Orlando Mortgage Blog

Being Ready Day One

There has been a huge sea change in the mortgage industry since August of 2007 in relation to available programs, qualifying guidelines, maximum financing in Florida, how a loan is priced and on and on. Rather than beat the "how we got here as an industry" drum again and again, I thought you might like to have a little insight on the current requirements in the market today or "what to expect". Start with the fact that you will be expected by all lenders to provide complete loan documentation such as pay stubs, bank statements, and whatever as it applies to the submission up front. That's an absolute today. 

Most of the moronic no income, no asset type loan products and lenders that had survived by pushing those loans are not around any longer though the problems they have caused still are. We're back to the basic documented fixed rate or fully amortized adjustable products that have served us so well for decades at least as far as conforming loan amounts up to $417,000. Unfortunately anything over that loan size, especially greater than $750,000 still might as well be in Siberia as far as reasonable availability and price are concerned due to an almost nonexistent market for the closed loans and few lenders want to hold them on their books today.

Our Florida market as it relates to the conventional loan theater still has rates that are historically very low in the middle 5% range today depending on loan purpose, property type, borrower type as in owner-occupied, second home or investor, loan-to-value (LTV) requested, credit scores and length of lock-in time. The rate you end up with today will depend on all of the above so a completed appraisal is very important since the LTV relates directly to program availability and price. 

The new Home Valuation Code of Conduct or HVCC* rule applying to all conventional loans that became effective May 1, 2009 on all loans purchased by Fannie Mae and Freddie Mac (that's basically the conventional loan market) requires all appraisals must now be ordered through a lender's approved Appraisal Management Company called an AMC. The purpose being to keep the loan originator for the lender or broker totally out of the valuation process, thereby, at least in theory, reducing the risk of fraud in the process per Mr. Cuomo of NY who pushed and got Fannie and Freddie to buy in on it. Another example of what I've always called the 1% rule. That's the 1% excuse that taints the other 99% common sense, so a politician can say they did something. 

Why do you care since you can't control it anyway? Knowing about it matters in various ways to you. First, the average appraisal is now a little more expensive by $50 to $100 because there's a new middle man...the AMC, that is now the only option. Second, it takes longer to get a report or address issues with a report that can put rate locks at risk or hold up your ability to lock in a timely manner and third, values are being questioned regularly. That's the way it is. So? Get it started as soon as you can...somewhere.

Only the AMC can order the appraisal from one of their pre-approved appraisers in a given market area on a rotation basis. They take their piece and pay the appraiser a considerably reduced fee compared to what appraisers were getting paid but are expected to be more detailed than in times past. In times past we all used appraisers local to the market that earned our business by giving timely and professional service. Getting a written appraisal in two to three days was expected. Today none of the AMC's promise less than 5 to 7 day service as a general rule and currently even with the drastically reduced business in the market many are now quoting longer time lines. If you have to question the report add more days to the process. So more cost to the consumer, questionable value risk aversion unless it's on the "lowball" side as many originators, sellers, and realtors will attest. Just Google HVCC* and look at some of the blogs yourself or click on the link below for more details now.  Bottom-line: higher cost, longer turn-times, more backside issues. So once again, please start as soon as you can.

Lenders themselves have centralized their processing shops, cutting heads and expenses so drastically in the last 12 months to save money that even a moderate increase in submissions pushes out decision times and that can be costly to you in a volatile market. Roller coaster service turn times have gone up from 1 to 2 days in underwriting to 5 to 7 working days or more on a purchase and pushed off refinance decisions to 10 to 23 working days out of underwriting or even longer. Add 2-3 days more to clear any conditions that may pop up on a decision and 2-3 days more to get a closing package. Anyone quoting less probably has less desirable pricing so that's why they aren't backed up. Anyone that even thinks about locking a rate at underwriting submission for less than 45 days is playing Russian Roulette on a refinance. As of July 30, 2009 the new Federal HERA Act and changes to Truth-In-Lending disclosure guidelines will be in effect potentially adding to the pre-closing time table should re-disclosure become necessary as well. Get it started as soon as...well you know.

The mortgage world is more cut and dry than ever. But you can make it through this new world of redundant consumer protectionism with it's over zealous disclosure rules that are adding more and more time to both ends of the process. The best you can do is be prepared, be detailed, be decisive and above all be patient. It applies to all of us wherever you may make application today, lender and broker alike. 

*Note: You can view an excellent commentary and video that explains the HVCC issue at the link below. If you would like to add your voice to those looking for a change in the new HVCC guidelines, please do and you can do so at:          

 www.hvccpetition.com

Bill Wilbanks

(407)647-4440

HOW CAN FLORIDA OWNERS BENEFIT?

Many folks apparently can. Part of the problem in many markets around the country, and certainly in Florida today is the decline in real estate values we've all seen from the highs we experienced in 2006. Many homeowner's desiring to refinance have found they are now required to have PMI because property values have fallen in many cases or are not able to do anything at all due to finding they owe more than the current fair market value of the property based on a new appraisal. Think about it. Say you bought a home a couple years back and put 20% down at that time. If the market value has fallen 10%, 15% or more, then today a refinance would likely require a PMI premium, and that's if you weren't upsidedown (owe more the the value) on equity.

The new HARP programs will not help everyone. But, you may still be able to refinance through one of these programs as long as your loan-to-value (LTV) on the new loan generally does not exceed 95% of the current fair market value and even up to 105% in some cases (premium pricing will apply in all instances above 95%) and are able to meet the rest of the program guidelines. I should note that it is apparent after the May 1, 2009 rollout LTV's greater than 95% appear to have been harder to get accepted through the system. These loans must currently fund by June 10, 2010.

Why does this help? Simple, as long as you didn't have PMI on the existing loan, you would not be required to have it on the new Refi Plus loan on LTV's greater than 80%. That can be quite a payment savings. You may be improving your position by getting out of a product like an ARM, balloon or simply a higher rate or getting a longer term in years to lower your payment. It may be your only option to take advantage of refinancing today. Unfortunately, if you currently have PMI then this option is not available and you have to try to meet the normal PMI requirements and guidelines. If you are at 80% financing or below now then a standard conventional loan would be your best choice.

Click on the "HARP ELIGIBILITY" button In the left column for more details now.

Bill Wilbanks

I had someone throw this one by me just the other day when they saw that rates jumped up last week after being relatively stable and below 5% for quite a while at that point and they missed it. They made the comment that they 'may have guessed wrong again on rates in the short run' and should have gone with what they knew they had and not tried to squeeze that last little bit on a rate. Rates jumped .50% in two days.

The old 20/20 rule again right?...hindsight is...well you know. That's an old story that we see several times every year with market fluctuations. Folks waiting on a rate and if they see it, continue waiting because, "It's going to go lower." This person put a slightly different angle on it however. They had been out of work for a little while this year and compared it to the 'salary' question on a employment interview. You know the one, "So, what salary are you looking for...?" If you get the position, you may wonder if you asked for enough. If it's a job you did want and you don't get it, you may wonder if you stepped over some magic number. I thought that was an interesting comment on human nature. I'd bet we've all felt that way one time or another.

I thought more about it a little later and came up with this. It doesn't matter whether you guessed right on a rate or made the right moves on the interview. All you could do in either case was to be prepared to take advantage of opportunities when and if they were offered. My customer related just how happy he was in this economy when a position was offered and that maybe next time a rate came available he'd be ready then too.

Bill Wilbanks

(407)647-4440