We are in the middle of the “dog days” of summer, which is our busiest time in Northern Michigan. Real estate is moving, and that is good news for all of us! The legislature has been moving, also, passing several Bills that affect real estate transactions. While I sent these out via e-blast, I am providing the information again in the event it was missed. Enjoy the warm weather while it lasts!
Federal Taxes and Homebuying
In the past, it was a requirement that homebuyers pay off any delinquent federal taxes to obtain financing. However, this is no longer a mandate for loans that are being purchased by Fannie Mae (and perhaps others). Under new rules from the government-sponsored company, as long as you have an approved payment plan with the IRS, you can qualify for a home loan. However, since monthly payments under any payment plan will be counted as debt when calculating the debt-to-income ratio, one may want to try to negotiate to have smaller payments and a longer payoff period. Of course, paying off the debt in full is the best solution, if it is feasible for a potential homebuyer to do.
There are some conditions that come with Fannie Mae’s new guidelines: First, a Notice of Federal Tax Lien cannot have been filed against the borrower in the county in which the property is located. Second, at least one payment under the IRS agreement must have been made before closing. Also, the lender must obtain extra documentation, including:
-- An approved IRS installment agreement with the terms of repayment, including the monthly payment and total amount due.
-- Proof the borrower is current on that contract. Acceptable evidence includes the most recent payment reminder from the IRS, reflecting the last payment amount and date received, and the next payment amount and due date.
Top Servicing Challenges Facing Lenders in 2018
According to the MBA, with originations expected to fall by the end of 2018, lenders are looking for new ways to solve servicing challenges to reduce costs and improve profits. Among their largest concerns:
Cost Reduction Challenges
The cost to originate a mortgage loan is nearing the $8,500 mark, but servicers are also subject to increasing costs. At a roundtable hosted by Fitch Ratings, servicers pointed to four primary reasons for their rising costs: (1) compliance expenditures impacting performance; (2) compliance costs; (3) more state servicer reviews; and (4) trouble transitioning out of HAMP to other modification strategies. Today, servicers are looking for ways to cut their operating costs without impacting their performance. Some are reaching out to third-party partners, but even that is a challenge.
Finding the Right Partners
Servicers have expressed difficulty in finding the right third-party outsourcing partners that understand the technology and process. There are very few that follow both. Due diligence is critical in today’s lending world, and servicing is too complicated to work with vendors that do not have the experience and knowledge required. Finding the right partners will involve extensive due diligence, adequate risk mitigation, and achieving high efficiency. Getting the right partners makes every interaction between the servicer and the third-party partner more efficient, lowering costs and improving the servicer’s bottom line.
Accessing the Best Technology
Servicers and lenders cannot take technology out of their process, and it can be difficult and expensive to keep up with the latest technology. However, failure to do so can quickly put the servicer at a competitive disadvantage. Having high-tech software is a critical tool for driving the advanced mortgage servicing machine. It is mandatory, not optional to be successful. The key is to find the right tools while balancing capital and operational expenditures with a satisfactory return on investment.
Servicing Success in 2018
As we all know, challenging times are also times for new opportunity. Servicers are looking forward to having the breathing room to do the work of transforming their businesses, whether they are pursuing operational efficiency or zero full tolerance compliance. Servicers should continue to focus on what drives value in our industry: compliance, quality, and customer service. And, it is a great time to find expert partners to help share that load.
Legal News and Case Law:
The Michigan legislature has been very busy, enacting 3 bills which will affect the manner in which we are currently handling our real estate transactions:
- Remote Online Notarization (RON) - PA 330 of 2018. We are one step closer to providing full electronic closings in Michigan! To date, a person had to be in the literal physical presence of a notary in order to meet the requirements of the notary statute and acknowledge a person’s signature. However, with the passage of House Bill 5811, the term “presence” now includes verification through a remote electronic platform approved by the Secretary of State. The law takes effect 90 days after the Governor signed it. However, we will not see much happening until next year. This law provides that beginning March 30, 2019, the Secretary of State will begin reviewing the RON platform(s) and may approve any or all of them. After that, a notary may acknowledge a person’s signature using the approved platform(s).
- Recording of Trust documents and Death Certificates. Senate Bills 731 through 740, comprising a package of bills intended to modernize language and remove obsolete sections of statutes regarding register of deeds offices in Michigan. The most relevant to us are Senate Bills 734 and 735.
- Senate Bill 734 amends Public Act 133 of 1991 (MCL 565.434) to require that a trust agreement or certificate of trust existence and authority that accompanies an instrument that affects an interest in real property be recorded as a separate document.
- Senate Bill 735 amends chapter 65 of the Revised Statutes of 1846 (MCL 565.48), which governs the conveyance of real property by a surviving joint tenant or tenant by the entirety, to require a death certificate to be recorded as a separate document when it is being filed concurrently with the deed or other instruments that purported to convey an interest in land by the survivor or survivors. These Bills are effective on September 17, 2018, which is 90 days after they were signed into law. They are known as Public Act (PA) 194 and 195 of 2018.
Maura A. Snabes, Esq., CES®, CLTP
Sr. Underwriting & Compliance Counsel
Phone: (231) 547-5220x102
802 Bridge St., Charlevoix, MI 49720
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.
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