John Bethell

Indiana's new Good Better Funds Law is effective July 1, 2009. Many of my clients are expressing concerns about back to back real estate closings and how to avoid long delays in funding while waiting for wire transfers to be received by the title company. If a chain of two or more closings is happening with a single closing agent there won't be nearly the problem with getting acceptable funds. Once the closing agent receives wire transferred funds on the first transaction the proceeds from each successive closing will already be in the closing agent's escrow account and wire transfering will be unnecessary. If a chain of transactions is closing with more than one title company or closing agent then the first closing agent will need to wire transfer the seller's proceeds to the next title company.

To minimize delays, I recommend that you try and schedule your closings on Tuesday or Wednesday mornings. A Tuesday or Wednesday closing will be among the first ones to be worked on by the lender each week. Friday closings only get worked on after the previous days closings are completed. We find that many scheduled Friday closings get bumped back to later in the day or rescheduled for the following Monday. Closing Tuesday or Wednesday puts your deal near the front of the line.

A closing that is completed by 10:00 a.m. or 11:00 a.m. will allow enough time for the closing agent to order the wire transfer to the next closing agent and for the wire transfer to be sent and received by the banks involved. Successfully completing wire transfers involve a number of people and processes. The title company at either end has little or no control or influence over these people or processes. Some banks will process wire transfers immediately. Some banks do them in batches only two or three times a day. Over the years I've come to realize that no one I can talk with knows for sure when a wire transfer has actually been sent. When people tell me that they've sent the wire they almost always mean that they've just given it to the next person in the process.

I am confident that John Bethell Title Company, Inc. will handle the logistics of this new law fairly well. Our bank processes wire transfers as they receive the requests. We receive email confirmation of wires transfers sent and received. We have a later cut-off than at most other banks. Much of the process is within our own control. Still, wire transferring will take longer than cutting a check to someone. The irreversible nature of wire transfers requires that we employ careful accounting procedures to prevent data entry, transcription or other errors; more procedures than we need when cutting checks.

Scheduling your closings for earlier in the day and earlier in the week will allow for the money to get to where it needs to be when it needs to be there.

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Another post in my continuing series Ask the Title Guy.

We've prepared a Wire Transfer Information Kit for Realtors® that Tammy Walker is currently distributing. If you'd like one, please email me or leave a comment.

Beginning July 1, 2009 the logistics surrounding many Indiana real estate closings will become even more complicated. House Enrolled Act 1374 effectively requires that most funds received by a title company or settlement agent for a closing be wire transferred. Cashier's and certified checks will only be acceptable for amounts under $10,000. The Indiana Department of Insurance is the responsible agency for monitoring compliance with the law. Title agents that ignore this law risk licensing actions by the DOI.

The biggest concern my clients express is that complying with the new law will result in even more delayed closings. There are a lot of reasons why closings get delayed. Right now the most common reason is that the lender is unable to meet the scheduled closing date. Lately, about twenty-five percent of our closings are being rescheduled at the last minute due to loan approval issues. Until we have the lender's closing instructions and their approval of the HUD-1, we are unable to provide a firm figure to the buyers. And without a firm figure, the buyer of course, cannot initiate a wire transfer of funds.

Here's a suggestion for avoiding a wire transfer induced delay. It won't work in all situations, but you may find it helpful.

If there are two or more buyers they can each provide a cashier's check and avoid the wire transfer requirement if each of their respective shares of the funds needed for closing is less than $10,000. For example, if two buyers need $16,000 to close, each one can provide a cashier's check for $8,000. (I don't even think that it needs to be separate checks.)

Be sure to check with your title company or settlement agent and make sure that this suggestion is acceptable to them.

If the buyers each need more than $10,000 to close I strongly suggest that they wait to initiate their wire transfer until the exact amount is known. The law makes no provisions for providing some of the funds as wire transfers and some funds as cashier's or certified checks if more than $10,000 per party is needed. In my opinion requiring buyers to make two wire transfers is worse than waiting until you have an exact number.

My next post will address how what time you schedule your closings for will help or hurt your chances for an on time closing

I hope that by now all Indiana Realtors®, mortgage lenders and other real estate professionals know about Indiana House Bill 1374. This new law, which is effective on July 1, 2009, prohibits title companies from disbursing real estate closings without funds over $10,000 having been wire transferred to the title company. I summarized the law in an earlier post here.

During the month of May I watched our business with an eye towards how this new law might disrupt or enhance closings. Reviewing our deposit records I see that about one-half of our purchase closings would have required the buyer to wire us funds had this law been in effect last month. We've also talked with a number of banks to get an idea of the process that will be involved for buyers needing to wire their funds.

The most important thing we can do is to prepare buyers and sellers. Managing expectations will go a long way towards keeping the closing a pleasant experience for all. Buyers should be made aware in advance that wiring their money may be required. Sellers must be cautioned that there's a possibility that funds may not be available immediately at the closing.

The biggest change is for buyers, who often are going to be required to wire their closing funds. After talking with several banks it seems that three or four hours is the average time that (meaning some will take longer) it will take for a wire to be initiated by the buyer at their bank and received by the settlement agent's bank. Many banks have early afternoon cut offs for processing both outgoing and incoming wire transfers. This will result in some wire transfers not being completed until the following day.

Instructions for wire transferring funds to our escrow account are now included with each title insurance commitment we issue. Give the buyer a copy of those instructions when you receive the commitment. We are distributing an information package to our customers that answer many of the questions that will no doubt come up. The package will help you explain the process to buyers and sellers.

Don't lose sight of the fact that although this is a significant change for Hoosiers, over thirty other states have enacted some form of this type of law. Real estate transactions continue to take place in each of those states. I'm certain that it won't take long before wiring funds to the settlement agent will be just another routine aspect of the transaction.

Over the next few days I will be sharing my thoughts on likely scenarios. Please check back regularly.

Federal credit market stimulus is clearly evident when examining mortgage recordings in Monroe County in the first two months of 2009. What is also apparent are those parts of the market that are not benefiting from any government action.

The 729 total mortgages securing loans between $50,000 and $500,000 are the most in this dollar range in the first two months of any of the last seven years. Mortgages in this range tend to be overwhelmingly residential first mortgages. I believe that this increased activity is indicative of the fact that Monroe County homeowners are taking advantage of the lower interest rates resulting from various government actions that began in early December 2008. Judging from new order counts in my company, this trend is still continuing.

On the flip side, mortgages outside that range are down significantly. Mortgages under $50,000 fell 46 percent from year ago levels (195 then, 104 now). These mortgages historically have been primarily home equity credit lines or piggy back purchase seconds. This segment has steadily declined during the last two years. Dollar value of loans over $500,000 (primarily jumbo and commercial) declined over 60 percent from year ago levels (after factoring out one $40 million mortgage securing school bonds). Are the declines in these two market segments reflective of tighter credit standards for loans deemed more risky than high equity first mortgages? I think so.

Monroe County benefits from the lowest unemployment rate in Indiana. The community's primary employers are Indiana University, the health care industry and medical supply industry. All three are not immediately affected by the state of the national economy.

The market is not flooded with vacant foreclosed homes and good values exist in all price ranges. Property values in Monroe County are also faring better than most other places. The worst that can be said in this regard is that values are not current increasing. The Office of Federal Housing Oversight ranks Bloomington for 2008 as the 72^nd best market out of 292 nationally with an appreciation rate of 0.64 percent during last year.

Next month I'll look at the first quarter numbers for a variety of measurements including recorded deeds and foreclosures. If you'd like to be added to our mailing list and receive a complimentary copy of our monthly statistical package, please contact me or Tammy Walker through the link to our company home page.

Meet Claire Voyant, who just joined John Bethell Title Company, Inc. Claire, is now assisting our closing team in predicting the property tax amounts for our real estate closing tax payment escrows.

Every year at this time lenders begin requiring that we insure them that the spring tax payment is paid. May 10^th is the statutory date in Indiana when the first installment of property taxes is due but that amount isn't usually known until the end of April. To comply with the lender's instructions, we escrow enough money (hopefully) at the closing to pay the taxes after the bills come out. Deciding the amount of the escrow is tricky.

This year, rather than attempt these predictions myself, I decided that we needed the services of a professionally trained prognosticator. Claire comes to us after seven years with a local funeral home successfully predicting death. Claire is looking to expand her professional experience by predicting taxes. She turned down competing offers from the IRS and the Congressional Budget Office.

Claire will gaze into her crystal balls (which I got a great deal on at Sam's Club® but I had to buy a case of them) and advise our closers as to what the future property tax amounts will be.

This is a feat of prophesy worthy of Zoltar, himself, with whom Claire apprenticed early in her career. For you see (actually, Claire sees) there are many changes with Indiana Property Taxes this year.

First, as most Hoosiers know, this year for the first time statutory caps will limit that amount of property taxes that can be assessed. For owner occupied residential property the cap is one and one-half percent. Residential rental, the cap is two and one-half percent. For all other improved property the cap is three and one half percent. Depending upon where you live and what you use your property for, your taxes will go up or down as a result of the caps.

Second, the State of Indiana is eliminating the state replacement and homestead credits (not the homestead exemption-that's different) which in the past reduced local property tax levies. So eliminating these will cause property taxes to increase.

Third, the State of Indiana is assuming responsibility for much of the school funding that used to make up the largest portion of the property tax levy. This will reduce taxes.

Fourth, last year's $640 million state subsidy to local governments that reduced property taxes for homestead properties is only $140 million this year. This will cause taxes to increase.

And fifth, no one knows for sure what if anything the State Legislature is going to do the next few months to change any of this. There are dozens of bills introduced in the current session that would affect property taxes.

You can see that Claire's work is cut out for her. And according to a state official I heard Tuesday only about a dozen counties are expected to mail tax bills on time, so we'll be doing a lot of tax escrows. The escrows need to be sufficient to pay the taxes when they become known.

Please join me in welcoming Claire to our team. After the need for tax escrows passes, Claire will assume the additional responsibility of helping our employees decipher what I really meant to say when I said something totally different. Claire foresees a rewarding career with John Bethell Title Company, Inc. long after the need for tax escrows subsides.