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FIND OUT HOW AT WWW.GETARESWAREDEMO.COM The Economy 3 Jobs, consumer spending key to recovery Dr. Carter Murdoch answered questions about market recovery like any good economist would, during his keynote address at the 2008 National Settlement Services Summit. He said, “It depends.” The complex chain of events the Bank of America compliance and marketing executive contemplated in his 2008 address are still weaving their spell over the U.S. economy. What Murdoch told the summit noting that the issue is not whether the federal stimulus package, particularly attendees back in 2008 was that recession is over, but whether the the construction components, is not recovery depends on a complex chain economy can generate the growth expected to be felt until 2010.” of events that involves a delicate necessary to put many of the balance between actions by the Fed, the unemployed back to work again. A conservative growth phase may not value of the dollar internationally, be all bad, however. Fazzari’s research investor confidence, reduction in “In the deep downturns of the 1970s has shown that the consumer spending housing stock, overall health of the job and early 1980s, strong consumer that pulled us out of recent downturns market, the possibility of recession, the spending growth led to strong was not “real” in the sense that the threat of inflation, and, ultimately, the recoveries. Unfortunately, I just don’t consumption was largely done via potential of pent-up demand unleashing see it happening this time.” Fazzari plastic. While the spending spree as consumer confidence builds back up. said. “I continue to worry that the looked good on paper, the underlying household sector cannot support growth household debt proved to be a house of We now know that the value of the over the next few years the way it did cards that came tumbling down in the dollar fell, investor confidence crashed, before the recession.” global economic crisis of 2008. housing stock increased, the job market tanked, and the Great Recession With consumer spending accounting Nobody seems eager to return to that became an ugly reality. for 70 percent of GDP, he considers it a kind of faux economic growth. So “matter of arithmetic” that the economy what’s ahead? The Kelley School of While some economists have already will stagnate over the next few years if Business predicts the following for declared an end to the recession, American households curtail their 2010: economists are united in their belief spending and borrowing to repair their • The housing market will show some that the economy will not come roaring balance sheets. growth; but, like the overall economy, back, but will more likely experience it will be muted. Home prices are conservative growth, with a slow return The Mortgage Bankers Association expected to rise slowly in most to full employment. (MBA) sees the problem through the markets. same lens. • Interest rates will rise slightly but The Indiana University (IU) Kelley remain low by historical standards, School of Business’ annual Business “The recession is behind us but the with some upward pressure possible Outlook Panel released their annual effects of the recession will linger for late in the year. report, noting that 2010 is going to be some time in the form of higher • Energy prices will be higher than in better than 2009, but that 2009 was unemployment and lower levels of 2009, but will remain far below the “awful.” business investment and home peak reached in 2008. construction. One of the big questions • Business profits in most sectors will “Better is not necessarily good,” said regarding growth will be the behavior hold up due to major cost cutting that Bill Witte, associate professor emeritus of consumers. The large losses of has occurred. The big gains in the stock of economics at IU. “2010 is going to consumer wealth in the form of reduced market have already taken place; stock be acceptable, except for the fact that home values and stock market losses, prices will grow more slowly in 2010. we’re starting from extremely low as well as the absolute losses of income • The global economy should expand levels.” resulting from unemployment, reduced by about 3 percent in 2010, with employment and the fear of stronger growth in emerging The IU panel said although the worst unemployment have constrained economies, especially Asia. As in the seems to be behind us, it will take three consumer spending,” said Jay U.S., global growth will fall short of to five years to restore the economy and Brinkmann, MBA’s chief economist the rates earlier in this decade. Along to reach full employment. and senior vice president for research with some depreciation of the dollar, and economics. “Timing of the this will lead to growth in U.S. exports Washington University economics economic recovery is very much tied to and possibly some further shrinkage in professor Steve Fazzari agrees that the the growth in consumer spending. In the trade deficit. unemployment rate is a key factor, addition, the effect of the bulk of the Continued on Page 4 2010 State of the Industry Report RESPA 4 RESPA: A wary industry embarks on a new path In 2009, the mortgage, real estate and settlement services industries experienced a magnitude of uncertainty with RESPA, marking the year as a pivotal moment in RESPA’s more than 30-year history. While some of the uncertainty has been resolved, many industry experts believe much of the ambiguity surrounding RESPA will flow into 2010. Here is a comprehensive report on the impact RESPA will have on the housing industry this year. The RESPA final rule has transfixed the expected to go more in-depth, by Many believe HUD realized that it industry, having been characterized as focusing on the intricate details of the went too far with this new definition the most significant change the industry forms and everyday scenarios. Best and would have lost its battle in court. has seen since the law’s inception. practices will be reported on, as HUD has indicated that it will revisit Issued by the Department of Housing processes and systems designed in the this provision in the future. but it is and Urban Development (HUD) on past few months to handle the new uncertain whether it will be revived in Nov. 17, 2008, the rule has drastically forms are fleshed out. 2010. changed the landscape of the entire mortgage industry and has already In 2010, the lending and title The second lawsuit brought against proven costly and confusing, causing communities are expected to ramp up HUD over the RESPA final rule multiple complications for mortgage their communication channels. In order involved the National Association of and title professionals. It is predicted to fill out the new GFE, lenders need Mortgage Brokers (NAMB). NAMB that these complications will continue information upfront from the title sued HUD over the way brokers are to prevail through the first half of 2010. agent, and to fill out Page 3 of the now required to disclose yield spread HUD-1, title agents need specifics from premiums (YSP) on the new GFE form. Looking back over the course of 2009, the lender. The argument NAMB made was that we saw industry members tuning into by fully disclosing the YSP the way the RESPA final rule’s potential impact. While many lenders and title agents HUD is mandating, the broker Awareness of the significance of the have complained that the new community is being put at a changes increased toward the end of disclosures will confuse consumers. competitive disadvantage. In July 2009, 2009 and thousands in the industry HUD estimates that the new forms will the trade group lost the case in court. found themselves scrambling in the save consumers on average $700. final weeks of the year to implement With the economic downturn, the new the rule’s new Good Faith Estimate Lawsuits over the rule YSP disclosure, the negative press the (GFE) and HUD-1 Settlement There were two lawsuits against HUD broker community has received and Statement forms, which went into over the RESPA final rule, both ending implementation difficulties of the new effect on Jan. 1, 2010. within two months of each other. One GFE, it is predicted that the number of lawsuit was brought against HUD by people serving in the mortgage broker As industry professionals began to the National Association of Home community will continue to decline in understand how complex Builders (NAHB) over the new 2010. implementation was going to be, the “required use” definition that HUD petitioned HUD for a delay of the rule, wrote into the final rule. The new HUD’s focus asking for more time to get questions definition made it illegal for In August, HUD fulfilled a promise that answered and implement new systems homebuilders to offer incentives to it would issue guidance to the industry and processes. Although HUD customers who use the builders’ on implementing the new RESPA announced numerous times in 2009 that affiliated mortgage lenders, title forms. The guidance came in the form it would not delay the implementation companies or other affiliated service of a frequently asked questions report date, countless industry professionals providers. NAHB filed a lawsuit over and has been revised numerous times to continued their hope of a delay up to this on Dec. 22, 2008, but dropped the address new areas in question. The the final days. case in May 2009 after HUD said it legal community expects that HUD will was eliminating the new definition continue with updates through at least In 2009, much of the training centered from the rule and reverting back to the the first quarter of 2010.

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