Are new regulations stifling real estate?
Over the course of the past three years there have been many changes in government regulations, policies and procedures that have directly affected the real estate industry. It is amazing how many that were designed to help and protect the consumer have had the opposite effect. They have caused delays, prevented closings, and added significant cost to real estate transactions.
These include changes in the appraisal process and lender disclosures. Both of those industries have been dramatically impacted to the point where the manner in which they conduct their business has been changed. Appraisers in most instances must now be ordered from a “pool service.” No longer can the lender call up the appraiser and place the order to get things rolling.
The lender now must provide an accurate HUD-1, or pay the difference if the estimate is less than the actual costs. That is causing delays while lenders work to get accurate costs instead of reasonable estimates based on their experience and industry rules of thumb. Once the HUD is received by the buyer, the lender has to wait three days before ordering an appraisal, another delay. One must wonder, with the delay and added costs, what benefits are actually being received by the borrowers?
The HAFA and HAMP programs have also been disappointing. They were designed to help borrowers in trouble to modify their loan, or achieve a short sale in a reasonable time without recourse. Until recent additional government pressure was applied, loan modifications were far and few between. Even when a loan mod was agreed to more often than not there were abuses perpetrated on the borrower. Their modification was nominally better than what they had and in the end typically all they had was a few years of reduced interest with the back interest and costs added on to the end of the loan. Sometimes to lower the payment they simply extended the amortization period, spread the payments out over a longer period of time. That merely keeps the borrower in their high payment situation longer, as after five years the payment adjusts again in most cases.
New pressure is coming to bear that may result in loan modifications being truly that, a modification not only of payment, but of interest rate and principal balance. That type of program, if implemented, will give borrowers the payment relief and encouragement they need to continue the endeavor of making their house payments. Some loan mods could have kept borrowers in their home by just not resetting the loan rate, but the loan investors weren’t allowing that to happen resulting in many foreclosures. When that happens everybody loses – borrower, lender, and whole communities.
Through all of this there are some highlights. While things had tightened up for second homes and income properties with lenders wanting a lot down and high interest rates, a recent quote from Kim Macarelli from Pacific Crest Mortgage saw rates of 3.875-4 percent for a second home with down payment being as little as 10 percent with good credit, and no mortgage insurance. For income properties, a home you are buying to rent out, she quoted as low as 20-25 percent down payment and a rate of 4.75 percent. Very attractive rates and programs for investors or people looking to get their retirement home in our area while prices and interest rates are so low. Call your lender or agent to find out the latest great news. Things change on a regular basis so call often to keep up.
n Lisa Wetzel and Jim Valentine are real estate agents with RE/MAX Realty Affiliates in Gardnerville. They are short sale and foreclosure specialists and certified distressed property experts. Contact them at firstname.lastname@example.org.