HVCC is raising havoc with a fragile housing industry

HVCC = The Home Valuation Code of Conduct
The focus of today's news centers around HVCC. I think it's important that you know about HVCC and how it can and WILL affect you and anyone you know buying, selling or refinancing a house. HVCC went into effect on May 1st this year, and is raising havoc with the already fragile housing industry.

HVCC has removed our ability to communicate with appraisers about your loan transaction. We are forced to use a "lender assigned" AMC (Appraisal Management Company) to order your appraisal. These management companies are located all over the country. They charge appraisers a huge percentage of the cost of the appraisal, which has driven up the cost of the appraisal to you, the consumer.

AMCs are not licensed, and are therefore not regulated, and the lenders can even own up to a 20% interest in the AMC we are required to use.

The best appraisers are often unwilling to work with AMCs, so we are often left with inexperienced appraisers doing what our local appraisers used to do best - evaluate a home's value based on their experience and knowledge of real estate in your local area. Can you believe your appraisal for a home in San Francisco, for instance, might be valued by an appraiser in Kansas? Does this make sense?

The increased cost of the appraisal is not the only way you can lose money. Since we are now relying on unknown people to do the appraisal, we have no control over the time frame to get a completed appraisal back to the lender. This can cost you in time to close the loan, which can result in either losing your rate lock, or having to pay for lock extensions. (Typical lender charges for lock extensions = 1/4% of the loan amount for a 15 day lock extension). Are we now talking potentially thousands of dollars?

And, what if the seller needs the loan to close faster? Can this result in a lost sale?

If you are unhappy with the valuation these appraisers arrive at, for your home, or the home you want to purchase, there are additional charges for an appraisal review. And, of course, you guessed it - the person doing the appraisal review is unlikely to know anything about your neighborhood or even home value trends in your state!

AND - if rates drop during your transaction, loan officers cannot transfer your appraisal to another lender to take advantage of better rates for you. You are forced to pay for another appraisal to move your loan!

If you are as outraged as those of us in the real estate, mortgage, and appraisal industries are, please write your Congressional representatives and let them know what you think. Help us kill this travesty called reform. We are doing all we can to fight this bill, but we need your help too.

Best regards,

Shelby Bateson

http://www.shelbytncmortgage.com/

The stock market is DOWN but mortgage rates are UP?

The stock market is down this morning, approximately 100+ points on the DOW. So, shouldn't mortgage rates be down too? That's the way it used to work, but nothing seems to work the way it used to work anymore.

Currently, the word on the street is that the economy seems to be stabilizing. This is causing many economists and analysts to start talking about inflation again, sparking fears that the Feds will start raising rates again by the end of 2009. The result is that investors are dumping bonds so they are liquid, in case bond prices (which move in the opposite direction of bond yields) start to rise.

Ben Bernanke is experiencing a conundrum - what to do now? If the Feds keep buying bonds, and most specifically mortgage backed bonds, will this create some level of inflation, causing him to have to raise rates to curb inflation? But, if he doesn't resume purchases of mortgage backed bonds, will mortgage rates continue to rise? Right now, the Fed is being very quiet as they watch, and mortgage rates have been on a tear.
Low mortgage rates were helping with stabilizing house values. Buyers were tipping their toes into the market, encouraged by record low rates, lower prices, and for those first time home buyers, the $8000 tax credit. As of today, the buyer has less buying power (due to higher mortgage rates) than he/she had in December 2008 (when housing prices were higher)! This is a conundrum of huge proportions.

Over the last two weeks, we have watched the average rate on the 30 year fixed rate mortgage move from a national average of 4.84% 5.45% this morning. Does this mean that housing prices will have to drop more to keep housing affordable? It is predicted that the Fed probably will not make any adjustments to their Treasury purchase program until after their next meeting June 23-24. This is because they do not want to be perceived as "reacting" to swings in yields, or acting in an arbitrary fashion. But we do know the following:

1. The yield on the 10 year bond rose to as high as 3.90% this morning, before dropping back to 3.8+

2. Government bond yields, consumer rates and price swings are increasing as the Fed fails to say if it will extend the $1.75 trillion policy of buying Treasuries and mortgage bonds through so-called quantitative easing.

3. Higher rates may deepen the two-year housing slump that helped trigger the recession and sideline consumers planning to refinance or buy their first home.

4. The median sale price for a U.S. home dropped in April to $170,000, down 26 percent from a record $230,000 in July 2006, according to the National Association of Realtors.

4. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan fell 16 percent to 658.7 in the week ended May 29 as borrowing rates climbed.

5. The Largest holders of Mortgage backed securities, PIMCO and Pacific Investment Management have cut back their holdings of these securities drastically as they watch what the Fed will do in the near future.

6. Mortgage bonds have gained 1.9 percent this year, according to Merrill Lynch & Co.’s Mortgage Master Index. Treasuries have lost 6.2 percent this year, according to another Merrill index, after gaining 14 percent in 2008.


There are economists out there who believe that the rates on mortgage backed securities could drop back down to as low as 2.15% by the end of this year. This would equate to mortgage rates below 5% again.

If you think it would be beneficial to you to refinance at this time, or some time in the near future, again, my best advice to you is to get a mortgage loan application in process and pre-approved, so IF rates drop again, you are in a position to lock in those lower rates. Virtually no one is talking about future rates at 4% anymore. But who knows? It could happen?

I do appreciate your feedback about these newsletters, and of course, your continued business and referrals.
The greatest compliment you can pay me is feedback and referrals.

Best regards,


Shelby Bateson
Town & Country Mortgage
10228 SW Capitol Highway
Portland, OR 97219
503-819-6545 phone
Lic # ML-3604
http://www.shelbytncmortgage.com/


* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.

Good news Bad News in the Financial Markets and Mortgage Markets

The good news is that new job losses reported for May took a dramatic drop. The numbers came in at 345,000 jobs lost in May 2009. While under normal circumstances this would sound terrible, consider that in the past 6 months, that number was consistently above 600,000. BUT, nationally, unemployment now stands at 9.4%!

There's even more to make matters worse; CNBC reported this morning that the real unemployment figure is closer to 16%:

if you add in people who have settled for part time jobs, or just any job in order to feed themselves and their families, plus those who have run out of unemployment benefits.
Also, we have all those college grads coming into the market this month, with no jobs, and not added into the 9.4% or even the 16% numbers!

And,to make matters even more dismal on the employment front, the average work week is now down to 33 hours. There are currently 12,000,000 people out of work in the U.S.

There is a debate going on right now on CNBC about whether the worst is behind us. Those who say we are close to bottom cite the following:
The DOW is up 2000 points since we hit bottom in March
New firings are down by almost 50% for the month of May
Bond yields are rising.
So far, inflation is very moderate - gas prices are rising but no where close to the $4.00+ we saw just a year ago.

Those who say "the other shoe has yet to drop" are citing:

Housing values have not yet stabilized
Unemployment is still too high, and we need to see employment figures rise before we can call a bottom
Bond yields are rising, which is driving up the costs of borrowing - most specifically Mortgage rates are rising so fast, it's frightening - which will not help our housing market
Retail sales still remain dismal, unless you are Walmart.
What do you think? Are you an optimist or a pessimist?

The yield on the 10 year bond rose again today. It topped out over 3.9% this morning, and closed the day at 3.84%. I hate to say it, but of course, mortgage rates rose yet again today. The average rate on 30 year fixed rate loans, as of today is above 5.5%! As we have discussed before, this is eating into buying power in a major way. For each $100,000 increment of a mortgage loan, the payment increases $62/month when the rate goes from 4.625% (where we were 2 weeks ago) to 5.625% (where we are today).

HARP loans (perhaps better known to most of you as the Obama "Making Homes Affordable" loans, or the Fannie Mae/Freddie Mac streamline refinances) are still available. This program has been funding through June 2010. While the process is streamline and requires less documentation from you as borrowers, the rates are almost exactly the same as other prime loan rates for conforming loan amounts ($417,000 or less). Also, adjustments to the rate are exactly the same as for other prime loans. The big benefit to the HARP loans is that you can be underwater and still qualify for these mortgages without mortgage insurance (if you current loan does not require mortgage insurance.)

Currently, we are hearing that a few lenders are starting to accept applications for those of you WITH mortgage insurance, but the guidelines have not yet been announced. I am not accepting those applications at this point, because virtually all lenders require pre-paid appraisals with your applications, and if the terms are not favorable, you have spent up to $500 for an appraisal you don't want or need. I will keep you posted once we receive all the lending rates and guidelines for this product. We do know that NONE of the big banks (B of A, Wells Fargo, Chase, etc) are offering this program yet, so I suspect there is more to what this loan will entail than has been disclosed to us so far.

Shelby Bateson
Sr. Loan Officer
Town & Country Mortgage
http://www.shelbytncmortgage.com