Questions and Answers on Hot Topics

Appraisal Issues, New Reg Z and Tax Credit

Questions on the Home Valuation Code of Conduct (HVCC)
From Sandy Carroll, Chief Executive Officer

Q. Am I allowed to talk to the Appraiser during the appraisal process?

A. Yes, Realtors can talk to an appraiser, but you cannot try to influence appraisal value EXCEPT that you can provide factual data that the Appraiser can then chose to consider (or not). A perfect example is a Realtor offering relevant comps that the appraiser may not have known about. It just has to be factual information that the appraiser can legitimately cite and use as a basis for valuation. You can also point out inaccurate information or discuss errors or missing information. Telling the appraiser how much a home needs to appraise at, in order to close is a perfect example of what is prohibited.

Q. Don't appraisers need to be members of the Berkshire MLS in order to do appraisals in Berkshire County?

A. Well, it sure would be nice, but appraisers are not mandated to use MLS data in the creation of legitimate appraisals. It is conceivable that out-of-town appraisers can generate perfectly sound appraisals of value in Berkshire County, provided they research the market and became familiar with the area and it's property. Comparable sale information can be obtained from town offices, or from the Warren Group and listing agents can sometimes be the source for active information.

That said, the Massachusetts Board of Real Estate Appraisers (MBREA) was thrilled to learn about a new Berkshire MLS policy adopted a few months ago, that offers a limited, week-long access to the MLS to ourside appraisers for the purpose of helping get the best information possible in the hands of any appraiser working in our area, without requiring full membership. Please note, full members / local appraisers who are members here receive MLS access at a significantly lower rate than the one-week rate.

Q. I had a bank call and tell me that none of their “approved” appraisers could make it out to a house for at least two weeks and we are supposed to close in less then three weeks. I suggested a number of appraisers that we have worked with in the past, but the mortgage lender refused to go off of their in house list. Does this break this new rule?"

A. Technically, the bank stopped you from breaking the rules. Neither Realtors nor Banks can recommend or influence the selection of an appraiser. If the bank took a Realtors suggestions and tried to hire an alternate appraiser not on the"list" then both would have been in violation. Hence, this rule is causing delays and problems in the field, and the reason why NAR is working so hard to halt this regulation until it's impact can be adequately examined.

Questions on the revised TILA Disclosure Requirements effective July 30, 2009
From Steve Ryan, MAR General Counsel and Michael McDonagh, MAR Associate Counsel 

Q. What do I need to know about the Truth In Lending Act (TILA) and what should I be telling my clients?

A. You are correct regarding changes to TILA and Regulation Z. While these new rules only change responsibilities for lenders and not for Realtors®, it is important to understand what these changes are and how they may affect the time frames for lenders to process loans. The National Association of REALTORS® has released the following information on these new rules:

Lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z).  The new requirements apply to loan applications filed on or after July 30, 2009 (about two months earlier than originally planned).   The new rules are complex and compliance will be a challenge for lenders.  

REALTORS® will want to learn the basics so they can advise clients of potential delays and the new procedures. Here are key highlights of the changes:

• The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinancing.  Investor loans continue to be exempt.

• Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.

• The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.

• Consumers may shorten or waive the 3-day and/or 7-day waiting periods for a “bona fide personal financial emergency,” but only after receiving an accurate TILA disclosure.  In the final rule’s preamble, the Fed stated that it “believes waivers should not be used routinely to expedite consummation for reasons of convenience.”  The Fed decided not to insulate lenders from liability even where a consumer modifies or waives the waiting periods.

• If the annual percentage rate (APR) changes by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan.  The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.

• For additional information you can go to Federal Reserve Board Final Rule and Staff Commentary (Federal Register, May 19, 2009) http://edocket.access.gpo.gov/2009/pdf/E9-11567.pdf

Update on the First Time Homebuyer Tax Credit
From Steve Ryan, MAR General Counsel and Michael McDonough, MAR Associate Counsel 

Q. I heard other states have programs where the $8000.00 Federal First Time Homebuyer Tax Credit is available for buyers to use as a down payment or to cover closing costs. What progress has been made on the effort to monetize the tax credit here in Massachusetts.

A. As of the middle of July, Massachusetts now joins a small but growing number of states that have developed a unique way to allow buyers to access the credit at a time when it can be most helpful in the home buying process.  In fact, a study just released by the National Association of REALTORS® found that 82% of would-be home buyers believe that saving enough for a down payment is still their biggest obstacle to home ownership.

Mass Housing is now offering a loan program that allows first-time homebuyers to use the $8,000 federal tax credit as part of their down payment or to cover closing costs, rather than waiting until they file their 2009 taxes.

How it works:

Homebuyers who are using a Mass Housing first mortgage loan to purchase their first home apply for the Tax Credit Loan program through their lender. The Tax Credit Loan is used to cover closing costs or as part of the down payment. In 2010, the homebuyer claims the $8,000 tax credit on their 2009 federal tax return. The homebuyer then repays the Mass Housing tax credit loan. No interest is charged if the Tax Credit Loan is repaid by June 1, 2010. Otherwise, the Tax Credit Loan is amortized over the next 10 years, at the same interest rate as the first mortgage

Eligibility:

To qualify for the Homebuyer Tax Credit Loan Program, you must be a first-time homebuyer using a Mass Housing mortgage; meet income limits and purchase price guidelines; purchase a one- to four-family home by November 30, 2009 and use the property as your primary residence for the life of the mortgage

For more information on the First Time Home Buyer Tax Credit including a detailed Q&A, visit www.marealtor.com

For more information on the Mass Housing Program visit their website at www.masshousing.com

Submitted by Sandy Carroll on 07/31/2009