FHFA to make desktop appraisals permanent

FHFA Acting Director Sandra Thompson also announced expansions to the eligibility requirements for refinance programs geared toward low-income borrowers

Desktop appraisals, a temporary flexibility implemented in March 2020 to keep the mortgage industry afloat amid lockdowns and social distancing, will become permanent, the Federal Housing Finance Agency said today.

Sandra Thompson, acting director of the FHFA, said both Fannie Mae and Freddie Mac will allow appraisals to be conducted remotely, using public records such as listings and tax appraisals, for purchase loans starting in early 2022.

The crowd erupted into applause on the appraisal news, which Thompson announced at the Mortgage Bankers Association Annual Convention and Expo in San Diego. It’s the trade association’s first large-scale in-person event since its 2019 convention, with some 3,500 in attendance.

Thompson said that “frictions in the appraisal process” can slow down the mortgage process, a problem she said is particularly acute in rural communities. Appraisers often spend much of their day driving from property to property, Thompson said.

Allowing desktop appraisals was one of a number of short-term appraisal flexibilities the agency announced in March 2020. Those flexibilities expired earlier this year. But the regulator was apparently moved by feedback it received after its December 2020 request for information on appraisal processes.

How do remote valuation solutions benefit appraisers?

To keep up with the high demand amid the ongoing pandemic, appraisers need a remote solution that keeps them in full control.

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“This can help each appraiser complete more loans in a day, and it can also help rural communities more readily obtain a necessary appraisal when the borrower is purchasing a property,” said Thompson. “This certainty should allow lenders, borrowers, and appraisers alike to take advantage of the efficiency gains that desktop appraisals can provide.”

Thompson also announced that Fannie Mae and Freddie Mac would expand the eligibility requirements for refinance programs geared toward low-income borrowers.

For RefiNow and RefiPossible, the new income threshold will be raised from 80% of area median income to 100% of AMI. The GSEs will also remove the 10-year seasoning cap from the original program.

The changes are geared toward making the programs easier for lenders to offer, by increasing the overall eligible population and addressing “operational frictions” for lenders. Take up among lenders has been slow, Thompson said.

Despite a historic refi boom, Thompson said, the share of refinance loans made to borrowers below 100% of area median income has dropped.

The Urban Institute and others have documented tightening of credit for low-income borrowers during the refi boom. In April, after a year of refinances that mostly benefited wealthier borrowers, the FHFA announced a new refinance option for low-income borrowers.

“These borrowers risk being left on the sidelines during a generational opportunity to lock in more sustainable monthly payments,” Thompson said. “And these are often the very people who could most benefit from adding breathing room to their budget.”

Thompson said that not everyone is in a place to qualify for a refinance.

“But that alone doesn’t explain the gaps we are seeing in refinances to creditworthy Enterprise borrowers,” said Thompson. “And we know from experience with HARP and with programs for lower income and minority borrowers that those with smaller balances tend to get left behind when it comes to refinancing opportunities.”

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Gen X homebuyers should prioritize aging in place: Boston Globe

By Didier Malagies • November 18, 2024

Homebuyers who are part of Generation X — primarily born between the mid 1960s and the early 1980s — should keep accessibility features in mind as they approach retirement, since Americans are increasingly looking to age in place in their own homes once their time in the workforce is complete. This is according to a recent article at the Boston Globe that took a closer look at the kinds of homes that those currently in their mid-to-late 50s may want to prioritize as they look to the future. Not only is it a good idea to think ahead for themselves, the article explains, but many members of Gen X are also a part of the so-called “sandwich generation” where they may be taking care of both their own children, and their parents simultaneously. “So for those considering moving out of the homes where they raised their children, there are some key boxes to check to make living in their next house easiest for everyone,” the story said. The biggest aspect to keep in mind is the one that could make the biggest accessibility difference, and that is keeping the house confined primarily to a single floor. “In most of our remodeling, we use a design technique called Universal Design,” said Brian Harvey, owner of Boston-area business Harvey Home Modifications . “That essentially is a design that will serve anyone of any physical capability in the house.” Keeping in mind what is not needed is also a useful exercise, he said, and ensuring that door frames are wide enough to accommodate wheelchairs could be beneficial for any current or future wheelchair users that do, or will, reside in the home. Bathrooms are also a major focus, since they can often serve as common sites for falls or other accidents since slippery, wet surfaces can be easy to find. “If the home you’re hoping to buy doesn’t have the accessibility you’re looking for, you’ll want to check with a contractor to see what kind of renovations are possible,” the story said. One of the ways the reverse mortgage industry has aimed to position the potential value proposition for prospective borrowers is by the ability to use the loan proceeds to fund home modifications. The U.S. Department of Housing and Urban Development (HUD) has also given attention to home modifications specifically for aging in place. This past summer, the department greenlit a new round of grant funding specifically to assist more older Americans with aging in place. Reporting earlier this year by the Associated Press (AP) also tracked the increasing desire of older Americans to remain in their homes for longer, illustrating how they were increasingly “splurging” on home modifications to better fashion their living spaces for later life’s natural mobility limitations. Home improvement retailers have also taken notice, with The Home Depot refreshing an in-house brand with accessibility in mind for things like grab bars and easier-to-use faucets. In 2021, Lowe’s established a single stop for items including wheelchair ramps and shower benches, the AP reported.

What happens with lower appraised values on FHA, Conventional, and VA Mortgages

By Didier Malagies • November 18, 2024

When a property appraisal comes in lower than the agreed-upon purchase price, it can complicate financing for the buyer. Here's what typically happens for FHA, Conventional, and VA mortgages: 1. FHA Mortgages Impact of a Low Appraisal: The loan amount is limited to the lower of the purchase price or the appraised value. A low appraisal means the buyer must: Renegotiate the purchase price with the seller. Pay the difference in cash. Walk away if the contract allows it. Required Repairs: FHA appraisals assess both value and property condition. If issues arise (e.g., safety concerns), the seller or buyer must make repairs before closing. Appraisal Stays with the Property: FHA appraisals are tied to the property for 120 days. If a different FHA buyer comes along within that period, they inherit the appraisal value. 2. Conventional Mortgages Impact of a Low Appraisal: Conventional loans also limit the loan amount to the appraised value. If the appraisal is low, the buyer must: Negotiate a lower price with the seller. Increase their down payment to cover the gap. Cancel the deal if allowed by a financing contingency. Appraisal Appeal or Second Appraisal: Buyers or lenders can challenge the appraisal or request another one if there’s evidence the appraisal was inaccurate. More Flexibility: Conventional loans often have fewer property condition requirements than FHA or VA loans, so the appraisal focuses more on market value. 3. VA Mortgages Impact of a Low Appraisal: VA loans use a Notice of Value (NOV) to determine the property’s worth. If the NOV is lower than the purchase price, options include: Negotiating a price reduction with the seller. Paying the difference in cash. Requesting a "Reconsideration of Value" (ROV) through the VA if there’s a strong case for higher value. VA Escape Clause: VA loans include a clause allowing buyers to walk away if the property appraises lower than the purchase price without forfeiting their earnest money deposit. Minimum Property Requirements (MPRs): If the property doesn't meet VA MPRs, repairs are required before closing. General Buyer Options in Case of a Low Appraisal: Renegotiate Price: Sellers may agree to lower the price to match the appraisal. Bring Extra Cash: Buyers can cover the gap out-of-pocket. Challenge the Appraisal: Provide additional data to support a higher value. Walk Away: Utilize financing or appraisal contingencies to exit the deal. Would you like more details on how to handle a specific type of mortgage? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

Housing supply will be impacted as more Americans age in place

By Didier Malagies • November 12, 2024

There is likely to be a “modest” amount of excess home supply driven by demographic changes as older homeowners move out of their homes or die. But the aging U.S. population is not expected to be an outright source of change to home-price projections over the next 10 years, according to a newly updated report on homes owned by baby boomers . “First, based purely on changing demographics, over the next decade there was projected to be a modest amount of excess supply of homes for sale as older homeowners age and die — around a quarter million units annually,” according to the report published by the Mortgage Bankers Association (MBA). “Second, housing supply and demand shifts from changing demographics are slow moving and highly predictable, which suggests that there would not be measurable effects on house price growth from population aging and mortality.” The report projects that over the next decade, there will be a “negative excess supply of homes for sale,” which will fuel a demographic mismatch between supply and demand during that time. Much of this is driven by the fact that baby boomers, as previously documented , are not selling their homes at the same levels as previous generations. “Since 2015, there has been a sizable increase in the homeownership rate among those 70 and older,” the report said. “This, combined with a larger base of older Americans from the aging of the baby boomers, has led to a greater number of existing homes held onto longer. “In contrast, pre-2015 homeownership patterns would have predicted that these homes would have been sold. So, older Americans are holding onto their homes longer, and there are more of them.” This could serve to raise existing home supply in future years, but demand will continue to outpace supply in the here and now. “The findings highlight the varying patterns for older Americans as shifting demographics, the pandemic, and overall buyer attitudes have impacted buying and selling decisions,” said Edward Seiler, executive director for the Research Institute for Housing America and associate vice president of housing economics for the MBA “It is evident that older households are aging in place , leading to updated predictions that show that there will be no excess supply of homes to the markets from older Americans moving or dying over the next decade. The report also projects that there will be “over 8 million homes supplied by older Americans as they age and die,” which will rise to roughly 9 million over the next decade. Of that total, “approximately 1 million will be due to the death of older Americans.”