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.
My friend and colleague Judy Gray from Cam Taylor Realtors in Columbus OH recently released a detailed overview of the issues discussed at the recent RDC event in San Diego, CA.
As Judy describes RDC, it is composed of members reflecting the breadth and depth of the US Domestic relocation bility industry; it facilitates open communication; highlights emerging trends; and identifies opportunities for the growth of the mobility profession.
While my personal focus is on Chicago relocation, it’s reassuring to see that my cohorts around the country are often faced with the same issues. Read the fantastic article on her propopoly blog here! Thanks for letting us share this information!
Housing and Economic Recovery Act (H.E.R.A.) : One of Rubloff’s hard working interns, James Waller, shared some comments on HERA – The Housing and Economic Recovery Act. James is currently pursuing a real estate degree at DePaul University in Chicago IL.
The Recovery Act is estimated to be $13.61 billion for various projects created by the Department of Housing and Urban Development. The Act will surely affect those transferring into or out of Chicago, or anywhere nationally.
This program will create tens of thousands of jobs by having workers produce modernized homes that are energy efficient. Additional resources will be used to stabilize and revive local neighborhoods and housing markets with heavy concentrations of foreclosed properties. This funding will also assist the vulnerable families and individuals who are on the brink of homelessness or have recently become homeless.
To be eligible for H.E.R.A. a candidate must have a loan on an owner-occupied principal residence. Your monthly mortgage payment must be greater than minimum range of about 31 percent of the borrower’s total monthly income. The borrower must certify that he/she did not obtain the existing mortgage fraudulently and has not intentionally defaulted on an existing mortgage. The borrower must also show they have not been convicted of fraud. Only the primary residence is allowed to receive this program, so this means no speculators, investment properties, second or third homes will be refinanced
A majority of homeowners that are facing foreclosure were misled or were in other ways the victims of unfair lending practices. In order to prevent future abuses by lenders, this act will incorporate a nationwide loan originator licensing and registration system to set minimum standards for all residential mortgage brokers and lenders. It also strengthens mortgage disclosure requirements to help ensure that borrowers understand their mortgage loan terms.
Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commercial property owners’ investment in energy efficiency upgrades. While commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program.
A number of new federal requirements in the housing industry (Chicago real estate as well as nationawide) are on deck for the near future - It is important as a relocating transferee or a relocation professional to be ready for it. Here’s an overview of four of the events coming between July ‘09 and January ‘10 — A more complete post on each is coming soon!
HERA - Hera is the Housing & Economic Recover Act. It will be begin 7/30/09 and will implement new timelines for delivery to consumers regarding disclousures and TIL. Many states, including Illinois, will also implement fingerprinting as an enhanced background check (see our blog post on that subject!).
HOEPA - The Home Ownership and Equity Protection Act - Effective 10/1/09, HOEPA affects high dollar mortgages. It will involve new categories, disclosures and processes. Get ready for lots of changes to the marketing materials consumers will receive.
HVCC - The Home Value Code of Conduct - Already enacted, HVCC includes new appraisal delivery regulations. HVCC requirements MUST be met for sale to Fannie/Freddie.
Finally, RESPA changes - The Real Estate Settlement and Procedure Act - Althought legislation is still in flux, RESPA plans include a revised HUD-1 and Good Faith Estimate; the “required use” provision will go away.
One of the best sources of hard data on the overall economy for Chicago and Chicago Real Estate in the government site http://www.bls.gov/eag/ and the specific Illinois information found at http://www.bls.gov/eag/eag.il.htm .
A quick perusal will give a snapshot of the last 5 months (with archived data available) of economic data, including Labor Force Data (including the key unemployment rate, which should be of great concern if you’re buying real estate in Chicago or selling real estate in Chicago . The January statewide unemployment rate, by the way, was 7.9%, up from 6.7% in September. Layoff rates are noted as well.
Construction starts, manufacturing info, trade and transportation information, plus statistics on finance and professional and business services are also available. Just think, it could be worse, you could own luxury real estate in Scotland (see www.guidemehome2chicagoluxury for more info)!
Whenever you consider relocation or selling in Chicago, take all the facts into account so you can make an informed decision!
“Hello, this is Arthur, can I help you?” – You might expect this on a real estate “floor call” (for those who don’t remember the old days, that’s a “phone call”), but today it is as likely to be a customer service representative on twitter!
We’ve recently launched yet another way to reach out to generation “Y” when buying real estate (and these folks will be buying again and again through the year 2060 and beyond!) – Hence “Ask Arthur.” So the savvy real estate office now not only has a phone number; an 800 number; a bevy of email addresses; online forms galore; and now a few more portals! We initiated “live chat” (instant messaging) about ten years ago, but the penetration of broadband was not nearly enough to make it practical (all of those 56k modems kept crashing!). So after 3 years of live chat we now have twitter as another communication portal.
Many forward-thinking companies, including Dell Computers and Comcast, are actively using twitter for customer service. Originally thought of as a communication tool for friends, twitter has evolved in many industries (real estate and relocation included) into a platform to spit out information – i.e. “Look at how great my listing is.”
But more and more it’s being used as a marketing tool, pushing out relevant news and business information, and finally being used to promote interaction between consumers! Consumers want instant “click here to communicate” tools – and twitter is a great one!
At the recent ERC / RDC conferences in San Diego (Employee Relocation Council and Relocation Directors Council ), I caught up with Judy Gray, CRP, RCC, Global Relocation Director for Cam Taylor Realtors in Columbus OH, who is also president of RDC. I asked her why, as a consumer or a relocation company, you would want to work with an RDC member. Listen to her response:
According to Corrinne Guerra at RWF Mortgage - Rates went up 3x today as the market has dropped significantly. The 30 Year fixed on a house will be at 5.625% tomorrow. Up from 4.75% a week ago. yikes!
Bob Carbonell, president RMR moving services, discusses private transferee moving services and the role they play in today’s business plan for companies providing movement of household goods.
Bob’s industry certifications include: Certified Moving Consultant (CMC), Certified Relocation Professional (CRP), Global Mobility Specialist (GMS), Certified Professional Mover (CPM); in addition, Bob received Tariff Specialist & Claims Specialist Training Certificates from The American Moving & Storage Association.
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”
