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Will Aggressive Foreclosure Measures Push Prices Down Further?

January 16th, 2012 by Sean Collins Leave a reply »

New Aggressiveness Seen by Banks in Dealing With Mortgages

A number of published reports during the past week have suggested that banks may be moving more swiftly in dealing with seriously delinquent mortgages and that such actions might lead to further price declines in many markets.  Writing in the Los Angeles Times on January 12th, E. Scott Reckard reported on the likelihood that California and other states might see an “enormous wave” of foreclosure actions in 2012 which could lead to further price declines.  Mr. Reckard cited RealtyTrac’s report that foreclosures were down by approximately one million in 2011 at approximately 1.9 million from 2010’s 2.9 million.  Brandon Moore, CEO of RealtyTrac, is quoted in the article as saying that: "There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets.  We expect that trend to continue this year."

Mr. Reckard noted that Realty Trac reported the average foreclosure took 352 days last year in California (a “non-judicial” state) versus 806 days in Florida and 1,019 days in New York, states which require judicial review of these matters.  Links to the Los Angeles Times report and to RealtyTrac’s December 2011 U.S. foreclosure map are found here: Foreclosures Expected to Rise, Pushing Home Prices Lower

US Foreclosure Trends and Foreclosure Market Statistics – RealtyTrac

On January 12th, CNNMoney’s Les Christie discussed the report that last year foreclosures fell to their lowest level since 2007 and noted that “While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays…”

Earlier last week, CNBC’s Diana Olick discussed some of the governmental and private measures to deal with foreclosures and a link to this is found here: Realty Check – Bulk Foreclosure Sales Could Cause Bigger Bank Write-Downs

Writing in the New York Times on January 8th, Gretchen Morgenson noted that:
“The authorities have fallen silent lately about a possible settlement over foreclosure abuses at big mortgage servicing companies…That’s probably not a terrible thing. After all, no deal is better than a bad deal.  State and federal authorities jumped into these talks without conducting serious investigations into foreclosure shenanigans.  Why strike a deal-one that would, say, shield banks from new litigation over toxic loans…without knowing what happened?”

Ronald D. Orol, writing for MarketWatch on January 9th, noted that the Home Affordable Modification Program had passed the 900,000 mark in loan modifications, far short of the Treasury Department’s original goals of from three to four million when the program was launched in 2009.  He also noted that a larger program which included Fannie Mae and Freddie Mac was needed and that many advocated the need for substantial principal reduction which was “…likely on the way.”  A link to Mr. Orol’s report is found here: Obama Loan Modification Program Moving Slowly

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McKissock 2012-2013 USPAP Online Course Now Available in Approx. 40 States and DC

McKissock Education, the official provider of the Appraisal Foundation’s online 2012-2013 USPAP courses, is now available in most states. Earlier this year, the Appraisal Foundation and McKissock announced their partnership and the online course is now available to most appraisers who are interested in completing this before the end of 2011. See if courses are available in your area and save up to 20% on course fees by going to our Online McKissock Portal.


Start saving up to 20% off of your continuing education course fees today with McKissock and Appraiser Help! 2012-2013 USPAP Courses Now Available!

Year End Reports on State of Commercial Real Estate Market Are Beginning to Appear

NAI Global has just released their “US Commercial Real Estate Market Year in Review” in which they state that the commercial market across the country is “continuing to struggle”.  Some of the trends they note are a “flight to quality” in office markets as a result of lower rental rates and the continuing problem in the retail sector with large “big box vacancies”.  They describe the industrial market as “bifurcated” with Class A properties in good locations having a strong demand while the demand is very weak for “outmoded Class B and C properties”.  NAI Global cites the large increase in investment sales volume in 2011 according to Real Capital Analytics, resulting in cap rates which “continued to compress” in almost every market with “national average cap rates for all property types below 8%”.   A link to the NAI Global report is found here: US Commercial Real Estate Market Year in Review

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Reader Comments About the State of the Appraisal Business

Jim Manning, California appraiser and author of “Public Trust Betrayed: The Truth Behind the Real Estate Appraisal Industry” recently wrote to us about a letter he received from California Congresswoman Jackie Speier in which she commended him for his work and offered some of her own thoughts.  Here are excerpts from this letter: "I agree with many of your conclusions. For example, you indicate that existing laws created after the savings and loan debacle were not enforced. I agree, and the State of California and federal regulators bear much of the blame for creating this recent real estate bubble and bust.

In addition, you indicated that the creation of third parties to buy appraisal services has driven down fees by 50% after they were already flat for a decade. Clearly, it is difficult to keep a well-informed appraisal force in the field if
wages and working conditions deteriorate so significantly over a brief period of time.  The reforms that we did in Congress in recent years resulted in the creation of appraisal management companies. I concur that this has had a bad impact on valuations as less experienced appraisers do more and more of the work…

In response to your book’s implicit message that we haven’t completed the job of cleaning up the financial system, I will think about the role of appraisers and determine if legislation or further inquiry would be helpful. I also strongly advise you to speak to your state legislators. The most immediate impact on appraisers and the real estate industry can be made by regulators enforcing existing laws… There are not enough federal "cops on the beat" for this type of day-to-day problem, except after the financial autopsy of Wachovia or Washington Mutual is ordered by a receiver. A state legislator, however, can hold a hearing and learn if these laws are being enforced, and take relatively quick action to overcome problems…”

Dudley Tyson of Maine Realty Consultants in Cape Porpoise Maine has this to say:
“I have just received the umpteenth request (requirement) for additional information in the appraisal report.  It occurs to me that the fee I charge should somehow reflect the number of pages, not including boiler plates, contained within the report. A survey of how many pages in a “typical” URAR 1004 would be interesting. I used to come in at between 18-20 pages. Currently, that number is more like 30… 

 I feel we have been absorbing the additional cost of producing reports that are growing larger and larger. Perhaps a menu of basic reports and a page of side dishes with additional costs? 

…I understand the need for the lender to feel secure in the market value of a property. However, this is a complete summary report, not a narrative. So why should I be paid 1995 fees for a report that is twice the volume of one from 1995?”

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"The Rise of New Groupthink"

This is the title of an article by Susan Cain in Sunday’s New York Times in which she states that “people are more creative when they enjoy privacy and freedom from interruption”.  Here is a link to this article for appraisers to use when receiving an insane amount of insane requests for additional documentation in an appraisal report: The Rise of the New Groupthink

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Former AppraiserLoft Execs Now Used Car Salesmen?

Lily Leung, real estate and business reporter for the San Diego Union-Tribune, reported on January 12th that two former executives of the defunct appraisal management company AppraiserLoft had moved on to a new industry after leaving appraisers nationwide with millions of dollars in unpaid appraisal fees. Ms. Leung reported that barely three months after shutting down AppraiserLoft, two of their top executives (Aman Makkar and Scott Stokas) had resurfaced online with a new venture known as Clearlot. 

We at AppraiserNews.com have no comment on this except to say that we anticipate that our readership may have some thoughts about this.

A link to Ms. Leung’s report is found here: CEO of Shuttered Appraisal Firm Now in Car Biz

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Asleep at the Wheel: Reports Released on the Federal Reserve’s Lack of Awareness of Problems in the Real Estate Market in 2006

Writing in the New York Times on January 13th, Binyamin Appelbaum noted that Fed transcripts released the day before showed that officials “…gave little credence to the possibility that the faltering housing market would weigh on the broader economy…”.  The transcripts quoted Timothy Geithner (then president of the Federal Reserve Bank of New York)  in December 2006 as saying:

“We think the fundamentals of the expansion going forward still look good”

The Times’ report noted that Mr. Geithner suggested that former Fed chairman Alan Greenspan’s “greatness still was not fully appreciated, an opinion now held by a much smaller number of people”.  A link to the Times’ report is found here:
Inside the Fed in 2006: A Coming Crisis, and Banter

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Rates & Dates

Mortgage interest rates remained at historically low levels in the most recent weekly reports issued by Freddie Mac and the Mortgage Bankers Association (MBA).

On January 12th, Freddie Mac reported that rates for all products in their survey reached historic lows.  30-year fixed-rate mortgages declined to 3.89% from 3.91% during the prior week and they noted that last year at this time, the rate was at 4.71%.

The MBA in its most recent Weekly Mortgage Applications Survey released January 11th for the week ending January 6th, reported that 30 year rates with conforming loan balances ($417,500 or less) declined to 4.11% from 4.07% during the previous week.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.34% from 4.41%.  At the same time, the average rates for FHA backed mortgages remained at 3.96%. 

In their press release of January 11th, the MBA also reported an increase of 4.5% in mortgage applications during this most recent survey.  Refinance applications declined to 80.8% from 81.9% in this most recent survey. 

On January 5th, David H. Stevens, former head of the FHA and current President/CEO of the MBA released a statement on the Fed’s Housing Policy White Paper in which he said:

"The Fed’s white paper is a thoughtful document that raises a number of very interesting issues that policymakers ought to consider as they seek to solve the ongoing ills of the housing market.  The Fed staff’s comments validate much of what we have been saying, as it relates to the balance between credit availability and consumer protection, as well as the role that Fannie Mae and Freddie Mac could play in stabilizing and revitalizing the mortgage market. 
 
"FHFA is tasked with preserving the assets and minimizing the near-term losses of Fannie Mae and Freddie Mac.  However, at the same time, Fannie and Freddie are the dominant players in the mortgage market and we agree with the Fed that, if allowed, could take steps that would benefit the markets by helping homeowners and making affordable credit more available for qualified borrowers.  Among those could be initiatives that may increase short term losses, but have long-term benefits for the housing market.
 
"We continue to urge policymakers to join us in advancing initiatives that will appropriately balance credit availability for qualified borrowers with regulation and protections for consumers that will ensure that the excesses of the past are not allowed to happen again." 

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 want to congratulate our most recent winner: Arizona Certified Residential Appraiser John Fournier.  John  was the first to answer that Mark Twain said “New Year’s Day: Now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual”; Benjamin Franklin advised “Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man”; and Jay Leno joked that “New Year’s Eve, where auld acquaintance be forgot.  Unless, of course, those tests come back positive.”  Today’s questions:

Today’s questions:

1. Who Said: "The best way to appreciate your job is to imagine yourself without one."

a) Oscar Wilde
b) Mitt Romney
c) George Romney
d) Donald Trump
e) None of the above

2. Who said: "Act enthusiastic and you will be enthusiastic"

a) Dale Carnegie
b) Napoleon Hill
c) Tina Fey
d) Tracy Ofri
e) None of the above

3. Who said: "Develop success from failures. Discouragement and failure are two of the surest stepping stones to success."

a) Dale Carnegie
b) Napoleon Hill
c) Aman Makkar
d) Anne Finucane
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!)

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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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