A new set of loan standards have been agreed to by Fannie Mae and Freddie Mac, along with the Office of Federal Housing Enterprise Oversight (OFHEO) to form an independent organization to launch and monitor a new set of loan appraisal standards in an effort to reduce the risk of fraud, among other issues.
The “New Home Valuation Protection Code” establishes new requirements governing appraisal selection, solicitation, compensation, conflicts of interest, and corporate independence, among other reforms. These requirements include prohibiting mortgage brokers from selecting their own appraisers, and prohibiting lenders from using “in-house” appraisers and using appraisal management companies they either own or control.
The agreement also calls for the creation of the “Independent Valuation Protection Institute.” which would serve to implement and monitor the “New Home Valuation Code.” The Institute will be funded by Fannie Mae and Freddie Mac and operate as a consumer contact center for complaints from both borrowers and appraisers.
New home construction was down 62 percent in January as homebuilders continued to cope with slow sales and the ongoing credit crisis, according to the latest data from the California Building Industry Association (CBIA).
Legislation to follow:
ü AB 2259; Ownership Rights in a Common Interest Development (CID). This bill calls for the protection of property ownership rights in a Common Interest Development by preserving an owner’s right to lease or rent their unit if such a right existed at the time they purchased the unit.
ü AB 2363; Megan’s Law – “Just Cause Evictions” under Megan’s Law. This bill would require local jurisdictions with a “just cause eviction” ordinance to permit landlords to evict a registered sex offender in order to protect a person at risk, as is permitted in existing law.
ü SB 1054 – Mortgage Loan Broker Disclosures. This bill would require a prominent disclosure to all parties whenever a broker, business entity, or licensee represents a buyer and originates a loan in a “1-4” transaction. This legislation will help to alleviate the perceived conflict created by the loan originator’s obligation to ensure that the loan application is accurate and adequately underwritten.
Qualifying for a mortgage loan in today’s market may be tougher than it was just last year. Lenders have tightened underwriting requirements for the loan approval process and, in many instances, eliminated “stated income” and “no down payment” loans. Many borrowers took advantage of these so-called “subprime” loans over the last few years, but today are among those reported to be having trouble making their mortgage payments.
Here is what you need to know about obtaining a mortgage in today’s market:
· Understand Interest Rates – interest rates are at their lowest levels in many years. During the last housing slow-down in the 1990s interest rates climbed to 9 percent and hit 12 percent in the 1980s.
· Understand Points – Points are a form of pre-paid interest that you may be required to pay your lender upon the closing of your loan transactions, above your other fees and interest. There are either origination points, which cover your lender’s fees, or discount points, known as “buyback” points, which are paid in exchange for lowering your monthly interest rate. With either option, one point is equal to 1 percent of your loan amount. Points may sometimes be charged based on your credit worthiness and your debt-to-income ratio.
· Get Pre-Approved – for a home loan will allow you to take a written letter of pre-approval from a lender as you shop around for your new home. The pre-approval letter may indicate to a seller that you are a serious buyer. When you go to a lender for pre-approval, you may be asked to produce income statements, and have your credit and debt information carefully scrutinized – be prepared, and collect all documents ahead of time to facilitate the process.
· Understand Different Loans – such as fixed-rate loans, adjustable-rate-loans and jumbo loans.
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