Major Misconception with new “Collateral Underwriter” Policy

There is a Major Misconception with new “Collateral Underwriter” Policy

I just got off the phone with Michael Crane, Assistant Vice President and Sr. Mortgage Banker with Fidelity Mortgage Bank, and he had a GREAT perspective on the changes coming next week with residential real estate appraisals!  Here is his take on the new policy regarding appraisals:

Michael Crane

Michael Crane, Assistant Vice President and Sr. Mortgage Banker with Fidelity Mortgage Bank

As I’m sure you’ve probably heard by now, Fannie Mae is releasing an appraisal evaluation tool called “Collateral Underwriter” this coming Monday January 26th.  There has been a lot of speculation, rumor, internet opinions, and everything in between regarding this, and I want to share several points that we as a management team have learned from several webinars and conversations with Fannie Mae (FNMA) – the leading source of residential mortgage credit in the U.S. secondary market.

 

Collateral Underwriter is like Desktop Underwriter for appraisals.

It will evaluate the report and note any potential issues via messages on a report that is generated when the appraiser uploads the appraisal to LenderX/Mercury.  This will be somewhat like a road-map for the underwriter, one that should result in a more efficient review.  The Collateral Underwriter report will be delivered to the loan officers and processors automatically with no request to the appraisal desk being needed, as the Collateral Underwriter report will be integrated with and be a part of the UCDP report.

Fannie Mae has been using Collateral Underwriter for quite a while now

Fannie Mae has been using Collateral Underwriter for quite a while now in their post-purchase appraisal reviews.  It is not new or untested.  Fannie has simply given us the opportunity to tap into the platform to give us the chance to polish the report pre-closing rather than post-closing.

Major Misconception

I have spoken to many of our appraisers and you have spoken to many of your realtors, and there is a major misconception regarding what Collateral Underwriter will do regarding alternative comps.  Some think that it will automatically pull 20 additional sales that the appraiser will have to respond to.  This is not the case.  We presently look at an AVM (automated valuation model) when we underwrite an appraisal, and it may reveal possible additional sales that may or may not be relevant to our house.  Collateral Underwriter will do the same, and it eventually may do away with the need for us to pull our own AVM, i.e. that is one less step that the underwriter will have to take to complete an appraisal review. Of course, it may not reveal ANY additional comps which is the best possible scenario.

Who is Affected?

Collateral Underwriter applies ONLY to conventional transactions, not FHA, USDA, VA, or Jumbo loans.

In Summary

I have seen several blogs and websites say things such as “Fannie Mae wants appraisers to come in low” and wants to “force appraisers to use low quality comps”.  This is simply not the case.  Collateral underwriter is designed to make sure that A) The data integrity of the appraisal is sound, B) The comps are the most appropriate ones, and C) The comps are adjusted properly in relation to the subject property.  Fannie Mae has no vested interest in depressing property values.  They only have an interest in ensuring that the appraised value is supported and that the integrity of the report is sound.

Thanks for the overview Michael!

 

If you want to reach out to Michael for more information, here’s how:

Michael Crane
Asst. Vice President/ Sr. Mortgage Banker
Office 770-649-4911 | Cell 678-414-0259 | Fax 866-422-4027
1000 Mansell Exchange West, Ste. 360
Alpharetta, GA 30022
NMLS #35105
www.mcrane.lionbankmtg.com
**Multi-year Top Producer Gold Award recipient from Mortgage Banker’s Assoc of GA.
**30 years Mortgage Banking experience in Atlanta!

How soon can I get a home loan after my Short Sale?

How soon can I get a home loan after my Short Sale?

We are always looking for the short cut (or shall I say the “most efficient path”) Let me be clear – I do not mean cheating the system. We have had way too much of that in the real estate industry already! I just mean working the system as aggressively as possible while staying within the lines.

Life on the real estate front has been tough over the past 5 years. Many people have been directly affected by this through a short sale or foreclosure. Some have even opted for bankruptcy to try to avoid losing their home. Once the dust settles though, the healing can begin. And that is where our coaching and strategies come into play.

John Davis

So, here is today’s question: How soon can I get a home loan after my Short Sale? To answer this and some other related questions we turned our in-house loan expert, John Davis with W.R. Starkey for his take on the current lending guidelines in these situations.

In general cash reserves and credit scores are slow to recover after emerging from distressed situations so the quickest path is almost always an FHA loan.

LENDABILITY AFTER A SHORT SALE
How soon can I get a loan after my Short Sale?

It depends on how much money you want to borrow and how much cash you have saved. The quickest path is almost always an FHA loan because it requires the least money down at 3.5% of the Purchase price. FHA will allow you to qualify for a new loan as soon as 3 years have passed from the date of your Short Sale. And, they will lend up to $346,250 in the Atlanta area depending on your financial situation. If somehow you are able to save up 20% to put down, you can cut a year off of the wait through a conventional loan option and get your loan after only 2 years. Otherwise, it will be 3 years for conventional with 10% down and at that point the 3.5% down FHA loan may be more attractive from a cash flow perspective.


LENDABILITY AFTER A FORECLOSURE
What about a foreclosure?

The typical waiting period for obtaining a new conventional loan after a foreclosure is 7 years. That is the number most people associate with foreclosures. However, what most people do not know is that the waiting period is only 3 years through the FHA lending channels. That is less than half the time!


LENDABILITY AFTER A BANKRUPTCY
What does it look like if I had to file for bankruptcy?

With bankruptcy, the path is not as long as a foreclosure and it depends on which route was taken ( Chapter 7 or Chapter 13 ). If Chapter 13 was the route taken, the waiting period may only be 2 years. With Chapter 7 and all other types the wait will probably be 4 years.

GOING ABOVE THE FHA LOAN MAX OF $346,250
If I am looking at a $425,000 property, do I have to go with a conventional loan?

No. Although the loan maximum allowed by FHA for the Atlanta area is $346,250, a buyer can still use FHA as the loan type and make up the gap difference with cash. FHA is not just a low budget/low credit last stop. Sometimes the rates and underwriting conditions are more favorable even for buyers with good credit scores and plenty of cash. FHA financing then becomes a savvy way to take advantage of low rates and low down payment rules so cash can be conserved for other things (like renovations, furnishings, etc).

Great information! Thanks, John.


Here is the Legal Fine Print so no one gets on to John for helping me with this:
NMLSR# 216222
GA License # 24412
Email: jdavis@wrstarkey.com
Cell 404.461.3794
Fax 866.546.9061
WR Starkey Mortgage, LLP NMLSR# 2146
7000 Central Parkway Suite 1440
Atlanta, GA 30328
Georgia Residential Mortgage Licensee