HVCC: Why Should YOU Care?

June 6, 2009 by 7 Comments

You may or may not have heard about HVCC.  You'll have the opportunity to learn about it first hand if you obtain a conventional mortgage.  In a nutshell, mortgage originators and processors (anyone considered to be in "production") are no longer allowed to order appraisals or know who the appraiser willbe until AFTER they receive the appraisal.  HVCC just went into effect in May, I wrote a post about my experience at Rain City Guide where a Real Estate Agent asked me:

If I understand you correctly:

  1. We don’t know who the appraiser is
  2. We cannot contact the appraiser even if we knew.   [Note:  the real estate agent CAN contact the appraiser if they somehow know who it is…the loan production staff cannot].
  3. We have no idea when the appraisal will be done.

The Home Value Code of Conduct was created as a result of the New York Attorney General investigating Washington Mutual (once a large bank) and eAppraiseit (an appraisal management company) for manipulating appraisers to produce higher values. 

HVCC was suppose to create a professional distance between mortgage originators and appraisers so that an appraiser could perform their task without pressures to produce a higher value.  Appraisals now go through an appraisal management company (which take on average 40% of the appraisal fee from the appraiser) to create this distance and supposedly reduce any conflicts of interest.  However, the code was amended to allow AMCs (appraisal management companies) to be owned by the very banks who are ordering the appraisals. 

From Fannie Mae's HVCC FAQs update on May 9, 2009 (Question 36):

Q. May an AMC Affiliate with, or that owns or is owned in whole or part by the lender or a lender-affiliate, order appraisals?

A: Yes, an AMC affiliated with, or that owns or is owned in whole or part by the lender or a lender affiliate, may order appraisals…

This smacks of the WaMU eAppraiseit scenario all over again!

So big bank owns an AMC where they order all their appraisals through and if a mortgage originator is brokering a loan to that big bank, the appraisal may be ordered through that AMC.  Big bank/title company collects an average of 40% of the appraisal fee from the appraiser just for ordering the appraisal.  If an appraisal cost $500; the AMC keeps $200 just for controlling and placing the order.  The appraiser, who once collected $500 for producing the report now receives $300.  Many appraisers are having to increase appraisal fees in order to make a living since AMCs are stripping them of 40% of their income. 

Instead of being able to select an appraiser by their qualifications, experience or expertise in a certain area; it's a crap-shoot based on which appraisers are participating (agreeing to lower compensation) with the AMCs.  

From CNBC's Diana Olick on the impact of HVCC:

"As many brokers expected, the HVCC is also resulting in some lower appraisals. Since the appraisers now may be unfamiliar with the local market, they will err on the lower side. Of course it may also be that the lack of a relationship with the lender is removing the 'expectation' of a certain appraised value. If the appraisal comes in lower than the sale price, then the deal is off."

HVCC does not allow second appraisals to be ordered due to low appraisal as it's considered "value shopping".  

With a refinance, no value can be provided to the appraiser–I can't even let the appraiser know what the home owner thinks the value of their home may be.  The home owner, if the appraisal comes in low, is out the appraisal fee (typically around $500).  

The National Association of Mortgage Brokers has been trying to battle this code with strong political opposition.  (NOTE to Mortgage Originators: NOW is the time to belong to your local chapter of NAMB if you care about the future of your industry).

The intentions of HVCC to stop the strong-arming of appraisers to create false values are good.  The results are terrible and many of us are trying to have this reversed.  I encourage you to please sign this petition and to contact your representatives in Congress.   

HVCC is going to hurt the consumer and will only help pad the pockets the owners of the Appraisal Management Companies.  

Filed Under: Appraisals, Fannie, Freddie and FHFA

Private Mortgage Insurance Termination

June 2, 2009 by 2 Comments

Private mortgage insurance (pmi) is used when a borrower has less than 20% down or home equity in their property.  PMI insures the lender in the event of a borrower defaulting on a mortgage–it does not provide insurance to the home owner.

[Read more…]

Filed Under: Mortgage Insurance Tagged With: , , ,

June’s Furlough Days for King, Pierce and Snohomish Counties

June 1, 2009 by Leave a Comment

If you have transactions scheduled for closings in these counties on the dates below, please contact your real estate professional. 

June 19, 2009 ~ King and Snohomish Counties recorder's office will be closed.

This means you need to be extra sweet to your funders and escrow officers before and after a furlough day…missing that extra day to record a transaction is enough to cause a few furrowed brows!

Update June 3, 2009: I recently learned that Kitsap County's recorders office will be closed every Friday until the end of the year! 

Filed Under: Escrow and closing

HUD Approves First Time Home Buyers Using Tax Credit Advance for FHA Loans

May 30, 2009 by 1 Comment

There's been a lot of rumbling about whether or not first time home buyers would be able to access the tax credit created by The American Recovery and Reinvestment Act of 2009 towards the purchase of their new home.  From HUD's announcement yesterday:

Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away.

Here are some important points for you to know regarding using the tax credit towards a home purchase:

  • The tax credit advance loan cannot be used towards the mandetory 3.5% down payment.  (Update: unless it is through a State Housing Financing Agency).
  • The tax credit advance loan may not exceed the anticipated tax credit due to the home buyer based on the computations of form IRS 5405. 
  • The borrower will need to provide a copy of their tax refund and/or form IRS 5405.
  • Borrower cannot have unsettled obligations with the IRS.
  • If the tax advance is in the form of a loan with payments, the borrower must qualify with that payment (unless the payments are deferred for at least 36 months).

Reminders about the First Time Home Buyer Tax Credit…

You can claim the tax credit if:

  • You purchased your main home after April 8, 2008 (who picked that day?) and before December 1, 2009.
  • You (and your spouse, if married) did not own any other main home during the 3 year period ending on the date of purchase.

The IRS defines "main home" as the one you live in most of the time.  It can be a house, hosueboat, housetrailer, cooperative apartment, condominium, or other type of residence.

You cannot claim the tax credit if:

  • Your modified adjusted gross income is $95,000 or more ($170,000 or more if married filed jointly).
  • Your home financing comes from tax-exempt mortgage revenue bonds.
  • You are a nonresident alien.
  • You aquired your home by gift or inheritance.
  • You acquired your home from a related person.

You must repay the tax credit if your home ceases to be your main home within the 36 month period beginning on the purchase date.  

HUD warns that homebuyers should beware of mortgage scams and carefullly compare benefits and costs when seeking out tax credit monetization services.

Don't forget, Mortgage Master is a direct endorsed HUD lender.  If you're buying a home in Washington State and are interested in an FHA loan, I'm happy to help you.

Filed Under: FHA, First Time Home Buyer, Residential Purchase

Hey LO’s! Join Me at Safeco Field on Friday, June 19, 2009

May 28, 2009 by Leave a Comment

RSVP by clicking here!

 

WAMPSafecoField

Filed Under: Events

Question from a Mortgage Porter reader: My Loan Officer Didn’t Lock…What Can I Do?

May 28, 2009 by Leave a Comment

Last night, I received this email from a borrower who's dealing with yesterday's dramatic rise in mortgage rates:

I was wondering if there was anything we can do if we asked our lender to lock in Monday (which I would suppose would mean Tuesday am) and he didn't because he was sick.  Now he is balking at giving us the rate that he quoted us.  We think that the lending institution should make good on their rate, since we HAD decided to lock in and it was their delay that caused the problem.  Is there a chance for us? 

Monday was Memorial Day and therefore, the mortgage originator probably could not lock and most likely was enjoying a day off.   On Tuesday, it sounds like the loan officer took another day off for health reasons. 

Unless the mortgage originator provided you a written lock confirmation, I'm not sure that you have a leg to stand on.   A rate quote is not a guarantee of rate.  In fact, it's only valid the moment the loan originator is providing it.  Rates change constantly–yesterday, most of the lenders our company works with issued 5 different rate sheets. 

Not being able to reach your loan officer when you want to lock is a risk when floating your mortgage interest rate.  If I have the day off (due to health or vacation) I do have a manager who will take care of locks and/or any issues that may arise.   Consumers may also find it difficult to make contact with their mortgage professional to lock because they may be working with another client at the moment (either locking another loan or in a consultation).  

Not locking your rate at application (if you're closing soon) is gambling the rate not only are your betting that rates will go down, you're risking not being able to lock for the reasons mentioned above and also with constant changing guidelines in this current environment.  Locking the rate is also a form of gambling (that the rate will go up).   Always consider which worse case scenario you can live with when making the decision to lock or not lock.

With that said, rates may come back down since the Treasury is not done spending their allotment towards mortgage bonds (which has been keeping mortgage rates artificially low).  No one can say precisely when this will happen or how much rates will be manipulated lower.  

Filed Under: Interest Rates

Reminder: No Closings this Friday for King and Snohomish Counties

May 18, 2009 by Leave a Comment

Due to budget restraints in King and Snohomish Counties, the recorders office will be closed this Friday and will not reopen until Tuesday (due to Memorial Day).  This means that if you are buying, selling or refinancing a home; the Deed or new mortgage (Deed of Trust) cannot be recorded on these dates.  Pierce County's recorders office will remain open Friday, May 22, 2009.

The Talon Group has calendars available with recording schedules for King, Pierce and Snohomish Counties–click here.   Each county is doing their own thing to their respective budgets.   Just last month, Snohomish County announced that they are closing early on Friday's (if they are not on furlough).

If you have a transaction scheduled to close on property located in King or Snohomish Counties this Friday, May 22, you may want to check with your real estate and mortgage professionals.

Filed Under: Current Affairs, Economy, Title Insurance

What I’ve Learned About Pugs

May 16, 2009 by 1 Comment

I have a 13 year old Pug, Orson.  Last month it seemed his hind legs were bothering Orshim so I took him to the Vet who thought it was most likely old age and arthritis.  He recommended giving him treats with glucosamine to see if that worked.   A couple weeks later, his front legs began to give him trouble as well and he began walking with a sway (almost as if he was a little drunk).  Orson and I went back to the local Vet and this time the prognosis was not good: possible brain tumor.  They referred us to Dr. Sean Saunders of Seattle Veterinary Specialist in Kirkland who specializes in neurology.  An MRI revealed that Orson does not have a brain tumor; he has Hansen's Type II invertebral disk disease–as bad as this sounds, I'm relieved since this is probably can be managed with doggy drugs. 

What's the probable cause (or at least an aggregator)?

  • Stairs.  His compact body is jarred going up and down stairs. 
  • Being walked with a traditional collar.  Orson now sports a nice harness for his walks.
  • Jumping can also cause injury to the disks in their spine.  Orson's not a jumper.

So this weekend, we're cleaning out our home office area.  Orson's "movin' on up" from the basement to a kennel in the office.  No more stairs for this fellow and I'm happy to share my home office with him. 

Filed Under: Misc.
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