Present Value LLC » FHA

An Explanation of the Anti-Flipping Waiver

admin — Tue, 03 Jan 2012 19:33:41 +0000

The recent announcement by the Federal Housing Administration (FHA) that they will extend the waiver of anti-flipping regulations through 2012 is welcome news to the entire real estate industry. But just what are “anti-flipping regulations” anyway?

First, let’s define flipping in this context. Property flipping refers to the practice in which a recently acquired property is resold for a considerable profit. Most property flipping occurs within a matter of days after acquisition, and usually with only minor cosmetic improvements, if any.

In May 2003, FHA and the Department of Housing and Urban Development (HUD) issued regulations stating that any home that was owned for less than 90 days could not be purchased by a buyer using an FHA-insured mortgage.

In 2010, in recognition of the housing crisis and given the large number of foreclosed homes sitting vacant, HUD and FHA realized that allowing investors to buy these homes, fix them up, and resell them quickly for a profit was not such a bad idea after all.

With the extension of the anti-flipping waiver, most investors are working on homes that are catering primarily to the first-time-buyer market. And restoring the value of run-down homes can rid cities of the foreclosure blight while improving overall property values.

Present Value LLC is a worldwide international appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!

By: Present Value

Additional Reading

Property Values in the Age of Foreclosures

Home Affordable Foreclosure Alternatives

Homeowners Foreclose on a Bank

The Sensible Accounting to Value Energy (SAVE) Act

admin — Wed, 02 Nov 2011 02:22:22 +0000

A bill now making its way through Congress, the Sensible Accounting to Value Energy (SAVE) Act, is garnering a groundswell of support from those within the real estate appraisal industry.

Under the SAVE Act, federal loan agencies would assess a borrower’s expected energy costs when financing a house. The U.S. Department of Housing and Urban Development would issue updated underwriting and appraisal guidelines for any loan issued, insured, or purchased by the Federal Housing Administration (FHA) or any other federal mortgage loan insurance agency.

The bill establishes two methods for determining expected annual energy costs: average utility costs, derived from the Department of Energy’s Residential Energy Consumption Survey database and adjusted for the square footage of the home, or if available, a qualified, independent energy report of the subject property.

The SAVE Act would help protect taxpayers from another foreclosure crisis; lower utility bills for U.S. households; drive business and job growth in the construction and manufacturing sectors; expand the accessibility and affordability of energy-efficient homes; and reduce U.S. energy dependence.

For more information about the SAVE Act, visit the Institute for Market Transformation, a non-profit organization dedicated to the promotion of energy efficiency, green building, and environmental protection in the United States and abroad.

Present Value LLC is a worldwide international appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!

By: Present Value

Additional Reading:

Appraisers Seeking Resources to Determine the Value of Green Buildings

Appraisal Institute Acknowledges It’s Not Easy Appraising Green

Congressional Budget Office: Refinancing Plan Could Cost $15 Billion

admin — Tue, 20 Sep 2011 16:57:05 +0000

The Congressional Budget Office (CBO) conducted a cost-benefit analysis of the Obama administration’s proposed federal refinancing plan to decrease homeowner defaults. The analysis revealed that such a plan would cost private bond investors $13 to $15 billion.

The CBO’s cost-benefit analysis showed a federally supported refinancing plan would result in the refinancing of some 2.9 million mortgages but would only reduce defaults by 111,000. Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) would save $3.9 billion on their credit guarantee exposure, but that gain would be offset by the losses suffered by investors in agency mortgage-backed securities. Those investors include the Treasury Department, government-sponsored enterprises, and the Federal Reserve, all of which would likely lose around $4.5 billion.

A federal refinancing plan could also have an impact on lawsuits filed by federal housing agencies against mortgage originators. A refinancing would relieve the originator of any obligation it might have had with regard to representations and warranties on the existing loan.

By: Present Value

Fannie and Freddie Align

FHA Loans

New Limits to Mortgage Loans Coming in October

admin — Wed, 20 Jul 2011 01:13:26 +0000

In 2008, Congress increased the upper limit for mortgage loans to $729,750 as an emergency measure during a pricey housing market. Borrowers were able to obtain mortgages more easily and less expensively with the increase. The loans were guaranteed by the government, ensuring that investors would receive payments even if borrowers defaulted.

As the government begins its withdrawal from the mortgage market, consumers face a loan limit reduction as of October 1. The cap for government-backed loans will fall from $729,750 to $625,500 in major cities like Los Angeles, New York, and Washington, D.C.

The new limits will vary by location. For example, loan limits for Fannie Mae and Freddie Mac will drop to $417,000 in parts of the country with less expensive homes; Federal Housing Administration (FHA) loan limits will fall to $271,050.

The planned reduction in October will shrink the government’s role in the market and open it back up for private investors to compete. To successfully implement the new limits, many lenders plan to use them well before the October 1 deadline to ensure all loans are properly funded.

Industry insiders agree that the government needs to withdraw from the market, and say targeting big loans for pricey homes is a good place to start.

By: Present Value

Additional Reading

FHA Loans

What Will Happen Post-Fannie and Freddie?

Lenders Turn to Present Value LLC for Pre-Loan Due Diligence

More Help for Unemployed Homeowners

admin — Tue, 12 Jul 2011 11:57:53 +0000

Last week, the Obama administration made policy changes to help unemployed homeowners with FHA-backed home loans prevent foreclosure. Under the current policy, unemployed homeowners who qualify can stop making mortgage payments for four months, but given today’s particularly depressed job market and the length of time those who lose their jobs stay out of work, the administration decided to allow 12 months forbearance. Companies that participate in HAMP will be asked to make the same change. Under the new policy rules, homeowners’ loans will continue to build interest during the forbearance period, which they’ll be required to pay back once the period ends.

Given the slow economic recovery, there is a large number of people who have difficulty paying their mortgages. Of homeowners with FHA-backed loans, 3,500 fall behind on their loan payments every month. Extending the forbearance policy will help keep those homes out of foreclosure.

Unemployment, variable interest rate mortgages, and dropping home values all contributed to the difficulties many homeowners face today. If you choose to purchase a home in this current economic climate, make sure you know what your future home is worth and rely on a certified appraiser who won’t give it an inflated value.

By: Present Value

Additional Reading:

Home Affordable Foreclosure Alternatives

FHA Loans

Obama Proposes Pulling the Plug on Fannie and Freddie

admin — Wed, 23 Feb 2011 02:30:40 +0000

The Obama administration has proposed the eventual dissolution of Fannie Mae and Freddie Mac in the Treasury Department’s long-awaited report regarding mortgage finance reform. The report, presented to Congress on February 11, calls for a shift of mortgage credit from government to private markets.

Fannie, Freddie, and the Federal Housing Administration (FHA) currently support more than 90% of new home loans. The Treasury report proposed the government’s main roles should be consumer protection, oversight of lenders, and assistance to low- and middle-income homeowners.

The Treasury blamed poor consumer protection, an overburdened and outdated regulatory system, and poor loan servicing practices for the recent housing market crisis. The report also pointed out that Fannie’s and Freddie’s current “profit maximizing” structure completely undermined their original mission of helping low-income and minority buyers purchase homes.

Experts believe that the FHA can’t carry the large loan market share it currently holds successfully for the long-term. “If (FHA) expands beyond its capacity,” the report noted, “it risks being unprepared to anchor the housing market should we suffer another economic collapse.”

By: Present Value

Additional Reading

Fannie Mae Plays Hardball

New Fannie Mae Rules to Prevent Inflated Appraisals

FHA Rule Changes Now in Effect

FHA Changes the Rules

admin — Tue, 26 Jan 2010 19:34:44 +0000

On January 20, 2010, the Federal Housing Administration – a government insurance company that backs mortgages and refinance loans for lenders that follow its guidelines – changed the rules for home borrowers.

Starting in the spring, borrowers will have to pay more up front to get a loan. The FHA is raising its upfront mortgage insurance premium from 1.75% to 2.25% of the loan amount. (Homebuyers pay for FHA insurance in two ways: through a one-time upfront premium and through monthly insurance payments.) At the same time, the FHA will ask Congress to raise the limit on the amount it can charge for annual premiums.

While tightening requirements for buyers, the FHA is cracking down on unscrupulous lenders responsible for the agency’s growing defaults and shrinking reserves. Officials at the agency – which is growing to become the lender of choice for buyers without perfect credit or those who can’t amass a 20% down payment – feel the changes are necessary because loan defaults have shrunk the FHA’s reserves below required levels. The problem would right itself by 2013 without intervention, but the proposed changes should bring the reserves back in line in the next fiscal year.

To read our previous blogs about the FHA and FHA changes, click here, here, or here.

By: Present Value

Appraisal Organizations Address Letter to the FHA

admin — Thu, 17 Sep 2009 21:45:28 +0000

A number of appraisal organizations, including the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers, released a memo to the Federal Housing Administration (FHA) regarding the Home Valuation Code of Conduct (HVCC) and FHA’s possible adoption of elements of the HVCC.

The letter calls the FHA to enhance appraiser independence and to more closely monitor mortgage brokers and appraisal management companies. Below are the specific, overarching recommendations made in the letter:

Recommendation 1: Establish the conditions for mortgage broker participation in the FHA appraisal ordering process.

Recommendation 2: Supplement state and federal appraiser independence requirements with more robust appraiser independence requirements specific to FHA.

Recommendation 3: Rescind Mortgagee Letter 97-46.

Recommendation 4: Develop rules and expectations relating to appraisal management companies.

To view the full letter to the FHA, visit the Appraisal Institute website, here.

To view Present Value’s previous blog posts on HVCC changes and industry reactions, click here, here, and here.

By: Present Value