All Encompassing Mortgage and Real Estate Thread

[Gil Bang 25,961]

Why is Freddie Mac throwing out automated appraisals for certain refinances that have seemingly worked well for five years?

In June 2017, Freddie introduced refinance appraisal waivers on eligible properties, expanding the program to purchase loans by September of that year.

On Wednesday, March 16, the same day the Federal Reserve raised its benchmark interest rate, mortgage giant Freddie Mac announced it will no longer allow these appraisal waivers, called an automated collateral evaluation (ACE), on cash-out refinances and certain “no-cash-out” refinances, effective July 17.

In its place, Freddie may instead offer borrowers “ACE plus PDR” (property data report). That’s Freddie’s internal “automated valuation model” or AVM and something of a physical inspection. The PDR is generated by a data collector who must answer some 200 questions after an onsite inspection. Eligible properties include single-family homes or condos as well as second homes.

It should be noted that properties worth more than $1 million did not receive these appraisal waivers. Even under Freddie’s new model using ACE plus PDR, it still won’t work for properties worth more than $1 million.

The alternative or option for the lender is to order an appraisal by a licensed appraiser. Refinance properties with two to four units and investment properties also are not eligible for this nuanced AVM and PDR process. You’ll need a complete appraisal for those.

And you might be waiting a long, long time for that appraisal appointment, which I’ll circle back to in a bit.

According to its FAQs, Freddie’s goal is to purchase loans (mortgage lenders fund loans and sell the funded or closed loans to Freddie) supported by the most reliable and appropriate valuation models available, helping to mitigate risk associated with loan default.

Why were automated valuation appraisal waivers reliable for nearly five years for so many refinances — but now not so much? Freddie representatives declined to comment.

 

https://www.ocregister.com/2022/03/17/freddie-mac-ending-automated-appraisal-waivers-on-cash-out-refinances/

 

[Neonmoon 38,129]

Damn, I loved those. 

[Wulaw Horn 19,074]

14 minutes ago, Neonmoon said:

Damn, I loved those. 

No shit. It’s like they are trying to do everything they can to make everything terrible. Getting appraisers more involved is the worst. 

[StruggleBus 3,922]

Let's raise rates and crush home values. It's beyond due. 

[Chewbacca 7,780]

Let's raise rates and crush home values. It's beyond due. 

It needs to happen.

[Hefeweizen 5,324]

12 hours ago, Chewbacca said:

On 3/18/2022 at 12:05 PM, StruggleBus said:

Let's raise rates and crush home values. It's beyond due. 

It needs to happen.

Do you mind waiting 45 days?  About to list and I would like to close before everything goes to shit.  Thanks.

[Dbeasy 15,052]

I have a family member wanting to buy raw land. I don’t handle that very often. What are the things they need to worry about in evaluating the purchase? Should they get an agent whose an expert on raw land, or use a lawyer instead. I’m worried about all of the nuances of buying land. 

Some of the questions are:

1. is a water well always good enough or could there be issues?

2. There is electricity. Anything else to worry about?

3. mineral rights? Easements? Environmental issues to prohibit building? How do you research all that stuff when buying land? Who does it?

Appreciate any insights

[Neonmoon 38,129]

1. Is there a Survey? You will need a survey. Are there any property line disputes?

2. Is it in a floodplain or wetlands?

3. We’re mineral rights severed? 
4. is there road access? Is there a road maintenance agreement if not a public road?

4. Septic Feasibility and County requirements. Can’t build a house if the land doesn’t support septic. Has a Perc test been performed?

5. What’s the property zoned for? How is it taxed?

6. A water well is good enough unless it’s a low flow well and you need to build storage capacity 

Edited March 20, 2022 by Neonmoon

[Hefeweizen 5,324]

19 minutes ago, Neonmoon said:

1. Is there a Survey? You will need a survey. Are there any property line disputes?

2. Is it in a floodplain or wetlands?

3. We’re mineral rights severed? 
4. is there road access? Is there a road maintenance agreement if not a public road?

4. Septic Feasibility and County requirements. Can’t build a house if the land doesn’t support septic. Has a Perc test been performed?

5. What’s the property zoned for? How is it taxed?

6. A water well is good enough unless it’s a low flow well and you need to build storage capacity 

Any adverse access easements?  Meaning, gates across it used by someone else.  Deed restrictions/conservation?  Usually I would do a Phase 1 just to make sure there aren't dipping vats, landfills, etc.

[Mother mopar 3,319]

Purchased raw land last summer in East Texas and there is some good feedback above. The deed restrictions are a huge one to think about, a lot of little stuff in there that can cost.

Do the Mineral rights convey with the property? Are there any exemptions with the property? If so you need to know...for example timber exemption requires management plans and a map/layout etc. Utilities were a big one for us as I did the well water as a kid in North Texas and I'll never do that again.

[Dbeasy 15,052]

Great questions. Some of those items I know how to get, such as floodplain and zoning. For other items like septic, exemptions, etc who are the people that do that for the buyer. I don’t trust realtors. Who should I hire?

[Mother mopar 3,319]

Great questions. Some of those items I know how to get, such as floodplain and zoning. For other items like septic, exemptions, etc who are the people that do that for the buyer. I don’t trust realtors. Who should I hire?

For exemptions, your local county tax office will know that.

[UTPhil2006 3,807]

Another crap start to the week to match the crap weather.  Up 9 basis points so far (raising the new 2.5 year high) to 2.23

[Wulaw Horn 19,074]

OK- so fun times. Mortgage backed securities are down 39 basis points this morning (MBS down means interest rates up).  Locking bias recommended as we have room to get worse from a technical perspective.  10 year doesn't have any support from a technical perspective to constrain it until about 2.54.  What does this mean?  Plenty of room to get worse from a technical perspective if no outside news changes the direction of the market.  

SO- here is your rate chart for this morning.  Remember what this is is the average rate locked as measured by my pricing engine for Friday the 18th.  This is national average in the pricing system, not a guarantee that this would be your rate, yada yada yada.  Most of our borrowers do better than this, some do worse.  

30-YR. CONFORMING

4.489% -0.020

30-YR. JUMBO

4.135% +0.035

30-YR. FHA

4.470% -0.036

30-YR. VA

4.239% +0.042

30-YR. USDA

4.413% +0.012

15-YR. CONFORMING

3.551% -0.058

[Neonmoon 38,129]

With the Fed penciling in 6 rate hikes this year, what's the 30 year going to look like in November? We crossing into 6%?

[Wulaw Horn 19,074]

12 minutes ago, Neonmoon said:

With the Fed penciling in 6 rate hikes this year, what's the 30 year going to look like in November? We crossing into 6%?

The rate hikes won't hurt us, the balance sheet run off will.  If the rate hikes actually calm inflation we will be fine.  If they don't- who the hell knows.  My kids won't have xmas but I will have a lot of time off to hang out with them?

 

[UTPhil2006 3,807]

1 hour ago, Neonmoon said:

With the Fed penciling in 6 rate hikes this year, what's the 30 year going to look like in November? We crossing into 6%?

[Incredulity 11,675]

That is going to pucker some a-holes.

[KYHorn 17,076]

3 hours ago, Wulaw Horn said:

The rate hikes won't hurt us, the balance sheet run off will.  If the rate hikes actually calm inflation we will be fine.  If they don't- who the hell knows.  My kids won't have xmas but I will have a lot of time off to hang out with them?

 

 

2 hours ago, UTPhil2006 said:

Y'all disagree on this? All the public-facing analysis suggests rate hikes indirectly increase mortgage rates. 

[Wulaw Horn 19,074]

5 minutes ago, KYHorn said:

 

Y'all disagree on this? All the public-facing analysis suggests rate hikes indirectly increase mortgage rates. 

My wizards of smart swear over and over and over again that the rate hike will not hurt us, interest rate markets like that b/c there is generally a flight to quality, and the entirety of the problem is balance sheet runoff.  
Those guys are pretty smart.  Nobody knows for sure, obviously, and with the balance sheet reduction we won't be able to test it this way.

[Gil Bang 25,961]

Great questions. Some of those items I know how to get, such as floodplain and zoning. For other items like septic, exemptions, etc who are the people that do that for the buyer. I don’t trust realtors. Who should I hire?

Haha.

“I don’t trust realtors. I just seek their advice because they know more than me”.

[Dbeasy 15,052]

3 hours ago, Gil Bang said:

Haha.

“I don’t trust realtors. I just seek their advice because they know more than me”.

You realize I’m a realtor, right? I’m talking about due diligence on the home, not realtor responsibilities. 

[Incredulity 11,675]

Gil bang’d

[Upgrayedd 5,813]

10 hours ago, Wulaw Horn said:

The rate hikes won't hurt us, the balance sheet run off will.  If the rate hikes actually calm inflation we will be fine.  If they don't- who the hell knows.  My kids won't have xmas but I will have a lot of time off to hang out with them?

 

It’s not the rate hikes that scare me, it’s when they stop. 

[Wulaw Horn 19,074]

MBS down another 45 points (down is bad means higher interest rates). That’s 125 points for the week. That’s 3/10’s of a percent. Good times, good times. 
My guys are saying incredibly oversold. This whole thing is very strange. The Fed isn’t really saying anything they haven’t already. I think there is some strange psychology going on right now that I don’t understand. 
market is incredibly oversold right now so we could/should get a bounce, but who knows. 

[Neonmoon 38,129]

1 minute ago, Wulaw Horn said:

MBS down another 45 points (down is bad means higher interest rates). That’s 125 points for the week. That’s 3/10’s of a percent. Good times, good times. 
My guys are saying incredibly oversold. This whole thing is very strange. The Fed isn’t really saying anything they haven’t already. I think there is some strange psychology going on right now that I don’t understand. 
market is incredibly oversold right now so we could/should get a bounce, but who knows. 

Powell hawkish words yesterday scared the market. 

[UTPhil2006 3,807]

46 minutes ago, Neonmoon said:

Powell hawkish words yesterday scared the market. 

Bingo.  Powell is the cause of the last few.  Who knows when the ride will stop, his words were pretty aggressive.

I'd guess that most of you who could just do a standard refinance already did and are below 4, but if you're looking at a cash out refi I'd pull the trigger sooner rather than later.  pdubord@prodigymbo.com or PM if you want me to run those numbers for you.

[Wulaw Horn 19,074]

1 hour ago, Neonmoon said:

Powell hawkish words yesterday scared the market. 

Sure, but he didn’t really say anything that wasn’t already said or known did he?  I thought we already priced this into the market, so we have the memory of a mayfly?

[Neonmoon 38,129]

1 hour ago, Wulaw Horn said:

Sure, but he didn’t really say anything that wasn’t already said or known did he?  I thought we already priced this into the market, so we have the memory of a mayfly?

[Wulaw Horn 19,074]

So, here it is from yesterday.  Up a smooth 2/10's or so.  Very nice.  Not at all concerning.

 

30-YR. CONFORMING

4.601% +0.112

30-YR. JUMBO

4.167% +0.032

30-YR. FHA

4.568% +0.098

30-YR. VA

4.305% +0.066

30-YR. USDA

4.466% +0.053

15-YR. CONFORMING

3.761% +0.210

[Chewbacca 7,780]

26 minutes ago, Wulaw Horn said:

So, here it is from yesterday.  Up a smooth 2/10's or so.  Very nice.  Not at all concerning.

 

30-YR. CONFORMING

4.601% +0.112

30-YR. JUMBO

4.167% +0.032

30-YR. FHA

4.568% +0.098

30-YR. VA

4.305% +0.066

30-YR. USDA

4.466% +0.053

15-YR. CONFORMING

3.761% +0.210

Aren't Jumbos usually more expensive than conforming loans?

[Wulaw Horn 19,074]

19 minutes ago, Chewbacca said:

Aren't Jumbos usually more expensive than conforming loans?

Typically yes.  We've been inverted there for a while.  Also- this doesn't have points priced in- lots of times Jumbo's come with points so take that fwiw.  

Finally, I imagine that this doesn't take into account the ARM nature of JUMBO's. 

For example- we can do a cash out Jumbo (or really any loan over $500,000) on an ARM for somewhere right around 3.25 as of this minute in time.  Similarly priced non arm, non jumbo would be 4.5 as of this second in time on a cash out, probably.  So, that's like 1.25% lower on the Jumbo cash out, but the cash out is the ARM.  However, a 10 year ARM is way longer than 95% of the population will be in their loan for, so it's practically fixed.  

When looking at deal points and dealing with equity and wanting access to it 3.25% is a very good number in this market environment (or really any market environment).  

You have to be really well qualified, of course, to make that happen (credit score, reserves, good income, and obviously equity in the property), but these are portfolio deals that are not as driven on a minute by minute basis as the typical guideline driven Fanny/Freddy deal typically is.  So, lower prices on a Jumbo, but that wouldn't necessarily be comparing apples to apples.  

Long story short- if you are surly elite and owe over $500,001- 1,500,000 we can still put you in a deal (purchase, cash out, whatever) right around 3 without paying points, and help the besieged 1 percent.  But we can't do it for the plebes at $499,000 without paying a fair amount in discount points.  I mean, if you like a rate 1 or 1.5% better than market that's your play, imo.  

[UTPhil2006 3,807]

1 hour ago, Chewbacca said:

Aren't Jumbos usually more expensive than conforming loans?

Used to be.  And will be again when the market normalizes itself at some point in the future.  But jumbo market is less reactionary.

[JOSEYWALES66 1,802]

3 hours ago, Wulaw Horn said:

So, here it is from yesterday.  Up a smooth 2/10's or so.  Very nice.  Not at all concerning.

 

30-YR. CONFORMING

4.601% +0.112

30-YR. JUMBO

4.167% +0.032

30-YR. FHA

4.568% +0.098

30-YR. VA

4.305% +0.066

30-YR. USDA

4.466% +0.053

15-YR. CONFORMING

3.761% +0.210

Wow.  I refinanced one year ago and got 2.25 on a 15 year with no points. 

[UTPhil2006 3,807]

4 minutes ago, JOSEYWALES66 said:

Wow.  I refinanced one year ago and got 2.25 on a 15 year with no points. 

Heck we were close to that in early December.  Show's you how fast things can turn on a dime.

[Wulaw Horn 19,074]

2 hours ago, JOSEYWALES66 said:

Wow.  I refinanced one year ago and got 2.25 on a 15 year with no points. 

I put a well qualified borrower in at 1.99 in October I want to say. Had a 10 year for 1.875%. No discount points. 

[StassneyHorn 6,583]

Used Danna, Phil and Thad for a refinance that closed this month. Once I get my escrow check back I will have actually been paid $200 to refinance, and knocked $208 off the monthly payment for my place.

Crazy part is the Trulia value for my place showed 277k on Feb 7 and 6 weeks later it’s now showing 318.5k.

so this is my thank you post. My HOA has been difficult to deal with both times but they got it done

Edited March 22, 2022 by StassneyHorn

[UTPhil2006 3,807]

13 hours ago, StassneyHorn said:

Used Danna, Phil and Thad for a refinance that closed this month. Once I get my escrow check back I will have actually been paid $200 to refinance, and knocked $208 off the monthly payment for my place.

Crazy part is the Trulia value for my place showed 277k on Feb 7 and 6 weeks later it’s now showing 318.5k.

so this is my thank you post. My HOA has been difficult to deal with both times but they got it done

Thanks bud. Yeah this one was pretty much a quick slam dunk minus the pesky HOA

[Wulaw Horn 19,074]

Hey, only up 11/100's of a point from Tuesday morning to Wednesday morning.  That seems fun. Typically, in years past, that would be one we point to as a terrible day. Now, that's just "tuesday"

 

DAILY MORTGAGE RATES  (March 22, 2022) — Powered by OBMMI™

30-YR. CONFORMING

4.712% +0.111

30-YR. JUMBO

4.280% +0.113

30-YR. FHA

4.657% +0.089

30-YR. VA

4.426% +0.121

30-YR. USDA

4.586% +0.120

15-YR. CONFORMING

3.752% -0.009

[UTPhil2006 3,807]

Give it time it's only 10 🙄

[KYHorn 17,076]

1 hour ago, Wulaw Horn said:

Hey, only up 11/100's of a point from Tuesday morning to Wednesday morning.  That seems fun. Typically, in years past, that would be one we point to as a terrible day. Now, that's just "tuesday"

 

DAILY MORTGAGE RATES  (March 22, 2022) — Powered by OBMMI™

30-YR. CONFORMING

4.712% +0.111

30-YR. JUMBO

4.280% +0.113

30-YR. FHA

4.657% +0.089

30-YR. VA

4.426% +0.121

30-YR. USDA

4.586% +0.120

15-YR. CONFORMING

3.752% -0.009

Crazy. Every week I have to go back and significantly adjust the monthly costs. Do you start to advise variable rates at some point?

Edited March 23, 2022 by KYHorn

[LCHorn 2,620]

26 minutes ago, KYHorn said:

Crazy. Every week I have to go back and significantly adjust the monthly costs. Do you start to advise variable rates at some point?

I typically only advocate ARM’s if the delta between that and a fixed is .5% or more, but every situation is different.  If you know you’re likely to move in three year’s then you shouldn’t be ARM averse regardless of the rate incentive.

[Wulaw Horn 19,074]

47 minutes ago, KYHorn said:

Crazy. Every week I have to go back and significantly adjust the monthly costs. Do you start to advise variable rates at some point?

Over $500,000 on a loan amount absolutely.  

Here is a scenario for a well qualified buyer, buying say, their second home (not a starter) in the Austin area after they sold their starter home:

This is a hypothetical deal for a well qualified buyer- not a promise to lend, but it literally matches someone I locked yesterday- not buying massive points or anything, lender fees are all pretty standard:

Conventional-

$750,000 purchase price

$600,000 mortgage

30 year fixed at 4.25%- total lender fees of $1114.00

$2952.00 P&I payment

That same loan on a 10 year arm (this is the most conservative arm product out there- we could get a lower rate on a shorter arm but I use 10 years b/c the average American sells their home at about 7 years so you would not see any risk of adjustment if you are average

10 year arm:

$750,00 purchase price

$600,000 mortgage

10/1 adjustable rate arm:- 3.25%- $2500 in lender fees

P&I Payment- $2611.00.

Deal recap- you spend $1400.00 more per month but receive a rate that is 1.00 full percentage points lower.  that's a monthly savings of $341.00 per month.  You've made that extra $1400.00 back that you spent on your loan in 4 months worth of payments.  

Over the course of the average American owning their home (7 years) you will have saved $28,644.00 during that time.

If you stay the entire 10 years you will save $40,920.00 during that term.  That's a big savings man, that matters. That's an entire new car just about (average price of a new car - $47,000.00- average economic life of a car- 8 years).  That's season tickets to UT football for a family of four every year in your yearly savings.  Yeah- for that dude I'm definitely recommending an arm- the numbers are just really stark.

If you know you are going to move the 5 year arm would be 3.125% at $200.00 lender cost for a total payment of $2570.  7 year arm would be 3.125% at $2400 lender cost). Same $2570.00 payment as the 5 arm, just costs $2200 more up front to set it up.  

 

 

 

[Wulaw Horn 19,074]

1 hour ago, KYHorn said:

Crazy. Every week I have to go back and significantly adjust the monthly costs. Do you start to advise variable rates at some point?

Math on a deal less than $500,000.00

Conventional:

Sales price- $620,000

Loan amount- $496,000

30 year fixed- $1500 lender costs- 4.25%  P&I- 2440

ARM

10 year- 4.125%.  Lender costs- $500.00  P &I- $2404.  Total savings over 10 years- $5320

7 year arm- Worse than 10 year arm- no sense looking further

5 year arm- 4.0%- lender cost- $4,000.  P&I- 2368.  Total savings over 5 years- $1,820.00

You could get cute and go with a 10 year in this situation- but you are only going to save ~$5,000 on the deal over the 10 year term.  I wouldn't bother injecting any risk into the deal for that little of a return.  

I think @LCHornhas identified a pretty reasonable break even point for when you want to start sharpening the pencil and seriously considering an arm- as you can kind of see by the difference in these 2 scenarios.  

[Surly Bevo 24,964]

[Wulaw Horn 19,074]

1 minute ago, Surly Bevo said:

I honestly believe every product that exists has a borrower that it works for, and if you are honest and intelligent about it there are a wide variety of products that can be helpful.  I just showed my work on a couple pretty common Surly type loan scenarios with purchasers.  
There are, however, big pitfalls that can exist if you don't properly measure risk.  I'd say the biggest factors that you need to worry about are:

1) How long is it realistic that I'm going to be in this place?

2) What is a good, historical number over a long time frame that will match what's likely to happen to my houses value over whatever the time frame for question #1 works out to?

3) How safe is my income?  Is it likely to go up or down?

4) How stable is my income?

5) How much money do I have in the bank to get through tough times if the wolf knocks at my door?

6) What's the worst that can happen when my payment adjusts, and how long will it take until that could potentially happen.

7) What outs do I have along the way while I try to make sure that #6 doesn't happen (outs being sell house, pay it off, pay it down, go to a shorter term at a lower interest rate, refinance into a longer term to lower the payments, put it on another arm to re-set the clock etc)?

Keep in mind too- even fixed rate payments adjust every year as taxes and insurance go up or down (hahaha- taxes almost never goes down in the real world, but theoretically they could) so it's not like your pristine payment is going to remain the same forever and always.  The largest jump will be in your first year as you taxes re-adjust to capture whatever you paid for the house, compared to whatever (usually much) lower figure that the last guy was paying taxes on.  Be prepared for that first year jump.  Have an extra $3,000-$6,000 on hand (depending upon the price point and tax rate of your house you purchased) to make up for that escrow shortfall so many buyers end up with. If you bought new have $10-$15k on hand if you are currently paying taxes as if you lived on a vacant piece of dirt.  The first time the taxes re-set typically mean more of a payment bump than if the interest rate went up a full point. 

[Incredulity 11,675]

17 minutes ago, Wulaw Horn said:

Have an extra $3,000-$6,000 on hand (depending upon the price point and tax rate of your house you purchased) to make up for that escrow shortfall so many buyers end up with. If you bought new have $10-$15k on hand

It's almost like you don't American.

[Wulaw Horn 19,074]

11 minutes ago, Incredulity said:

It's almost like you don't American.

Man, I tell everyone that buys a new house what they have to do. Otherwise their payment goes up like $2,000 a month in year 2 (the $1,000 a month they were light, plus the $1,000 a month they have to bring to catch up).  Even write it down for them.  Hey- your payment is going to be $1500 but it really should be $2500.  Put that extra aside every month and you will be cool.  Think of yourself as having a $2500 house payment b/c that's what it will be for the rest of your life.  Most listen.  A couple don't . 

 

Here is the nightmare scenario:  The builders lender shows the borrower a low payment, based upon a ridiculously small tax value, and doesn't explain how it's going to adjust when the taxes come in at a lot with a house instead of just a lot, put the borrower in at the payment that is the height of what they can afford (at the low payment) and then ghost them in a year when they get their new payment, can't figure out how they are going to pay it, can't refinance it b/c the house hasn't gone up in value enough to roll another $10,000 into the loan, and are stuck like chuck.  It sucks. That's not every builders lender obviously, but it's also certainly more than a couple.  Some of them explain it and the people don't listen anyway.  Or don't hear because they don't want to hear.   

[Incredulity 11,675]

1 minute ago, Wulaw Horn said:

Some of them explain it and the people don't listen anyway.  Or don't hear because they don't want to hear.   

Mortgage Lender "Sign this document, acknowledging you acknowledged signing document #43 of 50 disclosing the variable rate."

Borrower at reset  "I had no idea??"

[Wulaw Horn 19,074]

6 minutes ago, Incredulity said:

Mortgage Lender "Sign this document, acknowledging you acknowledged signing document #43 of 50 disclosing the variable rate."

Borrower at reset  "I had no idea??"

Sure.  And the borrower is not wrong there at all.  That's why a professional actually goes over that shit with them ahead of time.  And a professional that really wants to make sure that he's covered his own ass will send a separate email explaining the rate resets (or what's going to happen on a tax situation like we talked about with the new home) with that and nothing but that and has the borrower read and respond.  It's not necessary. But it is what I do.