There is still a movement underway to attempt to halt the new legislation.
Here is a link http://capwiz.com/namb/dbq/officials/ where you can contact you state reps and
make you feelings known.
Here are other issues that I want to add to the list of reasons not to allow passage of this bill.
1. Because each lender will have ties to their own appraisal management company there will be a serious impact on the portability of the appraisal. Let's say a customer applies to bank "A", pays for an appraisal and then gets denied by bank "A". If he decides to apply to a second bank, bank "B", he may very well have to pay for a NEW appraisal because that appraisal management company may not be on bank"B"'s list.
2. The borrower will now have to pay up front for the appraisal via check or credit card directly to the lender. And because there is now a middleman (the appraisal management company) added to the process the appraisal fees will most likely go up!
This is legislation is not going to be in the best interest of the consumer, you and me!
I urge you to forward this link http://capwiz.com/namb/dbq/officials/ to your mailing list if you have one. Then click on the link and make your opinion known. As I stated in the earlier post, this could result in a serious impact on anyone who makes a living in any field related to real estate. And if you own a home or wish to purchase a home, this will affect you as well.
Thursday, April 23, 2009
Tuesday, April 21, 2009
New Appraisal Requirements
HOME VALUATION CODE OF CONDUCT (HVCC)
As of May 1, 2009 there will be significant changes in the way real estate appraisals will ordered and handled by the lenders for conventional loans.
Banks and mortgage companies will now be required to utilize appraisal management companies who in turn will expedite the appraisal order. There will be several appraisal management companies on the lists of the different lenders. The appraisal management firms will act as a clearing house and select the appraiser or appraisal company on a rotational basis.
The loan officer will have no input with the appraisal management company in the selection of the appraisal company selected and will not be allowed to contact the appraisal company or the actual appraiser of the property. There many appraisal management companies and there are numerous new ones entering the field as a result of this legislation.
The idea here is that by using a rotational system with no contact with the loan officer who originated the loan there will be no pressure on the appraiser to "hit" the number.
That sounds good in theory but there is a significant potential downside.
First of all lenders are already being much, much tougher on appraisals. I do not see a need at this time for this legislation.
Now consider this, an appraisal is nothing more than an opinion of value, an estimate. There is no appraiser alive that can tell EXACTLY how much any home will sell for. Instead of having the possibility of over appraising a home, there is a likelihood appraisers will now become overly conservative and UNDER appraise properties. I have never heard of an appraiser getting scrutinized for appraising a home too low, only for appraising it too high.
It would therefore be in the best interest of the appraiser to utilize conservative adjustments and place a value in the low end of the range. There is nothing for him/her to be gained for being truly objective in the final value estimate.
This can have an enormous impact on the real estate and housing market. It could result in fewer homeowners being able to refinance to a lower rate and payment which in turn could affect insurance companies, mortgage lenders/brokers, real estate agents, builders etc.
Having previously been an appraiser for 12 years and prior owner of an appraisal company with 8 employees, I know of what I speak.
I hope I am just being overly pessimistic here. We shall see.
Once again this only affects conventional loans........... FOR NOW!!
As of May 1, 2009 there will be significant changes in the way real estate appraisals will ordered and handled by the lenders for conventional loans.
Banks and mortgage companies will now be required to utilize appraisal management companies who in turn will expedite the appraisal order. There will be several appraisal management companies on the lists of the different lenders. The appraisal management firms will act as a clearing house and select the appraiser or appraisal company on a rotational basis.
The loan officer will have no input with the appraisal management company in the selection of the appraisal company selected and will not be allowed to contact the appraisal company or the actual appraiser of the property. There many appraisal management companies and there are numerous new ones entering the field as a result of this legislation.
The idea here is that by using a rotational system with no contact with the loan officer who originated the loan there will be no pressure on the appraiser to "hit" the number.
That sounds good in theory but there is a significant potential downside.
First of all lenders are already being much, much tougher on appraisals. I do not see a need at this time for this legislation.
Now consider this, an appraisal is nothing more than an opinion of value, an estimate. There is no appraiser alive that can tell EXACTLY how much any home will sell for. Instead of having the possibility of over appraising a home, there is a likelihood appraisers will now become overly conservative and UNDER appraise properties. I have never heard of an appraiser getting scrutinized for appraising a home too low, only for appraising it too high.
It would therefore be in the best interest of the appraiser to utilize conservative adjustments and place a value in the low end of the range. There is nothing for him/her to be gained for being truly objective in the final value estimate.
This can have an enormous impact on the real estate and housing market. It could result in fewer homeowners being able to refinance to a lower rate and payment which in turn could affect insurance companies, mortgage lenders/brokers, real estate agents, builders etc.
Having previously been an appraiser for 12 years and prior owner of an appraisal company with 8 employees, I know of what I speak.
I hope I am just being overly pessimistic here. We shall see.
Once again this only affects conventional loans........... FOR NOW!!
Tuesday, April 7, 2009
Homeowner Affordability Plan
On April 6th the new affordability plan was put into action. The plan was designed to assist homeowners who would like to refinance and lower the interest rate on their current home and mortgage payment but as a result of the decrease in property values do not have enough equity. Another problem is the fact they may have enough equity, but not the 20% needed to avoid paying PMI. If they did have 20% when they took out the original mortgage they did not have to pay PMI. Having to pay it now would offset the possible lower mortgage payment and defeat the purpose of refinancing. This program only applies to mortgages currently held by Fannie Mae or Freddie Mac. Fannie Mae has named their program DU Refi Plus and Refi Plus which are explained below.
FANNIE MAE
Today we will mainly be addressing the DU Refi Plus as this the plan most borrowers will be seeking and Refi Plus has many similarities .
DU REFI PLUS
Under this plan the borrower must demonstrate that they have not been late on their mortgage. Due to a decline in home prices or where mortgage insurance (PMI) is not available they have been unable to refinance. The loan must be underwritten through Fannie Mae's Desktop Underwriter Program.
If you have an adjustable rate mortgage and would like to change to a stable fixed rate mortgage, this would plan would also apply.
The property must a 1-4 unit.
The loan must be held or guaranteed by Fannie Mae or Freddie Mac.
The new loan amount cannot exceed 5% of the appraised value. Let's say your home appraises for $150,000 you will be able to refinance up to $157,500. So if you currently owe $152,500 you should be able to also include most if not all of your closing costs in the new mortgage.
There must also be a positive benefit to the borrower such as:
1. A reduced monthly mortgage principal and interest payment
2. Move from an adjustable to a fixed rate.
SECOND MORTGAGES
No new subordinate financing is allowed. If you currently have a second mortgage the second mortgagee must subordinate. This means the second mortgagee must agree to let you refinancing ad agree to remain in the second position. This would be to their advantage because you are more likely to be able to meet the new reduced mortgage payment
CREDIT SCORES
There are no credit score minimums however if your credit score is too low you may have to pay additional fees or have a somewhat higher rate than someone with good credit. There may also be a higher cost depending on the loan to value.
ADDING OR REMOVING BORROWERS
The original borrowers must remain on the new mortgage unless there are extenuating circumstances. Adding new borrowers is acceptable under certain conditions.
There are other factors that must meet underwriting guidelines.
PRIVATE MORTGAGE INSURANCE (PMI)
You will not have to pay PMI if:
1. You did not have PMI when you purchased the home
2. It was removed as a result of paying down your mortgage balance
3. Your home's value had appreciated and the PMI was removed
Even if you borrow over 80% of the appraised value of your home when you refinance, you will not be required to pay PMI.
If you currently have PMI then you will be required to obtain it again through DU Refi Plus.
Lender Paid PMI is allowed.
REFI PLUS
The main difference between DU Refi Plus and Refi Plus is that the latter requires the refinance be serviced through the original lender. With DU Refi Plus the lender does not have to be the original servicer.
FREDDIE MAC
Freddie Mac's program is called Relief Refinance Mortgage. The biggest difference with this program is that if the new mortgage payment does not increase by more than 20%, the lender will not have to re-underwrite the borrower.
IS MY LOAN HELD BY FANNIE MAE OR FREDDIE MAC ?
Here are the links to the sites to determine if your loan is held by either Fannie Mae or Freddie Mac:
http://www.fanniemae.com/index.jhtml
https://ww3.freddiemac.com/corporate/
FANNIE MAE
Today we will mainly be addressing the DU Refi Plus as this the plan most borrowers will be seeking and Refi Plus has many similarities .
DU REFI PLUS
Under this plan the borrower must demonstrate that they have not been late on their mortgage. Due to a decline in home prices or where mortgage insurance (PMI) is not available they have been unable to refinance. The loan must be underwritten through Fannie Mae's Desktop Underwriter Program.
If you have an adjustable rate mortgage and would like to change to a stable fixed rate mortgage, this would plan would also apply.
The property must a 1-4 unit.
The loan must be held or guaranteed by Fannie Mae or Freddie Mac.
The new loan amount cannot exceed 5% of the appraised value. Let's say your home appraises for $150,000 you will be able to refinance up to $157,500. So if you currently owe $152,500 you should be able to also include most if not all of your closing costs in the new mortgage.
There must also be a positive benefit to the borrower such as:
1. A reduced monthly mortgage principal and interest payment
2. Move from an adjustable to a fixed rate.
SECOND MORTGAGES
No new subordinate financing is allowed. If you currently have a second mortgage the second mortgagee must subordinate. This means the second mortgagee must agree to let you refinancing ad agree to remain in the second position. This would be to their advantage because you are more likely to be able to meet the new reduced mortgage payment
CREDIT SCORES
There are no credit score minimums however if your credit score is too low you may have to pay additional fees or have a somewhat higher rate than someone with good credit. There may also be a higher cost depending on the loan to value.
ADDING OR REMOVING BORROWERS
The original borrowers must remain on the new mortgage unless there are extenuating circumstances. Adding new borrowers is acceptable under certain conditions.
There are other factors that must meet underwriting guidelines.
PRIVATE MORTGAGE INSURANCE (PMI)
You will not have to pay PMI if:
1. You did not have PMI when you purchased the home
2. It was removed as a result of paying down your mortgage balance
3. Your home's value had appreciated and the PMI was removed
Even if you borrow over 80% of the appraised value of your home when you refinance, you will not be required to pay PMI.
If you currently have PMI then you will be required to obtain it again through DU Refi Plus.
Lender Paid PMI is allowed.
REFI PLUS
The main difference between DU Refi Plus and Refi Plus is that the latter requires the refinance be serviced through the original lender. With DU Refi Plus the lender does not have to be the original servicer.
FREDDIE MAC
Freddie Mac's program is called Relief Refinance Mortgage. The biggest difference with this program is that if the new mortgage payment does not increase by more than 20%, the lender will not have to re-underwrite the borrower.
IS MY LOAN HELD BY FANNIE MAE OR FREDDIE MAC ?
Here are the links to the sites to determine if your loan is held by either Fannie Mae or Freddie Mac:
http://www.fanniemae.com/index.jhtml
https://ww3.freddiemac.com/corporate/
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