Erin Newington, Sacramento Mortgage Planner

Home Valuation Code of Conduct (HVCC)

The Attorney General of New York, Andrew Cuomo subpoenaed Fannie Mae and Freddie Mac back in late 2007. The subpoenas came on the heels of the filing of a lawsuit by the Attorney General against First American and its subsidiary eAppraiseIt. The lawsuit, announced on November 1, 2007, detailed a scheme in numerous e-mails showing First American and eAppraiseIT caved to pressure from Washington Mutual to use appraisers who provided inflated appraisals on homes. E-mails also show that executives at First American and eAppraiseIT knew their behavior was illegal, but intentionally broke the law to secure future business with Washington Mutual. Between April 2006 and October 2007, eAppraiseIT provided over 250,000 appraisals for Washington Mutual. The lawsuit is still pending, and the industry-wide investigation into mortgage fraud continues.

Basically, Fannie & Freddie caved to Cuomo agreeing to pony up $24 million to fund an institute board that must be approved by Cuomo's office. Part of the settlement includes the Home Valuation Code of Conduct (HVCC). The provision that has you all up in arms is that the appraisal must be ordered and controlled by the lender. Those of you who like to read will find that in Section III of the code (http://www.freddiemac.com/singlefamily/docs/030308_valuationcodeofconduct.pdf)

Additionally, you will find in section IV that most all of the lender's staff wont be able to order it either. The agreement can be found at https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/agreementappcode.pdf

These new poorly written rules are staged to go into effect January 2009. The comments period has a couple of days left (4/30/2008). Based upon the haste in which this was written I would expect a lot of changes before this is done. Please express your comments at the hyperlinks below.

Fannie Mae

https://www.ric-surveys.com/se.ashx?s=7205300750A3F19F

Freddie Mac

http://www.freddiemac.com/singlefamily/home_valuation_comment_form.html

Hmmm you mean all the troubles we are having isn't just the mortgage brokers fault? Imagine that! Wait until they start dipping into the wholesale lenders files. Imagine what they will find!

Closing cost... What are they?

What are closing costs?
Closing costs are the fees and pre-paid items related to funding your home loan. Closings costs can include the following items:

TYPICAL FEES

• Real Estate Agents Commissions
  Usually a percentage of the home's price (if purchasing a home)
• Origination fee
  The fee charged by the lender to process your loan
• Loan Discounts or Points
  If you elect to "buy down" your rate you pay points at closing. One point is equal to 1% of your loan amount.
• Appraisal
• Title Insurance
  The title insurance policy you are required to purchase protects the lender. To issue title insurance, government and other records must be searched to make sure no one else has a legal claim to the home.
• Escrow Fees
  These are fees from the title company charged to process your loan documents and act as a neutral third party.
• City, County and State Charges
  The local governments where you live may charge taxes and fees to record and stamp documents such as deeds and loan paperwork.
• Pest Inspection
  The terms of your contract or requirements from the lender require it, a pest inspection and report may need to be done.

PREPAID COSTS COLLECTED AT CLOSING BY YOUR LENDER

• Interest
  If you loan is finalized before the last day of the month, at closing you must pay a daily pro-rated interest for the remainder of the month.
• Homeowners' Insurance
  You must pay for your annual policy in advance to protect the lender and you in case your property is damaged. Supplemental coverage such as flood, earthquake, etc. may be required by the lender depending on the location of the property.
• Private mortgage insurance
  Generally speaking if your down payment is less than 20%, lenders require this policy in order to protect themselves if can not repay your loan. You can avoid this expense by putting a first and second mortgage in place. Ask us how!
• Reserves for impound accounts
  You can elect or the lender may require this account to be set up to pay your annual property taxes, homeowners insurance, flood insurance, private mortgage insurance. A portion of your monthly mortgage payment is used to fund this account so the above mentioned bills can be paid.

Understanding what you are looking at when reviewing your Good Faith Estimate will help you to ask the right questions!

If confirmed by the Senate, Preston would replace HUD Secretary Alphonso Jackson, who announced his resignation last month amid allegations of political favoritism and a criminal investigation. Jackson's last day on the job is to be Friday.

Jackson leaves behind the wreckage of a national housing crisis and a trail of unanswered questions about whether he tilted the Housing and Urban Development Department toward Republican contractors and cronies. He has been accused of favoritism involving HUD contractors for 2 years, and the FBI and Justice Department are investigating whether he steered business to his friends.

With almost 25 years of experience in financial and operational leadership positions, Steve Preston is passionate about serving the small business community. Prior to his post at SBA, he was Executive Vice President of The ServiceMaster Company, where he also served as chief financial officer during a period of expansion, restructuring and significant change in the regulatory environment. During the first half of Preston's private sector career, he was a senior vice president and treasurer of First Data Corporation, and an investment banker at Lehman Brothers.

Let's hope he can pick up the pieces in such a critical time in the lending industry!

In a previous post we discussed why it was so important to opt out of receiving prescreened offers.

To recap... Anytime your credit is pulled for a mortgage, unless you opt out of receiving prescreened offers, your information is being sold to the highest bidder! This "highest bidder" will receive your name, number, address, current debt and debt history, property information, age, gender and estimated income.

In our industry we refer to these leads as Trigger Leads.

It is a matter of hours that a Trigger Lead is sold and the "highest bidder" is often on the phone trying to reach the borrower the same day.

We have had complaints from our customers who elected not to opt out of these prescreened offers who now regret it. They receive phone calls all hours of the day from Mortgage "professionals" who are trying to convince them they have a better interest rate. In our industry we call those mortgage folks who buy these leads Bottom Feeders.

Many of these Bottom Feeders will hire several telemarketers to call on these leads (you can hear them in the background). Once the telemarketer gets a ''hot lead" on the phone, he then transfers them to the "mortgage professional' AKA "The Closer" who will try to convince them his/or her offer is better.

Now I can not say that all Bottom Feeders will act like the smuck in the video link below, but I can tell you it is consistent behavior based on our client's reports.

Be prepared to be shocked!

http://www.youtube.com/watch?v=yjm4GaP8fmU

Do you really want a guy like this giving you financial advice on your next home mortgage? I don't know about you but I must confess prior to us getting into the mortgage business, we have had a run in with one or two folks like this. It really makes me frustrated that this is the perception that we are trying to overcome when we tell folks what we do for a living!

I am tired of being put in the same category as these losers by some media stations and those in politics who want to use the broker as the escape goat for the current state of the industry. I am sure they are no longer employed because 2007 most likely hit then like a ton of bricks.