You just gotta love those declining market values. Now my favorite guidelines apply to appraisals.
Here's a few thoughts.
Refinances and bailout discussions are a joke when you just don't have any equity. Unless someone is going to go to 150% loan to value there's a problem. Also think about this; while a homeowner may not want to go to foreclosure they also may not want to continue to own a home that's worth $50,000 less than they paid for it 2 years ago.
It's the I don't want to be bailed out syndrome.
I have a client with great credit and an option ARM, you know a program where the only payment he can afford causes his balance to increase, who wants to refinance. I called him with good news and bad news. The good news is that there have been recent sales in his community so we have fresh comps. The bad news is that there have been recent sales in his community and the recent comps are $40,000 less than what he paid for his property.
Purchases (Realtors may want to pay special attention here)
While the guidelines may tell me comperable sales up to 6 months are acceptable I have some surprises for you.
Underwriters are looking for fresh stuff in markets with declining values.
Now while this may make things more difficult please remember that we went through periods of foolishness and this action is actually prudent, in my opinion (for what that's worth).
If a Realtor used seasoned comps in their market analysis or the listing is ageing you may have an appraisal problem at the point of sale.
Also, we used to look at some sales as distress sales, however they ALL look like distress sales now.
A favorite of mine is when i tell an investor the property is in Lee County, Florida. Here's the reply.
Reduce the LTV by 5% please-thank you very much.
That is not as bad as investors who have multiple criteria which they apply to the appraisal after it has been received. It's a test that the appraisal must pass or "your loan is approved," but not at the 95% you applied for, rather at 90%. No problem just fork over some more dough (if you've got it that is).
I was talking with my buddy "the bus driver" about 3-4 units in Cape Coral and what the value may be. The problem was that there were "no comps" available in the last 6 months.
Good luck with an appraisal there.
Well, as lenders, looks like we have quite the challenge with determining acceptable values.
It only looks that way because we do!
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