Just When You Thought That You Had Seen Everything...Appraisal Management Companies Entering Mortgage Business???

I have now been in the mortgage business for over 26 years and I have seen some really interesting and some just down right ridiculous things. This one will fit into the “ridiculous” arena. It has been reported today that several AMCs (appraisal management company’s) are looking to enter the mortgage business. Yes...these are the same guys who are the beneficiaries of the current HVCC rules that all of us have to live by and the same guys who assign an appraiser from Conyers to do an appraisal in Buckhead. They are also the same guys who then pay this guy from Conyers half of what he used to make to do this appraisal in Buckhead….which, in many cases, has resulted in low and sloppy appraisals. The old saying of “you get what you pay for” could not ring more true in this case. Many of the large banks (NOT SUNTRUST), correspondent lenders, and mortgage brokers are forced to use these AMCs for their appraisals and the results have not been very good as most of you know. Now, the same folks are wanting to get into the mortgage business as they see this as a “value add” to their current business model. I, however, would argue that they have contributed to our current prolonged housing recession as their “sloppy” appraisals have truly killed legitimate purchase deals which have sent values throughout the subject subdivision to lower levels than they should be at since this purchase...if the price is reduced to match the appraisal...will be used as a “comp” in the subdivision driving all prices down. I would also argue that they have killed any chance of some current homeowners from ever refinancing their homes due to low values. Their “sloppy work” as well as sending appraisers to areas they are not familiar with has most likely added to our current recession issues as many potential refinance customers are being denied due to low appraisals and therefore they don’t lower their payments which would give them more disposable income for other purchases which would stimulate the economy. Now, these companies want to enter the mortgage business!!! Could there ever be a bigger conflict of interest than this??? The Federal Government continues to take a hard look at banks and in some instances...they should...But I cannot imagine how they could let this happen. Am I worried that AMCs are entering the mortgage business??? Given their current track record for customer service...Not really.

HUD Issues Final Changes….

As reported yesterday, HUD was looking to make changes in their guidelines and now it is official!!! Most of these changes are effective with case numbers issued on or after April 5, 2010. I believe you will agree with me that they are not bad changes and in the case of property flipping…they are actually pretty good!!! I am providing the changes along with some insight on impact:

1. Seller paid concessions will be reduced from 6% of sales price to 3% of sales price. This is the biggest change. Six percent seller contributions usually meant a buyer to have 3.5% down payment and seller contributions would normally cover all closing cost and prepaids. Impact- buyer might need to have more money at closing.

2. MIP (Mortgage Insurance Prem) is being raised from 1.75% to 2.25%. This is not as big of a deal as it seems. This amount is financed into the base loan amount 99% of the time. It will not affect buyer’s cash to close at all and will have minimal impact on raising their monthly payment. When I first got into the business in 1984 the Upfront MIP was 3.75%. Over the years it has gradually ticked down to 1.75%.2.25% is still one of lowest percentages in FHA Upfront MIP over the last 20 years. Please do not let your buyer get hung up on this change. This change allows lenders to finance with only 3.5% down payment. Impact-perception may be big but reality it is not.

3. Monthly MIP on Loan to Values of 95% or greater will rise from .50 to .55. Again, I don’t see this as a “biggie.” Impact– A loan amount of $200,000 will experience an increased monthly payment of about $8 per month.

4. 90 Day Flip Rule has been TEMPORARYLY lifted. This means investors buying homes do not have to wait 90 days to sell if buyer is obtaining FHA financing. This is great as it will expedite transactions! Just keep in mind this is temporary, so stay in tune with industry updates. Also, this change goes into effect FEBRUARY 1, 2010!!! Impact- fewer headaches and more closings. Additionally this should invite more investors into the market to buy, fix up and sell homes. Good move by HUD.

Overall, I really don’t see any earth shattering things here. Probably a good financial move by HUD and should keep this valuable financing tool available for a long time.

Rates moved down slightly today!!! It is a great time to buy a home!!!

It’s a Buyer’s Market….On Steroids!

A buyer’s market is simply when the advantage is to the buyer. Typically it is when there are more sellers than buyers. The first quarter of 2010 is a buyer’s market on steroids! Never have there been so many compelling advantages for buyers to purchase. First if eligible for the federal tax credit, the government is paying you to buy a home. Seriously! Second due to unprecedented number of foreclosures, house prices are down…way down. It would be safe to say on average in metro Atlanta down 10-20%. Third, interest rates at flirting with lowest levels in last 50 years and the fixed rate mortgage are the best value (and safest) instruments for mortgage financing. So in summary there are a flood of homes on the market to choose from at deep discounts. Rates are incredibly low. Sellers want to sell. A buyer can get a great buy from a motivated seller, with low financing terms on a safe fixed rate and get an additional reward from the government in the form of a tax credit. Forget the fact that Mark McGwire, Roger Clemens, or Alex Rodriguez admitted to being on “ROIDS”. The real story is the “ROBUST Buyer’s Market” in play for the first quarter of 2010. Call your Realtor now to start your own investigation into home ownership!

DEMS Lose Seat In House...Health Care Bill Now In Question...Wall Street Looks For Direction

Last night the Republicans pulled off a huge upset in the State of Massachusetts by taking over the Senate seat once held by Senator Kennedy. For the first time in over 40 years the Republicans now control that seat which now makes things very interesting for the Health Care Bill as the Dems no longer have their 60th vote to push this through. Regardless of which side of the aisle you sit on this news has been favorable for interest rates….at least for today. The Federal Government is the mortgage markets biggest competitor in terms of attracting capital and if the Health Care Bill were to pass...the Feds would have to raise money to fund this endeavor which would compete for capital that could be directed towards mortgage backed securities which would keep rates low. The passage of the Health Care Bill would most likely move rates to higher levels….So, for now, we have missed a bullet and rates are holding steady with some bias towards lower levels. As noted yesterday in Market Watch, there is little meaningful economic releases coming out for the remainder of the week. Look for rates to once again take their direction from the DOW. If the DOW moves lower, rates will move lower which was exemplified in today’s trading. The mid-range ARM’s are beginning to come back in play as the 5 year conventional ARM is trading around 3.375% and the FHA ARM with 1 and 5 caps is now at 3.875% and borrowers get to qualify at the START RATE!!! FHA came out with their new proposed changes and I will update you on those in the next Market Watch.

Market Watch Week of January 18th

The economic calendar is pretty much void of any big releases this week. Look for rates to take their direction from the DOW this week…A higher DOW will mean Higher rates and visa versa.

Rates Searching For A Direction...

Roller Coaster Ride Continues... After getting hammered earlier in the week, mortgage rates have recovered most of their early week’s losses but continue to search for a true direction. Our “warriors of Wall Street” are not making things any easier as their opinion on the direction of the economy changes with the changes in our temperatures. While many of them had visions of grandeur that the economy was finally recovering they were hit with yesterday’s retail sales numbers and weekly unemployment claims. Retail sales actually fell in December (yes the Holiday shopping period) by .3% after seeing sales rise by a meager 1.8% in November. Unemployment claims rose last week by a surprising...OK surprising to our “warriors” but not to those who live in the real world….11,000. It was not surprising to me as I am sure many who were looking for jobs going into November took sales jobs at many retailers in hopes to land long term employment. The fall in sales did not help their chances of gaining permanent positions and once again found themselves looking for employment. The biggest fear on Wall Street is the specter of inflation. However, it is virtually impossible to have inflation when sales are down and over 17% of the population is either unemployed or underemployed. However, buyers should not take chances with interest rates. Our “warriors” could drive them notably higher at any time. It is a great time to buy while we are experiencing historically low rates and some of the lowest housing prices we have seen in years!!!