Homebuyer Tax Credit Deadline Now Sept 30, Loan Officers Comment On Home Appraisals

Tax Credit Deadline Now Sept 30
President Barack Obama signed HR 5623, the “Homebuyers Assistance and Improvement Act of 2010,” a three-month extension on the closing deadline for first-time home buyers to receive the tax credit. Potential homeowners with offers currently under contract now have until September 30 to close the deal, instead of the original June 30 deadline. Buyers had to be in contract by April 30 to be eligible for this extension.

Credit Union Expansion
Credit Unions are making a push to increase their market share of mortgage originations. To some degree, they have stepped in where private investors have exited the business. One example is Kinecta Federal Credit Union, which not only offers conventional and government programs, but also portfolio loans up to $4 million and piggyback HELOC’s up to $500k. The company was originally founded in 1940, and as it turns out is one of the largest credit unions in the nation. The firm is expanding its Wholesale Lending Division, and is looking for Wholesale Account Executives for Northern California, Southern California, Arizona, Oregon, and Washington, and hiring retail Mortgage Loan Officers in California, along with FHA and conventional processors, underwriters and funders.

Comments on Home Appraisals
Last week I mentioned some comments from an appraiser.

“I would counsel the mortgage brokers to tell the clients what their loan to value ratio is and what their loan amount is and then tell the appraiser when the borrower meets them.” Needless to say, I received some responses. “I am amazed at the appraiser’s comments. This is exactly what got us in trouble in the first place: make value, to do the deal. Come on – have we learned nothing? I’m speechless. The value is the value no matter what the loan…that’s the point of independent assessment, amazing.”

“This is the nonsense that contributed mightily to the housing debacle in the first place. Appraising a home isn’t rocket science. Find proximate comps, use them, and make the same kinds of adjustments that any rational buyer would make in their heads when they assess buying a home. Appraisers, in their defense, will ALWAYS be pushed by the broker who wants a commission, the realtor who wants a commission and the borrower who wants the big loan. These three are DESPERATE for money — because humans are always desperate for money. The appraiser, who is also desperate for money – knows that these other desperate parties will not use him if he doesn’t do their bidding. HVCC has removed a great deal of that. If Fannie and Freddie were smart they’d follow FHA’s lead and create a “Fannie/Freddie approved appraiser” program just like FHA has…”

It is true that the HVCC (Home Valuation Code of Conduct, which is a set of appraisal rules banning loan officers from talking to appraisers during the loan process) does have some fans in the mortgage industry, especially if complying with it leads to fewer buybacks. Many lenders have kept the ordering of appraisals in-house, and instead of farming out the job to AMC’s these companies gave the jobs to in-house staff that might have been laid off instead. Some companies apparently didn’t realize it was an option. Underwriters and other Ops staff have been moved into this role, with apparently pretty good success. Some say that AMC’s, who have minimum experience requirements, are doing about 60% of all appraisal work, since many lenders like the separation of the originator and appraiser.

Jobs Report Aftermath
Did anything change over the weekend after Friday’s anemic unemployment data showing a drop in NFP of 125,000 and a decline in the hourly workweek and hourly earnings? Not really: the June employment report confirmed views that the labor market is stumbling along, that any kind of recovery may be “jobless”, and stock prices dropping almost 5% last week indicates that rates (including mortgage rates) will be low for quite some time. In fact, economists are pushing any substantive move higher in rates into 2011, since housing is relatively slow, employment is slow, and there is no inflation. (Hopefully investors don’t begin worrying about the amount of debt the US has issued…) Yes, the unemployment rate dropped to 9.5%, but this was driven by a decline in “labor force participation” – people just aren’t looking for jobs.

Rates Dropping More?
In the past any drop in rates would normally portend a pickup in prepayments and supply. But as everyone knows this is not happening – yet. Smarter minds than mine believe that in order to see another refi boom the 10-yr yield must go below 2.80%, if not all the way to 2.50%. (Remember that the Fed owns the most negatively convex MBS’s – and it does not hedge!) Weak economic data from the US, Europe, and China caused investors to question the pace of the global economic recovery and slower economic growth is usually positive for mortgage rates and negative for the stock market. (And last week stocks had their worst week in over two months.)

Data Summary
It seems that not a week goes by without some release from the Institute of Supply Management. Today is no exception, with its Non-Manufacturing Index. Tomorrow we have the MBA’s rate lock activity, Thursday Jobless Claims, and on Friday some trade numbers. It is a very, very light news week indeed. All in all, Friday rates didn’t do much, with the 10-yr yield fluctuating +/- 3% and mortgage security prices unchanged. The 10-yr Treasury note yield, which Friday chopped around 2.95%, is sitting around 2.98% this morning. Mortgage prices are not doing much either, and are roughly around Friday’s levels.