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October 20th, 2008 10:28 PM


Lemar Wooley                                      Wednesday
(202) 708-0685                                October 1, 2008

Detailed Program Eligibility Requirements Announced

WASHINGTON – The Bush Administration today unveiled additional mortgage assistance for homeowners at risk of foreclosure.  The HOPE for Homeowners program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA).

“For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford,” said HUD Secretary Steve Preston.  “FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners’ ability to retain their homes.  We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them.”

The HOPE for Homeowners program was authorized by the Economic and Housing Recovery Act of 2008.  Since the President signed this vital legislation into law on July 30, 2008, the HOPE for Homeowners Board of Directors has worked diligently to develop and implement the program as directed by Congress.  The Board was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.

The HOPE for Homeowners program begins today and ends September 30, 2011.  The program is available only to owner occupants and will offer 30-year fixed rate mortgages – so the borrower’s last payment will be the same as the first payment.  In many cases, to avoid what would be an even costlier foreclosure, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home.

Borrower Eligibility

Borrowers are encouraged to contact their lender to determine eligibility, but may be eligible if, among other factors:

• The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.

• Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments.

• They are not able to pay their existing mortgage without help.

• As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.

• They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

How the HOPE for Homeowners program works

“HOPE for Homeowners will add to HUD’s existing efforts to make FHA refinancing available to homeowners who need it most,” said FHA Commissioner Brian D. Montgomery.  “One year ago, FHA expanded refinancing into its FHASecure program.  Since that time, we have helped more than 360,000 families keep their homes by refinancing with FHA, and we will assist a total of 500,000 families by the end of this year.”

The Board expects that the primary way homeowners will participate in the program is by working with their current lender. HOPE for Homeowners will serve as another loss mitigation tool available to distressed borrowers. 

HOPE for Homeowners also includes the following provisions:

• The loan amount may not exceed a maximum of $550,440.

• The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium. 

• The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.

• The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.

• The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.

• Existing subordinate lenders must release their outstanding mortgage liens.

• Standard FHA policy regarding closing costs applies, and they may be:

o Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90 percent of the new appraised value of the home.
o Paid from the borrowers’ own assets.
o Paid by the servicing lender or third party (e.g., federal, state, or local program).
o Paid by the originating lender through premium pricing.


• The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.

• The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.

The lender will disclose to the homeowner the benefits of the program including home retention, a new affordable mortgage based on the current appraised value, and 10 percent equity.  The lender will also explain the prohibition against new junior liens against the property unless directly related to property maintenance, and a minimum of 50 percent equity and appreciation sharing with the Federal government. 

The costs to the homeowner include the upfront and annual insurance premiums, as well as a share of the equity created by the write-down associated with the HOPE for Homeowners mortgage and any future appreciation in the value of the home.  At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD’s appreciation share. 

If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years.  The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation.  This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted.  All remaining appreciation is remitted to FHA.

The HOPE for Homeowners Board of Directors includes HUD Secretary Steve Preston, Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and FDIC Chairman Sheila Bair.  They have named the following people to serve on the board as their designees:  FHA Commissioner and Chairman of the Board Brian Montgomery, Federal Reserve Board Governor Elizabeth Duke, Treasury Assistant Secretary for Economic Policy Phillip Swagel, and Federal Deposit Insurance Corporation Director Tom Curry.

Read more about HOPE for Homeowners at

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Posted by Bill Bici on October 20th, 2008 10:28 PMPost a Comment

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NEW FANNIE MAE GUIDELINES 11/14/2008 Announcement 08-30 November 14, 2008 Amends these Guides: Selling Appraisal-Related Policy Changes and Clarifications Introduction Due to current conditions in the real estate market, it is paramount that appraisers are provided with sufficient guidance to properly appraise and document the appraisal report. Fannie Mae recognizes the Uniform Standards of Professional Appraisal Practice as the minimum appraisal standards for the appraisal profession. In addition, Fannie Mae has established its own separate appraisal requirements to supplement the Uniform Standards. This Announcement addresses several new or updated appraisal-related requirements and clarifies several other existing policies to help underwriters make sound underwriting decisions when reviewing the appraisal report. The following topics are discussed: New or Updated Policies • Implementation of the Market Conditions Addendum to the Appraisal Report (Form 1004MC) • Use of supervisory appraisers • Requirement to provide the sales contract to the appraiser • Requirement regarding the appraiser’s selection of comparable sales Clarification of Existing Policies • Repair escrows for existing construction • Research and reporting of the current and prior listings of the subject property • Appraising the entire site of a property • Time adjustments on the appraisal report • Verification of a sales transaction • Neighborhood boundaries and the selection of comparable sales • Effective age of the subject property • Utilizing the cost approach to value for insurance purposes Announcement 08-30 Page 1 Implementation of the Market Conditions Addendum to the Appraisal Report (Form 1004MC) Selling Guide, Part XI, Section 403.03: Trend of Property Values, Demand/Supply, and Marketing Time; and Section 203: Appraisal and Property Inspection Report Forms Fannie Mae purchases or securitizes mortgages in all markets and under all market conditions. The current appraisal report forms require the appraiser to report on the primary indicators of market condition for properties in the subject neighborhood by noting the trend of property values (increasing, stable, or declining), the supply of properties in the subject neighborhood (shortage, in-balance, or over-supply), and the marketing time for properties (under three months, three to six months, or over six months) as of the effective date of the appraisal. Fannie Mae also expects the appraiser to provide their conclusions for the reasons a market is experiencing declining market values, an over-supply of properties, or marketing times over six months. To further enhance the transparency of the conclusions made by the appraiser related to market trends and conditions, the Form 1004MC will be required for all mortgage loans delivered to Fannie Mae with appraisals of one- to four-unit properties with an effective date on or after April 1, 2009. A sample of the form is attached to this Announcement. In addition, the form is posted on Guidelines for Using Form 1004MC The Form 1004MC is intended to provide the lender with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. The form provides the appraiser with a structured format to report the data and to more easily identify current market trends and conditions. The appraiser’s conclusions are to be reported in the “Neighborhood” section of the appraisal report. Fannie Mae recognizes that all of the requested data elements for analysis are not equally available in all markets. In some markets it may not be possible to retrieve the total number of comparable active listings from earlier periods. If this is the case, the appraiser must explain the attempt to obtain such information. Also, there may be markets in which the data is available in terms of an “average” as opposed to a “median.” In this case, the appraiser needs to note that his or her analysis has been based on an “average” representation of the data. Regardless of whether all requested information is available, the appraiser must provide support for his or her conclusions regarding market trends and conditions. Inventory Analysis Section The “Inventory Analysis” section assists the appraiser in analyzing important supply and demand factors in order to reach a conclusion regarding housing trends and market conditions. When completing this section, the appraiser must include the comparable data Announcement 08-30 Page 2 that reflects the total pool of comparable properties from which a buyer may select a property in order to analyze the sales activity and the local housing supply. One of the tools used to monitor these trends is the absorption rate. The absorption rate is the rate at which properties for sale have been or can be sold (marketed) within a given area. To determine the absorption rate, the appraiser divides the total number of settled sales by the time frame being analyzed. The months of housing supply is based on the total listings for the applicable period divided by the absorption rate. Example Step 1: Calculate the absorption rate. If there were 60 sales during a 6 month period (e.g., “Prior 7 – 12 Months” column), the absorption rate is 10 sales per month (60/6). Step 2: Calculate the months of housing supply. If there are 240 active listings, there is a 24-month supply of homes on the market (240 active sales/10 sales per month). This may support the appraiser’s conclusion that there is an over-supply of homes on the market. Anomalies in the data such as seasonal markets, new construction, or other factors must be addressed in the form. Median Sale & List Price, DOM, List/Sale Ratio Section The appraiser must analyze additional trends, including the changes in median prices and days on the market (DOM) for both sales and listings as well as a change in list-to-sales price ratios. Example If the median comparable sale prices are $300,000, $295,000, and $305,000 for their respective time periods, the overall trend for the prior 12 months is relatively “stable.” Overall Trend Section The “Overall Trend” section is designed to reflect potential positive trends, neutral trends, or negative trends in inventory, median sale and list price, days on market, list-to- sale price ratio, and seller concessions. Example An increase in the absorption rate is generally viewed as a positive trend, whereas a decrease in the absorption rate may be viewed as a negative trend. Furthermore, a decrease in the number of days on the market, either sales or listings, more than likely represents an overall positive trend. Seller Concessions Form 1004MC also provides a section for comments on the prevalence of seller concessions and the trend in seller concessions for the past 12 months. The change in seller concessions within the market provides the lender with additional insight into current market conditions. The appraiser should consider and report on seller-paid (or third-party) costs. Examples of these items include, but are not limited to mortgage Announcement 08-30 Page 3 payments, points and fees, and in condominium or cooperative projects, items such as homeowners’ association fees and guaranteed rental programs. Seller concessions must be carefully analyzed by the appraiser since excessive concessions often lead to inflated property values. There are a number of markets across the country where, due to current conditions, there has been an increase in the prevalence of seller concessions. The following excerpt from the Selling Guide, Part XI, Section 406.5 (C) provides guidance for these circumstances: “The need to make negative dollar adjustments for sales and financing concessions and the amount of the adjustments to the comparable sales are not based on how typical the concessions might be for a segment of the market area— large sales concessions can be relatively typical in a particular segment of the market and still result in sale prices that reflect more than the value of the real estate. Adjustments based on dollar-for-dollar deductions that are equal to the cost of the concessions to the seller (as a strict cash equivalency approach would dictate) are not appropriate. We recognize that the effect of the sales concessions on sales prices can vary with the amount of the concessions and differences in various markets. The adjustments must reflect the difference between what the comparables actually sold for with the sales concessions and what they would have sold for without the concessions so that the dollar amount of the adjustments will approximate the reaction of the market to the concessions.” For further information regarding seller concessions in the appraisal, refer to the Selling Guide, Part XI, Section 205 and Section 406.05(C) (for additional guidance not referenced above). Foreclosure Sales and Summary/Analysis of Data The presence and extent of foreclosure/REO sales is worthy of comment when analyzing market data and must be reported on the form. The form also allows for the appraiser to summarize the data and provide other data analysis or additional information, such as analysis of pending sales, which over time can show a market trend. Use of Supervisory Appraisers Selling Guide, Part XI, Section 101.03: Use of Supervisory or Review Appraisers Fannie Mae defines the appraiser as the individual who personally inspected the property being appraised, inspected the exterior of the comparables, performed the analysis, and prepared and signed the appraisal report as the appraiser. Fannie Mae allows an unlicensed or uncertified appraiser who works as an employee or subcontractor of a licensed or certified appraiser to perform a significant amount of the appraisal (or the entire appraisal if he or she is qualified to do so)—as long as the appraisal report is signed by a licensed or certified supervisory or review appraiser and is acceptable under state law. This policy is updated to now require that if a supervisory appraiser signs the Announcement 08-30 Page 4 appraisal report as the appraiser, the supervisory appraiser must have performed the inspection of the subject property. Requirement to Provide the Sales Contract to the Appraiser Selling Guide, Part XI, Chapter 2: Appraisal (or Property Inspection) Documentation Fannie Mae requires the lender to ensure that it provides the appraiser with all appropriate financing data and sales concessions for the subject property that will be, or have been, granted by anyone associated with the transaction. Typically this information is contained in the sales contract; however, Fannie Mae currently does not require that the lender provide the appraiser with the sales contract. Fannie Mae is adding the requirement that lenders must provide the appraiser with the sales contract and all addenda, therefore ensuring that the appraiser has been given the opportunity to consider the financing and sales concessions in the transaction and their effect on value. If the sales contract is amended during the process, the lender must provide the updated contract to the appraiser. Requirement Regarding the Appraiser’s Selection of Comparable Sales Selling Guide, Part XI, Section 406.02: Selection of Comparable Sales The Selling Guide states that when a property is located in an area in which there is a shortage of truly comparable sales—either because of the nature of the property improvements or the relatively low number of sales transactions in the neighborhood— the appraiser may need to use as comparable sales properties that are not truly comparable to the subject property or properties that are located in competing neighborhoods. If the appraiser utilizes comparable sales outside of the subject’s neighborhood when closer comparable sales appear to be available, Fannie Mae is adding a requirement that the appraiser provide an explanation as to why he or she used the specific comparable sales in the appraisal report. This will add transparency to the appraiser’s selection of comparable sales and may assist the lender in underwriting the appraisal. Refer to the “Neighborhood Boundaries and the Selection of Comparable Sales” section of this Announcement for an additional clarification of this section of the Selling Guide. Repair Escrows for Existing Construction Selling Guide, Part XI, Section 202: Status of Construction; and Section 405.08: Property Condition The following clarifications apply to both of the above referenced sections of the Selling Guide as they pertain to postponed improvements. Furthermore, Fannie Mae is explicitly Announcement 08-30 Page 5 stating that completion or repair escrows are permitted under certain circumstances for existing properties. If the appraiser reports the existence of minor conditions or deferred maintenance items that do not affect the livability, soundness, or structural integrity of the property, the appraiser may complete the appraisal “as is” and these items must be reflected in the appraiser’s opinion of value. The lender is not required to ensure that the borrower has had this work completed prior to delivery of the loan to Fannie Mae. If there are minor conditions or deferred maintenance items to be remedied or completed after closing, the lender may escrow for these items at their own discretion and still deliver the loan to Fannie Mae prior to the release of the escrow as long as the lender can ensure that these items do not affect the livability, soundness, or structural integrity of the property. Minor conditions and deferred maintenance items include, but are not limited to, worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass. Minor conditions and deferred maintenance are typically due to normal wear and tear from the aging process and the occupancy of the property. When there are incomplete items or conditions that do affect the livability, soundness, or structural integrity, the property must be appraised subject to completion of the specific alterations or repairs. These items include, a partially completed addition or renovation, or physical deficiencies that could affect the soundness or structural integrity of the improvements including but not limited to cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, or inadequate electrical service or plumbing fixtures. In such cases, the lender must obtain a certificate of completion from the appraiser before it delivers the mortgage to Fannie Mae. Research and Reporting of the Current and Prior Listings of the Subject Property Selling Guide, Part XI, Section 401: The Subject Property Fannie Mae’s appraisal report forms require the appraiser to research and comment on whether the subject property is currently for sale or if it has been listed for sale within 12 months prior to the effective date of the appraisal. To clarify, the appraiser must report on each occurrence or listing and provide the data source(s), offering prices, and date(s). For example, if the subject property is currently listed for sale and was previously listed eight months ago, the appraiser must report on both offerings. Appraising the Entire Site of a Property Selling Guide, Part XI, Section 404: Site Analysis The property site should be of a size, shape, and topography that is generally conforming and acceptable in the market area. It also must have comparable utilities, street improvements, adequate vehicular access, and other amenities. Fannie Mae is clarifying Announcement 08-30 Page 6 that the appraisal must include the actual size of the site and not a hypothetical portion of the site. For example, the appraiser may not appraise only 5 acres of an unsubdivided 40- acre parcel. The appraised value must reflect the entire 40-acre parcel. Effective Age of the Subject Property Selling Guide, Part XI, Section 405.02: Actual and Effective Ages The effective age can be a good indication of the condition of the subject property. Fannie Mae is clarifying that when adjustments are made to the appraisal for the effective age, the appraiser must provide an explanation for the adjustments and the condition of the property. Verification of a Sales Transaction Selling Guide, Part XI, Section 406.01: Sources of Comparable Market Data It is important for the appraiser to ensure that the data he or she is providing in the appraisal report is accurate. When the appraiser is provided with comparable sales data by a party that has a financial interest in either the sale or financing of the subject property, the above section of the Selling Guide requires the appraiser to verify the data with a party that does not have a financial interest in the subject transaction. However, when appraising new construction, the appraiser may need to rely solely on the builder of the property they are appraising to provide comparable sales data, as this data may not yet be available through typical data sources such as public records or multiple listing services. In this scenario, it is acceptable for the appraiser to verify the transaction of the comparable sale by viewing a copy of the HUD-1 Settlement Statement from the builder’s file. Neighborhood Boundaries and the Selection of Comparable Sales Selling Guide, Part XI, Section 406.02: Selection of Comparable Sales The appraiser must perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised (based on the actions of typical buyers in the market area). The results of a neighborhood analysis enable the appraiser not only to identify the factors that influence the value of properties in the market area, but also to define the area from which to select the market data needed to perform a sales comparison analysis. As a reminder, although it is preferable for the appraiser to provide comparables from the subject’s neighborhood, Fannie Mae does allow for the use of comparable sales that are located in competing neighborhoods, as these may simply be the best comparables available and the most appropriate for the appraiser’s analysis. If this situation arises, the appraiser must not expand the neighborhood boundaries just to encompass the comparables selected. The appraiser must indicate the comparables are from a competing neighborhood and address any differences that exist. Announcement 08-30 Page 7 Time Adjustments on the Appraisal Report Selling Guide, Part XI, Section 406.05D: Date of sale/time adjustment The following is being added to Section 406.05D of the Selling Guide: If in the analysis and completion of the sales comparison approach the appraiser determines that time adjustments are required, the adjustments may be either positive or negative. The adjustments, however, must reflect the difference in market conditions between the date of sale of the comparable and the effective date of appraisal for the subject property. Utilizing the Cost Approach to Value for Insurance Purposes Selling Guide, Part V, Section 302: Coverage for Home Mortgages; and Part XI, Section 407, Cost Approach to Value If a lender requires the cost approach to be completed in order to obtain a replacement cost estimate for the purpose of determining the level of hazard insurance coverage required for a one-unit property, the lender may rely on the appraiser’s estimate of the replacement cost of the improvements. This is reported as the “Total Estimate of Cost New” on the appraisal forms. This estimate does not include any form of depreciation or obsolescence for the property. It is not appropriate for the lender simply to subtract the reported site or land value from the appraised value of the property to make the determination because the result is an estimate of the depreciated value of the improvements, not an estimate of their replacement cost. Effective Date The new Form 1004MC is required on all appraisals with an effective date on and after April 1, 2009. All other new and updated policies are effective for all appraisals on or after January 1, 2009. ***** Lenders who have questions about Announcement 08-30 should contact their Customer Account Team for additional information. Michael A. Quinn Senior Vice President Single-Family Risk Officer Announcement 08-30 Page 8 Market Conditions Addendum to the Appraisal Report File No. The purpose of this addendum is to provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. This is a required addendum for all appraisal reports with an effective date on or after April 1, 2009. Property Address City State Zip Code Borrower Instructions: The appraiser must use the information required on this form as the basis for his/her conclusions, and must provide support for those conclusions, regarding housing trends and overall market conditions as reported in the Neighborhood section of the appraisal report form. The appraiser must fill in all the information to the extent it is available and reliable and must provide analysis as indicated below. If any required data is unavailable or is considered unreliable, the appraiser must provide an explanation. If data sources provide the required information as an average instead of the median, then the appraiser should report the available figure and identify it as an average. Sales and listings must be properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the subject property. The appraiser must explain any anomalies in the data, such as seasonal markets, new construction, foreclosures, etc. Inventory Analysis Prior 7–12 Months Prior 4–6 Months Current – 3 Months Overall Trend Total # of Comparable Sales (Settled) Increasing Stable Declining Absorption Rate (Total Sales/Months) Increasing Stable Declining Total # of Comparable Active Listings Declining Stable Increasing Months of Housing Supply (Total Listings/Ab.Rate) Declining Stable Increasing Median Sale & List Price, DOM, List/Sale Ratio Prior 7–12 Months Prior 4–6 Months Current – 3 Months Overall Trend M AMedian Comparable Sale Price Increasing Stable Declining R Median Comparable Sales Days on Market Declining Stable Increasing K Median Comparable List Price Increasing Stable Declining E T Median Comparable Listings Days on Market Declining Stable Increasing Median List-to-Sale Price Ratio Declining Stable Increasing RSeller-(developer, builder, etc.)paid financial assistance prevalent? Yes No Declining Stable Increasing EExplain in detail the seller concessions trends for the past 12 months (e.g., seller contributions increased from 3% to 5%, increasing use of buydowns, closing costs, condo S fees, options, etc.). E A R C H & Are foreclosure sales (REO sales) a factor in the market? Yes No If yes, explain (including the trends in listings and sales of foreclosed properties). A N A L Y S I Cite data sources for above information. S Summarize the above information as support for your conclusions in the Neighborhood section of the appraisal report form. If you used any additional information, such as an analysis of pending sales and/or expired and withdrawn listings, to formulate your conclusions, provide both an explanation and support for your conclusions. If the subject is a unit in a condominium or cooperative project , complete the following: Project Name: Subject Project Data Prior 7-12 Months Prior 4-6 Months Current – 3 Months Overall Trend Total # of Comparable Sales (Settled) Increasing Stable Declining C O Absorption Rate (Total Sales/Months) Increasing Stable Declining N Total # of Active Comparable Listings Declining Stable Increasing D Months of Unit Supply (Total Listings/Ab. Rate) Declining Stable Increasing O / Are foreclosure sales (REO sales) a factor in the project? Yes No If yes, indicate the number of REO listings and explain the trends in listings and sales of C foreclosed properties. O - O P P R O J Summarize the above trends and address the impact on the subject unit and project. E C T S A Signature Signature P Appraiser Name Supervisory Appraiser Name P R Company Name Company Name A Company Address Company Address I S State License/Certification # State State License/Certification # State E Email Address Email Address R Freddie Mac Form 71 November 2008 Page 1 of 1 Fannie Mae Form 1004MC November 2008

Posted by Bill Bici on December 25th, 2008 11:28 PM
This is an interesting Real estate article. You create a great lens. I have enjoyed reading it. Thanks Tania “KB Custom Homes”

Posted by Tania on September 7th, 2011 5:37 PM