How does that affect the consumer? Consider the notification one Connecticut brokerage firm recently received from a major lending partner: Starting April 15, all good faith estimates (GFEs) provided to applicants must indicate a flat $455 charge for appraisals arranged through the appraisal management company. The broker previously charged $325. Consumers will now have to pay the appraisal fee upfront -- before any inspection or valuation is completed -- using a credit card, debit card or electronic fund transfer.
What happens if the appraisal comes in low and the applicants can't qualify for the refi or purchase program they sought? Tough luck: They'll have just two choices -- pay another $455 for a second appraisal, with no assurance that it will solve the problem. Or cancel the application.
Jeff Lipes, president of Family Choice Mortgage Corp., which serves the Hartford area, says the net effect of the underwriting, credit score and pricing changes is to "squeeze some people who are credit-worthy by any reasonable standard out of the market."
For instance, as a result of the restrictions on condos, Lipes says "whenever we hear the word 'condo' (from an applicant), we shiver" because the deck is stacked against them. Even for prime borrowers with 800 FICO scores and 50 percent down payments, said Lipes, "I can't tell them that we're certain we can get you a mortgage." A welter of recent rule changes from Fannie Mae have made some condo units in projects with commercial tenants or high percentages of investor units almost impossible to refinance.
In Naples, Fla., John Calabria, president of Bancmortgage Corp., says "it has become such a nightmare to lend money" because of the layers of add-on fees, higher mandatory down payments and FICO scores. One high-income client sought to put down 25 percent ($200,000) to buy an $800,000 condo as a second home but couldn't because the minimum down payment on such a unit is now 30 percent.
"That's ridiculous," said Calabria. "Some of this just doesn't make sense."