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New Fannie Mae Appraisal Program: Helping or Hurting?

by Christie Cannon

New Fannie Mae Appraisal Program: Helping or Hurting? | Keeping Current Matters

Every home must be sold TWICE! Once to the buyer, and once to the bank appraiser if a mortgage is involved.

The second sale may have just become more difficult.

A new program announced by Fannie Mae may slow down the home-sale closing process by causing more disputes over prices between sellers and buyers.

In a recent Washington Post article they explained the basics of the program:

“Starting Jan. 26, Fannie plans to offer mortgage lenders access to proprietary home valuation databases that they can use to assess the accuracy and risks posed by the reports submitted by appraisers.” 

“The Fannie data will flag possible errors in the appraiser’s work before the lender commits to fund the loan, will score the appraisal for overall risk of inaccuracy and may provide as many as 20 alternative “comps” — properties in the area that have sold recently and are roughly comparable to the house the lender is considering for financing but were not used by the appraiser.”

Using the additional information provided by Fannie Mae, the lender can then ask for an explanation from the appraisal company for any discrepancies and request an amended appraisal.

This added step in the process of determining the price of the home to be bought/sold, could add time to the closing process and cost to the appraisal for the additional work.

Why is this happening?

Fannie Mae wants lenders to make informed decisions when agreeing to the amount of a loan that a buyer will be approved for.

“Excessive valuations create the risk of future losses to lenders and investors if the borrower defaults and the house goes to foreclosure.”

What is the process now?

As a seller:

You’ve put your house on the market, picked an agent who has helped you determine that the best price to list your home for is $250,000, and found a buyer willing to pay that price. The appraiser comes to the home and agrees your home is worth the asking price and writes their report. Everything is working perfectly!

As a buyer:

You’ve found your dream home, in the right neighborhood, in the right school district, with the perfect yard, at the high end of your budget, but all the pluses are worth it. You agree on a price and start daydreaming about living in your new home.

What happens after January 26th?

The lender submits the appraisal report to the new Fannie Mae program and they come back with “lower-risk comps” that value the home at $230,000. The lender then turns to the appraisal company to justify the $20,000 difference, adding time and frustration to the process.

If the lender does not agree with the reasons for the price difference they will not lend the buyer the amount they need to purchase their dream home and the amicable, agreeable sale turns into a heated justification of the higher price. The buyer may even have to give up on the home if the funding isn’t there.

An article by Housing Wire shares the appraiser’s point of view:

“The bottom line, appraisers say, is this could lead to delays to closings and higher costs, as well as a depression of prices in markets where prices are rising.

Appraisers complain that if they have to justify every step of their comps for their valuation, rather than those coming from the one-size-fits-all evaluation from Fannie, it will delay closing, throw off buyer and seller timetables, and delay real estate broker commissions.”

Bottom Line

The fear of some real estate practitioners is that if appraisers feel as though they are constantly being second-guessed, they may become more conservative in their assessments, impacting home values and slowing growth in the market.

Big Changes with Fannie Mae are Here

by Christie Cannon

There are several big changes with Fannie Mae this year (& last):

1. As of Dec 2014, Fannie Mae will offer 3% down (97% LTV) Conventional financing.  

Why not just go FHA you say...?  

- Remember that with FHA loans, the FHA MIP (Mortgage Insurance) is for the life of the FHA loan!  Conversely, conventional PMI (Private Mortgage Insurance) may be eliminated when the equity target is reached (usually above 20%).  This means, that a borrower may not be required to refinance out of their mortgage insurance at a later date, risking a potentially higher interest rate in the future.

- Also, traditional FHA loans come with an upfront FHA funding fee & higher monthly mortgage insurance cost.

..... which leads us to #2....

 

2. FHA has reduced their Monthly Mortgage Insurance from 1.35% to .85% oN FHA loans.

Despite that seemingly small difference, this has a fairly large affect.

Marcel Deitrich, Senior Loan Officer with Starkey Mortgage offered the following on the affect this has on a $250,000 FHA buyer:

What does this mean to the average FHA Buyer at $250,000?  It means a month ago, on a $250K FHA purchase, their monthly MI was $269.23.  When the change is implemented, it would drop the monthly MI to $169.52.  That is $99.71 in savings on a monthly bases.  This compares a $2,019.48 monthly PITI to a new $1919.77 monthly PITI. 

- OR - If a buyer was in their comfort range with a $2,019.48 monthly payment, at that same payment, they can increase their purchase price to $265,000.

This is a huge step to putting FHA loans back in the game. - Marcel Deitrich - 972-672-3246 - NMLSR #231135


3. FHA Loan limits for Collin, Denton, Dallas, & Tarrant counties have been increased to $310,500.

Where are Mortgages Headed in 2015?

by Christie Cannon

Where will Mortgage Rates be Headed in 2015?

Where will Mortgage Rates be Headed in 2015? | Simplifying The Market

We finished 2014 with the 30 year fixed mortgage rate at 3.87% as per Freddie Mac. This is very close to the historic lows in the spring of 2013.

However, the Mortgage Bankers Association projects mortgage rates to be about 5% by the end of 2015. The website Investopedia agrees and gives some perspective on the 5% rate:

“Barring another financial and housing market implosion, and if the economy continues to improve, expect interest rates to rise in the latter half of 2015. If they do jump to the 5% range it will be a modest hike when compared to historical averages. Rates will still be far below the approximately 8.5% 30-year fixed-rates mortgages have averaged since 1971 when Freddie Mac started tracking them. Rates averaged 6% in the years leading up to the recession.”

Here are the latest 2015 mortgage rate projections from Fannie MaeFreddie Mac, the Mortgage Bankers’ Association and the National Association of Realtors:

Interest Rates 2015 | Simplifying The Market

A Look Back & a Glance Ahead with Freddie Mac

by Christie Cannon

Freddie Mac's chief economist looks back & reexamines their 2014 predictions! Click here to read.  It is a great review of the US Housing Data from 2014. 

Their 2015 predictions can also be found here

- Christie Cannon 

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Christie Cannon
Keller Williams Realty
4783 Preston Road #300
Frisco TX 75034
972-215-7747
Fax: 214-853-4774
Keller Williams Frisco - The Christie Cannon Team - http://www.christiecannon.com

 

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