Fannie & Freddie Pricing Increasing Sharply Soon - 01.11.11
Today's Poll: So... Given that they bought their Tuk Tuk for $3k, are you considering it?
Yes
No
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CTmortgageman: (January 11, 2011 7:24pm)
How much more can a loan officer take? Working for a hedge fund and making $500,000+ sounds like a better idea than the mortgage business. Tuk Tuk is an excellent idea. I remember when I wanted to import the smart car but since it was only running on diesel only in Canada; due to state laws I couldn't import it to the states. My bank/company just became the Preferred Lender for RE/MAX offices in New England so I've been happy about something for a change. Best mortgage website in Connecticut: http://www.NimaLoans.com
rbsplace: (January 11, 2011 4:56pm)
I guess I don't understand the alarm over Freddie and Fannie sticking it to their borrowers again. Supply and demand will take care of it. If their fees make their loans too expensive people won't buy from them. I have sold a lot of FNMA foreclosures but have yet to have them finance one of their own properties. They just can't compete with the local lenders, FHA and rural development loans being done at a better rate. If you don't like the price...don't shop there.
Chuck@HRC: (January 11, 2011 1:42pm)
Daggone: I couldn't agree with you more. Got another one to entertain you with: past client with a 1st (I did this one) and 2 bank home equity loans (yes, they did a fixed 2nd and a credit line 3rd) wanted to refi. I couldn't justify the cost of an appraisal to my client because comp's wouldn't support the value needed. The client then got an appraisal thru Wells at an even lower value than I projected. Never fear... one of the country's biggest on-line lenders had an appraisal done by an appraiser from Southern Cal (the property is in Northern Cal) that brought value in at $ 500k over the Wells value. Remarkably, of the 6 comp's used NOT A SINGLE ONE was a closed sale (i.e. all listings)! You guessed it, this lender made the Fannie high-balance loan based on this bogus value subordinating the 3rd as a 2nd. I certainly don't want to hear anyone from Fannie/Freddie pointing fingers solely at brokers for the crap they're still buying.
Daggone: (January 11, 2011 1:16pm)
Chuck - the value issue is familiar to me. I just got an appraisal $35,000 under contract price. I'm open minded, maybe somewhere in between could be realistic. Waiting to see if the AMC is going to get us any good results with dispute. I've never had an AMC appraiser ever back down on anything. The buyer has already spoken with a bank who has spoken with an appraiser who assures the buyer they can bring it in at contract price. Moral of this story, brokers like me are stuck with AMC's, banks can pick and choose their appraiser, and are still telling the appraiser what value they need.
Chuck@HRC: (January 11, 2011 12:56pm)
W.R.Buchanan: This is really the same issue as use of AVM's to "validate" value in a prime appraisal. You're correct that under USPAP, a "reviewer" should also be licensed however, the AMC's were exempted (a poor policy choice). Hopefully, with all the talk in D.C. about "fixing" these newly-enacted regulations we'll actually get reg's that work in the marketplace. Recently, I had an appraisal that was, at best, $ 25,000 short (at worst, $ 75,000 short) of the "true" value Yes, I provided newer comp's and the full appraisal done on a house across the street from the subject. I even did the math for the appraiser! No good... Fannie's AVM (run behind DO/DU concurrent with evaluation) simply wouldn't accept the real value. So how was this resolved? The AMC reviewer "re-worked" the numbers to bring in the exact same value and within Fannie's tolerances. Luckily, this loan worked at the lower value, although the LTV did kick in Fannie's infamous LLPa's.
W.R.Buchanan: (January 11, 2011 12:19pm)
PenelopeX: you obviously haven't heard or seen the Corelogic "Underwriters Risk Assessment, and Review of an Appraisal". This is a 19 page report and review of an appraisal done by someone in another county or state who should have their license yanked for violation of USPAP and good taste in General. The one I've been scrutinized by had plenty of "risk assessment" to the point of using non similar comps from other counties to drive the value of the subject down about 12% from where I had it. That's not only risk assessment, that is risk assignment! Doesn't matter what you do nowadays you'll have some idiot up your ass, because botttom line and not making loans is the current state of affairs. they have no confidence because by the time their incompetant staff get thru with an appraisal it is meaningless.I and many others have been pushing for complete licensing of everyone who even touches mortgage documents.Dodd-Frank was supposed to have this provision but Wells and BofA were exempt
W.R.Buchanan: (January 11, 2011 12:05pm)
TUK TUK,,, Nah! Can't get into that meter maid look. Randy
Lion: (January 11, 2011 11:18am)
Fannie & Freddie = Too Big To Give A Damn!
Chuck@HRC: (January 11, 2011 10:50am)
Joeyrizk: Unfortunately, LLPA's aren't new. Fannie/Freddie are just (just?) increasing those fees. Raising these fees, given the purchase and refi market projections for 2011, is unwize, at best, down-right stupid, at worst. This is what happens when statisticians [remember this same bunch of "number-crunchers" where thought to be the smartest guys in the room by the rating agencies] run the industry. Looking at LLPA's in the context of the tax analogy, it's no longer credible to argue that when you raise tax rates tax revenues increase. Washington state just figured out that its newly-enacted tax on high-income filers actually resulted in a 33% decline in high-income filers in that state (over 33,000 filed in 2008 versus only 23,000 filed for 2009). This is the same prospect for Fannie/Freddie's higher LLPA's.
Areukiddingme : (January 11, 2011 10:42am)
What a couple of douchebag's.
joeyrizk: (January 11, 2011 10:32am)
Nothing like adding more obstacles to Financial Recovery. During a time when unemployment is thru the roof and wages are down now we are going to add a higher payment for the Homeowner. I mean do we really have these type of morons running our Industry.Just more reason for me to look elsewhere for Employment.
Chuck@HRC: (January 11, 2011 10:26am)
Evergreenappraisal: You're correct that Fannie/Freddie are imposing their LLPA's as a yield-enhancer (i.e. offset to past losses). Again, to go back to posts sometime late last year. LLPA's, imposed in the manner dictated, are a hidden tax on every new loan applicant. PenelopeX: LLPA's are already passed on to the consumer by way of higher rates. YSP's generated from those higher rates obscure the inclusion of the agency's LLPA... it just looks like the lender is charging more to "get to the money". It wasn't long ago that NAMB proposed a GFE that distinguished the LLPA's from lender fees. You'll notice that never made it into RESPA (wonder why?)!
Chuck@HRC: (January 11, 2011 10:13am)
Joecolorado: Your observation isn't quite accurate. While Fannie/Freddie do, in fact, still have private owners (i.e. shareholders), FHFA was given, by congressional fiat, TOTAL CONTROL. If you go back and check the terms of the "conservatorships" you'll see that FHFA took over All functions of the shareholders, Board of Directors and day-to-day operations. Also, under their seller/servicer agreements with Fannie/Freddie, all seller/servicers are REQUIRED to maintain a level of common stock ownership based on loan volume and servicing assets. The totality of this conservatorship "take-over" can be readily seen from the write-downs/off of the value of those holdings by the seller/servicers. Today, shareholders in Fannie/Freddie are "shareholders" in name only with absolutely no input!
evergreenappraisals: (January 11, 2011 10:10am)
Hi Chuck, I don't think we're anywhere near done with the turns and twists in the regulatory scene. I'm sure you probably saw Rep. Michelle Bachman is introducing a bill to repeal Frank/Dodd. Granted, it's a long ways off from reality at this point, but something will work out here. With fees like Fannie would be charging, that coupled with the dip in demand will drive down the pricing of the properties. On the other hand, with Fannie/Freddie charging such risk pricing, (likely to help offset their losses) suddenly an alternative source which used to be considered 'hard money' pricing is now competitive. Don't you think there will be people with $$ sniffing out such profit potential and finding a way to make a market?
PenelopeX: (January 11, 2011 9:38am)
but, yes. I am hearing that banks and brokers are trying to pass-through these fees to the loan officer/originator and/or the consumer. It'll just be a matter of time before THOSE squeaky wheels will start churning and burning. This move by Fannie/Freddie is an expected reaction (and historically documented) to the boon-bust cycles we've seen happen in this country since the banksters took control of the fruits of our labor, eons ago. Credit tightening, inflationary rates and pricing...it's all part of the rubber band reaction of our economy to the depression and snail-slow recovery. I'm a bit more concerned about the reaction on Wall Street to Ron Paul movin' and shakin' the FED and their Captial Hill cronies...now, that's a distraction from our economic woes worth watching...IMHO.
PenelopeX: (January 11, 2011 9:30am)
I cannot help but think one reason for this price "hit" by Fannie/Freddie is that they've lost confidence (and a whole lot of duckets) in a system that can GUARANTEE them an accurate accounting of risk on the basis of a real property valuation product, like an appraisal. With the AMCs only providing a "review" of appraisal accuracy and not a true review of the risk assessment, or value conclusion of an appraisal, what does an AMC really accomplish for them...glorified clerical work by a licensed appraiser and call that a review of risk? NOT! The GSEs are starting to realize the "security" provided them by HVCC in using an AMC is a sham. Most credible appraisers know they cannot (or should not) be reviewing the work of an appraiser outside their scope/area of expertise (USPAP), so they pack their report with disclaimers and move it along...so no review of the risk, just a review of report accuracy. And the banks/lenders pay how much for this?!! They're learning...
Zfloat: (January 11, 2011 9:22am)
And here I thought a Tuk Tuk was a reference to having a tummy reduction!!!!!! Okay Okay, who the heck would travel on the road in a box so small that one collision would end your career and life??? Come on here, it's cute but a risky idea when considering the reward....I like SUV's
joecolorado: (January 11, 2011 9:16am)
Also dont forget that FNMA has shareholders(owners),that means there is no privatising their functions, it already IS a privately owned agency.
joecolorado: (January 11, 2011 9:09am)
Sandie, you make me laugh this morning thank you I really appreciate it. Its hard to find a four wheel drive TukTuk as they only have three wheels.......Amerisave just cut me off as I wouldnt do a recert on a four month old appraisal for the price they offered(they offered $150 ordered late on 23rd December required return the 24th December as its only a single form with one signature!!!) so they actually told me that I was to get no more work from them!
Chuck@HRC: (January 11, 2011 8:48am)
Evergreenappraisals: If, as you speculate, Fannie/Freddie may be unintentionally removing themselves from the market, what's the alternative? Congress hasn't yet authorized an alternative financing vehicle, such as covered bonds, federal regulators, like OCC and FDIC, are still hammering lenders about their past loans (mainly CRE) and Frank-Dodd imposes even more restrictions (5% retention, etc.) that will adversely affect how we'll be able to fund home loans. Lets also not forget that Basel III has a 90% reduction in how much mortgage servicing rights can be counted towards Tier 1 capital for the banks. Taken together, it certainly looks like our major banks won't/can't be the players they are today, so what's the alternative?
evergreenappraisals: (January 11, 2011 8:27am)
Speaking of outside the box....so Fannie and Freddie price themselves out of the market. What does the market do to respond? Well, there's going to be an upswing in owner financing, and I'm wondering if there might also be a return of private secondary market investors. If the feds won't bust up Fannie and Freddie and let the private sector take over, Fannie and Freddie may well inadvertantly do it to themselves.
Appraiser Micro: (January 11, 2011 8:20am)
excuse me: not afi - appraisersforindependence.com
Appraiser Micro: (January 11, 2011 8:18am)
mark - that documentation exists in mass already. Do you post on the Appraisers Forum? afi.com assimilates that info & many many others
Sandie: (January 11, 2011 8:16am)
I like the idea of the Tuk Tuk but it wouldn't fare very well in snow country. I doubt they make Four Wheel Drive Tuk Tuks. As for the Fannie Freddie info, oh joy, anothe hiccup in our industry. So I guess everyone is a risky buyer these days, duh, when was lending on a house not a risk?
Chuck@HRC: (January 11, 2011 8:14am)
It's been observed in several past posts that there's a perverse perspective on "risk" at every regulatory level, not just Fannie and Freddie. Lets face it, lending IS risk management at its most basic and there's only one true way to remove ALL risk in lending: Don't lend! Unfortunately, Fannie/Freddie have choosen to implement this risk management tool through pricing. At these newly announced loan level pricing adjustments, mortgages for all but the most highly-qualified applicant's are priced so expensive that credit-rationing will result. Rationing reduces available market-participants (qualified buyers). So, who at Fannie/Freddie and its primary regulator, FHFA, thinks this will help clear the current and "shadow" inventories? Alternatively, this may be the opening salvo to remove Fannie/Freddie from of the market via pricing. If this is the case, it's a really bad one.
mark: (January 11, 2011 8:07am)
Please talk to your Associations. It appears as though your Association will tell you that the "group" will stand firm but then the association board members companies undercut the group. If anyone is lucky enough to get any written document from an AMC with any language indicating that you must reduce your fee, please let me know as I need this.
Dweebster: (January 11, 2011 8:04am)
what is the make-out capacity of a tuk tuk?
Appraiser Micro: (January 11, 2011 7:56am)
yes yes - low appraisal fees are a problem. Dear appraisers - stop accepting low fees - problem solved. $350+ or bust!! Read national appraiser comments regarding frank-dodd here: http://www.federalreserve.gov/generalinfo/foia/index.cfm?doc_id=R-1394&doc_ver=1&ShowAll=Yes
Appraiser Micro: (January 11, 2011 7:54am)
I object - The housing market is looking great, from my shoes. For the first time ever, many in my family find housing to be affordable. In fact, the low prices will assist in stagnating ever increasing rental costs in the future because landlord competition in the rental markets will increase as peoples avg monthly payments are lower. The housing market crashed - alongside the general economy. The home price is where the economy meets the affordability. I don't want housing recovery without earnings recovery - no way jose. Everything is moving along just fine and poor people have opportunity for once, now that the credit loonies bit off more than they can chew. Loss for them, opportunity for me. Finally - a purchase opportunity for less than I'm paying in exorbitant rental charges. That's market balance from a buyers shoes.
mark: (January 11, 2011 7:47am)
How many appraiser out there recently received a call from Service Link telling them that your fees are too hign and that in order to receive further business, you had to further reduce your fee to $195?????????
gcall: (January 11, 2011 7:33am)
Fannie and Freddie repeated demonstration of ineptness and ability to be diametrically opposed to their chartered purposes has made me an advocate for dismanteling their organizations and privitizing theri functions with people who understand real estate instead of just understanding beans and bonuses!
Daggone: (January 11, 2011 7:33am)
Spoke with an AE this morning who said her company is all about the stockholders, so that is what is going on with a lot of things. That is what fannie is looking at as well. Makes one think also about the fact FHA increase PMI recently, increased down payment, etc. When one entity does a negative thing, it gives the other an opportunity to reciprocate with a negative. Think about it, getting a loan costs more, but housing costs less, rates are lower. Economics! Each of these things slows down housing recovery.
gcall: (January 11, 2011 7:30am)
Hi Frank and Bryan--watched this morning with a smile thinking--the guys see how Fannie and Freddie will kill market with pricing but a while back were advocating foreclosures to get this done and over with. Same deal--kills the market. We agree that need to clean things up but short sales hurt market values a whole lot less than foreclosures!! Thanks guys for the good job u do!!
Daggone: (January 11, 2011 7:26am)
I wonder if Fannie/Freddie really has 75% share, seems FHA took a big chunk of that already. As all of us know NOTHING that has been done by the feds, fannie/freddie, etc has helped one iota with the housing situation. I am thinking with the added fees by fannie that more buyers will use FHA when they can. I'd buy a tuk tuk in a heartbeat if I had any money.
joecolorado: (January 11, 2011 7:02am)
monopoly-where there is no alternative the borrower pretty much has to pay the fees(look what has happened to the airline industry,additional bag,seat,toilet,food,TSA,airport taxes and fuel fees).amcs pretty much run the appraisal industry as they offer fees which are acceptable to them for THEIR profit margin(typical/usual fees),quality is controlled by the amcs & is not an issue as their appraisers are generally all pretty bad and all amc requests have undue influence,no hit value no get work.(seems like HVCC has successfully completed its primary objective...NOT)its the old golden rule adage"I got the gold I make the rules",so FNMA is just following its mandate/constitution to maintain or increase profits for its own shareholders.Its a free open market..... where is the issue?dont like the fees go somewhere else....oh wait there IS no one else.The only real cost to FNMA etc is the politician's fee.
GaryP: (January 11, 2011 6:49am)
Here's the other thing that occurred to me. With the new compensation rule coming on 4/1, these new higher LLPAs will have to be added to rate, not taken from yield. I wonder if the GSE's considered that? That just adds to what I said in my earlier post about how they have priced themselves out of the mortgage market. If you haven't already, you had better brush up on your FHA guidelines. The loan that is greater than the FHA max, and less than your local GSE max. (>$271K, <$417K in my market), is going to become the next Jumbo loan, at least in terms of the rate we can offer. Yea, this is really going to help the housing recovery, NOT! That's just another way that the agencies are making a counter productive move. The best thing that could help them would be a strong housing recovery. Instead, this could help push prices down in non-FHA price range homes due to higher rates and the resulting slower sales.
GaryP: (January 11, 2011 6:28am)
Let's see, conventional loans have already lost 30% market share to FHA in the last couple of years. I think I can the direction of that trend, going forward. Also, what about investors, how is the real estate recovery going to be helped by pricing them out of the market. Its bad enough now with a 3% LLPA on rentals at 80% LTV. I just see the GSE's as shooting themselves in the foot here. This move is entirely counter-productive and something thqt will hurt them in the long run. I understand that they are hurting because of non-performing loans, but how are they helped by buying fewer higher quality, new loans because they priced themselves out of the market? The profits from these new loans should be off-setting their losses from old loans. With rates going up in 2011, refi volume is going to shrink and conventional lending is just going to become a considerably smaller piece of the lending market.
joecolorado: (January 11, 2011 6:25am)
Then you havent been looking hard enough..If you think that appraisers hide the details now.....wait until the ethical/good appraisers are all gone,dont worry about the wait it probably wont be too long.Good appraisers take into account EVERYTHING available that is viable to estimate value.We have to as we are the first in line to get our E&O insurance coverage tested or to get blamed by anyone that permits the use of cheap ass,crap appraisers or doesnt understand the appraisal process.Look to your own practices before you castigate all appraisers including good ethical appraisers and stop using crap ones to save yourself a few bucks.
HowardV: (January 11, 2011 5:38am)
FHA ALL THE WAY! 15 Year FHA with 10% down = NO Monthly Mortgage Insurance.
jplapf: (January 11, 2011 5:09am)
This is just another example of the agencies ability to “artificially” control the price of real estate. The agencies are doubling down on driving the price of real estate even lower to correct for the higher price their undue stimulus placed on the price of real estate. What would you expect from the agencies who cause the real estate bubble? The special or creative financing provided by these agencies had the effect of producing an undue stimulus on the price of real estate. This undue stimulus increased home prices by 100% over a 3 year period in many markets. Arizona, Florida and Nevada to name a few. Every FNMA/FHLMC appraisal certifies the price is not affected by an undue stimulus and the price represents the normal consideration for the property sold unaffected by special or creative financing. I have not seen an adjustment by an appraiser, an underwriter, or a company policy that had or enforced this certification.
Brett Pavel: (January 11, 2011 4:53am)
Yeah, I would love to dig my Tuck Tuck out of a snow bank here in northern Colorado, lol.
Divedude: (January 11, 2011 4:48am)
Sorry about the crack about the Tuck Tuck. As a maketing tool, you should also put on a Good Humor logo so people will then chase you down the street!! The old bait and switch.
Divedude: (January 11, 2011 4:26am)
Drive a Tuck Tuck through some of the neighborhoods that I work in. You'll be out of luck luck!!