Banks have become quite slow in processing of refinance applications. Closing on an approved refinancing has gone up to 60-90 days from the former 30 days. This is due both to the reduction in processing staff that banks have instituted, and the increased documentation required of the borrower. Sometimes there is delay due to the more stringent appraisal evaluations. For many loans brokers are not longer allowed to choose the appraiser, in order to prevent the occurrence of appraisals biased in favor of the borrower.

The effect of this delay is that sometimes the rate lock-in expires, and the offered rate may be higher than that available at the start of the application process, making the loan terms less desirable. To compensate for this, some large banks such as Chase have increased the duration of their rate lock from 60 to 90 days.

Homeowners should keep this in mind if they are considering refinancing in an effort to capture a lower mortgage rate and monthly payment. Be sure to act early when the rates are low, and inquire as to the typical time required to process the loan, as well as the duration of the rate lock.

Most all of the economic data released for the week ending August 7th beat the forecast, indicating that the economy is improving more quickly than expected. However, faster economic growth usually leads to higher future inflation, which is negative for mortgage rates. As a result, mortgage rates ended the week higher.

Strong manufacturing and housing data early in the week convinced economists to revise their forecasts higher, and Friday’s employment data supported this improved economic outlook. This was the 19th straight month of job delines, but it was the smalles level of losses since August 2008. The July unemployment rate fell to 9.4% from 9.5% in June, its first decline in 15 months. Overall, t his report revealed unexpected improvement in nearly every area.

This week’s housing market data also came in stronger than expected. June Pending Home Sales rose 4%, and Pending Home Sales are a leading indicator for future housing market activity. According to the chief economist of the National Association of Realtors, affordable home prices, low mortgage rates, and a rush to take advantage of the $8000 first-time homebuyer tax credit have helped increase home sales.

If you’re a buyer in Cardiff, Encinitas, Carlsbad, Oceanside, Vista, or San Marcos, don’t let these good market indicators pass you by. The late summer and early fall promises to be a very good time to buy real estate in San Diego.

Stricter lending rules are making it harder and harder for qualified buyers to buy a new condo.  Even with a good down payment, excellent credit, and a good work history, buyers cannot get approved for a mortgage.

At new condo projects, Fannie Mae, Freddie Mac, and the FHA have created a Catch-22 situation with their stricter lending rules. They will not back mortgages for a new condo project until a certain number of units in a development are in contract. At the same time, developments can’t reach that sales threshhold if buyers can’t get the mortgages.

Also, these same lenders won’t back mortgages at condo projects where more than 15 percent of homeowners are 30 days delinquent on homeowner association dues. And these days, many homeowners unable to pay their mortgages, also fail to pay their condo association dues. The lenders also refuse to give mortgages where a single entiry owns more than 10 percent of the units.

Developers are creating a variety of solutions to the problem. Sometimes, the lenders who lent money for the construction agree to issue mortgages to get them to the minimum sales threshhold. And local banks may help to fill the gap. Or developers may divide developments into phases. For instance, a 210-unit project could be split into three phases of 70 units each, so each phase could meet the requirements independently.

This scenario makes it very difficult for first-time buyers to buy into new condo developments. Instead, first-time buyers need to look for opportunities in established developments where the lenders’ guidelines can be more easily met.

Department of Housing and Urban Development Secretary Shaun Donovan announced that the Federal Housing Administration (FHA) has implemented changes to its loan modification program to make sure it is consistent with the Obama Administration’s Home Affordable Modification Program.  By August 15th, FHS borrowers will be able to significantly reduce their monthly mortgage payments by seeking a loan modification through their current mortgage company or loan servicer.

Donovan said, “Tens of thousands of FHA borrowers will now be able to modify their mortgages in the ssame manner as so many others who are taking advantage of the Administration’s Making HomeAffordable program.

FHA expects all servicers to implement the changes by August 15th. The program permanently reduces a family’s monthly mortgage payment through the use of a partial claim which defers the repayment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off.

FHA will pay an incentive to loan servicers for each FHA loan modified under the program.

Home sellers who have a Notice of Default on their FHA loan(s) or who have stopped making mortgage payments should look into the possibility of starting the loan modification process under this new program.

In a front-page article on Thursday, July 30th, the San Diego Union Tribune reported that often lenders do not grant loan modifications to strapped borrowers because they make more money collecting fees on delinquent loans.

If a home goes into foreclosure, lending companies collect fees out of the foreclosure proceeds. The longer a borrower is delinquent, the greater the time for the lender to collect fees. The Federal Reserve Bank of Boston recently said that mortgage companies are reimbursed for expenses while loans are delinquent, and they may have an incentive to foreclose rather than modify a loan.

In the meantime, many borrowers who are delinquent on their loan payments continue to negotiate with the bank holding their loan to try to negotiate a loan modification. Often they face a lengthy process as they wait up to 60 days or more to be assigned a negotiator, and even then, they don’t know if their loan modification will be approved. It’s a tricky situation at best.

Three months ago, new rules for appraisals, called the Home Valuation Code of Conduct, have driven up the cost of appraisals for borrowers trying to buy a real estate property. An appraisal that used to cost $275 to $300 now costs $375 to $500 under the new policy. That’s because buyers are now paying a middle man to work between the mortgage broker and the appraiser.

The Federal Housing Finance Agency sasys this new code is necessary to make sure homes are appraised correctly and fairly. Before the code went into effect, mortgage brokers could choose their own appraiser, and appraisers could be transferred from one lender to another. Now, if the buyer wants to try a different lender, they must pay for a second appraisal. The appraisal remains with the lender, not with the broker.

Before the code went into effect, many appraisers felt pressure from a mortgage broker to produce a desired value on a property so that the escrow could close. Appraisers were afraid they might lose business if they didn’t produce a certain value. Now, mortage brokers are no longer able to order, select, or pay appraisers.

Whatever lenders or appraisers think about the new code, it is a good start to addressing the practices of appraisers’ valuing properties higher than they were really worth. More accurate appraisals will protect buyers, the potential real estate property owners, and produce prices that are more realistic for the home buying market.