Phoenix House Talk

The Arizona Department of Housing (ADOH), one of five state housing finance agencies (HFAs) slated to receive federal funding through the administration’s Hardest Hit Fund, has submitted a proposal to the U.S. Treasury Department detailing how it plans to use its expected allocation.

According to RealtyTrac, a real estate data firm, Arizona’s foreclosure rate is currently second in the nation. In 2009, the greater Phoenix area experienced approximately 52,000 foreclosures, and through the first quarter of 2010, this area is on track to experience an additional 52,000 foreclosures.

While many early foreclosures were a result of over-speculation of single-family homes by investors and resets on adjustable-rate mortgages, numerous Arizona households are now facing foreclosure due to job loss or reduced income as a result of an ailing economy. In addition, many households are choosing foreclosure rather than remaining in homes where the amount owed far outweighs the current value of the property.

Taking into consideration the causes of foreclosure across the state, ADOH created a detailed plan of how it will use the financial aid made available through the Hardest Hit Fund. According to the proposal, the funding has the potential to assist approximately 4,000 Arizona households and will be used for permanent mortgage
modifications, second mortgage settlement, temporary mortgage assistance, and homeowner advocacy through HUD counselors.

ADOH plans to use the bulk of its funding — $90 million of its $125.1 million allotment — to reduce loan balances for heavily underwater borrowers, the Wall Street Journal said. For a principal reduction, the principal balance must exceed 120 percent of present market value of the home. The homeowner could then qualify for a maximum contribution of $50,000 that is matched by the lender and forgiven over a period of time.

According to the Wall Street Journal, the HFA also plans to use around $7.5 million to help extinguish second mortgages, another $12 million to help subsidize monthly mortgage payments for unemployed borrowers, and $10 million towards housing counselors.

In designing this proposal, ADOH developed a set of guiding principles to ensure that it assists homeowners who have demonstrated “personal responsibility” in their home purchase choices. It is the state’s intent to assist those who, through no fault of their own, are facing the potential loss of their home due to the current and unprecedented economic conditions.

Under these guidelines, a foreclosure must be imminent, meaning resources will only be utilized for households who have exhausted all options in remaining current on their mortgage payments. In addition, resources will only be utilized for primary residencies, and households must prove that their income is at or below 120 percent of the area median income.

Applicants must also demonstrate an approvable hardship, such as reduced income due to underemployment, a medical condition, divorce, or death. Homeowners who have “self-inflicted” wounds, such as refinancing to take out equity, will not be approved.

Resources will be made available statewide. However, geographic set-asides will be devised to assure distribution commensurate with foreclosure rates.

http://www.dsnews.com/articles/arizona-plans-to-assist-4000-households-with-hardest-hit-funding-2010-04-28

Wonder why that home you just tried to purchase has a discrepancy between contract price and appraised value?  Do you know how your lender has to fight with the appraisal in underwriting just to try and make the deal your go to closing? 

 In 2009, the government introduces HVCC, the Home Valuation Code of Conduct, a set of rules created to prevent those who stand to profit from a real estate transaction from putting pressure on the appraiser.  In my opinion, this is leading to the stagnant market we are experiencing instead of allowing equity to return to our homes here in Maricopa Country and the Phoenix Metro areas.

The rules prohibit real estate brokers and mortgage brokers from ordering appraisals and require that lenders erect a firewall between loan production staff and the appraiser.  Since the rule out of this program, there has been protest not just in Phoenix but around the country.  The downtown of the market has been blamed on appraisers, saying they were working with the lenders to help increase property values.  Personally, I think the banks require far more of the blame, but that is for another blog.

 So now, with another extreme decision by our government, agents and lenders can have no control over appraisers.  We CAN talk to them only if contacted directly by the appraiser and only discuss the property’s condition and the contract price.  Before, if property value and appraisal were only off by $1000, the relationship between the lender and the appraiser would help bring the deal together.  There have been a ridiculous number of transactions which have fallen apart since the HVCC was ruled out in May, and many for less than 5%.

I understand there were some bad appraisers during the boom.  But now, when we are trying to regain some equity, it is nearly impossible to have an appraisal come in even any higher than the last comp which is keeping values stagnant.  For example, if the recent sales were $150,000, $152,000 and $155,000, the home will not appraise for $160,000.  It will likely come in at $156,000 or LOWER.  What if I had three offers within 48 hours, all between $155K and $165K?  Why are the appraisers not taking into account the demand for some of these (mostly distressed) properties and allowing them to sell at the highest bid??

This is really hurting FHA buyers as the appraisal sticks with the home for 6 months (although this will be changing to four months).  For example, if a buyer is trying to buy a short sale for $170,000 and the bank accepts this price, everyone is happy.  Well, what if the buyer’s lender sends out an appraiser and the property appraises for $165,000?  If the bank is not willing to budge, that appraisal sticks with the home and no other FHA buyers will be able to purchase the home for $170K unless they add $5,000 to their downpayment.  As a listing agent in this situation, he/she is limited to find cash or conventional buyers to help meet the value the bank needs at $170K.