DSCR Loans

[ilsindaco2628]

I'm in New Jersey and I don't know if this is as much of a problem outside NJ And NY but these loans are getting a lot of appraisers in hot water.

This is the definition of DSCR Loans:

The debt service coverage ratio, also known as the debt coverage ratio, is a financial ratio that measures an entity's ability to generate sufficient cash to cover its debt obligations, including interest, principal, and lease payments. It is calculated by dividing the net operating income by the total debt service.




I've heard from management at two different AMCs that Fannie Mae is hitting them with lists of hundreds of appraisers that they can't use anymore mainly because of flagged reports for DSCR loans.

If you do take on these assignments as appraisers, STICK TO YOUR GUNS regarding your estimated market rents. I can't tell you how many times I've gotten reconsiderations of market rent, the subject is a two family in Newark NJ that hasn't been updated in 50 years and the rents they send in their reconsideration are brand new construction, single family homes, completely renovated... and they are basically telling you "we need these numbers for the loans to work." I guess too many appraisers are eager to help because a lot are getting blacklisted by Fannie Mae.

Has anyone else had issues with these loans?

 

[Non Sequitur]

There's a couple of GSE guys in the forum, hopefully you can get an answer.

 

[J Grant]

Do the right thing on any assignment regardless of loan type. If certain AMC's are pressuring for value via the ROV ( and it is a real thing), one would hope the AMC's get sanctioned as well. If apprasers are jacking up values they deserve to get hit, regardless of loan type. Maybe a large percent of these loans were audited - IDK.

 

[sputnam]

I'm in New Jersey and I don't know if this is as much of a problem outside NJ And NY but these loans are getting a lot of appraisers in hot water.

This is the definition of DSCR Loans:

The debt service coverage ratio, also known as the debt coverage ratio, is a financial ratio that measures an entity's ability to generate sufficient cash to cover its debt obligations, including interest, principal, and lease payments. It is calculated by dividing the net operating income by the total debt service.




I've heard from management at two different AMCs that Fannie Mae is hitting them with lists of hundreds of appraisers that they can't use anymore mainly because of flagged reports for DSCR loans.

If you do take on these assignments as appraisers, STICK TO YOUR GUNS regarding your estimated market rents. I can't tell you how many times I've gotten reconsiderations of market rent, the subject is a two family in Newark NJ that hasn't been updated in 50 years and the rents they send in their reconsideration are brand new construction, single family homes, completely renovated... and they are basically telling you "we need these numbers for the loans to work." I guess too many appraisers are eager to help because a lot are getting blacklisted by Fannie Mae.

Has anyone else had issues with these loans?

I can't seee how that is an issue that falls on appraisers unless, the appraiser isn't diligent in doing his/her job. If an appraiser is succumbing to pressure to hit a number, that's a fail by the appraiser.

 

[BRCJR]

Never have I seen the DSCR completed on a residential 1-4 unit property. Not saying that it is not done, just never seen it in those properties. I see if frequently in commercial properties completed by GC's.

 

[alebrewer]

The debt service coverage ratio, also known as the debt coverage ratio, is a financial ratio that measures an entity's ability to generate sufficient cash to cover its debt obligations, including interest, principal, and lease payments. It is calculated by dividing the net operating income by the total debt service.

Yep - basically using projected rental income to qualify for a loan (as opposed to personal income). Non-QM products for investors.

I've heard from management at two different AMCs that Fannie Mae is hitting them with lists of hundreds of appraisers that they can't use anymore mainly because of flagged reports for DSCR loans.

Most dscr loans are non-QM (that I'm aware of). Not sure why F/F would even be involved?

 

[ilsindaco2628]

Never have I seen the DSCR completed on a residential 1-4 unit property. Not saying that it is not done, just never seen it in those properties. I see if frequently in commercial properties completed by GC's.

That's surprising because they are coming over almost every day as new orders.

 

[CGinMN]

DSCR is a non-QM, so they won’t be sold to Fannie and Freddie, but they do get sold to non-agency secondary market investors. That’s doesn’t mean these appraisals don’t uploaded into the GSEs UCDP, they likely do in many instances. If Fannie and Freddie see a lot of overvaluations from specific appraisers, they could theoretically blacklist them.

 

[ilsindaco2628]

Never have I seen the DSCR completed on a residential 1-4 unit property. Not saying that it is not done, just never seen it in those properties. I see if frequently in commercial properties completed by GC's.

Just got an order this morning for a purchase of a single family... DSCR loan, needs a 1007 and rents.
Appears to be very common in NJ.

 

[Non Sequitur]

I've heard from management at two different AMCs that Fannie Mae is hitting them with lists of hundreds of appraisers that they can't use anymore mainly because of flagged reports for DSCR loans.

If you do take on these assignments as appraisers, STICK TO YOUR GUNS regarding your estimated market rents. I can't tell you how many times I've gotten reconsiderations of market rent, the subject is a two family in Newark NJ that hasn't been updated in 50 years and the rents they send in their reconsideration are brand new construction, single family homes, completely renovated... and they are basically telling you "we need these numbers for the loans to work." I guess too many appraisers are eager to help because a lot are getting blacklisted by Fannie Mae.

Has anyone else had issues with these loans?

The housing hustle igniting a foreclosure crisis in Baltimore

The foreclosures could send neighborhoods spiraling and make Baltimore America’s next great housing crisis.

www.thebanner.com

"In a sampling of 88 confidential loan applications reviewed by The Banner, the same two appraisers — XXXX XXXX and XXXX XXXX — surveyed all of the New Yorkers’ properties.

A variety of third-party reviewers repeatedly flagged many of those appraisals as risky due to their high valuations, according to the loan documents, which outline a host of concerns with the appraisals’ accuracy and methodology. But the lender still approved all 88 of them. Since then, some properties have been reappraised at lower values, the documents show.

Neither XXXX nor XXXX, both based in the Baltimore area, responded to multiple requests for comment. Both appeared on Wall Street blacklists."

I edited out the names because I don't want to place the blame for these loans on them, but the names are in the article if you read it.

DSCR requests started coming across my email a couple of years ago. Now I'm happy I just deleted any request that read DSCR. Can't say I had any particular knowledge, but it smelled to much like Ameriquest to me.