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New Fannie Mae/Freddie Mac guideline changes will cause delays in funding loans if allowed to continue

By Roger Howell

Mortgage and Lending with Fairway Independent Mortgage Corporation NMLS #2289 Individual NMLS #74935

March 05, 2008 01:00 PM

I just received news about Fannie Mae/Freddie Mac guideline changes that could have an affect on our business.

http://www.housingwire.com/2008/03/03/fannie-mae-new-york-ag-reach-agreement-on-appraisal-practices/

It appears only to affect NY, but I can see Fannie Mae and Freddie Mac rolling this to other states to avoid duplicate lawsuits by grandstanding AGs.

Evidently one of the changes, set to begin 1/1/09, is that mortgage brokers would not be able to submit appraisals to lenders directly. Our wholesale lender would have to order the appraisal in order for the loan to be sold to Fannie Mae/Freddie Mac. This only applies to Mortgage Brokers, not banks.

This will have the effect of slowing down the process, requiring the borrower to pay for the appraisal upfront instead of at closing, and would limit the ability of the broker to shop for the best deal for the client.

Furthermore, the question of using the appraisal at another lender has not been answered. As it stands, the appraisal is the property of who ever orders it, and there is no requirement to release it to another lender even if the borrower has already paid for it. That could leave a borrower paying for more than one appraisal if they're turned down at one lender or need to change lenders due to rate or program changes.

Who is behind this? It came out of the lawsuit by NY Attorney General Andrew Cuomo against several lenders. This was part of the settlement negotiated. It seems part of the ongoing battle between large mortgage banks and the much smaller mortgage broker community. Banks have been trying to put brokers out of business because brokers originate 2/3rds of the residential loans in this country. They seem to have many willing allies in political circles who are looking for a scapegoat in today's market. Interesting enough, some of the biggest fines and penalties paid for predatory lending were by banks such as Chase, Citibank, and Countrywide to name a few.

By adopting the new guidelines, it will cause delays, more expenses, and ultimately less choice for the borrower.

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Bo Hunt

First Choice Mortgage Group - Douglasville, GA

Metro-Atlanta Mortgage Professional

This is yet another example of how banks and direct lenders are attempting to run brokers out of the business. I've been noticing the expansion of programs, along with the loosening of standards by the retail side, while the woleside department continues to tighten standards, do away with programs, and shut the doors to the wholsale side altogether. Lest they forget, they are ultimately the ones that made the decision to fund the crappy loans submitted without utilizing their checks and balances available to them in the decision making process to begin with. However, I feel the true responsibility ultimately rests with the Federal Government to start with, pressuring the banks to create the lending standards allowing virtually anyone to purchase that could fog a glass! This isn't touched on by the media, however, and we as brokers will be the ultimate scapegoat. Good post, Roger, yet a sad one.

Mar 05, 2008 01:39 PM

Roger Howell

Fairway Independent Mortgage Corporation NMLS #2289 - Boise, ID

We do business the Fair way!

Hi Bo,

Thanks for the comments, I'm glad I wasnt the only one feeling persecuted this week.

I was at the IAMB conference today, and the NAMB president gave a speech. He said they have a plan to fight this, but they need our help. If you're not in NAMB, you should consider it. I gave money to our state PAC after his speech. I'm also going to commit to serving IAMB.

He also stated what I suspected, that Andrew Cuomo is looking at a 2012 presidential race and he needs a scape goat to make him look good to his party. I guess were it.

I left the conference with a renewed moral, and I know that the Mortgage Broker is not going away!

Mar 06, 2008 01:03 PM

Anonymous

Darren Brennan

To be a mortgage broker today? If the law goes through and you allow the lenders to order apprasials, this will cause at least a ten day turn time, let's not forget, the lender, nor the lender will be in any rush to provide good service. You will almost expect a valuation drop of at least 10-15% and the reason is a very simple one. MI or LPMI, the lender would rather have a higher LTV to force the borrower to carry MIO, it protects the lender. With all the hit,s that came out on 03/19/2008 and all the soft market conditions, and an uneasy feeling from the lender to produce an approval, it's amazing we are still here. The retail end, does enjoy many benefits,soft market seems not to be an issue, or at least based on what I have seen from friends working with various lenders. An example I could offer, is I had a loan and the lender cut the appraisal by 95,000.00 dollars. I had my borrower go to the retail side of the lender, and the loan was made. You figure. The truth is we can sit here and keep fighting for what rights we think we deserve, but the truth, we deserve nothing. We own nothing, we don't fund the loans, we don't make the loans. So if everyone see's a greener pasture with the actual lenders, maybe we should work for them. I feel the Mortgage Broker roll has already ended, and the retail side is off and running. Yes, it's sad, but we all knew it would blow up one day. Strong advise, foret the past, the past is over, and move forward. If that means to a lender side, so be it, or a new field of choice. I myself have have made MAY1st my last day in the wholesale mortgage business. I have seen so much bullshit, and unfairness, it's incredable. But, I also know, I am nothing more than a inbetween man for the borrower and the lender, and our day is ending. So do something that makes you smile, and stop fighting for what you never really had. I wish everyone the very best, and god bless.

Mar 20, 2008 07:25 AM

New Fannie Mae/Freddie Mac guideline changes will cause delays in funding loans if allowed to continue

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