HAVOC! OH, I APOLOGIZE, I MEANT HVCC!

Recently, the fine folks in the government implemented a new set of rules called the Home Valuation Code of Conduct (HVCC). The purpose was to protect consumers and lenders from buying or lending for over-valued properties. The problem was that in some cases, in a few areas in our nation, lenders were “forcing” appraisers into inflating property values higher than they should be to make loans. If for example a loan application had a purchase price of $200,000 and the property only appraised for $190,000, then either the buyer and seller agreed to lower the price or the deal never happened. In some cases, some very bad lenders got together with some very bad appraisers and bumped the prices up so that magically, the home appraised, thereby “saving” the loan and making more money for the lender. This is obviously a huge problem if it happens, because home owners are then stuck with properties that were not worth what they thought they were.

Being as we can all agree that this is not a good thing, the government decided they needed to solve the problem. Rather than simply investigating and prosecuting (which in the government’s defense some prosecution did happen, which generated these rules) and then setting up an oversight system where they could make sure the existing ethics rules and laws were actually obeyed (which 99.5% of the time they are), they decided that the best way to solve this problem was to set up a system where lenders were simply never allowed to talk to appraisers, the theory being that if lenders could never talk to appraisers then they could not influence values, thereby protecting consumers from purchasing over valued homes. No one talks to anyone, so no one can do anything bad, sounds good, right?

Now, you know me, I never like to be negative, but this is absolutely a case of a few bad apples spoiling the bunch. The old system wasn’t broken, what happened was simple, some criminals defrauded the system and broke the law. Implementing the HVCC rules to solve this issue is, in my opinion, overkill. Similar to this: someone breaks a window at your house, climbs in and robs you. Rather than fixing the window and installing a new lock, maybe investing in better security, you decide the answer is to just buy a new house somewhere else and start over. That is a bit of an over reaction, wouldn’t you say?

So, why specifically is HVCC a problem? Well, the new HVCC rules are causing numerous issues all through out our industry and while the intention of the rules were good, the solution set forth in these rules has caused way more harm than good and the rules need to be re-evaluated to address specific problems such as:

1. Appraisals now cost anywhere from $150 to $200 MORE than before.
2. Transactions are taking LONGER to close, 45-60 days instead of 30.
3. There is absolutely no accountability in the process at all, if the appraisal is late, holding up settlement, done improperly, etc, the lender has no ability to even talk to the appraiser to straighten out the issue, as the simple act of lenders talking to appraisers is outlawed under this new rule.
4. Experienced appraisers are being forced out of the business by the “system” and inexperienced appraisers are taking their place, leading to improperly done appraisals that we have no recourse in correcting, as outlined in #3.
5. These issues are costing consumers across the country millions of dollars in excess fees and some transactions are simply falling apart.

If you would like some more insight into the problem, the link below has a video that thoroughly explains our industry’s frustrations right now:

https://www.thinkbigworksmall.com/public/showArchiveVideo/1/4916

Until such a time as this issue is corrected, we will continue to have problems. There are a few solutions we real estate professionals can pursue until then:

1. Be realistic, set appropriate timeframes for your settlements. 30 day settlements are probably not realistic for you. Plan on increased closing costs as well, these appraisal prices are heading up, not down.

2. The complete impact of these new rules still has not been felt. Never assume that the parties involved, consumers, agents, lenders, know everything you know. If they are telling you it is fine, don’t worry, then I would suggest you dig a little deeper, pay attention and understand the process. Do not assume it will be fine unless you are taking steps to make it fine.

3. Use local lenders. Out of area lenders are more likely to end up with out of area appraisers. If they don’t know your market, can they really give you an accurate appraisal?

4. This is the most important :COMMUNICATE! All parties involved must understand that this is critical, while lenders can’t talk to appraisers anymore agents CAN. Make sure you know who is doing the appraisal, their name, number and company name. Keep it on file to refer to in the future if needed. Talk to each other, be realistic and work together. If you have a chain of 3 transactions all depending on one another to close, talk to all of the agents involved, not just the one on your end of the deal. Remember, it only takes one deal delaying closing or even worse falling apart, to break your chain and cause trouble for everyone.

So, stay informed, pay attention and guide consumers through this new maze competently and your transactions should be fine. Ignore the warning signs at your own risk or these rules will reek havoc on your business.

HVCC is a problem simply because it harms consumers. But it can be fixed. We can do better, we can protect consumers without harming them or costing them money. If you agree with me that there is a problem here, please go to the link below and sign the petition to have this misguided program reviewed and corrected, home buyers and sellers deserve better than this.

http://www.hvccpetition.com/

VIDEOS POSTED BY STEVE HARNEY: HOW TO COUNSEL BUYERS THAT INTEREST RATES ARE A REASON TO BUY NOW

Take a few minutes to watch this excellent discussion of interest rate trends by Steve Harney of www.KeepingCurrentMatters.com .  Steve offers a well thought out and easy to understand analysis of interest rate trends and explains very simply why NOW is the time to buy and waiting for a better rate is not advisable.  Click the video and take a look!

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me atJason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason Burkholder

HELP FOR OUR SERVICE MEN AND WOMEN AFFECTED BY POOR HOUSING MARKETS

The US Department of Defense, in conjunction with the Army Corps of Engineers, recently announced the Homeowner Assistance Program (HAP).  The program is designed to “assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.”  The program can benefit civilian personnel in some cases as well.  Here are some of the basics taken directly from the website established as a resource for affected individuals:

PRIVATE SALE

Eligible applicants may be compensated for the difference between 95% of the appraised fair market value of the property prior to the announcement date, and the appraised value of the property at the time of sale, or the sales price, whichever is greater. Closing costs are reimbursed for private sales.

GOVERNMENT PURCHASE

An eligible applicant may elect to sell the property to the government and receive, as the purchase price, an amount not to exceed 75% of the appraised fair market value prior to the date of the announcement, or the current total amount of outstanding mortgages, whichever is greater.

FORECLOSURE ASSISTANCE

If foreclosure proceedings have commenced, an applicant may elect to receive foreclosure benefits or private sale benefits. Foreclosure benefits may be paid directly to the applicant to reimburse for foreclosure costs paid by the applicant, or paid to third parties on the applicant’s behalf. NOTE: Eligible HAP applicants who work at overseas installations announced for closure or realignment may receive only private sale benefits. Government purchase benefits are not available at overseas installations.

HOW HAP ASSISTS YOU

HAP provides assistance in four ways. For eligible applicants, the Government may:

  1. Reimburse you for part of your loss from selling your home.
  2. Assist you, if you don’t have funds from the sale of your home to pay-off your mortgage.
  3. Purchase your home by paying off the mortgage.
  4. Help, if you default on your mortgage.

For more information on this program visit http://hap.usace.army.mil/homepage.html

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me atJason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!

IF IT SOUNDS TO GOOD TO BE TRUE……

I was perusing some online info the other day and came across this article on the new York Daily News Site:

RADIO ‘FORECLOSURE SPECIALIST’ LAVETTE BILLS HELD IN $800G MORTGAGE CON

BY Melissa Grace and Edgar Sandoval
DAILY NEWS STAFF WRITERS  Thursday, March 19th 2009, 10:16 PM

A Bronx real estate broker who hosted a radio show on WBLS and WLIB inviting distressed homeowners to contact her for help was charged Thursday with ripping them off instead.  Lavette Bills, head of MTC Real Estate, was charged along with Kirk Lacey, a Jamaican who lives in Florida, in a brazen $800,000 mortgage fraud scheme that allegedly preyed on people fearful of foreclosure.  In one case, Bills, 36, persuaded a Bronx homeowner who had called the show for help to put Bills’ name on the deed to her house on Tinton Ave. by promising to get the homeowner a loan to pay off the $38,000 mortgage. Bills sold the home to a straw buyer, according to the U.S. attorney’s office and the FBI. Bills allegedly made $150,000 on the crooked deal, including taking a $50,000 broker’s fee for the bogus sale. The homeowner, who just wanted to pay off the small mortgage, is now in foreclosure. Thanks to Bills, the new mortgage on the house totals $337,500, prosecutors said.  Antoine Brown, 34, the homeowner’s grandson, said he was unaware of the pair’s arrest, but was glad other people would not fall victim to their scheme. He first learned about the pair in a radio commercial. Bills’ business cards describe her as a “foreclosure specialist,” and she hosted a program on WBLS (107.5 FM) and WLIB (1190 AM) in 2007 on which she discussed mortgages and foreclosures, prosecutors said. Her Web site warns customers who go elsewhere “you have a right to feel cheated.” Bills and Lacey, 36, were each charged with conspiracy to commit bank fraud and face 30 years in prison and $1 million in fines. At an arraignment in federal court, Bills was freed on $250,000 bond. Lacey was freed on $150,000 bond and was ordered to surrender his passport and handgun.

Interesting article, eh?  Just proves the point that if it sounds to good to be true it is.  There is an entire industry of investors and scammers out there who focus on “distressed” homeowners for the sole purpose of separating a homeowner from their equity.  I had a case once where one of these “investors” offered the seller a great deal, they would catch up her mortgage payments and when they found a buyer pay her $1,000 and she got to walk away clean (oh, and she got to live in the house till it sold).  She thought it was awesome, until I did a CMA and marketing plan and at the end of my efforts to sell she walked away with about $12,000.  So, this so called investor who was going to save her was actually just taking away $11,000 of her money.  See all those handwritten signs and ads that say something like “we buy houses”?  Why do you think they are buying houses?  It is to make a profit, not for the goodness of their souls,

Don’t get me wrong, these people are not all evil and there is nothing wrong with making a profit.  I just believe payments for services rendered do not have to include taking advantage of poorly educated homeowners in distress.  Here’s what to do if you are behind on your mortgage and thinking of selling:  Call up a reputable real estate agent.  As a matter of fact, call 3 or 4 of them.  Get competing opinions.  Compare their service, compare their ideas, compare their estimates of the market value of your house.  If you want to, call up those investors to.  Some of them actually do a nice job, with a positive resolution for the homeowner.  Above all else, COMPARE and GET SECOND OPINIONS!  Remember, the activities of real estate agents are regulated by law, by ethics rules, by broker policies, etc.  Who is regulating the investors preying on the distressed homeowner?

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me atJason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!

PUTTING YESTERDAY’S HEADLINES INTO PERSPECTIVE

Amidst all the excitement over the end of 2008, the local paper published some articles that you may not have seen.  Well, alright, you probably saw them, 2 of them were pretty big headlines, at the top of the page.  The morning paper had the headline “Jobless rate here hits 5%, highest since September ’92”.  The evening paper ran the headline “Home sales here hit 25 year low”.  Buried in the business section of the morning paper was an article titled “Consumer confidence at an all time low”, right beside another titled “It’s time for vacation – unpaid that is”.

Tough stuff.  Sounds awful.  So, what does it mean for us, in real estate.  Let’s take these things one at a time, shall we?

We’ll start with the home sales.  It’s true, for the month of November, the number of closed sales posted (281) was down 35% from last year (I saw that one coming from the pending sales forecast, watch for more of that from me in the future, December won’t be any prettier) and that level is probably the lowest single month since 1983.  The total number of transactions is overall lower than it has been in at least 8 years.  So, we have less people buying homes here, but we also have less home coming on the market, as new listings were also down about 17%.  Sometimes we have to remember the right perspective.  If we had a ton of new listings coming on the market at the same time activity is going down, we would be in really bad shape, but if the number of new listings keeps falling in conjunction with the number of sales, the lines track each other nicely and add up to a fairly healthy inventory.  I did an graph last month to show the trend I am mentioning here, it is interesting how the new listing volume (green) tracks so closely to the sales volume (red).

Prices bear discussing as well and they are fairly stable, partly because we never had the huge run up in prices other areas have seen. Here in Lancaster, the MLS does not yet reflect all the year end closings and probably won’t for another couple of weeks, so expect this to change, but the average residential sales price appears to be $187,449, down about 3 percent from last years average sales price of $194,507.  When you compare us against market like California, where prices dropped 25% to 30%, we look pretty darn good.  The year will end here in Lancaster with sales volume down about 24%.

To understand this phenomenon, why we have less activity while prices remain stable, interest rates are super low (5%), yet buyers and sellers aren’t jumping in, we need to look at the rest of those articles I mentioned.

Jobs.  Will your job be there next week?  That’s what many of you are wondering.  Lancaster County has lost some jobs recently, some larger employers have closed down or downsized and while we aren’t anywhere near the tough times people in the midwest are seeing, if you lose your job it hurts. Our unemployment rate is at 5% because of those changes, but it’s still the third lowest in the state.  There is a growing trend in the business world of furloughing employees, just telling them to take a few unpaid weeks off until business picks up.  So, while you still have your job, you just lost those weeks of pay. We also have a number of workers whose hours get cut back on a regular basis, from 40 to 30, or overtime just disappeared, many people in Central PA are having to do more with less.

Is it different here than anywhere else?  Actually yes, it is, it’s better.  Despite all of the bad news, it is better here than most of the country, numerous financial publications have consistently ranked Lancaster County as one of the best economies and housing markets in the nation.  Cold comfort if you are one of the ones hurting but we should be happy with what we have.

So, if we are better off, if our unemployment rate is among the lowest in the state, if our economy is relatively stable, why the lack of action.  Well, in a word, it’s fear.  Consumer confidence is at an all time low.  People have been bombarded with negativity, so it’s no wonder.  How many giant headlines about lost jobs and tough times can you read before it becomes a self perpetuating cycle of fear?  It’s not just the headlines, it is the reality, the staggering arrogance and greed of finance leaders and CEO’s who bet your savings on their own profits, who mismanaged your money and then when their actions pushed your nest egg down by thousands of dollars, went to the government and said that without a hand out they would go under.  So, they get the handout, the market tanks anyway and they have the audacity to say the “decline to disclose what they are doing with the bailout money”!  It’s no wonder people are angry, frustrated and scared!

Fear is keeping people from moving forward.  The 2008 National Association of Realtors Survey of Buyers and Sellers listed some interesting statistics.  I thought the most interesting of all was that out of the 10,000+ responses they received, 62% of the buyers bought because it was “the right time” to buy.  Not because of interest rates, not because of the right home being available, but because it was the “right time”.

If you needed any more proof that humans make buying decisions, especially big ones like buying home, based more on emotion than logic, I don’t know where to find it.  Fear is why no one is moving in Lancaster County.  It keeps sellers from listing their homes, buyers from buying, it makes people want to hide in their living rooms until “things get better”.  Don’t believe me?  Next time you meet someone who talks about buying or selling in the future, ask them why they aren’t doing it now.  The answer will most likely be because they are waiting until things “get better”.

I for one am looking forward to 2009, a year where fear does not rule people any longer.  Things are changing, changing for the better.  I’ll leave you with two thoughts, one from Nobel peace prize winner Aung San Suu Kyi who said “Fear is not the natural state of civilized people”.  We cannot exist in a state of fear forever.  I am not downplaying the realities here, but if it is fear, fear of making a mistake, fear of doing the wrong thing, fear of change that prevents you doing what you want in life, then ask yourself how long fear is going to rule your life, how long will fear hold you back, delaying the inevitable?

The last thought is a piece from Shel Silverstein:

“The hens they all cackle, the roosters all beg,
But I will not hatch, I will not hatch.
For I hear all the talk of pollution and war
As the people all shout and the airplane roar,
So I’m staying in here where it’s safe and it’s warm,
And I WILL NOT HATCH!”

No matter how much the chick wants to wait, hatching is inevitable.  As always, if you are ready to hatch, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!  Happy 2009!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!

NEW MORTGAGE RULES TO PROTECT CONSUMERS IN PENNSYLVANIA

Check out the press release from the Department of Banking I posted below.  Great changes, putting things into law that should always have been there, hopefully this puts an end to the predatory lending practices that the recent licensing law changes may have missed.

If you’d like to read the complete Code Changes, check out this PDF

PA Bulletin Rules & Regulations

If you’d like to read the correspondence from the Secretary of Banking to the Mortgage Lenders explaining these changes, check out this PDF

Letter to Lenders

As I have said before, there is no substitute for an educated second opinion, so before you get a mortgage or refinance, call me at 717-371-0557, I’ll be happy to review your mortgage terms with you to make sure you are protected!

FOR IMMEDIATE RELEASE COMMONWEALTH OF PENNSYLVANIA
Dec. 22, 2008
Department of Banking
Commonwealth News Bureau
Room 308, Main Capitol Building
Harrisburg, PA 17120
BANKING DEPARTMENT ISSUES NEW REGULATION TO PROTECT HOMEBUYERS

Defines Proper Conduct for Mortgage Lenders, Brokers

HARRISBURG – Secretary of Banking Steve Kaplan today announced that new rules for the mortgage industry will help to ensure that Pennsylvania borrowers receive affordable loans with clear, up-front terms. The regulation was published in the Pennsylvania Bulletinon Dec. 20. “The major thrust of the regulation is two-fold: to restore sound underwriting practices to the licensed mortgage industry and improve disclosures,” said Kaplan. “The lax lending standards and increasingly complex loans that were commonplace during the housing boom helped to create the wave of foreclosures we are facing today.”

Under the new regulation, mortgage lenders and brokers must document and verify a borrower’s income, fixed expenses and other relevant factors in order to reasonably determine whether the borrower will be able to pay back an offered loan. This requirement will restrict low- and no-documentation mortgages in which applicants do not have to provide proof of income, employment and other information.

The regulation also requires mortgage companies to clearly disclose in a one-page summary whether a loan has any of the following features:

Variable interest rate,

Prepayment penalty or balloon payment,

Property taxes and hazard insurance included in the monthly payment, or

Negative amortization feature in which the payments are set so low they do not cover the interest, let alone principal, of the loan.

The new disclosure form will also note whether the lender has the ability to directly lock-in an interest rate. The form will be available to mortgage companies early next year.

The ability to repay and disclosure requirements will go into effect March 20. The regulation also contains new rules regarding loan funding, payoff statements, advertising and advice to borrowers, all of which take effect immediately.

“There is ample evidence that many borrowers do not understand the disclosures currently provided to them under federal law and that these disclosures have failed to keep up with product innovation in the marketplace,” said Kaplan. “The form developed by the department for use in Pennsylvania will go a long way towards bridging these gaps.”

The regulation is based on recommendations from the Department of Banking’s 2005 study, “Losing the American Dream: A Report on Residential Mortgage Foreclosures and Abusive Lending Practices,” which documented foreclosure trends and lending practices that are abusive to consumers.

The study also provided the blueprint for the five-bill mortgage reform package Governor Edward G. Rendell signed into law in July. The new laws require loan salespeople working for mortgage companies to be licensed by the Department of Banking and allow the department to share information on enforcement actions against licensees with the public sooner. The laws also prohibit prepayment penalties on loans of $217,823 or less, require lenders to notify the state when they intend to foreclose on homeowners, and increase penalties for misconduct by real estate appraisers.

###

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason


Search for Lancaster County Homes for sale by clicking here!