WE ARE A FINANCIAL SERVICES PROVIDER · ¾ cfpb regulations ¾ doi concerns ¾ the economics of the...

WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 1

WE ARE A FINANCIAL

SERVICES PROVIDER

PATRICK STONE WFG NATIONAL TITLE INSURANCE CO.

WILLISTON FINANCIAL GROUP

SW AGENCY EXPO

HORSESHOE BAY - AUSTIN, TX

OCTOBER 8, 2014


WE ARE A FINANCIAL

SERVICES PROVIDER THE WORLD WE LIVE IN…

CFPB REGULATIONS

DOI CONCERNS

THE ECONOMICS OF THE MORTGAGE TRANSACTION

THE ECONOMY

OUR ROLE IN THE PROCESS

ENHANCING OUR VALUE PROPOSITION

2015 – WHAT TO EXPECT

IMPROVING ECONOMY – IMPROVING REAL ESTATE MARKET

“KNOW WHAT YOU OWE” 8/1/15

BEING AN APPROVED VENDOR

YOUR COMPANY AS A FINANCIAL SERVICES PROVIDER


THE WORLD WE LIVE IN…


PLEASE RATE YOUR LEVEL OF AGREEMENT/DISAGREEMENT

WITH THE FOLLOWING STATEMENTS:

Courtesy of October Research/The Title Report Mar 2014, Sponsored by NATIC

Agree Disagree

The title industry is in better shape

than when I entered the business 30.3% 41.3%

Once implemented, these

mortgage disclosures could be an

improvement 22.6% 35.3%

Our industry needs to do a better

job communicating with consumers 70.3% 8.5%

Lenders hold too much power over

us 68.8% 4.8%

Fraud gets too much hype as a

concern in the industry 25.4% 42.5%

We need more regional

underwriters 28.6% 19.3%


THE WORLD WE LIVE IN…

CFPB REGULATIONS

DOI CONCERNS

THE ECONOMICS OF THE MORTGAGE

TRANSACTION

THE ECONOMY


CFPB REGULATIONS


CFPB FISCAL 2014

FUNDING = $608 M

PENALTIES = $61.8 M

TITLE = 30 K

STAFF = 1624 FTE


MAJOR COMPLIANCE INITIATIVES AND ACTIVITIES


SPECIFIC APPLICATIONS TO


DOI CONCERNS


HOW TITLE INSURANCE RATES

ARE REGULATED FILE & USE 17 STATES

USE & FILE 1 STATE

PRIOR APPROVAL 14 STATES

PROMULGATED 4 STATES

RATES NOT REGULATED 8 STATES

11 STATES REQUIRE FILINGS FOR FEES WHICH ARE

NOT INCLUDED IN TITLE RATES.


RATE REGULATION STATUTORY

STANDARDS

39 STATES – RATES NOT EXCESSIVE,

INADEQUATE OR UNFAIRLY DISCRIMINATING.

10 STATES AUTHORIZED TO REGULATE

PERCENTAGE OF PREMIUM TITLE AGENTS

RETAIN


NAIC TITLE INSURANCE TASK FORCE 2010 SURVEY OF STATE INSURANCE LAWS

AUTHORIZED TO REQUIRE DATA REPORTING

INSURERS IN 43 STATES

AGENTS IN 34 STATES

ATTORNEYS IN 4 STATES

ABSTRACTERS IN 4 STATES

ESCROW/SETTLEMENT AGENTS IN 10 STATES

AUTHORIZED TO REQUIRE TITLE INSURERS TO OBTAIN TITLE AGENTS IN 31 STATES

ATTORNEYS IN 4 STATES

ABSTRACTERS IN 2 STATES

ESCROW/SETTLEMENT AGENTS IN 10 STATES


THE ECONOMICS OF THE MORTGAGE

TRANSACTION Q1 UNPROFITABLE FOR NON-FINANCIAL LENDERS

COST OF COMPLIANCE ADDED 15 TO 25% TO THE COST OF

MORTGAGE ORIGINATION IN THE LAST 12 MONTHS.

52 DAYS TO CLOSE 32% FALL OUT RATE

MUST CHANGE

INTEGRATION:

• ELIMINATES REKEYING DATA

• ELIMINATES ERRORS

• CUTS DOWN ON PHONE CALLS, FAXES, ETC.

• REAL TIME SIMULTANEOUS DATA ENTRY


THE ECONOMY


ECONOMIC PERSPECTIVES

THE ECONOMY: RECOVERY AND THE IMPACT OF POLITICAL

POLICY

CREDIT: THE GOOD, THE BAD AND THE UGLY

REAL ESTATE RECOVERY: WHAT’S MISSING AND NEEDED? FIRST TIME BUYER

MOVE UP MARKET

CONSUMER CONFIDENCE

MORTGAGE FINANCE CERTAINTY


THE ECONOMY, RECOVERY AND

THE IMPACT OF POLITICAL

POLICY


gdp = c + i + (e-i) + g

THE ECONOMY


U.S. ECONOMY


U.S. ECONOMY REAL GDP


U.S. ECONOMY GOVERNMENT

SPENDING

Source: NYT


U.S. ECONOMY REAL RESIDENTIAL CONSTRUCTION EXPENDITURES

Source: NYT


U.S. ECONOMY PRIVATE CONSTRUCTION SPENDING AS A SHARE OF

G.D.P.


Source: WSJ


U.S. ECONOMY UNEMPLOYMENT SEPTEMBER 2014: 5.9%

Source: BLS


Source: NYT


U.S. ECONOMY “SHIFTING BALANCE” HOW THE COMPOSITION OF FEDERAL SPENDING HAS CHANGED

Source: WSJ


CREDIT:

THE GOOD

THE BAD

AND THE UGLY


U.S. ECONOMY CREDIT MARKET DEBT AND GDP


Source: Seeking Alpha

ONGOING DELEVERAGING IN THE

HOUSEHOLD SECTOR

Household Debt as % of

Disposable Income


ONGOING DELEVERAGING IN THE

HOUSEHOLD SECTOR

Source: FRED

Q1 1980 10.7%

Q4 2007 13.2%

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

Jan

-80

Jan

-81

Jan

-82

Jan

-83

Jan

-84

Jan

-85

Jan

-86

Jan

-87

Jan

-88

Jan

-89

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Household Debt Service Payments as a Percent of Disposable Personal Income (TDSP), Percent, Quarterly, Seasonally Adjusted

2014 Q1

9.9%


Source: NY Times


Source: JP Morgan


Source: Goldman Sachs


Source: FRED

WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 61 Source: FRED


REAL ESTATE RECOVERY

WHAT’S MISSING AND NEEDED?

FIRST TIME BUYER

MOVE UP MARKET

CONSUMER CONFIDENCE

MORTGAGE FINANCE CERTAINTY


U.S. House Price Performance By State (June 2013 to June 2014)


U.S. House Price Performance By State (June 2006 to June 2014)


ARE HOUSING PRICES DONE RISING?

1. PRICE TO RENT RATIOS NEAR LONG-TERM

AVERAGE


Source: Fortune




AVERAGE

2. HOMEOWNERSHIP RATES NEAR LONG-TERM

AVERAGE


Source: Fortune




AVERAGE

2. HOMEOWNERSHIP RATES NEAR LONG-TERM

AVERAGE

3. RATIO OF HOUSING WEALTH TO GDP HAS

NORMALIZED


Source: Fortune


Source: WSJ

WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 74 Source: WSJ

Multifamily 307K

Single-family 618K


Source: WSJ


FIRST TIME BUYER

WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 80 Source: WSJ

Source: Realtor.org


MANY YOUNG INDIVIDUALS LIVE WITH THEIR PARENTS,

BUT THE DECISION APPEARS CYCLICAL


WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 82 Source: Harvard Univ.

WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 83 Source: NYT

A Recovery in Borrowing Consumer loans outstanding are rising, and serious delinquencies are down. But

younger adults continue to shy away from buying homes.

WE ARE A FINANCIAL SERVICES PROVIDER - PATRICK STONE 10.08.2014 85 Source: NYT

Younger Turn for a Graying Nation Baby Boomers No Longer No. 1

From 1947 to 2010, the most-represented age in the United States population was

always a member of the baby boom generation. But that has now ended. Last year,

there were more 22-year-olds than any other age.


Population by Single-Year of Age Rising population in prime household formation years


MOVE UP MARKET


Source: NAR, APA, CORE LOGIC

PERCENTAGE OF OWNER OCCUPIED

HOMES WITH NEGATIVE EQUITY - Q2 2014

17.0 % Q2 2014

_________________

18.8 % Q1 2014


Q2 2014

Las Vegas 24.7%

Atlanta 28.9%

Orlando,Fla 24.9%

Chicago 27.1%

Tampa, Fla 23.7%

U.S. rate 17.0%


CONSUMER CONFIDENCE


Source: The Conference Board & The University of Michigan

CONSUMER CONFIDENCE

WILL AFFECT PURCHASES OF HOUSES AND CARS


Source: WSJ

September

86.0


Source: NYT


Source: WSJ


MORTGAGE FINANCE ISSUES

FINALIZE/ENACT CFPB RULES AND REGULATIONS

QM MODIFICATION/”CURE” TIMELINES

MSR SUPERVISION/TRANSFER RULES

DEVELOP “PRIVATIZED” SECURITIZATION MARKET - RMBS

GOVERNMENT ENTITY CLARIFICATION

FHA CREDIT LOOSENING/”G” FEES

ROLE OF FANNIE/FREDDIE


Source: WSJ/HUD

Q2 2014: 675


Source: WSJ


POSITIVE ECONOMIC OUTLOOK

Q2 4.6% (FINAL REVISION)

Q3 EST 3.0%

Q4 EST 3.0%

2015 EST 3.0%

RESULT • CONSUMER CONFIDENCE INCREASES PAST 95 EARLY 2015

• FIRST TIME HOMEBUYER REENGAGES SPRING 2015

• MOVE UP BUYERS EMERGE Q2 2015

• MARKET NORMALIZES 2016


OUR ROLE IN THE PROCESS

AND ENHANCING OUR VALUE

PROPOSITION


WHERE ARE WE AS AN INDUSTRY?

ESTABLISHED, BUT POORLY UNDERSTOOD

OF SECONDARY INTEREST TO REGULATORS

A NECESSARY PARTICIPANT TO LENDERS

VALUED BY REALTORS…FOR THE MOST PART

CONFUSING TO CUSTOMERS

AND ABSOLUTELY ESSENTIAL TO THE PROCESS


WHAT IS OUR VALUE PROPOSITION?

VALIDATE ASSET

GUARANTEE STATUS

CONFIRM OWNERSHIP

TRUSTED THIRD PARTY (SETTLEMENT)

ABSOLUTELY ESSENTIAL TO THE PROCESS


Privacy Limitations on the dissemination and use of information

Data Security Information regarding safeguarding and disposal requirements

NPPI IS THE #1 HOT ISSUE FOR LENDERS


ALTA® SEVEN PILLARS OF BEST PRACTICES Version 2.0 includes Assessment Procedures and Certification Package

4. Real estate settlement procedures and policies

5. Written procedures related to title policy production, delivery, reporting and premium remittance

6. Liability insurance and fidelity coverage

7. Procedures for resolving consumer complaints

1. Maintain current license(s)

2. Written procedures and controls for Escrow Trust Accounts

3. Written privacy and information security program to protect Non-public Personal Information And this is not

new…GLB became

effective in 1999.


2015 WHAT TO EXPECT

…OR WHAT WILL IMPACT OUR FUTURE?

FAMOUS DUMB PREDICTIONS

IMPROVING ECONOMY

“KNOW WHAT YOU OWE” 8/1/15

BEING AN APPROVED VENDOR

THE ECONOMICS OF THE TRANSACTION

YOUR COMPANY AS A FINANCIAL SERVICES PROVIDER

WHAT GUARANTEES OUR FUTURE?


*** FAMOUS DUMB PREDICTIONS ***

“THERE IS NO REASON ANYONE WOULD WANT A COMPUTER IN THEIR HOME …” Ken Olson – President and Founder of Digital Equipment

“DATA PROCESSING IS A FAD THAT WON’T OUTLAST THE YEAR …” Editor of Business Books for Prentice Hall – 1957

“I’M GLAD IT WILL BE CLARK GABLE FALLING ON HIS FACE …” Gary Cooper on his decision not to take the lead role in “Gone With the Wind”

“WE DON’T LIKE THEIR SOUND, AND GUITAR MUSIC IS ON THE WAY OUT …” Decca Recording Company rejecting “The Beatles” – 1962

"I THINK THERE IS A WORLD MARKET FOR MAYBE FIVE COMPUTERS." Thomas Watson, chairman of IBM, 1943

"WHO THE HELL WANTS TO HEAR ACTORS TALK?" H.M. Warner, Warner Brothers, 1927.

"EVERYTHING THAT CAN BE INVENTED HAS BEEN INVENTED." Charles H. Duell, Commissioner, U.S. Office of Patents, 1899


IMPROVING ECONOMY


Source: Fannie Mae


Source: US Energy Admin.


“KNOW WHAT YOU OWE”

8/1/15


Loan Estimate - 3 pages Replaces GFE and Preliminary TIL


Closing Disclosure - 5 pages Replaces Final TIL and HUD-1


BEING AN

APPROVED VENDOR


THE ECONOMIES OF THE

TRANSACTION

COST TO ORIGINATE HAS RISEN 15-25% IN THE

LAST 12 MONTHS DUE TO COMPLIANCE COSTS

REALTORS LOSING CONTROL OF POS DUE TO

AUTOMATION

TITLE COMPANIES FIXED COSTS


YOU ARE A FINANCIAL SERVICES

PROVIDER

CONDUCT YOURSELF AS THE MOST PROFESSIONAL (THIRD) PARTY

TO THE TRANSACTION.

BE PRECISE ABOUT THE FINANCIAL ASPECTS OF THE TRANSACTION

AND ABOUT THE INFORMATION CONVEYED THROUGHOUT THE

TRANSACTION.

EMBRACE COMPLIANCE – IT GUARANTEES YOUR FUTURE.

OBSESS ABOUT PRIVACY

OBSESS ABOUT SECURE DATA

PRESENT AN ENVIRONMENT THAT REFLECTS ALL THE ABOVE.

BE REGARDED AS THE ADULT IN THE ROOM.


CONTINUED HOUSEHOLD FORMATIONS

EMBRACING COMPLIANCE ENTHUSIASTICALLY

DRIVING OPERATING COSTS DOWN!!!

BECOME A DYNAMIC PART OF THE TRANSACTIONAL PROCESS

INTEGRATE WITH LENDERS

o ELIMINATE OR MINIMIZE DATA REKEYING

o ELIMINATE OR MINIMIZE “CHECK-UP” CALLS

o FACILITATE “SALEABLE” MORTGAGE

o SHORTEN THE TIME TO CLOSE

o LESSEN THE “FALL OUT” RATE

PROVIDE CLEAR AND FREQUENT COMMUNICATION

CONDUCT YOUR BUSINESS AS A FINANCIAL SERVICES PROVIDER

WHAT GUARANTEES OUR FUTURE?


Don’t Have

Need or Care

Need or

Like to Have

E-recording capabilities 46.9 % 53.1 %

Escrow account security technology 34.0 % 66.0 %

My title production system 40.2 % 59.8 %

Cloud hosting 71.5 % 28.5 %

Integration with providers/customers 55.6 % 44.4 %

Auto-filling of forms 44.7 % 55.3 %

Lien release/document retrieval 57.0 % 43.0 %

E-Marketing solutions 64.6 % 35.4 %

Paperless storage 25.2 % 74.8 %

RATE YOUR ATTITUDE ABOUT THESE TITLE

TECHNOLOGY ATTRIBUTES/SOLUTIONS


Source: October Research


Gov’tOversight

ConsumerSearch Sites

eTransaction Platform (Data, Documents, eSigs) eClosing

eRecord

POS & LOS System

SMARTDocs

eDocCustodian

Closing Agent Title Company Attorney

County RecorderCourt House

Recorder | Assessor | Taxation

MortgageOrigination

SalesContract

REALTOR

Loan AppInitial

DisclosuresGFE, TIL

Loan AppLoan Quote

Rates & PricingLock

VOE, VOICredit

MI Appraisal

Title

Closing Documents

eNOTE

Deed

eFile

Title Search, Examination,

Curative, Underwriting

eVaulting

LOANSERVICERS

eDisclosures

SELLER BUYER

Archive

eRecording

PaperDocuments

eVault

eVault

Property Search | Analysis | ContractOrigination | Appraisal | Title Exam | Closing | Recording | Disbursements

MLS

PROPERTYDATA(RETS) Processing

PropertyListing

eSignatures

Electronic Audit & Compliance Trail

Real Property Transactions Mortgage & Title Transactions

Mortgage Backed

Securities(MBS)

FANNIEFREDDIE

WALL ST. INVESTORS

eDelivery· MIN· MOM Loans

Capital Markets Transactions

Securitization

Data Data

Data Warehouses:

Analytics

Appraisal

UMDP | UCDP

UAD | ULDD

BrokerageIDX

Search PortalSyndicators

© All Rights ReservedWright | STRATEGY | Advisors

T h e S u p p l y C h a i n o f R e a l P r o p e r t y T r a n s a c t i o n sConsumers

Lender’s Back Office System

Realtors LendersAppraisers Title & Closing

Attorneys Recorders Securitization RegulatorsInsurers InvestorsTechnologistsCredit Agencies

Notarization

eNotarization

MERS as Mortgagee

State Laws


Source: CNN Money


THANK YOU

WE ARE A FINANCIAL SERVICES PROVIDER · ¾ cfpb regulations ¾ doi concerns ¾ the economics of the...

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