Sales Concessions and the FHA Appraisal

FHA has very specific guidance regarding Sales Concession and how roster appraisers must consider them.

• Types of Concessions

o       Loan discount points

o       Loan origination fees

o       Interest rate buy downs

o       Closing cost assistance

o       Payment of condo fees

o       Builder incentives

o       Down payment assistance

o       Personal property

• Lender must provide a complete and ratified contract of sale and/or financing data.
• Appraisers must:

o       Report the dollar amount of the concessions

o       Identify the party providing the concession

o       Verify all sales transactions for seller concessions (many MLS systems don’t report)

o       Report the type and amount of concession on all comparable sales.

o       Make market-based adjustments to comparable sales for sales concessions that affected the sales price. 

FHA reminds appraisers that ignoring sales concessions and the impact they may have on a sales price can easily lead to overvaluation. 

Please Let Me Know How I Can Be Of Further Assistance!

Sales Concessions and the FHA Appraisal

Fannie & Freddie Appraisal Quality Rating Codes Explained

On September 1, 2011, Fannie and Freddie are requiring appraisers to include a “Quality Rating Code” on all appraisal reports.  Here’s what they mean for both existing and new construction. 

Existing Property

C-1 – The entire structure is new, never been occupied and has no physical depreciation.

C-2 – Existing home, no deferred maintenance and requires no repairs.  This rating is give if   property is “almost” new or has been totally renovated.

C-3 – Existing home, well maintained but evidence of normal wear and tear.

C-4 – Existing home, minor deferred maintenance and requires only minimal repairs.

C-5 – Existing home, major deferred maintenance and in need of significant repairs but the home is still livable as a residence.

C-6 – Existing home, severe defects that affect safety, soundness and livability.  If property receives this rating, it’s not eligible for conventional loan.

New Construction

Q-1 – Unique home individual designed by an architect for a specific user and details are exceptionally high quality.

Q-2 – Custom designed home built on individual property owner’s land or high-quality tract lots.  Workmanship and materials are high quality.

Q-3 – Built from readily available blue prints in above-standard tract lots or individual’s land. Materials in home are up-graded from standard materials and workmanship exceeds standards.

Q-4 – Standard or modified blue prints.  Materials, workmanship, finish work are stock builder grade and may have some upgrades.

Q-5 – Basic, standard quality, economy homes with limited interior design.  Meets minimum building codes and inexpensive construction, stock materials and limited upgrades.

Q-6 – Low cost and may not be suitable to year-round use.  Low quality and could be built by non-qualified builder with or without plans. May not be able to obtain a convention loan if receives this rating. 

I just wanted you to know the new rating codes in case you need to explain it to your clients. 

Call me if you have any questions. 

Fannie & Freddie Appraisal Quality Rating Codes Explained

How the Mortgage Acts & Practices” Rules Affect Real Estate Agents & Builders

While there are 19 different and distinct prohibitions, here are the ones that affect real estate agents and builders.

1.      Misrepresenting the dollar amount of interest charged

a.      The amount of interest owed each month

b.      The difference between the interest owed and interest paid

2.      Misrepresenting Annual percentage rate including

a.      Simple interest

b.      Periodic rates

c.       Any other rates

3.      Misrepresenting Existence, nature or amount of fees

a.      In addition to “no fees” charged

4.      Misrepresenting Products sold in conjunction with loan

a.      Credit life or disability insurance

5.      Misrepresenting Taxes and insurance

a.      How taxes & insurance to be paid

b.      Escrow account

c.       Included or not included in monthly payment

6.      Misrepresenting Prepayment penalty

a.      Existence, nature, amount and terms of penalty

7.      Misrepresenting Terms of variable rate mortgage credit

a.      If using the term “fixed” for certain period of time

8.      Misrepresenting Rate Comparisons

a.      Rate or payment available for less than term of loan

b.      Comparing actual or hypothetical rate or payment

9.      Misrepresenting the Type of mortgage

10.  Misrepresenting Payments

a.      When due

b.      How many

c.       “No Payments”  (Includes Reverse Mortgages)

11.  Misrepresenting associations or loan or provider

a.      That provider is affiliated with federal government

b.      Endorsed, sponsored by, affiliated with government agencies

c.       Using government formats, symbols, logos the resemble government agencies.

12.  Misrepresenting consumer has been pre-approved or guaranteed a mortgage product

13.  Misrepresenting counseling services/Expert Advice

One more thing, if you do place an ad which includes mortgage terms, you must keep either a written or electronic version of it for 24 months.

How the Mortgage Acts & Practices” Rules Affect Real Estate Agents & Builders {Part – Two}

How the Mortgage Acts & Practices” Rules Affect Real Estate Agents & Builders

The Mortgage Acts & Practices Rules are in effect as of August 19, 2011. 

When you run an ad, or even mention mortgage terms, you must not only comply with Reg Z rules, you must comply with these, too.

First of all, here are the types of advertising/marketing that are outlined in the Act.  The Fed’s call it “commercial communications” and it means…