HVCC Won't Hurt FHA Mortgages

This week, David Stevens, Commissioner for the FHA, told the National Association of Mortgage Brokers (NAMB) that the FHA WILL NOT implement the Home Valuation Code of Conduct (HVCC) on FHA loans because he sees the problem it creates for originators. Under the guidelines set forth by the HVCC, a conventional mortgage, whether being placed with Fannie Mae or Freddie Mac, will need to have the appraisal ordered through an Appraisal Management Company (AMC). This system has been notorious for slowing down, if not destroying, real estate transactions by either taking too long, or coming in with a value that is grossly low.

While I do not condone pushing an appraiser to bring a value in grossly higher than it should be, there is clearly a problem with appraisers bringing in value too low and having no fear of losing business because, unlike a broker who would stop using an appraiser with a track record of doing this, the AMC's don't punish appraisers for coming in too low. And, both the AMC and the appraiser get paid, since the borrower is required to pay up front with a credit card.

All of this means that if you're a realtor or a potential home buyer, don't be surprised if your mortgage originator or "loan officer" (I can't stand that term), has the option of putting the loan through FHA and does so. The appraisal will come in on time, be done for a reasonable fee, and probably be in line with the actual value.

For more information on this topic or for any mortgage related questions, please call Rick at 1-888-282-2835 or e-mail Rick at rick@getanhonestmortgage.com

Personal Income and Outlatys, U of M Consumer Sentiment

In news released, personal income was unchanged and outlays rose 0.2%. This data was near expectations. On the inflation front, the core PCE component rose 0.1%, again as expected.

Lastly, the University of Michigan consumer sentiment report stood at 65.7, better than expectations for a read of 64.00. This data remains near historic lows.

Consumer Confidence for August 25, 2009

In news released this morning, consumer confidence stood at 54.1, better than expectation for a read of 47.9. This was good for stocks and bad for bonds. A confident consumer is more inclined to spend which may create inflation in the future. Stocks shot higher further pressuring rates.

2 Year Treasury Note Auction Results

This afternoon the Treasury auctioned 42B in 2-year notes with decent results. The indirect bidder participation, an indication of foreign demand, was almost 50%, better than last time.

Existing Home Sales

In the news, existing home sales rose to an annualized rate of 5.24M, much stronger than expectations for a read of 5.00M.

Producer Price Index, Housing Starts, Leading Economic Indicators, and Philly Fed Survey

In news released this morning, weekly jobless claims stood at 570k, weaker than the expected 550k economists estimated. This report indicated continued weakness in the labor market. Bottom line, the US economy will not fully recover until people have jobs.

In other news, the Philly Fed survey stood at 4.2, better than expectations of 1.0. Lastly, Leading Economic Indicators (LEI) rose 0.6%, near expectations.

The data released this morning was mixed; weekly jobless claims were bond friendly, and however the improvement in the Philly Fed and LEI were not.

This morning the Treasury announced the size of next week’s auctions. They are going to auction 42B of 2-yr, $39B of 5-yr and $28B in 7-yr. This will raise a record amount of new cash as only 19B is being refinanced. Yikes! Traders were pleased the amount of debt was at the low end of the expected range.

HVCC gets bad press from the Wall Street Journal

Appraisers are being squeezed by a drop in fees, due to having to split the fees with the Appraisal Management Companies. Some appraisers are compensating for this by driving longer distances to areas they are unfamiliar with to generate more orders in an effort to create more income. Questions are arising as to whether these appraisers know the neighborhood well enough to be determining an accurate value.

At one point, appraisers were making $300-350 per appraisal (for a single family home) and now, through the AMC’s, they’re making $175-200 after the AMC takes their cut. They’re being asked to work faster, although it doesn’t get the report to us any faster (see blog entry from Tuesday, August 11th). This conflicts with the goal of getting an accurate appraisal.

These appraisers are being asked to travel farther, work in unfamiliar markets, make less money, and this is supposed to be for the better good of the consumer?!!

HR-3044, the HVCC Moratorium Bill, now has 54 sponsors. A recent and less than flattering article in the Wall Street Journal illustrates how the NAR, one of the strongest lobbying groups in Washington, is making a hard push on this issue. Read about it at the following link…..

http://narblog1.realtors.org/mvtype/appraisalinsight/2009/06/interesting_letter_to_the_edit_1.html

The NAR has sent out over 10,000 press releases. Work is being done to get 150,000 signatures on the HVCC petition and when, not if, when that happens, it will be brought to Fannie Mae, Freddie Mac, and the office of Andrew Cuomo. If you haven’t already done so, you can sign the HVCC Petition at this link… www.hvccpetition.com. In my haste to get the word out about this petition, I discovered that I hadn’t even signed it yet. I just did and can confirm that there are now 82,538 signatures as of this post.

To contact Rick Masnyk, you can call him at 1-888-282-2835 or e-mail him at rick@getanhonestmortgage.com

Producer Price Index and Housing Starts

In news released this morning, producer prices fell 0.9% and the core rate, which excludes the volatile food and energy costs, fell 0.1%. This data was much better than the expected read of –0.3%, +0.1%.

On the housing front, housing starts in July stood at an annualized rate of 581k, lower than economists’ expectations for a read of 598k.

Industrial Production and Capacity Utilization

Industrial production rose 0.5%, expected up 0.3%, capacity use 68.5%, expected @ 68.3%

Consumer Price Index

The consumer price index was unchanged and the core rose 0.1%, exactly as expected. This data helps alleviate inflation fears that have been persistent as of late.

4/40 for Freedom Mortgage

Now here's something that could pull us out of the mess we're in. Check out the links below.

This link give you an appetizer for the program. Contact your reps afterwards....

http://www.4-40forfreedom.com/Home_B.htm

The next link is an article that first introduced me to the proposed program.

http://brokeruniverse.com/premium/archive/?id=163623

Results of the Fed Meeting 08/12/2009

The Fed left rates unchanged, says: Inflation subdued Economic activity leveling.

Will use all available tools to promote recovery. Vote was unanimous.

Trade Data

The trade deficit in June came in at $27.01 billion, lower than the expected $28.5 billion.

10Y Treasury auction & Fed Announcement this afternoon.

Why does it take so long to get an appraisal these days?

Most are finding that the process of getting an appraisal done, has become tedious and expensive. Here’s just an example of why that is. Typically what happens is the appraiser receives their orders from an AMC (Appraisal Management Company) and then set the appointment. They then complete the appraisal per the AMC’s appraisal guidelines and send in the report. When the AMC’s guidelines are not met, the appraisal goes back to the appraiser for corrections based on the AMC’s in-house review.

After the corrections have been made, the appraiser resends the report to the AMC. The appraisal is sent into the lender and if necessary, goes back to the appraiser, via the AMC, to make corrections based on the lender’s guidelines. After the second set of corrections, the appraiser again sends the report back to the AMC.

Delays and complications pile up throughout this process, from appraisal orders sitting in queues before being assigned, to the AMC’s calling appraisers for price quotes or estimated turn times, to back-and-forth review processes.

This is just one example of the complications that lurk in the new appraisal process forced into action by the HVCC (Home Valuation Code of Conduct). It is important to note that this process is not required on FHA or VA mortgages. VA appraisals have always needed to be ordered through the VA website, but that is just so a computer randomly picks the appraiser. The bottlenecks of the HVCC don’t apply.

It is also important to note that since the inception of the HVCC, Fannie Mae has taken a loss, financially, whereas HUD, has been extremely profitable, which leads one to believe that if a borrower has the option of a conventional loan vs. an FHA loan, the HVCC is steering those borrowers to an FHA mortgage, so if you are a realtor or a potential borrower, don’t be surprised if your mortgage broker or banker suggests an FHA mortgage.

Rick Masnyk is manager of the North Smithfield, RI branch of 1st Metropolitan Mortgage and can be reached at 1-888-282-2835 or at rick@getanhonestmortgage.com.

Preliminary Q2 Productivity

Preliminary Q2 Productivity rose 6.4%, higher than the expected 5.3% increase. Unit labor costs fell 5.8%, lower than the expected 2.4% decrease.

Employment Data for August 7, 2009

Non-farm payrolls down 247k, expected down 320k.

Average hourly earning up 0.2%, expected up 0.1%

Unemployment @ 9.4%, expected 9.6%

Expect rates to go UP!

ADP Employment Report

In news released this morning, the ADP payroll report indicated the US economy shed 371,000 jobs in July. This report is notorious for large misses; the average deviation from the BLS report has been 124k this year.

Personal Income and Outlays

In news released this morning, personal income fell 1.3% and outlays rose 0.4%. Economists’ estimates were for income to fall 1.2% and outlays to rise 0.3%. This data was near expectations and had little effect on trade.

In other news, pending home sales rose for the fifth straight month, marking a six-year anniversary since this last occurred.