As you know, the mortgage lending world was turned on its head last October with the implementation of the TILA-RESPA Integrated Disclosure. Indeed, the web has been inundated with TRID advice and analysis. Despite the coverage, there is one interesting development that?s been largely ignored: the Loan Estimate is not changing borrowers? behavior. We?ll tell you why and explain what it might mean for the future of TRID.

TRID Review

For those of you readers out there not familiar with TRID, we?ll give you a quick refresher. If you?re already an industry pro, please skip down to the section ?Why Aren?t Buyers Using the Loan Estimate for Comparison??

Since the Dodd-Frank Act became effective in 2010, the Consumer Financial Protection Bureau, or CFPB, has developed new requirements for the making fee estimates and disclosures prior to closing on a mortgage. Previous estimate and disclosure forms were consolidated, timelines were altered, and borrowers were given more time to compare the Loan Estimate and the Closing Disclosure. Naturally, the CFPB was concerned primarily with consumers, and lenders and loan officers were faced with a steep learning curve to become compliant.

The purpose of the Loan Estimate was to give buyers a more accurate depiction of the costs of a mortgage. Despite the CFPB?s best intentions, neither lenders nor real estate brokers are seeing customers use this tool to compare their options. As they say, you can lead a horse to water, but you can?t make him drink.

Why Aren?t Buyers Using the Loan Estimate for Comparison?

After receiving the Loan Estimate, buyers have ten days to search for a better bargain on a mortgage. After that, they must accept or decline the offer. The CFPB recommends that customers compare at least three separate Loan Estimates before choosing one. However,.

According to the chief executive of Quicken Loans, most buyers are not doing this. There has not been an increase in people shopping for Loan Estimates. He explains this may be because the buying process is long and exhausting enough without having to get mortgage estimates from several different lenders. If a company has a good reputation, or has been referred by a realtor or friend, buyers often feel confident they are getting a fair deal.

Paul Skeens, of Colonial Mortgage Group, echoes this sentiment. He says that hardly 5% of his clients utilize the Loan Estimate as a comparison tool. Another mortgage banker from the Seattle area states that he hasn?t heard of a single person who?s gotten a Loan Estimate with the intention of weighing it against another. Just because there is another tool, it doesn?t mean that buyers are taking advantage of it the way the CFPB recommends.

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A new survey of top mortgage originators conducted by the Mortgage Bankers Association suggests that multifamily and commercial lending numbers will increase substantially in 2016. This good news underscores other positive signs throughout the housing market. With an equity crisis in China causing global turbulence, housing is likely to serve as a safe haven for investments. Furthermore, pent-up demand caused by the recession is just beginning to give way.

The Numbers

With borrower demand comes the demand for lenders to make loans. One factor that?s likely to increase demand across the board is the many 10-year loans made in 2006 and 2007 maturing. The Mortgage Bankers Association found that among top mortgage originators:

? 90% expect mortgage originations to increase in 2016
? 50% expect a total increase of 5% or more
? 61% expect their own firm?s originations to increase by 5% or more

?Borrower Demand Remains High ? Borrowers have been jumping at the chance to take out loans, and survey participants are confident that will continue.

Strong ?Appetites? ? A full 100% of surveyed originators predicted borrowers to have a strong or very strong appetite for loans in 2016, and 97% expected lenders to have a strong or very strong appetite to make loans.

Predictions by Investor Group ? Loans from all major investor groups are expected to increase in 2016. The greatest projected increase is with commercial mortgage-backed (CMBS) securities. The following percentages represent the number of respondents who predict growth of more than 5%.

? CMBS ? 64 percent
? Pension and life insurance companies ? 48 percent
? Fannie Mae and Freddie Mac ? 43 percent
? Bank portfolios ? 41 percent
? FHA ? 27 percent

?Loan Returns – Loan returns are expected to remain moderate. Half of respondents characterized loans made in 2015 as low return, and only 30% said loans in 2016 would be low or very low return.

Loan Risk – Loan risk is expected to rise slightly in 2016. Just over half of survey respondents classified loans made in 2015 as ?medium risk.? Compare that with 41% of respondents expecting loans this year be ?high risk.? Last year, in the same survey, 31% of respondents saw their loans as high risk.

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Following a brief surge, interest rates on 30-year fixed rate mortgage loans fell 4 BPS (basis points) in the week ending January 8th. According to a survey of over 100 lenders administered by the Federal Home Loan Mortgage Corporation, rates now average 3.97% for 30-year borrowers who pay 0.6 discount points at close. While the 3.97% figure is a drop from the end-of-year 4.1% rate, it is still an overall increase from last year’s average of 3.73%.

Contributing Factors

The last several months have been bumpy for mortgage shoppers, and the recent Federal Reserve interest hike sparked speculation that mortgage rates would rise as well. However, since the Fed’s adjustment directly affects the national prime rate and not long-term rates, it should take a while for the rise to trickle down to borrowers.

Global concerns are also a factor for the American housing market. Concerns about the overseas economic market, such as a faltering Chinese economy and plummeting oil prices, have prompted a global equity selloff and a corresponding fall in Treasury bond yields.

Fluctuations Outside the 30-Year Mark

Conventional 15-year mortgages saw a two-BPS rise, attaining a nationwide 3.36% average with 0.5 discount points. 5-year adjustable rate mortgages saw a modest increase as well, climbing 1 BPS to 3.09%.

VA loan rates, which are extended to mortgage applicants with past military experience, are traditionally among the most cost-efficient options for borrowers. On any given day, a VA loan will beat comparable mortgage plans by 25 BPS ? and the effect is even more pronounced in 2016, with The Mortgage Report forecasting VA rates as low as 37.5 BPS below traditional plans.

What Rate Changes Mean For Lenders and Loan Officers

With the current low average rate, lenders and loan officers will see increased business from home shoppers. Even with an average 5% increase in overall home prices in 2015, the US housing market has seen brisk sales through the fall and winter. Furthermore, the Fed’s prime hike is generally seen as a vote of confidence for a strengthening economy, supporting the idea that the housing market can support a gradual increase in interest rates.

Lenders and loan officers may want to consider the Mortgage Reports’ prediction of increased popularity of zero closing cost mortgages. In this model, the lender agrees to pay the closing costs of the transaction in exchange for a small percentage point increase in the interest rate. Obviously, a careful analysis of cost-benefit is necessary, particularly with regard to closing costs (which can vary wildly state by state).

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Freddie Mac recently delivered its latest Multi-Indicator Market Index (MiMi), illustrating the progressing rebound of the national housing market. MiMi tracks and gauges the strength of the national housing market, as well as that of all 50 states and the top 100 metro areas. It blends Freddie Mac?s own data with local market data to determine the trends of single-family housing markets by examining a host of factors. The index uses three ranges to demarcate value: weak, stable, and elevated. Two states?New York and Kansas?and three metro areas?New York, NY; Minneapolis, MN and Palm Bay, FL?were upgraded to ?stable? status in the most recent report.

National Market Perspective

Currently, the national MiMi value sits at 81.9, revealing an overall market in the ?stable? range, with a three-month increase of +1.54% and a year-over-year improvement of +6.31%. While it has gone up 38% since its all-time low in October 2010, it continues to lag behind the all-time high of 121.7. Overall, 32 states and Washington D.C. fall in the ?stable? range. Last year at the same time, only 21 states and Washington D.C. had stable values. Additionally, 53 of 100 major metro areas are marked as stable, while only 29 were a year ago.

Biggest Market Improvements by Area

The biggest jumps by states over last month were New York, New Jersey, Florida, Oregon, and Colorado. By metro area, Allentown, PA; Tampa, FL; Cleveland, OH; Palm Bay, FL, and Las Vegas, NV fared best when compared to last month. Over the last three months, 43 of 50 states and 89 of 100 metro areas have shown an upward trend.

What?s Causing the Rebound?

According to Len Kiefer, the Deputy Chief Economist at Freddie Mac, the rebound has been primarily due to the continuing decrease in mortgage delinquencies and better employment figures. Steady buyer demand, robust economies, and above-average job creation in Western states like Utah have buoyed markets. Kiefer forecasts a modest rise in mortgage rates, but expects them to stay within historically low levels. As unemployment falls and incomes rise, he predicts robust growth in household formation, construction, and home sales.

Working with Acuity National Real Estate Solutions

As the housing market continues to improve nationwide, we can expect to see increased business for lenders and loan officers. Acuity National Real Estate Solutions is here to help meet that demand. We are considered one of the most technologically advanced title companies in the nation, offering clients a 24-hour portal where they can access, upload, and download files at any time. For more information, please visit our homepage.