Merry Christmas and Happy Holidays!

Best Wishes for Peace and Joy this Holiday Season and a New Year of Health, Happiness and Prosperity

HUD Appraisal Rules on HUD REO property

HUD issued Mortgage Letter 2013-44 on December 6, 2013. Majority of lenders implemented this rule in early February 2014. Although this rule is a year old, I wanted to post this as a reminder because I'm seeing some issues especially with over bids and properties with repair escrows.

HUD addressed the following in the Mortgagee Letter:

• Conditions that require a new appraisal on a HUD REO property, and
• Clarified their policy on the use of distressed properties as a comparable sale to establish value for HUD REO property.

New Appraisal Required

A new full appraisal must be ordered on a HUD REO property if any of the following conditions exist:

If a new appraisal is required based on the conditions above, the following applies:

• The original HUD ordered appraisal may not be used to underwrite the loan;
• HUD will not pay for the cost of the new appraisal. The borrower may be charged for the new appraisal as part of the borrower’s closing costs;
• A written justification for the new appraisal is required (documentation that one of the above conditions existed);
• Copies of all appraisals of the property must be retained in the loan file.

When the new appraisal is ordered, the new appraisal value may be less than the sales price and even HUD appraisal value. Sometimes there can be significant differences. This can cause the buyer to come out of pocket additional funds to cover the difference more than what the buyer had estimated when they made the over bid if they wish to complete the purchase. The significant difference in value most often arises with property that has major deferred maintenance and damage that does not exceed the $5000 repair escrow but has a bigger impact to value than the cost of the repairs would suggest (this is specific to HUD REO with repair escrow). 

Please keep this appraisal rule in mind when working on HUD REO properties.

Happy Thanksgiving!

We hope that you have a happy Thanksgiving with your family and friends. One of the things we are most grateful for is having wonderful clients like you. 

Changes to Fannie Mae guidelines

Fannie Mae Changes:

On July 29th, Fannie Mae posted a Seller Guideline Announcement updating their current credit policies as well as an update to DU. Those changes have been implemented over the past weekend. Many of the changes benefit borrowers who may have had foreclosures as part of bankruptcies in the past. However for borrowers with prior short sales, you are no longer eligible for financing after just 2 years with 20% down payment.

SUMMARY:

Effective Date(s):
All changes apply to applications dated on or after 08/16/2014 and to case files submitted or re-submitted to DU on or after 08/16/2014.

Mortgage Debt in a Bankruptcy
• The borrower is held to the BK waiting period and not the Foreclosure waiting period.

Foreclosures and DU
• Underwriters can instruct DU to ignore incorrect foreclosure information.

Deed-In-Lieu of Foreclosure and Pre-Forclosures (Short Sale)
• The waiting period for borrowers who have had a deed-in-lieu of foreclosure or short sale is now four (4) years.

New Mortgage Charge-off Policy - Effective immediately
• Fannie Mae will now require a four (4) year waiting period for any charged off mortgage account.

Please note: FHA allows financing 3 years after a short sale/foreclosure.

Wishing you and your family a fun and relaxing summer. 

Please let us know if there's anything we can do for you this season.

You Magazine May 2014

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		Christian Pak Managing Partner Homeland Financial Phone: (404) 939-0502 Fax: (678) 638-1215 License: 162627 cpak@homelandmtg.com www.christianpak.com

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