Monday, June 29, 2009

HVCC and Me

A perspective on the HVCC (Home Valuation Code of Conduct) from loan officer and colleague Randy Sawyer:

HVCC has been all around the blog world and the press of late. When it first rolled out on 5/1/09, HVCC reminded me of 10CC in that “I’m not in love” came to mind. After having experienced some of the ramifications of the HVCC, I offer this as an originator.

While I think the idea of an HVCC is good, I am not sure the idea is producing the desired outcome. An appraisal should be a justifiable and objective report. Whether there is the HVCC or no HVCC the goal of the appraisal is to quantifiably report a realistic property value. This protects lenders and borrowers which is a good thing especially these days.

Allow me to enumerate some issues I do have with this new process. First of all, appraisals now cost more money as there are more moving parts in the process, ranging from lenders, Appraisal Management Companies and their staff, the actual appraiser, and loan originators. This has ultimately added expense to the appraisal process, generally anywhere for 10% -20% more than this time last year. So the customer and/or the loan officer are straddled with the extra expense. Unfortunately, the appraisal now has to be paid for via credit card which can hurt a borrower who has no credit card, no credit limit left, or keeps a balance that will accrue more interest charges. I suppose one could dispute the charges for good reason, but that’s another issue.

Secondly, the process can take a little longer. An appraisal used to take a week, now it is probably closer to two weeks. Not a huge difference, but maybe enough of one to delay or derail a conventional mortgage loan.

Finally, we as originators are not allowed to have any contact with the actual appraiser. Sure we can call the AMC (Appraisal Management Company) but not the actual appraiser. Hence, more layers, more potential delays. I could go on about more disclosures needed with this new process, but that is really my problem not yours.

Monday, June 8, 2009

<5% Rates Were So Last Month

We all knew it was coming. Mortgage rates could only stay so low for so long. So why is it such a shock that they've jumped up nearly 1% in just two weeks?

Whenever rates increase 1% in such a short period of time it tends to make people scratch their heads (or bang them on the wall - take your pick). Back before the week of March 25 the 30yr fixed rate was ~4.5%. Now, at the beginning of the week of June 8, the 30yr fixed is ~5.5%.

Although there is no natural law that states, "what goes down must go up," the rate move was a sure thing.

What has caught many off guard is that they spiked so quickly and before many were expecting it. We were getting so used to sub 5% rates that we just assumed they would be around for a while (with the FED in such control and all!). But now we've learned a valuable lesson all over again - take it when you can get it.

So for now, 5.5% is the new 4.5%.

Articles that explain the situation much better than I can:

Bond-market rout lifts mortgage cost (AP, 06/06/09)

Bernanke Conundrum Threatens Housing On Mortgage Rate (Bloomberg, 06/08/09)