Appraisal System Updating Is a Top Priority to Lenders

 

The hot housing market has changed many things and one thing lenders want to see is appraisal modernization. A survey published in May by Fannie Mae, found that mortgage lenders see value in appraisal modernization, specifically in the implementation of non-traditional appraisals and inspection-based appraisal waivers. This was based on a survey conducted on senior mortgage executives. The survey concluded that 188 out of 200 (94%) feel that appraisal modernization will help reduce the loan origination cycle time.

The appraisal process time is one of the biggest obstacles the mortgage industry is facing. Right now, it is causing huge delays and higher costs. There are also fewer appraisers who are experienced in understanding more complex collateral assignments. Currently, the appraisers cannot get to all the houses that need to be appraised. Appraisal costs are going up due to the impact this has on the industry. The modernization will also amplify appraisal capacity and lower borrowing costs.

The survey also shed light on some other issues that are even more important for the lending industry. A digital portal for consumer loan applications was number one or two on many lenders' lists. There were also concerns mentioned about roadblocks that challenged adapting new modernization tools. These were speed or lack of speed, of integrating these tools with loan originating systems.

The pandemic also has played a hand in the issues the industry is facing when it comes to appraisals. Hybrid appraisals are now allowed under the FHFA (Federal Housing Financing Agency). Appraisers can now conduct them remotely using public records (tax appraisals and listings) for purchase loans. HUD (Department of Housing and Urban Development) extended its timeline on using hybrid appraisals because of the impact from the pandemic.

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Ways To Purchase a Home With No Down Payment

 Mortgage Rates are low and now is a great time to purchase a home. A big stumbling block for many is a downpayment. There are ways to borrow money through government-backed loans that give a borrower a chance to purchase a home with a smaller downpayment or no money down at all.

Lenders are protected when they lend borrowers the money for a home from the three government agencies which are the Federal Housing Administration, the US Department of Agriculture and the US Department of Veterans Affairs. These agencies ensure loans allowing lenders to reduce the risk of lending a loan to those who offer a low or no down payment.

"The goal across all these programs is helping people get into a home, knowing that homeownership is a key driver for removing the wealth divide," said Ed Barry, chief executive of Capital Bank, a bank headquartered in Rockville, Maryland, which operates Capital Bank Home Loans. "These programs are out there, but many people don't even know that they qualify."

An FHA loan allows a buyer to obtain a mortgage with a lower credit score, higher debt-to-income ratio and smaller down payments. In fact, it is easier for a home buyer to qualify for an FHA loan vs a conventional mortgage.

There is however a limit to the amount you can borrow on an FHA loan. This year the caps range between $356,362 and $822,375 and also depend on the location of the property. In order to find out the cap for your area, you can visit the Department of Housing and Urban Development website.

If you are a veteran or a surviving spouse of a veteran, then you will be eligible for a VA loan. VA loans offer 100% financing and better terms than a conventional loan.

"The advantage of the VA loan is the option to make no down payment," said Jordan Nietzel, a certified financial planner and founder of Trek Wealth Planning in Kansas City. "The thing that people need to watch out for is the debt-to-income ratio, which can go higher on a VA loan than a conventional loan. It can qualify you for a higher loan than you may be prepared to handle."

One catch is the VA funding fee. For a home purchased at $200,000 with a 5% down payment of $10,000, the VA funding fee will cost $3,135 or 1.65% of the $190,000 loan amount. The lower interest rate on a VA loan will be worth the VA funding fee.

In a rural area, there is a loan program called the USDA loan which allows for 100% financing with no down payment. These are great for low and moderate-income households. The buyer's household income cannot exceed 115% of the median income of the area around the home.

There are also property requirements for a USDA loan. The loan eligibility is based on the population density of the community. A potential buyer can search for USDA-eligible areas on the USDA website.

"People tend to think a USDA loan is for farmers," said Barry. "That isn't the case. It is designed for rural purchases. But that is defined by population density, not agricultural use. So you have eligible areas even 30 miles out of Washington DC."

"The challenge is finding someone who is knowledgeable in this space," said Barry. Not only about the type of loan, but about the areas where you are looking. "Usually this is more than just a transaction. It can be a super complicated process. A little hand holding is helpful."

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Affordable Housing Funds Receive $1 Billion

 The current housing market is on fire and will have even more support with the $1.09 billion disbursements for Fannie Mae and Freddie Mac. The Federal Housing Finance Agency (FHFA) has never authorized such a large amount. In fact, this is double what was given last year.

The Federal Housing Finance Agency (FHFA) was established in 2008. The goal for the agency is to make sure that regulated institutions make good on their commitment. It is also there for a safe place for liquidity and funding for the housing finance market throughout the economic cycle.

Along with the agency, as part of the Housing and Economic Recovery Act (HERA) of 2008, congress created the Housing Trust Fund (HTF) and Capital Magnet Fund (CMF). Their purpose is to support affordable housing. HERA directed the Enterprises to set aside 4.2 basis points of each dollar of unpaid principal balance of its total new business purchases and then allocate those reserved funds following each fiscal year for. The funding is divided with the HTF receiving 65% and the CMF receiving 35%.For 2021 more than $700 million will be given to the U.S. Department of Housing and Urban Development (HUD) and the Department of the Treasury for the CMF will receive $383 million.

This is good news for the housing industry altogether. Now is a great time to purchase a home if you are in the market or thinking of buying a home.

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NAHB’s Analysis Shows Gain in Custom Home Building for 2019

Low Mortgage interest rates have supported a surge in custom home building in the fourth quarter of 2019. The NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey revealed that custom home building increased at the end of 2019.

The US Census Bureau’s Survey of Construction (SOC) is a survey conducted by the US Census Bureau and partially funded by HUD (Department of Housing and Urban Development). The SOC reports up to date national and regional data on housing starts, completions and characteristics of all residential housing. The data which is collected includes the start date, completion date, sales date, sales price (single-family houses only), and physical characteristics of each housing unit, such as

square footage and number of bedrooms. The Quarterly Starts and Completions by Purpose and Design is based on the Building Permits Survey and from the Survey of Construction (SOC).

The National Association of Home Builder’s analysis shows 44,000 total custom building starts during the fourth quarter of 2019. This is a 16% gain over the same quarter in 2018 which totaled to 38,000 total custom building starts. Data shows a solid gain occurred during the last four quarters with custom housing starts totaling to 177,000.

The custom home building market will continue to expand with demand from both owner and contractor built homes. The low mortgage interest rates will protect the custom home building market thus maintaining the positive custom home building outlook.

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NAHB Works with Congress to Help Low-Income Housing Laws

Without the help of the country’s federal government, many Americans could not see homeownership in their future.  The National Association of Home Builders worked with the House of Representatives and the Senate to pass a bill in Congress that would facilitate the chance for low-income Americans to become homeowners.  On July 29, 2016, the President signed The Housing Opportunity Through Modernization Act which consists of several reforms which will increase access to affordable rental housing, provide assistance to low-income renters and facilitate homeownership.

There are many facets to the bill which is now a new law.  In the past voucher holders had no chance in competing with market-rate renters.  Because of red tape in the inspection process, voucher holders were not able to move into a multi-family unit such as an apartment or condominium immediately.  Now with the new law inspection requirements in the Housing Choice Voucher Program are more efficient and allow a quicker approval.

The contract terms of HUD’s Section 8 Project Based Housing Choice Voucher program is now 20 years instead of 15 which enables project-based vouchers to be used with the Low Income Housing Tax Credit residences.  Voucher holders will now be protected from economic influences that are out of their control, which means that when the market rental rate goes up, voucher holders will not have to be displaced because their payments are not high enough.  This also allows property owners to preserve respectable renters.

The Rural Housing Service Single-Family Guaranteed Loan Program will also be updated to compete with other government loan programs.  This will allow more low-income renters to actually be able to get a home loan.

FHA regulations that are enforced on existing condominium projects have been reduced.  This means that the purchase of a condo will be less stringent in terms of required owner occupancy for the buyer.  Buyers will now find it easier to purchase multi-family units for rental purposes, creating more rentals in the market.  Also, condo owners who are able to sell will then be able to move up to a single family detached home, if they would like.

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