JohnsBlog (articles, news, thoughts, advice)

On May 1, the Home Valuation Code of Conduct, implemented by New York Attorney General Andrew Cuomo amongst others, was initiated onto the mortgage market. It requires appraisals to be ordered through management companies instead of directly through appraisers.  What this action brought about was a system in which mortgage brokers, bankers, realtors, and homeowners could have no contact with their appraiser, nor any choice in which appraiser did the appraisal on their home.  The supposed goal of act was to eliminate inflated values or any coercion on appraisers brought about my real estate agents or mortgage originators.  However, there are a pile of negative attributes which are a mountain high, and cast a shadow completely over the original intent of this act.  The things that are negatively effecting loan transactions and consumers I've listed below.  Please feel free to contact me if you can speak of others.

1)These new AMC's (appraisal management companies) are a new industry brought about overnight, and are having their pockets lined by legislation.  Is it no wonder that AG Andrew Cuomo holds and ownership stake in an AMC?  His pockets are being stuffed by his own bill.  These companies in most cases charge MORE than the appraisers used to charge, and all they are doing is simply taking appraisal orders and sending them to appraisers.  This is resulting in HIGHER costs to borrowers.

2)Appraisers are being paid less for their work.  I've been told by appraiser friends that one AMC offers to pay him $175 yet charges borrowers more than $400.  That means the AMC is making more than the appraiser, simply for sending an order, not doing any actual work.  The general AMC response to this is "appraisers will make it up in volume".  However, if an appraiser is in a rural area, they may not.  This may completely destroy some appraisers' livelihoods.  To the same effect, why should an appraiser who has spent years building their business be forced to work twice as hard for the same amount of money?

3)Many AMC's are run by former sub-prime mortgage company executives.  Still chasing easy money, they've gotten into the next fad of "dont work hard, but make money by ripping folks off".  These people in many cases started this mess, why should they now profit from the fallout?

4)Appraisal process is now held up.  In the past, as a broker I could work with appraisers I knew charged a fair amount, did a great job for my clients, and could get an appraisal report back to me in a timely manner with an open line of communication if things were held up for any reason.  Now the loan process is at the complete mercy of the AMC.  They're going to get their same fee, and have no incentive toward work quality.

5)Lets face it, in every profession there are the good guys and the bad guys.  You choose a bank based on their merits and offerings, a broker based on customer service, knowledge, price, and products, and (in the past) an appraiser based on the quality of their work, cost, and efficiency.  Now, there are some appraisers who may be new to the business, or are simply not very good, that will be doing work for consumers based on no merit or quality of work....simply because they are the lowest bidder (which the AMC likes of course, because it means more profit for them!).  You could have an appraiser that's not worth the paper it's printed on, and there's nothing you can do about it.

6)Lenders have approved AMC's, of which they'll only accept appraisals through.  Wells Fargo, for example, uses RELS.  Flagstar uses imortgage.  Cardinal Financial uses Streetlinks.  While every appraisal management service is supposed to do the same exact function, they all have different fees, different processes, etc, and the lenders will not allow the appraisals to be interchanged.  What this means is that if you're lender is delaying, or if you are not approved after you've paid a $400 appraisal fee as a consumer, if you want to move your loan to another lender you'll have to pay another fee with that other lender.  You still have no control over who does it, so if the new lenders appraisal comes in lower, you may be out of luck.....want to try again elsewhere?  Guess what, that's another appraisal fee....at $400/each, you're up to $1200 in a very possible scenario.  Now answer this question....how does this help consumers, who often refinance for the very reason of SAVING money?

I think the above are the major problems with the new HVCC policy, and I encourage everyone to petition for changes to this bill.  While I think dishonest brokers and appraisers alike should be forcefully removed from the market, I think HVCC was the wrong course of action.  Please do a google search for "HVCC petition" and let your voice be heard to have some major changes made to HVCC.  I would love to see a more honest mortgage industry, but certainly not at the expense of my clients.  Even simple changes, wherein ANY appraisal management company (they'd have to be regulated, licensed, and audited of course) could be used for ANY lender.  That's a simple fix, but they won't change anything without outrage and protest....I urge you to express outrage against the current form of HVCC and seek change by letting your voice be heard.

www.petitiononline.com/hvcc/petition.html

On what's being deemed "Black Wednesday", we saw a mortgage bond plummet like we've not seen in years, and the low interest rate market you've become accustomed to was turned upside down.

Rates have been in the 5's (still remarkably low) but now appear to be in the decent into the 4's again.  This has been a great week for bonds, and if the rally holds, we'll be into the high 4's again soon on low-fee mortgage.  Great news to all those folks that have been held up in underwriting...if you've hung in there kudos to your patience.  Fortunately many of my clients were locked or are in long-term situations where they didn't need to lock and/or close immediately....good news, there.  For the few that have waited on extended UW, a great big thank you!

On other news fronts, it looks like Obamas healthcare plan is getting some very negative feedback, and his ABC infomercial got horrible ratings....all good news in my opinion.
     It's not that Im not for healthcare reform (heck, I just took a trip to the ER to get stitched up after a hockey wound without insurance....those bills are painful!!!), however I dont think there's been a proper analysis of the costs and how things will be paid for.
    So far, everything that's cost a lot and been approved with little oversight has done very little, if anything, for the economy.  I think the bill must be scrutinized and drastically changed from it's current form.  Hopefully the people and their representatives will make sure this happens!

Onto the HVCC front....this little, horrible idea of reform looks to be hitting a wall....with consumer complaints mounting and lobbying for a moratorium increasing, it looks like some changes will come to this bill very soon....THANK GOODNESS!  I myself have phoned and e-mailed the housing finance agencies and the NY Attorney General Andrew Cuomo (who started the HVCC bill) voicing my opposition in its' current form, and it looks like actions such as this are paying off.

Housing isn't at the bottom yet, but we're seeing some encouraging signs.  Rates should be wonderful for a short while longer, but not forever, so if you're a fencesitter waiting for the "lowest rate", get in there immediately and put an application in with your mortgage professional (or if you're really, really smart and appreciate wonderful service, with me!---there's my shameful plug) and get the process started so you can lock in once they are at or near the bottom.

More updates to come soon, including a site makeover within the next week or so, STAY TUNED!

My oh my it's been awhile.  Life's busy with rates low and the purchase season in full swing!  Rates have gone up quite a bit over the past couple weeks, suddenly and drastically...never a good combination! 

In addition, it seems like credit requirements and underwriting guidelines are getting more and more stringent, making even the "easiest" loans seem difficult.  It's quite a frustrating time for me right now, with submitting loans and being forced to wait a month or more to get them done for my clients....I remember I used to be able to close a loan in 2 days...those times weren't that long ago!  Hopefully the market will shift soon and we'll see a little bit of light at the end of the tunnel....Im so frustrated but I can only imagine how clients feel!  It's good to know we're still better than our competition, but I want better!

Perhaps the biggest piece of news in the business comes in the form of the new HVCC legislation that took hold May 1...please be sure to read my separate HVCC blog, as this is a very disconcerting item which has the potential to be very, very harmful to my clients and the housing market as a whole...not a good thing!!!

For now, things are pretty difficult, but the summertime is nearly here, so at least we've got some warm weather, sunshine, and beach weather!  That usually makes things a-ok!