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Questions About Making Home Affordable Refinance Program

Home appraisal value with basement finish?

I am a mortgage underwriter, and have a couple questions for an appraiser. I want to refinance my home, but I pulled the comps and there weren’t many in the value range I am hoping for. There are several which have 100-200 more above ground living space, with some varying finished basement square footage. Basement living space is common for the area.

My basement is already divided into 4 rooms. One is an unfinished laundry with a stall shower. The other three rooms have concrete flooring, a mixture of drywall/wood paneling walls, and ceilings. One room could be a family room, one of the rooms has a closet, but no egress window, but I am assuming this won’t make a huge difference since it can’t be included in bedroom count regardless, so all I can really get is the below grade square footage.

The fourth room is finished the same as the potential family room/room with closet, but it has the fuse box on the wall. If I finish this room as well, could it be included in the square footage as livable space?

Planning on painting everything, adding flooring (carpet or laminate sub-floor), trim. Two of the three rooms in question have ceiling lighting, the third has wall sconce lighting.

I just would like to get another opinion before I do all the work. I’d like to do a straight refinance versus the Home Affordable Refinance Program, because I have a purchase money second mortgage, which would be ineligible for modification. My only holdback on getting the refinance is what I think the value would be with the limited comps in the past 12 months.

I’m an underwriter- not an appraiser. I don’t know how to write an appraisal and necessarily know if they would consider a room with a fuse box on the wall living space or a utility room. Why do people on here answer questions rudely instead of being helpful?

Industry Expert answers:

Ok, lets start with the difference between GLA and square footage. Fannie Mae/HUD states that any room below grade is basement and is not considered in the GLA (Gross Living Area), so if you have a ranch or rambler with 1,000 sf of GLA and a 1,000 sf basement you do not have 2,000 sf of GLA. You have a 1 story home with 1,000 sf of GLA and 1,000 sf of basement. All rooms are counted but some are not give any value. Lets say you have a 3 bedroom rambler that has a 1000 sf of GLA and your neighbor has the same house that has a 1000 sf of GLA and has 4 bedrooms the value is the same. Because the difference is reflected in the GLA adjustment. Room count does not really mean a hole lot. It would be like taking a 1000 sf basement and framing it off with 6 bedrooms, you added NO value. The average family would rather have a family room and a den. Basements range in a wide range of construction, from unfinished to finished the same as the GLA area. The adjustments for basements would range from $5 sf to $30 sf, depending on the quality of construction compared to $30 sf to $50 sf for GLA. GLA is defined as above ground heated living area with at least 6.5 feet head room. Any portion of finished attic area without 6.5 feet head room is excluded from GLA. Stairwells are included in the ground level GLA only and excluded from any second floor area (a stairwell cannot exist on both levels) or basement area. Unheated areas, even if finished out, are excluded from GLA except for supporting areas such as closets, halls, foyers, etc. Some areas, such as sunrooms, enclosed porches, etc., even when heated may not be included in GLA unless the finish is equal to the primary GLA; such additional areas are treated separately in the grid on page 2 as amenities when not included in the GLA. If a garage conversion to living area is above grade, completely finished-out to an acceptable professional level, and heated, it is included in the GLA, but a percentage adjustment may be made if necessary for differences in relative quality of the finish compared with the primary GLA. For example, the primary GLA might have 2 X 6 exterior walls with extra insulation and a crawl space with floor insulation, while the garage conversion might have 2 X 4 walls with more limited insulation and a slab foundation. When major differences exist between the quality of finish, the garage conversion is omitted from the GLA and treated as an amenity at the bottom of the grid. In some cases, a garage conversion may contribute less value than the lost value of not having covered parking, when the conversion is of poor quality.

I’m not trying to be rude but this really bothers me, that you are reviewing my appraisals and have no clue what you are doing. Now I see why I get a bunch of nonsense request from underwriters, that just wast my time.

Has anyone done the Making Homes Affordable program…?

not the refinancing, but the payment modification? How long did it take to get approved? Was it a long process?

Industry Expert answers:

Well the time it takes for a HAMP Modification to go through really depends on the servicing company of your mortgage….There are government counseling services that will help you with your HAMP Modification for free, so what ever you decide do not pay a third party to do your modification for you…(http://www.makinghomeaffordable.gov/counselor.html ) So if you are looking into modifying your mortgage there are many perks in doing so, you just want to be as accurate as possible when reporting your income and expenses, be patient with the process, because a lot of these mortgage companies are so large that they are not able to handle the number of requests they are receiving due to the current economic status…any other specific questions?

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