Opening Titles and Closing Remarks

My real estate closing and title insurance business remained challenging during the first quarter of 2009 but in a totally different way that the previous six months. Opened order counts were the best since the first three months of 2004.

The challenging part for us is not getting the preliminary title work finished-we're doing an excellent job with our turn times. Managing all those files waiting to close is getting tougher. While new orders are way up, the percentage of those orders closing is far less than at any time that I can remember. According to my clients, these orders aren't dead; the process to get to closing is just taking significantly longer due to a number of factors.

First and foremost, loan underwriting is taking a long time . . . a very long time.  Reluctant to add staff when this flurry of activity started in December, many lenders now find themselves chasing their workloads, unable to get control of the ever increasing volume. Adding to the drag is that every loan underwriter feels they'll be seconded guessed on any deal that goes bad so they're being really cautious; more worried about not making bad loans than losing good ones.

Our market also has its share of valuation and appraisal issues but not nearly to the extent as in other areas. Generally housing values in Bloomington and Monroe County are not really going up much lately, but they're not going down much either. I've heard of some deals where the lender required a second appraisal. Condominium appraisals are very tough right now. Especially in developments with non-owner occupied units.

Even if the industry learns to deal with the volume and tighter loan standards, there's another change on the way that will further retard the settlement process. During the second half of the year, lenders and the settlement services industry will begin to implement new procedures in order to comply with changes to the federal Real Estate Settlement and Procedures Act (RESPA) that become mandatory January 1, 2010.

A new form Good Faith Estimate and a new three page form HUD-1 Settlement Statement are major components of the changes. The RESPA changes mandate considerable accountability for lenders with regard to borrower's settlement costs. The accountability will surely result in a training curve for everyone in the settlement services business. That learning curve is not going to make things happen faster. I'll be posting more about these significant RESPA changes over the next few months, so be sure to check back.

In the current environment realtors®, lenders, buyers and sellers are well advised to anticipate that closings will be delayed. To minimize that possibility, buyers need to provide their lender with all requested information as soon as possible. Realtors, instead of writing a purchase agreement with the usual end of month closing date, consider a day in the middle of the month and earlier in the week. There'll be less competition for the loan underwriter's time and less chance that your deal will be delayed.