http://fromthegroundup.freedomblogging.com/2008/01/09/economic-worries-spur-drop-in-mortgage-rates/ Mon, 08 Sep 2008 08:18:27 +0000 http://wordpress.org/?v=2.3.3 http://fromthegroundup.freedomblogging.com/2008/01/09/economic-worries-spur-drop-in-mortgage-rates/#comment-128 Jay Haugen Wed, 16 Jan 2008 16:27:07 +0000 http://fromthegroundup.freedomblogging.com/2008/01/09/economic-worries-spur-drop-in-mortgage-rates/#comment-128 The benefits of llower rates may have been lost due to higher downpayment requirements. FNMA and Freddie-Mac have recently instituted a series of restrictions that will make conventional lending more difficult in Arizona. The declining markets rules (contact Jay Haugen for a copy) are probably the most problematic as they can potentially affect every transaction, and in many instances borrowers will be unable to determine if they are affected until after the appraisal is obtained. This change becomes effective on all loan applications after 1/15/08. In a nut shell, if either the appraiser, or the desk-top underwriting software you are using, detects declining values in the area around your subject property, the maximum loan to value and/or combined loan to value must be reduced by 5% from the maximum allowed for each program. For example, a customer applying for an 80-15-5 combination would be limited to an 80-10-10 combination and would have to put 10% down, effectively disqualifying a borrower who does not have enough funds. A borrower approved for 100% financing on the My Community program or the Maricopa County bond program, would suddenly need 5% down if the appraisal indicates declining values. Many of our recent appraisals and quite a few desk-top approvals have started to reflect declining values, and the only way to avoid the 5% reduction is to prove that values have not been declining. This is difficult to do, especially with so many bank-owned properties reaching the market now. It is evident to me that this restriction is going to impact some of our transactions. The benefits of llower rates may have been lost due to higher downpayment requirements. FNMA and Freddie-Mac have recently instituted a series of restrictions that will make conventional lending more difficult in Arizona. The declining markets rules (contact Jay Haugen for a copy) are probably the most problematic as they can potentially affect every transaction, and in many instances borrowers will be unable to determine if they are affected until after the appraisal is obtained. This change becomes effective on all loan applications after 1/15/08. In a nut shell, if either the appraiser, or the desk-top underwriting software you are using, detects declining values in the area around your subject property, the maximum loan to value and/or combined loan to value must be reduced by 5% from the maximum allowed for each program. For example, a customer applying for an 80-15-5 combination would be limited to an 80-10-10 combination and would have to put 10% down, effectively disqualifying a borrower who does not have enough funds. A borrower approved for 100% financing on the My Community program or the Maricopa County bond program, would suddenly need 5% down if the appraisal indicates declining values. Many of our recent appraisals and quite a few desk-top approvals have started to reflect declining values, and the only way to avoid the 5% reduction is to prove that values have not been declining. This is difficult to do, especially with so many bank-owned properties reaching the market now. It is evident to me that this restriction is going to impact some of our transactions.

]]>