Home Appraisals: Changes on the Horizon?

A major legal brawl is breaking out over how homes are appraised, at what cost, and by whom. The outcome could directly affect the price you pay for your next piece of real estate, and the amount of mortgage money you can obtain.

The fight centers on an unusual agreement reached in March among Fannie Mae, Freddie Mac, their federal regulator, and New York Attorney General Andrew M. Cuomo. The agreement took the form of an out-of-court settlement under which Cuomo terminated an investigation of the mortgage finance giants' appraisal practices in exchange for their adoption of a far-reaching "home valuation code of conduct" covering all loans they purchase or securitize.

The code, which is scheduled to take effect on Jan. 1, would shake up the entire appraisal system:

• Mortgage brokers, who originate roughly 60 percent of all new loans, no longer would be allowed to select or pay appraisers. That could force some mortgage shoppers to pay for multiple appraisals rather than just one.

• In-house appraisers at banks and mortgage firms no longer would be permitted to do appraisals for loans to be funded by their organizations.

• Lenders would not be able to use appraisals generated by management companies - firms that contract with networks of appraisers nationwide - if they have a significant financial stake in the management company.

Inflated appraisals - often involving either pressure by loan officers or fraudulent collusion by appraisers themselves - played a role in at least some of the mess we're seeing in many housing markets.

Under the (Fannie-Freddie plan), consumers would be financially tied to the first lender they, or their mortgage or real estate professional, submits their application to. Any subsequent application may require a new appraisal, doubling or tripling the cost and time involved.

Housing Inventory Up Again in April

The number of homes for sale was on the rise again in April. Nationally, inventories expanded 3.5% last month overall and were up 6% over the same period last year.

Even some markets that used to be considered bulletproof have seen inventories grow and these bloated inventories have put pressure on home sellers to slash prices that have already been on a steep decline.

A National Association of Realtors study shows house sales remained soft in March, but the organization is forecasting sales will begin to improve over the summer.

The NAR's Pending Home Sales Index dropped 1 percent to 83 in March and was 20.1 percent lower than the March 2007 index of 103.9.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter.  NAR projects a median sales price of $213,700 and a 4.1 percent jump to $222,600 in 2009.

Cutting Debt: Tips from the Pros

Was one of your resolutions this year to pay off some debt? Finding it harder and harder to pay down debt today? Money Stacy Johnson has a few tips for secrets to paying down that debt. (Video runs 1:32)

What about you? Any ideas you have for cutting down on the debt that wasn't mentioned in this video? We'd love to hear them. Just use the comment link below to tell us your thoughts.

What is Happening to Mortgage Brokers?

What a difference a burst bubble can make. Only two years ago, mortgage brokers originated more than two-thirds of new loans, according to Wholesale Access, a mortgage research firm. Now their share of the mortgage pie has dropped to 45%.

That's a shocking loss of market share when you consider that brokers were supposedly a boon to borrowers. Because they don't work for any one bank, they can (supposedly) shop dozens of lenders on your behalf to get the best loan at the lowest price.

But they seldom did. Instead, many of these mortgage brokers pocketed kickbacks from banks in return for selling borrowers unnecessarily costly loans.

An April study by the Center for Responsible Lending, a nonprofit organization working to eliminate abusive lending practices, found that among borrowers with credit scores of 640 or less, those who used brokers paid an average of $5,222 more in the first four years of their mortgage than those who borrowed directly from a bank. Borrowers with credit scores of 640 to 720 paid $1,316 more.

If shopping for a mortgage, and you want to use a mortgage broker instead of going directly to a bank, demand that your lending middleman set his fee in advance - not just what you will pay but also what he will get from the bank, which affects your rate. His or her total fees should not exceed 2% of the loan.

Have you used a mortgage broker before? Do you feel you were treated fairly? We'd love to hear your experiences, or if you have never used a mortgage broker before but know of someone who has, leave us your comment or thought on this matter below by clicking on the "commment link". We'd love to hear from you on this subject.

Home Loans Without the Big Down Payment

Many people give up on the dream of home ownership before they even get started because they just don’t believe they will ever be able to afford the down payment and closing costs.

A down payment can be as much as 20 percent or more of the purchase price of the house and if you are looking at homes that cost as little as $150,000 you will need to come up with as much as $30,000 just to be approved for the mortgage. Most people don’t have this sort of money sitting in their bank account.

For those thinking these fees would hold them back from home ownership, there is an alternative. There are home loans out there that will help you to get into a home for very little in the way of a down payment and very little in the way of closing costs. Not everyone will qualify for these loan programs, but many people will and many people have been able to buy a home because of them. Why not find out if you qualify?

One of the best home loans for people without a large down payment is an FHA loan. FHA loans are loans provided by a lender but insured by the Federal Housing Administration. These loans allow a lender to provide funding to those who may have less than perfect credit because they are insured against default. These loans are a great option when you don’t have a lot of cash on hand because the down payment can be as little as three percent. When you are buying that same $150,000 home you would be looking at a down payment of $4,500 instead of $30,000. That's a much better deal, and while it still make take some time and effort to come up with the funds, it is much more doable for most people.

In addition to having lower down payment requirements, these loans also have limits as to what can be charged when it comes to closing costs. Many people are not prepared for the cost of closing a loan and they are handed a bill for thousands of dollars and their jaw sort of drops open. It’s hard to come up with these funds and a down payment. When you look at FHA home loans you will find they make closing costs much more affordable. There are also programs out there for you to take advantage of that will help you pay for the closing costs as well as the down payment.

Do your homework when it comes to financing the home of your dreams. You may just find that you can get into that new home for a lot less than you thought.