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Archive for May, 2010

AMC Love and Hate, Cuomo For Governor?

May 25th, 2010

Working With Some AMCs to Survive

Robert L. Martin was interviewed for this article. He is a Certified Residential Appraiser from Paso Robles, California, who practices solely in San Luis Obispo County.

Bob began his working career in 1977 immediately after graduating with a degree in real estate and property management.  During the ensuing decades, he has worked for Bank of America in both lender and appraiser positions as well as working as an independent fee appraiser and as a real estate broker.  Along the way, Bob worked to receive the SRA designation from the Appraisal Institute and established his own appraisal practice.

During the 1990’s, Bob had two appraisers working under him and built a healthy practice.  Most of Bob’s business was mortgage related residential appraisal work and the business thrived for many years up through the middle portion of this past decade.

During the past year, however, all of this changed as several banks Bob worked with on a regular basis either failed or were acquired by other lending institutions and, in combination with the advent of the HVCC, appraisal orders dramatically declined along with the fees for assignments.

When I spoke with Bob recently, he was unsure of whether he was going to continue in the appraisal business and was considering a career switch to an agricultural business since he lives on a ranch in what is largely a rural area.  He is currently working with several small community banks along with several AMCs but indicated that he’s “running a little bit scared” with revenues substantially down from previous years.

While the bottom line is always about money, Bob not only complained about being offered fees for appraisals that were far below the amount required to complete complex assignments properly but also felt insulted by the “babysitting” service performed by AMCs.  He offered one example: an AMC called him and offered him $125 for an appraisal assignment for a property along the coast that had the potential to be a complex job with many hours needed to complete the research to perform the job properly.  Of course, he declined the offer to appraise the property after which the AMC upped their offer to $180 before eventually agreeing to a fee of $350.  Bob then explained to the AMC that his customary fee for an appraisal of a property similar to this within this beachfront community was from $475 to $500 and would not agree to anything less.  Bob subsequently did not hear back from this management company.

Bob also spoke of other appraisers he knew who were considering options outside of the appraisal field and concluded our discussion by saying “Why do we need to run the most experienced appraisers out of the business?”

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Working with AMCs and Thriving

Debra Urianek is a Certified Residential Appraiser from East Islip, NY and is co-owner of Orion Appraisals and Management with her husband Bill. Debbie and Bill have an appraisal practice which includes rural and suburban portions of Long Island as well as urban areas in the outer boroughs of New York City.

Debbie has been practicing as an appraiser for more than twenty years and has been working with AMCs for most of her appraisal career. Approximately 90 to 95% of her appraisal assignments currently are from AMCs, as opposed to approximately 85% one year ago.  Most of the AMCs that she deals with are larger firms, although she deals with a number of smaller AMCs too, and some of these working relationships go back almost to the beginning of her appraisal career.  During this past year she reports little change in her price structure with the exception of across the board increases with the advent of Form 1004MC and one AMC which immediately increased fees for FHA appraisals by $100 on February 15th in response to the FHA’s Mortgagee Letter 2009-28 (which includes the mandate that “FHA-approved lenders have new responsibilities to ensure that FHA appraisers are ‘…compensated at a rate that is customary and reasonable for appraisal services in the market area…”)

Debbie has been a friend of mine for about 15 years and she is serious about providing quality appraisals and knows her market area well.  She is not only one of the hardest working appraisers I have met but she is also honest and very direct in her communications.  During the “sub-prime craziness” earlier in this decade I would not have wanted my Mom to hear Debbie’s response to a mortgage broker asking her to push values! Debbie does not tolerate attempts to influence her value opinions and reports to me that the AMCs that she has long-standing relationships with do not pressure her; I would expect that any new AMCs that tried to do so would have a rude awakening.

Debbie has a good support staff and attempts to maintain clear channels of communications with the AMCs that she deals with.  Many appraisers new to working with AMCs understandably lose patience with uninformed, non-appraiser employees (“phone slaves” as they are sometimes derogatively called) but Debbie and her staff try to be proactive by efficiently processing orders and providing “statuses” in a timely manner to their clients.

Debbie mentioned one bad experience receiving payment from AMCs.  Several years ago when Express Financial Service shut down, Orion Appraisal was owed more than $20,000 in appraisal fees.  After a lengthy period of time and a number of court filings, she was able to recover approximately 1/3 of the money owed.  Except for this one instance, Debbie reports that the AMCs she deals with adhere to their payment schedules with some paying every two weeks, some on 30 day cycles and others paying either immediately upon the appraisal clearing a review process.  A link to an article about Express Financial Service and the problems appraisers had is found here:

Express Financial’s Shutdown Wallops Real Estate Contractors

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New Bills Passed to Regulate AMCs

The Appraisal Institute reported in their online newsletter on May 19th that four additional states have enacted laws to regulate AMCs.  With the addition of these four states (Arizona, Vermont, Florida and Minnesota), fourteen states now have laws to regulate AMCs (the previous ten consisting of Arkansas, California, Indiana, Louisiana, Nevada, New Mexico, Oregon, Utah, Virginia and Washington).

Regarding these four most recent states to enact AMC bills, the Appraisal Institute article stated that:
“Under each of the new laws, AMCs operating in each state will be required to register with, and be overseen by, the state appraisal boards.  AMCs operating in each state will be prohibited from influencing or attempting to influence the development, reporting, result or review of a real estate appraisal through coercion, extortion or collusion by withholding or threatening to withhold timely payment of future business from an appraiser”.  The Appraisal Institute article notes that the Arizona law requires appraisers to be paid within 45 days of the date the appraisal is completed while the Vermont statute requires that AMC review appraisers have a licensing or certification status equal to, or greater than, that required to complete the appraisal assignment.

Additional information about the Appraisal Institute can be found by visiting their website at: www.AppraisalInstitute.org

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Freddie and Fannie to Implement Tweaked HVCC Provision

On May 19th, Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), conservator of Fannie Mae and Freddie Mac, wrote to New York State Attorney General Andrew M. Cuomo regarding the HVCC’s provision that Fannie Mae and Freddie Mac (the “Enterprises”) were to establish and fund an entity to be called the Independent Valuation Protection Institute (IVPI).  Noting that the HVCC was agreed to prior to the FHFA’s placement of the Enterprises into conservatorship, Mr. DeMarco stated that he has decided not to proceed with this portion of the agreement for reasons related to unnecessary expenditure of taxpayer funds.

In a press release dated May 20th, the FHFA described what would take the place of the functions of the never instituted IVPI:

“Fannie Mae and Freddie Mac will deploy a complaint process to address suspected code violations including a mechanism for providing pertinent information to state and federal regulatory and enforcement departments. The process will be put in place within the next few weeks.”

A link to Mr. DeMarco’s letter to Andrew Cuomo as well as the FHFA news release is found here: Fannie Mae, Freddie Mac to Deploy Appraisal Complaint Process

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Governor Cuomo? Last Chance for Action to End BPOs and BOVs

By now, most appraisers around the nation have heard about Andrew Cuomo’s May 22nd announcement that he was entering the race for New York State Governor.  Many pollsters have him in a favorable position at this point but before entering the Governor’s mansion, we think that it is not asking too much for him to read our letter dating back to August 4, 2009 (go to www.EndBPOsNow.com to see) and take one final action as Attorney General to use the powers at his disposal to help end BPOs (Broker Price Opinions of residential real estate) and BOVs (Broker Opinions of Value of commercial real estate).

Once again, we at Appraiser Help want to note our support for the positions taken by the four appraisal organizations which authored the March 8th and April 20th letters that we have previously discussed opposing the use of both BPOs and BOVs.  Links to these two letters are here:

Letter to State Appraiser Board Chairs from Leading Appraisal Organizations

Concerns Over Property Tax Assessments and Real Estate Taxes in Philadelphia

The Philadelphia Inquirer, in an article on May 14th, discussed the problems in the assessment system in Philadelphia which led to budgetary shortfalls and an almost 10% increase in property taxes.  A link to that article is here:

Council Approves Proposed Real Estate Tax Hike

As we reported in our last newsletter, opportunities abound in many areas of the country for appraisers performing appraisals for property assessment and tax grievances.  We would like to repeat three points from the last newsletter:

1. Licensed and certified appraisers are logically the professionals who should be involved in providing the most accurate, unbiased market value estimates to homeowners and commercial property owners concerned about property tax assessments that are overblown.

2. In many areas, property owners and departments of assessment recognize the contribution provided by appraisals provided by licensed and certified appraisers.  Why, however, is the number of grievances still such a tiny percentage of the overall number of over-assessed properties and why aren’t appraisals by licensed and certified appraisers used more frequently?

3. Final question: Why aren’t appraisers doing more to promote the importance of their services in property tax assessment matters for both residential and commercial real estate?

Rates & Dates

The Mortgage Bankers Association (MBA), in its most recent Weekly Mortgage Applications Survey for the week ending May 14th, reported that the average rate for 30-year fixed-rate mortgages dropped to 4.83% from the previous week’s rate of 4.96%. Freddie Mac reported a decline to 4.84% in their most recent report for the week ending May 20th, down from the 4.93% during the previous week.

While Bloomberg.com reported on May 19th that mortgage applications (particularly for purchases) fell overall even with these declining mortgage rates, the Wall Street Journal reported yesterday that anecdotal evidence from mortgage professionals suggested that refinance activity may have surged last week.  They reported that the financial turmoil in Europe was the big factor contributing to low mortgage rates since “…international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year…Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market.  Instead, many in the industry now say rates could drift as low as 4.5% this summer…instead of rising to 6% as some economists projected…”

New Thoughts on a Double Dip Recession

On May 14th in the New York Times, Yale University professor of economics and finance (and housing guru) Robert Shiller had some interesting and disquieting thoughts about the (long term) possibility of a double dip recession in an article titled “Fear of a Double Dip Could Cause One,” a link to which is found here: Feat of a Double Dip Could Cause One

Bloomberg.com reported yesterday that while home sales rose in April, inventories rose at a faster pace leading to concerns that property values may decline further.  It is noted that the Case-Shiller report will be coming out later today.  A link to the Bloomberg.com article is found here:

US Economy: Home Purchases, Inventories Increase

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

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

New Concerns in Commercial / Multi-Family Real Estate

Bloomberg.com reported yesterday that defaults in mortgages backed by apartment buildings jumped to a new high of 4.6% during the first quarter of 2010, approximately twice that of the year earlier level.  They cited a report by Real Capital Analytics which stated that borrowers were failing in their payments in regard to mortgages approved near the peak of the market.  The report also indicated that defaults rose during the first quarter for mortgages backed by office, retail, hotel and industrial real estate.  It quoted Sam Chandan, Real Capital’s global chief economist as saying that:

“Apartment defaults are leading other commercial real estate. Banks tended to make more aggressively underwritten apartment loans earlier during this last cycle. Credit and pricing reached their peaks for office properties and other commercial assets later.”

A link to the entire Bloomberg.com article is found here: Defaults on Apartment-Building Loans Set Record for U.S. Banks

“The Girl Who Kicked the Hornet’s Nest” is Released Today

In a previous newsletter we discussed the late author Stieg Larsson’s book “The Girl with the Dragon Tattoo” and its coincidental publication in the United States during the same week in September 2008 that Lehman Brothers collapsed and the financial system was shaken.  We noted an article by Frank Rich in the New York Times which stated that:

“What’s remarkable is that Larsson wrote all this in a book completed years before the meltdown of 2008 — and was referring only to Sweden. And yet the overlap with our recent history is profound — so much so that surely both his prescience and the universal resonance of his villains account for some of his novel’s marathon ride through the zeitgeist, its ability to touch the nerves of so many readers in America and throughout the West.

If anything, the animus driving “Dragon Tattoo” seems more timely every day.”

Well, she’s back! Book three in Larsson’s trilogy, “The Girl Who Kicked the Hornet’s Nest” is being released today. Fans of “The Girl” might be interested in a New York Times article from May 20th and a short biography of the author from May 22nd, links to which are found below:

The Afterlife of Stieg Larsson

The Life of Stieg Larsson

Ask Angie

We want to congratulate our two most recent winners: Benjamin B. Sadtler, a Certified Residential Appraiser with the Northern Appraisal Group in Richmond, Virginia and Holly M. Chaffee, a Certified Residential Appraiser from Las Vegas, Nevada.

Today’s questions:

Question 1) Who said:

“Beware of the man of one book”

1. Stieg Larsson

2. James Patterson

3. Plato

4. St. Thomas Aquinas

5. None of the above

Question 2) Who said:

“All I can say is, beware of geeks bearing formulas”

1. Warren Buffett

2. Bill O’Reilly

3. Albert Einstein

4. Rachel Madow

5. None of the above

The first person to respond with both correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com 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 www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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