Appraisers no longer required for some transactions


Realtor Report

The human element in home appraisals

For decades, now, we have been dealing with humans being replaced by streamlined processes or machines that end up making them dispensable. But what about eliminating the friendly face at the front door there to appraise your home? It appears appraisers may no longer be required to get formal property appraisals—a change that could save consumers hundreds of dollars and speed up the closing process as well.

As if slipped under the radar last year, a change in requirements took place in the Fannie Mae/Freddie Mac arena that has made waivers for traditional, in-person appraisals available. Instead of live appraisals, the two government-sponsored enterprises have started to use proprietary analytics and property data to value homes. That means no physical inspections of the home and no study of recent sales data in the area to come up with the valuation.

The usual in-person appraisal carries a price tag of about $500, according to Fannie. That cost is footed by the loan seeker, whether it's a buyer getting a mortgage or a homeowner trying to refinance. Despite this new opportunity, however, not everyone is eligible for these appraisal-free loans, which typically require a down payment of at least 20%. And it’s not as if borrowers can request these faster-track valuations. Fannie and Freddie identify properties that they deem appropriate, favoring those that have had other recent appraisals.

Experts in the field agree that if the two government lending entities have a good basic inventory of information about the house, its value, and what it sold for, it is more likely to be identified for a property inspection waiver. However, if your house or the house you want to buy hasn’t been appraised in quite a while, your chances of getting that waiver plummets.

Reports tell us only about 5% of Fannie loans were no-appraisal mortgages in 2017. Freddie hadn't tallied its number of no-appraisal mortgages, but estimates they will eventually account for between 10% to 15% of its new loans.

It’s altogether feasible that some buyers and sellers would rather skip the option of an appraiser-free transaction, however, even if it’s available to them. With many, it represents much more than saving a few bucks. How? In a recent realtor.com article, NAR chief economist Danielle Hale admits that it has the potential to lead to buyers into overpaying. By the same token, if the appraisal comes in lower than the agreed-to price, buyers could have some room to negotiate. In the current market, however many buyers are unable to negotiate anyway, even if the appraisal came in too low.

The article reveals the in March, 42% of buyers had contingencies in their purchase contracts allowing them to back out if the appraisal came back too low.

Refinances, however, are different animals. When refinancing solely to get a lower rate and nothing else has really changed about the property itself, it just makes sense to go appraiser-less whenever possible.

So what about the human factor in appraising properties. How much weight should it be given? The article cites a Sacramento-based appraiser that Fannie and Freddie's computer programs “cannot smell 20 cats living at the property” or judge the pride of ownership in the immediate neighborhood.

Despite this new change, appraisals are still considered the gold standard for real estate evaluation, so even if you are offered the option of saving that $500, you may opt to pass on it.

Source: Realtor.com,TBWS


This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways so far today.  The MBS market worsened by -40 bps last week. This was enough to worsen mortgage rates or fees.   The rates experienced moderate volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three things that have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Fed and 3) Oil

1) Geopolitical: U.S. Treasury Secretary Steven Mnuchin declared that looming U.S. - China trade war is "on hold." The U.S. will hold off on implementing tariffs, and China has agreed to purchase more from the U.S., specifically from the agriculture segment. Also, NAFTA is still a major concern as the administration is now focusing on a "skinny" version of NAFTA. Italy's debt problems and the Brexit will also garner plenty of attention from traders.

2) Fed: The two biggest events of the week are the release of the Minutes of the last FOMC meeting and Friday's speech by Fed Chair Powell. The Minutes will be combed over for more details about their discussions about the injection of their new word "symmetry" as it relations to their target inflation rate. We have a pretty full schedule this week:

  • 05/21 Raphael Bostic, Patrick Harker, Neel Kashkari
  • 05/22 Richmond Fed Mfg Index
  • 05/23 FOMC Minutes
  • 05/24 William Dudley, Kansas City Fed Index, Patrick Harker
  • 05/25 Jerome Powell, Robert Kaplan and Charles Evans.

3) Oil: WTI Oil prices have risen from $50.73 on May 21, 2017, to $71.39 on May 21, 2018. And the recent push above $70 has undoubtedly increased both awareness and concern over inflationary input costs. As WTI Oil marches towards $75 and Brent towards $80, it will pressure MBS.

This Week's Potential Volatility: Average

Mortgage rates and markets in general are likely to have a relatively calm week with the holiday. By Thursday of this week, many traders will be heading out of town. Of course, any unexpected geopolitical news has the ability to move rates.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

NMA Home Loans is Licensed by the California Department of Real Estate under License # 01111689 and NMLS # 320740

Ed Eissa

Mortgage Broker / Realtor

NMLS: NMLS 320740 - DRE 01111689

NMA Home Loans

7003 Sherbourne Lane, San Diego CA

Company NMLS: 320740

Office: 858-750-0931

Cell: 858-750-0931

Email: ed@nmahomeloans.com

Web: http://www.NMAhomeloans.com

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