To read it, click here.

In the settlement agreement, the parties resolved to address issues of appraisal coercion and independence in exchange for the Attorney General’s office terminating its investigation. The agreement stated that the HVCC would be the standard of conduct followed by the parties, and would be complemented and overseen by a newly formed Independent Valuation Protection Institute, or IVPI. The IVPI is funded jointly by Fannie and Freddie for a period of 28 months under the terms of the agreement.

At first glance, the HVCC and the agreement that spawned it seem like a good plan. Both lead off with language regarding the need for sound appraisals produced free of any influence or coercion on the part of the lender or any other party. But, as is always the case with any governmental or even de facto regulation, the devil is in the details. We believe the details create a misleading and dangerous environment for both borrowers and for appraisers.

1)         National Association of Mortgage Bankers (NAMB) conservatively estimates that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.  The minimum increase we have seen in direct consumer cost is $150 per appraisal.  That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction x 3,870,552* = $2,755,639,496 or $2.8BILLION in increased fees to consumers! (*2007 HMDA report of residential real estate loans originated)

2)         Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.

3)         AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time. AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.      
Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.
Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home. 

4)         HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

5)         No Portability! Consumers are “trapped” with a specific lender. Lenders are not allowing borrowers to transfer appraisals, regardless of the reason. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.

What can be done? Call NY Attorney General Andrew Cuomo’s Office: (212) 416-8000,
(Internet Complaint)
Federal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
Freddie Mac: (703) 903-2000, http://www.freddiemac.com/corporate/about/feedback.html

Senators, Representatives and Governors: Click here for contact information.
Also, please contact your local TV and Newspaper outlets.

No credit, limited credit, and less-than-perfect credit are acceptable with the RD Loan. The manual underwriting process benefits applicants who have not yet established credit or who suffer from lagging credit scores despite a sustained recovery from past difficulties. Underwriting considers the personal circumstances of each applicant and allows for common-sense decisions on a case-by-case basis. This gives an advantage to applicants who do not qualify for loan programs involving modern automated computer underwriting systems driven heavily by credit scores.

The RD Loan offers financing up to 102% of the appraised value (not sales price) of the property. Therefore, a down payment is not required.

The RD Loan (based on value) can be set above the purchase price to finance loan closing costs, pre-paid expenses, and incidental expenses. With no down payment and financed settlement costs, borrowers can acquire homes with little or no money out of pocket.

Unlike other government and conventional loan programs, there are no monthly mortgage insurance premiums on the Rural Development Loan. This lowers the monthly housing payment significantly.

The RD Loan does not have loan limits. The amount borrowed depends on the borrower’s repayment ability. This offers an advantage in communities where FHA and VA loan limits are low.

The RD Loan may be used as take-out financing for a loan to buy land and construct a new home. The value of a finished home is usually higher than the cost to build, so the loan amount (based on value, not acquisition costs) usually covers the entire cost of the project.

There is no need for payment reserves after closing on the RD Loan. This opens opportunities to borrowers who have not yet accumulated savings.

Because the RD Loan has low or no cash-to-close requirements, there is usually no need for statements, receipts, letters, and other types of documentation to verify savings or gifts.

The RD Loan program allows the lender to underwrite the loan using the start rate of a temporary 2-1 buydown rather than the note rate. The 2-1 buydown is a fixed-rate loan with a graduated payment. It is not an adjustable rate mortgage (ARM). In today’s market, the start rate would be 4.25% for the first year, 5.25% for the second year, and 6.25% for the remaining 28 years. This can make the difference for borrowers who cannot qualify for a home at the current note rate.

In January 2008, the RD Loan eliminated thermal standards. Prior to 2008, a house was required to have a certain level of insulation plus double pane or storm windows and doors. Thankfully, USDA has adopted the HUD minimum property standards. Now, we simply need a standard appraisal on FNMA Form 1004 or FHLMC Form 70.

The new Guaranteed Underwriting System (GUS) was introduced into the RD Loan in January 2008 giving lenders an automated underwriting system similar to Desktop Underwriter (DU) and Loan Prospector (LP) used by government and conventional agencies to provide loan approval with streamline documentation for borrowers with good credit scores and other compensating factors. As a result, we are now able to approve more borrowers with higher income-to-debt ratios. In addition, we continue to offer manual underwriting for applicants with no credit, limited credit, and less-than-perfect credit.

Despite the 102% financing, no monthly mortgage insurance, and other unique features, the RD Loan does not have a recapture fee or tax when the borrower sells the property. The recapture fee is a requirement of the Rural Development Direct Loan Program, a different program offered by USDA to very low-income borrowers. However, it is not a requirement of the Rural Development Guaranteed Loan Program offered to moderate-income borrowers.

FHA and other programs have “Flipping Rule” that prevents a buyer from purchasing a property from a seller on title for less than 90 days. However, the Rural Development Loan does not impose this rule.

The RD Loan allows for post-closing repairs required by the appraiser to meet minimum HUD property standards. This means borrowers can get a loan to purchase the property in its current condition plus additional funds to make repairs after closing. This benefits the borrower similar to the FHA 203(k) rehabilitation loan but with a simpler process.

There is no limit to concessions or gifts with the RD Loan, whereas FHA and other programs have a limit of 6% of the sales price. This is particularly helpful when a seller is willing to pay for repairs but does not have the cash to pay for them prior to selling the home at closing. In those cases, the seller can fund a repair escrow at closing without a 6% restriction.
The Rural Development loan offers unique opportunities to many homebuyers. However, it is not the best program for all situations.

The USDA program does not fit every homebuying scenario. In some cases it makes more sense to persue VA, FHA, and Conventional loan programs.

Technically you can get a bridge loan. Housing and Urban Development (HUD) has approved the use of a bridge loan but if you search their website for the Mortgagee Letter 2009-15 it is no longer available. If we have learned anything through the current state of the banking crisis it should be that “creative financing” is not the way to fix our mess. If you don’t have the money to put down on a mortgage loan maybe you should not be buying a home right now. You should be saving your money at a rate that will equal 3.5% of the purchase price of the home you can afford and then get an FHA mortgage loan.

What is the definition of a first-time home buyer?
You are considered a first-time homebuyer if:
- You purchased your main home located in the United States after April 8, 2008, and before December 1, 2009.
- You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.

Do I have to pay the homebuyer tax credit back? How much is the credit for? $7,500 or $8,000?
It depends. For homes purchased in 2008, the $7,500 credit (or 10% of purchase price, if less) operates much like an interest-free loan. You generally can repay it equal installments over a 15-year period unless you move out or sell the home earlier than that. The maximum credit is reduced to $3,750 for married individuals filing separately.

For homes purchased in 2009, you must repay the $8,000 credit (or 10% of purchase price, if less) only if the home ceases to be your main home within the 36-month period beginning on the purchase date. The maximum credit is reduced to $4,000 for married individuals filing separately.

What is the definition of main home? Does a condo count? How about an RV?
Your main home is the one you live in most of the time. It can be a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence.

What if I don’t owe or pay any income taxes?
This is a refundable tax credit, which means that even if you don’t owe any taxes, you will receive the credit amount via check or other means. For example, if before this credit you had a tax liability of $5,000 and withheld $4,000, you would owe the IRS $1,000. If you qualify and claim a $8,000 tax credit, you would now receive $7,000.

What are the income restrictions?
The amount of the credit begins to gradually phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers. It is completely phased out when your AGI is $90,000, or $170,000 for joint filers.

Can I just buy a home from a relative and pocket the $8,000?
You don’t qualify for the tax credit if you bought the house from a “related person.” According to the IRS, a related person includes:

Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.).
A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.
A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.
How do they determine the purchase date as applied to the cutoff dates?
If you bought an existing home, the date of purchase is your closing date, not the day that you sign a purchase contract or enter escrow. If you constructed a new home, you are treated as having purchased it on the date you first occupied it. (Seems like some wiggle-room here.)

What IRS Form Do I Have To Fill Out? Can I File For 2008 or 2009 Tax Years?
That would be the new revised version of IRS Form 5405 (where most of this information is from), which you fill out and attach to Form 1040. Any updated tax preparation software should be able to handle this. If you already bought your house in 2009, you can file either on your 2008 or 2009 tax returns. (Why not get it now?)

What if two unmarried people buy a house together?
If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any “reasonable” method. The total amount allocated cannot exceed the smaller of $7,500 ($8,000 if you purchased your home in 2009) or 10% of the purchase price. A “reasonable” method is any method that does not allocate all or a part of the credit to a co-owner who is not eligible to claim that part of the credit.

I am not a U.S. citizen. Can I still claim the tax credit?
If you are a resident alien according to IRS Pub 519 and satisfy all the other requirements, then yes you can claim the credit. Nonresident aliens are not eligible.

Not knowing how much house you can afford.
Many novice homebuyers spend a lot of time researching homes — comparing kitchen layouts and backyard square footage — but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get preapproved for a mortgage, Without first figuring out how much house you can afford, you risk falling in love with one you can’t.

Skipping the inspection.
Before signing anything, hire a professional inspector. The seller isn’t likely to tell you everything. Buyers hire their own inspector — independently of the selling real-estate agent — to ensure there’s no conflict of interest. (You can find inspection companies in the phone book, or by doing a simple Web search with your ZIP code.)

We hope this finds you in good health and good spirits. With all the
changes that have come and are still happening in the mortgage industry,
it becomes imperative to align yourself with companies who are not only
good at what they do, but also will stand by the promises they make.
We have been in business since 1995 and from day one we have
committed to these guiding principles: Faith, Morality, Honesty, Integrity,
Loyalty and Service to Man. Recently, there have been many lenders and
mortgage companies that have obviously abandoned some, if not all of
these principles, and they are quite obviously paying the price, most by
going out of business.

We at Heartland Mortgage want you to know, that by doing business the
right way we are still here, working for you and your family, friends, co-
workers and neighbors.

Currently there are many financing and refinancing programs available
now for home buyers and homeowners alike:

• Conventional Loans
• FHA/VA Loans
• Rural Housing Loans
• Jumbo Loans

If you find yourself in need of a review of your current mortgage or are
thinking of taking advantage of the current housing market to change
homes, please keep us in mind. We would appreciate the opportunity to
meet and exceed your expectations again. Our goal is to help take the
confusion out of the financing or refinancing process. Contact us now.

Sincerely,
The Staff of Heartland Mortgage