Are we in a Housing Recovery ?

Distressed Sales a combination of Short Sales and Foreclosure Sales are declining in the Mid Atlantic area Oct 2012 at 20.7 down from 31.2 Oct 2011

Although that doesn’t mean individual home sales will increase immediately because many home are still underwater.  It does mean that new home sales are up taking the place of those distressed sales. These new home sales will lead to construction jobs and increased appliance sales   This mini rebound has helped Home Depot sales that are up for the sixth straight quarter. Some stores up 4.2%. Are we out the woods? Not really, beware of the SHADOW INVENTORY- an estimated 1.2 million homes are still lurking. But we are seeing a light at the end of the tunnel and this time it isn’t the train.

If you are contemplating  purchasing  your first home in the near future, I suggest you begin working with a loan officer to see if you are pre-qualified or find out what it takes to purchase your first home.

Consumer Financial Protection Bureau; CFPB

The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau, (CFPB), one of the most powerful agencies in US history. Ironically, though Congress created them, they don’t answer to Congress. They answer to the Federal Reserve, or themselves. They are funded by the fines they create, which is a frightening standard, especially for the consumer who ultimately pays the fines.

The CFPB has the authority walk into any financial institution both small and large and regulate, supervise, enforce, fine exorbitant amounts of monies, subpoena and or educate.  A recent visit  to one of the larger lenders for the first time to see if every document in every files adhered to the exacting new standards.  The conservative lender thought they had done an excellent job of compliance due to the regimented oversight and exacting standards given to each of their employees. After a dozen regulators spent 10 weeks in their offices, amazingly they were only fined Two Million ($2,000,000.00) dollars. Hurray the CEO exclaimed, we can stay in business.  With joy and pride he announced to his staff that we would still be in business for another year. Also commenting that those dozen regulators would next go to smaller broker shops without the same resources and they would probably be out of business.

As a loan officer I’m appalled that small to mid-sized business owners will be put out of business by mega fines simply because they won’t have the resources to stay in business.  These fines aren’t necessarily  because any consumers have complained or been wronged. It is because Dodd-Frank has completely changed the way loans have been originated for the past 30 years.   One of the fines was due to an email inadvertently left off of a Good Faith Estimate.  I’ll bet the borrower had the Loan Officers business card and 10 other documents with the email address. That however, was irrelevant to the CFPB.   

The mortgage industry was turned upside down over the past few years and over 50 % of the loan officers working for independent lenders lost their careers because they couldn’t pass the tests. These are human beings that have worked in an industry for 10 to 27 years.  They didn’t have management or loan processing positions which would be a huge asset for many of the questions asked.   Oh yes, I forgot to mention, bank employees don’t need to take or pass the test. While some Loan officers landed jobs at Banks, the 50% figure counts those in bank positions.

But who is really paying for these fines? The consumer of course, lenders play with the fees and margins  daily gaining additional yield spread from consumers to keep big government thriving.  Because only large lenders can afford the fines and fees soon, we no longer have mortgage brokers competing for our business with lower fees and rates.

 If I were to refinance my home with a large bank right now as compared to a local correspondent lender/broker, I would pay a rate .75 pts higher. Neither would I have an independent person willing to meet me at my home after work or on the weekends. Someone I would have unlimited access.  I do want to be protected by another branch of government or approve of a consumer financial protection bureau's lack of oversight by the consitiutionally guaranteed oversight of congress, the supreme court or the president.

 

 

 

   

The  HVCC home-owners appraisal process initiated by the real estate melt down and the Dodd Frank Act is keeping the value of property down. The normal appraisal process wasn’t broken but overzealous regulations have stymied your ability to get a fair appraised value. The cost to you has been inflated and the service you receive lowered.  In an attempt to punish unethical appraisers and thwart conspiracies, the government has actually punished the homeowner and paralyzed the economy.

You have probably heard that “The Dodd-Frank Act” was designed to protect the general public in their quest to purchase or refinance their primary residence.  But, what does this overzealous eight-hundred plus page document actually do for the consumer?  Dodd Frank raises the cost to the average consumer in additional fees and costs in every aspect of their financial transaction.  The beneficiaries of your additional cost are a few large lenders that have received and are still receiving tax dollars to “Bail them Out” of the real estate melt down.

When I began my career as a dual agent, Realtor-Loan Officer seven years ago the average cost of an appraisal was $350.00. By law, I wasn’t allowed to add $1.00 to any third party service. The entire fee you paid went to the appraiser. I was allowed to use the appraiser of my choice as long as they were not on a list of unacceptable appraisers with the lender. The appraisal belonged to the borrower and could be used with any lender they chose to close their loan with.  The consumer took their appraisal to the lender that gave them the best rate and/ or loan program. Now your appraisal is tied to one lender.

Previously I told the appraiser what you thought your property was worth based upon homes sold in your neighborhood, additional improvements you had made, what you paid for the property, etc. I can state emphatically that the appraisers I did business with were never pressured or influenced into making any unethical decision.  We could discuss opinions within a few thousand dollars because much of an appraisal is based upon opinion. Sometimes a $5,000.  difference in appraised value can cost the homeowner to go over the 80% ratio that requires additional Mortgage Insurance. But lenders aren’t concerned with a 1% or $5,000 opinion difference. They were concerned with appraisal conspiracies.

Now, I must order your appraisal blindly through an online Appraisal Management System  (AMC), this AMC is owned by the lender. Therefore you must choose your lender before you get an appraisal because it isn’t transferrable.   That has implications in itself that could thwart your ability to work with the best lender for your loan to value ratio (LTV). The AMC makes a large commission (previously illegal) on your appraisal. The cost of your appraisal is now about $400.00 to $440.00. The AMC keeps about half of the appraisal fee and pays the appraiser the other half.  The larger the lender (i.e. Bank of America) the less the appraiser makes. Appraised value dramatically varies between lenders AMC’s.   

Since I am ordering your appraisal blindly, you may not be fortunate enough to get an appraiser that understands your neighborhood.  When your appraised value comes back undervalued the process to get it reevaluated is difficult and often impossible.  On the occasions that I have been able to request another appraisal based upon my own research of homes sold in the area.  The appraised value has increased 20%.  On another occasion the AMC refused to reevaluate the property.  The borrowers choose to wait until the appraisal expired (4 months). The new appraisal typically increased the value over 20%. Too often this value is exactly what the homeowner knew his home was worth. Recently one homeowners next door neighbors home sale wasn't considered in the appraisal but homes outside of the condo complex were; a grave injustice  to the homwowner. Luck of the Draw; unfortunately yes, due to the Dodd Frank Act that has tied the hands of ethical licensed Loan Officer’s trying to protect their borrowers.

The appraisal process was changed due to a few unscrupulous Real Estate Agents, Loan Officers and Appraisers who conspired to create a few appraisals that typically doubled or tripled the appraised value of the property. They conspirators used third party buyers with stated income loans to commit fraud. The buyers defaulted within months and the lender lost hundreds of thousands of dollars.  Had the lender done their due diligence and asked for a second appraisal when they looked at their online valuations, we as tax payers and borrowers wouldn’t have the burden of rebuilding their wealth.

Since we no longer have stated income loans for borrowers that were fronts for these conspiracies. Since we have online appraised value and the Underwriter can ask for e second opinion if they are concerend about value.  The HVCC process is an additional burden on the typical borrower that increases their fees and keeps property values down by using appraisers not familiar with the demographics of the properties they are appraising.