In response to the federal
government’s lowering of interest rates,
the mortgage business began to take off
after what seemed like a long hiatus. Much
of this business involves refinancing.
This increase also has led to a spike in
business for property appraisers. As brokers approach the changing market, they
must re-evaluate when and how they deal
with appraisers. The Home Valuation Code
of Conduct (HVCC), which took effect this
past May 1, prohibits brokers from ordering appraisals for residential loans set to
be sold to Fannie Mae and Freddie Mac.
The HVCC, however, does not appear to
impact Federal Housing Administration
(FHA) loans.
In light of this, here are eight tips for
minimizing delays in obtaining appraisals
for refinance transactions. Brokers can use
J. Daniel Neumann is
president of J. Daniel
Neumann Appraisals Inc.
He has been a residential appraiser for 22 years
and has appraised nearly
10,000 properties. Reach
him at dneumann2@comcast.net.
these tips when appropriate; when they can’t
order an appraisal themselves, they may be
able to provide this advice to clients.
1. Understand that the appraisal is a crucial aspect of the loan process. As such,
homeowners should make every reasonable
effort to allow the appraiser access to the
home. The sooner such access is granted,
the better. Appraisers need access to the
inside and the outside of the house and to
all areas of the property. In some cases, a
drive-by appraisal will suffice. These cases,
however, are few and far between in the
current credit environment.
2. Provide the appraiser with all phone
numbers — home, work, cellular — for
all borrowers. Make exceptions as necessary for restricted numbers. During busy
times, appraisers — much like brokers,
loan officers and processors — work long
and varied hours. They make appointments
in the evenings and on weekends. In other
words, they’re busy people, and it’s difficult
to say when they will need to call loan applicants. The more contact information
they have, the better.
3. Resolve the method of payment up-front. If brokers — or whoever is ordering
the appraisal — want appraisers to collect
their fee at the time of inspection, make
the borrowers aware of this. Borrowers
may react negatively if an appraiser asks
for payment unexpectedly.
4. Make the appraiser aware of all recent
home improvements or other upgraded
features, even if those improvements
existed when the borrower purchased the
home. If borrowers have a long list of improvements, they should write down each
of them. This will enable the appraiser to
consider all factors in an organized manner. Appraisers would rather have too
much information than risk overlooking
relevant facts.
5. Remain knowledgeable of current
price trends. Borrowers should be realistic or conservatively optimistic about the
expected value of their home. Competent
appraisers welcome information about
sales in the area. The more specific the
information, the better. Of special interest
are for-sale-by-owner properties, which
may not be included in certain databases
of comparable sales.
6. Be aware of all required forms and
documentation. This includes interior
photos and any requirements specific to
a particular lender. The credit crunch has
resulted in a variety of new and unusual
appraisal requirements designed to ease
lenders’ fears. Brokers and their clients
should be aware of these. In most cases,
appraisers won’t charge for reasonable
requests made known at the time they
conduct the appraisal.
7. Provide all needed data at or near the
time of order placement. This pertains
mainly to FHA-case numbers and sales
contracts when applicable. Most appraisers would rather process a case completely
once they begin. This avoids last-minute
calls wondering what happened to the
appraisal.
8. Be specific about when the appraisal is
needed. Don’t be bashful about holding appraisers to promised delivery dates. At the
same time, refrain from placing unrealistic
and unnecessary turn times on jobs.
During slow times for the mortgage
industry, bumps along the appraisal road
aren’t such a big deal. When things begin
to pick up, however, each delay can put a
deal at risk. That’s not something brokers
or their clients want to think about.
Why Credit Restoration Could Be Worthwhile
Multiple benefits may exist from teaming with a credit-repair firm
By Stephen Leifer, president, 1st Rate Financial
Chances are that the number
of clients you have had to turn
away because of credit issues has
increased in the past two years, as the
mortgage crisis took hold and credit markets tightened. Even clients with FICO
scores in the 700s have had trouble obtaining mortgages.
As foreclosures have increased — and
as legislators have worked to encourage
lenders to slow the pace of foreclosures —
banks have taken a much more conservative position on new loans, squeezing
brokers, title companies and others.
In response, mortgage professionals
are teaming with credit-restoration companies for numerous reasons. For example,
Stephen Leifer is president of 1st Rate Financial, which offers a suite of custom financial
solutions serving clients nationwide. He has
been helping consumers overcome credit and
debt issues for 15 years and understands their
impact on U.S. families. 1st Rate tailors affordable solutions to address clients’ specific
financial needs and goals, getting them out
of debt and enabling them to have a brighter
financial future. Call (866) 403-0248 toll-free
or visit www.firstratefinancialservices.com.
brokers can refer clients to these companies and receive referral fees. Credit-restoration specialists can then work with the
clients to remove credit-report errors expeditiously, keeping the broker in the loop
throughout the process. At the end of the
process, the client will be referred back to
the mortgage broker to apply for a loan.
The accuracy of consumer-credit reports from the big three credit bureaus
is not a new issue. In 2002, for example,
the Consumer Federation of America and
the National Credit Reporting Association
released a report showing that at least 30
percent of consumers risked being denied
credit or being incorrectly classified because of credit-report errors.
There are some common areas where
errors show up in credit files. For starters, many reports fail to note positive
information such as a mortgage that has
been paid on time consistently, a perfectly
paid installment loan or a revolving account with no derogatory information. In
contrast, a low percentage of negative information such as late payments or foreclosures goes unreported.
Although the Fair Credit Reporting
Act provides the ability to dispute items
on consumers’ credit reports, many people don’t do so because of a lack of time,
education or knowledge of their rights.
This past January, the National Consumer Law Center released a report
(online:
bit.ly/L3mxB) detailing the
problems consumers face when attempting to dispute and change false
credit information. According to the report, “Inaccuracies and errors plague the
credit reporting systems,” and “Credit
bureaus have little economic incentive
to conduct proper disputes or improve
their investigations.”
The report also stated that 6 million
U.S. residents could be denied a loan because of serious errors in their credit
reports.
When they receive dispute letters,
credit bureaus often automate a process
that could benefit from human analysis.
Although the bureaus ask for supporting
documentation from consumers, the bureaus often systematically fail to pass this
documentation along to the creditor when
investigating the dispute. After all, the bureaus make money from credit furnishers —
not consumers — so dispute investigations
represent an expense.
The good news is that brokers can help
by following a two-step process:
1. Pull all three of each client’s credit
reports. As of this past February, Experian
has stopped providing consumers with
their FICO score, but lenders will still use
Experian data to decide consumers’ creditworthiness. As a broker, you can still receive
the score and can make the comparison on
clients’ behalf.
2. Refer clients to a reputable credit-repair company for a thorough investigation and professional dispute follow-up. A
good credit-repair company can deliver
results based on experience dealing with
often-reluctant credit bureaus. In addition, these companies act as consumer
advocates by bringing dispute documentation directly to the creditor to support the
credit-correction report. These companies
also can dedicate their attention to the correction effort, saving time for consumers
and brokers.
Many of the most-respected credit-restoration firms also offer clients free credit
education. Brokers should look for these
kinds of firms when deciding which companies to recommend.
