Good Morning!

Last Thursday while attending an early morning meeting, I had the opportunity to hear my friend Zenet Negron, from First Priority Financial speak about how changes in appraisal policies and a declining market have impacted those ‘borderline’ borrower’s ability to refinance into a superior loan product.  So I asked Zenet if we could chat about this in today’s blog

DRI: Zenet, thank you for the time to chat and inform the public by means of my blog.  There are recent changes in appraisal law that were designed to give the public more protection through the loan process.  Have you already seen impact due to these changes?

Zenet: The appraisal process is pivotal to closing your loan.  As of Feb. 15, 2010, FHA loans are required to use an Appraisal Management Company (AMC) when ordering appraisals. Conventional loans adopted this practice in the latter part of 2009.

The process is now taking longer, which can cost the consumer more to complete a loan.  We have seen appraisals “come in” both under and over the current market values. In most cases out of area appraisers are being assigned by the AMC; hence, they are not entirely familiar with certain areas.

With every appraisal, the underwriter will review the appraisal report and establish a recommendation of value. It is not unusual for them to request a second appraisal. This long process is prohibiting some transactions from a timely closing.

DRI: Have you had someone actually impacted by this new policy?

Zenet: This past week, my refi-client had three comparable properties close escrow as their appraisal was being done. They were the ‘freshest’ and the rules require newer rather than older data be used.  Each comparable property had lower values which effectively reduced their home’s value and they were unable to refinance. So, the delay in process allowed closings occurring in a declining market to drive the new value out of range

DRI: This does not seem likely to be a ‘one time’ event.  What are you telling your clients?

Zenet: Timing is essential. If you're considering refinancing your home, it may be best to not postpone your decision and move forward. If you're purchasing, make sure to contact a reputable real estate professional that can properly negotiate your purchase price and that they are capable to renegotiate the purchase price in case the appraised value is lowered.

DRI: I know we have tossed out a significant coveration and lightly touched it.  I hope you will feel like taking this a bit deeper in a future blog.  Any interest?

Zenet: Absolutely.  I know we both work from a core value that our clients should be the most educated and well prepared in the marketplace to ensure their chance of success.  I would be glad to help.

DRI: Zenet, again, thanks for taking the time.  We all look forward to that day.