimism might also reflect the Trump administration’s emphasis on deregulation. And that's understandable.

Servicers are struggling to understand and implement the 900-page servicing rule that goes into effect later this year, mirroring the major confusion and significant investment lenders had to make last year in implementing the seemingly simple TILA-RESPA Integrated Disclosure rule. Now, there's new evidence that consumers were only minimally helped by TRID.

A survey by ClosingCorp shows that 58% of recent home buyers still experienced a change in their loan estimate before closing. A National Association of Realtors article cited closing costs, insurance costs, and taxes as the most common fees that needed to be adjusted.

From the article:

Indeed, 35 percent of recent home buyers say their closing costs and fees were higher than they originally expected, according to the ClosingCorp survey. The top five closing costs that most surprised home buyers were mortgage insurance (24 percent), bank fee/points (23 percent), taxes (22 percent), title insurance (21 percent), appraisal fees (20 percent), and fees paid by the buyer versus seller (20 percent).

Nevertheless, the TRID rule, which took effect in October 2015, has helped buyers understand more of their costs prior to closing. Thirty-one percent of buyers say they were not surprised about their closing costs because their loan estimates and closing fees matched, according to the survey.

The question is not whether there was some good that came out of the TRID regulation. According to this survey, 31% of respondents knew what to expect at closing. But when you weigh that paltry benefit against what it cost to achieve, it becomes ludicrous — all that time, money and effort for such a small result? The cost-benefit analysis on that one seems seriously flawed. Here's hoping for a saner approach going forward.

Despite being assailed on every side by the Trump administration, the Consumer Financial Protection Bureau continues with business as usual. On Friday, the bureau announced it’s seeking public feedback on using alternative data sources for people who lack traditional credit scores. CFPB Director Richard Cordray explained the bureau's interest:

“We want to learn more about whether this kind of alternative data could open up greater access to credit for many Americans who are currently stranded outside the mainstream credit system,” he said. “We also want to understand how market participants are, or could be, mitigating certain risks to consumers that may arise from these innovations.”

So who are these potential homeowners being left out for lack of credit? One segment is surely those in the gig economy, examined in an article in The Atlantic on Saturday. Citing a study by Intuit that 40% of the workforce will be freelancers by 2020, the photo essay by Jessica Chou looks at a number of young people in Los Angeles working in short-term, temporary positions.

The article offers a window into what drives many Millennials, which Chou boils down to this:

The gig economy seems to reflect people’s changing values and ideas about priorities in life and work. While greater personal freedom can result in income instability, it also provides an opportunity to shape one’s life in a more profound way. As Mai-Tam Nguyen, a pastry chef, said, ‘Even if you can make a lot of money, if you are not happy, what is the point?’

Indeed, the essay offers interesting insight for anyone wanting to sell or lend to this generation. View the whole article here

In the real estate battle between the West Coast and East Coast, the West is definitely winning, at least when it comes to one-bedroom rents in the 10 most expensive markets. The New York Times reported Friday that New York City saw a whopping 9.1% drop in rent over the last year for those units, with Boston notching the second-highest drop at 5.9%. It’s not that the average monthly rents there are now cheap — NYC still averaged $2,980 and Boston came in at $2,250 — but that’s a significant slow down.

Only two of the top 10 markets saw an increase this year, and they were both on the West Coast: Los Angeles at 3.6% and Seattle, which skyrocketed 8.5% but still remained the most affordable of the cities. See the whole list here.

Here's to a great week for everyone!

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