OK, for anyone who deals with appraisals in any form, here’s a great YouTube. One of the better lines is, “Wells Fargo and BofA getting appraisals done by appraisal companies they own – It’s like Michael Jackson running a freaking boys camp! My E&O is going to go through the roof!” Definitely worth 2-3 minutes:
Despite the fun poked at the appraisal process in that video, many lenders are still searching for help for the hurdles that HVCC has thrown up in their process. I am often asked about appraisal “soup to nuts” solutions. If you are interested, or want to see how one company is managing appraisal requirements for Fannie, Freddie, and FHA, you should take a look at ValuFinders. The firm has been around for many years, and has primarily focused on being a technology company that manages all of the REO’s for the government, but lately it has set up a system that helps brokers and lenders carry out the appraisal process and comply with the complete set of government regulations. Check with Paul Anderson at www.Valufinders.com.
You shouldn’t look for any new products from Fannie or Freddie. Neither will be allowed to introduce new loan products in the mortgage market while they are under the control of the U.S. government, FHFA announced, given the companies’ massive losses and looming challenges. A story in the Wall Street Journal noted “permitting the enterprises to engage in new products is inconsistent with the goals of conservatorship.” The new rule won’t apply to foreclosure prevention efforts, which are considered separate from new product offerings. Therefore, until investors are willing to introduce products on their own, don’t look for any new industry-wide programs.
So what is the latest on jumbo products? You know, the loans that seem to be needed within 10-30 miles of any coastline, on many waterways, or in the nice neighborhoods of any city, and are now being underwritten to very tight guidelines? The National Association of Realtors (NAR) estimates that the national share of home sales above $750,000 is approximately 2.3% for 2009, down from 4.4% three years ago. Everyone knows that putting jumbo loans into securities is not an option, currently. The loans are not part of the Fed’s MBS purchase program (although loans of up to $729,750 done in high cost areas can constitute up to 10% of a pool), and many are ARM’s, which constitute less than 10% of current production. Institutional investors don’t want the product, although many banks are adding the loans to their portfolios since the spreads are attractive versus their cost of funds. But banks are cautious about adding 30-yr maturity instruments to their balance sheets, even for their best customers, so many jumbo loans are ARM loans that either go to banks or may have some interest from hedge funds, money managers, private funds, etc.
How about the $1 Trillion in reserves banks are supposedly sitting on? If you ask someone off the street, “Who would YOU lend it to?” you might receive a shrug and a blank stare. Any mortgage banker might reply, “How about self employed or jumbo borrowers?”
Anyone taking a look at the budget saw that, once again, the mortgage deduction is viewed as low hanging fruit whenever there’s a deficit. In this case, the ack is on itemized deductions. The proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 (joint) and $200,000 (single) is being fought by various mortgage banking groups, including the MBAA. The MBAA has also publicly come out against the proposal to tax carried interest at ordinary tax rates (as opposed to the capital gains rate, as it is taxed now), as it would discourage capital formation for lending.