by Moe Veissi, 2012 NAR President
I was honored today to celebrate the 20th million loan given by the Department of Veterans Affairs home loan program.
Even more special was meeting the recipients of that loan — Elizabeth Carpenter and her son Joey. Elizabeth’s husband, Captain Matthew Carpenter, was a West Point Graduate and a veteran of the Iraq war who died of cancer in December of 2010. Last month, Elizabeth used her surviving spouse benefits to purchase a home in Virginia to be closer to family. I can’t describe what a thrill it was to welcome her and Joey to their new home.
The VA loan guaranty, which began in 1944 under the GI bill, provides veterans with a zero-downpayment loan. VA loans have one of the lowest default rates, and provide affordable financing to our nation’s military families.
NAR is working in partnership with the Department of Veterans Affairs to promote the VA home loan guaranty, and assure REALTORS® are familiar with this program and the benefits it provides veterans and their families. We are proud to work closely with the Department of Veterans Affairs to ensure that the VA guaranteed home loan program is not only a top priority for our nation’s policy makers, but is also widely promoted so that every veteran is aware of home ownership’s invaluable benefits. NAR never stops working with our elected officials to ensure that home ownership is accessible and affordable for our nation’s veterans.
We are especially proud of our work with Congress that raised VA loan limits and make permanent the VA adjustable rate mortgages.
Congratulations to the Department of Veterans Affairs for creating one of the most enduring programs – the VA home loan program – and for reaching 20 million loans.
Learn more about this terrific program in the video below.
By NAR First Vice President Steve Brown
We used to fear things that go bump in the night. With the internet, however, we must now look over our shoulder 24/7/365.
eHarmony…AOL…Monster.com…Google…CardSystems Solutions: what do all these large companies have in common? All were victims of some of the worst data security breaches ever. REALTORS are not immune. Greater use of databases and social media make data privacy and security very important issue for the real estate industry. In our wired world, the vulnerabilities of technology are more than enough to keep us awake at night.
When the 113th Congress meets in January, they are expected to look at the issues of data privacy and security and how they can better protect consumers from criminals ready to exploit weaknesses in technology.
Already in 2009, though, NAR had the foresight to create a Federal Technology Policy Work Group. Their task was to look at the Association’s technology and telecommunications policy positions. Among the work group’s resulting recommendations were a set of principles guiding privacy and data security.
The work group recognized the need to explore the development of a real estate industry self-regulatory program for privacy and data security. The purpose would be to seek a “safe harbor” from future federal privacy legislation. To accomplish this goal, NAR established a permanent Federal Technology Policy Subcommittee.
Now many members, particularly the large brokers, believe it’s critical that we establish a set of “Privacy Best Practices” for REALTORS. These would further enhance the working relationship with consumers and help prepare members for future federal privacy legislation.
The key to implementing a self-regulatory program will be education and outreach efforts by NAR. These will focus on creating educational opportunities for NAR members, centralizing a place where members can go for information, and increasing security precautions on standard real estate forms. These efforts will go forward, even as the Federal Technology Policy Subcommittee continues to explore the best way to achieve a self-regulatory program that will meet future federal requirements.
No one wants their private information in the hands of computer hackers. Know that NAR has been, and continues to work to establish the strongest, cutting edge methods to better protect you, your families and your clients. Things may continue to go bump in the night—but you can get a good night’s sleep. Through NAR, your fellow members are on guard.
To access more information check out our Toolkit, available as PDF. (Login required.)
By NAR 2012 Vice President Gary Thomas
While the real estate market is certainly started on the road to recovery, there are still a few hurdles that are preventing it from gathering steam. These include tight credit and uncertainty about the rules and regulations governing the mortgage market.
A recently released NAR survey found that issues with appraisals are also holding back home sales. We’ve certainly had this problem in Orange County, California, where I live. I’ve also heard about it from my agents, who have had deals delayed or blown due to problems with appraisals.
Appraisals are a vital part of the real estate transaction. Most appraisers work hard to provide accurate valuations that comply with the Uniform Standards of Professional Appraisal Practice.
However, appraisals generally lag market conditions and some changes to the appraisal process have caused difficulty. These include use of out-of-area valuators, inappropriate comparisons and excessive lender demands. Also, before the beginning of last year, some lenders’ loan processors edited valuations across-the-board, cutting them by a certain percentage.
Although most REALTORS® surveyed in September reported no contract problems, about 35 percent reported some kind of problem that negatively impacted completion of the sales contract.
The following problems were reported:
- Some appraisers are using foreclosures, short sales and run-down properties as comparables, without making adjustments for market or property conditions.
- Appraised values don’t always reflect market conditions such as rising prices, multi-bidding and/or low inventory.
- Appraised values fluctuate widely.
- Out-of-town appraisers are unfamiliar with area or local market conditions and may lack full access to data.
- Slow turn-around time by appraisers and banks delay closings.
There are signs of improvement. The appraisal industry has made progress in adapting to market conditions, expanding education and making adjustments for distressed homes used as comparables. We know that there have been cases where appraisers have faced pressure to complete appraisals using distressed sales as comparables, often in too short of a time frame, and with a scope of work not justified by the fee. NAR continues to advocate for an independent appraisal process and enhanced education requirements that allow appraisers to produce the most accurate reports possible.
Fortunately, the number of distressed sales is decreasing. They were one-third of all sales in 2011, but have averaged about one-quarter of sales in recent months. We expect it to continue to decline, reaching about 10 to 15 percent by 2013.
Meanwhile, we should all be aware of the issues surrounding some real estate appraisals. All home valuations should be made without pressure from outside sources. That said, know that REALTORS®, along with buyers and sellers, have the right to communicate with appraisers and lenders about errors or concerns with individual valuations.
By NAR 2012 President Elect Gary Thomas
So how do we sustain the housing recovery? That was the question on the table at a forum put together by the Progressive Policy Institute and the American Action Forum. It drew many people who care deeply about housing, including economists, politicians and public policy experts and media.
As part of the event, I participated in a panel to discuss future reform of government-sponsored enterprises (GSEs). We enjoyed a lively debate among panelists Douglas Holtz-Eakin, President of the American Action Forum; Jason Gold, Senior Fellow for Financial Services at the Progressive Policy Institute; and Christopher Mayer, Professor of Real Estate at Columbia University School of Business.
Most of the policy experts agreed that reforming Fannie Mae and Freddie Mac will be delayed in the near term as lawmakers focus on helping the country recover from the recession. Ultimately, we think it will be the regulator of the government-sponsored enterprises (GSEs)—the Federal Housing Finance Agency—that raises the issue. In the meantime, no real progress will be made on GSE reform until the Consumer Financial Protection Bureau and the Federal Reserve craft rules that establish reasonable underwriting and risk retention standards.
The fact is that today the federal government buys or insures 9 out of every 10 mortgages. In other words, the government provides the capital to keep the mortgage market, and, in turn, the real estate market alive.
Given this reality, there must continue to be a role for government in the secondary mortgage market to ensure the availability of mortgage capital. Therefore, any restructuring must ensure consumers have access to affordable mortgage capital in all markets, at all times, and under all economic conditions.
At the same time, the institutions must be reformed to ensure the failures of the past do not return. The structure that privatized profits and made losses public must be changed.
To address these issues, NAR developed a set of eleven principles to help shape reform that ensures a robust financing environment for both residential and multi-family housing. Broadly, these principles call for reform of the secondary mortgage market to:
1. Ensure the viability and affordability of long-term fixed rate mortgage products.
2. Define a clear and explicit role for the federal government
3. Return to strong regulation and oversight
4. Conduct strong underwriting of government-guaranteed products
5. Continue support of multifamily housing and other specialized consumer products
NAR shared these principles with Congress and industry partners. We have, and will continue to revise these principles to reflect the desires of our members. You can be sure that NAR will continue to speak up loudly and often on this important issue.
by Ron Phipps, 2012 Immediate Past President, NAR
So if you are like me, you have been working in real estate for a long time. You think you have seen it all. Your body of work includes lots of transactions, and some amazing human stories, both happy and sad. In real estate we deal with the full range of life experiences.
Our collective experience right now of getting to closing is an obstacle course. Doesn’t it feel like the stars are conspiring to knock your transaction off track? Just closed one that ended up with 4 appraisals and weeks of heartache before we got to closing.
So what is happening behind the Wizard of Mortgage Oz’s curtain? Am I the only one who struggles to get my buyer to the closing table? The answer is absolutely not.
What we do know is that we have over corrected from the free-flow capital, no underwriting standards of 2004-2006. I repeat…over corrected. Prior to 2004, the average credit score for Fannie Mae and Freddie Mac mortgage was 720; today it is 760. This means that 15 percent of potential buyers cannot qualify.
In the past, pre-approval letters actually meant something. Now, they are a single yellow brick on the road to homeownership. The sad part is that they do not have a lot of value.
So what is going on? The problem is that the market for mortgage backed securities is very limited. The federal government continues to buy or insure most of them, upwards of 9 out of every 10 mortgages. In other words, the government provides the capital to keep the mortgage market, and, in turn, the real estate market alive.
As a result, the mortgage package needs to be perfect and complete. Three years of tax returns and back statements are not enough. Explanations of all deposits and expenses over $1,000 are now required.
You know all of the new requirements. You also know the reality of conditional commitments. Is the lender really committing to the buyer if the ‘commitment letter’ really isn’t a letter of intent? What does that mean for a seller? What does that mean for you? How can a commitment be rescinded two days before closing?
What you need to know is that strict underwriting standards are being applied precisely and aggressively. Some investors will penalize the origination loan company $30,000 if a mortgage defaults in the first year. Yes, that will make the processor obsessive.
We have not even talked about the appraisal process. In general you need direct, like kind sales within six months and within a few miles of the subject. If not, it will be a problem. What is also true is that the “appraisal review” is where the real problems occur. Someone in the process looks at the appraiser’s work as something to just pick apart.
All of this is part of the process of compliance…to make sure the package is “perfect and complete.”
When Dorothy was lost in the Land of Oz and wanted to get back home, she just clicked her heels three times. I wish it were that easy for REALTORS® and consumers to get back to a place where closings would make it to the table.
In the meantime, what can we as REALTORS® do? Here are a few recommendations:
1. Understand the process, particularly underwriting criteria.
2. Educate the buyers (and sellers) to process and requirements.
3. Be realistic in timelines.
4. Manage buyer and seller expectations.
5. Help buyers identify the lenders that are most likely to provide them the loan.
6. Be proactive in real time with the process.
7. Be active in NAR with Calls to Action and RPAC to improve the situation.
We will get through this…sooner rather than later. See you at closing.