Posts Tagged ‘Fannie Mae’
Fannie Mae Plays Hardball
As we all know, real estate appraisers are the men and women in the field, going from property to property and making evaluations based on years of training and experience, and then reporting these numbers to mortgage lenders to establish property values.
But after receiving appraisals they feel are too high, some lenders have taken to performing desk reviews – appraisals done from a computer. While qualified real estate appraisers are able to perform accurate desk reviews if need be, lenders’ desk review values can be wildly inaccurate. Since there is no on-site inspection, they don’t reflect the condition of a house, they don’t add value for remodels, they’re often lacking information even on room additions, and so forth. Nevertheless, lenders are using desk reviews as justification to reduce appraised values, and sales continue to fall apart.
Fannie Mae has announced that effective September 1, 2010, lenders will no longer be allowed to reduce appraised valuations. Instead, they will be required to contact the appraiser to resolve discrepancies between the appraiser’s value and the desk review value. If the disagreement can’t be resolved on that level, the lender will be required to order a second appraisal.
By: Present Value
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An Update on HVCC
The Home Valuation Code of Conduct (HVCC), about which we’ve written several blogs, was enacted to provide better, more honest real estate appraisals. To say that the HVCC was and is controversial is a massive understatement, and most real estate appraisers have been counting down the days until November 1, 2010, when the HVCC agreement between Freddie Mac, Fannie Mae, and the New York state attorney general is set to expire.
Unfortunately for appraisers, November 1 may not be a day for confetti and champagne after all. Though that is the expiration date, it doesn’t necessarily mean that HVCC will disappear on that day. Fannie Mae, Freddie Mac, and other lenders are not required to remove HVCC guidelines from seller service agreements after the deadline, and as of right now, the belief within the industry is that the HVCC will linger well after the expiration date.
As they have been since its inception, new problems created by the well-meaning HVCC seem to keep cropping up and the issues appear to be growing. It’s more important than ever to make sure you use an established, licensed appraiser.
By: Present Value
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Modifications to the Home Affordable Refinance Program
Earlier this month, the Federal Housing Finance Agency announced an amendment to its Home Affordable Refinance Program, expanding refinance eligibility to help those homeowners who are at risk of being “underwater.”
The Obama Administration’s Home Affordable Refinance Program loan-to-value requirement has been raised to 125%. Previously, the program, announced in February, only applied to borrowers whose first mortgage did not exceed 105% of the current market value of the property.
The rationale behind the change to the program is that with the drastic decrease in property values in many areas, an additional 5% over the value of a mortgage wasn’t enough to help many borrowers. However, the program applies only to those borrowers who haven’t missed loan payments in the past year, and borrowers must hold a loan that was purchased by Freddie Mac or Fannie Mae. For those who are unable to make their payments at all, there are different programs that apply, which we will cover in a later blog post.
As discussed in Present Value’s previous blog post, “Decrease in Home Values Correlates to Increase of Homeowners Who Are ‘Underwater,’” a report released by Zillow.com in May, estimated that 22% of homeowners had mortgage balances that were greater than the value of their homes and that an additional 2.2 million borrowers were at risk of falling into this position if housing values declined an additional 5%.
The additions to the program will be beneficial for homeowners whose only other options would be to hope for the best in terms of home valuations or would be at risk for foreclosure. For more information on finding out the most accurate value of your home, click here.
By: Present Value
New Fannie Mae Rules to Prevent Inflated Appraisals
In February, Fannie Mae, the largest source of financing for U.S. home loans, announced that it will work to ban their use of in-house appraisals. An “in-house appraisal” means that the appraisal is conducted by brokers’ employees or by appraisers who are arranged by brokers. Appraisals will now need to be conducted by appraisers who are independent and do not have a conflict of interest. This development has the potential to decrease fraudulent appraisal activity.
Apparently, approximately three-quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes, which creates a financial incentive for mortgage brokers to push appraisers toward higher valuations. Higher appraisals can also contribute to economic instability because homeowners can qualify to refinance their homes and borrow cash against them.
The announcement came in response to a yearlong mortgage investigation by New York Attorney General Andrew Cuomo. Fannie Mae has agreed with the Attorney General of the State of New York and the Office of Federal Housing Enterprise Oversight to assist the regulators in their efforts to enhance home appraisal practices on behalf of consumers. The New York Attorney General’s office also announced it has terminated its inquiry of Fannie Mae, which began in November 2007.
Fannie Mae also will take two steps to assist the regulators in their efforts to enhance the quality and independence of the appraisal process. First, to help ensure appraisal independence and valuation protection, Fannie Mae will adopt a Home Valuation Protection Code, which will establish requirements governing appraisal selection, solicitation, compensation, conflicts of interest, and corporate independence, among other requirements. Additionally, Fannie Mae will provide $12 million over five years to help establish an Independent Valuation Protection Institute, which will monitor and study the area of home valuations.
By: Present Value
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