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Lawsuits, Jobs, Housing

September 13th, 2011 by Bill Collins Leave a reply »

Housing Issues Secondary in Obama "Jobs" Speech

Tara Steele, News Director at AgentGenius, noted on Sunday that real estate made up just 71 words in Obama’s 4,000+ word speech which disappointed many looking for new initiatives to bring this vital sector of the economy out of its depressed state.  The article quoted Bob Nielsen, chairman of the National Association of Home Builders (NAHB), as saying:
“While the nation’s home builders commend President Obama for tackling critical employment issues, it’s discouraging that the Administration still fails to recognize that housing has a central role to play in restoring the nation’s workforce. In normal times, housing accounts for 18 percent of the nation’s gross domestic product, and nothing packs a bigger local economic impact than home building. Constructing 100 average single-family homes generates more than 300 full-time jobs, $23.1 million in wage and business income and $8.9 million in federal, state and local tax revenue.”

Ms. Steele quotes Mr. Nielsen as noting that:
“Housing has traditionally led the nation out of past recessions and needs to be playing a far bigger role than it has so far in today’s lackluster recovery. That won’t happen until federal regulators move to end the credit freeze for new home production, banks allow qualified home buyers access to affordable home loans and policymakers acknowledge there is a clear need to support homeownership and get housing moving again to spur growth, create jobs and restore consumer confidence.”

A link to the AgentGenius report is found here:
Did Obama’s Speech Reveal Housing as a Priority as Aides Alluded it Could?

On Saturday, Bloomberg’s Lorraine Woellert reported on the comments by Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA) to explore ways to help homeowners refinance into cheaper mortgages as proposed by President Obama in his speech.  Ms. Woellert noted that FHFA officials met with executives in the mortgage industry on Friday to discuss possible changes in the Home Affordable Refinance Program (HARP).  It was originally projected by Obama administration officials that HARP would help as many as five million underwater homeowners but fewer than 840,000 borrowers have permanently refinanced under this program which was extended for another year (until June 2012) by the FHFA on Friday.  A link to the Bloomberg Businessweek report is found here:
Fannie and Freddie Regulator Considering Obama’s Mortgage Plan

On September 8th, Bloomberg View illustrated how a better strategy to averting foreclosures would be to write down loan principals:
“Consider, for example, a $100,000 loan on a house that’s now worth $60,000. A 50 percent writedown, assuming it made the loan affordable to the borrower, would leave the lender with an asset worth $50,000 and a homeowner motivated to invest time and effort in increasing the house’s value. That’s a lot more than what the lender would probably recover by ultimately selling the house after years of foreclosure costs and further depreciation. As of August, recoveries on defaulted loans made in 2006 and 2007 without government guarantees averaged 34 percent of the original balance and were headed down, according to data compiled by Amherst Securities Group.”  

Bloomberg View cited CoreLogic’s report that 13.3 million Americans owe almost as much or more than the value of their home and that while such an initiative would raise a variety of issues, it would be better than keeping millions of Americans “…in a 21st century version of debtor’s prison.”  A link to the entire report is found here:

Bloomberg View: Betting on Solar Energy; Fixing the Mortgage Mess

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"Mortgage Mess" Lawsuits Announced

On September 2nd, the FHFA filed lawsuits against 17 financial institutions including Ally Financial, Bank of America, Countrywide Financial Corp., Barclays Bank, Goldman Sachs, JP Morgan Chase and Morgan Stanley.  The press release announcing the lawsuits alleged “…violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.” The press release went on to say that the FHFA would
“…seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas, Inc. on July 27, 2011. In addition, each complaint seeks compensatory damages for negligent  misrepresentation. Certain complaints also allege state securities law violations or common law fraud.”  The FHFA release alleged that the loans involved “…had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.”

A link to the FHFA press release is found here: FHFA Sues 17 Firms to Recover Losses to Fannie Mae and Freddie Mac

On September 3rd, CNNMoney’s Tami Luhby noted that Fannie Mae and Freddie Mac bought more than $196 billion of these mortgage-backed securities from these 17 financial institutions during the middle of the past decade, according to the lawsuits.  Ms. Luhby’s report indicated that several of the accused financial institutions declined comment but that the Bank of America countered that the Government Sponsored Enterprises (GSEs) understood the risks inherent in investing in subprime securities.  A link to the CNNMoney report is found here: Government Goes After Financial Firms Over Mortgage Losses

On September 7th, Bloomberg View’s Jonathan Weil offered his own interesting thoughts on this matter in a report titled “Suing Banks Is Next Best To Letting Them Fail” and a link to this report is found here: Suing Banks Is Next Best to Letting Them Fail: Jonathan Weil

On September 6th, CNBC’s John Carney discussed the previous settlement made by Goldman Sachs with the Security and Exchange Commission (SEC) in which the firm vigorously resisted fraud charges and agreed to settle only when the government dropped such charges as part of the settlement.  Mr. Carney noted that Ben White of Politico’s Morning Money was reporting that the banks involved in the suits were pledging “all out war” against the GSEs and said that no quick settlement of these lawsuits were anticipated.  A link to the CNBC report is found here: Can Goldman Settle?

On September 9th, Bloomberg’s James Sterngold, citing anonymous sources, reported that a settlement of the GSEs matter with the SEC was imminent.  The SEC had alleged that Fannie Mae and Freddie Mac had not properly disclosed to investors their exposure to subprime mortgages prior to the 2008 crisis.  Mr. Sterngold reported that his source indicated that the GSEs “…will neither admit nor deny defrauding investors, nor will they pay any fines under the proposed settlement…”

On September 1st, Goldman Sachs also made headlines when the Federal Reserve ordered the firm to review questionable lending and foreclosure practices in its former mortgage unit.  CNNMoney’s Ben Rooney reported that the Fed would require Goldman Sachs to compensate any homeowners found to be financially harmed and that the firm would also be subject to monetary penalties.

On September 10th in an article titled “Banks May Fight Banks Over Mortgage Suits”, Bloomberg’s Thom Weidlich discussed the complexities inherent in the litigation involving various bank roles and claims in the collapse of the $2.3 trillion mortgage-backed securities market.  The article discusses the question of whether or not investors can sue as a class which would provide greater leverage to win larger verdicts or settlements. It quotes Jacob S. Frenkel, a former lawyer for the SEC, as saying that “It is possible to be both an alleged perpetrator and victim at the same time.” The suits discussed in the article involve mortgage bond deals which originally held $204.6 billion in loans, a figure which has fallen to $89 billion because of defaults, refinancing and home sales according to Bloomberg data and a list of transactions provided by a New York law firm.  Mr. Weidlich notes that the class actions involve some of the same securities found in the FHFA lawsuit filed September 2nd against the 17 financial institutions.  A link to the entire Bloomberg article is found here: Banks May Fight Banks as Mortgage Investors Pursue Class Status

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Links to Recent Real Estate Reports and Analyses

On September 8th, Clear Capital released its monthly Home Data Index (HDI) Market Report (through August).  While reporting an increase of 4.0% from the previous quarter, Clear Capital noted that the summer increase was off of record lows of last winter.  Clear Capital noted that “…the slowing rate of growth and weakening consumer confidence point to a stormy rest of year”.  A link to this report, which includes breakdowns by regional and local markets, is found here: Newsroom at Clear Capital: Market Report

On September 1st, Bloomberg announced that its Consumer Confidence Index declined to the second lowest level in two years and a link to Timothy Homan’s analysis of this data is found here:
US Consumer Confidence Slumps With Economic Outlook in Bloomberg Index

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How Are Appraisers Adapting to the UAD?

Anecdotal evidence from appraisers around the country leads us to believe that residential appraisers are mostly dealing successfully with the UAD, which went into effect on September 1st.  The extra time appraisers are reporting which they need to complete appraisals is ranging from 30 minutes to 3 hours with the learning curve associated with new software accounting for the latter.

Those appraisers who have waited until this late date to prepare for the UAD can  check out McKissock’s online class by clicking on the following link: Appraiser Continuing Education

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Appraiser News Welcomes Our Newest Sponsor: Bradford Technologies, Developers of ClickForms

It is my pleasure to announce the sponsorship of Appraiser News by Bradford Technologies.  As a user of Bradford’s products for many years (dating back to The Appraiser’s Toolbox, the precursor of Clickforms), I have found Bradford’s products to be easy to master for beginners (very intuitive) and reliable in their performance.  It is my recommendation that any appraisers who have not yet upgraded to become UAD compliant should strongly consider Clickforms.

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Rates & Dates

Freddie Mac and the Mortgage Bankers Association (MBA) both reported decreases in mortgage interest rates in their most recent weekly reports.
Freddie Mac reported that rates for 30-year fixed-rate mortgages declined to 4.12% for the week ending September 8th in comparison with the 4.22% rate reported during the prior week.   

The MBA in its most recent Weekly Mortgage Applications Survey for the week ending September 2nd reported a drop in its average to 4.23% from the previous week’s rate of 4.32%.   

In their press release of September 7th, the MBA reported a 4.9% decrease in mortgage applications during this most recent week with refinance activity accounting for 77.1% of applications.  Mike Fratantoni, the MBA’s VP of Research and Economics stated in the report that:

“Heading into the Labor Day weekend, the 30-year rate was at its second lowest level in the history of our survey (the low point was reached last October), and the 15-year rate marked a new low in our survey.  Despite these rates however, refinance application volume fell for the third straight week, and is more than 35 percent below levels at this time last year. Purchase application volume remains relatively flat at extremely low levels, close to lows last seen in 1996”

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

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

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Ask Angie

We would like to congratulate our most recent winner, David M. Maddox, a Certified Residential Appraiser from Las Vegas, NV.David was the first to correctly answer all three questions and chose as his prize the Trade Show Pass to Valuation Expo 2011 in his home town.

Here are the answers to the questions from the last newsletter:  Lao Tzu was the author of the quote “Be content with what you have; rejoice in the way things are.  When you realize there is nothing lacking, the whole world belongs to you”, Steve Jobs said “We’re gambling on our vision, and we would rather do that than make ‘me too’ products. Let some other companies do that. For us, it’s always the next dream” and he also said “I want to put a ding in the universe”. 

Today’s questions:

1. Who Said: "I have a different approach. I don’t file lawsuits because I really don’t care."

a) Carol Bartz
b) Nicole Kidman
c) Shaun Donovan
d) Alexis Stewart
e) None of the above

2. Who said: “Life can only be understood backwards, but it must be lived forwards."

a) Franz Kafka
b) Soren Kierkegaard
c) Barry Weber
d) Sarah Palin
e) None of the above

3. Who said: “People who say ‘Let the chips fall where they may’ usually figure they will not be hit by a chip"

a) Warren Buffett
b) Bern Williams
c) Mark Twain
d) Carol Bartz
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on

A Free Copy of the 12/10 UPDATED Directory of Appraisal Management Companies (Available Now to Members of and FREE!)

One Free Trade Show Pass to Valuation Expo 2011 in Las Vegas

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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!

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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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