FHA Tightening

FHA is tightening their lending requirements and very shortly raising down payments from 3.5 to 5 percent. Minimum FICO scores have gone from 580-620 and buyers are feeling the crunch. Credit card companies are lowering credit limits thus creating higher debt to limit ratios which in turn lowers FICO scores. Seems like a huge issue that interest rates and available balances can be controlled by credit score while a customer has an active account, and even if they pay on time. For example, a client with a 5k line of credit with a balance of 25oo is at a 50% debt ratio, if the company lowers their limit to 3000, their ration shoots up to 83% which will negatively impact a FICO, thus hurting the consumer when trying to apply for a mortgage or other credit. There is no incentive for credit companies to help you stay credit worthy, it is more profitable to hurt your scores.

Unfair appraisals

I totally agree with the centralization of appraisers as independent entities. Banks, brokers, agents, and homeowners had too much influence over appraisers especially the ones in which you sent repeat business. The problem now is since banks have to pick appraisers from a pool, they dont know how capable these people are at determining value. Many of the appraisers dont live in the areas they will now be asked to appraise. I had a client who found a 3/2 ranch totally renovated into brand new condition in Conyers. The appraisal was tied up for two months bc the only things which sold in the subdivision were forclosures for 30 -50k. Since there were no non distressed sales comps in the subdivision, the banks argued that 30-50 k was the market value for the area. Where in this country can you buy a new home for 90k. The common sense approach was lost and the deal almost died. Agents, thankfully the mortgage broker found an investor who didnt need the comps and the deal was done. Banks have to stop looking at forclosures as comps to non distressed properties, they are not like kind. Many of the homeowners in the subdivision are faithfully sitting on and paying mortgages from 130-150. Banks should be able to look at current first mortgage data in order to truly ascertain market value, no matter how far back, you should be able to see a trend with a slight dip attributed to forclosures. The 3-6 month comp rule banks are using will only lead to upside down owners walking away from homes they have no hope of breaking even.

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