Just a quick update of some of the recent changes in Mortgage Rates, Appraisals, and Tax Credit guidelines. If you have any questions please contact me at 404-272-8037, email@example.com or visit www.BeAtTheLake.com
Mortgage Rates Surge to Highest Point of the Year
Mortgage rates shot up significantly for the second straight week. Rates have now risen nearly 1% in a 15 day span. This has brought an abrupt end to the refinance boom and has been devastating information to pass on to many potential home buyers. Here is a brief overview of the main reasons rates pushed higher last week.
1. An improving economy. The economic outlook continues to improve sooner than expected. Last week, report on Pending Home Sales, Personal Income, Outlays, and Construction Spending all came in stronger than expected. Then, Friday's Employment report was the exclamation point on two weeks of improving data. Although the unemployment rate actually increased, the number of jobs lost (345k) was far less than anticipated (525k). The labor market is typically one of the last areas to show improvement during an economic rebound, so any positive signs are particularly significant. Further strength in economic data will do little to help mortgage rates improve.
2. Bernanke comments. The Fed Chief chimed in with comments supporting the notion that the recession would end this year. In testimony before Congress, he stated that he expects the economy to move higher later this year (although he said it may take a while for the economy to return to even average levels). These cheery comments certainly didn't help with rates.
3. Inflation concerns. In his talk to Congress, Bernanke tried to calm the markets by claiming that inflation remains tame, but investors weren't buying it. Investors are very concerned about the supply of new debt that will be needed to pay for all of the government stimulus programs. Any way you slice it, big government spending leads to higher rates.
4. Surging oil prices. Oil prices continued to rise and are now up to over $70 per barrel. If you look back, there is an amazing correlation between oil prices and long-term mortgage rates.
5. An unresponsive Fed. The Fed's program to buy Mortgage-Backed Securities has been the catalyst of rates dropping so low. However, at this point, most investors believe that the Fed is not inclined to expand its Mortgage-Backed Security purchase program beyond its current level of $1.25 trillion. Unless the Fed announces something different, the party with low, low rates may indeed be over.
How are the Appraisal Changes Affecting You?
The 'Home Valuation Code of Conduct' (HVCC) has been in place for only five weeks, but there are already realtors, loan officers, sellers, and buyers all over the country pulling their hair out as a result of the significant changes in how appraisals are now done. As a quick reminder, HVCC limits who can order an appraisal for Conventional loans (HVCC does not apply to FHA loans). No one whose pay is tied to volume in any way (such as commission or bonus) can order an appraisal and this includes loan officers, processors, support staff, and even underwriters (this essentially rules out most everyone in my office). Not only can all of these parties not order an appraisal, they also can't even know who the appraiser is or ever talk to them about value. Instead, the appraisal has to be ordered through "an independent and impartial process."
I certainly understand the intention of this new act. There has been a lot of fraud in the industry and a lot of collusion between mortgage loan officers and appraisers. Unfortunately, a few bad apples have ruined the whole process for everyone in the industry. The end result is a new system that is going to adversely affect all of us at some point in the future. In fact, many real estate deals have already fallen apart over the last month. With this in mind, I give you five killer B's to help you stay out of trouble when it comes to the appraisal process.
1. Be aware. Don't live with your head in the sand. The system has changed. You are going to be affected.
2. Be knowledgeable. Don't just know who the loan officer and lender are doing the loan, also know who they use for their appraisals. Most big banks and mortgage brokers are now going to national appraisal firms. Talk about a disaster waiting to happen! If a national appraisal firm is involved on one of your transactions, then expect low quality, poor service, delays, higher costs, and appraisers who have a limited knowledge of the area.
3. Be patient. Plan on the process taking longer. Expect delays and problems, and be aware that Conventional appraisal rushes are a thing of the past.
4. Be smart. Leave plenty of time in the sales contract for the appraisal contingency to be worked out. I suggest at least 20 days.
5. Be careful. Be very cautious of where you send your clients to get their mortgages. Its really not all about rate. In fact, the rate doesn't matter much of all if the transaction gets killed over a bad appraisal!
Our solution to HVCC has been to create a new appraisal ordering system which has enabled us to retain all of our existing appraisers. A computer assigns each appraisal on an unbiased rotating basis. Our system turns around appraisals in a timely manner, assigns only appraisers who are knowledgeable of the area, and has not increased the cost of appraisals by even $1. We only work with appraisers who look for ways to make transactions work. Although we can't talk to the appraisers directly, they know to contact the realtors involved if any value issues arise. The bottom line is that our system is reliable and it is working!
Last week, I sent out an overview of the new State of GA Tax Credit, however, I left out one very important detail. The subject property must either be a foreclosure or the property had to be listed on the market as of May 11th. If someone buys a home listed after May 11th, they are not eligible for the tax credit unless it is a foreclosure. Here is a great website with all of the tax credit details: http://www.hbag.org/page.asp?pg=Georgia+Homebuyer+Tax+Credit
Mortgage bond yields are now at the highest point since Nov 25, 2008:
|30 Year Fixed
|15 Year Fixed