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Appraiser Shark Tank, LSI settles with FDIC

March 10th, 2014 by Bill Collins Leave a reply »

Declining Number of Appraisers and Mortgage Appraisals

As we prepare to send out this newsletter, the number of licensed and certified appraisers in the United States totaled 100,256 with predictions that it would fall below 100,000 in coming months.  At the same time, mortgage appraisal volume has fallen dramatically and appraisers are facing heightened scrutiny of their work by appraisal management companies (AMCs), lenders and regulatory agencies.

What is an appraiser to do? Waiting for mortgage appraisal volume to increase or for older appraisers to retire is not an effective strategy as the situation is not likely to materially change for many years.  Many appraisers may work part time or drop out of the profession temporarily but are ready to re-enter the field if conditions change.  Many appraisers hope that appraisals for home equity lines of credit will increase as homeowners accrue increasing equity (see article below).  This, in conjunction with hopes that lenders and regulators finally end the scandalous practice known as BPOs (broker price opinions), many appraisers expect to see an eventual increase in mortgage appraisal volume.

It is likely that some appraisal fees may begin to rise commensurate with the increased scrutiny given to appraisals (and appraisers).  We also hope that the eventual elimination of BPOs (and BOVs, brokers opinion of value) by lenders will lead to an increase in appraisal volume.

As we have shouted out to appraisers many times before, it is time to proactively work to build their appraisal practices by:

1)  Increasing their skill sets (i.e. residential appraiser gaining experience with commercial work, learning to appraise high value or special use properties, etc.).

2)  Increasing their marketing.

3)  Concentrating on building a healthy private (non-mortgage) appraisal practice.

A recent episode of the popular show “Shark Tank” featured two would-be entrepreneurs promoting a three year old business named “Squeeky Knees”.  Without going into details, this venture was not viewed favorably by the “sharks”. It failed to receive backing, instead receiving a wave of criticism from the “sharks” for both the concept and business plan while the two “entrepreneurs” failed to listen to critiques and mindlessly babbled until the end of their segment. 

Appraisers have a choice: learn how to swim with the “sharks” or be devoured by them.

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FDIC Settles With LSI Appraisal and ServiceLink Appraisal

On February 12th, the FDIC (as Receiver for Washington Mutual) reached a settlement with AMCs LSI Appraisal, ServiceLink Appraisal and other defendants in their May 9, 2011 suit for damages.  The defendants denied liability in the action in which the FDIC sought more than $150 million for faulty appraisals which the AMCs managed for Washington Mutual from 2006 to 2008.  The settlement reached provides for the payment of $30 million by the defendants to the FDIC.  A link to a copy of the Settlement and Release Agreement is found here: Settlement and Release Agreement

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Recent Real Estate Reports

Last Tuesday, RealtyTrac released a study on the impact of institutional investors on the housing market which included commentary by Vice President Darren Blomquist and a “heat map” which graphically depicts the impact of such investors by county.  Mr. Blomquist summarized some of the survey data as follows: “In 2011 institutional investors — purchasing at least 10 residential properties in a calendar year — purchased 219,000 residential properties nationwide, representing 5.12 percent of all residential sales. That increased to 259,000, representing 5.82 percent of all residential sales in 2012, and 354,000, representing 7.40 percent of all sales in 2013. That’s a 44 percent increase in the institutional investor share of the residential sales market from 2011 to 2013.

Over the last three years these institutional investors have purchased more than 850,000 residential properties, representing 6.14 percent of all sales. But the national numbers don’t tell the whole story. In a select set of markets, purchases made by institutional investors represent more than 20 percent of all residential sales over the past three years.”

Mr. Blomquist also noted the impact of this investment: “For all 1,264 counties nationwide with data available to evaluate institutional investor purchases — or lack thereof — the median price of a residential property increased 14 percent from December 2011 to December 2013. But in markets where institutional investors accounted for more than 20 percent of all sales, home prices have appreciated an average of 31 percent over the last two years. It’s important to note that this is only 14 counties accounting for less than 1 percent of the U.S. population.

In counties where institutional investor purchases accounted for 10 percent or more of all residential property purchases from 2011 to 2013, home prices have increased an average of 23 percent. This is 88 counties, accounting for 12 percent of the U.S. population.”

The study did not show a similar relationship in regard to rental values. 

As other studies have indicated in recent months, investor activity is beginning to wane and the pace of price appreciation is slowing.  This raises the old question of “which came first, the chicken or the egg?” Did projections of slower price appreciation lead investors to withdraw or did their pullback contribute to slower growth?

A link to the RealtyTrac report is found here: Where Wall Street Is Most Likely To Be Your Landlord: Heat Map

While the homeownership rate has declined throughout this period, leading to concern over negative societal impacts, one positive outcome has been the fewer number of homeowners “underwater” on their mortgages with Zillow reporting February 27th that approximately 3.9 million Americans escaped from negative equity in 2013.  The Zillow Negative Equity Report indicated that 19.4% of homeowners with a mortgage were underwater at the end of last year, a substantial decline from the peak of 31.4% reported in the 1st Quarter of 2012.  Zillow projects that home prices will appreciate by 4.8% this year with negative equity dropping to at least 17.2% in the 4th Quarter.

“Effective” negative equity has also been reduced substantially with a growing number of homeowners now able to sell their home, refinance or obtain a home equity line of credit.

A link to the Zillow report is found here: Negative Equity Crosses 20 Percent Threshold To End 2013

Last Thursday, the CoreLogic Equity Report was also released.  It reported that the dollar volume of negative equity fell by $230 billion in 2013 and pegged the number of underwater borrowers at 6.5 million.  A link to the CoreLogic report is found here: Dollar Volume of Negative Equity Falls $230 Billion in 2013

Writing in the Wall Street Journal this past weekend, Nick Timiraos discussed the downside to rising prices as housing affordability has declined, particularly for first time buyers.

On February 28th, the Mortgage Brokers Association (MBA) released their “2014 Multifamily Economic Outlook”.  Some of its highlights:

~Multifamily rent growth and vacancy nationally will be slower this year in comparison with 2013 but will approximate long term performance.

~Property values will rise but at a lower rate than last year.

~Capitalization rates will remain below 7% over the next several years.

~The supply of new multifamily housing is essentially in balance with the demand. 

Price appreciation in the multi-family sector does not appear to be limited to “bricks and mortar” properties: CoStar Group announced last Tuesday that it is acquiring the online marketplace Apartments.com for a reported $585 million.

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Appraiser Help’s 2014 Directory of AMCs and National Appraisal Companies is Now Available!

To help appraisers evaluate how AMCs will work for their appraisal practices, we have compiled this expanded directory of AMCs and National Appraisal Companies, listing complete, contact information and other details for each listing.

If you’re looking to maintain or expand your mortgage appraisal practice, our Directory of Appraisal Management and National Appraisal Companies is a great place to start. Order it today for $69.99 and download it immediately!

Please visit our website now to make your purchase securely or contact us at (877) 434-2825 for more information on this comprehensive directory!

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Rates & Dates

Freddie Mac, the Mortgage Brokers Association (MBA) and HSH Market Trends all reported declining mortgage interest rates in their most recent surveys. 

On March 6th, Freddie Mac reported that 30-year fixed-rate mortgages fell to 4.28% from 4.37%. They also noted that last year at this time the 30-year rate was at 3.52%.

The Mortgage Bankers Association (MBA) reported on March 5th (for the week ending February 28th) that 30-year rates with conforming loan balances ($417,500 or less) declined to 4.47% from 4.53% the previous week.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) dropped to 4.37% from the previous week’s rate of 4.47%.  Rates for FHA backed mortgages also fell, to 4.13% from 4.17% the previous week.  Mortgage applications rose by 9.4% from the prior week’s figure which did not include an adjustment for the President’s Day Holiday.  Refinance applications declined to 57.7% of all applications from 58% the previous week.

On March 7th, HSH Market Trends reported that 30-year mortgage rates fell to 4.39% from 4.42% the previous week. Rates for FHA-backed mortgages also dropped, from 4.04% to 4.01%.

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

Additional information from HSH can be found by going to: HSH.Com

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Ask Angie

We would first like to congratulate our most recent winner: McHenry, Illinois appraiser Mari Mabus of Proficient Appraisals.  Mari was the first to answer correctly that Franklin Delano Roosevelt said “Here is my principle: taxes should be levied according to ability to pay.  That is the only American principle”; Leona Helmsley exclaimed “We don’t pay taxes.  Only the little people pay taxes”; and Andy Rooney quipped “The dullest Olympic sport is curling, whatever ‘curling’ means.”  Today’s Questions:

1. Who said: “By failing to prepare you are preparing to fail."

a) Dale Carnegie
b) Napoleon Hill
c) Benjamin Franklin
d) Colin Powell
e) None of the above

2. Who said: "It takes many good deeds to build a good reputation, and only one bad one to lose it."

a) Bill Buckner
b) Benjamin Franklin
c) Edward J. Smith
d) Alan Greenspan
e) None of the above

3. Who said: "I hate quotation. Tell me what you know."

a) Ralph Waldo Emerson
b) Benjamin Franklin
c) Mark Cuban
d) Mark Twain
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 Newly Released 2014 Directory of Appraisal Management Companies (Available 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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