Danny Salas

Archive for the 'Mortgage Industry Updates' Category

HARP Changes to Reach More Borrowers

News Release obtained from http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf

FEDERAL HOUSING FINANCE AGENCY News Release: 10/24/11

 

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Post Mortgage Credit Crisis Changes

 

Listen to this segment with Danny Salas on Real Estate Today Radio about the important changes that have occurred since the Mortgage Credit Crisis. Keep up with local market updates every Sunday from 11 Am to 1 PM on KPAY 1290 AM. 

  

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Check out the related article on Appraisals, which was featured in the Chico Enterprise Record.

 

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If You’re in Real Estate, and Don’t Understand This… You’re in Trouble.

AMC’S FORMED BY HVCC, WILL UPLOAD UAD CODES, TO THE UMDP’S UCDP, SO THE GSE’S CAN ASSESS A URAR AND 1004(D), TO APPROVE A 1003!  If you’re in real estate, and don’t understand this…you’re in trouble! 

After the Mortgage Credit Crisis (that’s it!  I’m referring to it as MCC from here on out!), everyone was blamed for the financial meltdown of Capitalism, worldwide.  Brokers, Bankers, Appraisers, Underwriters, and carnival ride operators (not sure about that one) were blamed for the fiasco. Government agencies were abolished, and new ones formed, like the Federal Housing Finance Agency (FHFA).  New laws were put in place, like Home Valuation Code of Conduct (HVCC) laws implemented into effect May 4, 2009.  Essentially, these entities were structured to manage lending practices to be certain that the world never experienced again, the gargantuan apocalypse and failure of the world capital markets.  So, for the most part, these changes have been favorable for the consumer.  No longer should you, legally, show up to escrow and have a surprise charge or interest rate on your closing statement.  No longer should the value of the home you’re purchasing be falsely represented to greedily, financially benefit a Realtor or Lender.  No longer should people purchase more than they can truly afford for a home.  Today, we’re going to discuss the appraisal changes that have already occurred, and what’s expected around the corner. 

As mentioned, on May 4, 2009, the Home Valuation Code of Conduct laws went into effect.  This change was implemented to prevent Loan Originators (Banks, Brokers, Credit Unions, etc.) from ordering appraisals from their “in-house” or commonly used appraisers.  In some markets, unscrupulous lenders were working with appraisers to increase the value of some homes, just to make a transaction work, as opposed to generating a true, appraised, “real,” value.  HVCC developed the formation of Appraisal Management Companies (AMC’s) requiring that lenders use these AMC’s to order their appraisals from a “panel” of appraiser “experts,” that the AMC had “hired.”  In essence, this removed the potential unrealistic valuations by putting a divider between the relationships.  Sounds like a good thing, right?  In some aspects, of course, it was a good thing.  The problem was that the AMC panels consisted of anyone that would do the job.  At first, we had appraisers from Texas, reviewing appraisals in Chico, and lowering values.  We had derelicts, that shouldn’t be operating carnival rides, appraising properties and adjusting values non-consistent with the experts that scrupulous lenders were used to dealing with in the past.  Estimates, into the trillions of dollars, were lost on real estate transactions that didn’t have careful, thought-provoking, legitimately adjusted calculations by professional, competent, knowledgeable appraisers. 

This nightmare wasn’t experienced on every deal, however, lenders learned quickly (the smart, educated ones, anyway) that  the “panel” of appraisers, on your AMC, was the key to successful real estate transactions, and smooth closings.  As you can imagine, it took time to understand the AMC’s procedures, and how to encourage an AMC to influence their learning curve, into an understanding of who the best appraisers were, in their particular areas, and to keep on their panel; building a good reputation for the AMC, and therefore, the lender.  This worked beautifully, for about a year and a half, until the introduction, this last month, September 1, 2011, of the Uniform Mortgage Data Program’s (UMDP) Uniform Appraisal Dataset (UAD).

UMDP will be used by Fannie Mae and Freddie Mac (The GSE’s), as a common way to deliver appraisals with uniform data requirements, like similar codes, to support improved quality and accuracy of data while preserving each GSE’s ability to determine what the data means to loan performance and loan quality, or how people pay the loans back.  It consists of the Uniform Loan Delivery Dataset (ULDD), the Uniform Collateral Data Portal (UCDP), and the Uniform Appraisal Dataset (UAD).  The ULDD and UCDP will be behind the scenes type changes, some already in effect, other changes to come.  But, the big change is (UAD). 

The UAD standardize certain data points to support consistent appraisal reporting.  Similar definitions, codes, common verbiage, etc. will be expected on appraisals so that the GSE’s have a uniform way of determining the quality of valuation, and influences on loan performance.  This information will be uploaded to a common portal, or website, monitored by a common entity. 

So, appraisers, via the AMC’s formed by HVCC, will upload their information and two pages of codes, to the UMDP’s UCDP, so the GSE’s can uniformly assess a client’s URAR and 1004(D), to approve a client’s 1003! 

This, actually, makes sense.  For those of you not understanding the industry jargon, URAR’s are Uniform Residential Appraisal Reports, and 1004(D)’s are appraisal certifications of completion from numbers that accompany appraisals.  A 1003 is the form number used for an application for a loan. 

Now, you must understand that in order to accommodate these new changes, the most significant impact on real estate transactions, will be expected turn times on appraisals.  Prior to September 1 and UAD, appraisal contracted turn-times, with our AMC, were five business days.  However, as appraisers learn the new codes, verbiage, and processes for uploading the information, we have experienced that 10 business days (or double the turn times) are more likely to be experienced.  At least until we all familiarize ourselves with all of the changes. 

Our turn times are still good…as we’re learning the new tricks, to circumvent delays…as we are smart!

HomePath Renovation

Homepath Renovation: Step by Step

Only available on properties acquired from Fannie Mae that require moderate renovation and designated by Fannie Mae on the www.homepath.com website as eligible for HomePath Renovation financing. Lender must document the file with appropriate pages printed from www.homepath.com

• Borrower must be an individual, US citizen, permanent resident alien or non-permanent resident alien.
• 1-4 unit owner-occupied principal residences only. Second homes, investment properties, manufactured homes, condos and co-ops are not eligible
• 1-unit owner-occupied 97% max loan to value 2-4 units 75% max loan to value
• The LTV is calculated from the LESSER of the purchase contract plus the total renovation costs (which includes renovation costs and required contingency) or the “as- completed” appraised value.
• Full “as-completed” appraisal required.
• The renovations must be completed within six (6) months after the closing date.
• Total Cost: The total renovation costs, including contingency, may not exceed the LESSER of 20% of the “as completed” appraised value or $30,000.00. No work can be started prior to closing. Rehab solely for foundation work is not permitted. Any foundation repairs may require a licensed foundation contractor.  Borrower may use more than one contractor; however, additional doc prep charges may apply. Each contractor must submit a Contractor Questionnaire, be accepted by the lender for the program and provide a W-9. Do-it-yourself projects are not eligible.
• Do-it-yourself Projects. “Do-it-yourself” borrower projects are not allowed.
• Renovation Escrow Account. Funds for renovation will be placed in an insured, interest-bearing account.
• Minimum Credit score required is a 660
• Max Debt to Income allowed is 45% (may allow up to 50% with strong compensating factors)
• Mortgage Insurance is not required; however loans with LTV’s over 80% are subject to applicable loan-level pricing adjustments.
• Loan Terms are 30 year fully amortized fixed rates ONLY (No balloons; ARMs; Interest-only)
• Escrow deposits for taxes and insurance will be established at closing. Borrower must provide paid-up first year’s homeowner insurance policy as a requirement of loan closing.
• Contractor: Contractors must be licensed and/or registered as required by individual
  State and/or local guidelines. All contractors must meet credit and reference guidelines as established from time to time by Construction Loan Committee and in accordance with FNMA HomeStyle guidelines. A Contractor Questionnaire must be filled out and signed by the business principal and include vendor and homeowner references related to the proposed project(s).
• Contractor Questionnaire: Contractor(s) must be designated for the construction project. The contractor(s) must complete a Contractor Questionnaire. Include a complete Questionnaire and send to the Construction Lending Department. Contractors must be registered or licensed in accordance with applicable state laws.
• Multiple contractors may be allowed on a case-by-case basis. All contractors must provide completed Contractor Questionnaire and W-9 tax information.
• Agreed Contract: Borrower must enter into a written contract with each contractor who will be performing some or all of the work. Each contract must include (1) the total amount to be paid to the contractor for the work, (2) a description and itemization of the work, (3) the timeframe needed to complete the work and (4) agreement by the contractor that the work will be completed within three (3) months of the closing of the loan
• Appraisal: Appraisal to be subject to completion of improvements. Appraiser must reference the existing condition of the property and specify the work to be done in detail. The appraiser must be provided contracts as described above indicating a description and itemization of the work.
• NO Cash-out: Borrower’s closing statement cannot show any cash to Borrower.
• Draws: Draws will be sent by Lender to Contractor. Draw requests must be signed by both Borrower and Contractor before submitting to Lender.
• Completion: All improvements must be completed in 3 months from closing. A 30 day extension fee of $750 will be charged to Borrower for non-completion. An additional $750 will be charged for each additional 30 days.

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