THE VOICE FOR REAL ESTATE IN ILLINOIS
TILA-RESPA I N T E G R AT E D DISCLOSURE
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NAVIGATING THE MORTGAGE MAZE Secretary Schneider Outlines Goals for IDFPR
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CONTENTS JULY 2015
Departments 4 President’s Message: Making the REALTOR® Voice Heard 5 What’s Online: Connect with IAR, Upcoming IAR Events 6 Quick Takes: Boomerang Buyers are Back, Gen Y and Homeownership 8 At the Capitol: Highlights from IAR Lobby Day 11 RVOICE: IAR Increases Support to Local Candidates 12 Homefront: Honoring REALTORS® of the Year
TILA-RESPA I N T E G R AT E D DISCLOSURE
28 Real Property Alliance: Launch of Website Promoting Property Ownership Issues 29 Latest Ethics Hearings
ILLINOIS ASSOCIATION OF REALTORS®
30 REALTOR® Community
THE VOICE FOR REAL ESTATE IN ILLINOIS
31 Taking the REALTOR® Message to Capitol Hill
14 19 22 25 26
TILA-RESPA Changes Coming Help Buyers Through the Mortgage Maze Show Them the Money: Mortgage Options for Today’s Buyers IDFPR’s Schneider Talks Agency Goals Foreclosures and the Illinois Real Estate Market
ILLINOIS REALTOR® July 2015
PRESIDENT’S MESSAGE Jim Kinney | ABR, CRB, CRS, GRI, 2015 IAR President
MAKING THE REALTOR® VOICE HEARD REALTORS® have to take their message to those who make the policies. We do this to show how engaged our members are on issues. We also make a point of showing how policy shifts can have big repercussions for IAR’s 43,000 members, their clients and the economy. Over the past few months, thousands of Illinois REALTORS® have sent messages to those who need to hear them the most. • Through REALTORS® Political Action Committee (RPAC) contributions and independent expenditures, REALTORS® took an active role in 58 races throughout the state in April. The effort was a resounding success, with 71 percent of REALTOR®-backed candidates achieving victory. • Also in April, close to 500 REALTORS® stormed the state Capitol in Springfield to lobby for private property rights. They met with scores of legislators and much of the General Assembly’s top leadership. • In May, REALTORS® were in Washington, D.C., where they met with most of the state’s Congressional delegation and had a meeting with Sen. Mark Kirk. Add in the countless calls, emails and responses to Calls for Action, and REALTORS® make a difference. More important, elected officials know we make a difference. Help us make sure the REALTOR® voice is heard. Already as of this writing 24 percent of IAR’s members have stepped up and made a donation to RPAC. We’re looking for more support, so if you want to make a donation or perhaps take the leadership step of joining the President’s Circle of givers, go to rpacnow.com.
Keep up the good work.
“REALTORS® have to take the message to those who make the policies.” — Jim Kinney
IAR President Jim Kinney at the Illinois Caucus meeting in Washington, D.C. (top left); Kinney with IAR Local GAD Brian Bernardoni (top right); Kinney meeting with Illinois House Majority Leader Barbara Flynn Currie at IAR Capitol Conference (middle photo); and with IAR Housing Policy Advisor Sharon Gorrell and IAR Director of Governmental Affairs Greg St. Aubin after testifying before an Illinois House Committee on Economic Development and Housing (bottom photo.)
ILLINOIS ASSOCIATION OF REALTORS® THE VOICE FOR REAL ESTATE IN ILLINOIS
2015 IAR OFFICERS President Jim Kinney, ABR, CRB, CRS, GRI email@example.com President-Elect Mike Drews, GRI firstname.lastname@example.org Treasurer Doug Carpenter, ABR, AHWD, SFR email@example.com Immediate Past President Phil Chiles, ABR, CRS, GRI, SRES firstname.lastname@example.org Chief Executive Officer Gary Clayton, CAE, RCE Editor Jon Broadbooks Senior Editor Stephanie Sievers Content Marketing Specialist Bill Kozar Graphic Designer Katie Grant For advertising information contact Arlene Braithwaite, 410-772-0820, email@example.com The ILLINOIS REALTOR® (ISSN 0744-221) is published four times a year during the months of January, April, July, and October by the Illinois Association of R EALTORS®, Post Office Box 19451, Springfield, Illinois 62794-9451. Periodical postage paid at Springfield, Illinois and at additional mailing offices. Postmaster: Send address changes to: The ILLINOIS REALTOR®, Post Office Box 19451, Springfield, Illinois 62794-9451, 217/529-2600.
CONNECT WITH IAR
Get social and connect with the Illinois Association of REALTORS® (IAR) on a variety of social media platforms: www.facebook.com/IllinoisAssociationofREALTORS www.youtube.com/user/IllinoisRealtor
Opinions expressed in any signed articles of the ILLINOIS REALTOR® are those of the author and do not necessarily represent the opinions of the Illinois A ssociation of REALTORS ®. Advertising of product or services does not imply endorsement.
TILA-RESPA Integrated Disclosure
Advertising rates are available at www.illinoisrealtor.org or on request. Annual dues of every REALTOR®, REALTORASSOCIATE®, and Affiliate member of IAR includes $3 for a one-year subscription to the ILLINOIS REALTOR®.
VOLUME 52: NUMBER 3 Copyright © 2015 Illinois Association of REALTORS® All rights reserved. www.illinoisrealtor.org e-mail: IARnews@iar.org blog: www.IARbuzz.com
Like us on Facebook. Join us on LinkedIn. Follow @ILREALTOR and @ILREALTORmag on Twitter. Subscribe to YouTube.com/illinoisrealtor
FIND OUT WHAT’S HAPPENING AT IAR Check out IAR’s event calendar for 2015 and 2016 so you can learn more about the events you want to attend. Find IAR events at www.illinoisrealtor.org/ events and map out your to-do list now.
PROFESSIONAL DEVELOPMENT WITH IAR
IAR is your trusted source for state-approved continuing education classes and postlicense required coursework offered at 60+ branch locations statewide, PLUS affordable and convenient “paperless” CE, home study and online options. www. illinoisrealtor.org/education.
LEARN ABOUT TILA-RESPA
Starting in August, new rules will affect the home buying and mortgage process. Use IAR resources to prepare for changes to TILA-RESPA and potential closing delays. www. illinoisrealtor.org/respa
ILLINOIS REALTOR® July 2015
QUICK TAKES Vacation Home Sales Up U.S. vacation home sales rose to a record high in 2014 and accounted for 21 percent of all transactions that year, according to NAR’s 2015 Investment and Vacation Home Buyers Survey. Where are people buying vacation homes? Forty-six percent were in the South, 25 percent in the West, 15 percent in the Northeast, and 14 percent in the Midwest.
The number of FREE contracts, forms and downloadable brochures available to members of the Illinois Association of REALTORS®. Find free IAR member downloads at www. illinoisrealtor.org/downloads (Member login required)
Boomerang Buyers Begin to Head Back to Housing Use G.I. Bill Benefits to Become an Illinois REALTOR® Veterans can now use their G.I. Bill benefits to take pre-license classes through IAR’s Licensing and Training Center, the only real estate school in the state that can provide the training under the G.I. Bill. The benefits only apply to LIVE courses and can’t be used for online, webinar or home study courses. Learn more about the benefit at www.illinoisrealtor.org/ GIBill
Homeowners who lost their homes to foreclosures or short sales during the recession are returning to homeownership and Illinois is among the top 10 states expecting to have the most return buyers, according to NAR research. Nearly one million of the nearly 9.3 million people who lost their homes between 2006 and 2014 have purchased again and another 1.5 million could become homebuyers within the next five years. About one-third of formerly distressed owners will ever return to the market, NAR said. Read more at http://economistsoutlook.blogs.realtor.org/2015/04/17/return-buyers-many-already-here-many-more-to-come/
Smartphones Only Online Tool for 7 Percent of Americans Nearly two-thirds of Americans own a smartphone today. But for some without broadband service at home or other online alternatives, a smartphone is the only way they access online services and information, according to the Pew Research Center report, “U.S. Smartphone Use in 2015.” That can be important for real estate professionals to know as they try to connect with consumers. Read the report at www.pewinternet.org/2015/04/01/ussmartphone-use-in-2015
The “Smartphone-Dependent” Population: 7 Percent of Americans Rely Heavily on a Smartphone for Online Access % of U.S. adults who have a smartphone, but lack other broadband internet service at home, and/or have limited options for going online other than their cell phone. ALL ADULTS
64% own a smartphone
15% have limited options for online access other than cell phone 10% have no broadband service at home other than smartphone data plan
7% overlap have limited options for online access and no broadband service at home
Pew Research Center American Trends Panel survey, October 3-27, 2014. PEW RESEARCH CENTER
Graphic from Redfin
Chicago Ranked 6th Most Walkable City With a walkability score of nearly 75, Chicago made Walk Score’s 2015 top 10 list of most walkable large cities. Believing that cities with good public transit, bike routes and walkable neighborhoods equal a better quality of life, Walk Score, a Redfin company, ranks various cities. Other cities on the list: New York, San Francisco, Boston, Philadelphia, Miami, Washington, D.C., Seattle, Oakland and Baltimore https://www.walkscore.com/cities-and-neighborhoods
Gen Y and Homeownership Gen Y, or Millennials, are optimistic about becoming homeowners one day. A study by the Urban Land Institute, “Gen Y and Housing: What They Want and Where They Want It,” CURRENT HOUSING found that 70 percent of Millennials expect 21% to own a home by live with family 2020 even though 3% 50% student/ only 26 percent own rent military currently. Looking 26% housing own longer term, 92 percent expect to eventually buy a home. Data from the Urban Land Institute
Other findings: • 50 percent are currently renters •
13 percent live in or near downtown; 63 percent live in other city neighborhoods or suburbs
21 percent still live at home
98 percent of those who do own a home are satisfied or very satisfied with homeownership
Gen Y constitutes 26.3 million American households
Find the full report at http://uli.org/report/gen-y-housingwant-want/
ILLINOIS REALTOR® July 2015
AT THE CAPITOL Julie Sullivan | Assistant Director, Legislative and Political Affairs
ILLINOIS REALTORS® SHOW THE POWER OF R IN SPRINGFIELD Hundreds of Illinois REALTORS® (IAR) attended the 2015 IAR Capitol Conference and REALTOR® Lobby Day in Springfield. REALTORS® know their local communities and IAR’s Capitol Conference allows them to speak directly to state legislators about the legislative and regulatory issues that affect homeowners and the real estate industry. Among the key issues on this year’s REALTOR® agenda: • Opposition to a bill that would have required mandatory video sewer inspections for every home sale. IAR argued this would raise costs for homeowners. • Urging the defeat of municipal efforts to short-cut around the legal process for resolving property liens — in particular a bill that would have allowed a municipality to attach liens to nonoffending properties. • Support for enhanced notice to buyers of condos in foreclosure of fees owed at closing.
IAR Leadership, lobbyists and members meet with Senate Republican Leader Christine Radogno, R-Lemont. Photo/Terry Farmer
IAR staff and the leadership team brief Senate President Pro Tempore Don Harmon, D-Oak Park, on the real estate market and key legislative concerns. Photo/Terry Farmer
Chicago Association of REALTORS® President Hugh Rider and Public Policy and Government Affairs MIG Chairman Ron Abrams show the Power of R.
Egyptian REALTORS® posted a selfie using IAR’s Capitol Conference app.
Lining up outside the Illinois State Capitol.
A meeting with House Majority Leader Barbara Flynn Currie, D-Chicago Photo/Terry Farmer
State Sen. Darin LaHood, R-Peoria, and Illinois REALTORS® Photo/Terry Farmer
Carrie Bey-Little and Nykea PippionMcGriff chat at the Major Investor coffee. Photo/Terry Farmer
Tracy Taylor, GAD Kris Anderson and Zeke Morris meet with Rep. Ken Dunkin, D-Chicago at the Capitol.
ISSUES TRACKER Stay up-to-date on which bills are dead or alive at www.IARactioncenter.org Learn more about the issues and find additional coverage from the 2015 IAR Capitol Conference at www.illinoisrealtor.org/capitolconference
REALTORS® talk industry issues with Rep. Mike Smiddy, D-Port Byron Photo/Terry Farmer
YPN members Julia Brenner, Lucas Albright, Kyle Kissane, Jeffrey Jay and Grace Goro at the Illinois State Capitol
REALTORS® Renate Meyer, Dean Rouso and Chris Read
IAR 2016 Treasurer nominee Matt Difanis, center, during Capitol visits
REALTORS® enjoy their meeting at the Capitol with Rep. Jay Hoffman, D-Belleville Photo/Terry Farmer
Mainstreet Organization of REALTORS® President Pradeep Shukla and Harsha Shukla
IAR Capitol Conference featured a mobile app for this year’s event
Chicago REALTORS® Gerald Perlow and IAR President Jim Kinney greets House Zeke Morris Photo/Terry Farmer Republican Leader Jim Durkin, R-Burr Ridge Photo/Terry Farmer
Hundreds of REALTORS® from around the state attended REALTOR® Lobby Day
IAR President-elect Mike Drews, Treasurer Doug Carpenter and Immediate Past President Phil Chiles
IDFPR Secretary Bryan REALTORS® attend the legislative briefing Schneider welcomed REALTORS® to Springfield
ILLINOIS REALTOR® July 2015
58 71% 15
Races received RPAC or IE funding in the April elections Supported candidates won their races
Races featured REALTORS速 running for local office
We made a difference. Learn more www.illinoisrealtor.org/local_impact
Mike Scobey | Assistant Director, Advocacy and Local Issues
IAR’S UNPRECEDENTED LEVEL OF SUPPORT FOR LOCAL CANDIDATES The Illinois Association of REALTORS® provided an unprecedented level of support to candidates for local offices in the April 7 municipal elections. With both RPAC donations and independent expenditures, we were involved in races throughout the state. Support was given to candidates — both newcomers and incumbents — who understand and appreciate real property rights.
Result: 71 percent of the candidates with support from IAR won
IAR’s involvement in this year’s municipal elections was unprecedented in terms of the amount of support. In addition to direct RPAC contributions (given to 21 candidates), IAR also provided “independent expenditure” support to 32 candidates. This is support that is not coordinated with the candidate’s campaign and usually takes the form of direct mail to voters. Independent expenditure support goes to candidates who strongly support REALTOR® positions on items such as property inspections, taxes and economic development. Twenty of these candidates won their races. The candidates were from all over Illinois — from Chicago to Carbondale. In some cases, where there were closely-contested races, the winning candidates attributed their victories to the independent expenditure support provided by IAR. Another form of support, known as “Opportunity Races,” was given to 13 candidates. This is direct mail sent to REALTORS® in the candidate’s jurisdiction.
RVOICE and RPAC get the job done in Broadview
A good example of how the REALTOR® support made a difference and will continue to do so is in the Cook County village of Broadview. The combination of RPAC contributions and RVOICE funds helped to defeat home rule and elect REALTOR®friendly candidates in Broadview. In January, when the village president rushed to put home rule on the ballot and squelch any opposition to it, IAR’s resources were put to work. For years, the village has had policies which were hostile to the free transfer of property and property rights. Weeks before the election, Local Government Affairs Director Jeff Merrinette met with the opposition group and a coalition was formed to fight Broadview’s one-sided campaign to pass home rule. The REALTOR®/citizen campaign included yard signs, two direct mailings and Internet advertising.
In addition to speaking out publicly against home rule, the REALTOR® campaign included RPAC support of a slate of candidates who opposed home rule and the current administration. In March, it was discovered that the mayor and village clerk refused to accept the nominating papers and denied the challengers a place on the ballot. It took a federal judge hearing the case to force the village to conduct a fair election. On election night, the challengers unseated all four trustee seats up for election and the home rule referendum was soundly defeated! Because REALTORS® engaged in a strong candidate interview process, local REALTORS® look forward to good discussions with Broadview officials about several policies ranging from crime-free housing to economic development. REALTORS® are in sync with the Broadview electorate. Both want a community with open policies welcoming homeowners and businesses to the process and limiting government burdens which impede their economic growth.
Home rule defeated in four Illinois communities
In addition to Broadview, voters in McLean (McLean County), Shiloh (St. Clair County), and New Baden (Clinton and St. Clair counties) overwhelmingly voted down home rule initiatives in their municipalities. IAR and local associations campaigned to inform voters about the potential for communities to layer on additional taxes and regulations — without voter approval — with home rule powers. In addition, a proposed $5 per thousand real estate transfer tax was defeated in Midlothian (Cook County). IAR sent direct mail to voters urging a NO vote on this referendum. The work that IAR did on these measures was done with funds from the RVOICE program. XX To read more about the work of RVOICE, visit www.illinoisrealtor.org/RVOICE
ILLINOIS REALTOR® July 2015
HOMEFRONT By Bill Kozar | Content Marketing Specialist
MEET THE 2015 ILLINOIS REALTOR® OF THE YEAR LORETTA ALONZO During her real estate career, Loretta Alonzo has enjoyed plenty of achievements, but she says none is more exciting than Illinois REALTOR® of the Year. While asking her to share some of the highlights, Illinois REALTOR® discovered the pride she’s felt in helping others succeed, too. Did you always know you would be involved in real estate? It’s funny what roads life takes you down. When I was in school (a Chicago business preparatory school named Jones Commercial), I thought I’d be a fantastic secretary. During my senior year, they found me a job at a bank working in the stock transfer department. That led to a job in the bank’s land trust department, and later a job as a legal secretary/paralegal for an attorney and his son who did a lot of real estate rehab in the Old Town and Near North neighborhoods of Chicago. I learned a lot from them. After my first son, Stacy, was born, I wanted to stay closer to home, so I went to Morton College in Cicero and earned a real estate certificate. That step led to work for an attorney who specialized in real estate closings. Then, in 1983, a partner and I opened our own Century 21 office, and I was responsible for training and management. In 1996, I started Century 21 Alonzo & Associates, which merged with Century 21 Affiliated in December 2014. What did you like about the business? Both of the offices I opened began without any sales staff, so I’m proud to have played a role in so many people’s growth and success. I love seeing the agents I trained become successful in real estate. Also, I’m proud that our company survived the downturn in the real estate market from 2008 to 2011 through merger and acquisitions of other offices. I am absolutely convinced
Loretta Alonzo is the managing broker for Century 21 Affiliated in La Grange Park. She is a member of the Mainstreet Organization of REALTORS® and was its REALTOR® of the Year in 2013. Prior to that, she was the REALTOR® of the Year six times for the West Towns Board of REALTORS®. Alonzo was the IAR President in 2012.
that my association involvement helped me succeed in my business. The agents in my office always liked being on the cutting edge of something new we were doing on the state or local association level. What did you like about association leadership? My involvement with associations began in 1983 when a REALTOR® asked if I would be interested in serving as the local association secretary. I joined the West Towns Board of REALTORS®, and I eventually moved up the chairs to president. When I was vice president, the president at that time (Richard Dolejs), encouraged me to attend an IAR business meeting in Springfield. I was absolutely amazed by what happened there and was bitten by the bug, so to speak. West Towns — which eventually merged with the Chicago Association — honored me with its REALTOR® of the Year Award six times. Following that, I became IAR district vice president, though that position no longer exists. Since 1984, I have consistently been involved in committees and task forces for IAR. In 2010, I joined the Mainstreet Organization of REALTORS®, and in 2013, I was named the Mainstreet REALTOR® of the Year. With all of your achievements, name your Top Five. • First, by far, Illinois REALTOR® of the Year •
2012 IAR President — being able to represent our state across the country and being the first Hispanic to be president.
IAR Distinguished Service Award — 2006
1984 — Woman of the Year — Mexican-American Business & Professional Woman’s Club
President of Multiple Listing Services of Northern Illinois (now MRED) for three years during a time when we were looking at changes to the new MRED and at the same time being treated and beating breast cancer.
What can veteran REALTORS® learn from the twentysomething REALTORS®? Just watching how they use and adapt to technology in our industry to help make their real estate profession easier, so they have more free time. As an old-timer, I sold real estate before faxes and computers. Talk about long days! We picked up keys to show homes, returned them to the office, wrote contracts, negotiated with the sellers (at that time, we all represented the sellers, even if you had the buyers). Then, we made copies and delivered them to everyone at their offices. We took buyers to the local bankers for their mortgage loans. What other goals would you like to achieve? I’m at a time in my life where I am completely content to let the younger generation move forward. I love being a mentor, so whatever advice I can give, I will. I love this industry, so whatever I can contribute, I will. For the first time in 19 years, I do not own my own real estate company, although I am the managing broker of my office. I look forward to the growth of this new venture.
I am a volunteer at heart, and I have always been involved in clubs, committees and various programs. I volunteer in the community where I live, serving on a Veteran’s Club and the Marketing Committee. I think my pride in helping others comes from my mother and an uncle. My mother was involved in an auxiliary of the Lions Club International and was a working mom. My uncle was a volunteer leader in the Lions International, fraternal clubs and he still translates at local schools for parents who can only speak Spanish. What real estate issues concern you most today? • Professionalism of our agents in the business — I know this is always important, but so many agents want to take shortcuts and there is no such thing in this business. •
Third-party aggregators getting into our business — They have our
listings then we have to pay referral fees to these companies because they capture our leads. •
Our aging population — I’m on the IAR Senior Housing Working Group, and I live in an “Over 55” community where I see so many seniors not able to stay in their homes because of their limited physical or financial state. Our real estate taxes are so high. Then there is a cost of moving to an assisted living facility or nursing home that makes the move almost impossible for some.
What are your thoughts on being named 2015 Illinois REALTOR® of the Year? First, I was totally surprised to receive this honor. It’s not an award you can strive to receive or campaign for. It is something you are honored with
Congratulations to the 2015 Local REALTORS® of the Year!
Bloomington-Normal Assoc. of REALTORS®
Capital Area REALTORS®
Central Illinois Board of REALTORS®
Champaign County Assoc. of REALTORS®
Ron Abrams Chicago Assoc. of REALTORS®
Danville Area Board of REALTORS®
Decatur Assoc. of REALTORS®
Egyptian Board of REALTORS®
when your peers see how much you care about this profession that you want to improve it. I always said if you don’t like something or you want it to be better, you have to be part of the solution or you don’t have the right to complain. All of my colleagues who have received this award previously all say the same thing. I have been truly blessed and honored in this profession, and to be recognized as our Illinois REALTOR® of the Year makes me proud to have played a very small part in our real estate industry.
Greater Gateway Assoc. of REALTORS®
Heartland REALTOR® Organization
Hometown Assoc. of REALTORS®
Illini Valley Assoc. of REALTORS®
Kankakee-Iroquois-Ford Assoc. of REALTORS®
Lamoine Valley Board of REALTORS®
Loretta after being announced as the 2015 Illinois REALTOR® of the Year. She and local REALTORS® of the Year were honored at a banquet in June.
Northern Illinois Commercial Assoc. of REALTORS®
REALTOR® Assoc. of the Fox Valley
Catherine Simon-Vobornik Joan D. Welt REALTOR® Assoc. of Oak Park Area Northwestern Illinois Assoc. of REALTORS®
Mary Ann Ladendorf
Mainstreet Organization of REALTORS®
REALTOR® Assoc. of Southwestern Illinois
Quad City Area REALTOR® Assoc.
North Shore-Barrington Assoc. of REALTORS®
Quincy Assoc. of REALTORS®
Peoria Area Assoc. of REALTORS®
Rockford Area Assoc. of REALTORS®
Three Rivers Assoc. of REALTORS®
ILLINOIS REALTOR® July 2015
TILA-RESPA I N T E G R AT E D DISCLOSURE
READY? B y J e f f r e y T. B a k e r, I A R Tr a n s a c t i o n H e l p l i n e A t t o r n e y, S o r l i n g N o r t h r u p A t t o r n e y s
eginning Aug. 1, 2015, the rules governing disclosures by creditors in real estate transactions are changing. While this date is rapidly approaching, there are still many unanswered questions as to how exactly the new rules will be implemented. Here, we take you through what is known and what is not known about
the newly created Integrated Disclosure rules and show you how the new rules may significantly impact real estate transactions in Illinois.
For decades, lenders have been subject to the disclosure requirements contained in the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA). Under TILA, creditors were required to provide borrowers with the Good Faith Estimate and the initial Truth-in-Lending disclosure when an application for a loan was made. RESPA, on the other hand, required lenders to provide the HUD-1 and the final Truth-in-Lending disclosure at or near closing. At the height of the economic crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which among other things, directed the newly created Consumer Financial Protection Bureau (CFPB) to integrate the two sets of disclosures required by TILA and RESPA. The result of the CFPB’s efforts was what is now
referred to as Regulation X (which is over 1,800 pages long) and which combines all of the previous disclosure requirements into two new documents – the Loan Estimate and the Closing Disclosure.
The Loan Estimate combines the Good Faith Estimate and initial Truth-in-Lending disclosure with the intent of providing consumers a clearer picture of the costs, features, and risks of the mortgage loan they’re applying for. One of the biggest changes for lenders under the new rules are the strict timelines that are established for delivery of the new documents. The Loan Estimate, for instance, must be delivered to the consumer within three business days of the lender’s receipt of the consumer’s application. For the Loan Estimate, “business days” includes Saturdays if the lender is open for business on Saturdays. Further, the Loan Estimate cannot be provided any later than the seventh business day prior to consummation of the transaction. If
a mortgage broker is involved, they may prepare and deliver the Loan Estimate on behalf of a creditor, but it’s ultimately the creditor that is liable for any errors or omissions on the document. Exactly when a lender receives a loan application depends on the information that is provided by the consumer. A consumer is considered to have made an application when they have provided a lender with only six key pieces of information, including: their name, income, social security number, the address of the property, an estimated value of the property to be purchased, and the amount of the mortgage loan that is being sought. Even if the creditor requires further information from the borrower in order to determine credit-worthiness, once these six pieces of information have been provided, the creditor is obligated to provide the Loan Estimate within three business days, unless the creditor chooses to deny the application. The new rules do not prevent lenders from creating systems that limit some of the information provided by consumers such that the “three business day” requirement is not triggered. For instance, pre-approval and qualification letters are still allowed, however, they must now contain the following, explicit language in 12-point font: “Your actual rate, payment and costs could be higher. Get an official Loan Estimate before choosing a loan.” The Loan Estimate document expires ten days after it is delivered to the consumer. In other words, if the consumer does not indicate to the bank that they intend to choose the loan within the 10-day period, the creditor will need to issue a new or revised Loan Estimate – which, of course, comes with a whole new set of timeline requirements.
The purpose of the Loan Estimate is to provide consumers with the best possible prediction of what the true costs of the loan will be. Therefore, banks are required to use good faith and exercise due diligence to obtain the information that is provided on the disclosure document – this includes real estate commissions and other predictable fees. In general, the test for whether an estimate has been made in good faith is simply whether the amount paid at closing is more or less than the estimate contained on the Loan Estimate document. If a consumer is required to pay more at closing, then it is presumed that the estimate was not in good faith. However, the CFPB recognized that there are some settlement costs that can vary depending on the transaction. Thus, to better determine whether the lender has acted in good faith, the CFPB created three categories of costs, each with its own rule or “tolerance” for determining whether the estimates are in good faith. In addition to the creation of the three categories of costs, lenders now must also provide consumers with a written list of services and providers for which the borrower is entitled to shop. This list must be provided in the same amount of time as the Loan Estimate and must identify at least one available settlement service provider for each service and also clearly state that the
consumer is not required to choose from those providers on the list. The first category of costs created provides for a 10 percent cumulative tolerance between the amount estimated on the Loan Estimate and the amount actually paid by the consumer. Charges that fall within this category include recording fees and charges for third party services where the service provider is not the creditor or an affiliate and where the consumer is entitled to shop for the service and chooses from the creditor’s written list of service providers. The second category provides for zero tolerance between the amount estimated and the amount actually paid for by the consumer. In other words, there can be no difference between the Loan Estimate amount and the amount that the consumer actually paid without a violation. These charges include fees paid to the creditor, mortgage broker, or an affiliate of either. These costs also include fees to unaffiliated third parties if the consumer was not entitled to shop for the service that was charged for, as well as transfer taxes. Finally, the third category includes costs for which there is no tolerance limitation. These charges include prepaid interest, insurance premiums, and those services where consumers are entitled to shop for the provider and the consumer chooses not to use a provider on the creditor’s list of service providers, or services that are not required by the creditor at all. The most obvious result of this new disclosure scheme is to insure the disclosures at the time of the loan application are as close as possible to the actual amount that will be charged to the consumer at closing. In order to change or revise the Loan Estimate, there must be a change of circumstances that qualifies according to the new rules. Qualifying circumstances are extremely limited but do include events that are beyond the control of any of the parties and changes to a borrower’s eligibility or ability to qualify, such as the loss of a job.
For those transactions that proceed to closing, the lender must now provide the new Closing Disclosure document to the consumer. The Closing Disclosure combines the HUD-1 and the final Truth-in-Lending disclosure into one document and is designed to provide the consumer with a detailed explanation of all of the costs and charges associated with the transaction. Lenders are required to provide the Closing Disclosure form no later than three business days before consummation of the loan. Interestingly, “business day” in the context of the Closing Disclosure is defined differently than with the Loan Estimate. In the case of the Closing Disclosure, “business day” always includes Saturday, regardless of whether the lender is actually open on that day. Most brokers will notice immediately that the Closing Disclosure document differs greatly in appearance from the more recognizable HUD-1, however, the document is designed to be more easily understood by consumers. Among the document’s key features are an entire page devoted to an explanation and statement
ILLINOIS REALTOR® July 2015
of all of the mortgage loan terms and more importantly the costs or cash required to close. The second page of the Closing Disclosure then breaks down the closing costs and allocates them by the party responsible for paying them. Brokers will also notice that the new Closing Disclosure document contains a column to show when certain costs are paid for by third parties, however, the new rules do not require that these be shown. In other words, unlike with the current HUD-1, the new Closing Disclosure does not require those costs covered by the seller’s or buyer’s broker to be disclosed. Unlike the Loan Estimate, which must be delivered (in person or simply put in the mail) within three business days of the loan application, the Closing Disclosure must actually be received by the consumer no later than three business days prior to the consummation of the loan. A lender or mortgage broker may deliver the Closing Disclosure form in person, by mail, or by email. However, absent evidence to the contrary, if the form is mailed or emailed, it is presumed to be received three business days after the date it was mailed or emailed. Certain changes to information contained on the Closing Disclosure may require restarting the three business day requirement. Changes to the APR, the loan product (i.e., switching between an ARM and a fixed rate product), or the addition of a pre-payment penalty, all require a new Closing Disclosure and a new three business day period before the consummation may occur. If other information on the Closing Disclosure requires changes, it is recommended that a new form be produced and delivered to the consumer one business day prior to the consummation. Finally, the Closing Disclosure is the ultimate document that is used to determine whether the estimates contained on the Loan Estimate form were made in good faith. If one of the estimates falls outside the tolerance limit for its category, the lender must refund the excess amount charged to the consumer and reissue a new Closing Disclosure document reflecting the refund within 60 calendar days after consummation.
While the Integrated Disclosure rule’s changes appear to be primarily aimed at lenders and settlement service providers, the practical impact is sure to be felt throughout the entirety of a real estate transaction, including the work that brokers do in Illinois. There are many unanswered questions about how exactly the new rules will impact various parts of a transaction but there are several areas where conclusions can already be drawn. One of the first, most obvious impacts the new rule will have is to prolong the amount of time required to close a transaction. Mistakes on the Loan Estimate or the Closing Disclosure significantly impair lenders’ ability to sell their loans on the secondary market. Thus, extra care will be afforded to insure that mistakes are corrected before consummation and that means closings will likely be delayed more often. Furthermore, remember that consumers have 10 days to decide whether to move forward after receiving their Loan Estimate. Because lenders cannot charge consumers for most costs prior to their acceptance, this also could cause substantial delays. According to most commentators, it is recommended that brokers work with their clients to complete all necessary work and documentation no later than seven days prior to the proposed closing so that enough time has been set aside to deal with changes that may be necessary to the Closing Disclosure form.
It is safe to say that after Aug. 1, the procedure for closing a real estate transaction is going to look completely different than it does now. While there is still much to be determined, in order to avoid costly delays or
There are a number of webinars and resources available to help you learn more about the upcoming TILA-RESPA Integrated Disclosures (TRID) changes.
WEBINAR: IAR Legal Webinar: Are You Ready?
On June 25, IAR Legal Services will discuss what Illinois REALTORS® need to know about the new rules during a one-hour webinar for IAR members. A recording of the webinar will be available afterward for download at www.illinoisrealtor.org/legal/webinars. Reminder: IAR Legal Webinars are a members-only benefit so you will need to log in to access the recording.
upset clients, it is best if everyone, including brokers, begin familiarizing themselves with the new rules and procedures as soon as possible.
Because of delayed closings, it is also projected that there will be fewer closings per day and the costs charged by settlement providers will likely increase to accommodate the changes. Given this, however, as with any new important regulations, the exact impact these changes will have cannot be seen until they are fully implemented. Even then, some new regulations require legal challenges before there is proper authority for the correct implementation. Further complicating matters is the CFPB’s indication that they may not immediately enforce the new rules if the parties involved can show a focused, good-faith effort to be in compliance with the rules. However, without further guidance from the agency, it’s still unclear how this “enforcement grace period” would actually work. In the context of Illinois transactions, it remains to be seen how financing contingency language will need to change to accommodate the new practices implemented by lenders. For instance in those areas where attorney review is included in the form real estate contract, it is possible that multiple Loan Estimates will be required in response to changes made to the underlying deal between the buyer and seller. It is safe to say that after Aug. 1, the procedure for closing a real estate transaction is going to look completely different than it does now. While there is still much to be determined, in order to avoid costly delays or upset clients, it is best if everyone, including brokers, begin familiarizing themselves with the new rules and procedures as soon as possible. Learn more about TILA-RESPA changes at www.illinoisrealtor.org/respa
WEBINAR: TRID-RESPA: A Comprehensive Overview with Leonard Bernstein
On May 4, IAR and the Illinois Bankers Association offered a webinar on how the integration of TILA and RESPA will affect the real estate and lending industries. Leonard A. Bernstein, Managing Partner of Reed Smith, LLP, in Philadelphia, led the webinar. Find a recording of the webinar and a PowerPoint presentation at www. illinoisrealtor.org/legal
VIDEO: Window to the Law:TRID Changes Coming
National Association of REALTORS® Senior Counsel Finley Maxson discusses the integrated disclosure forms and the new requirements under the TRID rules that will affect real estate transactions in this video. www.realtor.org/topics/real-estate-settlement-proceduresact-respa
ILLINOIS REALTOR® July 2015
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HELPING BUYERS NAVIGATE THE
By Bridget McCrea
Housing sales are up and buyers are more active than they have been in years, but are there still obstacles to getting those purchasers financed and into their homes? It didn’t take long for Janice Weathington to recognize the warning signs of a potential problem with her buyers’ home financing. In fact, this broker-associate with Century 21 Affiliated in Homewood says the red flags started going up not long after the purchase contract was signed and the mortgage application was filled out. And while Weathington’s buyers had their “ducks in a row” on the financing side (with a preapproval, good credit and enough monthly income to support the new acquisition), the lender wasn’t nearly as organized or prepared. “I’m not sure if the loan officer was just overworked, or if something was going on internally at the bank,” Weathington explains, “but it didn’t take long for the problems to start surfacing.”
In this particular case, Weathington says the loan officer got to the point where he would no longer return her phone calls — a situation that not only delayed the closing but that also forced her buyers to find a different mortgage source. “There was definitely a bit of instability within the lender’s operations at the time,” she says, noting that the same scenario has occurred two other times within the last year. “I’ve had a few banks where loan officers quit in the middle of the transaction, and other cases where we had to switch lenders because the banks just weren’t prepared,” says Weathington, who sees strong communication among lenders, REALTORS® and clients as the key to working through such issues. In the absence of such relationships, she says one of the best ways to save the deal and help buyers navigate the mortgage maze is by switching to a more reliable funding source. In some cases, for example, she says community banks, credit unions and even Veteran’s Affairs (VA)-backed loans are the easiest for her buyers to obtain.
ILLINOIS REALTOR® July 2015
“Credit unions often present the least amount of problems when it comes to getting buyers qualified and making sure the financial side of the deal gets through to closing,” says Weathington. “I also had a VA loan that went pretty smoothly.” Despite the case-specific challenges that she’s dealt with over the last Weathington year, Weathington says that for the most part, financing is available and plentiful right now for qualified buyers. “At this point,” she says, “buyers who are qualified are getting approved and are successfully closing their transactions.”
Lightning in a Bottle
With the national housing market continuing to rebound in 2015, the positive momentum has buoyed Illinois home sales. The state’s housing market got off to a strong spring start with higher home prices and sales, a trend that was also seen at the national level. By March 2015, median home prices were steadily climbing closer to their pre-recession levels. When adjusted for inflation, median home prices had recovered to 79 percent of their 2008 levels in Illinois and 74 percent of the prior levels in the nine-county Chicago area, said Geoffrey J.D. Hewings, director of the Regional Economics Applications Hewings Laboratory at the University of Illinois. As the recovery continues, so does the need for the mortgage financing that supports a wide variety of homebuyers — from the first-time buyer to the seasoned purchaser who is looking to buy a second or third home. The good news, say those interviewed, is that financing is for the most part within reach for qualified buyers. Regardless of market conditions, however, there are always certain considerations and challenges that have to be factored into the process.
Take credit, for example. An ongoing aspect of the typical consumer’s financial portfolio/history, credit scores can present significant obstacles for purchasers who may have blemished credit records that extend years into the past. This particular obstacle to homeownership hasn’t changed much over the last few years, says Terry Clemans, executive director of the National Consumer Reporting Association in Roselle. Clemans says the somewhat elusive nature of the actual “credit score” versus what the banks or lenders are using to make their final decisions can be especially challenging for consumers. “Buyers tend to get overly obsessed with specific scores (from Experian, TransUnion, Clemans and Equifax) without realizing that the bank that’s underwriting the loan uses a ‘merged’ report,” Clemans explains. “They basically get all three scores, throw out the high and the low scores, and then use the middle score to determine the underwriting.” Adding to the confusion is the fact that there are multiple versions of FICO scores (VantageScore, FACO or ‘education’ scores, etc.) that “might be within 5-10 points of the FICO score from a particular bureau,” says Clemans, who consistently reminds consumers not to get too fixated over their individual scores. “When working with buyers, one of the best things REALTORS® can do is remind their clients that pinpointing an exact score that their lenders will use is like trying to catch lightning in a bottle,” says Clemans. “That’s because most of the scores being marketed to consumers are not true FICO scores; they’re education scores.” REALTORS® should also know that in April the three credit bureaus reached an agreement that will allow credit counseling agencies to provide copies of credit reports and scores directly to consumers. “This has been a real sore subject
“Buyers tend to get overly obsessed with specific scores (from Experian, TransUnion, and Equifax) without realizing that the bank that’s underwriting the loan uses a ‘merged’ report. They basically get all three scores, throw out the high and the low scores, and then use the middle score to determine the underwriting.” – Terry Clemans
www.illinoisrealtor.org 20 www.illinoisrealtor.org
“The more we move away from the epicenter of the financial and real estate-related challenges that happened in 2007-08, the more normal things become and the more confident people become.” - Steve DiMarco for a long time, and the fact that the scores are now going to be available is a good thing that puts more information in the consumers’ hands,” says Clemans. He predicts more changes to the credit system lie ahead. “There have been a variety of changes implemented — and more to come over the next two years,” says Clemans, “that will result in major improvements in the overall accuracy and ‘in-depthness’ of the credit reporting [process] for consumers.”
6 Things REALTORS® Should Know About Financing Right Now The lending environment remains favorable for qualified buyers
Getting pre-qualified and pre-approved for a mortgage before shopping around for homes is as important as ever
Smooth Sailing Ahead
From his vantage point as president of Baird & Warner Financial Services in Chicago, Steve DiMarco says getting buyers qualified, pre-approved, and then approved for a home mortgage isn’t very challenging right now. “Over the last three years we’ve seen more liquidity in the mortgage market for consumers,” says DiMarco, who is also president of Key Mortgage Services. “You still have to step up and document and prove yourself as a borrower, but overall the market is good, DiMarco buyers are purchasing homes, and property sales are on a record pace this year.” In assessing current finance-related market trends, DiMarco says REALTORS® should be aware that roughly 48 percent of buyers are Millennials (born 1981-1997) and that this particular phenomenon is likely to continue. That means agents will need to work harder when it comes to helping this group — many of whom came of age and/or graduated from college during the depths of the recession — get their documentation and credit histories prepared for lender review. On a positive note, DiMarco says down payment expectations have waned somewhat over the last few years and that guarantors like Fannie Mae are backing loans that require just 3 percent down (versus 5 percent in 2014). “There’s been somewhat of a lessening of costs, although the breaks do tend to decline along with credit quality (i.e., the most qualified buyers are getting the best deals and lowest upfront cost structures),” DiMarco said. “The FHA has made its program more affordable for consumers with its 3 percent down payment, and Fannie Mae has followed suit.” Looking out to the remainder of 2015 and even into 2016, DiMarco sees “clear sailing ahead” as the challenging, recessionary time period fades further away. “The more we move away from the epicenter of the financial and real estate-related challenges that happened in 2007-08,” says DiMarco, “the more normal things become and the more confident people become.”
Home sales and median prices are on the rise across much of Illinois
Credit scores play a key role in determining loan eligibility and interest rates
If traditional banks and lenders aren’t a good match for your buyers, consider credit unions, community banks, and/ or the U.S. Department of Veterans Affairs (if your buyers qualify for a VA loan) Now is the time to educate yourself on the new TILA-RESPA disclosure rules, and the newly-combined Truthin-Lending forms. See the article, “TILARESPA Integrated Disclosure: Are You Ready?” on page 14.
About the writer: Bridget McCrea is a business, real estate and technology writer in Clearwater, Fla. She can be reached at firstname.lastname@example.org.
ILLINOIS REALTOR® July 2015
THE MONEY: Mortgage options that could help your buyers get into homes
By Stephanie Sievers, Senior Editor
new Illinois mortgage program along with lower down payments and mortgage insurance changes to a few federal government-sponsored programs could open the door of homeownership to more consumers this year. For some buyers, particularly those looking for their first home, saving up for a down payment and finding the right mortgage options can be daunting. But there are programs that could fit their needs including one specific to Illinois homebuyers.
New IHDA Program: @HomeIllinois
In March 2015, the Illinois Housing Development Authority (IHDA) rolled out its newest mortgage program, @HomeIllinois, featuring $5,000 in down payment and closing cost assistance and a 30-year mortgage product. What’s different about @HomeIllinois? Unlike past IHDA loan programs, @HomeIllinois is available not just to first-time homebuyers, but also to repeat buyers and homeowners looking to refinance. @HomeIllinois also replaces previous loan programs — Smart Move Trio, Welcome Home Heroes and the Building Blocks Pilot Program. “In addition to first-time buyers, we felt that there was definitely an opportunity to reach both repeat buyers and those looking to refinance. With @HomeIllinois, we are unifying all of IHDA’s homeownership efforts under one brand. This allows us to be a one-stop shop for any buyer at any stage in their life,” said Cami M. Freeman, IHDA Director of Marketing and Communications. @HomeIllinois offers a 30-year mortgage with affordable interest rates to Illinois residents who want to buy a home. There are income and purchase price limits (see chart next page) and borrowers must contribute $1,000, or 1 percent of the purchase price, whichever is greater. Borrowers must meet credit requirements, plan on living in the home as a primary residence and complete homeownership counseling. In turn, qualifying borrowers can get $5,000 down payment or closing cost assistance, lender paid mortgage insurance 22 www.illinoisrealtor.org
and the choice of FHA, VA, USDA or conventional loan types. First-time buyers can also qualify for a federal Mortgage Credit Certificate (MCC), which lowers their tax burden on the home. For those looking to refinance, @HomeIllinois has similar requirements: borrowers must meet income and purchase price limits, credit requirements and live in the home as a primary residence. All @HomeIllinois borrowers must complete online or in-person homeownership counseling. Counseling educates consumers about the process of buying a home, budgeting for the purchase and understanding their loan options. Homeownership counseling helps buyers understand what it takes to purchase a home as well as the financial steps it takes to remain there, according to IHDA officials. The number of lenders participating in @HomeIllinois throughout the state is growing. In late spring, IHDA had 187 lenders throughout Illinois participating in the @HomeIllinois program and that number is expected to grow. In 2014, more than 10,000 buyers qualified for $1.2 billion in affordable home loans and down payment assistance through IHDA programs, representing 20 percent of the state’s first-time homebuyer market and the highest annual total in IHDA’s more than 30 years of mortgage lending, according to IHDA.
Other mortgage program changes to be aware of as you work with real estate clients this summer: Fannie and Freddie offer 3 percent down payment options Fannie Mae and Freddie Mac now offer low down payment mortgage programs to qualifying home buyers. In late 2014, Fannie Mae launched My Community Mortgage, a conventional loan product that allows qualifying first-time homebuyers (those who have not owned a home in the last three years) to come up with a down payment as low as 3 percent.
Learn more about @HomeIllinois at www.athomeillinois.gov including Frequently Asked Questions about the program at www.athomeillinois.gov/faq. Find a list of lenders at www.athomeillinois.gov/find-a-lender/
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Freddie Mac offers a similar 3 percent down product called Home Possible Advantage, but it is available to low- and moderate-income borrowers, first-time and repeat borrowers and those in underserved communities. Learn more about Fannie Mae’s MyCommunityMortgage at www.fanniemae.com/singlefamily/mortgage-products and Freddie Mac’s Home Possible Advantage at www.freddiemac. com/homepossible/hp.html
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FHA lowers mortgage insurance premiums In early 2015, the Federal Housing Administration (FHA) reduced the mandatory annual mortgage insurance premiums on new loans with terms greater than 15 years. The reduction — half of a percent — is estimated to save more than two million new FHA borrowers an average of $900 a year on their loan costs, according to FHA officials. FHA — which offers lower down payment loan options — also projects the lower costs will prompt as many as 250,000 first-time buyers to purchase a home over the next three years. Learn more about FHA loan programs at http://portal.hud.gov/hudportal/HUD
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More low or no down payment loan programs to consider: •
U.S. Department of Agriculture Single Family Housing Guaranteed Loan Program – Program assists low- and moderate-income households buy homes in eligible rural areas. www.rd.usda.gov/programs-services/ single-family-housing-guaranteed-loan-program Veterans Affairs Home Loans – A mortgage option for U.S. service members, veterans and eligible surviving spouses . VA home loans are provided by private lenders, but the VA guarantees a portion of the loan. www.benefits.va.gov/HOMELOANS
(410) 772-0820 The publication of any advertisement of a product, service or education idea is not in any way to be construed as the approval, guarantee, or endorsement of IAR of such product, service or idea.
ILLINOIS REALTOR® July 2015
Jump Start Your CIPS DESIGNATION! The Illinois Association of REALTORS® is partnering with Mainstreet Organization of REALTORS® to offer one course of the CIPS Designation series - “Global Real Estate: Local Markets” (6 hrs. CE Elective, RB7005-564001070).
Build Your Confidence to Serve the Global Market Global Real Estate is a Growing Specialty
“GloBal Real eState: loCal MaRketS” This introductory course offers you an overview of the international real estate business environment, including capital flow, currencies, government regulations and cultures. Topics include international brokerage, networking, marketing and selling.
Wednesday, July 22, 2015 • 9:00 a.m. - 4:00 p.m. Management Association Institute 3025 Highland Parkway, Downers Grove, Illinois 60515 $150 (includes lunch)
Instructor: Jenny Basantes, GRI, CIPS, ABR, AHWD, e-PRO, REALTOR® Upon completion of this course, you will receive elective credit towards the ABR and CRS designation (U.S. members only). By completing this course in our classroom setting, you will have the opportunity to network and be a part of the elite group of individuals who are on board to jump start their CIPS designation process. Once you have completed this course, go online to complete the remaining courses. www.realtor.org/designations-and-certifications
Secretary Schneider Looks to Bring Improvements to IDFPR
By Stephanie Sievers, Senior Editor
ppointed in February to lead the Illinois Department of Financial and Professional Regulation (IDFPR), Secretary Bryan A. Schneider brings a mix of private and public sector experience to the position. Schneider talked to Illinois REALTOR® about some of his goals for IDFPR. Your legal career has included working in the government arena as well as most recently as Divisional Vice President and Assistant General Counsel for Walgreens. How will that experience benefit you as you lead IDFPR? Most of my legal career has been spent Sec. Schneider representing individuals and companies in heavily regulated industries so I think that I have a sense from that private sector work about how regulations affect people and how they affect companies. IDFPR’s Division of Real Estate was created last year. What are your goals for the division? I want to make sure that eventually we get a director for real estate. We’re working on that and having regular discussions to identify a good candidate for that position. In the meantime, I’m the acting director of the division, and I’ll do my best job of leading the professionals who work there. We always have an eye on making sure our staffing is at the right level so we can serve the needs of our registrants and also investigate inappropriate or unlicensed behavior when necessary. I also want to put an emphasis on efficiency and the customer experience. I’d like to put as much focus as I can on how registrants, real estate brokers, managing brokers and consumers interact with our agency. I can’t help but notice that the current department website is just cluttered and not terribly user-friendly so we’ll try to make some improvements there. We’d like to make some improvements in our IT structure so that getting a new license is as easy as possible. We need to get less dependent on paper for people to communicate with us and for us to communicate with people. How is the department being held back now by technology? If you look at all the professional licensing activity — real estate and non-real estate — it is dependent on the same technology infrastructure and it just isn’t effective and efficient. Are there things IDFPR can do to improve service when a real estate licensee calls with a question or questions? I have heard people say when they call into the call center it’s a nightmare, and then I’ve had other people say ‘No, it’s not the best call center in the history of call centers, but it’s not all that bad.’ I’ve tasked my team to start a robust discussion
around how are we going to handle telephone inquiries. We have a company that helps us with our call center work and I need more clarity on how the escalation process works and what commitments we can expect from the people who are working on our call center for us. If people want to call and try to get some information, we’ll make sure our call center capabilities are as good as we can possibly make them. Do you have preliminary timelines on when you would like to get certain changes implemented? We’re thinking a fiscal year at a time. We have some working goals that hopefully we can start delivering in fiscal 2016. Given that the state has swept funds from the Real Estate License Administration Fund, how will the department be able to accomplish its goals without the funding to fall back on? I think the real estate fund sweeps were a necessary response to a not inconsiderable crisis. I don’t want to say it has absolutely no effect because that would mean that money wasn’t needed in the first place. But our fiscal team has been able to map out a plan and a cash flow approach that should keep us delivering some of the service improvements that I just discussed. It has to be monitored carefully every step of the way, but we do think there is enough flexibility in our accounts that we can deliver. We’re not going to use that as an excuse to not deliver on our service improvements. Do you think the department has enough resources for enforcement of existing real estate law? We’re at or very close to statutory levels of staffing. For real estate I don’t think we’ve got a huge staffing gap there for our enforcement activities. You can always use more but with respect to investigations and enforcement, I don’t think we have a huge staffing gap and we have good people there so it’s just a matter of having the new team of managers focus on what needs to be focused on and get the teams aligned with them. Do you have a message for Illinois REALTORS®? The purchase of a home is the most significant expenditure that an awful lot of us will ever make. We need that right level of oversight and supervision so that real estate agents, and there are many, are allowed to do their jobs. And Photo/Terry Farmer those folks who are either not getting the appropriate licensure, maintaining the appropriate education levels on an ongoing basis or are engaging in activity that is not authorized in Illinois, are not able to take advantage of Illinois consumers.
ILLINOIS REALTOR® July 2015
What Do Illinois Foreclosure Numbers Show? By Bill Kozar, Content Marketing Specialist
The positive effects of improving home sales and job growth should outweigh the negative effects of foreclosures on the state’s economy, says Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory (REAL) at the University of Illinois. For example, Hewings has forecasted home sales in May, June and July will show moderate year-over-year growth. He’s forecasted a three-month average increase of between 4.4 and 5.5 percent statewide, 5.7 to 7.2 percent for the Chicago PMSA. But it’s been more difficult to predict when the foreclosure inventory will return to pre-recession levels. Hewings says that may be because the recession was so unique he didn’t have enough data to use as a gauge. As time goes by, subsequent forecasts have extended the time it will take to lower the foreclosure inventory to 2007-08 levels. In the May forecast from REAL, a range of between May 2017 and June 2020 is given. Rescuing foreclosed properties The state foreclosure inventory was 33,453 in April. Although it isn’t possible to know for certain, Hewings says some foreclosed properties may not be selling quickly because of factors that aren’t in the statistics. “We have not addressed the issue of location of foreclosed properties,” he says. “We have looked at price differentials between foreclosed and non-foreclosed, and they are significant (about $100K difference in median prices). This suggests that the characteristics of the two inventories may be different, in terms of attributes of the house as well as location. “We don’t know if some of these houses may have been abandoned or not. But if they stay on the market for a long period of time and someone isn’t willing to buy and remodel, then one has to speculate the location or the conditions are factors,” Hewings says. Also, he says there is nothing fundamental about the pre-bubble inventory. “We may be converging on a level that is higher than that prior to 2008.” Percentage of sales So, why are foreclosures accounting for a smaller percentage of sales? “Foreclosures are a smaller percentage of sales because additions to the foreclosure inventory have been declining — except for the last month — while foreclosure sales have been increasing,” he says. “In essence, we are reducing the foreclosure inventory but at decreasing rates.” Overall, he believes the positives of these foreclosure trends, combined with the expansion of foreclosure assistance programs and the upswing in job growth are pointing to better days ahead.
MORE FORECLOSURE ASSISTANCE PROGRAMS AVAILABLE
Earlier this year, the Federal Housing Finance Agency opened the MyCity Modification pilot program in Cook County and extended the Home Affordable Mortgage Program (HAMP) and the Home Affordable Refinance Program (HARP) another year so struggling homeowners could get financial assistance to prevent foreclosures. MyCity is a program that reduces — by up to 60 percent — the monthly principal and interest payments made by eligible homeowners. Single-family properties must be valued at $250,000 or less, although two-, three- or four-unit properties of more than $250,000 may be eligible, too. The mortgage loans must be owned by Fannie Mae or Freddie Mac, the properties must be located in Cook County and must be primary residences, second homes or investment properties. The only other city that has been offered this program is Detroit. HAMP (www.makinghomeaffordable.gov/programs/lowerpayments/Pages/hamp.aspx) helps make loans more affordable for consumers by providing incentives to lenders, while HARP (http:// harpprogram.org/index.php) gives home owners with Freddie Mac or Fannie Mae loans a chance to refinance those loans at lower interest rates. Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory (REAL) at the University of Illinois is encouraged by these programs because his research has shown that foreclosures can have negative effects on neighborhood property values as well as the perceptions of those living nearby or prospective home owners. (www.illinoisrealtor.org/ foreclosureimpact) Coupled with programs that encourage development and remodeling of properties already foreclosed, Hewings says assistance programs such as the MyCity Modification are vital to the future of their communities. (www.fhfa.gov/PolicyProgramsResearch/Programs/ Documents/MyCity-Modification-Cook-County.pdf) “Reinvesting in these neighborhoods makes a lot of sense,” Hewings says. “I’ve seen it myself. When this program was announced, I knew it could have the potential to stabilize a neighborhood, change people’s perceptions, preserve the property tax base. It is really very, very important.” He says that an investor who buys a foreclosed home and makes noteworthy improvements can have a domino effect on the opinions of others. “Other home owners might look at how a foreclosed property is being remodeled and get motivated to make improvements on their own home. Suddenly, the community looks a whole lot different to everyone.”
The Next Great Revenue Stream Real Estate Agents understand the importance of referrals. They spend much of their time cultivating relationships and invest a large amount of money marketing to homeowners and buyers. Now Real Estate Agents can create a new revenue stream at very little cost by marketing for Agent to Agent referrals. Listing Agents are the target market because they represent homeowners that are usually moving out of the Listing Agentâ&#x20AC;&#x2122;s service area. According to a recent U.S. Census Bureau report on moves, about 51% of residents move to a different county or out of state, and even when homeowners move within the same county, many if not most are moving to an area outside the service area of their Listing Agent. One U.S. Census Bureau report indicated that more than 50% of the top 10 most common state-to-state moves were between neighboring states. A nationwide advertising campaign is underway to create a national directory of Real Estate Agents interested in getting referrals from other Real Estate Agents. This marketing platform will provide Listing Agents easy access to multiple agents in a single search. By simplifying the search process, Listing Agents will be more apt to refer their clients (homeowners) to another Real Estate Agent to help them find a replacement home. If you want to increase your sales volume in 2015 and beyond, take advantage of this new Internet portal that will connect Listing Agents with Buyer Agents throughout the country. Act quickly because there is an important benefit to early enrollment. To get referrals from Listing Agents, and learn about the extra benefit of early enrollment in the national referral directory, visit REAgentReferrals.com.
Real Property Alliance As part of an ongoing effort to engage Illinois residents on issues that affect private property ownership, the Illinois Association of REALTORS® launched Real Property Alliance (RPA) in April, 2015. The non-profit, educational foundation replaces an earlier, static website with a new, mobile-friendly website which provides updates on property ownership issues that are occurring in the state capital or communities throughout Illinois.
for are in the interest of Illinois residents, we have an opportunity to tell our story to a broader audience.
• The website serves as a platform for distributing brochures. The association’s
RVOICE program shares material on everything from staging a home for sale to what to consider when making a home purchase.
• RPA seeks to engage and build a coalition. The website collects email addresses and
The website serves several purposes:
ultimately will provide updates on issues that affect the state’s residents.
• It provides an instant means for distributing private property rights information. Because the issues REALTORS® fight
The website has links to a growing list of brochures with a consumer focus.
RPA connects consumers with REALTOR®-friendly resources via NAR’s HouseLogic website.
Updates are provided on issues which affect Illinois residents through the foundation’s blog.
The website seeks interaction through consumer engagement. Newsletters and other elements are in development.
ETHICS HEARINGS In September 2014, the IAR Board of Directors approved publishing the results of ethics hearings throughout the state. These are the conclusions of ethics hearings and are not part of the Ethics Citation Program.
TIME PERIOD: Nov. 1, 2014 to April 30, 2015
Articles found by Hearing Panel to have been violated and ratified by the Board of Directors
Previous violation(s) in last three (3) years?
Discipline and fines imposed
Yes or No
Articles 1, 12 and 16
$750 fine, Letter of Reprimand and 2 continuing education courses
Articles 1 and 3
$250 fine and Letter of Warning
Articles 1 and 9
$500 fine, Letter of Warning, 2 continuing education courses
Articles 1 and 11
$500 fine, Letter of Reprimand and 1 continuing education course
Articles 1 and 3
$1,000 fine and Letter of Reprimand
Articles 1, 2 and 9
1 continuing education course
Articles 9 and 12
$2,000 fine, Letter of Reprimand and 2 continuing education courses
Articles 12 and 16
Letter or Reprimand, 2 continuing education courses
$250 fine, Letter of Reprimand and 2 continuing education courses
$2,000 fine, Letter of Reprimand and 2 continuing education courses
$250 fine, Letter of Reprimand and 1 continuing education course
$500 fine, Letter of Reprimand and 1 continuing education course
The REALTOR® Pledge of Performance and Service The term REALTOR® has come to connote competency, fairness and high integrity resulting from adherence to the National Association of REALTORS®Code of Ethics. The Code sets forth standards of conduct and professional integrity that are the hallmark of the Illinois Association of REALTORS® and what sets apart REALTORS® from other real estate professionals. The Code of Ethics imposes duties above and beyond those imposed by law or regulation and applies only to real estate professionals who choose to become REALTORS®. If a REALTOR® is found in violation of the Code, they are subject to discipline. Many difficulties result in miscommunication and can be resolved through speaking directly with the REALTOR® or with a principal broker (managing broker/owner) in the firm. If you are still not satisfied, you may want to contact the local association of REALTORS® in your area to have an informal dispute process scheduled to resolve the issue or you may want to consider filing an ethics complaint. Find the 2015 REALTOR® Code of Ethics at http://www.realtor.org/governance/governing-documents/the-code-of-ethics
ILLINOIS REALTOR® July 2015
REALTOR® COMMUNITY FOLLOW US:
IAR Spring Conference: Jump Start Your Career
Six Illinois REALTORS® Inducted into NAR RPAC Hall of Fame
Hundreds of people attended the IAR Spring Conference & Expo in Collinsville in May. This two-day event featured sessions with Joe Niego, Terry Watson, Ashton Gustafson, CE courses and updates on professional standards and legal trends.
Six long-time advocates of the REALTORS® Political Action Committee (RPAC) were inducted into the RPAC Hall of Fame in May. Hall of Fame honorees are recognized for $25,000 in lifetime contributions to RPAC.
Let’s Talk Real Estate with U.S. Sen. Mark Kirk Illinois REALTORS® met with Sen. Mark Kirk (R-Ill.) for a Let’s Talk Real Estate event in Washington, D.C. The discussion covered a range of issues affecting the industry including the Marketplace Fairness Act, federal loan programs and 1031 exchanges.
Crosby Receives 2015 NAR Distinguished Service Award Congratulations to Illinois REALTOR® Jean Crosby, CRB, CRS, GRI, who was one of only two U.S. REALTORS® to receive this year’s National Association of REALTORS® Distinguished Service Award. Crosby, a partner and owner of Berkshire Hathaway HomeServices Crosby Starck Real Estate, will be honored at a ceremony at the NAR convention in San Diego in November.
Taking the REALTOR® Message to Capitol Hill The Illinois REALTOR® delegation met with members of Congress in Washington, D.C., in May during the REALTORS® Legislative Meetings & Trade Expo.
North Shore-Barrington REALTORS® pose for a photo with U.S. Rep. Jan Schakowsky, D-Evanston.
FPC William Griffin introduces U.S. Sen. REALTOR® Nykea PippionMark Kirk, R-Ill., at a Let’s Talk Real Estate McGriff meets U.S. Rep. Bobby event. Rush, D-Chicago.
Illinois REALTORS® meet with U.S. Rep. Adam Kinzinger, R-Manteno.
REALTORS® from Central and Southern Illinois meet with U.S. Rep. John Shimkus, R-Collinsville.
REALTORS® use a selfie stick to snap a quick group photo between meetings.
IAR Federal Political Coordinators (FPCs) serve as liaisons between the real estate industry and federal policymakers.
REALTORS® and U.S. Rep. Bob Dold, R-Kenilworth.
REALTORS® Zeke Morris, Ed Neaves and Jeff Gregory.
REALTOR® Chris Read speaks during the Illinois Caucus.
U.S. Rep. Randy Hultgren, R-Winfield, talks with REALTORS® about issues affecting the industry.
Southern Illinois REALTORS® talk about industry issues with U.S. Rep. Mike Bost, R-Murphysboro.
U.S. Rep. Bill Foster, D-Naperville, greets REALTORS® at his office.
ILLINOIS REALTOR® July 2015