John D Ambrogio

….You’re stupid or broke!  Strong words, but thank you Marc Roth for exposing the emporer’s new clothes on this one!  Your humble author definitely has plans to buy at least some more investment property in 2010 and take advantage of these all time lows and historically low rates (although I’ve got a nagging vacancy in Chicago’s Tri Taylor neighborhood, if anyone is looking for a rental bargain!).

But back to Mr. Roth’s succinct appraisal - “Maybe you’re a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don’t act soon, you will regret it. Here’s why: historically low interest rates.”  He goes on to address a number of other issues that can apply to buying real estate in Chicago or just about anywhere else in the country.

Yes the nay-sayers will remind you that it’s very hard to get the best mortgage rate without fantastic credit, or that nasty little extras like property taxes have not gone down, or that 10.3 of us seem to unemployed - but that’s not “big picture” thinking.  If you have the means, this is an opportunity that won’t come again for many years.  So for those on the sidelines - Carpe Diem!

Read the fantstic article here.

John D Ambrogio

BREAKING NEWS from RIS MEDIA:   Obama Signs Homebuyer Tax Credit Extension

According to RIS MEDIA: President Barack Obama approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010!!!!!!!!!! A great day for Chicago real estate.

John D Ambrogio

Here’s some fantastic insight on some of the changes coming to RESPA, by my Rubloff colleague Ross Nemzin.  Ross can be reached at rnemzin@rubloff.com 

Another of the new federal requirements that will impact every mortgage operation in the country is the Real Estate Settlement Procedures Act (RESPA). RESPA is an HUD consumer protection law that was created in 1974 to help consumers become better purchasers of settlement services and to decrease the puffed up costs of real estate transactions due to kickbacks between lenders, realtors, construction companies, and title insurance companies. It also requires that lenders provide borrowers with a good faith estimate (GFE) for all the costs of a loan. RESPA reform has been going on since 1992 and at last a final rule for the act was recently created with a compliance date of January 1, 2010.

The final rule promotes RESPA’s functions by requiring more timely and useful disclosures about mortgage settlement costs and protecting borrowers from paying inflated settlement costs. According to the Federal Register, RESPA will do this by - Improving and standardizing the GFE form; guaranteeing that the first page of the GFE is understandable; allowing borrowers to ID a particular loan and make comparisons easier; providing more accurate estimates of settlement costs on the GFE; helping to more accurately compare the GFE with the HUD-1.   

It is important to note that the costs outlined on the GFE are only estimates. The HUD-1 Settlement Statement is a list of the actual fees charged to the borrower and can be reviewed by the borrower one day before settlement. The borrower should request to see the HUD-1 and should question any charge that is not understood.

After much consideration, the proposed changes to the definition of “required use” have been withdrawn from the final rule of RESPA. These changes would have eliminated incentives or discounts to borrowers that use affiliated settlement service providers.

It seems as though RESPA’s final rule is very beneficial to the homebuyer, yet only time will tell.  However, anyone relocating into or out of Chicago should certainly take note….

John D Ambrogio

James Waller, shared some comments on HOEPA– Home Ownership Equity Protection Act.  James is currently pursuing a real estate degree at DePaul University in Chicago IL.  He can be reached at jwaller@rubloff.com .  As always, it’s best to stay informed by using a strong, secure mortgage lender.

On July 14, 2008 the Board of Governors for the Federal Reserve released new rules under the Truth in Lending Act (T.I.L.A.) Regulation-Z. This law helps to protect consumers from deceptive practices made by lenders towards mortgages and home equity loans. If the lender does not supply the obligatory disclosures or terminates the loan in less than three days, then the borrower has the right to take legal action and may be able to receive compensation for damages, legal fees and get the loan reinstated. H.O.E.P.A. is applied to all lenders and not just federally –regulated banks. 

 
The guidelines illustrate how we are shielded by creating a new category of “higher-priced mortgage loans.” It is defined as closed-end consumer credit transactions secured by the consumer’s principal dwelling. The Annual Percentage Rate (APR) on the loan will exceed the rate on a Treasury security with a comparable maturity by 3%. This shall include purchase loans, refinancing of loans, and home equity loans. Yet, this will exclude loans for vacation properties, open-end home-equity plans, reverse mortgages, or construction-only loans.

 
 Furthermore, this legislation implements early consumer disclosures for closed end mortgages secured by a principal dwelling. Certain prohibitions include acts or practices for subprime mortgage loans and loans that meet HOEPA’s cost triggers. Additional acts or practices for closed-end credit transactions attained by a consumer’s principal residence. Also, misleading advertising practices in relation to closed-end mortgages.

John D Ambrogio

 My colleague here at Rubloff, Ross Nemzin, has shared his thoughts on the upcoming HVCC - One of four major changes coming to the relocation financing world in the next few months.  Ross, who is earning a degree in real estate while working at Rubloff, can be reached at rnemzin@rubloff.com  

As described in an earlier post, a number of new federal requirements in the housing industry will be enacted within the next few months.  One of those requirements, the Home Valuation Code of Conduct, has already been formally implemented.  In a broad sense, the HVCC is designed to ensure and improve the independence and accuracy of appraisals and provide increased protections for homebuyers, investors, and the housing market.  The HVCC has nine sections that each deal with a specific part of the new act.

The first section of the HVCC establishes controls and safeguards to ensure appraiser independence.  The main point is that all appraisers must be licensed or certified by the state in which the property to be appraised is located.  The other major aspect of section one is that nobody shall influence any part of the appraisal process in any way.  Section two requires lenders to provide customers with a copy of their appraisal or property valuation report no less than three days prior to the closing of the loan.  The customer does have the right to waive this requirement.

The third section of the HVCC involves appraiser engagement and selection.  Specifically, the lender must select, retain, and provide for payment of all compensation to the appraiser.  The third section forbids any influence in the selection of an appraiser for a particular assignment, including any communication that may have an impact on valuation.  Finally, any employee in charge of selecting appraisers must be trained, qualified, and completely independent of the loan production staff and process.

The next two sections focus further on the independence of appraisers.  The fourth section prevents improper influences on appraisers by describing specific instances in which an appraisal report cannot be used due to its impartiality.  Section five creates the Independent Valuation Protection Institute (as approved by the parties) which compels the lender to provide information to appraisers and borrowers regarding the availability of the Institute’s services, including a telephone hotline and email address and the publication and promotion of the best practices for independent valuation. 

The sixth section requires lenders to test the quality of appraisals and provide Fannie Mae or Freddie Mac with any irregular results.  In section seven, a lender is required to alert the applicable State office to any known violation of laws or unethical conduct by an appraiser or appraisal company.  Section eight forces a lender to certify that the appraisal report was acquired in compliance with the HVCC and lays out punishments for violations.  The ninth and final section deals with the scope of the HVCC and its affect on property valuation prior to its enactment.

So, what does all this legal jargon actually mean?  Well, first of all, Freddie and Fannie will only purchase loans that were appraised in compliance with the new Code.  In addition, many lenders are up in arms about the independent selection of appraisers, citing the fact that the HVCC has resulted in appraisers performing appraisals in areas they are not familiar with, the forced use of appraisers with less experience, and much lower appraisals.  Appraisers unfamiliar with an area are more likely to undervalue a home, which can destroy a deal if a seller is unwilling to list the home for that low of a price.  Further, there is an increased cost for the appraisal because the appraisal fee is now split between the appraiser and the appraisal management company.  The HVCC has greatly altered many aspects of a real estate transaction, often with overwhelming effects.

John D Ambrogio

The almighty credit score, the 740 hurdle, the mysterious FICO…..is it going give a wink and a nod to the millions of foreclosure customers coming into the credit market.

Short sales, deeds in lieu of foreclosure, and “proper” foreclosures are affecting Americans all over the country.  While it may not be part of YOUR FICO score it will impact the pool of clients who may want to buy your relocation home in Chicago .

Is “foreclosure” still the scarlet F that it used to be?  I don’t think so, not since people started bragging about bucking the system and declaring bankruptcy.  While it still makes them less of a candidate for the most competitive loan around, they can still get loans nonetheless.    The huge stigma just isn’t there anymore.  So how does that reflect on those of us (gentle reader included, perhaps) who don’t have a foreclosure on their FICO?    We have to admit that a foreclosure five, or seven, years ago carried a much bigger stigma than it does today.  We simply have too many foreclosed properties to throw those owners out “with the bathwater” as it were.

Experts and pundits alike seem to concur – FICO scores will have to be adjusted to take into account the huge amount of bad loans that have flooded our nation.  We simply HAVE to figure out a way to realistically lend to these people if we want them to continue to contribute to the US financial system.

Then again, as they say “a nod is as good as a wink to a blind horse”