Katerina.  Thanks.  I couldn't believe it.  McLean is the luxury community in Northern Virginia.  They have not the foggiest idea what they are doing.

Jan.  MY GOSH.  Is your market that bad???   That map is great.  Thanks.  They have Baltimore in a "hot zone" too.  I can understand that.  But, McLean doesn't make any sense. 

Marc.  I'm trying to figure it out.  One of the problems, I believe, could be that the national people like Fannie and Freddie lump Washington/Virginia together, Montgomery/Hagerstown, etc. together.  Some of the areas they join are disparate.  I just don't know what to say either. 

Rhonda.  Isn't that sad.  Isn't it sad that the public have no control over these hacks and crooks. 

John.  Paragraph 9 of the MAR Contract of Sale protects the buyer completely.  That is the paragraph in which most agent want to use the infamous "TBD". 

If I'm representing a buyer, I limit the financing model in that paragraph to how how the buyer is willing to go with financing, interest rate, down payments, etc. 

If you have a 5% down or 100% financing in Paragraph 9 and the lender won't approve later on after the appraisal, the buyer can void and submit a release. 

If I'm representing a seller, I want the financing model in paragraph 9 to be as accurate as can be compared to the lender's letter to make sure a buyer can't use it for Weasel room.  I would also make sure the contract required the appraisal be done in 5-6 days and in the Addendum of Clauses, require that the property remain in ACTIVE status until the appraisal is satisfactory.

If a buyer submits a contract with TBD in Paragraph 9, they can't Weasel out no matter what the lender requires in the end because they didn't set limits that the seller accepted.

I have rarely seen a situation that the magnificent MAR contract doesn't cover, along with the options under the Paragraph of Clauses. 

One thing is for sure, you do NOT want to remove the financing contingency with these land mines all around.  Agents are often anxious to remove the financing contingency paragraph.  Not smart. 

I love the MAR Contract.  A smart agent can play it like a Stradivarius. 

Joey.  I thought they were supposed to add a unique and innovative rquirement to their loan approvals, ABILITY TO REPAY THE LOAN.  WOW, what a concept.

You are right, of course.  That said, we need prices to come down in all areas.  Fannie Mae doesn't understand the difference between a declining market and market prices coming down. 

Ken.  Thanks.  I'll look for it.  My objection to Fannie Mae's mapping is that they don't understand our area.  They have persisted in making the DC/MD/VA areas different markets by combining disparate areas as one market which have no financially, demographic or any other similarities  They combine urban and rural.  They combine Montgomery County, one of the highest priced ares with Hagerstown, rural and low priced. 

Fannie Mae doesn't know he difference between an apple and an orange.

Ken.  In reality, PG is less of a declining market than many other markets in the DC/MD/VA metro market because it didn't increase at the rate the other areas did.  Same thing happened in the early 1990s, Northern Virginia and Mont. lost a lot of market value but PG actually gained in those years. 

I believe it really IS redlining in the case of PG.  In the case of McLean, it's simple ignorance.

Joan.  I agree.  It's going to get a lot worse before getting better.  Of course MGIC will do the same.  How else can they justify raising the cost of MI??

Bryant.  That's great. 

The problem in my market is with average price ranges in the $500K - $800K ranges, another 5% is big money. 

Of course, the buyer is correct, prices will eventually bounce back.  Eventually. 

Diane.  Of course, McLean is a high performer.  Of course it is.  Buyers in McLean are often putting down big money and they have low LTV.  This thing is insane.

Jim.

I don't even have a problem with 10% down, 5% down, or zero down, IF, and it's a big IF, the buyer has credit to justify the lower down payment and they have the documented ability to repay the loan.  But, teaser rates with fraudulent loan apps and fraudulent documentation put people in homes that they shouldn't have been approved for with 30% down.  It appears that it is the resetting of ARM products that is causing most of the trouble. 

My observations of the mortgage mess is that it was fraud on the part of speculators and lenders who wrote loans for unqualified buyers who were unqualified when the loan was made that caused a lot of the trouble.

The unrestrained escalation in home prices simply turned the market on it's head and a lot of folks were left with homes that they couldn't pay for and couldn't sell. 

Requiring high down payments in our market takes too many folks out of the market and just makes them renters. 

Bill.  I understand completely.  What you say is accurate and that is the problem.  As with any arbitrary methodology such as "declining area", it will be used to limit the borrowing ability of perfectly qualified home buyers who will not be able to buy even though they are completely credit worthy, upward mobile, stable folks who will not be able to join the ranks of home owners because they haven't been able to save huge amounts of money in an area where the cost of living is very high. 

We've sold hundreds of homes in the past 10 years to families with zero to 5% down and only one defaulted and that was a sub-prime. 

Good credit and the paying attention to qualifying ratios is more of a predictor of ability to repay than down payment.  At least that is my observation.  Certainly a better predictor than lines drawn on a map by a bunch of bureaucrats. 

Families will not be able to buy where they want to live.  They'll have to buy based on where a map tells them what their down payment will be. 

Cameron.  The whole State of CA?  That just shows how little sense this entire thing makes.

Missy.  CW is what I would call a corporate criminal enterprise.

Kathleen.  McLean is inside the beltway and outside the beltway.  Inside is very expensive due to proximity to DC and National Airport and the Pentagon and not to mention the highest ranked public schools in Fairfax County.  40-50 year old homes in McLean, inside the beltway sell for about $520 a square foot on 10.000 square foot lots.    On a half acre lot, if the house has been upgraded, it will go for about $570 a quare foot.

Laurie.  We have an addendum for that.  If the appraisal is low, the buyer has X days to notice the seller to either lower the price or the contract is void.  Then the seller has X days to lower to appraised value or make another offer. It can go back and forth for a few days.

If a house is particularly nice and I have a buyer in a good cash position, I write in the contract that, in case of an appraisal below contract, the buyer agrees to pay an additional $XXX, usually, $2,000, $5,000 over appraisal.  That way, the seller has already agreed and so has the buyer. 

• Contract $450,000 with an agreement to go $2,000 over appraisal.
• Appraisal $$445,000.
• New Price $447,000 already agreed.

I like to get things pinned down in the contract to limit paperwork and so everyone knows where everyone is in case of a low appraisal.  Since this is a condition of the contract, both parties have already decided how to handle a low appraisal.

Of course, Fannie Mae has thrown a greasy wrench into everything in many areas.  But, I can protect my buyer with our financing clause because the financing is in the contract. 

Derek.  My complaint is that McLean is NOT a high risk area or declining area.  It will be one of the last areas to decline.  We need list prices to come down everywhere.  But, let the market do the job, not a bunch of bureaucrats, some of whom line their own pockets by manipulating financial data. 

Fannie Mae shouldn't be in the business of manipulating the market by making financing harder in one area than another based on lines on a map.  This is insane.

Shucks, about the only thing that brings real prices down in areas like Bethesda in MD and McLean in Va is homes being purchased for "tear down" lots to build MultiMillion new homes on the lots. 

Kaye.  I'm glad you have a handle on it.  You're right of course. 

The people who made the real money between 2004 and 2007 were the Fannie Mae executives who manipulated the financial reports to enhance their own cash bonuses to the $Millions of Dollars. 

Franklin Raines pocketed $Millions when he manipulated Fannie Mae's books and then, when he was booted out, he got more $Millions for separation pay. 

These are our leaders???

Jesse and Kathy.  Absolutely.  I've been petitioning for Franklin Raines to be prosecuted for over a year.  If he hadn't screwed up Fannie Mae, they could have had the limit raised and purchased more good loans rather than having to spend 2 years "correcting" their financial filings while the housing market went in the toilet.

Laurie.  I'm assuming your question is rhertorical.

Ray.  Sadly, you're correct.  I could write reams about the misconceptions that reporters call me to verify.  When I tell them that their premise is incorrect and that I can't verify misinformation, they refuse to listen.

Jason and Deanna.  What we're finding is when there is more than one offer, the one with the strongest lender approval gets the contract.  Also one of our buyers had to put up 10% rather than 5%.

Tina.  I'm laughing out loud.  Thank you.

Derek.  The government is totally helpless to do much of anything about anything.  What they have managed to do, screw up Fannie Mae, give the keys to the vault to the hedge funds and generally fiddle while Rome burned is typical for the past few years. 

FHA won't help in areas like McLean.  It's over the limit.  $550K is the lowest price listed and it's a "tear down".

How is the FHA limit going to be affacted by an area that has been designated "declining".

The more the government gets involved in this mess, the worse it gets.

Ron.  You're right, it is complicated.  However, the thought that FHA will help in area of Northern Virginia like McLean is interesting but just not realistic. 

There is the additional complication of government comps.  Appraisers would have an impossible task finding a government comp. for locations in McLean.  The exception would be homes close to Pimmit Hills, in Falls Church, which is contiguous with McLean.  However, the 5-6 homes sold in the FHA range were all financed with conventional loans.

Bottom line, FHA isn't going to help McLean.  $417 isn't going to help where the lowest price home is almost $600,000.

Darhlene

Thanks.

I suspect that the challenges will be for the wrong reasons, but I believe you're probably correct. 

This uncertainty is causing a distinct slowdown as if we needed more reason for the buyer to just sit, this is really doing it.