Dennis' Mortgage Blog

Question of the week:  How will the now in effect Home Valuation Code of Conduct (HVCC) affect me as a mortgage applicant?

Answer:  On Wednesday I provided a rather detailed explanation of the HVCC process to real estate professionals and posted it on my mortgage blog so I will avoid the process description here—the only amendment I will make to those comments is as we move into the requirement for HVCC some lenders are treating the ordering process differently than I described and allowing us to choose which national service we can order through.  As well, as the industry begins to use the HVCC process and sees the flaws and bottlenecks I am sure there will be some changes in the processes and regulations. 

From a borrowers perspective the HVCC requirement creates a couple of significant changes and impacts.  First, be prepared to supply a credit card number and authorization at time of your application to order the appraisal service, or be contacted by the selected appraisal service further in the process for the information; the first option will speed up the process. 

Second, do not sign any offer to purchase that does not have the Appraisal Contingency clause (item 2.J in the C.A.R. contract) unless the box, and only the box, checked is that the appraisal contingency is removed when the loan contingency is removed; or amend the section to state the appraisal contingency is not removed until xx days (I suggest 3-5) after borrower receives a copy of the appraisal.  This is an important factor as the control of the timing of when the appraisal will be completed and delivered is now out of the control of the originator and in the hands of the appraiser—who we do not select, and the appraisal service—who in some cases we do not select. 

Third, be prepared for escrows to lengthen beyond what has become an industry standard of thirty days as we await the appraisal with no control in contact appraiser to find status.  This also impacts the time frames to lock in rates—instead of 30 days we may have an industry standard of 45 days.  Until we go through several of the transactions over a month or two we will not be able to determine what will become the standard time frame.  Note that there are only a handful of appraisal services nationwide that are approved by the lenders.  Effective today they will be handling the processing of every appraisal in the nation for every Fannie Mae and Freddie Mac mortgage—how well prepared they are for the incredible volume they are about to be hit with is unknown.

Fourth, the accuracy and quality of the appraisals will not be of the standard many of us are used to given that we are no longer able to contact the experienced, professional and proven appraisers we have been working with for many years.  This may involve appeals, re-certifications, etc.

My advice is this:  This process was is in effect and until Congress changes it we will have to live with it.  Many of us in the mortgage industry have written and contacted members of Congress (my letter to my Congressional “representatives” is here), I invite consumers and other real estate professionals to contact their representatives, particularly with stories where American home buyers or those looking to refinance have been adversely impacted because of HVCC.  In the meantime we have to work with the process, it will take patience and communication between all parties to follow the process and be prepared so the best result can occur for you the borrower. 

***It is very important to note that the HVCC does not apply to FHA mortgages but only to Fannie Mae and Freddie Mac mortgages. These rules apply on all Fannie/Freddie mortgages across the country regardless of who is the originator.

Have a question for me?  Ask me!  

This week has seen a drop in prices for Mortgage Backed Securities (MBS), which many of you know means a hike in rates.  Initially MBS prices rose, and rates dropped, on the news of the swine flu epidemic, the prices hit a hard level of resistance and bounced down.  As this was happening we had economic news and Fed statements which all indicate the recession is weakening (strengthening?) and a bottom is becoming more apparent.  Americans are saving money at a faster clip despite not earning as much, which is not great news for retailers today but good news for retailers in the future.  The stock market had a good week which caused more investor funds to flow from mortgages to stocks.

As we look ahead I continue my stance of our being in the very bottom section of the bell curve, whether we are at the rate bottom yet, approaching it or even having passed it by, is not known and will not be until some time after we pass it.  I do feel however that with the economic news we are getting heading into summer the length of time with rates consistently below 5% for conforming mortgages is getting shorter.

Rates for Fannie and Freddie climbed this week, especially the “high-balance” or conforming-jumbo as the Fed bought more MBS for mortgages below $417,000.  As you can see on the chart the conforming-jumbo product still has not found the amount of stability we have seen in the “regular” conforming loan products—which may be a factor in the very limited products for true jumbo mortgages.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional  4.875%                           UP 0.125%

30 year conforming-jumbo 5.375%                   UP 0.375%

30 year FHA    5.00%                                      FLAT

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

I am pleased to say I am taking an afternoon off today.  A few of us from Stratis Financial will be playing in a golf tournament benefiting the Coast Guard Auxiliary of Huntington Beach.  A fun time for a good cause and some needed time away from the phone and keyboard.  Any inquiries will be responded to on Saturday, thank you in advance for your patience and support of my mental refresher!

Have a great weekend,

Dennis

Do you Facebook?  If so “friend” me, I’m listed as Dennis C. Smith!

Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.