Federal regulators mull appraisal-free mortgages for some loans – Orange County Register

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed rate averaged 3.88 percent, improving 2 basis points from last week’s 3.90 percent and dropping to the lowest rate since November. The 15-year fixed averaged 3.17 percent, unchanged from last week.

The Mortgage Bankers Association reported a 6.2 percent decrease in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $424,100 loan, last year’s rate of 3.48 percent and payment of $1,900 was $95 less than this week’s payment of $1,995.

What I see: Locally, well qualified borrowers can get the following fixed-rate mortgages at zero cost: A 15-year at 3.25 percent, a 30-year at 3.875 percent, a 15-year agency high-balance (or loans from $424,100 to $636,150) at 3.625, a 30-year agency high-balance at 4.25 percent, a 15-year jumbo (or loans over $636,150) at 4.375 percent and a 30-year jumbo at 4.50 percent.

What I think:  Last week my staff was elated to tell four separate mortgage applicants that the automated underwriting engine just said “no” to the appraisal inspection and its $525 price tag. The last time something like that happened at my shop was exactly never!

For now, Freddie Mac will fund up to 80 percent of a home’s value on some refinances without an appraisal. Next up is bypassing the appraisal on loans for home purchases with 20 percent or more down.

“Pending approval from (the Federal Housing Finance Agency), we are hoping to implement it in the very, very near future,” said Andy Higginbotham, senior vice president of single-family housing at Freddie Mac.

Fannie Mae will only waive the appraisal on certain refinancing borrowers, not purchasers. Fannie can fund up to 90 percent of a single unit’s value for principal residences and second homes (which includes properties requiring mortgage insurance) and up to 75 percent (includes second liens) for rentals.

And, you are in the sweet spot on a cash-out refinances for up to 70 percent combined loan-to-value and up to 60 percent for second homes and rentals.

What gives?

As long as Fan and Fred have appraisal data on that specific property in their uniform collateral data portal or UCDP, these mortgage giants believe they have the ability to peg the property value.

What about the property condition, especially on a used (resale)…

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