Adrian Cox

The Federal Mortgage Disclosure Improvement Act (MDIA) goes into effect on 8/1/09. This new Act applies to all applications dated 8/1/09 forward. The easiest way to understand the concept of MDIA is to think of it this way. Purchase loan borrowers now have the same protection as a refinance borrower, meaning the Act basically creates a rescission period of 3 days for purchase loans.

What is happening here is the Federal Government is making sure purchase borrowers cannot get "jammed at the table" with new fees and feel forced to close. The borrower now has 3 days to understand any fee changes before they close, just like the 3 day rescission period for refinances. This new Act is designed to ensure that the consumer is aware of the fees and will eliminate the practices of unethical Lenders that under disclose the closing fees in hopes of getting the deal.

You may consider standardizing your Admin fees on your real estate transactions. Often, the admin. fees change from deal to deal and are not charged on all cases. I don't always know what your fees are, or if they are being charged, until we receive a preliminary HUD-1 from the Title Company. This could be a potential problem that would cause a settlement to be delayed. It is imperative that we disclose these fees up-front so there will be no settlement delays. There is no way around this. This is a Federal Law. I will be asking about the Realtor Admin. fees on all deals referred by my Realtors going forward. This way we will not have to delay settlements. Please call me with any questions, and I look forward to working with you to ensure a smooth, stress-free transaction.

Here are some of the particulars that pertain to your real estate transactions.

If there are ANY changes (changes that trigger re-disclosure are below) made to the initial GFE and TIL that cost the borrower more money than what was originally disclosed, then I must re-disclose a new GFE and TIL, have these signed by the borrower, and then the loan MUST wait 3 DAYS to close.

Here are the changes that trigger the new Act:

-Origination Fees

-Loan Discount Fees

-Appraisal Fees

-Appraisal Re-Inspection Fees

-Credit Report Fees

-Flood Cert. Fees

-Tax Service Fees

-Commitment Fees

-Processing Fees

-Underwriting Fees

-Transfer and Recordation Fees (Stamps as well)

-Realtor Admin. Fees (charged to the borrower) **********(See comments above)

Thanks for your time.

The ability to determine a property's value in structuring a real estate transaction has always been important. In today's market, it's more important than ever. Zillow.com, Trulia.com and other online resources are helpful, but make sure you're using multiple data sets to establish the preliminary figures. I was reminded of this when speaking with Marney Kirk, a Keller Williams Realtor who I recently met. With her permission, I am reblogging her latest encounter with Zillow.

Misleading Towson Zillow Zestimates Explained Further

May 21, 2009 by Marney Kirk
Filed under Baltimore, Blog, Buying Tips, Featured, Selling Tips

As I wrote March 2, Towson Zillow Zestimates in general, are statistically off by a large amount.

Last week I had a client call me because his HELOC was reduced by a large amount right in the middle of construction to improve his home. He could not understand how the bank could make the determination that his Towson house value had dropped over $200,000 in the past 18 months since he opened his HELOC.

Upon speaking to the bank, the representative pulls up Zillow, and proceeds to tell him this is how they discovered the value change.

"Is this true? Has my value really dropped by THIS much? I knew we were in a depressed market, but did not think it was THIS bad," he asked me.

Based on a true market analysis, his value has really only dropped by $25-50,000. So how is Zillow off this much?

Enter the powers of social media!

I was able to find both the COO & the Director of Community Relations for Zillow on Twitter.

I contacted COO Spencer Rascoff and he tweeted back:

"Lenders shouldn't rely on Zestimates. Use an appraisal." "We have "a Zestimate is not an appraisal" language all over the site. http://twurl.nl/7lj6mc "

He then emailed me directly because he wanted to get to the bottom as to why they are so far off.

Director of Community Relations David Gibbons tweeted:

"...it may not change outcome by he {sic} can't reduce heloc based on Zestimate alone." "Lenders are supposed to use commercially licensed AVMs & appraisals, not Zestimates!"

While they are both correct, and I agree with them wholeheartedly, lenders ARE using their site, and if the site's purpose is to provide real estate information, then the site should be more accurate.

Through emails and more discussion, I was able to find out more about how the Zestimate values are determined.

David direct messaged me that it: "looks like your purchase price and taxes have the biggest impact on your Zestimate..."

I asked what that had to do with a current value of a home, because there is no correlation whatsoever in the real estate market from what you paid for it and what it is worth now.

His answer: "homes only sell on average once every seven years so when figuring out what a home is worth its last price is important - though 2002 is...we count past sales in less and less over time ... a sale last year would have much greater impact."

NO WONDER the values are off so dramatically. And if Zestimates continue to be calculated in this respect, then we should be looking for values to be tremendously off in 2013-2014 in the other direction. So my client can be assured that in 3 years his Zestimate should be approximately $200,000 OVER true value!

Please be aware that the Zillow Zestimates, at least in the Towson market area, may have no relationship to the true value of any home.

This reiterates the point that REAL ESTATE IS LOCAL and, as COO Rascoff wrote: "a Zestimate is not a replacement for a real estate agent. Far from it."

Ultimately, the figures that we use to structure a transaction will be provided by a full appraisal from a licensed appraiser who knows the local market. Just be cautious when using online information and the homeowner's perceived value in putting your deal together. In this market, more information and data points are more important than ever.

George Harrison was so right when he penned that song. Lyrics below: I guarantee that if you read the words and think of the melody in your head, your attitude will improve right away! I know I'm not the only one who feels this way, but I am eliminating as much of the doom and gloom media as possible as I go through out my day. It is astounding ttat we waste so much time worrying about things we can not control. That doesn't mean I want to go around with my head in the sand, but I'm trying to filter the information overflow through conduits that are specific to my position in the market and around the advancement of our profession and related industries. Gonna keep this short, but enjoy the smile all day.

Here comes the sun, here comes the sun,
And I say it's all right

Little darling, it's been a long cold lonely winter
Little darling, it feels like years since it's been here
Here comes the sun, here comes the sun
And I say it's all right

Little darling, the smiles returning to the faces
Little darling, it seems like years since it�s been here
Here comes the sun, here comes the sun
And I say it's all right

Sun, sun, sun, here it comes...
Sun, sun, sun, here it comes...
Sun, sun, sun, here it comes...
Sun, sun, sun, here it comes...
Sun, sun, sun, here it comes...

Little darling, I feel that ice is slowly melting
Little darling, it seems like years since it's been clear
Here comes the sun, here comes the sun,
And I say it's all right
It's all right....

Obama Unveils Homeowner Affordability
and Stability Plan

President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes.

The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. In addition, the plan includes a third initiative to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.

Many of the plan's details are still being worked out and will not be announced until March 4, here is an overview of the plan's main components.

Refinancing Initiative
Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. Therefore, the refinancing initiative in the new plan provides refinancing help for homeowners with less than 20% equity in their homes or who owe more than their home is worth. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.

According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.

As with the rest of the plan, details about this initiative will be released at a future date-including what, if any, credit score requirements will be included.

Stability Initiative
This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.

The goal of this initiative is simple: "reduce the amount homeowners owe per month to sustainable levels." To accomplish this, lenders are encouraged to lower homeowners' payments to 31 percent of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs.

Homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.

Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify. This initiative also includes a number of additional elements and incentives that benefit homeowners and lenders alike, including:

• Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
• Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.

Supporting Low Mortgage Rates
As part of the Homeowner Affordability and Stability Plan, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability. This portion of the plan will use using funds already authorized in 2008 by Congress for this purpose.

The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.

Again, the government plans to unveil the final details of the plan on March 4, 2009. For now, you can download a sheet of common Questions and Answers produced by the government at: www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pdf

I will continue monitoring the plan as new information becomes available. If you have any questions or would like to discuss how this may specifically impact you, I'd be happy to sit down with you. Just call or email me to set up an appointment.

Sadly, I wasn't the one with the relationship. Here's the story. A few weeks ago, I was contacted by a young lady who wanted to buy a home with her boyfriend. On December 15, 2008, I pre-qualified their application for an FHA purchase and she informed me that she would be shopping the deal to two other loan officers. One is a LO that I know personally and think would do a fine job and the other was a "friend in the business". Uh oh. It's not because I didn't know this person that I got that feeling, but the applicant indicated that he had had a mortgage company that failed (hey, it happens) and was now with another lender. I kept in touch with her over the next week and just before Chritmas, she said she would "be in touch" if they found a property they were serious about. In other words, they were going with another loan officer. No problem.

This past Sunday, January 4, 2009, the boyfriend calls me and asks for my help, stating that they had not heard from the other LO in a week and a half. On Monday, I updated their file, contacted the listing agent, selling agent, title company and arranged to have the property appraised on 1/6/2009. I also had the FHA case number generated, locked the rate and provided all of the information to the appropriate parties. The settlement date is set for 1/16/2009, so time is running short. Today, the boyfriend calls me to say that they were going with the "friend in the business". For their sake, I hope he can deliver. I understand that the boyfriend needs to keep the peace with his girlfriend, but when he intimated that he was much more comfortable working with me, it just doesn't seem right. The other loan officer explained that he had not contacted them for a week and a half so that he didn't "stress them out over the holiday season". Oh well, can't win them all and hopefully the way I handled this will result in some referrals. Happy New Year to all and here's to a healthy and prosperous 2009.