IRVINE, CA—The TRID or TILA-RESPA Integrated Disclosure Rule, newly in effect, will have some impact on mortgage generation, but transactions will still close, First American Financial Corp.'s chief economist Mark Fleming tells GlobeSt.com. Following the release of the firm's inaugural Future Transaction Index, which measures title-agent sentiment on a variety of key market metrics and industry issues—including expectations for price changes across multiple property types and expectations for changes in volume for purchase and refinance transactions—we spoke exclusively with Fleming about the major takeaways from the FTI and the challenges that today's title agents face, particularly with the TILA-RESPA Integrated Disclosure rule.

GlobeSt.com: What are the major takeaways from your FTI?

Fleming: The Future Transaction Index is basically a forward-looking measure of sentiment in the real estate market. It's a leading indicator of transaction levels, both purchase and finance, and price forecasts. One of the main upshots was that the forecast for residential house-price appreciation is 7.7% year-over-year for the next year. Title agents are forecasting significant increases in home sales. Conversely, they are forecasting a significant slowdown in refinance mortgage transactions. From my perspective as an economist, that makes sense, and there's good news there: even with increasing interest rates, title agents are still predicting that price appreciation will grow.

We are relatively price insensitive on the purchase side—whether the interest rate is 3.7% or 4%, it's still a cheap mortgage. Even when mortgage rates were 13% and 15% in the 1980s, people still bought homes—they bought fewer homes, but they still bought. The majority of home sales in the market are to already existing homeowners, and the FTI indicates that's the case.

We also surveyed title agents on why loan applications fall through or are cancelled. The primary reason for cancellation this past year was lack of ability to get credit. The forecasted expectation for the most important reason for cancellation next year is that the price won't be supported by the appraisal. We're moving away from access to credit as the problem to more of the fact that the price of the home is being challenged. Prices in part are going up, in fact, because mortgage rates are so low. The low mortgage rate allows you to leverage your home and creates more demand, which is in part why we've seen asset inflation in housing pricing over the last couple of years. In an ironic way, increasing the mortgage rate could bring house-price appreciation more in line with income growth.

GlobeSt.com: What are the biggest challenges that title agents face today?

Fleming: The implementation of the TRID rule just happened, so agents were getting closings done late last week to precede the implementation date. They walked into the office on Monday having to do it for the first time in a different way. When we surveyed agents about TRID, they were optimistic about the change. They felt it was not so scary, but a lot of work, and they also indicated very strongly that TRID is much more than a form change. They're not just swapping out one set of forms for another, but there will be a process-flow change, a three-day wait period, and a question of when will the period get triggered—or not. I jokingly liken this to the housing version of Y2K—a lot of work's been done, systems have been reprogrammed, but at the end of the day, we all wait to flip the switch and see what happens. There will be bumps in the first couple of months, but people will be able to close loans.

GlobeSt.com: What are the untapped opportunities that title agents should know about today?

Fleming: The real challenge is that providing settlement services is going to be very different now. There is a lot of change happening, and it's time to come up with creative solutions. Title agents need to be partners to lenders, to figure out what the lenders need, and those who can come up with innovative solutions to the issues and problems we're going to have will withstand the changes and reap the benefits. Be a change agent to help solve the problem and create the best process we can under the new regulations—embrace the change.

GlobeSt.com: What else should our readers know about the FTI?

Fleming: We'll be doing it on a quarterly basis. The next survey will be conducted later this month, and we'll be releasing the results in December. If an agent can participate in the survey, they'll have their voice heard.