CFPB will update Know Before You Owe rule
Here’s everything in the works right now

http://www.housingwire.com/articles/37658-cfpb-will-update-know-before-you-owe

The mortgage-regulation balls are back in the air at the nation’s largest regulator of consumer debt products.

Staying true to its announcement back in April, the Consumer Financial Protection Bureau released a set of proposed updates to its Know Before You Owe mortgage disclosure rule after industry calls asked for greater clarity and certainty on the rule.

However, despite the welcomed changes, the bureau failed to address one major concern the industry asked for clarity on, the secondary market.

After the Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, went into effect on Oct. 3, 2015, there were initial hiccups and headaches centered on how long loans would take to close, potentially causing a lot of problems for consumers who are strapped for time.

But a lot of these have past, and once those problems subsides, mainly the secondary market was left to experience the biggest pain points from TRID at this point.

Besides these addressed changes below, the industry, for now, will be required to heed the original guidance the bureau put out that “examiners will be squarely focused on whether companies have made good faith efforts to come into compliance with the rule.”

Here is the full explanation of changes from the CFPB:

1. Tolerances for the total of payments:

Before the Know Before You Owe mortgage disclosure rule, the total of payments disclosure was determined using the finance charge as part of the calculation. The Know Before You Owe mortgage disclosure rule changed the total of payments calculation so that it did not make specific use of the finance charge. The Bureau is now proposing to include tolerance provisions for the total of payments that parallel existing tolerances for the finance charge and disclosures affected by the finance charge.

What this means:

This change would make the treatment of the total of payments disclosure consistent with what it was prior to the Know Before You Owe mortgage disclosure rule.

2. Housing assistance lending:

The rule gave a partial exemption from disclosure requirements to certain housing assistance loans originated primarily by housing finance agencies. The bureau’s proposed update would promote housing assistance lending by clarifying that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The rule would also exclude recording fees and transfer taxes from the exemption’s limits on costs.

What this means:

Through the proposed update, more housing assistance loans would qualify for the partial exemption, which should encourage lenders to partner with housing finance agencies to make these loans.

3. Cooperatives:

The bureau is proposing to extend the rule’s coverage to include all cooperative units. With a cooperative, a buyer becomes a shareholder in a corporation that owns the property. The buyer is then entitled to exclusive use of a housing unit in the property. Currently, the rule only covers transactions secured by real property, as defined under state law. Cooperatives are sometimes treated as personal property under state law and sometimes as real property.

What this means:

By including all cooperatives in the rule, the Bureau would simplify compliance.

4. Privacy and sharing of information:

The rule requires creditors to provide certain mortgage disclosures to the consumer. The bureau has received many questions about sharing the disclosures provided to consumers with third parties to the transaction, including the seller and real estate brokers. The bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers, and their real estate brokers or other agents.

What this means:

The bureau is proposing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.

Mortgage Bankers Association President and CEO David Stevens commented on the proposed updates saying, “MBA appreciates the CFPB’s efforts to update and clarify certain aspects of the ‘Know Before You Owe’ rule. This particular regulation has a big impact on both borrowers and lenders, so it’s important that the Bureau and stakeholders continually reassess the implementation process to ensure its effectiveness. We look forward to commenting on the rule, and continuing to work with the CFPB to gain further clarity in order to improve this and other rules and regulations.”

National Association of Federal Credit Unions President and CEO Dan Berger, while positive on the news, is still hesitant on if the changes are complete enough.

“NAFCU appreciates the CFPB revisiting the TRID rule and, at first glance, there appear to be a few positive components that we strongly advocated for on behalf of our members,” said NAFCU President and CEO Dan Berger. “Most notably, the bureau has taken our advice regarding the codification of its informal compliance guidance.

“However, the bureau has not gone nearly far enough to address the numerous substantive compliance issues that have been highlighted by credit unions. Although our compliance experts will continue to analyze the proposal to identify its full impact, NAFCU believes this should be the first step in a process to create a mortgage disclosure rule that is workable for financial institutions and benefits consumers.”

The CFPB stated that it is allowing input from a wide range of stakeholders and invites the public to submit written comments on the proposal. Comments are due Oct. 18, 2016 and will be weighed before final regulations are issued.

China’s debt
Coming clean
Plans to rein in credit slowly take shape

http://www.economist.com/node/21701793/print

AS ANYONE who has conquered addiction knows, the first step is admitting that you have a problem. China, hooked on debt for much of the past decade, may be reaching that point. In recent weeks officials have talked at length about the country’s troubling reliance on credit to fuel growth. They have also sketched out a range of possible solutions. It is only a start—withdrawal symptoms in the form of defaults and slower growth are sure to hurt, and could yet prompt a relapse. But the new tone is encouraging nonetheless.

The frankest admission came in a front-page article in the People’s Daily, mouthpiece of the Communist Party, in early May. An anonymous “authoritative person”, widely believed to be Liu He, an economic adviser to President Xi Jinping, warned that high leverage could spark a systemic financial crisis. China’s total debt load jumped from less than 150% of GDP in 2008 to more than 250% at the end of last year. Increases of that size have presaged economic trouble in other countries.

Last month the government convened its first news conference on the topic, bringing together officials from the finance ministry, the central bank, the banking regulator and a top planning agency. The Chinese Academy of Social Sciences, a prominent official think-tank, has also opined on it. The research arm of the central bank has published a paper with a section on what can be done. And this week, a forum in Beijing gathered officials, bankers and academics to sift through the suggestions.

All of them have homed in on corporate debt as the main worry. That is obvious enough from a quick comparison with other big economies: China sits in the middle of the pack for total debt but is at the high end for corporate liabilities (see chart). Yet it marks a change of tone from recent years, when officials focused on cleaning up the debt of local government. This presented a more immediate but smaller problem, and also a more manageable one.

The most important outcome from all the discussions has been an outline, albeit rough, of how China hopes to tackle its burden. There will be no rush to deleverage. Sun Xuegong, a central planner, said China would start by slowing the rise in its debt-to-GDP ratio before guiding it lower, trying to avoid too much collateral damage to the economy in the process.

Officials think they can cushion the blow from eventual deleveraging in three ways. First, they want to get more bang from new debt. That, in theory, means choking off credit to underperforming state-owned firms or restructuring them in the image of their sleeker private-sector peers. Loans would flow to better firms generating higher returns.

Second, they want equity financing to help replace debt. That is tough, given the woeful state of the stockmarket after last year’s crash. But there are other ways. Regulators are working on a programme under which banks will swap some loans to indebted companies for equity stakes instead. Banks have pushed back, fearing that they will be saddled with bad investments. Officials insist that only viable companies will receive this treatment.

Finally, the government will use fiscal policy to prop up growth, in effect transferring debt from corporate balance-sheets to its own. That makes sense: official public debt is low, at less than 50% of GDP, while state-owned companies are the biggest debtors. However, direct bail-outs would give state firms little reason to improve their operations. So the central bank’s researchers suggest other measures, such as tax cuts, which would improve the business environment for all.

Scepticism about whether China will end its credit binge is warranted. Last December the government identified deleveraging as one of its main tasks for 2016. Yet credit issuance has outpaced economic growth by a wide margin, raising overall debt levels. And China’s approach to state firms is inconsistent. Officials recognise that getting them to operate more like private firms, constrained by budgets, is critical to controlling debt. But at the same time the Communist Party recently reiterated that they must obtain its approval before making any big decisions. China is sure to keep one promise, at least: there will be no speedy resolution to its debt problems.

I think Terry here is the owner of an apartment building which would explain the higher interest rate. I also think she did not understand that when an insurance payment is made on a property it goes to the actual OWNER of the property (the bank) not the debtor (her).

I don’t really get what the phrase “women owned business” is suppose to illicit. She used it a couple of times as if the system was stacked against her because of her gender. Typical victim mentality on this one. I guess she didn’t realize property investment entailed some risk.

This person who emailed her story, would have been much more effective in telling it, and convincing reasonable un-foolish minds of her plight, by remaining calm, refraining from hyperbole and uncontrollable rage, and by focusing and detailing the facts methodically.

Chicago property tax bill double whammy: Increases plus an assessment hike

http://www.chicagotribune.com/news/local/politics/ct-chicago-property-tax-double-whammy-met-20160731-story.html

Anne McDermott had braced herself for a big increase in the property taxes on her Near South Side town home, but when she opened the bill last month, she was still taken aback.

She’d figured a boost of maybe $550 on the $4,214 she paid last year. That’s a jump of about 13 percent, the average increase on Chicago property tax bills for 2016. But McDermott’s bill went up by nearly $1,360 — more than 32 percent.

It was the result of being hit with a double whammy: Not only were huge tax hikes by City Hall and Chicago Public Schools taking effect, but the taxman came as he does every three years and reassessed the value of McDermott’s home. And he concluded it was worth a whopping 31 percent more.

“I had to sit down, and then I read things to see if I could make sense of it,” said McDermott, who moved to the city seven years ago from the western suburbs, where the tax rates were higher but the housing prices were lower. “It’s a little scary, because this is I think one of the largest property taxes the city has done, and that may not be the end of it.”

Thousands of home and business property owners in trendier parts of the city saw tax increases far above the average boost of 13 percent. Like McDermott, the growth in the value of their house for tax purposes — as determined by Cook County Assessor Joe Berrios’ office — far outpaced the growth in other parts of the city.

Those hefty assessed value increases compounded the effects of the recent tax increases, which Mayor Rahm Emanuel pushed through the City Council and Chicago Board of Education last year to shore up pension funds for city police officers and firefighters and give financially struggling CPS more money to pay for construction projects.

The practical effect is that folks in many city neighborhoods are rejiggering household and business budgets to come up with the money needed to make this year’s second property tax payment, which reflects the larger-than-expected increases and is due Monday.

In many cases, taxpayers are struggling to understand why their bills went up far more than anticipated. The explanation lies in the complex way property taxes are calculated in Illinois, and how property values factor into that equation.

How it works

Local governments — including the city, Cook County, CPS, the Chicago Park District and the Metropolitan Water Reclamation District — figure out how much money they want to collect from property taxes. That’s called the levy. Emanuel asked for a record property tax increase at City Hall and a larger-than-usual tax hike at CPS. The result was a much higher total property tax levy in the city.

County tax officials then take the total amount of money government wants and divides it up among all city property owners based on each home’s individual assessed value relative to the total value of all properties in the city. Think of it as a giant pie. If the whole pie is worth $100 and your piece is worth $1, you would pay one one-hundredth of the tax levy, or 1 percent of the total amount government wants.

If your piece of the pie is bigger than your neighbors’ — meaning your home is worth more — you’ll pay more in property taxes than they do. And if your home value goes up more than theirs, you end up paying for a bigger portion of any property tax hike.

The assessor takes a look at the value of homes and business properties in Chicago every three years. He did so last year, but your home’s new value wasn’t reflected until the property tax bill you got this year. In this particular reassessment, the tax man caught up with several years of growth during which property values were recovering after the Great Recession.

“The reason you saw such a huge increase in the more affluent neighborhoods, like the Gold Coast and Lincoln Park, is because they had a larger increase in values over the last three years, whereas other neighborhoods did not see as much of a rebound from the recession,” said Molly Phelan, a Chicago attorney who specializes in real estate taxation.

Data provided by the assessor’s office show that property values increased faster downtown, along the lakefront and in up-and-coming neighborhoods, where the median increase for single-family homes was 20 percent or more.

In Kenwood, Hyde Park, Wicker Park and Logan Square, the median increase topped 25 percent. In Old Town, Lincoln Park, the Gold Coast, the Magnificent Mile, Near North, River North — and even part of the “Hipster Highway” along Milwaukee Avenue in Ukrainian Village and Bucktown — the median increase exceeded 30 percent.

So folks living in those areas paid for more of the combined $425 million property tax increase for the city and CPS than folks who lived in economically struggling neighborhoods on the South and West sides. By comparison, the median increase was below 10 percent in such neighborhoods. Coming in with increases of a little more than 5 percent were Calumet Heights and Riverdale.

Many Northwest and Southwest side neighborhoods saw increases ranging from about 10 percent to 13 percent.

Homeowners who live in the areas that fell in the middle of that spectrum were likely to see tax increases close to the 13 percent average. Those at the bottom of the spectrum saw lesser tax increases — and in some cases possibly none at all — and those at the top were hit particularly hard.

A Tribune analysis of data provided by the assessor’s and treasurer’s offices show that the 10 biggest residential property tax increases occurred in single-family homes in River North, Lincoln Park and the Gold Coast. The business titans and sports stars who own many of the homes ended up with tax bills that increased anywhere from $67,429 to $104,909. In each case, the tax hikes topped 90 percent.

The impact

Property tax increases don’t only affect homeowners. They also can chip away at the margins of commercial property owners who don’t have the ability to immediately raise rents for the businesses that occupy their buildings.

Significant commercial property assessment increases along the booming Hipster Highway or in Fulton Market west of the Loop posed a problem for many owners who rent to business tenants with multiple-year leases that have fixed rates, Phelan said. To lower their tax bills in line with the revenue their property value generated, they had to appeal their assessments, she said.

“Obviously, they have to go back and appeal every three years to make sure that they’re not getting their valuations pushed up with the surrounding neighborhood, because they’re locked into” leases, Phelan said. “Which is a huge concern for the small landlords that operate in these up-and-coming neighborhoods.”

Phelan also recommended that homeowners who think their assessed values increased more than was warranted appeal their assessments. Although it’s too late to change this year’s tax bills, appealing could lower them in future years.

“You can always go back every single year and file a property tax appeal, and if it’s unsuccessful, it’s unsuccessful,” Phelan said. “They’re not going to raise it on you.”

This year’s tax increase is not the end of it.

“The unfortunate truth is that the pain is not over,” Phelan said. “It is just beginning.”

The city has locked into increases of at least $225 million over the next three years, while CPS is planning to increase taxes by an additional $250 million for teacher pension funding next year. That’s $475 million total over the next three years.

McDermott, the Near South Side town home owner in Dearborn Park, said she understands the city has chosen to raise more money to cover contributions to long-shortchanged public worker pension systems. And she said she prefers city living to the suburbs, even though she now does a reverse commute for her job as an office designer.

“The good news is the city is still attracting businesses, but the bad news is there is still a substantial pension shortfall,” she said.

“You kind of wonder — do you want to stay in the city?” she asked. “I don’t think I would move to the suburbs; it does make you consider other cities in the Midwest.”