Thursday, July 28, 2011

Upper-mid Range California Homes Market Softening

July 28 2011 - The demand for properties in the $650K-$750K space is now shrinking. We can expect softer prices ahead in Orange County, L.A., and the Bay Area. In San Diego, the impact extends down to $555K.

Why? Changes in the maximum loan limits for FHA and high balance conventional loans take effect in the weeks ahead. Filling the void are jumbo loans with higher rates (which require higher income to qualify) and higher down payments and reserves, which require substantially more assets.

For Los Angeles, Orange County, and the Bay Area the maximum loan limit for FHA and conventional (high-balance) lending is reduced to $625,500. For San Diego, it is $546,250.

Originally scheduled for Dec 31,2010, FHA loans need to fund by Sept 1, 2011 to allow time to insure by Oct 1, 2010. Conventional high balance loans must be originated before Sept 30, 2011.

Softer prices ahead in this part of the market spell opportunity for buyers who still qualify. Historically low interest rates remain in effect.

Friday, July 22, 2011

Appraisal Industry Changes

Many changes have occurred in the appraisal industry over the last two years with even more to come. The beginning of this year started with the start of Fin-Reg (in which the Consumer Finance Protection Bureau is now “open for business” with the last week) meaning fines are coming down quickly and hard.

Starting September 1, the way appraisers report their findings and the way they deliver a report will change. UAD stands for Uniform Appraisal Dataset which is the first part in a series of changes for how the overall loan is delivered to the GSE’s. They are doing this to make the appraisals more standardized as to what an appraiser might consider good condition in Texas is vastly different than what an appraiser in Connecticut might think. There are a total of 72 additions to the form with 60 being mandatory and 12 being optional. Phrases like neutral, beneficial and adverse will become standard. Very Good, Good and Average will be replaced in condition and quality fields with a 1 through 6 rating with 1 being exceptional and 6 being horrible. Appraisals will also have to be delivered in both a pdf and xml format. The appraisal software companies have started to release the UAD reports now with the xml capabilities within a week.

Some of the important changes are

1) FHA and VA are also using the UAD reports but not the delivery method

2) Appraisals MUST be sent to the GSE’s before the loan for conventional and jumbo loans (Not FHA or VA)

3) If the lender orders a field review that review is sent with the loan and not the original appraisal

4) If an appraisal is sent to the GSE’s in the new format incorrectly it will be kicked out and deemed unacceptable

5) GSE’s wont accept a C5 or a C6 rating for condition

6) Any C6 issue makes the whole property a C6 rating unless subject to repair

Make no mistake, these are major changes in the appraisal world in both reporting and technology.

Here is a link to a webinar if you would like to familiarize yourself with the changes.