The Alpharetta Blog

In this posting, I wanted to share some info I just received about the Mortgage market and some more of the "complexities" we are seeing lately.  This email was written by my Mortgage Advisor Kelli Harris and I think it provides us with some insight to what's going on in the mortgage industry right now.  This was directed to the Realtors in my office and pertains to the Atlanta area only:

I am getting more and more calls with questions regarding DECLINING MARKETS and their impact on your sales.

Let me tell you what I know and what I’m hearing.....

Here’s what I know:

What is a DECLINING MARKET?

A declining market is defined as an area that has seen a significant decline is sales price over a period of time.

How is it determined that an area is deemed to be Declining?

Fannie Mae and Freddie Mac created a master database that tracks this information. Prior to registering a loan, every loan originator must run that subject property’s zip code through a Declining Market Indicator. The indicator simply says “YES” or “NO”. Now getting a “NO” does not redeem us altogether. The appraiser has the ability to state whether they believe the area should be declining and if the appraisal says the area is declining, than the lender will go with that.

What happens if the property is found to be in a Declining Area?

The current policy as written requires maximum financing to be reduced by 5% for loans in a declining market. Due to recent changes by the Mortgage Insurance companies, On March 15, 2008 unnamed mortgage company Y changed the maximum financing available for Conventional products to 97% (min 680 credit score). As a result, for registrations on or after March 15, 2008, if the product allows a max 97% LTV, in a declining market the maximum LTV must be reduced to 92%. Likewise, if the buyer has a credit score between 620 -679, the minimum down payment requirement is 5%. So if the property is found to be in a declining market the max LTV is now 90%.  (The buyer would have to put down 10%).

FHA and VA loans are not impacted by the declining market indicator. This only pertains to Conforming Loans.

With the MI changes, it is possible, that the above guidelines may worsen. (Of course, I will let you know if this happens)

What am I seeing for this area?

At this time, the greater Atlanta area is NOT considered a Declining Area. LET ME REPEAT....Alpharetta, Rowell, E Cobb, Dunwoody, Cumming, Duluth, etc (ie All Atlanta and Greater Atlanta) are NOT DECLINING at a pace that merits this designation. This has been confirmed by 1^st Appraisal Solutions.

Now we can’t say this will always be the case but at this time, we are fine.

WHAT AM I HEARING...

There are several lenders who are using this declining market situation as a way to force buyers into putting more money down. Many out of state (online lenders) are using bad data and not allowing the appraisal to verify or dispute their designation. There are some big name lenders who are telling the appraisers to state that the area is declining so they can ask for more money down. I know this to be true and am closing on a loan later this month that Lender X claimed the area was declining. We did not and our appraisal backed this up.

SO WHAT’S THE LESSON HERE??????

Don’t let one lender dictate or kill a deal for you. Regardless of whether you represent the Buyer or the Seller, if you have a contract where the lender is claiming an area is “Declining”, have that buyer call me.

I will let you know if and when a key zip code truly becomes declining.....but unless you hear it from me, don’t believe it folks.

The point for all to know is that there are many aspects to the mortgage lending area.  It is even more imperative for buyers to find a rock solid lender that will look out for the buyer's best interests.  I've found that Coldwell Banker Home Loans is one such company.