Joe Farro

Most don't realize that without all the Feds efforts mortgage interest rates would be much higher and economy worse off that were we are today. Today processes are at work to bring the mortgage market back. As much as most want to say how hard it is to get a loan there is a reason for this. Investors who buy mortgages need to feel confident that the loans they are buying are good quality(solid appraisals, good credit, stable income). We desperately need these investors to come back into the market and begin to buy these securities. Simply put if they don't buy - mortgage rates will need to rise to a level that makes it attractive. We need to do our part to make sure the mortgages they buy are the best quality.

The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week's statement is the Fed's nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.

It is a given that once the Fed ceases its purchases, that interest rates will most likely climb higher...most likely back above the 6% area. Next year this time we could be in the mid to low 6's. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.

Now is the time to take action.

MORTGAGE RATES Loan Programs Interest Rates* 30 Year Conv. Mid - low 5's 30 Year FHA/VA Mid - low 5's Rural Development Mid 5's 5/1 Arm Conv. Low 4's 5/1 Arm Jumbo Mid 5's Please contact us for specific situations and specific rates. *Risk Based Pricing will affect rate offered. MORTGAGE RATE TRENDS DAILY RATE LOCK ADVISORY For an in depth explanation and daily update click on The Daily Rate Lock Advisory. A copy of this newsletter can be found at Market Update. also check out Quick Tips and Home Loan Toolbox

With all the HVCC changes to conventional loans - FHA released some of their new appraisal guidelines. Lets look at them


FHA Appraisal Changes

1- Changes effective January 1st, 2010.

2- Mortgage brokers and commission based lender staff are now PROHIBITED from selecting the FHA appraiser.

3- Lenders are not required to use Appraisal Management Companies.

4- When a borrower switches lenders FHA prohibits the 2nd lender for ordering additional appraisals to obtain a higher value unless:
-The FHA DE underwriter determines the 1st appraisal is deficient
-The appriaser of the 1st appraisal is the other lenders exclusionary list
-The first lender delayed the trasfer of appraisal to cause harm

5- Appraisals are now valid for only 120 days for all existing and proposed or under construction properties.

Please remember that this has just been released and that most lenders have not created policy to handle this. Just like most other regulatory changes this year I am sure most lenders will create their own policy on how to comply with these guidelines. The good news is that everyone has some time to prepare. I don't believe this will be difficult to work with and will update you as things continue to develop.

Strategies and Tips for Realtors on working with Appraisers and the HVCC:

Remove the lockbox off of the home before the appraiser comes out to generate a phone call from the appraiser asking to gain entry (make sure you enter "call before showing" in listing info). When the appraiser calls, politely ask them to get a sense of their competency. Here are some suggestions: Where are they based? Have they ever appraised in the area before? What data sources will they be utilizing? Do they have enough time to complete the appraisal?

1. If you feel that the appraiser is not knowledgeable about the area, politely ask them to hold off. Next contact the lender and see about having someone else assigned. Rely heavily on the USPAP(page2)rules regarding appraising only in geographical areas in which an appraiser is competent (familiar).
2. Provide comps of your own before the appraiser comes out. This is important as appraisers have to take pictures and will want to avoid making a second trip. It is also important that the comps you offer have closed in the last 3 months. Comps closing longer than 3 to 6 months will likely be adjusted downwards for date of closing. (Comps closing longer than 6 months ago are unacceptable).
3. Download this helpful document from the NAR regarding the HVCC and educate yourselves.
   
   

MORTGAGE RATES Loan Programs Interest Rates* 30 Year Conv. Mid - low 5's 30 Year FHA/VA Mid - low 5's Rural Development Mid 5's 5/1 Arm Conv. Low 4's 5/1 Arm Jumbo Mid 5's Please contact us for specific situations and specific rates. *Risk Based Pricing will affect rate offered. MORTGAGE RATE TRENDS DAILY RATE LOCK ADVISORY For an in depth explanation and daily update click on The Daily Rate Lock Advisory. A copy of this newsletter can be found at Market Update. also check out Quick Tips and Home Loan Toolbox

Delays in closings are the number one cause for a client to be disappointed with the process of purchasing a home. This year with all the foreclosures, shorts sales and changes in the industry we now have another item to pay attention to that now can be added to your already long list of things to do. Home owners associations are a part of many communities and are now may be creating delays as the owners of foreclosed properties may not be current on association dues or having a property with a subdivision violation that need to be corrected before a closing can occur.

This is not surprising to me as many times, we(Lenders) receive realestate contracts are lucky to have any disclosure notifying anyone that there is a Home Owners Association(HOA). It is great for a lender to know up front so we can quote accurate closing costs and payments. Home owner associations have initiation fees that can affect the buyers funds for closing or monthly fees that affect payments. Upfront disclosure is always the remedy for all parties to facilitate a smooth closing.

To miss closing dates or have delays caused by no one obtaining the HOA info or being able to clear any conditions in a 30 day period is unacceptable. This is not meant to point fingers but there has to be a better way. I believe the first line of defense against this is a listing agent providing information on the HOA and to properly disclose in the initial contracts. This will greatly assist all so that by the time it reaches the closing attorney they are alerted to contact the HOA and can now get any information pertaining to the home. Lets not wait for the title report to come back. Buyers agents also need to ask when making offers - may be helpful to provide in the listing information. Once this is identified up front this should allow for more time for the title agent to obtain the info. Again lets not wait for the closing agent to find out there is a HOA and then start the process. I find it hard to belive that a listing agent would not have this info and or a buyers agent would not do any due diligence when receiving or making offers just seems like common sense. Yes common sense however, this does not have much to do with what we are dealing with today. Dont kill the messenger I was told to say this. By the way dealing with foreclosure attorneys is never a winning experience when issues arise that are time sensitive. This is not the hard stuff and should be a simple fix. Us survivors need to stick together.

Any insight/feedback is greatly appreciated.

MORTGAGE RATES Loan Programs Interest Rates* 30 Year Conv. Mid - low 5's 30 Year FHA/VA Mid - low 5's Rural Development Mid 5's 5/1 Arm Conv. Low 4's 5/1 Arm Jumbo Mid 5's Please contact us for specific situations and specific rates. *Risk Based Pricing will affect rate offered. MORTGAGE RATE TRENDS DAILY RATE LOCK ADVISORY For an in depth explanation and daily update click on The Daily Rate Lock Advisory. A copy of this newsletter can be found at Market Update. also check out Quick Tips and Home Loan Toolbox

I have already heard of a couple of a closings that have been affected by the new truth in lending requirements now required. When a lender discloses an initial truth in lending in todays market there now is a requirement that the final one(provided at closing) has to be within a .125% tolerance. The truth in lending is a form that a buyer signs at loan application that discloses the APR. The Annual percentage rate(APR) is the real cost of funds a buyer pays that takes into account certain closing expenses. In a perfect world buyers are told to compare APR's in choosing lenders with low interest rates - surprise we don't live in a perfect world. Unfortunately some lenders today still utilize misrepresentation and bait and switch tactics.

So what does this have to do with the closing date? Based on the previous topic of HERA HOEPA, most don't realize that lenders are checking the initial truth in lending figure against the final one. Most do know that when it is off by more than .125% the lender must redisclose and now wait 3 days for the client to understand the process.

You know as well as I do that some times figures are changed last minute. In todays environment this could impose delays and you need to make sure that you are in touch with your lender when making these changes due to the potential of causing a delay.

I have done some of the math on the impact to APR based on a change in closing costs

$100,000 loan - $1000 - $1250 change may trigger a change in APR and delay closing

$200,000 loan - $3000 change may trigger a change in APR and delay a closing

Please remember the lower the loan amount the bigger the impact on APR when changes are made.

Now that you can see the math the next item is what closing costs trigger the change in APR. I have gone ahead and prepared a list of fees that are both included and not included>

I understand that sometimes changes need to be made last minute. Working with someone who knows the ins and outs of the new legislation and understanding it impacts your clients loan has never been as important. Clients can be forgiving but the one item they never seem to forget is if they miss the closing date. Set the best expectation and do it right.

Please visit Realtor Toolbox and go to Easy Notes for our APR handout

MORTGAGE RATES Loan Programs Interest Rates* 30 Year Conv. Mid - low 5's 30 Year FHA/VA Mid - low 5's 30 Year Jumbo Mid 6's 5/1 Arm Conv. Low 4's 5/1 Arm Jumbo Mid 5's Please contact us for specific situations and specific rates. *Risk Based Pricing will affect rate offered. MORTGAGE RATE TRENDS DAILY RATE LOCK ADVISORY For an in depth explanation and daily update click on The Daily Rate Lock Advisory. A copy of this newsletter can be found at Market Update. also check out Quick Tips and Home Loan Toolbox

This is a simple one that many still struggle with. Just he other day had a Realtor want me to specifically give an exact dollar amount for a prequal. For the record, this is impossible in that every property is different based on the property taxes and home insurance. The best that any lender can do today is provide a range that makes sense based the buyers qualifications and needs.

As home values have fallen some property assessments have remained the same or gone up. Typically many have used a calculation of 1.25% of the sales price to calculate taxes. Today the best practice is to pull the exact tax amount from the county web site. We have provided a link for every county in the US on our site in the Home Loan Toolbox page. Just scroll down and click on the Property Tax Resource page, click on state, choose county and select Tax Commissioner for that county.

In addition, to the property tax differences most still don't realize the payment differences based on every $1,000 financed. look at the differences below.

30 year Fixed 30 year Fixed
Interest Rate Cost Per $1,000 Cost Per $10,000

5.5% $5.68 $56.80

6.0% $6.00 $60.00

So as you can see the differences per $1,000 is very small in the payment for a 30 year fixed. So when someone is looking put down another $2,000 or raise the sales price $2,000 so that the seller can pay for some of the closing costs, you can no see how small an impact it is.

So to sum this up as best practice for any agent when working with buyers - you need to not only know the price range but also have an understanding of the payment. Partner with your loan officer when looking at making offers and writing contracts so your buyer has the right expectations.

MORTGAGE RATES Loan Programs Interest Rates* 30 Year Conv. Mid - low 5's 30 Year FHA/VA Mid - low 5's 30 Year Jumbo Mid 6's 5/1 Arm Conv. Low 4's 5/1 Arm Jumbo Mid 5's Please contact us for specific situations and specific rates. *Risk Based Pricing will affect rate offered. MORTGAGE RATE TRENDS DAILY RATE LOCK ADVISORY For an in depth explanation and daily update click on The Daily Rate Lock Advisory. A copy of this newsletter can be found at Market Update. also check out Quick Tips and Home Loan Toolbox