HVCC Changes Residential Mortgages

HVCC Changes Residential Mortgages

The Home Valuation Code of Conduct (HVCC) adds an extra element of risk for the consumer when buying a new home or refinancing their existing mortgage. The code requires the random selection of appraisers by appraisal management companies set up individually by the chosen lender. Homeowners, who were often accustomed to using a “preferred” appraiser during much of the last decade, no longer have this option. First implemented for most loans as of May 1^st, 2009, HVCC has since expanded to include all FHA & conventional loans bought by Fannie Mae or Freddie Mac. The goal of the Code was to prohibit borrowers or mortgage originators from selecting appraisers which was believed to create a conflict of interest and thus reduce the quality of the appraisal. While the idea was noble in theory, it has substantial ramifications for the homeowner and the greater mortgage industry as a whole.

Homeowners have faced longer wait times, reduced quality of appraisals, as well as increased costs. Appraisal management companies (AMCs) have added an extra middle man to the process of loan origination. When banks sign up with relatively few management firms, it allows such companies to increase prices for the appraisal to pay for office staff and management while facing less competition. Such appraisal costs increases have been passed onto the homeowner and have been up to 33% higher than prior to HVCC. In addition local appraisers were forced to sign up to staff such companies, resulting in substantially reduced income due to reduced payouts by management companies to the appraiser. As a result of all of these changes, management companies will select appraisers far from the local market of the homeowner requiring the appraisal. Appraisers, trying to increase profits are taking on more jobs. Appraisal quality, speed of completion, and accuracy of appraised value have lagged. Homeowner’s have a difficult time disputing the inaccuracies in the reports, even after several rounds of quality control that are supposed to be part of the appraisal process. In addition, many have reported poor service with the AMC’s, delays with return calls, and a lot of added confusion from informal third party communication with the client. Most importantly, homeowners who spent up to $500 on an appraisal in an effort to obtain financing are often out luck when the completed appraisal makes them ineligible for a loan.  

HVCC was intended to provide a more accurate picture of the value of a home for the benefit of the homeowner and the investor who buys the loan. While it is true there were cases of aggressive mortgage lending creating undue pressure on the appraisal process, HVCC by itself has done little to curb such practices. The unethical and often illegal behavior of the few originators, homeowners, and realtors engaging in such activity created undue problems for those involved in the mortgage process. Those engaging in wrongdoing will only find new and innovative ways to stay ahead of any new regulations, including ways to get around HVCC itself. Reform in the mortgage industry is a necessary and vital need for its future. However HVCC has turned out to be another poorly planned and executed regulation by politicians who are often more focused on their political futures than the actual issue at hand.

Trigger Leads

As if refinancing wasn’t difficult enough, homeowner’s now have more to worry about when applying for a loan. There are lenders and brokers that are immediately notified as soon as anyone does a mortgage credit report that's needed when taking an application to refinance. Almost immediately after the application, borrowers are often bombarded by phone calls and mail from other lenders. Brokers and lenders have the ability to buy "Trigger Leads". A trigger lead is generated by Experian, Trans Union and Equifax when a residential mortgage credit report is pulled. They are selling the information within hours so that others can solicit you for your refinance business. The information sold does not include your Social Security Number. It does, however, include your scores and your basic mortgage profile. They also include your phone number. It’s called purchasing “trigger leads” and guess what? 

It’s perfectly legal!

What’s the problem with home owner’s having brokers and lenders contact them to compete for their refinance business? Well, for one – it’s one of the leading causes of identity theft in the United States. Fortunately, today there is an option to opt-out. The consumer credit reporting industry has provided a way to “opt out” and remove your name from these lists. You can contact them by phone a 1-888-567-8688 or online.

Some have reported calls or mail that claims to need additional information as they work on processing your loan file. This is not legitimate, always remember to verify with your loan officer prior to giving any information to somebody to "process" your loan. Be sure to opt out right away before you fall victim to these deceptive practices. You can choose a five year or lifetime option, and the lifetime option will require a signed form. Make sure to report those violations to your states attorney general- the fines are rather hefty. If you don’t opt out now, be on the lookout for suspicious phone calls or mailers from someone who has purchased your data offering terms that are too good to be true – there is always a catch. Don’t wait until your data is stolen – protect yourself from trigger leads today!

HOME AFFORDABLE REFINANCE PROGRAM

Today there is a government-backed stimulus program, called Home Affordable Refinance Program (HARP), part of the Making Home Affordable program that allows those with declining home values qualify for today’s low rates. This is not to be confused with the Home Affordable Modification Program (HAMP) that has recently gotten some negative press (there will be more information on during a future blog over the next few weeks). The need for this program is tremendous. Many home owners are finding out that refinancing at today’s record low rates may be unobtainable. Several years of double digit housing price declines have caused them to become ineligible because they lack equity in their homes. While this would not have necessarily been an issue three to five years ago when clients could qualify for loans that had the best rates with less than 20% equity, today it is impossible. Many of the mortgage insurance companies that would have insured the lender against loss due to low homeowner equity positions are now out of business. Furthermore, the second mortgage lenders who used to provide a subordinate loan to help ease the equity issue for homeowners have been hit with record losses resulting in the products becoming unavailable.
This program will often allow homeowners to refinance their Fannie Mae or Freddie Mac owned homes, even if the home is not owner-occupied. Many home owners’ facing declining values have been unable to qualify due to their home’s depreciating value. As a result, those individuals have been unable to take advantage of today’s record low rates. While there are still restrictions, the first step for home owner’s told they were ineligible to refinance must first research whether Fannie Mae or Freddie Mac government agency currently owns their mortgage. Many unfortunately assume the owner of the mortgage is the same as the servicer, that’s the reason you need to check for yourself!
Some highlights:

• You are not currently paying mortgage insurance (MI/PMI) as part of your existing 1^st mortgage loan payment. If you are in this situation and are lucky enough to be eligible for Freddie Mac’s program, you may be okay.
• If you have an existing second mortgage, your home equity lender will have to agree to subordinate to the new first mortgage terms.
• No additional cash may be received at closing for debt consolidation, home improvement, etc.

While the Making Home Affordable Programs are not going to meet everyone’s needs, they are a start. With no end in sight to the continued price decline in many markets plus the unpredictability of the appraisal process through the Home Valuation Code of Conduct (****The HVCC will be covered in detail in February!), this program is the only coarse of action for many looking to save money on their mortgage. This program is currently scheduled to end by mid-year 2011 so don’t wait. With a divided Congress, there an extension of this program is unlikely.

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Good News for Maryland Homeowners

Good news for Maryland homeowners looking for possible relief on their property tax bills. 

For some time now the Maryland State Department of Assessment and Taxation has no longer automatically credited homeowners the Homestead Credit as seen on previous tax bills. The homestead credit used to be a standard credit to all owner-occupied residents in Maryland, however, due to the housing market downturn and lost Maryland State reviews, this policy changed. The changes actually went into effect as of 2008, but most homeowners are still not aware they are able to reinstate this credit and save big money off their property tax bills for their existing homes.

The Homestead Credit limits the increase in taxable assessments each year to a fixed percentage. Every county and municipality in Maryland is required to limit taxable assessment increases to 10% or less each year. The homeowner pays no property tax on the market value increase which is above the limit.

The original goal of the Homestead Credit Legislation was to help homeowners deal with large assessment increases on their principal residence. This is a quite an important step to take at a time when homeowner’s are struggling to make ends meet. With high unemployment, declining home prices, and household expenses, even a few hundred dollars a year can mean the difference to local families

The Homestead Credit Legislation does set out certain rules to ensure no homeowner incorrectly receives the credit. This credit isn’t available on rented or multiple properties of a single owner, and a new amendment enacted in 2007 requires all homeowners to submit a one-time application to establish eligibility for the credit.

The application form is automatically mailed to new purchasers of residential property with their first assessment. Current homeowners were mailed a copy at the end of December as part of three different mailing groups over 2008-2010.  

Didn’t get a copy? I did you throw it out as “Junk Mail”?

Homeowners now have to apply in person, via mail, or online. I encourage all homeowner’s to fill out this one time Homestead Credit Application as soon as possible.

If you have been denied a Homestead Tax Credit and you believe that you are eligible, contact the Central Office for the Homestead Tax Credit Program. A final denial of a Homestead Tax Credit by the Central Office may be appealed within 30 days to the Property Tax Assessment Appeal Board in the jurisdiction where the property is located.

For questions about the Homestead Tax Credit in Maryland check out the Homestead Department’s website.

Buying a new home in 2011

Millions are beginning to see the American Dream of homeownership as something not as economically feasible or worthwhile to pursue as it once was. A growing number of Americans are determining renting is all they will ever be able to achieve. Existing homeowners, looking to get out from under the weight of crippling mortgage debt, are looking to downgrade their existing homes. These homeowners will find greater challenges in this market.

The strength of the housing market is quite dependent on small regional differences and area markets can vary greatly. Certain housing markets in areas of California, Florida and Arizona have seen tremendous drops in home values during the Bubble Burst, while other markets throughout the US never were subject to such swings, remaining quite steady through the initial real estate downturn. 

While last quarter 2010 economic numbers have helped boost the existing housing sales in the greater Baltimore/Washington DC area, sales are still down from last year. Fortunately, the stabilization, or leveling off, of many area housing markets has economists predicting the light at the end of the tunnel. The months leading into the spring of 2011 are looking like a good time to buy. Mortgage interest rates are still near their record lows, and this combined with the current reasonable housing prices has created an ideal Buyer’s Market.

While mortgage financing may have become challenging for some homebuyers, the last few years have opened considerable opportunities for FHA and VA loans. These options allow down payments of as little as 3.5%, offer help toward seller closing costs of up to 6% of the purchase price, and give hope to those of us with credit scores as low as 600.

The standard conforming loan limit is $417,000. For those looking to purchase homes which require a loan size above this limit, HUD has expanded loan size eligibility. Depending on statutory county limitations, refinances and purchases up to $729,750 may be eligible to receive today’s low rates.

Your grandfather always advised you to buy low, sell high. For those who have sat on the sidelines and rented for the last few years, or are first time homebuyers, the perfect storm has arrived. 

So what happens to those with an existing home when the mortgage is more than the house is worth? Well – options still remain. Renting out the home or refinancing into lower fixed rate mortgage through the Making Home Affordable Program are options more homeowners seek every day. Mortgage companies continue to work with customers to modify existing loans and keep Americans in their homes when financially feasible. The most risky options, such as letting your home foreclose, can have many long term ramifications and will create an inability to qualify for your next home, car, or even credit card.

Everyone’s housing situation remains unique and no one should be taking more than a casual look at the home buying search without a comprehensive evaluation completed by a licensed, qualified mortgage consultant or realtor. Only someone with experience can give you the information you need that is customized to your own unique needs.

Home value websites such as Zillow, Cyberhomes, and Homesdatabase are meant to be a guide and not indicative of a likely sales price. Be cautious in allowing them to affect your offering, or asking prices. Furthermore, county tax assessments are not indicative of true value. These are really nothing more than the basis for how the county assesses property values for taxation.

A key bottom line that is often overlooked is the change in your budget once you’re in that new home. As with any major purchase it is vital to plan realistically, and consult experts accordingly to see if buying a home is not only possible, but the right idea for you.   

The Mortgage Market in 2011

Happy New Year to all!

As the New Year hits us with feelings of hope, new chances and resolve; it also can come with a feeling of uncertainty. As the media talks about “rebounds” in the economy and a better overall outlook in 2011, it’s a whole different ballgame in the housing market and, as a result, the mortgage market. There is still several months worth of inventory left on the market, near record numbers of homeowners behind on their mortgages, rising interest rates……not to even mention tighter than ever lending restrictions!  Even with today’s unemployment rate drop to 9.4%, the fact remains millions remain out of work and can’t pay their mortgages.

The mortgage market has made great progress toward correcting the lending practices of the early part of the last decade. Many of these changes have been implemented over the last couple of years and continue to be tweaked. A National Mortgage Lending System, better known as NMLS, requires individual state licensing and regulation of loan officers. The homeowner is able to access this database to insure the loan officer company they are working with is licensed person and has a clean track record. Banks and regulatory agencies are required to verify all loan officers and lenders are properly licensed and can more easily track those who are not.

Other changes include requiring the appraiser to be independent of the loan officer, the ban on upfront fees collected at application through the Mortgage Disclosure Information Act (MDIA)  and the Good Faith Estimate changes implemented on 1/1/2010 banning fee changes at settlement. These, as well as many other changes have given us better lending practices, and thus better loans. This will result in a stronger, long term housing market which will benefit all homeowners.

As many of you may know, just qualifying for a home loan is a challenge. Just having a solid job, good credit and equity in your home doesn’t guarantee an easy loan process in 2011. Easy loan underwriting with limited documentation is a thing of the past. Get ready for lenders to delve much further into your records this year to qualify for a loan. Those who haven’t gone through the loan process in the last few years will see how exceedingly different the lending process has become. These higher standards for loan origination strengthen the lending system, and hopefully will continue to help the market as a whole. As we move forward into a more prosperous market in 2011, we do so with the knowledge that it is also a stronger market, one not plagued with the weakness of bad lending practices.

Fortunately, 2011 brings a lot of positives. Rates, while having risen up to .75 to the rate over the last two months, are still at record lows. Everyone knows someone who still hasn’t refinanced – thinking rates would continue to drop. Rates remain quite volatile and can change several times a day. It is still a very good time to refinance or even reduce  your loan term to a 15 year mortgage. For those who may have little equity or no equity at all - The government’s Making Home Affordable Program is still in effect through June 2011, allowing many to refinance to today’s low rates even with reduced housing values. For those thinking of moving this year or buying their first home, this year looks like it will continue to be a buyers market. There are many sites to search for home– but I recommend Homes Data Base. This site provides clearer information on the subject property, better research tools, and filters out more unwanted information in the home buying search.

We’ll get more into these topics weekly over the coming months. Please feel free to contact us with any requested topics. Also, Integrated Financial Solutions, LLC is now on Facebook. By becoming a fan, you will get market updates and weekly postings and specials!

Welcome to Integrated Financial Solutions, LLC

Our office is a small, locally owned mortgage brokerage company located in Ellicott City, Maryland. The experienced advisors at IFS specialize in ensuring our clients get the best programs and the most favorable rates customized to their unique needs. Below is an example of some of the many programs offered:

• Primary, Secondary or Investment home financing
• Purchase money, refinance and/or cash out refinancing
• Less than perfect credit allowed
• Government Financing options: including FHA, VA, and USDA
• Jumbo financing up to $1.5 million
• Government and conventional high balance loans (where applicable)
• Making Home Affordable Programs – helping those facing declining home values

Integrated Financial Solutions, LLC has many relationships with outside lenders thus allowing our clients to often receive below-market interest rates. Clients often comment how pleased they are to receive such excellent service and expertise at such low rates. Happy clients are paramount to the continued success at IFS. As a result of these clients, our relationship with them lasts well after the mortgage process is complete. When the changing needs of our clients occur, clients know they have an advisor at IFS for life and our office is only one call away. Such a relationship allows us to enjoy working exclusively with our existing clients and their referrals.

We guarantee a courteous, no hassle approach. We’ll also provide your own personalized plan to show how we can help and well as an update of today’s current market conditions. And, if you’re better off staying with what your current loan program, we will let you know too! Please call or email us to day to discuss how our expert advice can help you with your mortgage needs.