FHA Mortgage Loan Blog » Mark Madsen

Are Las Vegas REO And Short Sale Listing Agents Discriminating Against FHA Borrowers?

Mark Madsen — Tue, 13 Oct 2009 20:08:23 +0000

With a drastic reduction in Las Vegas REO and Short Sale MLS inventory, some FHA First-Time Home Buyers are dealing with agent discrimination which is making things even more challenging on getting an offer accepted and closed in time to take advantage of the $8,000 Tax Credit.

FHA and VA borrowers are often discriminated against due to the listing agents’ lack of education, experience or understanding about how these government insured mortgage programs work.

What most real estate and mortgage professionals don’t realize is that the FHA has actually been updating its underwriting guidelines since 2005 for the purpose of becoming relevant again.

However, as the Fed prepares us for another 10-12 million foreclosures over the next year or two, I believe that there has to be a radical shift in how buyers are treated by the almighty REO listing agent if we really want to figure out a solution to the housing mess.

video credit: OC Real Estate from San Diego Home Blog

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102

Las Vegas, NV 89147 | NV LIC 2511

702-432-5626 | Email

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Why Mortgage Brokers Are Concerned About HUD Delegating FHA Approvals To Lenders

Mark Madsen — Sun, 11 Oct 2009 22:32:55 +0000

In a series of Mortgagee letters released by the FHA in September 2009, one particular announcement has caused major concern among mortgage brokers and small correspondent lenders about their ability to continue offering FHA mortgage loans due to the new licensing structure mandated by HUD.

Tony Gallegos address the main talking points and generally fears, as well as gives his own personal opinions about the future relationships between large lenders, brokers and FHA mortgages.

Message From Tony:

Over the last week, I have been bombarded with questions and concerns regarding the recent announcement by the FHA delegating authority to approved direct endorsement (DE) lenders to approve mortgage brokers to originate FHA loans. To answer these questions, I produced this brief video.

via mortgagecicerone.com

About The Guy In The Video:

Tony Gallegos, aka The Mortgage Cicerone, has spent the past 22 years building, leading and managing large scale enterprise FHA/VA production entities, most recently as Vice-President and National Retail Government Production Risk Manager at Wells Fargo Home Mortgage (the nations #1 government lender).

With experience as a personal loan officer (412 funded loans in one year), and a senior executive at a mega bank ($25 Billion origination volume),Tony is qualified to tell you the difference between average and superstar mortgage professionals.

Currently, Tony and his business partners started Cognicorp FHA/VA Training Solutions…thus providing rare but powerful evidence it is actually possible for an individual to re-emerge from the corporate collective, even after full assimilation has occurred.

Article Bullets:

The FHA has decided to allow large wholesalers, or Direct Endorsement (DE) underwriters to approve which brokers they’d be willing to do business with.

Previously, it was the FHA that directly approved brokers for FHA business. Now, as of January 1, 2010, the large banks will be the ones policing the FHA approved lenders and brokers.

Industry Concerns:

Mega lenders will create a monopoly and force the brokers out of FHA lending by throwing them under the regulatory bus.

Since mega lenders will be the ones commissioned to approve smaller brokers and lenders for FHA financing, many believe that they will set training, reserve requirement and adequate staffing guidelines that most of the smaller companies won’t be able to live up to.

The large lenders will implement severe credit overlays on their broker and correspondant affiliates, which in turn will create a non-competitive environment that will eventually squeeze out any perceived competition to the large lenders’ retail divisions.

Tony’s Thoughts:

1. This could happen in the short-term, but not a viable business plan for the long-term.

2. There isn’t a massive large bank cartel planning to collapse the lending world.

3. FHA Commissioner, David Stevens, has stated several times that he wants to create and encourage competition in the marketplace.

4. Mega lenders can gain tremendous market share by partnering with brokers and correspondant lenders for the purpose of building their government servicing portfolio, which is where the real money is for mega lenders.

5. NAMB needs to become relevant again and build a strong loby. *Jim Pair, current NAMB President is working hard on this.

6. Regulatory controls are coming about – regardless of how much we cry about it.

Related Articles:

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email

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>> Fast Application —————- >> Rate Tracker
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The Truth Behind The Media’s Perceived FHA Reserve Requirement Crisis

Mark Madsen — Sun, 11 Oct 2009 22:25:37 +0000

There has been a lot of recent news about FHA Commissioner David Stevens announcing that the FHA may see its 2% capital reserve requirement fall below the minimum level set by Congress.

The concerns of unemployment, combined with the gaining FHA market share are certainly factors that would lead most industry professionals and politicians to question whether or not we’re leaning towards another massive “bank” bailout of the FHA.

However, as posted by Tony Gallegos, The Mortgage Cicerone, there is more to the story than the media is disclosing:

Received additional information today directly from FHA Commissioner David Stevens about his speech last Friday concerning the FHA Reserve Fund. Actually, I should say the FHA Reserve FUND(S) (as in plural).

The big FHA news last week was the the five mortgagee letters released and Commissioner Stevens’ announcement concerning the FHA Capital Reserve Fund. As noted in my September 18th post, the Commissioner affirmed the agency insurer will most likely see its 2% capital reserve requirement fall below the minimum level set by Congress. However, what every media report I read neglected to disclose is that the FHA actually maintains two reserve accounts to address and pay expected losses.

While we have been hearing about the Capital Reserve account, nothing has been articulated about the FHA Financing account. The FHA Financing account was established to reserve funds for expected FHA losses over the next thirty years and the Capital Reserve account is a residual account over and beyond the Financing account. In addition, these two accounts hold in excess of $30 billion. In fact, Commissioner Stevens recently ordered a large portion of the Capital Reserve fund transferred to the Financing account, thus causing the level of the Capital Reserve fund to approach the 2% level. To provide further clarification, the two funds collectively account for a 5% reserve fund.

Another point that must be clarified; while the FHA reserves funds for projected losses over the next thirty years, FANNIE and FREDDIE only reserve their expected losses for the next twelve months. Since most industry individuals reference the two latter agencies as the industry standard, they failed to discern or communicate this very important distinction.

Commissioner Stevens stressed, he does not expect the FHA to have the Congress appropriate additional funds to cover additional losses.

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Bullets:

FHA Commissioner Dave Stevens affirmed the agency insurer will see its 2% reserve requirement fall below the minimum level set by Congress.

To address this issue, Mr. Stevens stated the FHA will tighten its current credit guidelines to uphold its insurance fund and mitigate further fund runoff.

Commissioner Stevens; “to be clear, the fund’s reserves are sufficient to cover our future losses, so FHA will not require taxpayer assistance or new congressional action.”

FHA actually maintains two reserve accounts to address and pay expected losses that collectively account for a 5% reserve fee – est $30Billion

While the FHA reserves funds for projected losses over the next thirty years, FANNIE and FREDDIE only reserve their expected losses for the next twelve months.

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Related Articles:

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email

MORTGAGEE LETTER 2009-31 | Strengthening Counterparty Risk Management

Mark Madsen — Sun, 11 Oct 2009 16:25:01 +0000

Mortgagee Letter Summary:

HUD is changing the rules with regards to how brokers and lenders become approved to fund FHA mortgages.

While there are many concerns over the potential eligibility requirements for some of the smaller broker shops and correspondent lenders, the current FHA Commissioner, David Stevens has stated several times that he wants to create and encourage competition in the marketplace.

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September 18, 2009

MORTGAGEE LETTER 2009-31

TO: ALL APPROVED MORTGAGEES

SUBJECT: Strengthening Counterparty Risk Management

This mortgagee letter provides notice of several FHA program changes as a result of the enactment of the “Helping Families Save Their Homes Act of 2009” (Public Law 111-22) (the HFSH Act). Section 203 of the HFSH Act contains provisions that provide limitations on those eligible to participate in FHA programs, restricts the use of a mortgagee name in advertising and promotional materials, places additional requirements on FHA-approved mortgagees, and expands FHA’s authority to pursue civil money penalties for violations of program requirements.

These new requirements will help to strengthen FHA’s oversight of approved lenders and better manage program risks.

Ineligible Participants

The HFSH Act establishes additional ineligibility criteria for FHA-approved lenders and mortgagees. These ineligibility criteria were effective upon enactment of the HFSH Act. The HFSH Act directs that a lender or mortgagee shall not have any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the applicant mortgagee who is:

(1) currently suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under part 25 of title 24 of the Code of Federal Regulations, 2 Code of Federal Regulations, part 180 as implemented by part 2424, or any successor regulations to such parts, or under similar provisions of any other Federal agency;

(2) under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant’s integrity, competence or fitness to meet the responsibilities of an approved mortgagee;

(3) subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review;

(4) engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;

(5) convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry—

(i) during the 7-year period preceding the date of the application for licensing and registration; or
(ii) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;

(6) in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of State law; or

(7) in violation of any other requirement as established by the Secretary.

While this mortgagee letter advises of additional ineligibility criteria imposed by statute in determining entities that FHA may approve as lenders and mortgagees, this mortgagee letter does not alter the current procedures in place in regulation and handbook applicable to appeal of adverse determinations.

Expiration of existing FHA approval: Entities already approved by FHA will not be permitted to renew their status at the next annual recertification date if they are not in compliance with the above-listed eligibility criteria. Effective with the issuance of this mortgagee letter:
Applications for approval submitted prior to the issuance of this mortgagee letter, but not yet approved, will be returned to the applicant, along with the application fee, for reapplication in accordance with the new criteria listed above.
The FHA approval for mortgagees that are not approved under the new criteria will expire thirty days after the recertification date.

Change of Lender’s Fiscal Year End Date

All requests by lenders to change the ending date of their fiscal year must be submitted in writing on company letterhead and signed by an executive officer to: Director, Lender Approval and Recertification Division, 451 7th St SW, Rm B-133/P3214, Washington DC 20410. FHA reserves the right to deny such requests and will notify lenders accordingly when such denials occur.

Change requests must be submitted 90 days prior to the end of a lender’s current fiscal year as shown in FHA records in order to be considered. If a lender is non-supervised, the subsequent audited financial statements that must be submitted as part of the annual renewal of FHA lender approval cannot have an ending date greater than 18 months after the submission to FHA of the preceding fiscal year’s audited financial statements.

Submission of Audited Financial Statements by Supervised Mortgagees

Effective January 1, 2010, and consistent with the authority of section 203(b)(1) of the National Housing Act, all supervised mortgagees must now submit an annual audited financial statement within 90 days of their fiscal year end. Audited financial statements must be submitted in accordance with HUD Handbook 4060.1 REV-2 and prepared and audited in accordance with HUD’s Inspector General’s most recent Handbook 2000.04, Consolidated Audit Guide for Audits of HUD Programs. Financial Statements must be submitted electronically through FHA’s Lender Assessment Sub System (LASS).

LASS is a web-based portal that allows lenders to upload their audited financial statements for FHA review. Chapter 4 of HUD Handbook 4060.1 Rev 2 provides further details on submission of audited financial statements through LASS. This new requirement is a prudent safeguard that permits FHA to ensure that those entities with which it does business are adequately capitalized to meet potential needs. FHA is aware that the majority of supervised and non-supervised mortgagees are already required to prepare audited financial statements for various regulatory bodies, GSEs, and investors. Therefore, this additional requirement should have a minimal impact on approved mortgagees.

Use of Name

Consistent with section 203 of the HFSH Act, FHA-approved mortgagees must use their HUD registered business names in all advertisements and promotional materials related to FHA programs. HUD registered business names include any alias or “doing business as” (DBA) on file with FHA. FHA-approved mortgagees must keep copies of all advertisements and promotional materials for a period of two years from the date that the materials are circulated or used to advertise.

Change of Mortgagee Status

Consistent with section 203 of the HFSH Act, approved lenders are required to notify FHA if individual employees of the lender are subject to any sanction or any other administrative action. Additionally, lenders are required to notify FHA if there is a revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Act. In addition to notifications already required by HUD Handbook 4060.1, REV-2, Chapters 2 and 6, FHA-approved lenders must notify FHA of the following business changes:

(1) the debarment, suspension or a Limited Denial of Participation (LDP), or application of other sanctions, other exclusions, fines, or penalties applied to the lender or to any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the lender pursuant to applicable provisions of State or Federal law; and

(2) the revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other similar declaration of ineligibility pursuant to State law.

All FHA-approved lenders must report these changes immediately in writing on company letterhead and signed by a senior officer to: Director, Lender Approval and Recertification Division, 451 7th St. SW, Rm B-133/P3214, Washington, DC 20410.

Civil Money Penalties
The HFSH Act expands FHA’s ability to seek civil money penalties against any owners, officers, or directors, of an FHA-approved mortgagee for violations of program requirements. FHA is also authorized to pursue civil money penalties against:

any non-FHA approved or unauthorized individual or entity that originates an FHA-insured mortgage;

(2) any participant in FHA programs that causes or participates in any violation set forth in Section 536 (b)(1) of the National Housing Act;

any person, party, company, firm, partnership, or business, including sellers of real estate, closing agents, title companies, real estate agents, mortgage brokers, appraisers, loan correspondents, for any use of Federal Housing Administration, Department of Housing and Urban Development, Government National Mortgage Association, Ginnie Mae, the acronyms HUD, FHA, or GNMA, or any official seal or logo of the Department of Housing and Urban Development except as authorized by the Secretary.

In addition, the HFSH Act amended the definition of “knowingly” such that a person acts knowingly when he or she has actual knowledge of acts or should have known of the acts.

HUD’s civil money penalties regulations will be updated with a conforming rule published at a later date.

Effective Dates: Except as otherwise noted above, the provisions of the HFSH Act were effective upon enactment of the Act. The appropriate HUD handbooks pertaining to these new requirements will be updated within 120 days from the issuance of this mortgagee letter. Furthermore, HUD will issue conforming regulations as necessary. The reporting and recordkeeping requirements in this mortgagee letter are effective upon assignment of an approval number by the Office of Management and Budget (OMB). The OMB approval number when assigned will be announced.

Title I Lender Approval: All provisions of this mortgagee letter also apply to currently approved Title I lenders and future applicants for Title I lender approval.

If you have questions regarding this mortgagee letter, please call the FHA Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

David H. Stevens
Assistant Secretary for Housing-
Federal Housing Commissioner

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Related Articles:

Video – What Is An FHA Mortgage?

Mark Madsen — Wed, 17 Jun 2009 03:52:25 +0000

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FHA Frequently Asked Questions by timeline:

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00:00 - What is an FHA mortgage?

01:22 - Is there a lot of red tape with FHA mortgages?

03:17 - What are the benefits of FHA to borrowers?

05:30 - Does a previous bankruptcy or foreclosure prevent someone from getting an FHA loan?

06:19 - What are the income and employment requirements to qualify for an FHA loan?

07:21 - How does FHA mortgage insurance requirements benefit the borrower?

08:29 - Can real estate agents use their commission as the down payment?

09:10 - Are appraisals for FHA mortgages complicated?

10:38 - What happens when an appraiser identifies minor defects?

11:23 - What restrictions does FHA impose on closing costs?

12:34 - Does HUD have a rule on property flipping?

13:28 - What is the Total Scorecard?

14:36 - Where can the borrower’s cash investment come from?

15:10 - Can I finance repairs to my home?

15:47 - What is the role of FHA today?

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Home Valuation Code of Conduct (HaVoCC)

Mark Madsen — Fri, 12 Jun 2009 14:07:47 +0000

I was recently interviewed by Brain Wargo, a business reporter from the Las Vegas Sun, about the Home Valuation Code of Conduct for a story he was writing titled “Realtors Complain About ‘Low Ball’ Appraisals”

Realtor.org and several other National publications ran with the story as well, which proves how hot the appraisal / equity topic is.

While I certainly appreciate the time and effort Mr. Wargo spent interviewing me, I understand how challenging it must have been to explain the full impact that HVCC has on the Las Vegas Real Estate Market in a manner of a few quotes.

Either way, I’ll take any opportunity that I can get to raise awareness about how the Home Valuation Code of Conduct (HVCC) is wreaking HAVOC on Las Vegas Real Estate, short sales, and foreclosures.

Let me start by briefly breaking down the history of the HVCC with a few highlights, and then I’ll leave my responses to the Las Vegas Sun Low Ball Appraisal article.

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Home Valuation Code of Conduct (HVCC) Overview

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The Home Valuation Code of Conduct (HVCC) is an agreement between New York Attorney General Cuomo, Fannie Mae and Freddie Mac, and their new regulator the Federal Housing Finance Agency that was presented as a means to stop mortgage and appraisal fraud.

At first glance, the intent appears to solve issues where appraised values may be influenced by lending institutions or other parties involved in the mortgage and real estate transaction.

However, a deeper look at the details in this agreement reveals language that ultimately hurts the consumer.

An official statement from the National Association of Mortgage Brokers (NAMB) about HVCC -

A revised HVCC released on December 23, 2008, by New York Attorney General Cuomo is a de facto regulatory action, failing to follow necessary regulatory procedure.

The Home Valuation Code of Conduct (HVCC), as written, goes too far. It will impair consumer choice and impede competition, ultimately costing consumers more money and hurting small businesses in a way simpler, more effective, less burdensome solutions would not.

In a response from The Appraisal Press – HVCC: The Cure Is Worse Than The Disease, there are five major aspects which they believe will harm the appraisal industry and the consumer:

Under the HVCC, any lender using a professional appraiser incurs substantial regulatory risks and additional costs, whereas AVMs, BPOs, and other valuation alternatives are expressly and repeatedly exempted from the same regulations and liabilities.

The HVCC unduly restricts the appraiser’s ability to operate a business in the same manner as the other parties already in the transaction.

Lenders must be prohibited from owning or controlling, in whole or in part, any sort of valuation entity or mechanism used in the origination of a loan.

All valuations, regardless of method employed, must be provided to the borrower in the same manner.

Any complaints regarding the valuation process should be reported solely to the IVPI, not to the lender overseeing the origination.

What started with a 2007 lawsuit where Attorney General Andrew Cuomo sued an appraisal division of First American Corp. for allegedly inflating home values on an estimated 260,000 Washington Mutual loans between 2006 and 2007 has now been shifted to blaming street level originators and appraisers.

If revealing truth and transparency were the real motives behind this agreement, more stories would have been exposed where appraisers were pressured by developers and Appraisal Management Companies to bring in value.

The lending community is also sharing their disgust towards HVCC and how it is already hurting consumers and industry professionals.

It is vital for all mortgage and real estate professionals to get behind NAMB’s efforts to fight HVCC, regardless of whether you are a member of NAMB or not.

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Las Vegas Sun – “Low-Ball Appraisals”

Since a few other local agents appraisers were included in this article, I thought I would break down my responses to the major points from the contributors and comments from the readers.

Mark Stark, owner of Prudential Americana, said he thinks appraisers are focusing too much on projecting what values will be instead of what they really are.

“The appraisers are being very conservative,” Stark said. “They are trying to cover themselves.”

Appraisers are absolutely covering themselves. They don’t want to be labeled by the Appraisal Management Company or Lender as the “guy who can bring in values” anymore.

Plus, higher values may require a little more work to support vs just coming in at a safe number. And, who wants to work harder when your pay has been cut by up to 40% from some of these AMCs?

Julie Burkart, an appraiser with Southwest Appraisal Service in Las Vegas, said everyone is surprised by the decline in values and suggested that the drop is not appraisers trying to cover themselves. They are basing their decisions on the data they have, she said.

“They are not worried about covering themselves if they are doing a good job,” Burkart said. “There are a lot of people out there who think their homes are excluded from the price drops, but they are not.”

Agreed – Sellers have to start realizing that their granite counters and upgraded sink fixtures don’t stand a chance against the 19 foreclosures in their neighborhood that are all listed (not selling) for 50% less than they owe.

But Mark Madsen, communications director for Raintree Mortgage Services, suggested some appraisers don’t want to come in too high with the values so that they can keep working.

“I think appraisers are scared to get blacklisted,” Madsen said. “If the appraisals are too high, then banks may no longer accept appraisals from that person,” Madsen said.

To be fully transparent, I personally haven not spoken with an appraiser who was blacklisted from an AMC for bringing in high values.

Nancy Tucker, a Realtor with Coldwell Banker Premier, said some of the fault lies with banks selling foreclosure properties. Lenders are listing initial prices that are well under the market value as a way to generate multiple offers.

The lender accepts the highest offer and other buyers fall by the wayside, Tucker said. But when the appraisal is completed for the home, it is well under the price agreed to by the lender and prospective buyer. That is forcing deals to get redone when there is no other competition left, she said.

Definitely going to be more of an issue with HVCC. To make things worse, if the buyer wants to get a second opinion on that value they’ll have to pay for another full appraisal – $450ish. Oh yeah, those nice courtesy calls from the appraiser warning the loan officer that the values are significantly off are prohibited now.

Stark said the new policies are a concern because there is no guarantee of appraisers’ quality of service because they are selected from a list rather than by the lender.

“You wouldn’t let a doctor operate on you if you didn’t know the quality of service he provides,” Stark said. “You have no say.”

Amen, brother.

Madsen said he expects the new rules to push back closings by two to three weeks.

“With the amount of inventory we have out there, it is not good to slow it down,” Madsen said.

Tucker said the rules have pushed back her closings from about 30 days to 45 days.

Any questions?

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The good news is that FHA or VA loans are not impacted by the HVCC guidelines – yet. We are still able to work with our trusted appraisers to ensure the buyer is getting the most accurate value.

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email

New Las Vegas FHA Appraisal Guidelines April 1, 2009

Mark Madsen — Sun, 10 May 2009 02:52:23 +0000

There are new FHA Appraisal Guidelines that went into effect on April 1, 2009 that Las Vegas home buyers and sellers need to know about.

These new FHA Appraisal Guidelines are not to be confused with the recent Home Valuation Code of Conduct (HVCC) agreement that went into effect on May 1, 2009.

In order to accurately report on housing trends in specific neighborhoods, appraisers will have to follow new guidelines for all properties that will be secured by FHA-insured mortgages.

Overall, the FHA Appraisal requirements specifically relate to homes in declining markets.

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There are basically 10 major points of interest that sellers, buyers, and agents need to pay attention to with regards to the new FHA Appraisal Guidelines:

The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71) needs to be completed. This basically has to do with creating more transparency for appraisals conducted in declining markets.

At least two comparable sales within 90 days of appraisal date.

A minimum of two active listings or pending sales, in addition to three closed comparables.

Bracketed listings using both dwelling size and sales price when possible.

Adjust active listings to reflect the List To Sales Price Ratio.

Adjust pending sales to reflect contract sales price when possible.

Include original list price and any revised list prices.

Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.

Absorption Rate Analysis.

Known or reported sales concessions on active pending sales.

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How will this impact Las Vegas home buyers?

FHA states that a declining market is any “neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.” The 1004MC form will identify a declining trend in the market. FHA reminds Direct Endorsed lenders that both the lender and the appraiser are equally responsible for the integrity, accuracy, and thoroughness of an appraisal submitted to FHA.

How should real estate agents and sellers respond to the new FHA Appraisal Guidelines?

You can read how some real estate agents feel about this here and here. Basically, agents need to be prepared to give a value of a property based on the most recent 90 days (three months) neighborhood comps to avoid complications on a new purchase transaction.

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Online Resources

What everyone ought to know about home appraisals

Appraisal Scoop – 1004MC – April Fools?

Revised Fannie Mae Guidelines

Appraiser Forum

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email

How Will The Home Valuation Code of Conduct (HVCC) Impact Las Vegas FHA Loans?

Mark Madsen — Sat, 09 May 2009 23:40:43 +0000

The new Home Valuation Code of Conduct (HVCC) regulations that went into effect on May 1, 2009 will have a significant impact on Las Vegas real estate purchase and mortgage refinance transactions.

HVCC is a new agreement between the Federal Housing Finance Agency (FHFA) and the New York Attorney General’s office to help enhance the integrity of the home appraisal process in the mortgage finance industry by implementing policies that govern the way appraisals are ordered for all single-family mortgage loans that are sold to Fannie Mae and Freddie Mac.

This does not include FHA or VA mortgage loans at this time, however, many lenders may adopt a blanket policy where they require all appraisals to be ordered through a third party (unregulated) Appraisal Management Company (AMC).

Simply put, HVCC is intended to create a communication barrier between the appraiser and those who derive their income from the successful closing of a loan.

As defined by the federal agencies, the “loan production staff” consists of those responsible for generating loan volume or approving loans, as well as their subordinates.

HVCC is the result of a 2007 lawsuit where Attorney General Andrew Cuomo sued an appraisal division of First American Corp. for alegidly inflating home values on an estimated 260,000 Washington Mutual loans between 2006 and 2007.

While there are many mixed emotions by the mortgage broker community and appraisers, here are a few main bullets for all lenders, real estate agents, appraisers, buyers, and sellers to consider before making your own determination as to whether or not the HVCC will end up costing mortgage consumers more money:

Appraiser / Loan Officer relationships just became obsolete due to the fact that anyone who has an income based on the loan closing will not be able to speak with the appraiser.

No more courtesy calls from an appraiser to the loan officer if they feel that the value is off.

All appraisals will be ordered through a third party AMC that will randomly select an appraiser. This means that buyers and sellers will not have control over the quality or experience of the appraiser.

Appraisal Management Companies may take a large fee as the middle man, as well as control who they give business to, which will put added pressure on an already underpaid appraiser industry.

Since communication between loan officers and appraisers will not be permitted, rush files, appraisal updates, and value conflicts will prolong closings and may require extended loan lock costs.

An increase in the cost of appraisals is a likely result, as well as extra appraisal fees if a file needs to be moved between lenders.

Lenders have up until 3 days prior to the closing of a transaction to provide a consumer with a copy of the report.

Instead of using an AMC, some lenders may choose to establish in-house appraisal ordering departments that follow the HVCC guidelines. This may result in a politically self-serving “Approved List” for the banks, which could affect the way values are determined or loans are underwritten and denied.

Personal Commentary:

I have been a Las Vegas Mortgage professional since 2000, and have witnessed the drastic rise and fall of real estate prices in our market.

The only benefit that I can see with the new HVCC guidelines is that my real estate agents and clients will no longer be able to blame me for not “bringing in the value” to make their deal work.

Even though my official job description as a loan officer is to find affordable mortgage programs, there has always been a tremendous about of pressure from clients and real estate agents who believe that I have some magic appraiser on pay-roll that can produce higher appraisal values.

Unfortunately, this lender / appraiser collusion has had an impact on the current foreclosure mess that we’re dealing with in Las Vegas.

Most of the banks, brokers, and speculating novice real estate investors that contributed to the false sense of equity that caused the crash are out of business. However, those of us left in the industry are paying for their actions.

Even though HVCC may not immediately impact our FHA Loans, we are prepared for the logistical chaos that our other conventional and noncomforming mortgage clients may experience.

What do you need to be aware of for future real estate / mortgage transactions?

Allow plenty of time for closings, due diligence periods for appraisals, and rate locks.
Update the MLS listng description with as much info that will help support your values.
Have all of the neighborhood comps readily available to give to the AMC if there is a discrepancy.
Be patient and confident knowing that we are in this together.

Other Resources:

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email

Down Payment and Acceptable Sources of Borrower Funds for a Las Vegas FHA Purchase Mortgage

Mark Madsen — Mon, 27 Apr 2009 19:58:54 +0000

FHA Mortgages are popular programs for Las Vegas First-Time Home Buyers due to the low down payment (3.5%) that is required.

This can be a little confusing for borrowers looking at foreclosure properties that have a significant amount of perceived equity, but the FHA clearly defines that the minimum down payment on a purchase transaction is 3.5% of the lesser of the appraised value or the sales price.

In addition to the FHA 3.5% down payment, borrowers must have sufficient funds to cover borrower-paid closing costs such as pre-paid taxes, insurance, title, appraisal, underwriting, and processing fees.

All sources of funds have to be properly documented and verified. Underwriters will be looking to verify that there were no additional undocumented debts incurred by the borrower to obtain all or part of the required cash investment in the property.

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Acceptable sources of borrower funds include the following:

Earnest Money Deposit
Savings and Checking Accounts
Cash saved at home
Private savings club
Savings Bonds
IRAs
401 (k) and Keogh Accounts
Stocks and Bonds
Thrift Savings Plans
Gift Funds
Sales Proceeds
Sale of personal property
Commissions from sale
Trade Equity
Rent Credit
Sweat Equity
Collateralized Loans
Disaster Relief Grants and Loans
Employer’s Guarantee Plans
Employer Assistance Plans

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Questions About the Source of Down Payment Funds:

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Q: How is the Eearnest Money Deposit verified?

The EMD is the initial deposit submitted with an accepted purchase contract offer which is held in an escrow account. These funds count towards the borrower’s down payment and/or closing costs.

The EMD is verified by a cancelled check, certification from the deposit-holder acknowledging receipt of funds, or separate evidence of the source of funds.

*If the EMD exceeds 2% of the sales price or appears to be excessive based on the borrower’s history of savings, there may be more documentation required to source and document the money trail.

Q: How are Savings and Checking Accounts verified?

A verification of deposit (VOD), along with the most recent bank statement is one way a lender may request to verify these funds. If there is a significant increase in an account, or the account was recently opened, a written letter of explanation may be required as well.

Q: What if I have been saving money in a jar or under the mattress?

The borrower will need to provide a written letter of explanation and evidence of the ability to accumulate the cash. This can include analyzing a borrower’s income stream, the time period which the funds were saved, spending habits, documented expenses, and a history of using financial institutions.

Q: How is a down payment documented from a 401 (k) or IRA?

While liquidation of the account is not required, underwriters will only use up to 60% of the value of the assets, unless the borrower can prove that a higher percentage an be withdrawn after subtracting any Federal income tax and penalties.

Q: Do I have to show liquidation of funds from Stocks or Bonds?

No, you may not have to show actual liquidation of funds from a Stock or Bond, but the accounts will be verified by providing monthly or quarterly statements.

Q: Who can give a Gift Fund?

A gift fund can be considered as an acceptable source of down payment as long as there is no expected of implied terms of repayment to the donor by the borrower.

Gift funds can be given by the following:

A relative
Borrower’s employer or labor union
A charitable organization
A government agency or public entity that has a home ownership program
A close friend with a clearly defined and documented interest in the borrower

As a general rule, the FHA is not concerned with how the donor obtained the Gift Funds, as long as the funds are not associated with the sales transaction.

Q: Can real estate agents use their commissions as part of the down payment?

Yes, a family member who is a licensed real estate agent may also donate their commission.

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There are many more down payment options that can be considered by an FHA underwriter as acceptable funds to close.

It is important to be completely transparent with your loan officer at the time of the initial application and financial strategy session so that we can put a game plan together for your individual scenario and goals.

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Top 5 Las Vegas Mortgage Links / Articles / Questions

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Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email

Las Vegas, NV Clark County FHA Loan Limits

Mark Madsen — Sun, 26 Apr 2009 05:17:39 +0000

After a brief reduction in Las Vegas, Nevada (Clark County) FHA loan limits, we are back up to an amount that should satisfy most First-Time Home Buyers.

County Name	Single Family	Two-Family	Three-Family	Four-Family
Clark	$400,000	$512,050	$618,950	$769,250

* Reverse Mortgage Loan Limits for the FHA HECM have also been raised to $625,500

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Top 5 Las Vegas Mortgage Links / Articles / Questions

______________

Raintree Mortgage (Las Vegas)

9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email