Wednesday, July 29, 2009

Can gift funds come from the seller, lender or other interested party?

Answer: The gift donor may not be a person with an interest in the sale of the property (seller, real estate agent/broker, builder, or any entity associated with them.) The exceptions to this rule are when parents are the sellers,or when the real estate agent is a relative.

Tuesday, July 21, 2009

Homebuyer Protection Alert!

Recent Federal legislation can impact your closing date. When completing your Purchase Agreement, even if you are prepared to move forward and close quickly, a more conservative timeframe of at least 30-45 days from the time of the contract acceptance would be a more realistic expectation at this time.

Listed below is information on two pieces of legislation that stand to impact your closing date, and a few bullet points that explain the reasoning behind and effects of each measure.

HVCC: Home Valuation Code of Conduct
HVCC was designed to ensure that appraisals are conducted objectively and without pressure from parties with an interest in the transaction. Under HVCC:

The appraisal and selection of the appraiser will be ordered by someone not directly involved in the origination of the mortgage. This could be either someone else within the mortgage company or a third-party appraisal management company.

A copy of the appraisal must be provided to the homebuyer/borrower no less than three days before closing.

The minimum time expectations for receipt of the appraisal should be a few weeks and not days. (While receipt of the appraisal may be received in shorter timeframes, conservative expectations are warranted.)

Communication between the appraiser and the originating mortgage professional is prohibited. It is imperative that the agents involved in the transaction be prepared at the time of inspection to offer supporting value information if warranted.

HERA: Housing and Economic Recovery Act
HERA was designed to ensure that the borrower(s) involved in the transaction are given accurate disclosure information (Truth in Lending Statement pertaining to Annual Percentage Rate or APR) regarding the loan they are applying for and adequate time to re-evaluate their decision to proceed in the event of any changes that would impact their costs to finance. Under HERA:

No fees may be collected for the transaction other than those for running a credit report at the initial time of application. Additional fees may be collected only after four business days.

Should the APR change by more than .125% on a fixed rate loan or .250% on an adjustable rate loan, the lender must disclose the new APR and the borrower must have a minimum of three business days to review the information before the transaction may proceed.

Items that can trigger re-disclosure requirements include a change(s) in the loan amount, closing date, loan program, any fees that impact the APR or interest rate from the rate indicated on the original loan application.

In cases where documents are sent by mail to the borrower related to re-disclosure of APR and/or providing a copy of the appraisal, anticipate six business days (three to allow for mailing and three to allow adequate time to review them) before a closing can occur.


Jorge Merlos
(909) 945-8621

Thursday, July 16, 2009

What is the Value of my Home?

Over the past few months many clients have struggled with the question of,
“What is the value of my home?”

This answer is as good as any in this market considering all of the foreclosures, short sales and
such going on. However; before you settle on a value number for your home, make sure you ask yourself WHY you are asking this question.
There are many ways to look at the so called value of your property!
Let me explain!
  • Are you considering selling your home? If you are, remember that your home will typically sell for an amount that a buyer is willing to pay you for it. No matter how much we all jump up and down, no buyer in their right mind – in this market - is going to pay us what we think our home may be worth.
  • If you are considering listing your home for sale, your best bet is to seek the advice of a
    professional “Realtor” ® before doing so. They can provide you with valuable information that you MUST have before deciding on the final listing price.

Are you considering refinancing? If you are, an appraisal will most likely be initiated with the transaction. The appraiser will give the lender, in the appraisal report, an opinion of what they consider to be the current market value of your home as of the date the property was

Couple of things about the appraisal:
1. You’ll most likely NOT agree with the appraiser’s value assessment. But, if the number
they come up with works, and you are able to proceed with a more favorable rate and
financing term, don’t get too bent out of shape with the value. It’s just an opinion.
2. You’ll most likely NOT agree with the comparables that the appraiser chooses. They
have strict guidelines that must be followed before a comparable can be chosen. One of
the most important being “recent sales in your most immediate area”. With all of the
short sales and foreclosures going on in most subdivisions, this guideline can be a real
value killer.

3. Once again, if the number they come up with works, and you are able to proceed with a
more favorable rate and financing term, don’t get too bent out of shape with the value.
It’s just an opinion; it’s NOT what you may be able to sell your property for at some time
in the near future.
Are you trying to dispute your property’s tax assessor’s value? Typically, the county “Tax Assessor’s Office” assigns an “Appraised Value” to your property.This value or number is used to calculate your annual property tax. It’s not a number that should be used to list your home for sale. Nor is it a number that a lender is going to use to consider lending you money on the property.
If you’re looking at the tax assessor’s property valuation and thinking, “Man, there is no way my home will sell for this amount”, then you may want to consider filing a dispute valuation with the taxing authority. Be prepared to fill out the necessary paperwork and provide them with evidence to support your claim. Be prepared to stand in line along with all of the other
thousands of property owners that are currently disputing their property value.

Are you trying to determine if you have enough homeowners insurance? If this is your goal, you really need to call your insurance agent and let them help you with this. At a minimum, you want to always make sure that your home is insured for at least 100% of
it’s estimated replacement cost. Replacement cost is not:

1. The market value of your home.
2. The home’s purchase price or the cost of the land.
3. The outstanding amount of your mortgage.

Make sure your insurance agent explains to you the difference between market value and
replacement cost for insurance purposes. You don’t want to find out the difference between the
two when it is necessary to file a claim with your insurer.

Are you considering buying a home or making an offer on a property? Make sure you talk to your realtor before deciding on this number. They can tell you what similar homes are selling for in the neighborhood, how long houses are staying on the market, and tons of other important information that MUST be considered.

Are you looking for general home sale statistics? I’ve listed below a couple of the most quoted sources in the media for home sale statistics. There is a bounty of information at both of these, so be prepared to be overwhelmed.

The National Association of Realtors -
Case-Shiller Home Price Indices -,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

Are you looking for a value estimate for your property as determined by modern automated valuation techniques? If you are, then the websites below may help you in your search for the perfect “valuation” number. Just make sure you’re sitting down before you plug in your property address and review the results you receive.

HomeValueBot - - -

In conclusion, let me say that there will always be many opinions on what your home is truly worth. Before you can really begin your quest for your specific valuation number, it’s important that you first ask yourself – WHY you’re asking this question – and then seek the advice of trusted professionals in the real estate industry.

I’m here for you! As a Certified Mortgage Planning Specialist™, my role is to help you make sense of all the chaos and confusion in the market, so that you can make informed mortgage and home buying choices. I am committed, qualified and equipped to help you evaluate your mortgage and real estate options.

Please call or send me an email if I can assist you.

P.S. Thanks for the Article Johnathan! Great content for a message that needs to be conveyed.

Wednesday, July 15, 2009

Government Regulation Clogs the Pipes

It's no secret that many facets of lending and real estate have changed as a result of the credit crisis. In addition to tightened lending practices that resulted from rising mortgage delinquencies, Washington has been heavily involved in altering the way lenders do business today.

Two individual pieces of legislation impacting our business need to be taken into account when determining closing dates for purchase transactions.

Home Valuation Code of Conduct
The Home Valuation Code of Conduct (HVCC) went into effect May 1, 2009. Intended to shield appraisers from undue influence from loan officers and lenders, this legislation installed a "firewall" between those individuals directly involved in the origination of the loan from the selection of and contact with appraisers.

HVCC also requires that borrowers receive a copy of the appraisal a minimum of three days in advance of closing. Part of the kicker here is that "received" is considered, in effect, three business days after the appraisal has been mailed to the borrower.As HVCC requires a firewall between the originator and the appraiser, the time to receive an appraisal has increased, in some cases by as much as two weeks or more. While this may not always be the case, it is important to take into consideration when considering closing dates. Today, conservative closing dates are mandatory to properly manage expectations of all parties.

Housing and Economic Recovery Act
The Housing and Economic Recovery Act (HERA) amends and impacts several aspects of obtaining a mortgage, the disclosures required for borrowers, and the timing of their delivery. This impacts the minimum time required to close, and should any changes be made to a loan application that could impact the Annual Percentage Rate (APR), this could impact the closing date.

Other than paying for a credit report, lenders may not accept any additional fees from a borrower until four business days after disclosures have been provided to or mailed to a borrower. This has the potential to delay several aspects of the application process.

Finally, upon making application, a borrower is provided a Truth in Lending (TIL) statement, detailing the total expected costs that could be incurred over the life of the loan. Should anything change in the loan application that could change the APR by more than .125%, a new TIL must be reissued to the borrower a minimum of 3 business days before closing. Items impacting the APR could include a borrower accepting a higher interest rate than initially qualified by floating their rate at application, a change to the loan amount, a change in product, a change in closing date, and any changes to fees.

What Now?
While there is more we can discuss on the specifics of these legislative implications, I felt it important enough to let you know now that I would not recommend you write purchase contracts with short closing time frames.

I will be preparing additional information you can provide both your buyers and sellers to help explain the rationale behind not scheduling closing dates in advance of 30 days at a minimum and ideally not less than 45 days.

Thank you again for your business and if you have any questions, please pick up the phone and call me.