If you read the paper, you will have noticed on Thursday in the Chronicle Business section the article stating ‘A break for first time homebuyers ‘. Well…….there is a catch. Isn’t there always? Last month, the legislators came up with a feel good plan for buyers to access this $8,000 before they actually earned it. What a shocker! They now made it possible , in theory, for buyers to access these funds for closing costs (only) when they buy the house, not having to wait until next spring when the return is filed. The issue since this was released is ‘ WHO’ is going to forward this money? No agencies have really stepped up. There have only been a few. So as of this week, the State of Texas (via the Texas Dept of Housing and Community Affairs – TDHCA), will make that possible. BUT WAIT!!! Let’s look at the fine print. First, it says ‘some ‘ of the tax credit. Second, only 700 borrowers for the first wave of approved money. And thirdly, the most important, is it has to be paid back within 90 days to remain interest free.
Well, let me give you a hint here. If the people using it today for buying a home could afford to pay it back within 90 days, do you think they would take this in the first place? So what we will have is yet another quagmire of a government agency earmarking some federal money to this program, in hopes people pay back in the 90 day period, and when they don’t, the program will freeze because they have no more money to advance.
I am not sure you really want to know my thoughts about this. But I’ll give it a shot. You can stop reading if you want to. WHY CANT WE ALL JUST BE COMPLACENT WITH THE DELAYED GRATIFICATION OF ‘ FREE’ MONEY IN 2010? Why do we have to look for ways to get ourselves in trouble with borrowed/advanced funds, yet again?
Rates are down this week! Hip Hip Hooray! The reason? Do we really care? Soon enough we will own the bragging rights of having an interest rate below double digits, or won’t we? That remains the million dollar question. In summary, they are low, so get out there and spend it.
Friday, June 26, 2009
Friday, June 19, 2009
Home Valuation Code of Conduct - ACT NOW!
This is a SPECIAL EDITION , and the most important column I have ever written. The integrity of the appraisal process as we know it has been severely, and I mean severely, compromised.
All of you realtors have likely already been affected somehow if you have closed a loan since May 1, when HVCC (Home Valuation Code of Conduct) became our reality after a very persuasive New York Atty General persuaded Fannie and Freddie to amend their guidelines to his personal gain- winning a case. You need to forward this to ALL YOUR CLIENTS, past , present, and future. The people that the legislators will listen to are the homeowners (not the realtors, nor the lenders, who’s income is dependent on the process. Not to mention lenders/loan officers are taboo now anyway, in their eyes). So if you are not selling a home today, you will be, and this will most certainly affect you! So consumers need to take action now! And of course if we do, it won’t hurt.
THIS IS HOW YOU CAN MAKE A DIFFERENCE!
NY Attorney General Andrew Cuomo's Office: (212) 416-8000,
Internet ComplaintFederal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
Freddie Mac: (703) 903-2000,
Also, please contact your local TV and Newspaper outlets.
Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.
Talking Points:
1) National Assoc of Mortgage Brokers (NAMB) conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.
2) Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.
3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.
4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo's investigation.
5) No Portability! Consumers are "trapped" with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.
Background:
I. Lack of Portability
A. Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.
B. Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.
C. In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.
II. Lack of Quality
A. AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal. i. Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.
B. Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.
III. Increased Cost of Appraisals
A. The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.
B. $150.00 - minimum increase per appraisal$561.95 - average loan amount of $224,778 at .25% for extended lock period$711.95 - average total increase per transactionx 3,870,552* - 2007 HMDA report of residential real estate loans originated$2,755,639,496 - $2.8BILLION in increased fees to consumers!
IV. Articles Illustrating the Effects of the HVCC
A. The Appraisal Bubble - The Center for Public Integrity
B. The Cure is Worse than the Disease - Appraisal Press
C. Appraisals Roil Real Estate Deals - The Wall Street Journal Feel free to forward these articles and/or reference them in your conversations
All of you realtors have likely already been affected somehow if you have closed a loan since May 1, when HVCC (Home Valuation Code of Conduct) became our reality after a very persuasive New York Atty General persuaded Fannie and Freddie to amend their guidelines to his personal gain- winning a case. You need to forward this to ALL YOUR CLIENTS, past , present, and future. The people that the legislators will listen to are the homeowners (not the realtors, nor the lenders, who’s income is dependent on the process. Not to mention lenders/loan officers are taboo now anyway, in their eyes). So if you are not selling a home today, you will be, and this will most certainly affect you! So consumers need to take action now! And of course if we do, it won’t hurt.
THIS IS HOW YOU CAN MAKE A DIFFERENCE!
NY Attorney General Andrew Cuomo's Office: (212) 416-8000,
Internet ComplaintFederal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
Freddie Mac: (703) 903-2000,
Also, please contact your local TV and Newspaper outlets.
Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.
Talking Points:
1) National Assoc of Mortgage Brokers (NAMB) conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.
2) Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.
3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.
4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo's investigation.
5) No Portability! Consumers are "trapped" with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.
Background:
I. Lack of Portability
A. Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.
B. Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.
C. In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.
II. Lack of Quality
A. AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal. i. Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.
B. Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.
III. Increased Cost of Appraisals
A. The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.
B. $150.00 - minimum increase per appraisal$561.95 - average loan amount of $224,778 at .25% for extended lock period$711.95 - average total increase per transactionx 3,870,552* - 2007 HMDA report of residential real estate loans originated$2,755,639,496 - $2.8BILLION in increased fees to consumers!
IV. Articles Illustrating the Effects of the HVCC
A. The Appraisal Bubble - The Center for Public Integrity
B. The Cure is Worse than the Disease - Appraisal Press
C. Appraisals Roil Real Estate Deals - The Wall Street Journal Feel free to forward these articles and/or reference them in your conversations
Tuesday, June 9, 2009
Will mortgage rates go back down?
It feels like summer ! Not only is school out and the traffic is eased up, but it feels like summer! The glorious hot days dear to Houstonians are officially here. So are the home buyers! We continue to see contracts pending, and inventory lessening. Thank goodness! There are still, however, some appraisals that come back with inventory at a 6 mo + supply. To lenders, that means a ‘declining market’. And beware that if your listing is in such an area, the lender may have some additional conditions, or may not even do the loan at all. That’s right, declining markets are not favorable. The reason? If we foreclose, we don’t want large marketing times to get rid of it! It also signifies a trend downward in prices. No lender wants to be on the top end of the market. So encourage your sellers to consider all realistic offers. I suppose realistic is the main catch here. Who knows in these unprecedented times? There may be other reasons, but that is the main concern.
The First Time Homebuyer Credit – in all its glory, has to be the most confusing legislation there is right now. No one is clear on what, how or when. The latest rumor is that FHA will allow the moneys to advance for down payment. Part of it is true, but keep reading. Our representatives on Capitol Hill have no idea what has to happen to ‘advance’ a tax credit to a homeowner. Who will check if they are delinquent on any federal debt? Who will advance the money (a HUD memo states it has to be a ‘3rd party’, certainly not them). Ok, then who? Is it really a good idea to advance money anyway before its spent? Isn’t that what got us in this mess to begin with? And then, the legislation just last week changed yet again, and now FHA loan purchases can use the money ONLY toward closing costs, not down payment. Again, WHO will administer this money? No lender thus far has jumped on this idea. So the opportunity may be there for your buyers, but they need to settle to the fact they will get it upon filing 2009 return. Not too much to ask for free money!
Interest Rates – are still low! Maybe not the 4.5% of last month, but STILL historically, low! As compared to 2 weeks ago, almost up a full point! Why? Good news in the market. Could it be from the good news to investors that Angelo Muzilo has been charged with Fraud, and that gives them a ‘temporary’ feeling that the culprits are about to be caught? Or could it be that banks are to pay back tarp money? Or maybe the ‘come clean’ speech to Muslims by our President in Egypt last week. I would have thought that the unemployment doldrums would have shocked rates back down…but no such luck yet. Rates also have gone up due to positive indicators in the market. Words from our legislators and commander in chief like ‘not as bad as it was’, or ‘the recession end may be near’ ……those types of words allow investors in stocks to feel like buying. When they buy, investors pull money out of bonds. Then bond rates go up, as the price is down to attract buyers back into the bond market.
Will rates go back down? – THAT is the million dollar question. Who knows. But inflation and higher rates is INEVITABLE. Take my word. My advice? If your buyers are holding out for rates to come down, or purchase prices to come down, they may be missing the boat on living in the present. Our (primary) homes are where we raise our families and share time with loved ones. If it makes sense, do it. If not, wait. But hanging on for a false sense of reality may be missing the boat on opportunity that is right in front of them.
The First Time Homebuyer Credit – in all its glory, has to be the most confusing legislation there is right now. No one is clear on what, how or when. The latest rumor is that FHA will allow the moneys to advance for down payment. Part of it is true, but keep reading. Our representatives on Capitol Hill have no idea what has to happen to ‘advance’ a tax credit to a homeowner. Who will check if they are delinquent on any federal debt? Who will advance the money (a HUD memo states it has to be a ‘3rd party’, certainly not them). Ok, then who? Is it really a good idea to advance money anyway before its spent? Isn’t that what got us in this mess to begin with? And then, the legislation just last week changed yet again, and now FHA loan purchases can use the money ONLY toward closing costs, not down payment. Again, WHO will administer this money? No lender thus far has jumped on this idea. So the opportunity may be there for your buyers, but they need to settle to the fact they will get it upon filing 2009 return. Not too much to ask for free money!
Interest Rates – are still low! Maybe not the 4.5% of last month, but STILL historically, low! As compared to 2 weeks ago, almost up a full point! Why? Good news in the market. Could it be from the good news to investors that Angelo Muzilo has been charged with Fraud, and that gives them a ‘temporary’ feeling that the culprits are about to be caught? Or could it be that banks are to pay back tarp money? Or maybe the ‘come clean’ speech to Muslims by our President in Egypt last week. I would have thought that the unemployment doldrums would have shocked rates back down…but no such luck yet. Rates also have gone up due to positive indicators in the market. Words from our legislators and commander in chief like ‘not as bad as it was’, or ‘the recession end may be near’ ……those types of words allow investors in stocks to feel like buying. When they buy, investors pull money out of bonds. Then bond rates go up, as the price is down to attract buyers back into the bond market.
Will rates go back down? – THAT is the million dollar question. Who knows. But inflation and higher rates is INEVITABLE. Take my word. My advice? If your buyers are holding out for rates to come down, or purchase prices to come down, they may be missing the boat on living in the present. Our (primary) homes are where we raise our families and share time with loved ones. If it makes sense, do it. If not, wait. But hanging on for a false sense of reality may be missing the boat on opportunity that is right in front of them.
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