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What’s New:
The year 2016 marks the 95th anniversary of like-kind exchanges and the 25th anniversary of the 1991 regulations. Two huge milestones for our industry to celebrate this year!
Corporate Settlement Solutions has successfully completed the Service Organization Control (SOC) 2 Type 1 audit. The SOC2 audit validates the security of infrastructures and services and is rapidly becoming an industry standard. The SOC2 audit validates the security of infrastructures and services and is rapidly becoming an industry standard. The SOC 2 report is for service organizations that hold, store or process information of their clients, not financial reporting significant. The report confirms that the existence of internal controls which have been designed and put into place meets the requirements for security principles set forth in the Trust Services Principles and Criteria for Security. It evaluates and reports on the design of controls put into peroration as of one point in time and is a great accomplishment for CSS.
Market News:
Mortgage rates: Mortgage rates moved higher for the second week in a row, according to the latest data released March 10th by the Federal Home Loan Mortgage Corp. A better than anticipated employment report held to drive the Treasury yields higher, which pushed the 30-year fixed loan rates to their highest level in a month, rising to 3.68 percent with an average 0.5 point. It was 3.86 percent a year ago.
The 15-year fixed-rate average inched up to 2.96 percent with an average 0.5 point. It was 3.1 percent a year ago.
The five-year adjustable rate average rose to 2.92 percent with an average 0.4 point. It was 3.01 percent a year ago. The five-year ARM has remained below 3 percent for the past two months.
In addition, the Mortgage Bankers Association has increased its projections from mid-December of 2015 to mid-February of this year for refinances, from $415 billion of loans to be refinanced this year, to $520 billion. Only time will tell.
The Piggyback loan may be back: While the mortgage industry implosion is still fresh in the minds of many, it appears as though the piggyback loan may be making a comeback. Most lenders require mortgage insurance on loans with smaller than a 20% down payment to compensate for their extra risk. However, there are a few new and resurrected programs that have become available, including the piggyback loan. All of the programs allow borrowers to avoid the added monthly expense of insurance (which typically costs from 0.3% to more than 1% of the loan amount annually), but they may pay a slightly higher interest rate instead. The 20 percent down payment requirement is etched into the charters of both Fannie Mae and Freddie Mac, which back or purchase most mortgages in the United States, so it will not be applicable to these types of loans.
Most commonly, the borrower pays the insurance in the form of a monthly premium, which must be automatically canceled once the mortgage balance reaches 78 percent of the home’s original value (though homeowners can petition to have it dropped once it reaches 80 percent). Mortgages from the Federal Housing Administration (FHA) will continue to charge insurance for the life of the loan.
A new program from Bank of America, in partnership with Freddie Mac and a group called Self-Help, avoids the insurance altogether, even though it permits down payments as low as 3 percent. There are some significant limiting factors, however, including a maximum family income and mortgage amount. There is also Social Finance (SoFi) in which eligible home buyers can put down as little as 10 percent on amounts of up to $3 million — without mortgage insurance — though those loans will have a slightly higher interest rate.
Other jumbo mortgage lenders, which generally make loans above Fannie’s and Freddie’s limits of $417,000, are also providing loans with slightly smaller down payments.
In addition, credit unions across the country have a little more flexibility in offering low-down-payment loans without insurance, primarily because they keep their loans on their own books.
The piggyback or second mortgage–which will not necessarily allow 100% financing as we have seen in the past– can take different forms. The second loan may be a home equity line of credit, which generally requires interest-only payments but adjusts to a principal and interest payment after 10 years, or a fixed rate second mortgage, which rates are usually a bit higher than the line of credit.
Avoiding mortgage insurance won’t always be possible. Nor will it always be the best or most economical decision. But the good news is that prospective home buyers have options, whether through a traditional bank, a credit union or a newer alternative lender.
Legal News and Case Law:
FIRPTA Withholding Increase. On December 18, 2015, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”). As part of this, certain provisions relative to FIRPTA withholding were amended. For all closings on and after February 26, 2016, the withholding amount was increased from 10% to 15% of the sales price unless there is an exemption or a reduced rate applies. This liability to withhold rests ultimately with the buyer of the real estate from a seller that is subject to such withholding, although a settlement agent is often the party that remits the funds and documentation completed by buyer and seller at closing.
Flat Recording Fee:
On February 16, 2016, the Senate passed the Flat Recording Fee package (consisting of multiple Senate Bills). Senate Bill 599(S-4), a part of the package, would amend Section 2567 of the Revised Judicature Act (RJA) to do the following:
- Require a fee of $30 to be paid to the register of deeds for recording a document, regardless of the number of pages.
- Require a fee of $5 to be paid to certify a recorded document.
- Require the State Treasurer, by April 1 of the fifth year after the year in which the bill took effect, and then every five years, to adjust the fees listed in Section 2567 to reflect the percentage change in the Consumer Price Index, or 5%, whichever was less.
The bills now move on to the House.
Condominium Legislation. Senate Bill 610 has been passed by the Senate and now moves to the House. The bill would amend the Condominium Act to revise provisions under which a developer may withdraw undeveloped portions from a project or convert them to “must be built” without the prior consent of co-owners, mortgagees, or other interested parties; and provisions under which undeveloped portions that are not withdrawn after a specified time period remain as general common elements and construction rights cease.
Corporate Settlement Solutions has many Michigan branch offices to serve you—Traverse City, Suttons Bay, Elk Rapids, Charlevoix, Bellaire, and Mt. Pleasant in addition to providing services throughout the eastern United States.
Maura A. Snabes, Esq., CES®, CLTP – Sr. Underwriting & Compliance Counsel
Phone: (231) 547-5220×102/802 Bridge St., Charlevoix, MI 49720
e-mail: msnabes@visitcss.com.
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