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Archive for April, 2010

Hope for Appraisers / What’s Worse than BPOs?

April 27th, 2010

Mortgage Fraud Suit Brought by SEC Against Goldman Sachs

On April 16th, the SEC filed a civil fraud suit against Goldman which alleged that the Wall Street giant misled investors in connection with their conflicting positions on hedge fund trades that profited if subprime loans defaulted and the housing market collapsed.  The New York Times and the Huffington Post offered interesting analysis of this case on April 18th and links to these articles follow:

Senior Executives at Goldman Had a Role in Mortgage Unit

Goldman’s Blueprint for Dumping Toxic Assets: How These CDOs Were Designed to Fail

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Triple A or Triple X? The Inappropriate Relationship Between Credit Rating Agencies and Wall Street

In an article in the New York Times on April 23rd, the question was raised of how so many bad mortgage investments earned credit ratings that made them look so good.  The article suggested that close collaboration between the regulators and the Wall Street firms was to blame and it stated that:

“In essence, banks started with the answers and worked backward, reverse-engineering top-flight ratings for investments that were, in some cases, riskier than ratings suggested…”

The entire article can be read by clicking on the following link:

Rating Agency Data Aided Wall Street in Deals

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More From Our Readers About BPOs, AVMs, the NAR and the Growing Conflict

Here are several more of the many e-mails that we received in response to the article in our recent newsletter titled ‘Conflict’ Breaks Out Between Appraisal Institute, NAR and Others over BPOs:

Bill, as usual your publication is spot on.  Keep up the good work…My involvement with the mortgage industry has been limited as I specialize in litigation and on complex properties both residential and commercial.  My future plans for Tomasini Appraiser’s include an AVM model which will become active later this year.  Like most appraisers I have followed the history of our profession with a mixture of shock and disappointment…Since May 1st, 2009 residential fees have fallen to a level where most appraisers cannot even pay their bills much less plan for retirement/children’s education, etc. Present day communication has gone back to the days of Maxwell Smart and the dreaded “Cone of Silence”.  Not only in our profession, but throughout Corporate America it has now become almost impossible to speak to a living person via telephone.  Firewalling our data stream has left our future in the hands of AVM’s…BPO’s…and other intercomputer products much to the delight of the Mortgage Industry…I don’t know what the future – if any – holds for today’s Appraisal Profession.  Our Associations are once again very busy in Washington trying the same “Lets see what the Politicians/Attorney’s can do for us… David Tomasini,
Pres., Tomasini Appraisals, Inc./Maj. Ptnr., Flintstone Valuations, LLC,
Reno, Nevada

BPO’s are also illegal in Oregon. I have written to the local and national board to express my displeasure in regards to the way my membership dollars are being spent. My Realtor wife supports me in this. How many times has an appraiser been called by a Realtor to appraise a prospective new listing because they had no idea what it was worth?

J Steven Sanders,
Certified General Appraiser, Oregon

Bill, in Florida a speaker has traveled the circuit teaching realtors how to get foreclosure listings and the first step is to do BPO’s.   He proceeded to give about 30 minutes of the 8 hours toward how to do BPO’s.  He said you should spend no more than 5 minutes to do a BPO.  As he pointed out, some realtors in his office do over 250 BPO’s a week.  As his description went on it was clear that he hired a person for each task, shooting pictures, inputting information and general management.   He just did a quick visual of the BPO on the computer and sent it out.  He implied that it has been over a year since he was in the field to personally see any of the homes he did BPO’s on. Thomas Hayes,
Certified Residential Appraiser,
Melbourne, Florida

Bill, please note that we are organizing appraisers in New Jersey to end the illegal use of BPOs.

Warren Cohen, Certified Residential Appraiser,
WC Appraisals,
Fairlawn, New Jersey
Editors note: Mr. Cohen contacted us regarding a meeting of New Jersey appraisers but that meeting has already occurred. Please contact Appraiser Help if you would like contact information for Mr. Cohen regarding future events.

What do we think about the BPOs and this “conflict” between the appraisal organizations and the NAR? We have been very clear about our position towards BPOs and our support for the positions taken by the four appraisal organizations who authored the April 20th letter along with the March 8th letter discussed in our previous newsletters. Please visit our website for additional information and ways you can join the effort to end BPOs.

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What’s Worse Than a BPO for Residential Valuation? Maybe a BOV (Broker Opinion of Value) for Commercial Use

On April 20th, four appraisal organizations addressed a letter to State Appraiser Board Chairs & Lead Staff Contacts concerning Commercial Broker Opinions of Value (BOV).  The four appraisal organizations (the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers & Rural Appraisers and the National Association of Independent Fee Appraisers) stated that:
“Our purpose in writing is to bring to your attention the possibility that real estate agents and brokers in your state may be providing broker opinions of value (BOV) of commercial real estate without appropriate appraiser credentials. If true, such performance blatantly disregards numerous state statutes that require appraiser credentialing for opinions of value of real estate. We strongly urge you to take aggressive enforcement action against any provider of a BOV who does not hold an appropriate appraiser credential…we urge the state Appraiser Board to bring this issue to the attention of the board responsible for the licensing and regulation of real estate agents and brokers, so they may investigate and take appropriate enforcement action against any agent or broker who is performing a BOV for an unauthorized purpose.”

The entire April 20th letter from the four appraisal organizations can be viewed by clicking on the following link: Letter to State Appraiser Board Chairs Regarding Commercial Broker Opinions of Value

Some Good News For Appraisers From Washington

On April 20th, Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program went before the Senate Committee on Finance and called upon the Treasury Department to utilize appraisals for the Home Affordable Modification Program (HAMP) in an effort to prevent fraud.  He stated that:

“To protect against fraud, Treasury should abandon its differing valuation standards across HAMP and adopt the Federal Housing Authority’s appraisal standard for all HAMP principal reduction and short sale programs.”

The entire testimony of Mr. Barofsky can be viewed by clicking on the following link:

Statement of Neil Barofsky Before the Senate Committee on Finance

On the same date, the Office of the Special Inspector General for TARP issued its quarterly report which included the following recommendations:

Treasury’s new initiatives…include:

“Requiring that servicers ‘consider’ principal write-downs at their option as part of the loan modification process when indicated by program guidelines, with increased incentives for successful principal write-downs.

A new program, to be backed by $14 billion in TARP funds and managed by both Treasury and the FHA  that will enable seriously underwater  borrowers to refinance their mortgages so that the total amount that they owe on their homes will not exceed 115% of the homes value”

Rates & Dates: Temporary Drop Bucking Most Long-Term Predictions

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending April 16th reported that the average rate for 30-year fixed-rate mortgages dropped to 5.04% which represents the second week of declining rates after reaching 5.31% two weeks ago. Freddie Mac also reported a decline to 5.07% in their most recent surveys for the weeks ending April 22nd and April 15th after reaching 5.21% on April 8th.

The Mortgage Bankers Association News Link reported figures from the National Association of Realtors which indicated that existing home sales rose in March at the same time that there was a reduction in overall housing prices.  It reported that existing home sales increased by 6.8% in March which reversed the prior three consecutive months of declining numbers.

The report indicated that while the supply of housing was down to 8.0 months from 8.5 months, the total unsold housing inventory increased by 1.5% to 3.58 million existing homes available for sale, the highest level since September of 2009.

Another NAR survey reported that first-time buyers purchased 44 percent of homes in March, up from 42 percent in February, with investors accounting for 19% of transactions in March and repeat buyers the balance. All cash transactions remained high at 27%.

The MBA report went on to indicate that: “The Federal Housing Finance Agency Purchase-Only House Price index fell by 0.2 percent on a seasonally adjusted basis in February, 3.4 percent lower than a year ago. This was the third consecutive monthly decline in the series. The previously reported 0.6 percent decrease in January was unrevised. The index is currently 13.3 percent below its April 2007 peak and is at its lowest level since October 2004… We expect that prices will continue to decline on a year over year basis for the rest of the year, but at a decreasing rate. The Q4 to Q4 change at the end of 2010 is estimated to be a gain of 0.2 percent.”

In a joint press release on April 16th, the Census Bureau and HUD reported that new housing starts rose 1.6% in March, a jump that some attributed to the federal government’s tax credit incentives to homebuyers which is scheduled to end at the end of this week, along with other factors such as bad weather in February in many parts of the country.

An analysis of this data by CNBC can be viewed by clicking on the following link: March Housing Starts

Additional information from the Mortgage Bankers Association can be found by going to their site at: Mortgage Bankers Association: Research and Forecasts

Additional information from Freddie Mac can be found by going to: Freddie Mac Weekly Primary Mortgage Market Survey

Readers interested in Freddie Mac’s April 2010 Economic Outlook can view it by clicking on the following link: History Repeats Itself… But, Which History?

To Rent or To Buy? Depends on Where You Live

An interesting study reported in the New York Times on April 20th weighs the costs and benefits of renting vs. owning in markets across the US. The article can be found here: In Sour Home Market, Buying Often Beats Renting

Will the FDIC Come Knocking on Your Door?

Residential and commercial appraisers interested in keeping informed on liability issues should check out the Appraiser Law Blog, which can be accessed at

The Reviews Are In For “The Big Short” and “The End of Wall Street”

Last newsletter we discussed Michael Lewis’ bestselling book “The Big Short: Inside the Doomsday Machine” which offers interesting and fresh perspectives on the various forces and interests that led to the financial meltdown along with characterizations of those who saw it coming and profited from that understanding. This book and another new book “The End of Wall Street” by Roger Lowenstein were reviewed by Newsweek columnist Daniel Gross in the New York Times on April 16th and a link to that column is here: Eve of Destruction

Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: with your thoughts!

We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at


Bill Collins, Appraiser Help Inc.

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