Atlanta Agent (AA): We report often on how low inventory is in Metro Atlanta, and how that affects agents. What about on the lending side? How does low inventory impact your day-to-day business?
Whitney Fite (WF): Low inventory in Atlanta has become a major issue on the lending side of the business. The low inventory levels are leading to multiple-offer situations, which are driving home prices up. So, when a buyer and their agent try to make an offer stand out, they often shorten due diligence timeframes, lender approval timeframes and agree to shorter-than-usual closing timeframes.
Taken together, all of these concessions eventually “roll downhill” and become the lender’s problem. Ultimately, the lender has to perform each task within less than ideal timeframes.
AA: What are other challenges you are encountering in Atlanta’s 2016 market?
WF: Due to the low inventory levels and multiple-offer situations we’ve experienced as a result of low inventory, we are starting to see low appraisals come in more often. This is most often caused by homebuyers’ willingness to pay over asking price to ensure they get the home, and sellers trying to take advantage of the market conditions when there aren’t enough comparable sales for the appraisers to use.
AA: Finally, should agents brace themselves for any new regulations that may impact the buying/selling process?
WF: The industry is still finding its way through TRID, which continues to impact the buying process. The next big change on the horizon in our industry is the implementation of Trended Credit Data, which adds a more comprehensive analysis of the data contained on the credit reports to the underwriting process. Credit reports currently used in mortgage lending indicate only the outstanding balance, utilization and availability of credit, and whether a borrower has been delinquent in the past. The reports also “score” the credit on a numerical scale.
On June 24, Fannie Mae will launch version 10.0 of Desktop Underwriter, an automated underwriting engine. This new version will use trended credit data in the review of the risk assessment, which provides access to historical monthly data on several factors, including balance and scheduled payments as opposed to actual payments made on revolving accounts.
That more comprehensive approach to analyzing a borrower’s credit profile allows for smarter, more powerful prediction of risk, and will be more indicative of which borrowers are most creditworthy. As with any new regulations, there are some concerns that this will create a more subjective approach to the approval process, which can lead to inconsistencies. That is yet another example that the only constant in the mortgage industry is change.