Appraisal Scoop

HUD Releases New 4155.2, Lender’s Guide to the Single Family Mortgage Insurance Process

HUD recently released a new handbook - HUD 4155.2, Lender’s Guide to the Single Family Mortgage Insurance Process.

Click here or the link below to view handbook. Pay particular attention to Chapter 4 - Property Valuation and Appraisals.

The new FHA (Federal Housing Administration) portal contains the online version of the new Information Mapped Handbooks as well as links to corresponding forms and resources on the HUD (Housing and Urban Development) website.

The online 4155.1 and 4155.2 handbooks incorporate and consolidate guidance from Handbooks 4155.1 REV5, 4000.2 REV-3, 4000.4 REV-1, 4165.1 REV-2 and related Mortgagee Letters through ML 08-39. Although these Handbooks are available for informational purposes only at this time, you are encouraged to become familiar with how to use them.

Lots of good info for FHA appraisers.

I recommend you take the time to print out this Chapter or place it on your Internet favorite list.

http://www.fhaoutreach.gov/FHAHandbook/prod/contents.asp?address=4155-2 

Source: http://www.ICAPweb.com  

HUD Mortgagee Letter 2009-09 Adopts Use of 1004MC Market Conditions Addendum

Currently, all Federal Housing Administration (FHA) Roster Appraisers are required to report on housing trends in the Neighborhood section of the applicable property specific appraisal reporting form.

The Uniform Standards of Professional Appraisal Practice (USPAP) mandate that an appraiser maintain documentation necessary to support all analyses, opinions and conclusions for each appraisal assignment in a work file.

In order to ensure greater transparency and accuracy of appraisals performed for FHA-insured financing, FHA will adopt the Market Conditions Addendum (Fannie Mae Form 1004MC/ Freddie Mac Form 71, released November 2008).

For all appraisals of properties that are to be security for FHA-insured mortgages and that are performed on or after April 1, 2009, the appraisal must include the Market Conditions Addendum.

Fannie Mae Announcement 08-30 contains further information and instructions on completing the Addendum and is available online at: 

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf  

Mortgagee Letter 2009-09 Source - HUD

Download HUD Mortgagee Letter 09-09ml Word Doc

Download HUD Mortgagee Letter 09-09ml PDF

Second Appraisal Required On Cash Out FHA Refinances

Just a quick heads up about a change to the guidelines for the FHA 95% loan to value cash out refinance program effective for all case numbers issued after January 1, 2009. This change does not apply to the standard 85% loan to value program.

The guidelines already included additional requirements that many loan officers have overlooked when taking applications for 95% loan to value cash out refinances:

• The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceding the date of the loan application.
• If said property is encumbered by a mortgage, the borrower must have made all of his/her mortgage payments within the month due for the previous 12 months, i.e., no payment may have been more than 30 days late and is current for the month due.
• The property that is security for the refinanced mortgage must be a 1- or 2-unit dwelling.
• Subordinate financing may remain in place, but subordinate to the FHA insured first mortgage, regardless of the total indebtedness or combined loan-to-value ratio, provided the homeowner qualifies for making scheduled payments on all liens.
• Any co-borrower or co-signer being added to the note must be an occupant of the property.  Non-occupant owners may not be added in order to meet FHA’s credit underwriting guidelines for the mortgage.

In Mortgagee Letter 2008-09, FHA already made it a requirement that two appraisals were required when the loan amount exceeds $417000. Those loans are also limited to 85% LTV (loan to value).

Now HUD has extended this requirement to any loans with an LTV above 85% beginning with any case number issued on or after January 1, 2009.

From Mortgagee Letter 2008-40:

In addition, FHA will now require a second appraisal for all cash-out refinances where the LTV, exclusive of the UFMIP, will exceed 85 percent of the appraiser’s estimate of value.  This second appraisal requirement applies regardless of the loan amount or the location of the property, i.e., whether the property is in a “declining area” or is not.  This second appraisal requirement for cash-out refinances is effective for all case number assignments on or after January 1, 2009 and is to adhere to the instructions set forth in ML 2008-09.  Please also note that cash-out refinances with LTVs exceeding 85 percent will be over-selected for post-endorsement technical reviews (PETR) to assure the quality of the underwriting.

Mortgagee Letter 2008-09 sets out the requirements for the 2nd appraisal. It must be done by an FHA approved appraiser engaged by the lender and the costs may be passed on to the borrower. If the second appraisal has an estimated value more than 5% below the first appraisal, the maximum mortgage must be determined based on the lower appraised value.

If you are a mortgage broker, please take note of that last sentence. This means that wholesale lenders are going to be picking these loans apart even more closely than they have been. And they haven’t exactly been easy with the underwriting lately to begin with. Also, remember that the borrower should be prepared to have as much as $900 of their cash out eaten up by appraisal fees!

I will Post the new requirements tomorrow regarding The revised Home Valuation Code of Conduct (the"Code") The Effective Date for any Lenders selling loans to FHLMC to comply with the new "Code" is May 1, 2009.

Source: Bryan Schroeder - ActiveRain

AUTHOR: Bryan Schroeder is a Certified Mortgage Consultant in Salem, OR.  Bryan has worked in the mortgage industry for over 15 years and areas of expertise include FHA and Conventional loans, Lot loans, and New construction.

 

The Subprime Wolves Are Back - FHA-Backed Loans: The New Subprime

The same people whose reckless practices triggered the global financial crisis are onto a similar scheme that could cost taxpayers tons more. As if they haven't done enough damage. Thousands of subprime mortgage lenders and brokers—many of them the very sorts of firms that helped create the current financial crisis—are going strong. (see The Mortgage Standard)

Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country's swooning economy.

Podcast: The Subprime Wolves Are Back

To read the entire article - click here!

HUD requires lenders provide "Good Faith Estimate" that CLEARLY discloses closing costs.

For the first time in more than 30 years, the U.S. Department of Housing and Urban Development today issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers.

HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table.

 

  Click here for the complete article

HUD Announces New, Permanent FHA Mortgage Loan Limits

New limits range from $271,050 to $625,500

WASHINGTON - U.S. Department of Housing and Urban Development Secretary Steve Preston today announced the new Federal Housing Administration (FHA) mortgage loan limits for single-family homes as prescribed by the Housing and Economic Recovery Act of 2008.

Beginning January 1, 2009, FHA will insure single-family home mortgages up to $271,050 in low cost areas and up to a maximum of $625,500 in high cost areas. The February 2008 Stimulus Package temporarily raised the FHA maximum to $729,750 through December 31, 2008. The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the Stimulus Package.

"In today's environment where access to credit is being restricted, we need to make mortgage loans readily available to households throughout the country, and especially in high-cost areas," said Preston. "These new loan limits will ensure FHA can to continue help struggling homeowners refinance into safe, affordable government-insured loans, and allow many first-time buyers take advantage of today's buyers market"

For several years, FHA's loan levels were below the cost of the average home in communities across the nation. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process. In some cases, borrowers turned to exotic subprime loans.

FHA mortgage insurance makes home financing more available to low-income and first time homebuyers. This is because the mortgage is backed by the full faith and credit of the government, freeing lenders from assuming the risk of default.

Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans.

The Housing and Economic Recovery Act pegs the national conforming mortgage loan limit to a house price index chosen by the new Federal Housing Finance Agency (FHFA). For 2009, the national conforming limit will remain at the current level of $417,000.

The Act says that the new FHA loan limits will be set at 115 percent of the median house price in a given area, as determined by HUD, but can not be lower than 65 percent of the conforming loan limit (the national floor). Also, the FHA mortgage limit cannot exceed 150 percent of the national conforming loan limit (the national ceiling).

Click here to continue reading . . ..

The URARS Part 5: Making the List: Key Reference Sources of Appraisal Procedures Definitions and Techniques

Have you read a few good books lately? Perhaps all of us should read a little more. When I was teaching the Housing Market Analysis class at the "a la mode regional conventions", I would ask the audience, "how many of you have read The Appraisal of Real Estate"? To my surprise (and shock) at several locations, only a few hands were in the air.

For the many years I have been in this profession, most I know have always considered "The Appraisal of Real Estate" as the "bible of appraising" and perhaps the most definitive and authoritative source on appraising currently in print. That's not to say that there aren't other good appraisal books out there, only to make a point. Many of those in the profession have yet to read and study the most widely referenced book on appraising.

If that is the case (and I have no reason at this point to believe otherwise) would appraisers have a better understanding of the principles, techniques, applications, etc. (outlined within The Appraisal of Real Estate) if they did? If The Appraisal of Real Estate was "required reading" for appraisers, users of appraisal services, underwriters, loan offices, agents and others, would some of the issues fade away?

For the URARS addendum, should we have a section that lists key references by title and edition? If so (and given the number of books and publications available), how much is enough? Should we limit the list to several that are comprehensive or should a few specialty references be added? Listed below are a few of my choices. What other publications (they must be in print and widely available) would you suggest or is this list adequate?

Click here to continue reading . . . .

Get Ready Appraisers - FHA Mailing 675,000 Letters to At-Risk-Homeowners

WASHINGTON -This week, HUD's Federal Housing Administration (FHA) is mailing hundreds of thousands of letters to homeowners at risk of losing their homes through foreclosure and urging them to consider a safer, more affordable alternative to the high-cost mortgages they are currently paying. The first round of 280,000 letters was mailed in February. FHA's public awareness campaign will continue through September, ultimately reaching 850,000 distressed homeowners.

Letters are being sent to homeowners who have already faced or are experiencing the first reset of their adjustable rate mortgages. Through the end of the year, FHA can insure home loans valued between $271,050 and $729,750. Normally these loan limits are set between $200,160 and $362,790 but were expanded through President Bush's Economic Stimulus Package. Bipartisan FHA Modernization legislation awaiting final action by the Senate and House of Representatives would permanently increase the loan limits to an acceptable level. 

View full article . .

Below is a copy of the letter being sent to homeowners. - Click Here

FHA Seeks to Ban Seller-Assisted Payments

Federal housing officials are trying again to ban seller-assisted down payments on federally insured mortgages, amid concerns about mounting losses tied to these loans.

HUD's Federal Housing Administration (FHA) will reopen the public comment period on a proposed rule that would ban seller-funded downpayment assistance on mortgage transactions insured by the FHA. The proposed rule will be re-published in the Federal Register and comments will be accepted for 60 days following publication. The rule can also be viewed on FHA's website.

Under the seller-funding practice, a third party -- typically a charity -- provides the down payment for the buyer and is then reimbursed by the home seller, often a home builder. This can help home sellers close deals with buyers who can't come up with down payments on their own.

In a speech to the National Press Club, HUD's Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery warned FHA must take action because these loans, which now make up one third of FHA's portfolio, are causing substantial losses. 

This year, as a result of its annual re-estimate, FHA had to book an additional of $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio.

The rule would clarify that downpayment funds for FHA-insured mortgages cannot be derived from sellers - directly or indirectly - or any other party that stands to benefit from the transaction financially.

"The IRS, GAO and our own Inspector General have previously expressed concerns with these circular financing schemes.  Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments," noted Montgomery.

Related Sources:

• FHA Seeks to Ban Seller-Assisted Payments
• Prepared Remarks of Brian Montgomery at the National Press Club

Most Common FHA Appraisal Report Compliance Issues

Anthony Blackburn, of Apple Appraisal, Inc., in Martinez, CA responded recently to a WinTOTAL Users Group forum question about common errors with FHA appraisals. The following was his response.  At the bottom of this blog post is a "bookmarked" pdf highlighting the references to his list.

"I'm reviewing a batch of about 25 reverse mortgage appraisals, post funding. Not a single one complies will all of HUD's guidelines!"

Most commonly, the reports that I review fail to:

1. Include patios, porches, garages, breezeways and other offsets on the sketch. Failure to state "covered" or "uncovered" to indicate a roof or no roof (such as over a patio).
2. Have the street scene photo include a portion of the subject site.
3. Enter a legal description of the property.
4. To state that the use of the appraisal is to support FHA's decision to provide mortgage insurance on the real property that is the subject of the appraisal; and intended users include the lender/client and FHA.
5. Clearly define the boundaries - north, south, east and west - of the subject's neighborhood. Providing a description of neighborhood boundaries by physical features such as streets, rail lines, other man-made barriers or well defined natural barriers (i.e. rivers, lakes, etc.) details the make up and understanding regarding neighborhood composition.
6. To adequately and accurately describe current market conditions in the subject's neighborhood.
7. List all dimensions of the site beginning with the frontage. If the shape of the site is irregular, show the boundary dimensions (85' X 150' X 195' X 250')
8. Describe the view from the property (None is not an acceptable response).
9. Include the CORRECT zoning
10. To correctly report the number of COMPARABLE sales in the past 12 months and active listings on page 2.
11. To correctly calculate time adjustments from the contract date of the sale, and report both the contract and closing dates when time adjustments are made.
12. Enter the name of the subdivision or PUD in the location field of the sales comparison approach.
13. Describe the view from the site on the sales comparison approach, i.e. similar homes, commercial area, water view, scenic view, etc. Such terms as "Average" or "Good" are only to be used as adjuncts, i.e. "Residential/Average", "Water view/Good".
14. To enter ONLY the actual age of the subject in the age field of the sales comparison approach.
15. To accurately report the subject's condition as "Fair" when it is indeed "Fair".
16. Research prior sales or transfers of comparable sales
17. To analyze and report the analysis of the subject's prior sales

Download 41502appdHSGH.pdf - This appendix to HUD's 4150.2 has been bookmarked to correspond to the list above.

Thanks to Anthony Blackburn, of Apple Appraisal, Inc., of Martinez, CA for compiling and sharing this list!