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Tag Archive for: Mortgage Lending

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Community, Member News, News

WBA Announces $50,000 in Housing and Economic Development Grants

The Wisconsin Bankers Association (WBA) is pleased to announce that five grants of $10,000 each have been awarded to support housing and housing literacy, economic development/community investment, and financial or cyber literacy in Wisconsin.  

“Affordable housing and housing literacy are acute needs for individuals and families in our state and are critical drivers for our economy’s workforce needs,” said Rose Oswald Poels, WBA president and CEO. “We are proud to offer this inaugural grant opportunity, which showcases the partnership of Wisconsin banks and non-profit organizations to strengthen programming that empowers Wisconsinites to become financially capable, promotes homeownership, and builds wealth that can be passed on to future generations.” 

The selected projects include: 

  • Columbia Savings and Loan Association, Milwaukee, Wis. 
    • Columbia Savings and Loan Association plans to present homeownership workshops and related financial literacy sessions to individuals in their market. In addition, qualified low- and moderate-income borrowers may receive downpayment assistance to substitute or supplement FHLBank Chicago’s Downpayment Plus Program and/or City of Milwaukee grant funding. 
  • Community First Bank, Boscobel, Wis. 
    • Community First Bank plans to develop/distribute educational/promotional resources to benefit individuals across its footprint in Southwest and South Central Wisconsin with a focus on current and prospective homeowners in rural areas. Such resources could include video content on topics such as credit repair strategies and steps to homeownership. The bank may also partner with others involved in the home-buying process to offer educational events to help consumers more fully understand the housing market, housing availability, and the steps required to purchase and maintain a home. 
  • Peoples State Bank, Prairie du Chien, Wis. 
    • Peoples State Bank plans to provide a three-part community education series and one-to-one counseling sessions in partnership with Couleecap, Inc, a community action and United States Department of Housing and Urban Development (HUD) counseling agency.   
  • Premier Community Bank, Marion, Wis. 
    • Premier Community Bank plans to host financial education events in English and Spanish — including presentations, videos, and supplemental materials — focusing on housing counseling/homeownership opportunities, fraud prevention, and cyber literacy. This outreach is geared toward elderly, financially challenged, and low- to moderate-income community members. 
  • Waldo State Bank 
    • Waldo State Bank will support Consumer Credit Counseling Service (CCCS) — a non-profit organization with HUD-accredited and NFCC-certified (National Foundation for Credit Counseling) counselors — in providing the Open the Door Homeownership (ODHO) program for new homebuyers. The grant funding will drive awareness of the ODHO homebuyer education classes through radio, print media, etc. to underserved and marginalized populations, provide a manual to participants (available in English, Hmong, and Spanish), and offer one-to-one counseling required for most downpayment assistance programs.
June 21, 2024/by Cassandra Krause
https://www.wisbank.com/wp-content/uploads/2021/09/Triangle-Backgrounds_Yellow-on-Light-Blue.jpg 972 1921 Cassandra Krause https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Cassandra Krause2024-06-21 07:00:582024-06-20 16:32:20WBA Announces $50,000 in Housing and Economic Development Grants
Panelists
Member News, News

Real Estate, Workforce, and Inflation Among Top Economic Trends to Watch in 2024

Experts at the Wisconsin Economic Forecast Luncheon weigh in on what is in store for the remainder of the year  

By Cassandra Krause

2024 Midwest Economic Forecast Luncheon

2024 Midwest Economic Forecast Luncheon

The Wisconsin Economic Forecast Luncheon — back in person for the second year post-pandemic — was presented on April 10, 2024, by the Wisconsin Bankers Association in partnership with WisPolitics and WisBusiness. Dr. Mark Eppli, director of the James A. Graaskamp Center for Real Estate at the University of Wisconsin–Madison Business School, gave the keynote address covering macroeconomics, the single-family housing market, the single-family mortgage market, and commercial real estate. A panel discussion, moderated by WisPolitics and WisBusiness’s Jeff Mayers, included insights from bankers and economists. The bankers were Doug Nelson, regional president, Johnson Financial Group; and Mike Olson, president and CEO of the Bank of Brodhead. The economists were Dale Knapp, of Forward Analytics, a division of the Wisconsin Counties Association; and Romina Soria, a senior economist at the Wisconsin Department of Revenue (DOR).  

100% of Excess COVID Consumer Savings is Now Spent 
Dr. Mark Eppli

Dr. Mark Eppli, University of Wisconsin–Madison

In his macroeconomic overview, Eppli noted that the Federal reserve has kept short- and long-term rates high — pushing mortgage interest rates and interest rate spreads dramatically higher — yet the U.S. gross domestic product (GDP) grew 3.1% in 2023 (compared to a 50-year average of 2.7%). He illustrated that while the Federal Reserve had its feet on the brakes, the president and Congress had their feet on the gas, so to speak, with federal deficit spending increasing $9.8T between Q1 of 2020 and Q4 of 2023.  

Nationwide, the unemployment rate has remained under 4% for over two years, and Eppli pointed out that while Wisconsin’s employment growth since the pandemic has been below the national average, Dane County has been a source of employment growth for Wisconsin. However, Eppli referenced a January 2024 article in the Wall Street Journal that showed that job quit rates and job postings are in decline. Eppli predicted that the second half of 2024 will see less economic growth and less consumer spending, citing factors such as student loans going back into repayment and recent data from the Federal Reserve Bank of San Francisco indicating that pandemic-era excess personal savings has now been spent. 

Wisconsin Housing Supply Remains Tight 

Data from the Wisconsin REALTORS® Association (WRA) and the Graaskamp Center shows that Wisconsin residential sales are down 29% since a peak in 2021, and Eppli noted that a limited for-sale housing supply is hurting sales volume. Federal Reserve Economic Data shows Wisconsin’s listing inventory down 79% from 2016 levels. On top of many current homeowners having refinanced into mortgages with low interest rates, WRA data shows that home prices have nearly doubled in the last 10 years. This means that people are not moving, and Eppli predicts that long-term housing demand will remain robust while the inventory of for-sale homes will remain tight in 2024. 

Commercial Real Estate Prices May Have Hit Bottom 

To close his keynote presentation, Eppli covered the commercial real estate market. He pointed to data from the Green Street Commercial Property Price Index® showing that commercial property values are around the early COVID pricing lows and said that prices may have hit bottom by this point. He named retail and office spaces as particularly challenged areas of commercial real estate as demand is low. Offices, for example, have not only low demand but are also expensive to operate. On the other hand, Eppli described apartment and industrial commercial real estate market fundamentals as ‘solid’ and ‘very solid,’ respectively.  

Housing Affordability and Cost of Living Among Top Concerns 
Panelists

(Left to right) Jeff Mayers, WisPolitics/WisBusiness; Doug Nelson, Johnson Financial Group; Dale Knapp, Forward Analytics; Mike Olson, Bank of Brodhead; Romina Soria, Wisconsin Department of Revenue

During the panel discussion, Bank of Brodhead’s Olson emphasized the importance of housing affordability to Wisconsin’s economy and noted that customers are coming to banks for education about what they can afford in terms of debt to income. When asked whether rental units can fill the housing inventory gap, Johnson Financial Group’s Nelson replied that they are only a safety valve for a point in time; units fill up quickly and prices go up. He stressed that everyone needs to have their eye on affordable housing. Knapp, of Forward Analytics, added that the cost of things like food and energy at home, as well as the cost of things like car insurance have gone up significantly, resulting in excess savings being drawn down. DOR’s Soria said that while some people will adapt to higher interest rates, others — particularly those who are in the bottom half of wealth percentile groups — will be priced out of buying a home. Soria also noted the issue of Wisconsin’s aging population and its implications for the state’s workforce. 

Will There Be a Recession in 2024? 

The final topic of discussion amongst the panel was the possibility of a soft landing in 2024. Olson, who is both a banker and a farmer, drew a laugh from the audience when he likened economic forecasts to weather forecasts: “every year, somebody predicts a drought.” Though the panelists did not come to a clear consensus on exactly when the U.S. economy may experience its next recession, all agreed that the next recession is likely not as imminent as many outlooks from six months or a year ago had predicted.  

April 11, 2024/by Cassandra Krause
https://www.wisbank.com/wp-content/uploads/2024/04/IMG_1190-scaled.jpg 1920 2560 Cassandra Krause https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Cassandra Krause2024-04-11 08:30:112024-04-10 22:57:24Real Estate, Workforce, and Inflation Among Top Economic Trends to Watch in 2024
Member News, News, Resources

Committee Chair Spotlight: Mira Hird

The following is a brief interview with Mira Hird, assistant vice president – residential relationship manager at Peoples State Bank, Wauzeka. Hird is chair of the 2023–2024 Mortgage Lending Committee.

How did you first get into the banking industry?

I found my finance and business classes very interesting in high school and started my first banking job while going to school.

Why did you decide to join a WBA committee? Why should others consider lending their time and expertise to shaping Wisconsin’s banking industry?

My supervisor asked if I would be willing to be a part of the committee in her absence if she was unable to attend.

I have found the committee to be a great resource.  It’s great to use the members to bounce ideas off of and see what they are experiencing in their areas and if they are the same issues we are seeing.  Lending your time and having our voices heard to provide feedback to our industry leaders of concerns is important in continuing to forward.

How has WBA facilitated the growth you have seen in your career and as a leader?

I have attended several WBA schools and courses: Residential Lending Committee, Residential Lending School, Consumer Lender School, Agricultural Lending School, Several (FIPCO) Software Users Conferences, and many more.

As a banker, and as a leader, what is the most important lesson that you have learned?

Change is inevitable in our industry.  Regulations, forms, software, processes, plus much more are always being altered or changed.  Learning to accept that and be open to new ways on how to adapt or change your job duties will get you further in your career.

Who (or what) motivates you to succeed?

My customers. . . I’m always working to serve them the best way possible and work hard to go above and beyond what their needs are.  I strive to be the contact for all of their banking needs.

January 8, 2024/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Triangle-Backgrounds_Blue-on-Lime-Green.jpg 972 1920 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2024-01-08 15:37:172024-01-08 15:37:17Committee Chair Spotlight: Mira Hird
Compliance, News

Executive Letter: 2024 Brings Adjusted Regulatory Thresholds

By Rose Oswald Poels

Happy New Year! As we step into 2024, there are several thresholds which have been adjusted by both state and federal regulators which go into effect now that the new year has arrived. Below is a collection of thresholds effective January 1, 2024, including a link to pull each publication for reference.

Regulation Z, TILA

  • The exemption threshold for Regulation Z (Truth in Lending Act) will increase to $69,500, up from $66,400.
  • The exemption threshold under Regulation Z for HPML appraisals will increase to $32,400, up from $31,000.
  • The asset-size threshold under Regulation Z which exempts creditors from the requirement to establish an escrow account for HPMLs will be:
    • For creditors and their affiliates that regularly extended covered transactions secured by first liens, the asset-size threshold is adjusted to $2.640 billion, up from $2.537 billion; and
    • The exemption threshold for certain insured depository institutions with assets of $10 billion or less is adjusted to $11.835 billion, up from $11.374 billion.
  • The dollar amount thresholds under Regulation Z for HOEPA and QM-related loans have been adjusted as follows:
    • For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages will be $26,092.
    • The adjusted points-and-fees dollar trigger for high-cost mortgages will be $1,305.
    • For QMs under the General QM loan definition in § 1026.43(e)(2), the thresholds for the spread between the annual percentage rate (APR) and the average prime offer rate (APOR) will be:
      • 2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $130,461;
      • 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $78,277 but less than $130,461;
      • 6.5 or more percentage points for a first-lien covered transaction with a loan amount less than $78,277;
      • 6.5 or more percentage points for a first-lien covered transaction secured by a manufactured home with a loan amount less than $130,461;
      • 3.5 or more percentage points for a subordinate-lien covered transaction with a loan amount greater than or equal to $78,277; or
      • 6.5 or more percentage points for a subordinate-lien covered transaction with a loan amount less than $78,277.
    • For all categories of QMs, the thresholds for total points and fees will be:
      • 3% of the total loan amount for a loan greater than or equal to $130,461;
      • $3,914 for a loan amount greater than or equal to $78,277 but less than $130,461;
      • 5% of the total loan amount for a loan greater than or equal to $26,092 but less than $78,277;
      • $1,305 for a loan amount greater than or equal to $16,308 but less than $26,092; and
      • 8% of the total loan amount for a loan amount less than $16,308.
  • For open-end consumer credit plans under TILA, the threshold that triggers requirements to disclose minimum interest charges will remain unchanged at $1.00.

Regulation C, HMDA

  • The asset-size threshold to be exempt from collecting HMDA data in 2023 is adjusted to $56 million, up from $54 million.

Community Reinvestment Act (CRA)

  • The Board of Governors of the Federal Reserve System (FRB) and Federal Deposit Insurance Corporation (FDIC) CRA regulations have adjusted the asset-size thresholds used to define “small bank” and “intermediate small bank” to be:
    • Small bank means a bank that, as of December 31 of either of the prior two calendar years, had assets of less than $1.564 billion; and
    • Intermediate small bank means a small bank with assets of at least $391 million as of December 31 of both of the prior two calendar years and less than $1.564 billion as of December 31 of either of the prior two calendar years.
  • The Office of the Comptroller of the Currency (OCC) made the identical adjustments to the asset-size thresholds used to define “small bank or savings association” and “intermediate small bank or savings association.”

Required Escrow Rate Under Wisconsin Law

  • The Wisconsin Department of Financial Institutions (WDFI) has established the interest rate that must be paid on required escrow accounts under section 138.052(5) of the Wisconsin Statutes. The new rate is 0.18%.

Other Regulatory Thresholds and Limits

  • The dollar amount of the maximum allowable charge for disclosures by a consumer reporting agency to a consumer pursuant to Fair Credit Report Act (FCRA) section 609 for the 2024 calendar year is $15.50.
  • The exemption threshold for Regulation M (Consumer Leasing Act) will increase to $69,500, up from $66,400.
  • The FDIC Designated Reserve Ratio remains 2% for 2024.
  • The OCC is maintaining the general assessment, independent trust, and independent credit card fee schedules from 2023. There will be no inflation adjustment to assessment rates. OCC is increasing the hourly fee for special examinations and investigations to $170 from $161. The increase is to ensure adequacy in recovering the cost of conducting special examinations and investigations.
  • Contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,000, up from $22,500. The limit on annual contributions to an IRA increased to $7,000, up from $6,500.
  • Multifamily loan purchase caps for Fannie Mae and Freddie Mac will be $70 billion for each enterprise, for a combined total of $140 billion. The caps reflect current market forecasts. FHFA will continue to require that at least 50% of Fannie’s and Freddie’s multifamily business be mission-driven affordable housing.
  • The conforming loan limit values for mortgages to be acquired by Fannie Mae and Freddie Mac in 2024 for one-unit properties will be $766,550, an increase from $726,200.
  • New loan limits for FHA’s Single Family Title II Forward and Home Equity Conversion Mortgage (HECM) insurance programs, based upon property size and location, range from $498,257 to $3,317,400.
  • Beginning January 1, 2024, the standard IRS mileage rates for the use of a car (also vans, pickups, or panel trucks) will be as follows. The rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
    • 67 cents per mile driven for business use, up 1.5 cents from 2023;
    • 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023; and
    • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

I look forward to this new year and am excited about what 2024 may bring. Be sure to stay connected with WBA through our various releases and publications, and through our social media channels.

January 2, 2024/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Untitled-3_Yellow.jpg 972 1920 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2024-01-02 10:44:592024-01-02 11:10:03Executive Letter: 2024 Brings Adjusted Regulatory Thresholds
Education, Resources

Factors to Consider Before Buying a Home

Read more
September 28, 2022/by Jaclyn Lindquist
https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg 0 0 Jaclyn Lindquist https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Jaclyn Lindquist2022-09-28 08:39:112022-09-28 15:57:47Factors to Consider Before Buying a Home
Compliance, News

Legal Q&A: New Interest Rate on Residential Mortgage Loan Escrow Accounts

Wisconsin DFI sets escrow interest rate at 0.09% for 2022

By Scott Birrenkott

Q: Has the Wisconsin Department of Financial Institutions set the Interest Rate on Required Residential Mortgage Loan Escrow Accounts for 2022?

A: Yes. The Wisconsin Department of Financial Institutions, Division of Banking (DFI), has calculated the interest rate required to be paid on escrow accounts for residential mortgage loans subject to Wisconsin Statute Section 138.052(5) to be 0.09% for 2022. The interest rate shall remain in effect through December 31, 2022.

Note that while Wisconsin Section 138.052 previously required financial institutions to pay interest on the balance on any required escrow accounts, Wisconsin Act 340 modified this requirement so that it only applies to loans originated prior to the effective date of the Act (April 18, 2018). Thus, financial institutions must continue to pay interest on required escrow accounts prior to April 18, 2018. Any escrow account associated with a loan originated after the effective date of Act 340, 138.052 no longer requires payment of interest. Wis. Stat. Section 138.052 applies to loans secured by a first lien or first lien equivalent in a 1-4 family dwelling that is used as the borrower’s principal residence.

The escrow rate notice may be found here.

February 2, 2022/by Jaclyn Lindquist
https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg 0 0 Jaclyn Lindquist https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Jaclyn Lindquist2022-02-02 22:44:272022-02-02 22:44:27Legal Q&A: New Interest Rate on Residential Mortgage Loan Escrow Accounts
Compliance, News

Year-end Frequently Asked Escrow Questions

While there has not been a recent significant change to escrow requirements, it is WBA’s understanding that many banks pay taxes from escrow by December 20 every year. Around this time, many questions arise as to State and Federal requirements regarding escrow accounts. Furthermore, given the lingering impacts of the COVID-19 pandemic, many borrowers may have been, or currently are, in deferral or forbearance, resulting in insufficient escrow balances. This article presents several questions and answers to refresh banks on relevant requirements, and important considerations, regarding escrow accounts both with respect to the pandemic, and more generally.

Q1: Does Wisconsin have rules regarding disbursements from tax escrows?

A1: Yes. Wis. Stat. section 138.052(5m) governs escrow accounts required to be maintained to pay taxes or insurance in connection with consumer-purpose loans secured by a first lien real estate mortgage or equivalent security interest in the borrower’s principal dwelling. For example, the requirement applies to covered purchase money, refinance, and home equity transactions but does not apply to loans that are business or agricultural purpose, or manufactured home transactions. It also does not apply to voluntary escrow accounts. If a bank maintains a voluntary escrow account, it should ensure it has adequate documentation to evidence that fact. 

For covered loans, banks must provide an escrow notice before closing giving the borrower options regarding how the bank will make payments from the amount escrowed: 

Escrow agent sends a check by December 20 to the borrower for the amount held in escrow for the payment of property taxes made payable to the borrower or to the borrower and the taxing authority. 

  1. Escrow agent pays the property taxes by December 31 if the escrow agent has received a tax statement for the property by December 20.  
  1. Escrow agent pays the property taxes when due.  

This notice is not required under section 138.052(5m) if the escrow agent’s practice is to pay the borrower the amount held in escrow for the payment of property taxes by December 20, or to send a check in the amount of the funds held in escrow for the payment of property taxes, made payable to the borrower and taxing authority. 

Regardless of whether a notice under state law may not be required, banks are reminded that a voluntary agreement is still required under the Real Estate Settlement Procedures Act (RESPA) to pay property taxes annually as permitted under Wis. Stat. section 138.052(5m). See the discussion below regarding the interconnection between state and federal law.  

Q2: Does RESPA have rules regarding disbursements from tax escrows? 

A2: Yes. RESPA section 1024.17(k) prescribes rules that apply to escrow accounts established in connection with RESPA-covered loans to pay taxes, insurance, or other charges. If the terms of the loan require the borrower to make payments to an escrow account, the bank must make disbursements in a timely manner. A timely manner means payment by the disbursement date, so long as the loan account is not more than 30 days overdue. 

If a taxing authority offers a bank a choice between annual and installment disbursements, RESPA includes additional requirements. Generally, disbursements must be made on an installment basis depending on whether the taxing authority offers a discount, or charges additional fees, for installment disbursements.  In Wisconsin, where taxes may be paid in annual or installment payments, and the taxing authority does not offer a discount for payments on an annual basis nor does it impose any additional charge or fee for installment payments, the bank must make disbursements on an installment basis, unless the bank and borrower agree to another disbursement alternative. 

Most property taxes in Wisconsin may be payable in two installments. If the first installment is paid by January 31, the second installment may be paid by July 31. Because no discount is available for making annual payments, and no penalty is imposed for making installment payments, RESPA requires property taxes payable in this manner to be disbursed on an installment basis, unless the borrower voluntarily agrees, in writing, to an annual disbursement.

Q3: How do the requirements under Wis. Stat section 138.052(5m) and RESPA section 1024.17 work together?

A3: RESPA preempts State law only to the extent of any inconsistency. Generally, escrows governed by section 138.052(5m) must also comply with RESPA, and banks must disburse tax escrows in installments, or as otherwise agreed to by the borrower. Thus, banks will want to consider their written agreement as to the borrower’s choice of disbursement methods, and as discussed in Q1 above, a bank may pay by December 20 by check.  

As RESPA requires taxes to be disbursed in installments, and State law allows more flexibility in how taxes are paid, in order for bank to disburse money from a required escrow account, annually under the section 138.052(5m) December 20 method, RESPA requires the customer’s voluntary agreement of that option. And, while notice under section 138.052(5m) may not be required, RESPA still requires the customer’s voluntary agreement to pay by December 20; see the discussion in Q2. FIPCO’s WBA Tax Escrow Option Election form meets the requirements under Wis. Stat. 138.052(5m) and also serves as the voluntary agreement to disburse property taxes out of escrow in any method other than installments to comply with RESPA.  

Q4: What if a deficiency occurs before disbursement?

A4: As discussed in Q2, RESPA generally requires the bank to disburse funds in a timely manner. If a deficiency exists, the bank must still cover the amount due. Upon advancing the funds, the bank may seek repayment from the borrower after performing an escrow account analysis.  

If the deficiency is less than one month’s escrow account payment, then the bank: 

  1. May allow the deficiency to exist and do nothing to change it; 
  1. May require the borrower to repay the deficiency within 30 days; or 
  1. May require the borrower to repay the deficiency in 2 or more equal monthly payments. 

If the deficiency is greater than or equal to 1 month’s escrow payment, the bank may allow the deficiency to exist and do nothing to change it or may require the borrower to repay the deficiency in two or more equal monthly payments. 

If the borrower is not current, then the bank may recover the deficiency pursuant to the terms of the mortgage loan documents. For example, language within the WBA 428 Real Estate Mortgage states that if the escrowed funds held by bank are not sufficient to pay the escrow account items when due, bank may notify consumer in writing, and consumer shall pay bank the amount necessary to make up the deficiency in a manner described by bank or as otherwise required by applicable law.  

Furthermore, for loans that are not covered by RESPA (i.e., the escrow account is not required), the bank will need to determine how the deficiency will be covered, either by the borrower, or the bank, pursuant to the terms of its agreement. 

Q5: How does a payment deferral or forbearance affect escrow considerations? 

A5: As a result of the pandemic, bank may have deferred or forborne payments for some of its borrowers. Bank should consider its deferral and forbearance agreements to confirm whether this deferral or forbearance included escrow payments. Even if it did not, financial distress caused by the pandemic may have resulted in more escrow shortages and deficiencies than typical. Banks should consider how they are monitoring loans for payments, and accounting for expected, and unexpected shortages. Specific attention may need to be paid to escrow balances for loans in deferral, forbearance, or modification. Banks should identify loans that will be short, and determine how the deficiency will be handled, with the above considerations in mind.

Q6: What is the escrow rate for 2022, as set by 138.052? 

A6: At time of this release, the Wisconsin Department of Financial Institutions, Division of Banking, has not yet released the 2022 interest rate required to be paid on escrow accounts for residential mortgage loans subject to Wisconsin Statute Section 138.052(5). WBA will continue to monitor and will report the 2022 rate once released. Once set, the 2022 interest rate shall remain in effect through December 31, 2022.

Q7: Does 138.052 require Wisconsin banks to pay interest on escrow accounts?  

A7: Not for loans originated after April 18, 2018. 2017 Wisconsin Act 340 eliminated the requirement that a financial institution pay interest on escrow accounts for residential mortgage loans originated on or after the effective date of the Act. Thus, a Wisconsin financial institution is not required by law to pay interest on any escrow account maintained in association with a loan originated on or after April 18, 2018. 

Wisconsin Section 138.052 previously required financial institutions to pay interest on the balance on any required escrow accounts. As discussed above, 138.052 applies to consumer-purpose loans secured by a first lien or first lien equivalent in a 1-4 family dwelling that is used as the borrower’s principal residence. Banks must continue to pay interest on escrow accounts they required prior to the effective date of Act 340. However, for any escrow account associated with a loan originated after the effective date of Act 340, 138.052 no longer requires payment of interest. A bank should also consider the terms of its contract as to whether any payment of interest is part of the agreement.

Q8: Bank is closing loan in December for which bank will require escrow for the payment of taxes. The first mortgage payment will be February. Can bank escrow for 2020 taxes to be paid in 2021? 

A8. No. RESPA’s escrow collection rules are prospective in nature. Bank should only collect for 2021 taxes to be paid either in December 2021 in a lump sum (with borrower’s permission as outlined above) or in installments. Bank should not collect for anything between December 1 and 31 because nothing is owing during that time as the bank should only be collecting for 2021 taxes. Bank should not be collecting for 2020 taxes for payment in 2021. Borrower should be on his/her own to pay 2020 taxes.  

December 7, 2021/by Cassandra Krause
https://www.wisbank.com/wp-content/uploads/2021/09/Triangle-Backgrounds_Yellow-on-Light-Blue.jpg 972 1921 Cassandra Krause https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Cassandra Krause2021-12-07 14:58:232021-12-07 14:58:23Year-end Frequently Asked Escrow Questions
Businessmen shaking hands across table
Compliance, News

Legal Q&A: Delivery of Instruments to Mortgage Borrowers Requirements in Wisconsin

By Scott Birrenkott

Q: Does Wisconsin Require Delivery of Instruments to Mortgage Borrowers after Payoff?

A: Yes. Wisconsin requires delivery of the instrument, and, depending on the transaction, other payoff requirements.

WBA is frequently asked whether banks must provide a copy of a note to the borrower at time of payoff. Wisconsin law requires provision of a payoff statement, and for Wisconsin Consumer Act transactions, the bank must provide a copy of the “instrument.” A copy of the note would meet that requirement.

Wisconsin’s payoff statement requirements can be found under Wis. Stat. section 708.15(3). That section requires that the bank must file and give the secured creditor notification within 30 days after receiving full payment or performance of the secured obligation. Additionally, for loans covered by the Wisconsin Consumer Act, Wis. Stat. section 422.306 provides several requirements regarding receipts, accounting, and evidence of payment. One such requirement is that the bank must give or forward to the customer instruments which acknowledge payment in full. It also requires release of any security interest when there is no outstanding secured obligation.

“Instrument” is a defined term under Uniform Commercial Code Article 9. An “instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment.

A note would meet the definition of “instrument” under Article 9. WBA is also frequently asked whether it must be the “original” instrument or a reproduction of such item provided to the borrower. This question is not addressed within the statutes. Thus, the bank should check with its practices in relation to the requirements. For example, it could be that the bank has a practice of providing the original stamped “paid,” to provide the borrower with documentation that the obligation has had been paid directly on the original. It might also be a decision which is made as a matter of best practice, as then there can be no question as to whether the original was paid.

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com.

November 18, 2021/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/10/bigstock-business-men-handshake-149288153-10-scaled.jpg 1709 2560 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2021-11-18 14:26:072022-01-07 14:28:40Legal Q&A: Delivery of Instruments to Mortgage Borrowers Requirements in Wisconsin
Community, News

Convergence of Boomers, Boomerangers, Housing Costs and the Pandemic Boosts Interest in Multigenerational Homes

At a time when aging baby boomers need a bit of help, more adult children need a place to stay, and housing costs keep climbing, some families are turning to multigenerational homes.

While the COVID-19 pandemic appears to have accelerated such family togetherness nationwide, the use of a house by multiple generations of a clan already had been rising amid changing demographics and housing expenses, according to residential real estate experts.

An analysis by the nonprofit newsroom Wisconsin Watch and the Center for Public Integrity found the state has about 325,000 multigenerational households, or 13% of all households. Most are concentrated in Kenosha, Milwaukee, Racine, Rock, and Waukesha counties. Nationally the rate is about 18%.

“I kind of do think it’s going to continue as a trend, because you have parents a lot of times who are in a little bit of a need of assistance,” said Steve Bechtolt, vice president-mortgage lending for The Bank of New Glarus. “They are not ready for full-time assistance in relation to going to a nursing home, but they could use some help. And I think you are seeing them moving in with children.”

According to the National Association of Realtors, before the pandemic there was an even split between buyers who purchased a multigenerational house either to accommodate aging parents or to provide space for adult children who came back home — so-called boomerang kids — or those who never left. But now aging parents is the No. 1 reason.

While older parents have their grown children to assist them if needed in a multigenerational home, the fact that many seniors are willing to help with childcare for grandkids also figures into the strategy of a house containing three generations of the same family.

Still, there are plenty of parents providing a place for their adult children. The percentage of adult children living at home has never been higher, according to a Pew Research Center analysis last year.

Drawing on U.S. Census data, Pew found 52% of young adults resided with one or both of their parents. Young adults living with their parents grew for all major racial and ethnic groups, men and women, and metropolitan and rural residents, Pew said. Growth was sharpest for the youngest adults — those ages 18 to 24 — and for white young adults, Pew found.

The New York Times reported this summer that shifts in how families live and work, brought on by the pandemic, were creating a surge of baby boom households with multiple generations in the U.S.

But some say it’s been occurring to a lesser degree for years. One reason is the simple economics of sharing space.

Christine Buckman, universal loan officer at First Bank of Baldwin, said over the last five years she has periodically seen people who want to purchase a house for more than one generation of a family.

Some of the driving factors, she said:

  • Convenience to help with aging and/or widowed parents
  • Traditional cultures where it is commonplace to have elders or parents live with the family
  • Snowbird parents who find it wasteful to keep an empty home in Wisconsin while they are in the South six months of the year.

Buckman, who is vice chair of the Wisconsin Bankers Association Mortgage Banking Committee, cited an example involving a married woman with two young children and her parents, who owned a house in Wisconsin and a condo in Florida.

“The parents decided to sell their home in Wisconsin and the parents, daughter and her husband proceeded to design a new custom home for construction together,” Buckman said. “It was designed as one home with two separate wings, so to speak.”

A main foyer leads to the daughter’s family living area, and the foyer also leads to a second living quarters that provides a separate living room, bathroom, small kitchenette, and bedroom.

“The idea being they could leave all the doors open and come and go from each other’s space, but if privacy was desired or needed, the doors could be closed to separate the living areas as well,” Buckman explained.

It was a great solution for the grandparents who were in Wisconsin less than half of the year because it eliminated the expense and upkeep of an unused property while they were in the South. It also gave the grandparents a chance to spend quality time with their daughter and grandchildren in the summers.

“We did have to structure the loan with all four adults as borrowers,” Buckman said. “They were all on deed as well. They worked out the other logistics on financials between themselves.”
The grandparents used proceeds from the sale of their Wisconsin home for a large down payment, while the mortgage payments, taxes and insurance were the responsibility of the daughter and her husband.

The custom home cost more than $900,000, but the strategy worked, she said.

“Pooling their resources and qualifications allowed them to achieve a beautiful property to serve their whole family of three generations,” Buckman said.

Having multiple buyers of a house can be tricky, said Chris Boland, vice president-consumer lending manager for North Shore Bank.

“Multigenerational housing doesn’t necessarily mean multigenerational ownership, although sometimes in these situations the whole family wants to be equivalent owners of the property,” said Boland, who is based in the Green Bay area. “The challenge that presents is that all four of them need to qualify. If somebody has a detrimental credit situation it can make it difficult for the whole transaction to work because of that one individual.”

Over the past few years, some home builders have been featuring “in-law suites” and other convertible space in the houses they are putting up.

David Belman, president of Belman Homes in Waukesha, said a true in-law suite is like an apartment attached to a house.

It typically has a family room, a small dining area, a kitchenette, and a bedroom with a bathroom.

“They have their own private space so they can cook, eat and sleep there, but they can also connect in with the rest of the home if they want to be part of the family,” Belman said.

It’s hard to include all those apartment-like features unless lots in a subdivision are big enough, however, Belman said.

Belman said an alternative for homes built by his company is a first-floor room than can be converted for use as bedroom/bathroom or office.

“I have a really popular floor plan that has a first-floor bedroom-full bath, but it’s not the master suite,” Belman said. “It’s a flexible living space.”

It could be used by an older parent or adult child.

“They would still use the kitchen and their home – they’d be living in the home fully – but they have their own space, their own bathroom,” Belman said. “And down the road, if they’re not there, that room can then be used as an office, a craft room, a sitting room. Home offices are really popular right now just because of COVID.”

While multigenerational homes may be drawing more interest from the general population, they have been common among some groups for years, said Miguel Pesqueira, vice president-community banking manager for North Shore Bank in West Allis.

“From the CRA point of view — the Community Reinvestment Act — we have seen this multigenerational living forever,” Pesqueira said. “It’s really more of a way of life for low-income minority individuals. It’s not uncommon to have grandma and husband and wife and children and grandkids all living under the same roof.”

Even though the pandemic may be a current impetus, Pesqueira said he believes more people from the broader population will pursue multigenerational housing.

“The middle class is shrinking, and I think this is a way of addressing that shrinking budget, by pulling family together,” Pesqueira said.

Buckman said among factors that would seem to encourage multiple generation homes is the increasing longevity of grandparents, and their willingness to provide daycare for grandchildren.

Said Boland: “I think it’s something were definitely going to see more of.”

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years.

October 5, 2021/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg 0 0 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2021-10-05 15:15:022021-10-05 15:15:02Convergence of Boomers, Boomerangers, Housing Costs and the Pandemic Boosts Interest in Multigenerational Homes
News, Resources

Forbearance Resource for Homeowners

By Scott Birrenkott

The Wisconsin Bankers Association has provided a resource to assist homeowners with questions regarding options as forbearance periods end and the pandemic still lingers. Generally, there are a few ways borrowers can make up their missed payments. However, the method of repayment can vary depending on the loan. Not all borrowers will be eligible for all options. Borrowers are encouraged to ask their servicer about available options.

Download: Assistance for Homeowners in Forbearance

 

September 3, 2021/by Cassandra Krause
https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg 0 0 Cassandra Krause https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Cassandra Krause2021-09-03 17:14:592021-10-12 17:31:33Forbearance Resource for Homeowners
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