May Day Brings Changes

A whole new world started May 1 as all lenders scurried to form their new appraisal ordering policies for conventional Fannie Mae and Freddie Mac loans. Even at the last hour, lenders were hoping for a reprieve which never materialized. Here are the new rules, and they WILL affect your buyers:

1. No loan officer will be able to order an appraisal. All appraisal orders will go through the lender.
2. Payments for the appraisal will be paid for by the buyer immediately. No more waiting for the closing date to come around.
3. Appraisal Management Companies (AMC's) will assign appraisers and make up to half the fee charged. (Interesting fact - Some AMC's are owned by Banks)
4. The industry is expecting delays in the appraisal process.
5. A lot of great appraisers are refusing to sign up for this. They see it as the AMC's taking half their fee and having to do twice as much work to make the same money. This leaves the AMC's using appraisers that are new to the business, less-experienced, or maybe not very good. (Good luck with those values!)
6. Borrowers will get a copy of the appraisal sent to them 3 days prior to closing.
7. If you change lenders, you may not be able to use the appraisal and your buyer will have to pay for another one.
8. Although geared towards conventional only right now, some lenders are already saying they will use the same system for FHA loans. (Again - some AMC's are owned by banks).
9. VA buyers will still have appraiser assigned by VA.
10. Your loan officer will have NO contact with the appraiser!
11. The appraiser assigned may come from outside the immediate market area.
12. PLAN NOW! - Consider extending closing dates by 15 days as lenders struggle to work through the growing pains of this new system.

Lenders Begin to Tighten FHA Loans

Mortgage banks are further tightening FHA loans. The first item to notice is that the previous lending limit of $417,000 between FHA normal limits and FHA Jumbo limits now has to include the UFMIP (up-front mortgage insurance premium) while previously it could be added to the $417,000 maximum normal limit. The next item to change is that a 660 (up from 620) credit score will now be required on FHA Jumbo loans and it must include a DU approve eligible through the FHA Total Scorecard Underwriting System. Purchases with a loan-to-value above 95% will require a FULL 2nd appraisal. Your buyers will need to be prepared also for an anticipated raise in FHA appraisal prices as the industry moves to a nationalization of appraisal ordering on May 1st. We have already been advised by some of these companies that they will be charging up to $600 for an FHA appraisal. That would be $1200 for 2 on FHA Jumbos.

These guidelines are effective immediately with several lenders and it will run through the rest of them as days go by. Rest assured, we will keep you informed here in this blog of any agency guideline changes.

Do other agents a favor and suggest this blog.
For marketing tips and tools, go to http://www.AgentSignIn.com

UPDATE ON THE $8000 TAX CREDIT!

A website listing all the details concerning the $8000 first time buyer credit can be found at http://www.GiveMe8000.info and it includes program guidelines and links to the IRS forms necessary to obtain your credit. Make sure all of your past clients know of the firstime buyer credit of $7500 for last year and the new one for this year. This is a great reason to call past clients and then ask if they know anyone that wants the tax credit too!

Need Marketing Help?

You have heard it before. You must create an USP (unique selling proposition) to set yourself apart from all the other agents out there. While there are a multitude of marketing ideas and programs (most of which cost money), there are some ideas that cost little to nothing to implement and there success toward helping you reach your goals is only determined upon your own ability to follow through.
Here are some ideas:

1. Make sure every listing you have has it's own internet website.
2. Have your own website seperate from the one your company may provide.
3. With your website in place, begin to blog.
4. Join website communities like BrokerVoice, Facebook, Twitter, and other internet environments that can showcase your talents.
5. Consider just how much your existing loan officer helps you in your marketing efforts. Beyond getting deals closed, are they providing leads or helping you further your career?
6. Follow blogs that relate to real estate and try to get in tune with what is happening in the industry beyond just the negative rantings and boo-hooing out there.
7. Think positively about how you can use news to your advantage.

You can start using items 1 & 2 by visiting http://www.AgentSignIn.com to get your own personal website up and running and get individual websites for each of your listings. Both of these are FREE to you by the companies we use for our systems and I am more than happy to help anyone to get up and running.
Final TIP: Make sure you follow this blog for news and success tips! Subscribe today.

Changes - They Are A-Comin'

We are hearing different things from the street regarding government FICO score changes.
There are changes looming on price adjustments for FHA and VA loans, we just don’t know
when they will take effect.

>620 Minimum FICO score for FHA and VA purchase and rate/term refinances.

>620 Minimum FICO for FHA streamline loans.

We do know for certain that as of March 9, 2009, all VA Interest Rate Reduction Refinance Loan
(IRRRL) transactions, must have a minimum FICO score of 620.

So, everything we hear has 620 being the magic score for every type of loan out there currently. In this age of "responsible" lending, lenders and their associated investors want to shore up their portfolios with "good" loans only. We see M.I. companies pushing towards 740 has a prime score for conventional conforming loans with heavy fees if the score is lower than that. The above 620 score seems to be where the government loans are going to settle.

As you begin to talk with potential home buyers (renters especially), it is increasingly obvious to me that as soon as someone makes the decision to head towards home buying, they need to have an experienced loan officer begin to evaluate their credit report and scoring and allow sufficient time for corrections to be made to get the highest score possible prior to actually pulling the trigger for loan preapproval. Your buyers will thank you for it!

The Skinny on the Stimmy - How to Get the $8000

Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.

Fannie Mae and Freddie Mac Change the Appraisal Process

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.

One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. The down side of such a process is that lenders will have little to no communication with the appraiser, which means there won't be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house. The new code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations.

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process. The big thing to remember is that gone are the days of talking to an appraiser about the value. It is not unlike VA choosing the appraiser for you. I expect many home buyers to be reviewing internet places like Zillow to check on values.

As an agent, get used to looking closer at what similar homes have sold for with about the last 3 months as many areas begin to track downward. Recent appraisals I have seen are showing Pierce County (for example) condos tracking downward by about 1/2% per month currently. A drop of 6% is at least smaller than many parts of the country. A savvy seller will want to pick a "sell my home first" value that is slightly lower than the competition and get away from the idea of "my house being better than theirs".

With homes for sale on the market for 6 - 9 months, obviously, the sale price of that listing is NOT the price to compare to.

Best wishes for a prosperous NEW YEAR!

Additional Resources:
Federal Housing Finance Agency's: News Release
Federal Housing Finance Agency's: Home Valuation Code of Conduct
Free Individual Web Sites for your Listings: AgentSignIn.com
How to Put on a First Time Buyer Class: Putting on a Class
Know of Buyers that are waiting due to Fear of Job Loss?: New Payment Protection