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To continue from last week when I was telling you about the ill’s of the HVCC. This means that the appraiser no longer has the time or desire to do the research to make an educated assessment of value. This is not the independent appraiser’s fault it is just simple economics. Our government was on the right track when the HVCC was developed. They were trying to stop collusion by the involved parties to a transaction. And in my opinion they almost got it right. The problem is the independent appraisal companies are having trouble getting appraisers to accept the fee and therefore, are having trouble getting the local appraisers to do their appraisals. So they bring in an out of area appraiser who doesn’t have the time nor desire to figure out the accurate value figures for a subject property. Both the National Association of Realtors and the Mortgage Broker Association have lobbied to get the HVCC rule changed but up to now, no one in Congress or in President Obama’s cabinet appear to be listening. What is the solution? Change the rules of HVCC to set the fee that the third party provider can charge for referring an appraisal out and give the bulk of the fee where it rightfully belongs, to the appraiser. I agree with regulation to prohibit another meltdown but stopping the process by muddying up the process is not the answer.

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Have you ever heard of the Home Valuation code of Conduct or as its better known “HVCC”? If you have done any conventional mortgage business since June of 2009 or FHA mortgage business since January 2010, you have not only heard about it you have undoubtedly been affected by the agreement. Essentially HVCC is an agreement that was drawn up by the Office of Federal Housing Enterprise and Oversight that requires the GSE’s (Government Sponsored Enterprise’s) namely FNMA “Fannie Mae” and FHLMC “Freddie Mac” to only accept appraisals that are done by a company that is independent of the loan process. Bottom line is any entity (lender, broker, escrow, title, etc) that is listed on the HUD 1 Settlement Statement as being paid at closing cannot order the appraisal. Why is this a bad thing? Simple, we now have national third party appraisal companies that have cropped up and lenders are directing their sales people and their brokers to use. They charge approximately the same price for an appraisal (350-400 dollars) for a standard URAR appraisal. BUT they only pay the appraiser, who does all of the work, approximately half of the fee. This has put the independent appraiser in a position to have to do twice the work to make what he/she was making in the past. Why is this important? I will finish the thought in next week’s Blog.

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Happy New Year to all of you, I wish I was starting the first blog of the year with better news. I sat in on a panel of mortgage industry experts earlier this week and we all came up with the same conclusion. The U.S. government and large banks (B of A, Wells Fargo, Chase etc) are trying to run brokers and small bankers out of the mortgage business. HUD’s proposed a new rule for Full Eagle mortgage lenders net worth requirement is set to increase from $250,000 to 2.5 million. This will effectively eliminate all but the largest mortgage companies. In addition, HUD wants to eliminate the Mini Eagle or correspondent program all together. This will make the lender responsible for approving correspondents, brokers, or licensees. What this does is effectively run the broker and small banker out of the FHA market. Why? Supply and demand. The large Banks will get to choose who they do business with. Who will they choose? A broker network where they have to give up a portion of their profit to the brokers or their in house branches where they keep all of the profit. My bet is the latter. What will this do to the consumer who wants an FHA loan? It will force him/her to accept the fees, points and processing time that is given by these few lenders. In effect a monopoly will be achieved and it will drive brokers from the market and cease all real competition. I am a firm believer in survival of the fittest but I also believe in consumer rights. If HUD’s proposal does get passed then the only loser will be (as usual) the little guy. I recommend you email your congressman or President Obama and let them know that this proposal cannot be passed.

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On October 14th, legendary UCLA basketball coach, John Wooden celebrated his 99th birthday. He is an extraordinary man! In the rough economic times that we live in I thought it would be prudent to give you the keys to Wooden’s success. He speaks of them as his “12 Lessons in Leadership”. The beautiful thing about his ideas is that they are all free and all still applicable in business today. Take a look and see if you can use any of his Lessons to generate business.

1. Good values attract good people.
2. Love is the most powerful four-letter word.
3. Call yourself a teacher.
4. Emotion is your enemy.
5. It takes 10 hands to make a basket.
6. Little things make big things happen.
7. Make each day your masterpiece.
8. The carrot is mightier than a stick.
9. Make greatness attainable by ALL.
10. Seek significant change.
11. Don’t look at the scoreboard.
12. Adversity is your asset.

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I was asked yesterday what a deed in lieu of foreclosure was and is it a good alternative to a short sale? A deed in lieu of foreclosure is where a homeowner contacts his/her respective mortgage company and essentially deeds the house back to the mortgage company before the mortgage company forecloses due to non payment. A short sale is when a homeowner finds out what the market price is for his/her house, usually with the help of a realtor, and if the value of the home is less than what is owed they try to sale the home on a “short” of value “sale” or short sale. The lender that is carrying the paper has to agree once an offer comes in which usually takes about 2-4 months. Which one is better? For times sake it is the Deed in Lieu of foreclosure. But for liability sake it is a Short Sale. When a lender agrees to a short sale they almost never go after the homeowner for the deficiency or loss incurred by the lending institution. With a deed in lieu, the homeowner opens themselves up to a possible deficiency judgment that forces the homeowner to take the left over debt with them and pay it off over time. President Obama is supposed to introduce legislation that will make it impossible to get deficiency judgments against homeowners who short sale their properties.

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With the advent of the Internet, applying for a mortgage has become a simpler process. There are various online mortgage lenders who offer facilities like affordable fees, prompt response and opportunity to furnish your financial details online.

There are multiple benefits of applying for an online mortgage. However, there are some downsides of requesting for a mortgage online as well. You must be leery about these shortcomings. Before requesting for a loan, you must check the background of the lender. You might also face some problems which you would not have faced if you dealt directly with the lender. The five tips given below would help you successfully apply for a mortgage online:

Utilize the search engines to find online mortgage lenders

Search engines like Yahoo!, Google or MSN work as outstanding resources to find online mortgage lenders. Just input the keyphrase “online mortgage” and you would come across a variety of reputable lenders like LendingTree, Ditech, E-loan, Wachovia, Countrywide and Bank of America. Various conventional mortgage lenders also provide the facility to apply and qualify for mortgages online.

Utilize other sources to get your online mortgage lender

The Internet is not the only source to locate online mortgage lenders. You can also find them on newspaper advertisements, magazines, e-mails and television commercials. The bank or credit union in your area can also help you with online mortgage application facilities. This helps you since you already know their past performances.

Perform extra research on online mortgage lenders

If you’re keen to work with a lender that you’re not acquainted to, you must perform additional research prior to sending your application. Be diligent in your approach. You must stay away from predatory lenders. They often use ploys like bait and switch and teaser rates to attract consumers. Always remember to go through the fine print.

Prepare with your financial details

When you’ve made a decision on the lender that you would work with, make sure that you’re ready with all your financial details. The online lenders would ask for similar details that you would have furnished to a traditional lender. These include your income, your debt, your investment and savings. If your source of income is unstable, you must mention it too.

Fill out the online application
As soon as you have all the details ready, the following step is to fill out the online application form. The process differs from one website to another. Most of the time, it would just require 1-2 minutes. Websites like Ditech.com and Lendingtree.com would receive your details and forward it to various lenders. As a result, you can receive multiple rate quotes from the lenders. Other websites would have somebody talk to you to evaluate your loan options. They can also e-mail you the mortgage rate quotes from several lenders.

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As we wind down towards the end of 2009, it is important to note which direction interest rates tend to go as we inch closer to 2010. After Thanksgiving the month of December sees Mortgage Bond traders on Wall Street tending to take more time off as Christmas approaches, with the week between Christmas and New Years being a ghost town for all of Wall Street. What does this mean for people who are trying to figure out when the best time to lock the interest rate on their loan is? The easiest way to describe this time is “be cautious”. Rates normally go up during the last month of the year but there have been exceptions. Last year being one of them, we saw rates slightly dip during December but if you look at a bond chart you will see the rates were all over the board. If you don’t have time to watch the market or you don’t understand how the bond market relates to FHA or Conventional (FNMA, FHLMC) interest rates, then by all means follow my Twitter account, @Hollander_FHA. I post a tweet a few times a day letting my followers know what is happening with the market. If you are unable to follow then my recommendation is to lock in your rates before Thanksgiving.

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Why is the mortgage industry in the mess that it is in? The simple answer is we allowed the fox to guard the hen house. I went to the Mortgage Bankers Conference this week in San Diego and the pervading theme that I heard from lenders that I spoke to was how do we stop mortgage fraud? My response was to stiffen the penalties to all of the individuals that are involved in the frauded transaction. Mortgage Bankers and Brokers need to start policing themselves before the President Obama, HUD, and our state governments do it for us. How do we do it? We need to impose strict and swift penalties for those few people in our industry that think that the fraud short cut is an acceptable way to do business. In addition, we need to urge our legislators to criminally penalize those people who are found guilty of the serious crime of fraud. We need to urge our government to impose stiff penalties and jail time for borrowers who commit fraud as well. In most cases I am not for government imposing its will in our industry but it is obvious that we can’t do it alone. With the NMLS or National Mortgage Licensing System being implemented this year it will help but we need some muscle. While I was in San Diego I was amazed to see that several companies are already starting to advertise VOE or Verification of Employment only loans. Can a stated income loan given to a W’2 borrower be far behind? If we don’t safe guard our own industry from unscrupulous bankers, broker, and borrowers can we really blame the President Obama and Congress for making up rules for us, not with us? Right now FHA loans have taken over as the #1 viable option for people to get a small down payment loan. HUD has not changed its view of how a borrower and a property should be underwritten. As a DE Underwriter I know that HUD wants full documentation in order to safeguard against fraud. The stated income stated asset loans, SISAs, or “liar’s loans” were not the only reason that our economy is in recession but it was a contributing factor and the backlash against us has lasted for over two years now. This weeks MBA conference’s attendance was the smallest I have seen. I hope that we have turned the corner and learned from our mistakes.

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It has come to my attention that there is a bill that has been floating around that congress is calling for the banishment of Yield Spread Premium or YSP paid to Mortgage Brokers. YSP is the fee that a lender/bank pays a Mortgage Broker to either do a certain volume of business or sell a certain interest rate. While this may seem a good idea up front, as usual, Congress has missed the mark. I believe that there does need to be YSP regulation, but prohibiting the payment to brokers is only going to make the consumer pay more to get their financing. Instead of a consumer paying 1 point in origination they will have to pay 2 or even 3 points to get a deal done. Not to mention the fact that the banks and lenders who do not have to disclose YSP are immune to the regulation because they are not required to disclose YSP on a Closing Statement. What it amounts to is President Obama’s big plan for regulation in the mortgage market is being put solely on the Mortgage Brokers and very well could lead to more fees to the consumers. And once again the “little guy” will get squeezed while the big banks laugh all the way to Wall Street.

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