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Author: HarryCarysGhost Three stars, 500 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127815  
Subject: Help!!! Date: 12/8/2010 10:10 PM
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I was wondering if anyone who works in real estate, or anyone who has gone through refinancing would be willing to help me out?

Without giving too many details heres the crux of my situation.

Due to foreclousures I owe much more then my place is worth (had an appraisal and was floored by how much)

I have a 6.75% interest rate on a 30y fixed (and yes I did the right thing by putting 20% down)

My mortgage is right about the cutoff of the % of income needed to get into a government program which name escapes me.

Tried working with my bank, they would approve me to redo my loan, but when the appraisal came through that went out the window.

Tried working with my lender, they said they can't help since I have'nt been late or missed any payments.

(How messed up is that I'm being penalized, for being responsible WTF)

So my options are-

Start missing payments(and ruin my good credit)

Being late on payments(which I was told would not wreck my credit, this is probably the option I would go with but wanted to check with the Fool first)

Or, should I try one of the many Re-Fi into a lower rate ads I hear on the radio?

Really ticks me off that because I pay my bills, I'm having problems getting the help I need.

When I bought my place I was working a lot of O.T. Now depending on the amount of jobs in sometimes I'll get 4 days. So it's eating into my savings, I suppose they'll say why don't you sell some stocks, but the majority of my port is for the long term.

Sorry for the rant, but I'm really pissed off (and that's hard to do, I'm normally a pretty mellow fellow)

I originally posted this on Caps, then I thought there might be a board for this, so I hope you guys can help me out.
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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119140 of 127815
Subject: Re: Help!!! Date: 12/8/2010 11:58 PM
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Without giving too many details heres the crux of my situation.

Sorry, you need to give a few more details - either actual numbers or percentages. Without knowing some actuals, it's difficult to give appropriate advice.

I have a 6.75% interest rate on a 30y fixed (and yes I did the right thing by putting 20% down)

And I presume you haven't borrowed any additional money on your home? Have you paid any additional principal into the loan? How far into the loan are you (months)?

My mortgage is right about the cutoff of the % of income needed to get into a government program which name escapes me.

That would probably be HARP (Home Affordable Refinance Program). Here's a webpage so you can see if it is: http://makinghomeaffordable.gov/refinance_eligibility.html

Tried working with my bank, they would approve me to redo my loan, but when the appraisal came through that went out the window.

What is your current principal balance as a percent of the appraisal? Is the appraisal reasonable given what's been going on in your neighborhood? Did you check to see if the appraisal had everything right about your home (# of BRs, BA, sq ft, garage, lot size, etc.)? If your local government re-appraises on a regular basis, and the appraisals are supposed to be 'fair market value' - is the appraisal in line with the government's estimate? Can you contact the realtor that you used to buy the home, and get them to give you an estimate of their value? What do on-line home valuation models (Zillow, etc.) say the value of your home is?

Appraisals can be wrong, so you need to ensure that the appraisal is correct and in line with other estimations of the value of your home.

If the appraisal is correct, do you have some cash on hand that you could use to pay down the principal balance to the 125% LTV max? If not, could you borrow some money elsewhere?

Tried working with my lender, they said they can't help since I have'nt been late or missed any payments.

(How messed up is that I'm being penalized, for being responsible WTF)


I would disagree that you are being penalized. Modifications are for people who are having difficulty in affording their housing expense and basic living expenses, like food, utilities or child care necessary to earn money. Having significant other expenses, like credit card debt, car payments or cell phone/internet/cable expenses will not justify getting a modification - you will likely be told to cut back on those expenses instead.

If you have a housing payment that you can afford, the inability to refinance without putting extra money in isn't a penalty. It's an investment decision that you have to make. Is keeping your investment portfolio worth not being able to refinance?

So my options are-

Start missing payments(and ruin my good credit)


Well, let's just check some basic things to see if it's worth it to ruin your credit to try to get a modification.....

Is your current housing expense (principal, interest, taxes and insurance) more than 31% of your gross monthly income? If not, you probably don't qualify for a modification, so ruining your credit won't be worth it.

Do you have savings or after tax investments that amount to more than 3 - 4 months of your monthly housing expense? If you do, you probably won't qualify for a modification, so again, ruining your credit probably won't be worth it.

Has your income dropped since you originally got the loan? You will need to show some type of hardship to qualify for a modification - this is the most common one and you will need proof of the decrease in your income.

Being late on payments(which I was told would not wreck my credit, this is probably the option I would go with but wanted to check with the Fool first)

Just being late - paying after the 15th, but before the 30th - so you get charged a late fee but it doesn't get reported on your credit history, probably won't be enough to qualify you for a modification, especially if you have other accessible savings/investments.

Or, should I try one of the many Re-Fi into a lower rate ads I hear on the radio?

Well, do you really think you can trust the people on the radio? I would suggest getting recommendations from people you trust, or looking around this board for some recommendations from people who have had good experiences. Other lenders can do HARP refinances. I would suggest looking at PenFed www.penfed.org Amerisave www.amerisave.com or AimLoan www.aimloan.com

Really ticks me off that because I pay my bills, I'm having problems getting the help I need.

Having enough income to pay your bills means that you may not qualify for the help that you want, even if you go late on your payments. Be careful about assuming that just being late on your payments will help you qualify.

So it's eating into my savings, I suppose they'll say why don't you sell some stocks, but the majority of my port is for the long term.

Well, your house is for the long term, too, isn't it? You need to make a decision on which one will be more beneficial to you in the long run. If you have to pay some money in to be able to refinance, will it be worth it?

AJ

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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119141 of 127815
Subject: Re: Help!!! Date: 12/9/2010 12:01 AM
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DO NOT try one of the ads on the radio. They're rip-offs.

Determine a break-even point and then consider:

- Consulting an attorney to determine your legal options. A little money up-front can help avid greater damage.

- A short sale to get out from under the payments and rent for a while.

Also, search for organizations in your area that can act as your advocate. Most of these are active in foreclosures, but who knows what info you can get from them...

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119142 of 127815
Subject: Re: Help!!! Date: 12/9/2010 12:02 AM
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- A short sale to get out from under the payments and rent for a while.

A short sale will not preserve good credit.

AJ

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Author: jackcrow Big gold star, 5000 posts 10+ Year Anniversary! Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119143 of 127815
Subject: Re: Help!!! Date: 12/9/2010 12:10 AM
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Others here are more knowledgeable about current specifics so I will not even attempt addressing current programs available.

Why do you perceive that Tried working with my bank, they would approve me to redo my loan... different from should I try one of the many Re-Fi into a lower rate ads I hear on the radio?

I may not be understanding you, as I read your post it reads to me like "I tried refi with my bank .... should I refi with company advertising on the radio?"

The problem with an upside down loan is that a bunch of equity for you and the original lender disappeared and needs to be paid off somehow, some way. There are, kinda, two broad paths; the first is to grind through the original loan, its in place both parties agreed to it and both parties are legally bound to it and both parties are dangling on the same upside down equity hook. The second is to pay off the negative equity and then re-fi the remainder.

Until you can get close to 5% down on current market value, unless you qualify for one of the Govt sponsored programs, re-fi is likely to be a tough to find.

Options:
1)Grind on as is dipping into your E-fund as needed to weather the current economic conditions until 5 days a week returns. This is what the E-fund is built for.
2)Weigh the cost benefit of cashing out current investments, now is near recent highs at least, and using that money to re-fi which lowers monthly costs. With monthly costs lowered and X/month surplus to invest and Y/years to retirement what is the new retirement forecast?

This is my best response to my understanding of your situation as explained.

jack

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Author: HarryCarysGhost Three stars, 500 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119144 of 127815
Subject: Re: Help!!! Date: 12/9/2010 1:25 AM
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And I presume you haven't borrowed any additional money on your home? Have you paid any additional principal into the loan? How far into the loan are you (months)?

No additional loans, I started out paying additional pricipal, but haven't done that for a year.

How far into the loan are you


Around 50 months.
Yeah HARP was it, I owe 70 grand, and the appraisal came in at 35
(nice timing right :)

I'm just trying to keep myself out of any trouble, while the banks and government want to see me distressed first.

Seems backwards to me.

Just being late - paying after the 15th, but before the 30th - so you get charged a late fee but it doesn't get reported on your credit history, probably won't be enough to qualify you for a modification, especially if you have other accessible savings/investments.


That's what I figured about paying late but thats what the rep told me to do.

So your saying I can re-fi if I pay a mortgage broker, thats my next step. Just wanted to see what the Fools had to say and I'll check out your links.

Thanks

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119145 of 127815
Subject: Re: Help!!! Date: 12/9/2010 2:49 AM
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So your saying I can re-fi if I pay a mortgage broker

I didn't see that said.
And I would run away from anyone who wanted money up-front to do a re-fi.

I owe 70 grand, and the appraisal came in at 35

Is 35K realistic? Anything wrong with the appraisal? ex. wrong sq. ft for your lot or house, etc?

If you're underwater a little, possibly you can refi by paying downyour balance (ex. if it's worth $60K, maybe you can pay off $20K of the loan and get a nice refi rate)

With a relatively small (<$70K) loan you're going to have problem with overcoming the static costs of a refi with benefits from lower rate. ex. $1K in closing costs for various fees to broker/title-company/closing-agent/etc. takes a lot longer to get to break-even when saving 1% on a $50K loan than when saving 1% on a $400K loan.

Make sure you have really run through the numbers before you sign anything / pay anything.

Good luck

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119146 of 127815
Subject: Re: Help!!! Date: 12/9/2010 10:33 AM
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Yeah HARP was it, I owe 70 grand, and the appraisal came in at 35

Well, for you to be able refi using HARP, an appraisal would have to come in at $56k or you would have to pay additional money down - $26.25k with an appraisal of $35k.

However, I would encourage you to make sure that the appraisal is correct, as suggested in my last post. If you bought at the top of the market for about $100k, with an $80k loan that you have now paid down to $70k, that would mean that your home's value has dropped by 65% from the peak - from $100k to $35k - that's a really significant drop, even in the areas that have really been hit hard.

I'm just trying to keep myself out of any trouble, while the banks and government want to see me distressed first.

Seems backwards to me.


So you want additional taxpayer money spent to help people who might get into trouble? Or are you suggesting ditching the help to the people who are in trouble to help those who might get into trouble? As a taxpayer who thinks that the governement already spends too much, I certainly wouldn't support the first idea, and the 2nd idea is the one that seems backwards to me.

So your saying I can re-fi if I pay a mortgage broker, thats my next step.

No, I didn't say that. I suggested a few places you might want to check out. But you don't "pay" a legitimate mortgage broker except with a possible 'origination fee' when you close your loan, so don't go with anyone that requires a payment up front, other than an application fee/appraisal cost. But if your appraisal is correct, your LTV is 200%. Being that underwater, you are unlikely to be able to refi with anyone. So that's why your NEXT step needs to be confirming that the appraisal is correct.

As foo1bar suggested, you also need to look at how much a refi will really save you. The current interest you are paying each month on $70k is $394. As of today, Bankrate says that the current rates are at 4.91%. So, let's assume that you could get a rate of 4.75%. That would drop your interest paid to $277 a month - yes, a $115 a month savings - but keep in mind that the savings would decrease as your principal decreases, and you will have added 4 years onto your loan.

And closing costs for refis are typically in the $3k - $4k range, so you would end up either adding to the loan amount, decreasing your savings, or paying out of pocket an amount that is probably 3 years of interest savings.

And to get a rate lower than average, you may end up paying even more in closing costs. If you only got a 5.5% rate, in order to keep closing costs down, your maximum interest savings would only be $43 a month.

So, you really need to run the numbers to see if there is an actual benefit for you. On loans less than $100k, it's often not worth it to refi.

AJ

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Author: jackcrow Big gold star, 5000 posts 10+ Year Anniversary! Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119147 of 127815
Subject: Re: Help!!! Date: 12/9/2010 11:11 AM
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Yeah HARP was it, I owe 70 grand, and the appraisal came in at 35

I'm floored by this. You are 4 years into a 30 year, you said you put 20% down, you have 70k left and the appraisal came in at 35k. Even in the hardest hit markets this devaluation does not pass my common sense test. The lower end of the market almost always tends to be lest volatile, in fact, besides the normal foreclosures under more typical conditions, the under 100k - 90k is often down right boring.

Generally, the prior 150ks doubled and tripled into 300k, 450k because they are a broad target market. These are the typical starter and/or second homes for families with children and many retirees shop in this range. These are the homes that many folks were trying to flip and these where the price ranges that builders were stuffing the market with inventory. The market drivers are/were there for the doubling, tripling and more. I just don't know of a large population of folks driving up the prices of the lower cost homes.

Of the three communities I have been in, smaller and mid sized, over this real estate boom and bust for the most part the under 150k has risen and corrected almost to were it was at the beginning of the rush. The sector saw less price appreciation because people were loading the market with these in order to upgrade. The likely incoming buyer did not have a great deal of bidding power as they are most likely first time home buyers who now qualify due to lower rates and some questionable lending practices.

It just does not make sense to me that a 35k home tripled to near 100k and then plummeted back to 35k. That bracket of homes just is not likely to have the market to create those types of market pressures.

With all of that said, each local real estate market is unique. I have spent hundreds of hours with clients and customers trying to explain that where we are is not completely in line with national or often regional numbers.

I would strongly recommend you hire your own appraiser and ask for a full appraisal. Often bank appraisals, particularly when it is very busy, are not of the same quality of a full appraisal. The bank just wants to know if the market price is close enough that the mortgage has average risk. The appraiser most likely did the best he/she could for the money and time and the client; a drive by assessment and quick and dirty market comparison. Comparisons matter, the closer the comparison is to yours the better and because this is a refi and foreclosures often become distressed it is perfectly reasonable to work with the appraiser to avoid, where ethically possible, foreclosures. If the appraiser focused on recently sold that were near in size and 2 out of the 3 happened to foreclosures and may not be the best comparables you are going to get a skewed appraisal. In this case it would be skewed in favor of the lender who hired them so this is perfectly ethical, the client/customer is protected.

Makes sense?

If you are the client and ask for a full appraisal they should use at least three methods to find a range of values for your home. As a paying client it is not unreasonable to disagree with comparison homes if you have good reason. Good reasons are you have a garage, that one doesn't, you have a partially finished basement that one doesn't, you have 1.25 bath that one doesn't. Location can also matter, in many communities there is a part of town that just is not as nice as the rest and those homes final sale price reflect that. It is no secret that the house next to the crack house or the house busted for cooking meth just is not as desirable as the same size one 3 blocks from the school and 6 blocks from the police station. Things that don't push the value up much are new decks, refinished baths and kitchens, new roofs . . . Additions can add value over time but it often takes 3-5 years under normal market conditions for the addition to benefit home equity.

jack

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119150 of 127815
Subject: Re: Help!!! Date: 12/9/2010 4:47 PM
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The $35K appraisal on a house that cost around $100k a few years ago amazes me too if it is anywhere near right. If there has been significant damage or a there is a major repair that is obviously needed then that could cause the appraisal to be a lot lower than a similar house in good condition. The appraiser would not want to underestimate the cost of repairs.

I am not saying it is the right thing to do but if the appraisal is right for you neighborhood and you like the neighborhood, then some people would scrape up the $35K in cash however they could and buy a similar house down the street for $35K in cash and stop making payments on the prior house to get it sold off in a short sale even though it would trash their credit. A lot of how this would work out would depend on the state laws so it would be critical to work with a lawyer.

Greg

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Author: HarryCarysGhost Three stars, 500 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119151 of 127815
Subject: Re: Help!!! Date: 12/9/2010 9:24 PM
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Thank you all for your replies.I wish I would have checked with the Fool before I started the process

I was kind of upset last night since I had just gotten off the phone with a Citi rep. He was really nice and helpful but I just couldn't believe those were the options that he presented me. None of which seem attractive (the radio one was mine, kind of a joke). And I was just shocked that a bank employee was telling me not to pay my bills, thats what I thought was backwards.

I don't think I was very clear on what actually happened, (thats what I get for typing without thinking my blog through for at least a day)

About six months ago, I wanted to re-fi into a lower rate so I went to my credit union and they referred me to a the branch that covers mortgages in my area.

Well the first thing they asked was if my condo board was an FHA approved loan (I think, sorry my memory sucks) What the board said was they had right of first approval, well this was not a good thing since the guy I was dealing with told me that would cause problems.

After doing all the paperwork, and credit checks, My credit union said that they would back the loan. But the appraisal had not happenned yet.

Yes you are correct that the comparisons were of foreclousures, I live in a pretty big complex with muliple buildings, and most people who live there would be considered lower middle class. I definately over paid. It was at the height of the housing bubble, I checked and just a few years earlier a one-bedroom condo like mine was going for $60 grand.

Way I saw it was I had the money due to an inheritance, and when I added up how much I spent on rent in my life it was close to $32 grand.
So I pulled the trigger.

So the appraisal came in at average $35. My credit union called and said they could'nt take on that much risk. Even though I personally was'nt a risk theres no way they could justify haveing that on the books(Which I totally get).

The advice given was for me to contact my lender and mention the homeowners underwater act(again from memory so please correct if wrong)
So I did that and over a couple of months, was able too get all the parerwork in(no delay on my part, the process just goes at a snails pace)

Finally I was told that I was on track to be approved, it would have lowered my rate to about 5.6%. But for whatever reason Fannie Mae denied my request, which I don't understand. Since my income is at 31% of my mortgage. So I don'tknow what happened there.

One other thing I probably would'nt have even done this. But the year after I moved in my property taxes doubled, then there was a special association fee to install sprinklers.

So I've only been paying the amount I originally agreed to for one year, just feels like I'm getting hammered from all sides. And then to have the banks make me jump through hoops for six months while telling me that something could be done is what led to my rant.

Thank you all for your wonderful advice, I'll be referencing this and the blog on Caps before I take any further action.

Hope everyone has a happy,healthy holiday season.

John.

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119160 of 127815
Subject: Re: Help!!! Date: 12/12/2010 11:05 AM
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Since my income is at 31% of my mortgage. So I don'tknow what happened there.
I think the guidelines are lower than 31%, but in any case any other debt would be included, including credit cards, cars, personal loans, etc. Could be simply that your overall debt exposure was too high.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119163 of 127815
Subject: Re: Help!!! Date: 12/12/2010 11:56 AM
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I think the guidelines are lower than 31%, but in any case any other debt would be included, including credit cards, cars, personal loans, etc. Could be simply that your overall debt exposure was too high.

Actually, when calculating mortgage modifications, the maximum principal, interest, taxes and insurance monthly payment is supposed to be no more than 31% of your gross income. Other debt is not considered. Mortgage modifications are not being offered in order to allow people to afford their other debt, but to provide them with an affordable house payment.

AJ

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119164 of 127815
Subject: Re: Help!!! Date: 12/12/2010 12:04 PM
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Thanks, AJ! As usual, you are a font of great information...

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Author: crowflip Big red star, 1000 posts Old School Fool Ticker Guide SC1 Blue Captain Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119166 of 127815
Subject: Re: Help!!! Date: 12/12/2010 5:12 PM
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Most alarming is your appraisal coming in at 35K considering the information you have provided. As others have pointed out already, appraisers are not at all created equal and my first thought is seek out one with a reputation for generous appraisals, not dishonest, just generous. Real estate investors find such appraisers through good realtors. They do this to be sure when they first purchase an investment, they can come out positive in equity right off the get go. This is perfectly honest and legal. I can't imagine, for the life of me, you can't get a significantly better appraisal. I would start by calling realtors in the area and looking for one who deals with a lot of real estate investors. Such a realtor would know a good appraiser.

Second, find a good mortgage broker to help you out. That's one of the functions of a good mortgage broker. Again, don't hesitate to call several. Some see a tough situation, balk at it, and brush you off. Others see a tough situation and get to work and get it done. As pointed out above, generally, you shouldn't be paying a mortgage broker anything, at least that's how it works where I live. Someone can get this done for you.

Rob

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119167 of 127815
Subject: Re: Help!!! Date: 12/12/2010 9:13 PM
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As others have pointed out already, appraisers are not at all created equal and my first thought is seek out one with a reputation for generous appraisals, not dishonest, just generous. Real estate investors find such appraisers through good realtors. They do this to be sure when they first purchase an investment, they can come out positive in equity right off the get go. This is perfectly honest and legal.

Sorry, it's not legal. The buyer (or in this case, refinance or modification beneficiary) choosing the appraiser not allowed, at least not for conventional loans that are eligible for sale to Fannie/Freddie - and a a HARP refinance or HAMP modification requires that the loan be a Fannie or Freddie loan. Here are the requirements for "independent appraisals" from Fannie: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/... Freddie has similar rules.

AJ

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Author: crowflip Big red star, 1000 posts Old School Fool Ticker Guide SC1 Blue Captain Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119168 of 127815
Subject: Re: Help!!! Date: 12/13/2010 12:23 AM
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Interesting, not how it works here in Canada in so far as I know, but then again, maybe it does when dealing with this kind of re-fi. Can't say I've run into the situation personally so far in my life. Either way, for our friend here it would be irrelevant since he's not living here. Sorry if I spread any false hope.

rob

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Author: jackcrow Big gold star, 5000 posts 10+ Year Anniversary! Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119171 of 127815
Subject: Re: Help!!! Date: 12/13/2010 12:28 PM
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AJ,

Sorry, it's not legal. The buyer (or in this case, refinance or modification beneficiary) choosing the appraiser not allowed,

True, but it is a heck of a good way to prove to the lender that their first appraisal is junk.

jack

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119172 of 127815
Subject: Re: Help!!! Date: 12/13/2010 12:41 PM
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True, but it is a heck of a good way to prove to the lender that their first appraisal is junk.

As already suggested, there are several other ways to dispute the original appraisal, most of which would be less costly than hiring your own "chosen" appraiser. That's why I said in my original post on this thread:

Is the appraisal reasonable given what's been going on in your neighborhood? Did you check to see if the appraisal had everything right about your home (# of BRs, BA, sq ft, garage, lot size, etc.)? If your local government re-appraises on a regular basis, and the appraisals are supposed to be 'fair market value' - is the appraisal in line with the government's estimate? Can you contact the realtor that you used to buy the home, and get them to give you an estimate of their value? What do on-line home valuation models (Zillow, etc.) say the value of your home is?

Appraisals can be wrong, so you need to ensure that the appraisal is correct and in line with other estimations of the value of your home.


All of the suggested methods would be free, and if they didn't convince the lender that the original appraisal was wrong, then the difference in valuation could at least help the OP determine if it would be worth it to hire their own appraiser.

Of course, the additional cost for hiring an appraiser would have to be added into the cost-benefit analysis to determine whether refinancing a $70k loan makes sense from a financial standpoint in the first place.

AJ

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119195 of 127815
Subject: Re: Help!!! Date: 12/15/2010 4:36 PM
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Sorry, it's not legal. The buyer (or in this case, refinance or modification beneficiary) choosing the appraiser not allowed, at least not for conventional loans that are eligible for sale to Fannie/Freddie - and a a HARP refinance or HAMP modification requires that the loan be a Fannie or Freddie loan. Here are the requirements for "independent appraisals" from Fannie: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/...... Freddie has similar rules.

AJ do you mean to say it isn't acceptable and so won't help, or that it's actually illegal per some state or federal statute for a home owner to hire his own appraiser?

xtn

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119196 of 127815
Subject: Re: Help!!! Date: 12/15/2010 4:39 PM
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I'm just trying to keep myself out of any trouble, while the banks and government want to see me distressed first.

I doubt they want to see you distressed at all. But why would they just give out aid willy-nilly to someone who wasn't distressed?

xtn

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119198 of 127815
Subject: Re: Help!!! Date: 12/15/2010 4:59 PM
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AJ do you mean to say it isn't acceptable and so won't help, or that it's actually illegal per some state or federal statute for a home owner to hire his own appraiser?

It used to be that it was allowable for the lender to accept an appraisal from an appraiser that the buyer/homeowner had chosen. In 2009, there was regulation put into place that required Fannie/Freddie to disallow this option, and then in 2010, as part of the Dodd/Frank legislation, there was further direction requiring that appraisals for Fannie/Freddie/FHA/etc. loans be from "independent" appraisers.

So - it's legal for a buyer/homeowner to hire their own appraiser. It's just that the appraisal that is produced for the buyer/homeowner can't be used to value the home for a mortgage sold to or guaranteed by Fannie, Freddie, FHA, etc.

AJ

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119201 of 127815
Subject: Re: Help!!! Date: 12/16/2010 8:44 AM
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AJ -

Gotcha. Thanks for the 'splanation.

Hope you and Joel are happy and snuggly,
xtn

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Author: BlackFrank Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119209 of 127815
Subject: Re: Help!!! Date: 12/16/2010 1:28 PM
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Rent

---

I feel cheated; no backstory?

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Author: Mosquito7778 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119217 of 127815
Subject: Re: Help!!! Date: 12/17/2010 6:12 PM
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appraisers are not at all created equal and my first thought is seek out one with a reputation for generous appraisals, not dishonest, just generous. Real estate investors find such appraisers through good realtors. They do this to be sure when they first purchase an investment, they can come out positive in equity right off the get go. This is perfectly honest and legal.

Your statement makes no sense.
Wouldn't an investor want a conservative appraisal to be sure they "come out positive in equity"? A "generous" appraisal doesn't magically mean a property an investor is considering has more equity. Thats completely backwards.

Mosquito

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Author: Dukenewkirk Big red star, 1000 posts Old School Fool Ticker Guide SC1 Blue Captain Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119218 of 127815
Subject: Re: Help!!! Date: 12/17/2010 8:53 PM
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Sorry, not at all backwards. When a property investor purchases he wants a higher appraisal than the purchase price by as much as possible as long as it's reasonably justifiable. The reason for this is so that once the property is purchased, a property investor can then use the higher appraisal value to justify a refinance, pull out equity and use that equity again to purchase more property that they can again put up for more rental income. Then it's rinse and repeat. This is how leveraging works and it's how the Trumps of the world take millions that mommy and daddy gave them and turn it into billions.

Rob

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Author: Mosquito7778 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119248 of 127815
Subject: Re: Help!!! Date: 12/22/2010 2:29 PM
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Sorry, not at all backwards. When a property investor purchases he wants a higher appraisal than the purchase price by as much as possible as long as it's reasonably justifiable. The reason for this is so that once the property is purchased, a property investor can then use the higher appraisal value to justify a refinance, pull out equity and use that equity again to purchase more property that they can again put up for more rental income. Rob

Sorry, but if an investor wants to buy a "generous appraisal" to make themselves feel like they are getting a good deal thats fine.
But if they think that taking that high appraisal to a bank to refinance and pull money out is going to work they will be sorely surprised.
A bank will want its own appraisal to accurately judge the property value. I would think a bank would be especially dubious of appraisors that have a reputation of being "generous".

Then it's rinse and repeat. This is how leveraging works and it's how the Trumps of the world take millions that mommy and daddy gave them and turn it into billions.

Thats also how the Casey Serins of the world destroy themselves. They may have an inflated paper wealth at one point, but have total debt that is much greater than the true property values. You cant keep stripping phantom equity out of rental properties for ever. Eventually the banks will want to get some money back.

Wouldn't an "investor" that is looking for rental property to purchase care more about the cash flow potential than getting an inflated property apprasisal?

Sorry Rob, this may have worked back in 2005, but banks aren't nearly as willing to throw money a someone just because they bring in a "generous" appraisal.

Best of luck
Mosquito

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Author: Dukenewkirk Big red star, 1000 posts Old School Fool Ticker Guide SC1 Blue Captain Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119269 of 127815
Subject: Re: Help!!! Date: 12/24/2010 5:42 AM
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Cash flow is certainly a key factor. At no point did I ever suggest it didn't matter. If anything I said suggested that, it wasn't my intention. A high enough DCR in the property is where you find that equity I spoke of. I am puzzled that you believe you can buy stock in companies on the market at a discount while real estate can't be bought at a bargain. Your argument suggests that real estate is all perfectly valued at the point of sale. I can assure you that it's not.

In either case, none of this applies to this thread at this point and I'm not on a personal mission to flog real estate investment on anyone. It clearly would take pages of debate as people seem to have pretty strong ideas about what can and can't be done in real estate or what banks will or won't do. From a mortgage broker's perspective it's interesting how little individuals at one bank know about what their own competitors do.

Like any business venture it involves risk that some find more acceptable than others. My experience is that it can be tremendously lucrative for some people and that such financing is quite common for those people if they know what they are doing. As with any kind of investing, nothing is certain, guaranteed or safe really. Neither is working 9-5 loyally for 20 years with a 'good company' for an hourly slave wage and believing your pension will take care of you when you get ill in old age or suddenly let go mid career. Neither is living on the hope that our government will print our way into prosperity. Yet that seems to be what most of our society is willing to believe and settle for.

The well wishes are always welcome though, as good luck, if it exists is certainly not easy to come by and I wish it right backatcha.

Weary Fool

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Author: HarryCarysGhost Three stars, 500 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119322 of 127815
Subject: Re: Help!!! Date: 12/30/2010 8:58 PM
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You guys wanna hear something pretty goofy (in my mind it is at least.

After being told that my best bet was to be late on my mortgae.

I did'nt receive that months bill. Ok I figured it was a mistake and sent a check to the P.O box. well...turns out I was .18 cents short since I did'nt know the proper amount to send.

After not receiving a bill for the second month, I called up and they told me I was late due to that .18 cents. I was'nt receiving a bill because I was in the remodification process. The guy I was dealing with saw the absurdity of this and had it rolled over to this month.

Since it did'nt work out I'm resigned to grind it out. I just wish I was told that I was'nt eligible. Could have saved me a lot of hassle.

Thanks Everyone.

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