2022 started off with several important compliance and document updates. Our experts have compiled and summarized them for you below.
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In November, year-over-year nominal house price appreciation reached 21.5 percent, the sixth consecutive month it has set a new record. According to our Real House Price Index (RHPI) - which measures housing affordability based on changes in income, interest rates and nominal house prices - affordability declined 21.0 percent compared with a year ago, as the growth in nominal house prices combined with the 30-basis point increase in the 30-year, fixed mortgage rate vastly outpaced the 4.4 percent increase in income. Affordability is likely to decline further in 2022, because both mortgage rates and nominal house prices are expected to rise.
As the year came to a close, we made a number of changes to documents in our library, but we didn’t see any activity coming out of the state legislators or from federal agencies or regulators during the month of December. We anticipate this will change as 2022 gets underway. Our expert compliance team will keep you up to date.
As we entered the holiday season, regulatory changes as well as new rules handed down from investors slowed to a halt, leaving only some document updates to report in this month’s compliance roundup. These changes are outlined below.
Document Changes
Our compliance team delivered a number of both minor and significant document updates in October. First American Docutech Corporate Counsel Tadayoshi Sakota took a closer look at form 4506-C and provided answers to some of the questions from lenders who are finding the IRS guidance less than satisfying.
We didn’t see a great deal of activity from state departments in September and nothing from the federal agencies or secondary market investors. That will likely change soon, as September saw the U.S. Senate confirming Rohit Chopra as the new Director of the Consumer Financial Protection Bureau. Our compliance team will keep you abreast of relevant changes the new Director decides to make.
As you plan for 2022, we understand the increasing focus on digitization and automation to combat margin compression. Likewise, the role of eClosing continues to be a priority to improve the customer experience, reduce costs, and close more loans faster. Historically, eClose functionality has been directly tied to a lender’s document generation engine. However, now you have the flexibility to quickly implement a hybrid eClosing process, regardless of which document generation engine you use.
A closing package for a mortgage loan is comprised of many different documents that serve varying purposes. There are disclosures mandated by state and federal law or investors that are provided to inform the borrower about important terms of the transaction. There are documents that are given by custom or tradition that serve many different purposes that are usually required by the lender. Then there are the most important documents in the loan package, the promissory note, and the security instrument. The promissory note is crucial because it is the physical manifestation of the borrower’s promise to repay the holder/lender. The security instrument is important because it is the agreement that creates the property interest that gives the lender the legal right to take possession of the property or collateral if the borrower defaults on their promise to pay.
Housing market potential continued to strengthen in August, according to our Potential Home Sales Model, increasing 0.05 percent compared with July. The market potential for existing-home sales is now nearly 10 percent higher than in August of 2020, when the housing market’s summer rebound was ramping up following the initial pandemic-driven decline in the spring.
