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Wednesday, January 19, 2022

Appraisal can level the playing field of pre-approval home buying

Today, more than ever, low-down payment buyers can barely compete against an outright cash rush or large-down payment pool of people to embark on a life-changing road to home ownership.

During the past three years, my experience shows, buyers with less than 20% down will have to make about five times the number of offers to get into escrow—if they don’t throw in the towel first.

What else can we do as a nation to increase the number of low down payments, minority and first time buyers?

My answer is appraisal pre-approval, as mortgage pre-approval lenders now offer. Buyers can then submit their lender’s guarantee the property will appraise a set amount with their purchase offer.

By threatening America’s appraisers to provide a uniform valuation dataset immediately after each appraisal, taxpayer-owned mortgage giants Fannie Mae and Freddie Mac filled out current, accurate property appraisals for a large portion of the nearly 111 million U.S. residential properties. A Fort Knox is compiled.

Indirectly, Fan and Fred direct the loan and appraisal approval of approximately 65% ​​of US mortgage transactions. There’s a good chance the residential appraisal can survive without taking on a Fan and Fred type of business.

So, why do buyers have to make an expensive estimate of what that starter home is worth when Fannie and Freddie may already have a high confidence level of its real-time value?

“It makes all the sense in the world for Fannie and Freddie to open up their systems,” said Ted Tozer, former president and CEO of Genie May under President Obama.

“It’s a really interesting idea,” said Urban Institute Fellow Laurie Goodman.

Yes, Fan and Fred may already offer property inspection exemptions. But that’s only if you’re putting at least 20% down and you can estimate what the valuation needs to come down to minimally.

All other things being relatively equal, it becomes easier for sellers to accept all cash offers. No hassle. No moose. There is no waiting for the evaluation to be completed. And no worries about falling sales because valuations have gone down.

Scary stuff for buyers. They are scraping money together. Perhaps begging and borrowing from their families for a better future. They are eager to buy at a reasonable price.

Bidding a very low probability means raising more cash to make up for the shortfall. If you bid too high, you get the pad, but you pay more.

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“I think we need to explore options for low-income and small down payment borrowers with respect to their ability to compete on homes,” said Guy Sekala, publisher and CEO of Inside Mortgage Finance.

When Fan and Fred have prior knowledge, but still keep quiet, how can that be a fair borrowing? Every mortgage originator in America should hit two trees with the disclosure of the proper lending paperwork it must issue to mortgage applicants. Can you say classic hypocrisy?

I told a highly respected industry lawyer that there is nothing in Fan or Fred’s charter that requires them to hide pickles from the public.

Especially after the Federal Housing Finance Agency (Fanny and Freddie’s regulator and custodian) of its own expressed concern in December. 4 appraiser hit pieces about reducing “evaluation bias” in the evaluation process. It cited anecdotal evidence of assessment bias against minorities.

The last sentence of the commentary states that the 78,000-member Assessment workforce is overwhelmingly white and male.

Therefore, the FHFAs – through Fan and Fred – submit their reports to the appraisers. Boss appraisers around to replace report flaws. Then issues a self-righteous “we’re on it” comment.

Fannie, Freddie and the FHFA declined to comment.

Freddie Mac Rate News: The 30-year fixed rate averaged 3.45%, its highest rate since March 2020 and is up 23 basis points from the previous week. The 15-year fixed rate averaged 2.62%, up 19 basis points from the previous week.

The Mortgage Bankers Association has reported a 1.4% increase in mortgage application volume for the past two weeks.

ground level: Assuming that a borrower receives an average 30-year fixed rate on a loan corresponding to $647,200, last year’s payment was $232, down from this week’s payment of $2,888.

I’m looking for: Locally, well-qualified borrowers can obtain the following fixed-rate mortgages without points: a 30-year FHA at 2.99%, a 15-year traditional at 2.75%, a 30-year conventional at 3.375%, a 15-year conventional The traditional high-balance ($647,201 to $970,800) at 2.99%, the 30-year traditional high-balance at 3.625% and the 30-year fixed jumbo at 3.625%.

Eye catching loan of the week: A 15-year fix at 2.75% at no cost.

Jeff Lazerson is a mortgage broker. He can be contacted at 949-334-2424 or [email protected] His website is www.mortgagegrader.com.

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