Appraisal Bill has Passed

Unfortunately the new Appraisal law has passed. This means any conventional loan will now have to be ordered directly through the lenders AMC/Appraisal Management company. The AMC is a third party vendor through which appraisal companies will now receive the appraisal assignment. The loan officer will have no input or contact whatsoever with the appraiser.

We have already seen a decrease in appraisal values and an increase in the cost with the new fee increasing from $300-$325 to $345-$385. Government loans do not currently fall under this guideline but they will probably adopt this policy as well in time.

The banking industry had a mechanism already in place to weed out unscrupulous appraisers.
All they had to do was order a review appraisal periodically and remove any appraiser found to be incompetent or unethical. The problem is, they never enforced the policy. When I was an appraiser I would receive requests to review appraisals of other firms. 3-6 months later I would receive another request from the same lender to review an appraiser whom I had already indicated was not performing his job ethically or was incompetent. There was no point in ordering a review if the lender was just going to continue using the same unethical appraisers.

It is my personal hope that in time this new law will be viewed as unnecessary and a detriment to the real estate industry as well as homeowners and will therefore be rescinded.

Update on $8000 Tax credit Monetization-Suspended

Here is the Original statement from Mr. Donovan, Secretary of HUD.

HUD Secretary Donovan appeared at a NAR function last week and this is an exact excerpt of his remarks:

"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly."

Well unfortunately it looks like Mr. Donovan jumped the gun. As of right now HUD has suspended this program. Whether or not it comes back is anyone's guess.

Too bad, it would have been great for first time home buyers strapped for cash.

Utilizing Child Support Income

One thing that comes up quite frequently is utilizing income from child support to qualify for a mortgage. Many borrowers are under the false impression that just because they have a divorce decree stating the ex-spouse has to pay child support, that this qualify's the child support to be used in the mortgage approval. Actual receipt of child support payments must still be VERIFIED.

In many instances the custodial parent will be paid in cash which means there is no way to verify the actual payments were received. Depending on the underwriter, sometimes they will accept a bank statement showing deposits in the exact amount indicated in the divorce decree, but that is very rare.

One of my past customers always gave the ex a hand written receipt from a receipt book which has the carbon copy for her records. Lenders will not accept this. Anyone can go out and buy a receipt book and make any entry they wish.

The easiest way to prove they received the child support is with a money order. Another way is a statement from the state if the child support is garnished. Of course you can use cancelled checks from the ex-spouses account. Unfortunately many ex-spouses are not on good terms after the divorce and they are under no obligation to provide the cancelled checks if they so choose. Most underwriters like to see 12 months of proof but will often accept 3-6 months worth. The more the better.

One of the more popular mortgage programs today is the USDA Rural Housing as it is one of the few programs left that does not require a down payment. However, the USDA will accept no less than 12 months verifiable proof of receipt of child support payments to be used in qualifying.

If you are a divorced parent and are being paid in cash, make sure you start receiving payment in a verifiable form as soon as possible.

If you are a Realtor make sure your potential customers are aware of this and start receiving payments that can be verified. If you can obtain as least 3 months of proof you stand a better chance of using it. Child Support can be a huge plus in determining the amount for which a borrower can qualify.