Good News for those facing foreclosure…
In connection with the streamlined modification program announced jointly by the Federal Housing Finance Agency (FHFA), Freddie Mac, and Fannie Mae on
November 11, 2008, Fannie Mae and Freddie Mac is instituting a halt to all foreclosure sales on occupied single-family properties as well as to the completion of evictions from occupied single-family properties scheduled to occur from November 26, 2008 through January 9, 2009.
The temporary halt on foreclosures is designed to allow affected borrowers facing foreclosure to retain their homes while Fannie Mae and Freddie Mac work with FHFA to implement the streamlined modification program scheduled to launch December 15, 2008. The foreclosure halt will apply to all portfolio mortgages and all MBS pool mortgages owned or guaranteed by Fannie Mae and to foreclosures of homes that are already in process with foreclosure sale dates scheduled during the halt period. Servicers and foreclosure attorneys (or trustees) must institute the halt on foreclosures for eligible homeowners no later than November 26, 2008.
FNMA to Require New Appraisal Addendum to Further Document Current Market Conditions
The current appraisal report forms require the appraiser to report on the primary indicators of market condition for properties in the subject neighborhood by noting…
1. Trend of property values (increasing, stable, or declining)
2. The supply of properties in the subject neighborhood (shortage, in-balance, or over-supply)
3. The marketing time for properties (under three months, three to six months, or over six months) as of the effective date of the appraisal.
4. Fannie Mae also expects the appraiser to provide their conclusions for the reasons a market is experiencing declining market values, an over-supply of properties, or marketing times over six months.
To further enhance the transparency of the conclusions made by the appraiser related to market trends and conditions, the Form 1004MC will be required for all mortgage loans delivered to Fannie Mae with appraisals of one- to four-unit properties with an effective date on or after April 1, 2009.
Areas of Additional Information Now Required on Form 1004MC
Inventory Analysis Section (Absorption Rate)
The “Inventory Analysis” section assists the appraiser in analyzing important supply and demand factors in order to reach a conclusion regarding housing trends and market conditions. When completing this section, the appraiser must include the comparable data that reflects the total pool of comparable properties from which a buyer may select a property in order to analyze the sales activity and the local housing supply. One of the tools used to monitor these trends is the absorption rate which is the rate at which properties for sale have been or can be sold (marketed) within a given area. To determine the absorption rate, the appraiser divides the total number of settled sales by the time frame being analyzed. The months of housing supply is based on the total listings for the applicable period divided by the absorption rate.
Example
Step 1: Calculate the absorption rate. If there were 60 sales during a 6 month period (e.g., “Prior 7 – 12 Months” column), the absorption rate is 10 sales per month (60/6).
Step 2: Calculate the months of housing supply. If there are 240 active listings, there is a 24-month supply of homes on the market (240 active sales/10 sales per month). This may support the appraiser’s conclusion that there is an over-supply of homes on the market. Anomalies in the data such as seasonal markets, new construction, or other factors must be addressed in the form.
Median Sale & List Price, DOM, List/Sale Ratio Section
The appraiser must analyze additional trends, including the changes in median prices and days on the market (DOM) for both sales and listings as well as a change in list-to-sales price ratios.
Example
If the median comparable sale prices are $300,000, $295,000, and $305,000 for their respective time periods, the overall trend for the prior 12 months is relatively “stable.”
Overall Trend Section
The “Overall Trend” section is designed to reflect potential positive trends, neutral trends, or negative trends in inventory, median sale and list price, days on market, list-to- sale price ratio, and seller concessions.
Example
An increase in the absorption rate is generally viewed as a positive trend, whereas a decrease in the absorption rate may be viewed as a negative trend. Furthermore, a decrease in the number of days on the market, either sales or listings, more than likely represents an overall positive trend.
Seller Concessions
There is a section for comments on the prevalence of seller concessions and the trend in seller concessions for the past 12 months. The change in seller concessions within the market provides the lender with additional insight into current market conditions. The appraiser should consider and report on seller-paid (or third-party) costs. Examples of these items include, but are not limited to mortgage payments, points and fees, and in condominium or cooperative projects, items such as homeowners’ association fees and guaranteed rental programs. Seller concessions must be carefully analyzed by the appraiser since excessive concessions often lead to inflated property values.
There are a number of markets across the country where, due to current conditions, there has been an increase in the prevalence of seller concessions. The following provides guidance for these circumstances:
“The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area—large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate. Adjustments based on dollar-for-dollar deductions that are equal to the cost of the concessions to the seller (as a strict cash equivalency approach would dictate) are not appropriate. We recognize that the effect of the sales concessions on sales prices can vary with the amount of the concessions and differences in various markets. The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions.”
Foreclosure Sales and Summary/Analysis of Data
The presence and extent of foreclosure/REO sales is worthy of comment when analyzing market data and must be reported on the form. The form also allows for the appraiser to summarize the data and provide other data analysis or additional information, such as analysis of pending sales, which over time can show a market trend.
Have a Jumbo Loan Need? Don’t Overlook Your Veterans!
Did you know that the VA will guarantee loans up to $1 million! The myth is that VA loans are only available up to a $417,000 loan amount. The fact is that the VA will guarantee loans up to $417,000 with no money down, but if the borrower puts additional monies down, they will guarantee up to $1 million. The amount of money required for down payment is the dependent upon the Veteran’s eligibility. If the Veteran has full eligibility, the down payment required will be the difference between 25% of the sales price and $104,250. For example, if the purchase price were $500,000, then 25% of 500,000 would be 125,000 which you would then subtract 104,250 which equals a down payment amount of $20,750. The loan amount would be $479,250 plus the funding fee. You would then have VA rates on a Jumbo loan amount with less than 5% down and no mortgage insurance…not a bad solution.
The funding fee rates are fairly inexpensive when you put down as little as 5%.
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|
|
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Regular Military |
None
5% or more (up to 10%)
10% or more |
2.15%
1.50%
1.25% |
3.3% *
1.50%
1.25% |
|
Reserves/
National Guard |
None
5% or more (up to 10%)
10% or more |
2.4%
1.75%
1.5% |
3.3% *
1.75%
1.5% |
So don’t forget to find out if you have VA eligibility for those Jumbo transactions!
Two Peanuts walked into a bar. One was a salted.
Happy Thanksgiving!
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