I have mentioned that mortgage applications have been way down in recent weeks. Today, we saw a spike in applications. I believe this is at least partly attributable to the fact that the FHA is tightening rules starting January 1st so brokers might be rushing to beat that deadline. FHA is the lender of choice for the marginal loan.
The major change is that the bank must order the appraisal and not the broker. While this seems like a minor change it will have an impact on the marginal loan. When a broker orders the appraisal it always comes in where he wants it to. When the bank orders the appraisal it is unpredictable. The applicant is on the hook for the appraisal fee whether or not the appraisal comes in.