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Appraisals Excluded from Obama Refi Program?

October 24th, 2011 by Sean Collins Leave a reply »

Obama Administration Announces New Refi Plan to Help Underwater Homeowners, Not Underwater Appraisers

The Obama Administration yesterday released some details regarding an expansion of the Home Affordable Refinance Program, a three year old program which originally targeted five million borrowers but has to date helped less than 900,000.  The program currently allows borrowers to take new loans up to 125% of their home value but the proposed changes would remove any loan to value limits (i.e. the loan can be double the market value of the house) providing the borrowers had made at least six consecutive monthly payments. 

Bloomberg’s Lorraine Woellert reported yesterday that early projections were that the changes would result in help to anywhere from 600,000 to 1,000,000 homeowners.  Initial reports indicated that appraisers might benefit little from the program, however, with Binyamin Appelbaum of the New York Times writing yesterday that the plan dispenses “…with the need for an appraisal in many cases.”  A link to yesterday’s Times report is found here: Administration Proposes Changes to Mortgage Refinancing Program

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Headline News This Past Week

“Gloom Grips Consumers; It May Be Home Prices”
Another article by Binyamin Appelbaum on October 19th discussed how the U.S. has “…a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow”.  The Times article discusses several studies and notes that only recently have economists really studied how the decline in housing prices affects consumer spending and attitudes.  Mr. Appelbaum notes that the “wealth effect” is greater for changes in home equity than with other investments such as stocks because people expect that changes in home prices are less likely to be reversed quickly.  The article cites a recent paper by Wellesley College economics professor Karl E. Case in which he projected that the decline in home prices in the four years after peaking in 2005 resulted in a loss of $240 billion in consumer spending in 2010, a figure which doesn’t even include other impacts of the housing crash such as the extremely low level of new home building.

“Consumers Most Negative Since Recession”
Shobhana Chandra of Bloomberg reported on October 20th that the Bloomberg Consumer Comfort Index in October had slumped to its lowest level since February 2009.  Ms. Chandra noted that the Thompson Reuters/University of Michigan preliminary index of consumer sentiment also fell in October “…as Americans’ outlooks for the economy and their finances slumped to the lowest level since 1980.”

Also on October 20th, the National Association of Realtors (NAR) existing home sales report showed a 3.0% decline in September from the previous month along with an 18% contract cancellation rate, identical with August but twice the rate of last September.  The NAR press release noted that: “Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.” The NAR also reported that the national median sale price was down 3.5% from last September.  A link to the entire press release is found here:
Existing-Home Sales Off in September but Higher Than a Year Ago

One day earlier, CoreLogic released a report entitled “U.S. Housing and Mortgage Trends”.  CoreLogic’s report showed a substantial decline in homeownership rates for those of “prime home-buying age”.  CoreLogic also cited Census Bureau data which showed significant declines in median income and a continuing increase in the percentage share of income allocated to housing by consumers.  The report also noted that “…investor activity in foreclosure auctions has receded over the last few years and transitioned to the purchase of REO properties for sale by banks.”  A link to CoreLogic’s report is found here: U.S. Housing and Mortgage Trends

Jennifer Johnson, writing in the Phoenix Business Journal yesterday, reported that PMI Group Inc. was seized by the Arizona Department of Insurance late last week.  Ms. Johnson noted that Bloomberg reports that this most recent casualty of the housing bust was the nation’s third largest mortgage insurer.

On October 17th, noted economist Nouriel Roubini discussed the connections between rising income inequality and the frequency and severity of economic and financial crises.  He concludes that: “…any economic model that doesn’t properly address inequality by providing public goods and economic opportunity to all will eventually face a crisis of legitimacy. Many academic research studies, including a recent IMF study, show that widening inequality leads to lower economic growth. So, even aside from the issue of “fairness,” inequality is also bad on traditional economic “efficiency” criteria”.  A link to Mr. Roubini’s analysis in EconoMonitor is found here: Full Analysis: The Instability of Inequality

Yesterday, CNNMoney’s Annalyn Censky reported on the call by New York Fed President William Dudley for “urgent action” to prop up the housing market and a link to this article is found here: Fed’s Dudley calls for housing aid

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Any Good News Amidst The Gloom?

On October 19th, the Commerce Department reported a large jump (15%) in housing starts in September which was mostly due to a surge in construction of multi-family housing and apartments.  At the same time, however, the Commerce Department reported that building permits dropped by 5% to a five month low.  Bloomberg’s Bob Willis and Alex Kowalski discussed the Commerce Department report when it came out and a link to the report is found here: Sept. Housing Starts Up More Than Forecast

On Friday, CNNMoney’s Les Christie released a report entitled “Foreign Buyers Scooping Up U.S. Homes”.  In this report, Mr. Christie noted that “Foreigners spent $82 billion buying up U.S. homes in the 12 months ended in March, up 24% from a year earlier, according to the National Association of Realtors (NAR). That represents 8% of total U.S. sales.”  He cited a study by Metrostudy, a housing analytics firm, which reported strong sales of condominium properties in South Florida with Canadians and South American buyers making up the majority of the sales.  Mr. Christie reported on the recently proposed Senate bill, con-sponsored by Democratic Senator Charles Schumer of New York and Republican Senator Mike Lee of Utah which would grant visas to investors who spend at least $500,000 on residential real estate in the U.S.  New York appraiser Jonathan Miller is noted in the article as reporting that the New York market is now attracting more Asian and Latin American buyers than in the past.

On October 15th, Toluse Olorunnipa tempered the enthusiasm for a quick recovery in South Florida and nationally by reminding us about the elephant in the room (the “shadow inventory”).  A link to this Miami Herald article entitled “Shadow Inventory of Homes Could Topple Real Estate Recovery” is found here: Shadow Inventory of Homes Could Topple Real Estate Recovery

CNBC’s Diana Olick reported on the “Most Promising Housing Proposals” in a video on October 21st including an expected initiative this week by the Obama Administration to refinance mortgages of underwater homeowners.  A link to this video is found here: Most Promising Housing Proposals

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Appraising AppraiserLoft’s Debt to Appraisers: $3 Million?

On October 20th, HousingWire’s Jacob Gaffney reported that AppraiserLoft’s outstanding obligation to appraisers for appraisals performed and invoiced was approximately $3million, according to two individuals reportedly familiar with the situation.  Mr. Gaffney also reported that SettlementOne, a real estate settlement firm, was in talks with AppraiserLoft to acquire certain assets of the firm, but not its liabilities.  A link to the Housing Wire report is found here: AppraiserLoft Closure Leaves $3M in Unpaid Appraisal Invoices

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Quick Quiz: Which Will Come First?

a) Appraisers will Occupy AppraiserLoft
b) Appraisers will receive payment in full for their AppraiserLoft invoices
c) Real action will be taken by those in power to prevent a further precipitous decline in the real estate market
d) None of the above

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Rates & Dates

Some market volatility was evident in the most recent weekly reports issued by Freddie Mac and the Mortgage Bankers Association (MBA).

Freddie Mac reported that rates for 30-year fixed-rate mortgages declined to 4.11% for the week ending October 20th in comparison with 4.12% for the week ending October 13th.   Frank Nothaft, vice president and chief economist for Freddie Mac noted that:
“Mortgage rates remained relatively unchanged this week amid mixed economic data reports. Retail sales were up 1.1 percent in September, almost four times the pace set in August, but consumer sentiment was down in October, according to the Thomson Reuters/University of Michigan index. Finally, in its October 9th regional economic review, the Federal Reserve reported that overall economic activity continued to expand in September, but contacts noted weaker or less certain outlooks for business conditions.

"The home construction industry had some good news for a change. The National Association of Home Builders/Wells Fargo Housing Market Index jumped four points in October, the largest one-month gain since April 2010. Housing starts sprang up 15 percent in September, largely driven by a spike in multifamily starts to a level last seen in 2008. Building permits on 5-or-more unit buildings fell by 13 percent, however, suggesting that the multifamily building pickup may be temporary.”

The MBA in its most recent Weekly Mortgage Applications Survey for the week ending October 14th reported that 30 year rates increased to 4.33% from 4.25% during the previous week.   

In their press release of October 19th, the MBA also reported a 14.9% drop in mortgage applications during this most recent week with refinance activity accounting for 77.6% of applications. 

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 contratulate our two most recent winners: Nanci Stone-Hayes, a Certified General Appraiser with Yankee Appraisals in North Conway, New Hampshire and Ginny Furr, a Certified Residential Appraiser with Ginny Furr Appraisal Service in Trinity Center, California.  Nanci covers portions of northeastern New Hampshire and southwestern Maine while Ginny covers several counties in northern California. 

Today’s questions:

1. Who Said: "If hard work were such a wonderful thing, surely the rich would have kept it all to themselves."

a) Lane Kirkland
b) Groucho Marx
c) Karl Marx
d) Lindsay Lohan
e) None of the above

2. Who said: "How much easier it is to be critical than to be correct"

a) Sarah Palin
b) Benjamin Disraeli
c) Milton Friedman
d) Dick Cheney
e) None of the above

3. Who said: "Number 9, number 9, number 9…"

a) Herman Cain
b) Sarah Palin
c) The Beatles
d) The Rolling Stones
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 AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies (Available Now to Members of AppraiserHelp.com and FHAAppraisers.com 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: bill@appraiserhelp.com 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 www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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