RTC Mortgage Blog

Jumbo Loans, Appraisal Guidelines, IRS Security Breach

June 12th, 2015 4:48 PM by Richard T. Cirelli

Jumbo Originations Up Sharply
Residential lenders originated an estimated $70.0 billion of jumbo loans in the first quarter of 2015 nationwide, a 59% increase from first quarter 2014.

Moreover, a number of jumbo lenders more than doubled their production during that time. “Our jumbo pipelines are near record high, as the demand for jumbo mortgages remains healthy,” said an official from a leading jumbo lender.

Jumbos accounted for 19.4 percent of total mortgage originations in the first quarter of 2015, consistent with the peak of 19.7 percent in the previous quarter. For all of 2014, jumbos accounted for 19.0 percent of total production. Keep in mind these are national figures. In our local, high-priced market I’m sure that the numbers are even higher.

As an independent mortgage broker, I am seeing continued interest in jumbo loans from new and old lenders, some with creative financing including stated income loans, lower down payment requirements, larger loan limits and more creative underwriting methods. As the market has slowed down a bit due to slightly higher interest rates, competition among lenders for jumbo loans has increased. In many cases, jumbo loans have lower rates than conforming loans. Call me for any conforming and jumbo needs.

Review of Lender Appraisal Regulations:

The appraisal regulations continue to be a point of confusion for borrowers and real estate agents. For that reason I thought I would review the procedure here and mention a new rule too.

The most important thing for all to understand about appraisals is that no party to the transaction can choose the appraiser. Therefore, the appraiser is not chosen by the lender, the mortgage broker, buyer, seller, real estate agent or any other person or entity involved in the transaction.

Appraisals are ordered through Appraisal Management Companies (AMC’s). These are companies responsible for managing a panel of qualified appraisers and for randomly assigning an appraiser for each order. Once the appraisal is complete, the appraiser turns it in to the AMC where it is reviewed for accuracy and compliance before it is released to the lender.

One more important requirement is that the borrower cannot be charged for an appraisal until they have acknowledged the lender’s loan disclosures. Lenders and mortgage brokers have 3 business days by law to disclose once a loan application has been taken or received. To be legally compliant, appraisals cannot be ordered in advance or at the same time that a loan application is received. Disclosures must come first if the borrower is paying for the appraisal.

New Appraisal Rule:
New rules on appraisal management companies (AMCs) requires every state to have laws regulating AMCs or lose the ability to appraise FHA, Fannie Mae or Freddie Mac loans in the state. If the AMC has more than 15 appraisers in the state or 25 total that provide services for them, they must register. The real meat of this is that now both the appraiser and the AMC are required to abide by the Uniform Standards of Professional Appraisal Practice (USPAP). The rule also creates a national registry of AMCs that comes with a fee, of course. This will probably result in appraisals becoming more expensive again.

IRS Breach Causes Mortgage Delays:

You probably heard that the IRS last week disclosed a massive security breach that allowed hackers to obtain detailed tax-return information on 104,000 taxpayers.

But you might not have connected that event with a procedure encountered by most home buyers seeking a mortgage: Lenders require borrowers to sign an IRS form that allows underwriters to obtain transcripts typically covering the last two years of past tax returns. The form involved is known as a 4506-T, and it’s part of the many disclosures that  applicants are required to sign at the beginning of the loan process.

So what’s the possible connection between the security hole at the IRS and your mortgage application? Your mortgage broker or lender provides the 4506-T form to a third-party vendor that has signed up with the IRS to access taxpayer transcripts.  The hackers penetrated what’s known as the “Get Transcript” application on the IRS’s Web site. Get Transcript, was pulled offline in the wake of the breach, thereby creating a delay for lenders needing the IRS transcripts.

Posted in:General
Posted by Richard T. Cirelli on June 12th, 2015 4:48 PM



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