Knightlines Mortgage Services, LLC

Whether you live in Bonita Springs, Florida (Lee County) or Eustis, Florida (Lake County) or even Palm Beach Gardens, Florida (Palm Beach County) or anywhere in the USA for that matter, your needs to finance a home loan mortgage may be killed thanks to a wonderful idea called Home Valuation Code of Conduct, or HVCC.

What is HVCC? Quite simply it is government intervention that forces a total hands off involvement of the appraisal process in determining a property value for the purpose of financing.

Who is hurt by this? The Appraiser and the borrower.

The Appraiser:

1. Forced to join a management company that will collect up to 40% of the appraisal fee. Yes, that is right.  The appraiser will now lose almost 50% of his/her income by being forced to join in order to keep working.
2. Only targets appraisers.  Other valuation models, such as AVM (Automated Valuation Models) and BPO (Broker Price Opinions) are not affected.  This will lead lenders to accept these values (which are less accurate) due to the less restrictions.
3. No communication between the broker or lender or anyone else that stands to earn money from the deal.  Single handedly destroyed all relationships with these entities literally overnight.

Borrower:

1. If a new lender is needed, a new appraisal is needed.  In the past, the Broker could simply submit their appraisal to the new lender.
2. Increased time to fund loans.  Lenders and Brokers can no longer communicate with Appraisers to expedite orders, which means longer rate locks (IE Higher interest rates).
3. Forced to stick with current Lender even if not what they want because of increase fees to having to obtain a new appraisal.

And there is one big issue that surrounds this whole crazy plan… what is the property worth?  Well, now without the communication from the broker or lender, an appraiser is left to appraise the value of the property.  Sounds good in theory, but let’s look at reality.

Appraiser is given an order to appraiser property 123 Main Street, Anywhere, USA.  Appraiser is not told the loan amount or an estimated value on the property. (PROBLEM 1: IN THE PAST, AS A COURTESY, THE APPRAISER WOULD CONTACT THE BROKER TO SAY YES OR NO ON THE ESTIMATED VALUE BEFORE WASTING ANY ONE’S TIME OR MONEY.)  Appraiser determines value of property, but to keep in good favors with the management group and to avoid future legal actions for why they valued the property at $x.xx shaves several dollars off the top.  (PROBLEM 2: THE ORIGINAL VALUE MAY HAVE BEEN THE RIGHT NUMBER TO DO THE DEAL, BUT TO PROTECT THEMSELVES AGAINST A NOW UNKNOWN, THE DEAL IS DEAD.)

Real life scenario: Borrower wants to refinance house.  Eligible for RefiPlus, so we can go to 105% of the appraised value.  Appraisal was ordered.  Cost $400.  Original appraisal cost before HVCC $350.  (Appraiser needs to charge more because he has to pay someone now.)  We needed at a minimum $x.xx to make the deal fly, but appraiser does not know this.  Appraisal took over one week to obtain, when in the past took only 48 hours.  Appraisal is returned with a value of $10,000 less then $x.xx.  Deal is dead.  Borrower is out $400.  Broker is penalized by lender for fallout of locked loan.

Had this been pre-HVCC. The appraiser could have said it will be a tight deal on the value and let the borrower decide on whether to proceed.  Now, the borrower is out $400 and had no decision.  Pre-HVCC, the appraiser would have looked harder for comps to get the value that was needed just to keep the relationship with the broker/lender. (There is nothing wrong with this provided that the comps are there and justifiable.)  Pre-HVCC would have allowed the borrower to get a 15-21 day rate lock offering a lower interest rate, instead of a 30 day lock or floating the rate in the current volatile market.

HVCC is a big deal when it comes to financing your home.  It costs you, the borrower, more money.  It eliminates your options to shop with multiple lenders when using a broker, which means you might not be getting the best deal.  It is just all around bad news.

Help us help you in getting your rights back when financing your mortgage loan.  A moratorium is being requested for 18 months.  Should this happen or even if it does not, contact your state legislature to voice your opinion on the issue.  Or take the time to sign a petition against HVCC.

I am stealing that line from Neil Cavuto of Fox Business Network.

In a recent broadcast of Fox News, Cavuto mentioned how someone asked him about mortgage rates.  The person was hesitant to buy a new house because mortgage rates went back up.  Cavuto asked him what he was going to do… wait to see if they go back down was the response.

Cavuto, in his off tangent thinking, begins to share how “Damn” young this guy is.  But his answer to the potential home buyer was “5.25% is pretty good.”  Then he proceeded to tell the young man to “Shut up.”

Why did Cavuto tell him to shut up?  The answer is pretty simple.  ”5.25% is pretty good.”  Remember when mortgage rates were double digits.  Remember when prime was over 20%.  Remember when…

Most people, if they think hard enough, will remember those days.  Now, doesn’t 5.25% or even 5.75% sound “pretty good.”  Yes, it does.  And yes, 4.75% sounds better.  Unfortunately, those days are in the past, and soon you will be saying I remember when rates were 4.75%.  For those of you who waited to see if rates would go any lower, are now going to say, I remember when rates were 4.75%, but all I got was a 5.75% rate.  But you know what?  That is still “pretty good” compared to what it could be.

So what is the moral of this story?  It is shut up about the rates.  They are going to be what they are.  It is only a matter of how long does a borrower want to wait to lock in their rate.  4.75% is gone.  5%+ is in.  It is still a “pretty good” rate.

Oh, and to put this into monetary terms, a $150,000 mortgage at 4.5% over 30 years has a payment of $706.  The same mortgage at 5.25% has a payment of $828.  That is roughly $36 per .25% increase to the rate.  That breaks down to just over $1 per day per .25% increase to the rate.  Can you afford an extra $1 per day to go to your mortgage if rates went up .25% tomorrow.  If the answer is “No,” then you need to do something today.  If the answer is “Yes,”  then can you afford a full 1% increase (or $4/day)?

Each day you spend watching the rates go up is just another dollar that you could have been saving.

If you want to watch the Cavuto news clip, click here.

I have said it once.  In fact, I have said it more than twice.  And now, I am saying told you so.

Just two days ago, mortgage interest rates were still under the 5% barrier at 4.875% for a 30 Year Fixed Rate Mortgage (FRM).  Today, the dreams of owning a home with a mortgage loan at a 4%+ interest rate turned into a horrifying nightmare that those days are no more.

With new home sales seeing an increase of almost 3% nationwide, most of those sales coming from first-time home owners, lending institutions have begun to increase their rates in hopes that they can liquidate new mortgages more easily on the secondary mortgage market.  With these higher rates, Mortgage Backed Securities (MBS) become a stronger financial investment for Wall Street.

As the previous ceiling of 5% becomes the new floor, future home owners and current home owners looking to refinance can expect a testing of the new ceiling in the upcoming months.  What this means is that 5% will soon become a thing of the past, too.  And mid-5% rates become the new floor and the ceiling testing the 6% interest rate range.

Even with interest rates climbing, lenders are keeping their qualifying guidelines in place.  So future borrowers looking to purchase a new home will now qualify for less of a home.  Add that with slowly increasing home prices, it is only a matter of time before the opportunity for many new home owners to own a home disappears much like the fog fades away and the city of Brigadoon is gone for another 100 years.

Hope is not all but gone, yet.  Call us today to get your financing in place before your opportunity of home ownership starts knocking on someone else’s door.

Some people still think that things are going to get better.  So I decided to hold off one week on writing something, so this way I could write on what did happen.  As they say, “Hindsight is 20/20.”  Now, there is no arguing that things are getting worse.

May 1, 2009 – Policy went into effect whereby lenders are no longer accepting broker/3rd party appraisals.  This is better known as the Home Valuation Code of Conduct (HVCC).  Lenders will now order an appraisal for a newly submitted loan.  Why is this bad?

• Brokers must make a decision on what lender they will use prior to knowing the value of a the house.  Some lenders have better “bumps” for varying LTVs.  If the LTV comes in too high, the bumps may offset the “Par” rate.  If it come in too low, the borrower could be missing out on a lower rate.
• Brokers can no longer submit to more than one lender.  Let’s say the lender all of a sudden becomes backlogged (YES, this does happen) and are no longer turning loans over in a couple of days but rather weeks, brokers used to be able to submit the file to another lender to get the faster turn time.  Now that the broker no longer owns the appraisal, a new appraisal would need to be ordered for the new lender.
• Relationships break down.  Brokers and appraisers will no longer work in unison to help a borrower determine a range value for their house prior to ordering the appraisal and working on the file to make sure that a loan is even possible.
• Home values will decrease, as appraisers will want to low ball a value to make sure that they stay on the lender’s good side to see future business.
• Etc. Etc. Etc.

May 4-8, 2009 – Mortgage rates started at 4.5% on Monday.  On Friday, mortgage rates climb up to 4.75% for a 30 year fixed.  This rate increase was sparked by the failure of mortgage backed securities (MBS) to be sold on the market Thursday.  Fannie Mae stepped up to the plate to buy the MBS in hopes to keep rates down a little longer.  But investors want rates to come back up before they will start buying MBS again.  FNMA only has so much money and time left to keep rates low.  A .25% increase in less than 5 days is a sign of things to come.  Especially when you look at market trends.  The ceiling is being tested… it is only a matter of time before the ceiling becomes the new floor.

I can go on about how time is coming to an end for low mortgages and favorable financing guidelines, but I felt that these two items were the most important of this week.  One ties the hands of those who are here to protect you and get you the best possible deal, and the other proves that rates are on the rise.

The clock is striking eleven… don’t wait for it to strike twelve and the fairytale ends because there is no happily ever after for those waiting for lower rates.

This week it is projected that mortgage rates will reach a 5 year record high.  Thanks to declining markets, credit lending guidelines tightening down, banks going out of business or merging to avoid bankruptcy, and many other economic factors, potential homeowners will now be facing an even more difficult time in trying to qualify for a new home due to the sharp an sudden increase in mortgage loan interest rates.

Just last week, mortgage loan rates were in the 4-5% range.  But by the end of this week, mortgage rates could be as high as 7-8%.  Those people who were waiting for the right time to buy have missed that ship, as it set sail last week.  The great deals of low priced houses and low rates, may never be seen again in our life time.  Those who jumped on the golden opportunity have the potential of turning their gold into platinum, while those who procrastinated will struggle to even purchase cardboard box big enough to cover them from head to toe.

But in all this bad news, there is good new!!!  What you have already read has not happened yet.  Rates are still at all time lows.  They are still in 4-5% range.  There are still some 100% mortgage financing programs out there.  Banks are still lending money.  And homes are still being purchase at great prices.  Don’t wait till the title becomes a reality.

Call your realtor today to find a deal, I mean home, that is right for you.  And call us today, to get your financing in place and your rate locked in before they really do go back up.  Time is not on your side…