Beltran Properties

The Informed Homeowner for August 2009

We continue to be in an interesting and challenging time. Foreclosures are in a moratorium, allowing for those who have chose to attempt to modify their loans, more time to wade through the muddy "lender" water. We are faced with new appraisal requirements, stalling or cancelling the most simple transaction. Lenders appear to be on the opposite end of the pendulum when it comes to qualifing you for a loan. All coupled with the fact that the President has implimented "bail-out" legislation to jump start the economy.

If you are in the position of owing more for your home than it is worth, you are not alone. There are several options to try. First, seek advice from a friend in the business, a professional. We deal daily with a wide variey of situations, and solutions. It is not right that the banks gave us loans based upon lenient underwriting, and now seek to punish us for their mistakes. A modification company, which mostly did not exist until March of this year, is one approach. Do all you can to keep the bank from taking your home. If they do, it will continue drop home values, and harm the economy. There is legislation that is supposed to help us. The problem with that is not every one is familar with it, especially it seems, the banks. Instead of cutting staff, they need to train people to respond to these requests. What a novel idea, jump start the economy by creating jobs.

As to the new appraisal requirements restricting "lenders" from choosing their own appraisers, good idea, bad application. It appears there was a "lender" pressuring appraisers to inflate the values for homes in order to get larger fees from the loan. Since lenders charge a percentage of the value as their fees, they could make a lot of money.  This requirement is for FHA, fanny mae, HUD loans. Lenders must bring in a consulting appraiser, who hire an appraiser to do the job. Generally the "new" appraiser is out of area, and unfamilar with values. This increases the cost of the appraisal, gives an impractical value, and delays an already time restricted transaction. The appraisal industry has had rules in place for years requiring any appraisal to be within 5% of any other appraisal on the same property in the same time frame. To further require policing is counter productive. If you get an undesirable appraisal, remember the transaction is a negotiation, so negotiate.

The lending market is now being microscopic about approvals. Where were you two years ago??? Old criteria that were overlooked are now a deal breaker. For example, if you applied to refinance your loan and had offered your home for sale within six months, they will deny you. The reason? You are not a good risk: they will not make a lot of money (interest) from you since you may sell the home after you re-fi. If you are looking for purchase money to buy a home, debt to income ratios, reserves (savings), seasoned down payments, and of course credit scores are critically reviewed.

It is an exciting market these days, with opportunity and challanges. Be wise, be careful, be patient, and use a friend in the business. Remember fi it does not feel right, question it, and if you have time, pressure it until it is.