Appraisal Pros Prose

My grandson Oliver's Angel Day was July 25, 2008. He was only seven months old when he was taken from us. I miss him so, and that pain and sorrow lingers always just below the surface.....thank you to all for remembering my family in your prayers....

Now, in a press release by the Federal Reserve on July 14th, the final rule to amend Regulation Z (Truth in Lending) was outlined. The important bullets include:

• Lenders are prohibited from making a loan without regard to the borrower's ability to repay the loan from income and assets OTHER THAN the home's value. And, in the future, the homeowner does NOT need to prove that a lender violating this prohibition by demonstrating that it is part of a "pattern or practice."
• Creditors are required to verify the income and assets they rely on to determine the borrower's ability to repay.
• Prepayment penalties are banned if the payment can change in the first four years of the loan. For higher priced loans, the prepayment penalty period cannot last for more than two years. This is a far stricter rule than originally proposed.
• Creditors are required to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
• Creditors and brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
• Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. Servicers are also now required to credit the consumer's loan payment as of the date of receipt.
• Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling. Currently, only early cost estimates are required. Consumers cannot be charged ANY FEE, except a reasonable fee for obtaining the consumer's credit history, until they have received the early disclosures.
• Advertising must become more truthful and can no longer present as being "fixed", when indeed the rate can change under the fine print.

These new rules take effect October 1, 2009. The single exception is the new escrow requirement, which has been extended to 2010, to allow lenders to establish new escrow systems, as needed.

And, just as important, President Bush signed into law the most aggressive package to combat the country's housing crisis on July 30th. I am waiting for someone smarter than me to break the sections down and explain in simple English before I relay the news to you!

So, 'til next time, it's all good!

Last week, The Wall Street Journal reported that US Senate lawmakers, increasingly aware of the role of housing and the economy will play in the upcoming elections, took a major step towards passage of a broad package of legislation Tuesday.

They voted to limit debate on the package that includes tax relief, a program to refinance up to $300 billion in mortgages for cash-strapped borrowers and change the FHA to ease the agency's ability to assist homeowners.

Both Democrats and Republicans are expected to support the bill, despite the threat of a veto from the White House.

Part of the bill calls for lenders to voluntarily write down the value of a distressed loan in order for the homeowner to qualify for the new FHA-backed loan. In return, borrowers would have to share future appreciation with the federal government.

In other news, Countrywide's troubles mount as officials in three states filed separate legal actions against the mortgage lender. Bank of America is expected to purchase the Countrywide Financial Corp. by July 1st. California, Illinois, and Washington have filed in their state courts, alleging that Countrywide used "misleading marketing practices" to steer buyers into "risky and costly loans" to satisfy Wall Street's call for loans that could be packaged into securities. The state of Connecticut is expected to follow shortly by filing its own suit, alleging that Countrywide is "falsely promising refinancing opportunities and lying to consumers about possible risks", says Connecticut Attorney General Richard Blumenthal.

And, lastly, Fannie Mae and Freddie Mac, have scrapped the restriction of demanding higher down payments from buyers whose properties are located in a "declining" market area. Fannie Mae's senior vice president , Marianne Sullivan, said the policy was reversible because of improvements to the company's automated underwriting systems, allowing it to "assess each loan more precisely."

And, so, 'til next time, it's all good!

Well, I have some good news and some bad news.

First the good news - home sales are up in inner-city Detroit.

The bad news is the homes are all foreclosures, for the most part. Sales are also up sharply in Las Vegas, Sacramento, Ca., and Fort Myers, Fl., as investors snatch up these properties at rock bottom prices - knowing that the value has nowhere to go but up!

Thomas Lawler, a housing economist in Virginia, says sellers "have moved into the acceptance mode" and homes are being priced to sell quickly. He says, "I think it is the first stage of good news for the market."

It is believed that the nationwide inventory of foreclosed homes is nearly half a million homes. Many lenders were slow to slash prices, hoping to avoid huge losses. But, more lenders are deeply cutting prices, as the cost of taxes, insurance and upkeep grow.

For the first four months of 2008, home sales in Detroit, excluding suburbs, were up 48% from a year earlier!

This information came to us from the Michigan Association of Realtors. The average home price dropped 56%, and many feel that there will be no further price drops.

Visit our webpage, Detroit Properties Available, to find a bargain for yourself before the gravy train moves on!

Also, on a happy note, some top US bank regulators are proposing that New York Attorney General Andrew Cuomo's plan to address inflated appraisals should be dropped. It is believed that his plan unfairly penalizes the appraisers, rather than the brokers and lenders that threaten to blacklist appraisers that cannot "hit" value.

It is also believed that Cuomo's plan would add hidden costs and fees to an already overpriced mortgage cost system.

Comptroller of the Currency, John Dugan, suggests that Cuomo's plan violates federal law. He states, "The code would impose a dramatically different new set of operational standards for appraisal practices on a national scale that would conflict with and effectively supersede the comprehensive federal scheme established by Congress."

How I love to end the week on a happy note! 'Til next time - it's all good!

Forbes.com reports that the savior of the mortgage mess will be the FHA, in partnership with lenders willing to work with it. Lenders are scrambling to become FHA approved, as the Federal Housing Administration is fast becoming the bank's best friend.

Some major US lenders are again enticing risky borrowers with attractive terms and as little as 3% down. Wells Fargo is looking for borrowers, with some help from the federal government.

Though "FHA delinquencies tend to be quite high," states Alex Pollock, former president of the Federal Home Loan Bank of Chicago. "They are substantially higher than the prime market - not as high as the subprime market, but nonetheless quite high. You're in a sector of the market that is by definition risky."

Bill Glavin, special assistant to FHA Commissioner Brian Montgomery, expects the FHA to increase loan volume by 162% in the fiscal year 2008.

From Wells Fargo to Countrywide to Bank of America, lenders are actively promoting FHA-insured loans through all of their sales channels.

The FHA's role in the market "will clearly fill the void of subprime financing," says Vicki Wagner, an analyst at Standard & Poors. Wagner said an FHA loan "by definition, looks and acts like a subprime loan."

On the same note, Cyril Moulle-Berteaux, managing partner of Traxis Partners, LP, a NY-based hedge fund firm, writes in his Wall St. Journal On-Line op-ed that "The Housing Crisis is Over", as of May 6th.

His indicators:

• Though being at the bottom does not indicate a return to booming prices, the trend is no longer getting worse.
• This current housing bust is the better part of three years old. Home sales peaked in July, 2005. He quotes home sales down 63% from peak levels of 1.4 million. When adjusted for population growth, housing starts are off 50%, falling to 1982 levels.
• Residential construction is near 15 year lows.

How, then, is the crisis over? Homes are once again affordable and unsold inventory will continue to decline and will peak out in a couple of months.

So, all of that sounds wonderful to me! And, we are FHA approved in 14 counties! So, give us a call when you get to be an FHA lender!

And, 'til next time, it's all good!

The latest word out of Washington, D.C., last week states that the downward trend in the housing market will continue until early next year!

That consensus is far gloomier than the one just a few months ago, when it was thought that the bottom would be reached in late summer or early fall of this year. But, the economists who convened at the spring construction forecast conference of the National Association of Home Builders disagreed.

The association's chief economist David F. Seiders says, "Foreclosures keep getting worse. Where in the world does it stop?"

The latest S&P/Case-Shiller Home Price Index shows that new and existing home prices fell 12.7% in February 2008 from just a year ago.

For those trying to sell their home, that means adding incentives like seller financing or lease options, pricing their home below the competition (which is nearly impossible with all the bank owned properties on the market!), and marketing aggressively.

But not all economists have such a gloomy outlook on the future of the housing market. Nariman Behravesh, chief economist of Global Insight believes that there is now a substantial amount of capital out there to fix the subprime mess.

And, James Glassman, managing director of J.P. Morgan Chase & Co., believes the current mess is partly due to creditors overreacting to the subprime mortgage crisis, leaving only those with cash saved able to buy homes. He states that the overall economy is sound and the crisis will subside as credit becomes freer and home prices stabilize. "The wheels aren't coming off the wagon," he said.

And, so, take your pick of whose opinion is correct.....and, 'til next time, it's all good!

From today's Wall Street Journal comes another possible program to assist the struggling housing market and those families a step or two away from foreclosure.

This plan would allow homeowners to receive federal loans to pay down as much as 20% of their principal. The plan was introduced by the Federal Deposit Insurance Corporation to help stem the rising tide of foreclosures.

The success of the program hinges on the willingness of mortgage servicers and investors to agree to restructure those loans in trouble, as well as to pay the financing cost of making a federal loan.

The FDIC believes that "only the federal government is in a position to help arrest the downward cycle in housing markets by facilitating temporary aid to borrowers facing financial difficulty and encouraging widespread restructuring of unaffordable mortgages."

The FDIC Chairperson, Sheila Bair, did acknowledge that the firms willing to service the program would receive some benefit. But those same firms would be required to cover the financing costs and would have to subordinate their own claims to the federal government if they choose to take part in the program.

Right now, the Bush administration, lawmakers, and industry and consumer groups are in the process of being briefed on the program by the FDIC. Ms. Bair states that she cannot foretell a response, but hopes the program will receive bipartisan support.

And I say - please pass this program and any other ones on the table to get this economy moving again!

So, 'til next time, it's all good!

Earlier this month, the Wall Street Journal online Guide to Property reported a new problem with a growing number of borrowers. Those that can afford their mortgage payments are also walking away from their homes.  Economists are hoping that this is just a small issue, but the numbers appear to be gaining. Homeowners are deciding that they no longer want to pay on homes with negative equity; that is, they owe more on the property than the current value. Especially hard hit are those who purchased property to flip, and the tough credit market has made it next to impossible for would-be sellers to find buyers.

Walking away from a home used to be seen as a last resort, but the trend appears to be taking hold nationwide. Also, the number of suspicious fires at homes due to be foreclosed upon is on the rise. California seems to have the largest number of fires per capita on soon-to-be foreclosed on properties.

On a happier note, the Congress appears to be closer to putting through some programs to assist delinquent borrowers in an effort to revive the housing market.

The current administration has been under steady pressure to pass additional legislation to help struggling homeowners. Mr. Bush is wary of government over reaction and insists on moderate expansion of federal assistance for lower-income home buyers only.

Lawmakers are hoping to put through some plans that would prompt lenders to take some loss, though not as much as if the property were to be foreclosed on. Progress on the bills is expected to become more aggressive after the Congressional Easter Break.

So, 'til next time, it's all good!

Americans are not just behind on their mortgages anymore....now we can't pay our car payments or our heating bills, either.

Besides leading the nation in home foreclosures, Nevada has seen a 50% increase in deliquent utility accounts from one year ago. In New York, there has been a 12% increase in deliquent utility bills in the last 90 days. Many of the midwestern states do not allow heat to be shut off during the winter months, so families use the opportunity to let the bill slide for a month or two so they can pay their mortgage and/or car payment.

With Michigan having the highest unemployment rate in the nation, and some of the highest heating costs, families are struggling to keep up with their utility payments.

Though it seems that natural gas is super expensive to heat with, propane and heating oil are even worse! And, because the companies that furnish propane and heating oil are generally smaller and not regulated, they do not offer shut off protection programs.

Last spring, 1.2 million households were without heat after being shut off for nonpayment. Those families were an average of $850 behind on their payments and many were unable to scrape together the balance due before this winter hit and so still do not have heat!

Mark Wolfe, executive director of the National Energy Assistance Directors' Association, states "We're back at the point of crisis again this winter." Congress is considering adding $1 billion to the existing $2.57 billion funding for heating assistance under the Federal Low Income Home Energy Assistance Program.

Gosh, I can't wait for spring!

'Til next time, it's all good!

Deb

I have talked before about Michigan helping Michigan....it is a point that I cannot stress enough, it seems.

We opened our doors two years ago in April, and have contacted literally thousands of Michigan companies. We asked for one or two orders per month from each of our new contacts....not too much to ask, is it? One or two orders per month from each of our new contacts would not put their current appraisal company out of business and would give us the boost in sales that we need as a relatively new startup. We received some response to our request, but not nearly enough!

I say again - "If Michigan won't help Michigan, who the h*ell will?"

Every business in Michigan has the responsibility to help each other, or none of us will survive! Send us work - we will not disappoint you! Get out of your comfort zone a couple times a month - it will do you good to talk to and to meet new people!

On the same note, Senator Clinton announced in January her plan to assist homeowners that are in jeopardy of losing their homes to foreclosures; the Mortgage Refinancing Initiative Act. Clinton says that those states with the highest foreclosure rates will receive the greatest assistance. (Michigan is number 1 - not something to be proud of in this case!)

Clinton's plan includes a 90 day moratorium on subprime foreclosures, a five-year freeze in rates on subprime adjustable rate mortgages, and $30 billion in assistance to states and communities to fight foreclosures and offset the costs associated with mounting home vacancies.

Clinton states that any plan to jumpstart the economy is useless without tackling the foreclosure crisis.

And, I state, Amen to that!

So, 'til next time, it's all good!

Deb

Hhhmmm, this is an interesting twist on the whole real estate mess. The city of Cleveland, Ohio, is suing 21 of the nation's top lenders for violating Ohio's public nuisance law. Mayor Frank Jackson, along with his Law Director Robert Triozzi have announced that the city is seeking damages from the lenders for their part in the mortgage meltdown currently plaguing the US.

Jackson and Triozzi allege that underhanded lending practices have wreaked havoc on Cleveland's neighborhoods, creating a public nuisance.

Mayor Jackson claims that it is extremely costly for a city to rebound from the declining tax revenues caused by the fallout of foreclosures and believes that the 21 lenders should be responsible for partial reimbursement to the cities affected by their reckless lending practices.

The 21 defendants named in the suit are as follows:

• Ameriquest Mortgage Company
• Bank of America Corp.
• Bear Stearns Companies
• Citigroup, Inc.
• Countrywide Financial Corp.
• Credit Suisse (USA)
• Deutsche Bank Trust Company
• Fremont General Corporation
• GMAC-RFC
• Goldman Sachs Group
• Greenwich Capital Markets, Inc.
• HSBC Holding, PLC
• Indymac Bancorp, Inc.
• J.P. Morgan Chase Co.
• Lehman Brothers Holdings, Inc.
• Merrill Lynch & Co, Inc.
• Morgan Stanley
• Novastar Financial, Inc.
• Option One Mortgage Corporation
• Washington Mutual, Inc.
• Wells Fargo & Company

This is the second lawsuit of its kind filed in 2008. The City of Baltimore also announced that they are suing Wells Fargo Bank, claiming that the lender harmed Baltimore's African American and minority communities and created high rates of foreclosure with unscrupulous lending practices.

So, the band plays on....

'Til next time, it' all good!

Deb