New fees are proposed for Government Backed or Insured Loans

The new design of Fannie and Freddie, when or if that happens, may require fees get charged for any federally backed loans - and it's about time...The trick will be to charge a fee sufficient to cover the Government losses and not perceived as charging too much.  It was interesting to note that until recently, FHA had turned a profit.

Some suggest private lenders form a cooperative of sorts and pay fees into a "mutualized loss pool" to provide guarantees for mortgages.  In addition, pay a "reinsurance" fee to the Government as additional insurance for additional losses.

It is interesting to note that almost $10 Trillion of mortgages have been created over the past 30 years which seems to have outpaced the "capacity" of the nation's banking system.

Source:  WSJ, 8-24-2010 page A6.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.

Deficiency Judgment - The unfortunate final 'gotchya sucker' from your lender!

Update 2-18-2012:  Freddie Mac has decided to prohibit loan servicers from going after borrowers under deficiency judgments under certain short sale or deed-in-lieu of foreclosure actions.

Source:  http://realestateinsidernews.com/nar-2/freddie-mac-no-on-deficiency-judgments/

For those who mail house keys back to the lender or have a hardship and have to lose the house, or even sell the home for less than the total mortgage amount, do you think filing for bankruptcy will allow you to settle the debt and move forward and start over? ---Well, not so fast...Get ready to pay later and be hounded for years.

As part of your Security Deed (Mortgage), you agree to pay back the loan. If for some reason you can't pay it back, and you have to give up your home (short sale, deed in lieu of foreclosure, or foreclosure) the debt doesn't just disappear. The lender/loan servicer may file what is called a Deficiency Judgment. It is a court order against borrowers ordering them to make up the difference between the gross amount they receive from the liquidation of the property (minus) the debt (loan balance plus legitimate loan expenditures/losses/legal costs). If there is an overage, you should be clear. If there is a shortage (negative equity), you are on the hook for the shortage.

The deficiency judgment may be filed anytime for up to 5 years after you get rid of the property and they may be able to collect on that debt up to 20 years after they file the judgment. To further agitate you, this Deficiency Judgment may be deemed a "benefit" to you by loan forgiveness and is normally taxable income. However, I believe that the US Congress eliminated this "forgiveness of debt" on a real property and will not taxable again this year.

Also, I do believe that regardless of whether or not you file bankruptcy, the debt can still be held against you.

For example, I know a woman over 60 who lost her job, couldn't afford to make payments on her mortgage, and she filed for Chapter 7 bankruptcy with an attorney who told her the house was protected under the bankruptcy settlement. However, she showed me the paperwork of the bankruptcy settlement and it excluded Deficiency Judgments from the bankruptcy filing. Since that was her whole point of filing bankruptcy, and not having the assets to cover the mortgage payoff, she wonders why she filed for bankruptcy at all since that was her goal - to cover what she could and have the debt relief. I suggested she confirm this with her bankruptcy attorney and GET IT IN WRITING from the attorney.

I had heard that the bankruptcy laws were essentially rewritten a few years ago to make it more difficult to completely discharge your debts, but since I am not aware of the criteria and protections, I am not sure where it all stands. Your credit score will take a hit but after paying on time for 12 months straight, your credit score returns to a much more respectful rating....

In Georgia, the court has to confirm with the lender within 30 days after sale that the sale was made at market value and there is no right of redemption by the Borrower. See the Richmond Federal Reserve Bank Study of the different US States' Laws on Deficiency Judgments.

Does anyone have any more knowledge of these deficiency judgments to shed some light on this unfortunate subject?

Ginnie Mae - Who is it and why do we care? Can you say "$9 Trillion of Mortgage Backed Securities"?

Well, maybe not without taking a little antacid and two Advil first...
Who is it? In 1968, Congress established the Government National Mortgage Association (Ginnie Mae)- A government-owned corporation within the Department of Housing and Urban Development (HUD). At this time, mortgages were usually held by local/regional community/commercial banks and not sold in groups to get the money back to reloan to others but held by the institution which only had so much money to lend and that was it. This reduced the number of loans available and restrained the availability of affordable housing.

Ginnie Mae solved this problem (i.e. liquidity-limited dollars for loan and variable interest rates per region) that revolutionized the American housing industry in 1970 by pioneering the issuance of mortgage-backed securities (MBS).

What Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans — mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture's Rural Housing Service (RHS) and the Department of Housing and Urban Development's Office of Public and Indian Housing (PIH).

Today, Ginnie Mae securities are the only mortgage-backed securities that offer the full faith and credit guaranty of the United States government (i.e., You - the taxpayer).

Why do we care? As of right now, it insures about $9 Trillion in Government issued Mortgage Backed Securities...And almost 10% of them are delinquent by more than one month...

Who really owns your mortgage?

According to a recent WSJ article (4-3/4-2010, Page B1) some lenders who foreclosed on homes thought they owned the mortgage - but they didn’t!

Lender Processing Services (LPS) Inc. is a company who uses a computer software program that most lenders use to track most US mortgages from creation to final payoff. LPS has been so overwhelmed with recording the ownership and transfer of ownership of the recent mortgage volume of the past several years that they have made some mistakes when getting them notarized and recorded in public records. It has become difficult for some banks to truly identify and prove ownership of a mortgage.

Can you say “lawsuit” – not only by banks who think they own mortgage and don’t, but how about homeowners who stop foreclosure proceedings through the courts…

Can you say “Bogus Assignee?”

Did somebody in Congress get sweet deals from Countrywide?

If the investigations result in confirmation of charges, I hope the Senate's Ethics Committee (as well as the House's Oversight and Government Reform Committee) investigations of the 30+ Countrywide VIP loans to US House & Senate member/staffers & the trial of three former Countrywide executives (including  Angello Mozilo) results in some hangings, but I'm not holding my breath...my guess---acquittals (like Congress ok'd Dodd's 6 VIP loans) and no penalties for the sleezeballs. (Senators Chris Dodd -who is not running for another term and Kent Conrad were both cleared by Senate Ethics panel.)

The SEC claims the defendants hid ever increasing risks and problems in the loan portfolios.

Was this the reason why other Countrywide shenanigans were ignored?

Note:  Remember the comment about "rearranging deck chairs on the Titanic"?  Well, the old Countrywide was bought by Bank of America and is now called "Bank of America Home Loans.

Thank you sir,... may I have another?

Source:  WSJ Article 8-14-2010, Page B1

Update WSJ 8-24-2010, A6 - The Securities and Exchange Commission (another SEC), is investigating Angelo Mozilo to see if he and other Countrywide executives hid some substantial risks from investors.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.

Fannie Mae and Freddie Mac....unfortunately, these dollars make sense

• Former Fannie Mae Franklin Raines made $91 million from 1998 thru 2003;

• Top five (5) Fannie Mae executive earned $34 million in compensation;

• Top executives at Freddie Mac earned $35 million in 2006;

• In 2009 (after the downturn in mortgage business), the top five (5) executives at Fannie Mae made $19 million, collectively. The CEO earned $6 million;

• From 2001 through 2006, Fannie Mae spent $123 million to lobby Congress (second highest total lobbying expenses in the US);

• Alt-A loans accounted for 9% of Fannie Mae's business but represented 40% of credit losses in 2009;

• Losses as of 5-10-2010 have amounted to $146 billion - the ceiling of debt losses back by the Federal Government (i.e., taxpayers) had been raised to (and expected to reach) $400 billion;

• Both Fannie and Freddie were delisted from the New York Stock Exchange;

• Armando Falcon (former head of Fannie's and Freddie's Federal regulator) said they had a culture of arrogance and greed and the failure of management that caused their collapse;

• By June 2010, 5.1 million homeowners will own a home worth 75% or less of the mortgage amount Broker's Blog 2-3-2010; and

• Fannie, Freddie, and the FHA now comprise 90% of mortgages.

No prosecutions, investigations, or correction of this mismanagement:

PRICELESS!

As a side note (per WSJ 4-9-2010-page 4B) - Robert Rubin (former Treasury Secretary under Clinton and former Chairman of the Board at Citigroup) said that everyone in the industry failed to see this crises...

Does that give you faith and confidence in the entire financial and regulatory system?

UPDATE 8-9-2010:  Per the 8-6-2010 WSJ page A2, loans acquired since the beginning of 2009 have performed better than in the past due to "tighter lending standards" by Fannie and Freddie....well a little late don't you think?  DUH! (Oh and Fannie and Freddie have required $146 billion since 2008 to cover losses on loans they purchased.)

Fannie Mae/Freddie Mac says "Buy Back these crappy loans!"

Lenders made representations and warranties that certain loans were good loans.  Now that those loans are delinquent, Fannie and Freddie are finally doing their "due diligence" investigating each loan and renegotiating their agreements of purchases of those loans.

If they find the borrowers or lenders lied about information in loan applications and documents, they are requiring the lender to "buy" the loan back.

Mortgage insurers can rescind mortgage insurance - which triggers Fannie & Freddie buybacks - and lenders end up paying  insurers to prevent Fannie/Freddie buyback .

Morgan Stanley alone estimates their buybacks to amount to about $17 billion through 2014. (But watch out or the next wave of losses and write-offs - and then more layoffs due to these losses.)

Note:  Federal Housing Fiance Agency (FHFA) now regulates Fannie and Freddie.  But once Fannie & Freddie get reorganized and either spun-off, or absorbed into government grasp, who knows what Congress is up to.  I recently heard Matt Taibbi mention on C-span that AIG was classified as a thrift and not an insurance company and regulated by only one insurance expert in the regulatory agency (Office of Thrift Supervision).  I believe the new Financial Regulatory Reform bill (code named - the wimpy milk toast bill) called for a new agency to head up oversight in these areas.  Can you say "rearrange the deck chairs on the Titanic, please"?

After the fat,dumb, and happy eater has indulged themselves at the "all-you-can-eat" buffet, they are looking to lose weight.

Too little...too late?

Note:  About 9 out of every 10 loans is a government backed loan (about 40% FHA and about 50% Fannie or Freddie Loan) and there are at least $5 Trillion in government backed mortgages...And about 4.5 million homeowners are at least 30 days delinquent on their mortgage right now.

Yield Spread Premium - Gone or changed form?

The basic truth about matter in the universe is...it doesn't disappear, but only changes form.

The WSJ on 8-17-2010, page A6, raised one of the "dirty little secrets" in the mortgage business.

The Yield Spread Premium - Basically, loan originators "could" give the borrower a lower rate, but charged a higher rate and were paid by the lenders a "bonus" for that higher rate.  Was it disclosed? Yes, but in a somewhat overlooked fashion.

Now I don't know how may times this happened, but it has happened in the past - hence the change by the Federal Reserve (albeit under pressure by public outrage and not by the choir boys at the Fed...).

I have never and will never recommend any lender who does this.  Yes, some clients have used lenders of their choice who charged this YSP. I don't remember many, but they tend to be obscure, off branded lenders - some of which do not exist any longer.

The Federal Reserve has "now" banned the YSP (Effective April 1, 2011)..
(Hey - why not make it effective now and why wait so long?)

I don't think anyone objects to compensating loan originators, but to reward them in a "bait and switch" manner is unconscionable.

As much as my Libertarian self shudders, my personal belief is that if the Federal Government can't hang anyone over this, but they should at least make the lenders who did this refund the amount paid to the loan originators to the home buyer or reduce their loan balance by that amount.

My skepticism makes me believe that this "reward or bonus" will exist in this or other form in somebody's pocket besides the borrower.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.

Credit Score - What is it and how it's used

You may already have a good idea that a good credit score means you can obtain credit easier or at a better interest rate, but have you ever considered how it's calculated or what it's based on?

The closely guarded formula (algorithm) that "predicts your financial debt behavior" (i.e., credit risk) is compiled from all sorts of financial information about you.  All the FICO (Fair Isaac Company) score is trying to do is to give creditors your "predictive" behavior of handling money and debt.  Generally, the more fluctuation in debt or erratic your financial behavior, the lower the score. It an also be used by employers as part of their analysis of your total profile. Sometimes, employers considering people in positions of high responsibility will look at your amount of debt to determine the likelihood of you selling information to competitors to pay your debts.

5 major factors comprise the credit score and what % of the score:

Payment history (37%) - Basically, Do you pay on time? If you've ever been late (especially within the past 12 months), your score gets reduced.
What you normally owe, how much of the available credit balance you have, and how many accounts you have. (29%) For example, if you open a bunch of retail accounts, and use a large % of the balance, this could score negatively.
Length of time you have carried a credit history. (7%) In other words, have you used credit wisely. Also, if you open a number of accounts, or purchase major items on credit shortly before you apply for a mortgage, this could also negatively impact your score.
Are you increasing the amount of debt? (12%)  Opening new credit lines within a short time (whether special similar retail offers from Kohl's, Macy's, etc or different types for car, student loan, furniture, clothing, etc,).  

Note:  I understand that you can apply/research any number of mortgage rates within a 14 to 45 day period and it will not seriously degrade your credit score.  However, since the Fair Isaac website mentioned it's up to the lender to use anything between 14 to 45 days, ask the lender what formula they use.

• Types (credit cards; installment - car/furniture; retail (clothing) accounts; and finance companies-student loans) of credit you are using. (15%)  A good mix of types and consistent payment helps raise score.
• New debt (10%) - Are you opening alot of new accounts from retailers offering incentives or applications for several other types credit?

Notes: Judgments, liens, and paid collection items stay on your report for 7 years.

For more information about credit scores, check this website from FICO.

1,616 Foreclosures headed to the Cobb County courthouse steps in September 2010

That beats the previous record of 1,609 in October 2009.   We certainly want to pray for the homeowners and their families.

President Obama announced the Housing Finance Agency Innovation Fund will issue $2 Billion to help unemployed homeowners in 17 states (including $126.6 Million for Georgia). It is estimated that the total federal money for Georgia alone will only help 4,000-5,000 of the almost 260,000 Georgians in this situation.

Also, HUD will provide $1 Billion to the Emergency Homeowners Loan program to provide assistance up to 24 months to homeowners who experienced a "substantial reduction" of income and are at risk of foreclosure.

No details of how they will help but significant loan balance reduction and permanent reduction of monthly payments would help.

Are there any down payment assistance programs left to use?

Are there any down payment assistance programs left to use?

Not much remains now, but maybe there will be in the future...and the future has arrived - at least loan programs sponsored by these four states:  Idaho, Massachusetts, Minnesota and Wisconsin.  They are offering ZERO DOWN PAYMENT loans - more Exotic State Mortgages.

However, most other programs have been terminated.  For instance, the Georgia Dream Program ended June 30, 2010. See other programs that at one time were available here at the FHA website.

On July 30, 2008, the Federal Government passed H.R. 3221 - Housing and Economic Recovery Act of 2008. Section 2113 of the bill prohibits seller-funded DPA (Down Payment Assistance) for loans backed by the Federal Housing Administration.

Prior to this bill, the seller could contribute up to 6% to the buyer to cover either a down payment or closing costs on an FHA loan. The changes are effective October 1, 2008.

 The bill is means the elimination of Non Profit Down Payment Assistance. Only Government funded housing grants are available for Down Payment Assistance under the American Dream Down Payment Assistance Act.

8-20-2010 Update:  Almost 625,000 people were helped with DPA programs from 2000-2005; in 2004, 31% of 510,000 FHA single family DPA from non-profits v. about 6% in 2000; the GAO warned that the DPA programs were artificially inflating prices; and IRS Commissioner (Mark Everson) raised concerns.

8-26-2010 Update: The Atlanta Development Authority offers a downpayment assistance program for properties within the Atlanta BeltLine Tax Allocation District city limits.It appears that the only low cost loan program available for home Buyers is an FHA loan that requires only 3.5% down payment.Note: According to http://www.mortgageloan.com/mortgage-delinquency-rates-decline-mba, about 25% of subprime loans; 7% of prime loans; 14% of FHA loans; & 7% of VA loans were delinquent as of Feb-2010.

Conference on the Future of Housing Finance on Cspan 8-17-2010

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT - PANEL DISCUSSION
Housing Finance Reform and Broader Financial Markets

Conference on the Future of Housing Finance on Cspan - Moderated by Treasury Secretary Tim Geithner

The following individuals are panelists at the conference:

• Barbara J. Desoer, President of Bank of America Home Loans
• Ingrid Gould Ellen, Professor of Urban Planning and Public Policy at New York University's Wagner Graduate School of Public Service and Co-Director of the Furman Center for Real Estate and Urban Policy
• Bill Gross, Co-founder and Co-chief Investment Officer of PIMCO
• Mike Heid, Co-president of Wells Fargo Home Mortgage
• S.A. Ibrahim, Chief Executive Officer of Radian Group Inc.
• Marc H. Morial, President and Chief Executive Officer of the National Urban League
• Alex Pollock, Resident Fellow at the American Enterprise Institute
• Lewis Ranieri, Chairman of Ranieri and Company, Inc.
• Ellen Seidman, Executive Vice President for National Policy and Partnership Development at ShoreBank Corporation, and Chair of the Board of Directors at the Center for Financial Services Innovation
• Michael A. Stegman, Director of Policy and Housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation
• Susan Wachter, Richard B. Worley Professor of Financial Management, Professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania's Wharton School
• Mark Zandi, Chief Economist of Moody's Analytics

Cluster*&%$ or the beginning of something better?

You listen and decide...

"Biggest bang for your buck" in home improvements!

It really depends on a few factors..

What is everyone else doing in your neighborhood? - What will a Buyer look for in your home compared with other homes in your neighborhood?

Start with smaller improvements and ladder upward - light fixtures, doors, windows, upgrade in flooring, fresh paint inside and windows/trim/exterior, adding heated/cooled square footage, etc.,.

Consult some remodeling resources - Click here and go to General Maintenance Tips for several links to remodeling suggestions and costs - http://www.abuyeragent.com/maintips.htm

What does an appraiser consider value? Mostly good condition of interior and exterior; additional functionality of structures or systems; and heated/cooled square footage are good starts. Appraisers don't really care if the siding is pressboard or concrete siding, but value brick more than concrete siding. Also, appraisers assign single pane and thermal pane windows the same value; carpet v. vinyl, no difference but hardwood is better value than carpet. A new roof doesn't necessarily mean you'll get a higher price, but it helps. New v. old HVAC systems perform the same function and therefore, don't add to appraisal value. Granite or Corian (not laminate) counters add value.

Think British - bland or earth tones, stay middle of the road with neutral colors if you are reselling - don't over personalize unless you (a) want to stay there forever, or (b) intend to change it all back and make it all neutral before you put the house on the market. Think of it as a blank canvas against which a fresh brushstroke of living can be expressed by the next owner.

Bottom Line: Hey - it's your house, do with it what you want but try not to listen to remodeling contractors or vendors of household improvement products. They tend to want to "sell" you on what "they" say has value, not what "really" has value in the real estate marketplace.

How are mortgage insurers fairing these days?

Back in 10/2007, the WSJ reported that mortgage insurers were covering lot of home loan losses and getting hit pretty hard with losses/payouts.

MGIC Investment Corp reported a net loss of $372 million and likely be 2009 before it became profitable (like it wasn't before and won't charge extra in the future, right..)

Old Republic International was planning to get hit too. In fact, seven of the largest mortgage insurers (including PMI Group, Radian Group, and Triad Guaranty Inc.) were to report losses on loans up to 35% of the loan's value.

Note: The WSJ article mentioned the housing downturn would bottom out in 3Q08...I guess that's why they call it "a guess".

Update 8-11-10: MGIC posted its first profit in 12 quarters last month as the cost of claims declined.

Oh, and here's an interesting twist - even if your lender doesn't file a deficiency judgment, maybe the mortgage insurance company will - see this article.

Check out more information about deficiency judgment in each state at http://www.foreclosurefish.com/blog/index.php?id=994

Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA)

According to the IRS, your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012 - see 10 facts about debt forgiveness at the IRS website.

The MFDRA is effective for mortgage debt canceled between 2007 and 2012. Forgiven debt does not qualify as income if the mortgage was to purchase, repair or build on the borrower's primary residence. The forgiven debt must have been part of a mortgage restructuring or cancellation of debt following a foreclosure. Individuals are limited in this time period to $2 million of exemption and married couples filing separately are limited to $1 million each. The forgiven debt and the reason for exemption must still be filed on tax returns.


Forgiven debt qualifying as income for the IRS includes short sales on real estate. Bank foreclosures on real property may also qualify if the property later sells for less than the amount owed on the loan.


See IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments  for more information regarding the income tax treatment of forgiven debt.

Property developer "gotcha's" - Have you read your HOA CCRs lately?

Does your HOA have them?

A little thing like a "capital recovery fee" is planted in the covenant homebuyers agree with upon acquiring a property in a subdivision with homeowner's association CCRs.

These fees are established by clauses in subdivision covenants that require sellers to pay a percentage (often 1%) to the original developer every time the property changes hands for a certain length of time (often 99 years).

Does your state outlaw them? If not, have you written your State Rep or Senator?

Source: WSJ, 7-31/8-1-2010, page A3 (Home Resale Fees under Attack).

Pardon me...but what does your sheetrock smell like?

Chinese Drywall Cases are being settled in some of the states and perhaps more are to come.

Millions of tons of Chinese drywall, or gypsum board, were imported into the U.S. from about 2004 through 2007 when a shortage developed after record hurricane seasons at the height of the building boom. Judge awarded $2.6 million in settlement of one case.

According to another WSJ article on 8-10-2010, Lowes reached a $2.2 million settlement agreement with a multi-state (Georgia, Florida, Louisiana, and Arizona) settlement for defective Chinese drywall (even though Lowe claimed not due to laws or drywall was determined defective)...The settlement is supposed to begin within the net 30 days and all claims settled within 6 months (180 days) from the start date.

10-19-2010 Update:  10-15-2010 WSJ - A5 -  A New Orleans Federal Judge adjudicated a settlement in this case that may be applied in about 40 states  that now have related litigation.  Knauf Pkasterboard Tianjin (KPT) agreed to replace all their drywall, all electrical wiring, gas tubing and appliances in about 300 homes in four states over the next several months at an estimated cost of $40-80 per square foot.  Note:  German based Knauf Gips KG is also involved.

Flood maps for homes and businesses - who's in charge?

Update 2-20-2012: FEMA encourages citizens around Upper Chattahoochee River area (i.e., metro Atlanta) to check out their flood possibilities using this website of preliminary flood maps: http://www.GeorgiaDFIRM.com  

Source:  http://7thspace.com/headlines/402869/fema_fema_encourages_upper_chattahoochee_river_region_residents_to_resolve_to_be_ready_and_learn_about_flood_risks.html

According to the 8-9-2010 MDJ, the Cobb County Water System entered into an agreement with the Georgia Environmental Protection Department to produce an updated flood plain map for Cobb County. Even though the article said the “partnership will cost the county any money”, but someone will bare the cost - will it cost us more in water bills and eventually federal, state and local funds?

Also, where is FEMA in this process? - Are they in the loop when drawing Flood Maps? How will the local County flood maps be used? Will FEMA adopt them? Will they be used by insurers and mortgage lenders (who only use Federal Flood maps), or apply to Federal funding if floods occur?

FEMA may need to get involved after a while and hopefully the final maps can be quickly approved, easily uploaded and integrated into the Federal Flood Maps, but will that be another level of bureaucracy...

So in the end, FEMA, GEMA, GEPD and CCWS (and others?) will all get involved. I don’t object to the need for the maps (since if you ask everyone, they can’t tell you – via a map - what areas of Austell and Powder Springs were flooded in September 2009----which helps a prospective homeowner be aware of past floods), but who should be in charge and at what will be the final cost to you and me?

Are lenders making money on short sales and foreclosues?

We report - you decide...

http://www.youtube.com/user/fiercefreeleancer

Home Valuation Code of Conduct (HVCC) - Blessing or Curse?

Ok boys and girls - what's the answer?

Yep - you got it - it all depends....on who you ask.

Mortgage brokers, appraisers, and real estate agents are against the HVCC.

Mortgage lenders and appraisal warehousing companies are for it.

Why? Money, of course!

The HVCC establishes a middle-man (i.e., warehouse appraisal companies) which essentially receives the appraisal order from a lender, keeps a portion of the appraisal charge, and then hires the appraiser (for less than they used to receive) to perform the appraisal. It was established as a response to mortgage fraud during the past decade. There was a certain degree of collusion between mortgage brokers and appraisers to "make the appraisal work" for the sales price regardless of value just so the deal could close. Mortgage brokers and real estate agents only get paid when properties close.

Since established in May 2009, the HVCC has resulted in several appraisals (anywhere from 20-40% or more) not meeting sales price and therefore killing deals. Result: No income.

Mortgage lenders own stakes in these warehousing companies and thereby benefit from the recent surge in business. Stop the HVCC and - no income.

Oh, and some lenders are currently objecting to proposals in the financial regulation overhaul bill regarding the disclosure of how much of the appraisal cost goes to the warehouse company.

Source: WSJ article 6-18-2010, Page A6.

Bottom Line: It's not a perfect system - yet. This has made me more aware of the variance in appraisals between appraisers and how an appraiser who knows the local community has a better grasp on its direction, but still needs to follow specific objective and subjective guidelines. Since there is subjective influence, there will be variation between appraisals. But I favor the choice of an appraiser through warehousing that is located within a 10-15 mile radius of the property because they will have more awareness of what's happening closer to their home than to go 25 miles away and spot check a community they do not know.

I also favor the concept to remove the influence of the appraiser from the lender's control, but who should have a financial interest in the appraisal warehouse company? I don't believe these companies should be owned by the very people who have direct benefit over it control - lenders.

Update 8-5-2010: H.R. 4173, the Wall Street Reform and Consumer Protection Act effectively enables the termination of the HVCC in November 2010. That's both good and bad news depending on the future legitimacy/quality of appraisals and relationship between lender/appraiser. Let's hope that there is an arms-length transaction, appraiser is fair and knowledgeable of local market, and appraiser gets more of the appraisal fee for starters...

Update 12-18-2010: It appears that the Dodd-Frank Financial Reform Bill caused the Federal Reserve to implement new Appraiser Rules - We will see if the industry is better off or worse than HVCC was - http://realtytimes.com/rtpages/20101118_wallstreet.htm

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Loss of home is effective homelessness - our prayers should be with each one

Some quick notes...according to Mortgage Daily News

A very negative result of all the turmoil in housing and financial meltdown - over a million individuals and families are temporarily or chronically homeless....for whatever reasons (employment, health, or significant lifestyle change) some of these people are in shelters or on the street...

There have been an estimated 1.24 million foreclosures in the last few years (currently about 4.5 million other homeowners are delinquent or in foreclosure)...existing and new homes, 3.99 million and 210,000 respectively (not sure if that's high/low/normal)....131.2 million housing units in the U.S. in the 2Q10 (112.2 million were occupied - of the occupied homes, about 2/3rds (or 75.1 million) of those units owner occupied and 37.1 million rented (vacancy rate for rental housing is at 10.6 percent of rental units). The number of vacant properties has increased by nearly 400,000 units to 18.9 million in the last year.

FHA Penalizes Over 1,000 Lenders for Violating Regulatory Standards

Federal Housing Administration's Mortgagee Review Board (MRB) took action againt the 1,000 lenders believed to perform fraudulent or predatory lending practices.

Note:  The artile also mentioned the MRB suspended 905 other companies for one year for failing to comply with the MRB's annual recertification requirements and assessed $3,500 fines against 147 lenders which had been out of compliance but had cured that situation.

Go to the Mortgage Daily News story which addresses the details.

Viist HUDs website here to see details of the specific actions taken againt each lender including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.

Sorry, but nobody was executed or thrown in prison...

When there's lots of cars---in your neighbor's yard---who ya' gonna call?

Cobb County residents - call Code Enforcement 770-528-2180.


"The code allows up to 3 of any combination of cars, boats, recreational vehicles on a hardened surface. In the R-30, R-20, R-15, R-12, RD, RA-4, RA-5 and RA-6 districts, only one vehicle, one boat and one recreational vehicle (or any combination of such totaling three) may be parked in the rear and side yard areas on a hardened surface."

Inability to meet any of these requirements constitutes a violation.

But remember; when the trailer's rockin' don't go knockin!