Typically at the end of a year, I write a blog about what we have seen change over the past year. This year, however, I thought I would write about a few things that I think we might see coming in the year ahead. I don't have a crystal ball, and I could certainly be wrong... but why not take a stab at predicting the title issues we will see forthcoming?
Over the next few blogs, I'll more fully explain why I made these particular predictions. But for now... here is the list.
- FORECLOSURES: The biggest issue in 2010 has been foreclosures. Although the final numbers for 2010 aren't out yet, it has been estimated that there will be 1.8 million foreclosed homes in 2010.
I predict that in 2011, we will see more foreclosures, between 2.2 million and 2.5 million.
- FORECLOSURES: We also saw unprecedented delays in the foreclosure process due to clogged dockets, wrongdoing by lenders and foreclosure mills, and constantly changing government programs intended to help struggling homeowners.
I predict that in 2011, we will continue to see delays. however the courts will be spending more time on substantive legal issues than procedural mis-steps.
- HOME PRICES: After a steady decline of more than 30% from the peak in 2006, home prices have remained fairly flat throughout 2010. The median price of home is actually up a bit, but the average price is a little lower.
I predict that in 2011, home prices will decline further - by between 5% and 10%.
- PRIVATE TRANSFER FEE COVENANTS: By the end of 2010, 19 states had adopted legislation banning or restricting the use of private transfer fee covenants.
I predict that in 2011, 10 to 12 more states will pass bans. But, the important thing to watch for will be federal legislation on this issue. The federal government could put an end to them... or, worse, undue all the state bans. Two bills were introduced in 2010, one going each way, but neither passed. I predict that the federal government will not pass anything with regard to transfer fee covenants in 2011.
- AFFILIATED BUSINESS ARRANGEMENTS: Nothing has divided the title industry like AfBAs. The biggest news concerning AfBAs was the 6th Circuit decision in Carter v. Welles-Bowen Realty, in which the judge ruled that HUD's ten-part test for sham AfBAs was unconstitutional. It is currently pending appeal.
I predict that in 2011 the Carter decision will be reversed allowing HUD to continue to apply the ten-part test.
- MORTGAGE INTEREST RATES: Mortgage interest rates dropped to lows around 4.5%.
I predict that in 2011, we will see modest a modest increase in mortgage rates to between 5.5% to 5.75%.
- REPRESENTATION OF INDEPENDENT TITLE AGENTS: The American Land Title Association (ALTA) has traditionally been the voice of the title insurance industry. This year, they reported that "despite a sluggish economy, ALTA reached record membership in 2010 with over 3,800 member companies and 1,350 new members." But there is another industry association to watch in 2011, The National Association of Independent Title Agents (NAILTA).
I predict that in 2011, ALTA will still lead the way in number of members. However, I believe that NAILTA will be the preferred organization by independent title agents when it comes to speaking out for their interests.
- TITLE INSURANCE CLAIMS: Historically, the title insurance industry has had a claims ratio of between 5% and 6%. I expect that rate will be between 7% and 8% for 2010 when the numbers come out.
In 2011, I predict the claims ratio will be slightly higher - somewhere between 8% and 10%.
- TITLE SEARCH STANDARDS: We have seen a steady decline in search standards over the past several years. 2010 was no exception. Insurance is being written on current owner searches, and sometimes even something less.
It will come as no surprise that I predict a further decline in 2011.
- INDEPENDENT TITLE SEARCHERS: 2010 was a rough year for independent title searchers. There has been less work to go around and those still getting work are having a difficult time getting paid on time.
I predict in 2011 we will see more of the same kinds of problems, but this will be the year many throw in the towel and get out of the business. That may mean things might seem to stabilize for those who manage to hang in there.
Feel free to comment on my predictions, and add your own. What do you think will be the hot issues in 2011? I have some other thoughts, such as the affect the new Financial Consumer Protection Bureau will have on the title industry, what kinds of foreclosure prevention programs we might see develop, and new federal legislation we might expect. But... I'm not ready to make a prediction on those just yet.
Whatever 2011 has in store for us... I wish all of you the best in the coming year and I hope it provides new opportunities and positive change.
Robert A. Franco
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