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Rate Update and HVCC Chaos

Last week was pretty quiet with economic news, and interest rates ended the week about where they started. The 30 Year Fixed currently sits at 4.875% (5.054% APR) and the 15 Year Fixed is at 4.250% (4.557% APR). There is a lot of news this week that could potentially move interest rates. New Homes Sales came out this morning, up 11% in June, the biggest gain in 8 years. The biggest economic report this week is Friday’s GDP data for the 2nd quarter of 2009. GDP is the broadest measure of economic activity. The Treasury will also auction a total of $109 billion in 2, 5 and 7-Year Notes beginning tomorrow. Investors will be closely watching the level of demand.

The Home Valuation Code of Conduct, or HVCC, seems to be causing more problems in the mortgage world than it was trying to fix. HVCC outlines new rules related to appraisals used in mortgage loans backed by Fannie Mae and Freddie Mac. The intent of the new regulation was to eliminate fraudulent practices between the real estate appraiser and the mortgage lender. Such practices include artificially inflating values or turning a blind eye to health and safety issues.

What has actually resulted from this new regulation is longer turn times for appraisals, more expensive appraisals, and more uncertainty. Appraisals are now taking upwards of 7 business days to complete, which could result in a longer rate lock period and, thus, more expensive loan fees or higher interest rates. The cost of the appraisal has also gone up approximately $150, yet the appraiser gets paid less than before, with the appraisal vendor company retaining the difference. In refinances especially, value is often the sole factor in determining if a transaction is even possible. In the past, lenders could pick up the phone and discuss the property value, potential comparables, and any other issues with the lender. HVCC has eliminated the ability for this human-to-human interaction to take place, and lenders must now rely on online value estimators like to determine value. Even with all the tools available to estimate a property value, the consumer is ultimately depending on a favorable report from some random appraiser who may not even be from the local area.

There are several petitions circulating the mortgage industry professionals to put an end to HVCC. You can help put a stop to this nonsense by visiting… every signature helps. Your congressional representatives are also getting involved. In fact, in a bipartisan effort, Representative Childers (D-MS) and Representative Miller (R-CA) introduced HR 3044 calling for an 18-month moratorium on HVCC.

And don’t just take our word for it…

Daniel Podesto
Central Coast Lending, Inc.
(805) 771-9870

Written by Keith Byrd - Go to Keith's Website/Profile