Wednesday, December 23, 2009
Friday, December 18, 2009
Texas Is Listening
So are other folks....
On December 11, 2009, the Federal Financial Institutions Examination Council proposed “Reverse Mortgage Products: Guidance for Managing Compliance and Reputation Risks.” It is located at 74 Federal Register 66652 (December 16, 2009). Comments are due February 16, 2010. It looks like a good step to help protect consumers of reverse mortgages.
TREC, TALCB INITIATE REVIEW OF RULES
On December 11, 2009, the Federal Financial Institutions Examination Council proposed “Reverse Mortgage Products: Guidance for Managing Compliance and Reputation Risks.” It is located at 74 Federal Register 66652 (December 16, 2009). Comments are due February 16, 2010. It looks like a good step to help protect consumers of reverse mortgages.
TREC, TALCB INITIATE REVIEW OF RULES
AUSTIN (Texas Real Estate Commission) – The Texas Real Estate Commission (TREC) and Texas Appraiser Licensing and Certification Board (TALCB) yesterday announced a formal review of all agency rules in 2010.
This process is different from regular rulemaking proposals in that it will include consideration of public and regulated industry comments prior to the writing of rule proposal drafts.
“2010 will be the key year for a comprehensive review of all agency policies,” TREC Administrator and TALCB Commissioner Douglas E. Oldmixon said. “We will be initiating strategic planning in addition to this formal rule review. Instead of responding to proposals, participants will have the opportunity to provide input before draft rules are created, helping to shape how the agency implements statutes and policies.”
All of the rules under review will be posted in the Texas Register per state law and agency rulemaking procedure. TREC and TALCB are currently inviting comments on Texas Administrative Code, Title 22:
- Part VIII: TALCB, Chapter 155: Standards of Practice
- Part VIII: TALCB, Chapter 157: Practice and Procedure
- Part XXIII: TREC, Chapter 534: General Administration
- Part XXIII: TREC, Chapter 539: Residential Service Company Act
Monday, December 14, 2009
Saturday, December 12, 2009
Friday, December 11, 2009
Wholesalers Lenders Start Using AMC’s to Ensure Appraiser Independence
Wholesalers Lenders Start Using AMC’s to Ensure Appraiser Independence: "* Expand ⇗
* Registered
mackduckett 5 hours ago
The real 'Hook' is that seniors (borrowers) must pay for the appraisal up front and no checks.....cash or a credit card!
Now, I ask all of you.....can your seniors who NEED money to live on; and generally wait 'til it's nearly too late DON'T have $450-$650 in either cash or credit card availability to do this stupid stupid thing to satisfy some beauracrat who probably doesn't even understand RMs and is running scared from the sub-prime debacle which seniors had absolutely nothing to do with!!!
I urge everyone to write/email/call HUD (your regional office) and attempt to explain this insanity!"
* Registered
mackduckett 5 hours ago
The real 'Hook' is that seniors (borrowers) must pay for the appraisal up front and no checks.....cash or a credit card!
Now, I ask all of you.....can your seniors who NEED money to live on; and generally wait 'til it's nearly too late DON'T have $450-$650 in either cash or credit card availability to do this stupid stupid thing to satisfy some beauracrat who probably doesn't even understand RMs and is running scared from the sub-prime debacle which seniors had absolutely nothing to do with!!!
I urge everyone to write/email/call HUD (your regional office) and attempt to explain this insanity!"
Wholesalers Lenders Start Using AMC’s to Ensure Appraiser Independence
Wholesalers Lenders Start Using AMC’s to Ensure Appraiser Independence: "* Expand ⇗
* Registered
mackduckett 3 hours ago
I misspoke about LO's vs Banks collecting cash for appraisals.....the plain truth is stated by other commenters about the quality of the appraisal and the frustration of seniors who cannot have a clue as to the value of their homes even considering appraisal district.
Plain talk: HUD has created a poicy which is DISCRIMINATORY TOWARDS SENIORS."
* Registered
mackduckett 3 hours ago
I misspoke about LO's vs Banks collecting cash for appraisals.....the plain truth is stated by other commenters about the quality of the appraisal and the frustration of seniors who cannot have a clue as to the value of their homes even considering appraisal district.
Plain talk: HUD has created a poicy which is DISCRIMINATORY TOWARDS SENIORS."
Wednesday, December 9, 2009
Reverse Mortgages: The latest financial scam | Economy | NewJerseyNewsroom.com -- Your State. Your News.
That's nothing to the number of seniors who will be denied reverses starting 2010:
Thousands of disadvantaged or fixed income seniors nationwide who would benefit from the HUD program will be denied access because borrowers will soon be required to pay for an appraisal up front to the tune of $600.00 plus and they simply won't be able to afford it and that is discriminatory. In the past, appraisal costs were simply rolled into the reverse mortgage and paid at closing. No senior was excluded under that scenario. While this action primarily affects seniors it also has a huge impact on those agencies brokering the loans and of course working appraisers, both of whom will lose income opportunity in the worst of all possible times.
Reverse Mortgages: The latest financial scam | Economy | NewJerseyNewsroom.com -- Your State. Your News.: "BY CAROL ABAYA
NEWJERSEYNEWSROOM.COM
THE SANDWICH GENERATION
New Jersey has a high concentration of baby boomers who are also seniors and one of the highest concentration of seniors (especially those over 85) in the country. Everyone needs to be wary of the latest financial scam — that of reverse mortgages.
Various consumer watchdog groups are now warning seniors to stay away from reverse mortgages (RM). RM brokers, now targeting baby boomers and seniors, are the same 'players' as those who touted sub-prime mortgages."
Thousands of disadvantaged or fixed income seniors nationwide who would benefit from the HUD program will be denied access because borrowers will soon be required to pay for an appraisal up front to the tune of $600.00 plus and they simply won't be able to afford it and that is discriminatory. In the past, appraisal costs were simply rolled into the reverse mortgage and paid at closing. No senior was excluded under that scenario. While this action primarily affects seniors it also has a huge impact on those agencies brokering the loans and of course working appraisers, both of whom will lose income opportunity in the worst of all possible times.
Reverse Mortgages: The latest financial scam | Economy | NewJerseyNewsroom.com -- Your State. Your News.: "BY CAROL ABAYA
NEWJERSEYNEWSROOM.COM
THE SANDWICH GENERATION
New Jersey has a high concentration of baby boomers who are also seniors and one of the highest concentration of seniors (especially those over 85) in the country. Everyone needs to be wary of the latest financial scam — that of reverse mortgages.
Various consumer watchdog groups are now warning seniors to stay away from reverse mortgages (RM). RM brokers, now targeting baby boomers and seniors, are the same 'players' as those who touted sub-prime mortgages."
FHA Developing Method to Mathematically Determine Reverse Mortgage Eligibility
What happened to "if you are 62 and older and you live in your home, you are eligible for a reverse mortgage ? Dave
FHA Developing Method to Mathematically Determine Reverse Mortgage Eligibility: "The Federal Housing Administration will issue preliminary regulations that would be the first step in developing a method to mathematically determine a borrower’s eligibility for a reverse mortgage said Meg Burns, the director of the FHA’s office of single-family program development in a New York Times article.
The administration recently implemented a new set of standards for HECM counselors which established a roster and testing standards used to qualify counselors.
Counselors will also have to follow a set of protocols to help determine whether a reverse mortgage will help a borrower. Burns told the NY Times that “We’ll be weeding out the bad counselors going forward.”
The changes come after a report from the Government Accountability Office, which sent investigators posing as borrowers to 15 reverse-mortgage counseling sessions. According to the report, none of the counselors covered all the required topics and that some overstated the length of the sessions in records provided to the government."
FHA Developing Method to Mathematically Determine Reverse Mortgage Eligibility: "The Federal Housing Administration will issue preliminary regulations that would be the first step in developing a method to mathematically determine a borrower’s eligibility for a reverse mortgage said Meg Burns, the director of the FHA’s office of single-family program development in a New York Times article.
The administration recently implemented a new set of standards for HECM counselors which established a roster and testing standards used to qualify counselors.
Counselors will also have to follow a set of protocols to help determine whether a reverse mortgage will help a borrower. Burns told the NY Times that “We’ll be weeding out the bad counselors going forward.”
The changes come after a report from the Government Accountability Office, which sent investigators posing as borrowers to 15 reverse-mortgage counseling sessions. According to the report, none of the counselors covered all the required topics and that some overstated the length of the sessions in records provided to the government."
Life After Fannie Mae for Reverse Mortgages
Life After Fannie Mae for Reverse Mortgages: "Fannie Mae long the stalwart in secondary market support for the product, through its Home Equity Conversation Mortgage, clearly is in pull-back mode. Earlier this year, the government financing agency increased its required yield on reverse mortgages, which had the net effect of increasing interest rates on those loans by 50 to 75 basis points, thus reducing the proceeds seniors receive from a reverse mortgage."
Sunday, December 6, 2009
HUD Reverse Mortgages Discriminate Against Financially Disadvantaged Seniors
Thousands of disadvantaged or fixed income seniors nationwide who would benefit from the HUD program will be denied access because borrowers will soon be required to pay for an appraisal up front to the tune of $600.00 plus and they simply won't be able to afford it and that is discriminatory. In the past, appraisal costs were simply rolled into the reverse mortgage and paid at closing. No senior was excluded under that scenario. While this action primarily affects seniors it also has a huge impact on those agencies brokering the loans and of course working appraisers, both of whom will lose income opportunity in the worst of all possible times. Here's how this impending disaster developed.
In January of 2010, HUD will have transferred the ordering of all appraisals done in a reverse mortgage to mortgagees instead of brokers using a program called Home Valuation Code of Conduct (HVCC). This program has been a dismal failure in the conventional or forward lending industry and is about to be shut down on that side of the lending world, so why would HUD intentionally insert it into reverse mortgages? Well, the truth of it is, they didn't create this clearly prejudicial situation directly. When they took away the broker's access to ordering appraisals, they handed it to the mortgagees. For whatever reason, mortgagees decided to have Appraisal Management Companies (AMCs) handle all all appraisals for an added fee, of course, that is added to the appraisal cost and will be passed directly to the senior borrower. This was solely a mortgagee decision. In fact HUD mortgagee letter 9-28ml says FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence. That said, HUD still bears the brunt of responsibility of putting appraisal ordering in the hands of the mortgagees without doing their homework. They need to fix this situation before it impacts potential borrowers and the industry as a whole by significant reductions in the numbers of reverses applied for, unless that is their overall intention. If so, why don't they say so and that becomes a whole different matter.
It might further be noted that the appraisal, even though paid for by the borrower, never is made available to the borrower during the course of the reverse. How can any senior make an informed decision about whether the reverse is a good decision or even if the lender is the right one for them?
Solutions? (1)One choice is to put appraisal ordering back in the hands of the brokers with stringent controls and clear elimnination of upfront paying for appraisals by the senior. (2) Have the broker provide each borrower with a copy of the HUD/FHA list of approved appraisers for their area and let the borrower pick one from that list with the understanding that the appraiser will be paid at the close as before. It really wouldn't make any difference which appraiser they pick as long as they are on the list. The latter makes a lot of the politics and opportunities for deception go away.
No matter the decision, the looming discrimination against disadvantaged and fixed income seniors is real and must be addressed immediately. It would appear in direct opposition to the President's approach to getting country back on its feet.
Reverse Mortgage Valuations (a process in need)
Reverse Mortgage Valuations
(a process in need)
There is at least one systemic issue in Reverse Mortgages that poses the threat of killing the program altogether. It is the valuation process and it will go from a situation where brokers are authorized to initiate appraisals to one that (according to the latest HUD letter on the subject) will direct that mortgagees have that authority exclusively starting January 1, 2010. While the former may not have been the best choice, the latter leaves wolves ilo foxes tending the sheep and senior citizens are the sheep. Here are some points in support of the systemic issue claim:
Valuations are flawed from the very beginning as borrowers are required to pay for their appraisals but have no chance to know thewir home's fair market value in the process and in fact rarely get to see the appraisals done regarding their rev erse mortgage. They either need to be able to participate in the process or the mortgagees pay for the appraisal as a cost of doing business.
Mortgagee underwriters are already challenging FHA certified appraisers as to valuations assigned in many cases and I have documentation clearly showing just one instance where an underwriter told the broker that she had arbitrarily lowered the value on the appraisal by 25% following an online search of unknown sources (see attached appraisal and UW condition report). An underwriter with no knowledge of the market searching some online real estate listing source in an effort to determine a value makes absolutely no sense at all. What is currently listed for sale on an online real estate listing website has no bearing on the property in question or comparable sales. Only actual similar properties that have sold can establish a parameter for valuation. In addition she had never seen the property. That conflicts directly with USAPAP and FHA appraiser requirements (MORTGAGEE LETTER 2009-28) that states “The DE Underwriter who has responsibility for the quality of the appraisal report is allowed to request clarifications and discuss with the appraiser components of the appraisal that influence its quality.” It says nothing about changing the value or telling the appraiser to change the value of his/her report. That letter further states “Appraisers are reminded that the Uniform Standards of Professional Appraisal Practice (USPAP) apply to all appraisals performed for properties that are security for FHA insured financing including the Competency Rule. Per the Appraiser’s Certifications contained in the property specific Fannie Mae/Freddie Mac appraisal reporting forms adopted by FHA, appraisers must certify that:
“I have knowledge and experience in appraising this type of property in this market area” (Appraiser’s Certification # 11) and “I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records and other such data sources for the area in which the property is located.” ( Appraiser’s Certification #12). A subsequent review (see attached) of the aforementioned appraisal by Financial Freedom supported the appraiser's original valuation and the loan was transferred, only to have the senior underwriter in FF override his own review and support his UW's value deduction. The borrower was in immediate jeopardy of losing their home due to repairs done based on an appraised value. This is a single case, but what about the many borrowers who have no advocate to assist them in this process. They can only blindly trust the system and many of them are being deprived of their correct entitlements because theyhave no choice but to trust a system which is letting them down.
The new process that puts the authority for requesting appraisals in the hands of the mortgagees when added to mortgagee UW intervention in the valuation process is a clear recipe for disaster. I have been able to speak with several very good appraisers and they have all said, “why should we want to do appraisals when someone can do a desk audit and pronounce a value change without ever seeing the property?” This will result in forcing many good appraisers away from the reverse process and only leave the culls. It also raises a whole different issue about state's rights where mortgagee underwriters are assigning values to real estate property in many cases from outside the state of venue. In spite of strong Mortgagee letters of regulation, FHA is planning to move appraisal initiation from the lender to the mortgagee and allowed the mortgagee to become his own policeman. Is that not what was being done with the bank brokers? Are mortgagees not bankers too? Clearly that is not a solution. I am aware of the fact that The House Financial Services Committee has just passed an amendment to the Consumer Financial Protection Agency Act to phase it out, and allow all loan originators, licensed or registered in accordance with the SAFE Mortgage Licensing Act, to order appraisals directly. H.R. 3126 is the number of this bill. It may help but it is a long way from reality and apparently does not address the arbitrary devaluing of FHA appraisals. Regulatory monitoring and compliance of valuations, broker and mortgagee functions must be removed from the industry players and directly enforced more strngently by FHA through license removal and either fines or criminal violations or both. Until that happens, the person for whom the program was created (a senior borrower) will continue to suffer by being deprived of a fair and accurate valuation and the correct entitlement for his/her property and they will not even know it. While clean loans will be impacted, it is the folks who have critical repair issues that affect their abilities to live a reasonable life who will suffer most and yet are they not really the ones who should benefit from this program?
Because the borrower is denied access to the valuation process, there is the fairly common situation where the borrower needs extensive repairs to meet FHA minimums. Even if the borrower pays for an FHA appraisal of their own up front to find out how much the home would be worth, they will have no inkling what they are entitled to for those repairs if the outcome of the value is left to underwriters. A broker would be hard pressed to provide an entitlement to the borrower knowing that the second appraisal to be ordered by the mortgagee may not even come even close to the one they have or that some UW will not devalue the property. How will the broker know, if the appraisal that matters is not done until the loan is turned over to the mortgagee?. There are variations on this theme, but for all practical purposes, it may well be too late in the process as repairs might be completed based on an initial appraisal and a bill is owed to the contractor who is entitled to recourse which in many cases will cost the borrower his/her home. The repair rider is not the answer as most significant repairs quickly exceed the allowable percentage under today's repair costs and some mortgagees are frwquiring all repairs to be done prior to closing. Of course if the two appraisals differ the borrower can always go to arbitration? Imagine the impact on FHA if that became the norm. An option might be for FHA to provide a list of certified appraisers to lenders and have them present it to the borrower to select an appraiser in their area. That might clear up a lot of issues.
The current alternative is that the broker simply turns down the borrower as too hard to do and that is commonplace in the market. The alternative will increase in use as brokers have less and less input on the valuation part of the process. A dialogue must exist between the broker (or someone on the front end of the process), borrower and the appraiser in order for this process to work effectively unless the mortgagee is willing to take on that responsibility and we know the answer to that. This most assuredly is not an endorsement of the broker's role in the valuation system but instead it is obvious that this is the perfect place for FHA to insert itself either via direct actions with appraisers or perfecting the enforcement of its regulations so that guilty appraisers, brokers and mortgagees will only get to ply their trade on 8x10 foot rooms with bars for walls or sell pencils on street corners.
Senior Citizens are the most maligned group in society today. They come from a generation where they bought cars, horses and even homes or businesses on a handshake based on someone's word or simple trust. Some Seniors seem to understand today's ethics or lack of it, but for the most part that group remains vulnerable to the scammers and 'slicks' of our world. All they seek is to have their homes fixed up, pay off a mortgage and maybe put a little jingle in their pockets at the end of this process called a Reverse Mortgage and because it is a government program they trust that to happen. Somehow we owe them better than they are getting and as their place in time is something we all arrive at, it would seem that fixing this program now might be the prudent and proper thing to do.
(a process in need)
There is at least one systemic issue in Reverse Mortgages that poses the threat of killing the program altogether. It is the valuation process and it will go from a situation where brokers are authorized to initiate appraisals to one that (according to the latest HUD letter on the subject) will direct that mortgagees have that authority exclusively starting January 1, 2010. While the former may not have been the best choice, the latter leaves wolves ilo foxes tending the sheep and senior citizens are the sheep. Here are some points in support of the systemic issue claim:
Valuations are flawed from the very beginning as borrowers are required to pay for their appraisals but have no chance to know thewir home's fair market value in the process and in fact rarely get to see the appraisals done regarding their rev erse mortgage. They either need to be able to participate in the process or the mortgagees pay for the appraisal as a cost of doing business.
Mortgagee underwriters are already challenging FHA certified appraisers as to valuations assigned in many cases and I have documentation clearly showing just one instance where an underwriter told the broker that she had arbitrarily lowered the value on the appraisal by 25% following an online search of unknown sources (see attached appraisal and UW condition report). An underwriter with no knowledge of the market searching some online real estate listing source in an effort to determine a value makes absolutely no sense at all. What is currently listed for sale on an online real estate listing website has no bearing on the property in question or comparable sales. Only actual similar properties that have sold can establish a parameter for valuation. In addition she had never seen the property. That conflicts directly with USAPAP and FHA appraiser requirements (MORTGAGEE LETTER 2009-28) that states “The DE Underwriter who has responsibility for the quality of the appraisal report is allowed to request clarifications and discuss with the appraiser components of the appraisal that influence its quality.” It says nothing about changing the value or telling the appraiser to change the value of his/her report. That letter further states “Appraisers are reminded that the Uniform Standards of Professional Appraisal Practice (USPAP) apply to all appraisals performed for properties that are security for FHA insured financing including the Competency Rule. Per the Appraiser’s Certifications contained in the property specific Fannie Mae/Freddie Mac appraisal reporting forms adopted by FHA, appraisers must certify that:
“I have knowledge and experience in appraising this type of property in this market area” (Appraiser’s Certification # 11) and “I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records and other such data sources for the area in which the property is located.” ( Appraiser’s Certification #12). A subsequent review (see attached) of the aforementioned appraisal by Financial Freedom supported the appraiser's original valuation and the loan was transferred, only to have the senior underwriter in FF override his own review and support his UW's value deduction. The borrower was in immediate jeopardy of losing their home due to repairs done based on an appraised value. This is a single case, but what about the many borrowers who have no advocate to assist them in this process. They can only blindly trust the system and many of them are being deprived of their correct entitlements because theyhave no choice but to trust a system which is letting them down.
The new process that puts the authority for requesting appraisals in the hands of the mortgagees when added to mortgagee UW intervention in the valuation process is a clear recipe for disaster. I have been able to speak with several very good appraisers and they have all said, “why should we want to do appraisals when someone can do a desk audit and pronounce a value change without ever seeing the property?” This will result in forcing many good appraisers away from the reverse process and only leave the culls. It also raises a whole different issue about state's rights where mortgagee underwriters are assigning values to real estate property in many cases from outside the state of venue. In spite of strong Mortgagee letters of regulation, FHA is planning to move appraisal initiation from the lender to the mortgagee and allowed the mortgagee to become his own policeman. Is that not what was being done with the bank brokers? Are mortgagees not bankers too? Clearly that is not a solution. I am aware of the fact that The House Financial Services Committee has just passed an amendment to the Consumer Financial Protection Agency Act to phase it out, and allow all loan originators, licensed or registered in accordance with the SAFE Mortgage Licensing Act, to order appraisals directly. H.R. 3126 is the number of this bill. It may help but it is a long way from reality and apparently does not address the arbitrary devaluing of FHA appraisals. Regulatory monitoring and compliance of valuations, broker and mortgagee functions must be removed from the industry players and directly enforced more strngently by FHA through license removal and either fines or criminal violations or both. Until that happens, the person for whom the program was created (a senior borrower) will continue to suffer by being deprived of a fair and accurate valuation and the correct entitlement for his/her property and they will not even know it. While clean loans will be impacted, it is the folks who have critical repair issues that affect their abilities to live a reasonable life who will suffer most and yet are they not really the ones who should benefit from this program?
Because the borrower is denied access to the valuation process, there is the fairly common situation where the borrower needs extensive repairs to meet FHA minimums. Even if the borrower pays for an FHA appraisal of their own up front to find out how much the home would be worth, they will have no inkling what they are entitled to for those repairs if the outcome of the value is left to underwriters. A broker would be hard pressed to provide an entitlement to the borrower knowing that the second appraisal to be ordered by the mortgagee may not even come even close to the one they have or that some UW will not devalue the property. How will the broker know, if the appraisal that matters is not done until the loan is turned over to the mortgagee?. There are variations on this theme, but for all practical purposes, it may well be too late in the process as repairs might be completed based on an initial appraisal and a bill is owed to the contractor who is entitled to recourse which in many cases will cost the borrower his/her home. The repair rider is not the answer as most significant repairs quickly exceed the allowable percentage under today's repair costs and some mortgagees are frwquiring all repairs to be done prior to closing. Of course if the two appraisals differ the borrower can always go to arbitration? Imagine the impact on FHA if that became the norm. An option might be for FHA to provide a list of certified appraisers to lenders and have them present it to the borrower to select an appraiser in their area. That might clear up a lot of issues.
The current alternative is that the broker simply turns down the borrower as too hard to do and that is commonplace in the market. The alternative will increase in use as brokers have less and less input on the valuation part of the process. A dialogue must exist between the broker (or someone on the front end of the process), borrower and the appraiser in order for this process to work effectively unless the mortgagee is willing to take on that responsibility and we know the answer to that. This most assuredly is not an endorsement of the broker's role in the valuation system but instead it is obvious that this is the perfect place for FHA to insert itself either via direct actions with appraisers or perfecting the enforcement of its regulations so that guilty appraisers, brokers and mortgagees will only get to ply their trade on 8x10 foot rooms with bars for walls or sell pencils on street corners.
Senior Citizens are the most maligned group in society today. They come from a generation where they bought cars, horses and even homes or businesses on a handshake based on someone's word or simple trust. Some Seniors seem to understand today's ethics or lack of it, but for the most part that group remains vulnerable to the scammers and 'slicks' of our world. All they seek is to have their homes fixed up, pay off a mortgage and maybe put a little jingle in their pockets at the end of this process called a Reverse Mortgage and because it is a government program they trust that to happen. Somehow we owe them better than they are getting and as their place in time is something we all arrive at, it would seem that fixing this program now might be the prudent and proper thing to do.
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