Are you Commingling? Mortgage Definitions

Commingling can take several different forms and meanings so we are going to focus on the root of the word. According to Wikipedia, Commingling literally mean “mixing together.” This is a common concern in the Real Estate world when it comes to collecting Earnest Money deposits and such. Taking a clients money and mixing it with your own personal funds is illegal. Financial advisors and attorneys also run the risk of serious legal action if they were to commingle funds.

It is when a fiduciary mixes funds that he holds in care of the client with their own funds. This makes it difficult to determine who’s funds are who’s and in the case of financial investment how to distribute gains.

For the purposes of this blog I wanted to touch on Commingling from the gift perspective.  As FHA continues gain steam as one of the premier financing tools for a home purchase so does gift for down payment. The Paper trail of the gift is extremely important and must be consistent throughout. For Example: Your aunt has agreed to give you $5000 for the use toward your purchase. Your aunt must show she has the ability to give the money via a bank statement, evidence the withdrawal from that account, show the cashiers check and the borrower must provide a statement receiving the funds. The cashiers check and the deposit into the borrowers account must match. Many times clients take the Cashiers check from the aunt and Commingle the funds with another small deposit. Now the paper-trail of the gift does not match across the board. If the additional funds were case they are hard to track.

Commingling could cost you time and anxiety in your purchase transaction if you do not pay attention.

HVCC rules and regulations start today!

One may start by asking what is HVCC? The term HVCC stands for the Home Valuation Code of Conduct. It has been designed so that the lender chooses the appraiser that values the collateral that the lender is lending against. It was felt that the Broker had undue influence on the appraiser that they worked with. In short, it was felt that we as Brokers could control the value of an appraisal simply by asking our appraiser to push. Certainly I do believe that there were cases that the appraiser may have been influenced by a Broker. I am not naive. However, in the end there were underwriters, desk reviews, and field reviews that were three points of quality control. Essentially the Underwriter or staff appraiser or the appraiser that performed the field review all had a chance to change the outcome. IN many cases they did change the outcome.

FNMA and FHLMC also known as Fannie Mae and Freddie Mac entered into an agreement with the Federal Housing Finance Agency and the New York Attorney Generals office to follow certain procedures on all loans delivered to the agencies. The policy requires the lender to order the appraisal on all conventional 1-4 family properties effective as of 5/1/09.

Do FHA and VA adhere to the policy? As of now it is not required that either FHA insured loans or VA guaranteed loans follow the new policy. The Brokers will still order FHA appraisals and VA has always been controlled by the lender.

Who are the appraisal companies that are being used and what does this do to the appraisal profession? The Lenders are using approved appraisal management companies that have appraisers approved under their umbrella. The Lender orders from the management company and the management company selects one of the appraisers they have on staff. The Problem is that the appraiser have taken a large pay cut for the same amount of work. For an appraisal that they made $375 on they now will be limited to $200 or so dollars. How would you like to take a 50% pay cut? Also, business as you know it networking and such is partially out the door. Time to specialize as an FHA appraiser.

Payment – The management companies can be paid by the Broker or the consumer online. Many of them accept Visa, Mastercard or AMEX. This will have to be done prior to the order beginning to take place. It will be critical to get this done right away so that the timeline of your purchase is not thrown out of wack. Yes, I will need the three digit security code from you:( Another part of the payment that is completely annoying is that it will vary from management company to management company and by location. The lack of standard fee practice will get confusing and will lead to an apparent lack of professionalism when you have to say on the GFE.

Turn Times – They will be five business days in a perfect world. Want a rush give me some more money. No longer can you ask your appraiser to swap an appraisal so that you may meet a deadline. I am sorry in advance to my Real Estate partners. This will be another thorn in our side to overcome. The good news is we have gotten quite good at overcoming the thorns.

Appraisal Conditions – This will be something that will also slow down the process as it has to go through the lender as well. Tack on a few more days. Hopefully they will condition less since they chose the companies that we will have to work with.

Consumer and the Broker will get a copy – The consumer will get a copy three days prior to the close of escrow or sooner. The borker will have a copy available on the website for their file.

Assignment – Decide that you want to use another lender? Well the appraisal will only be assigned if the loan is declined. Therefore you will have to go through the process again. Yeah!!!!!!!!!!

These are only a few of the requirements of the HVCC regulations and I am sure they are not the last that we will have to abide by. The industry is changing and like all Metamorphosis it is a little painful. The punishment is a little tighter than necessary but for now this is what it is. Hang on for the ride and don’t be surprised when the lender still asks for an appraisal review.

As Always thank you for reading,

Matt Freeman