Blog of the Mortgage

Many of you have wondered about our policy to require all appraisals have 2 closed comps in the last 90 days, 1 pending sale in the last 60 days and the Days on Market (DOM) for all comps within a subject’s neighborhood.

I can’t say many appraiser’s are used to having a lender actually REQUIRE appraisal conditions up front and we’ve had more than a few appraisers call us and you by the same token a bunch of lunatic crack pots.

The ire has been significantly raised when we asked for the list price to sales price ratio for the last 90 & 180 days. Talk about putting an industry on its ear (?). I suppose I can’t blame appraisers these days. This would be the very first time in history that their practices have been called into question. To have a new(to California) Wholesaler enter a new market with new customers and begin the push back has not been easy. Let me tell you!

Of course those of you who have dealt with the multiple MI companies first hand know that these aren’t guidelines pulled out of thin air. These are merely MI requirements. Heck, it lowers our liability and increases our viability and if nothing else it prepares YOU the loan officer for imminent changes forward. We’ve noticed as a group here that when we make a change the rest of the industry follows suit within 60-90 days.

Well, it’s not exactly 90 days but FNMA is now requiring a brand new form for ALL Appraisals (you’ll see Lenders begin requesting it in Late January and Early February).

FNMA is going to Require form 1004MC for ALL appraisals. Guys, this isn’t a bad thing. Appraisers that can’t actually deliver proper value will throw a royal fit but find that their appraisals are uninsurable/un-purchasable.

Hopefully the bad actors will shape up or simply ship out.

Some examples (items that will be very familiar to you J):

From FNMA Update 08-30 (Nov. 14^th, 2008)

Median Sale & List Price, DOM, List/Sale Ratio Section

The appraiser must analyze additional trends, including the changes in median prices and days on the market (DOM) for both sales and listings as well as a change in list-to-sales price ratios.

Foreclosure Sales and Summary/Analysis of Data

The presence and extent of foreclosure/REO sales is worthy of comment when analyzing market data and must be reported on the form.

Requirement to Provide the Sales Contract to the Appraiser

Fannie Mae is adding the requirement that lenders must provide the appraiser with the sales contract and all addenda, therefore ensuring that the appraiser has been given the opportunity to consider the financing and sales concessions in the transaction and their effect on value. If the sales contract is amended during the process, the lender must provide the updated contract to the appraiser.

That’s the easy part. USPAP will update the appraisers accordingly but send this notification as well as the FNMA Document out to your appraiser and get them ready. That way, when you ask for it in 45 days they won’t act surprised or irritated at the extra workload. Plus, we can be sure, appraisals will increase in cost (if only by $20/unit). This is extra work after all. Hopefully competition will keep the price down?

FNMA 7.1 Update being delivered 12.13.08.

While we were busy making preparations for Halloween FNMA quietly delivered changes to FNMA 7.0 (which just went into effect July 1^st) and is now bringing us 7.1 phew. I can barely keep up.

This was released on 10.16.08. You may have heard about these changes but likely not.

Here are some notable pieces:

· “High Balance” loan limits: max LTV of 75 % for 2units; Cash-out max of 75%; 1-2 unit investment max of 75%

· FICO Floor of 680 for “High Balance” (over $417k).

· For borrowers with Bankruptcy the time allowable before delivering approve/eligible findings is increased from the current 24 months to 48 months (thank goodness for FHA!).

· Second homes are investment properties are beginning to follow those requirements of the MI companies. More of us being lead by the Insurer. Those of us in California and declining/adverse markets will not notice a change since we’ve been living in this reality for months now.

· 7.1 adds a minimum 6 month ownership requirement or to have the property off of the MLS in order to take advantage of maximum financing opportunities.

Income & Employment:

The following will be the minimum income/employment documentation levels issued by DU Version 7.1:

· Salary/Bonus/Overtime: The minimum documentation level required will be one current paystub and a verbal verification of employment.

· Commission/Self Employment: The minimum documentation level required will be one year’s personal federal income tax return.