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Dodd-Frank Changes

February 7th, 2017 by Bill Collins Leave a reply »

What will become of Dodd-Frank? Let’s try to answer some of the most important questions that appraisers have.

1) Will appraisers and their organizations have any input as to the changes that matter most to them?

Hopefully we’re wrong but it does not appear as though appraisers and appraisal organizations make the cut here. On Friday, President Trump heaped praise on Jamie Dimon, the President of JPMorgan Chase saying “There’s nobody better to tell me about Dodd-Frank than Jamie, so you’re going to tell me about it.”

Many appraisers are aware of JPMorgan Chase’s less than stellar history of working with appraisal management companies (AMCs) with poor reputations. The October 7, 2013 issue of AppraiserNews discussed the defunct AMC Evaluation Solutions and its largest client, JPMorgan Chase.  We noted at the time that Evaluation Solutions”…owed appraisers millions at the time of its collapse and subsequent bankruptcy.  Evaluation Solutions utilized an appraiser selection process which also did not make the appraiser’s qualifications first and foremost”. In that issue of AppraiserNews, I also discussed Chase’s relationship with a large California based AMC that also utilized a “broadcast” method of procuring appraisals for assignments at fees far less than “customary and reasonable”:

“One other email I received was striking: an offer from a different (unnamed-not Evaluation Solutions) California based AMC to perform an appraisal in Sagaponack, New York for $265.  The client is Chase and the first request was received on September 27th, followed by new emails on September 30th and October 1st; no other appraisers had accepted this assignment (which was broadcast to a number of area appraisers). The Village of Sagaponack has consistently been at or near the top of studies regarding the most expensive real estate in the U.S.  Appraisals in Sagaponack not only involve a great deal of time when compared with other areas of Long Island (i.e. extra time involved in measuring and sketching a very large dwelling, difficulties in obtaining truly comparable sales, etc.) but carry more responsibility (as well as potential liability)”.

We asked the question “What did Chase know and when did they know it?” and continued:

“A fee of $265 for the Sagaponack appraisal is far below ‘customary and reasonable’.  The California AMC notes in their appraisal request that:

‘Customary and Reasonable (C&R) Fees
Section 129E of the Truth in Lending Act (TILA);
Unless an assignment has been designated as a Purchase or Refinance assignment above, it is not a ‘covered transaction’ and therefore does not require that a customary and reasonable fee be paid pursuant to TILA requirements’.

(Unnamed) AMC’s Policy;
‘(Unnamed) AMC’s standard policy is to pay a fee that we deem to be customary and reasonable regardless of whether the assignment technically qualifies as a ‘covered transaction’ under TILA. The appraisal fee has been calculated in a manner intended to establish a customary and reasonable fee for this assignment.  Please note, however, that certain assignments may be found to be complex or to require an increased scope of work due to unique property- or assignment-specific characteristics.”

AppraiserNews noted then that “The offered appraisal fee is far below what is customary and reasonable and the California AMC has the capability of recognizing this easily; it is an insult to suggest that the fee ‘has been calculated in a manner intended to establish a customary and reasonable fee for this assignment’.  The suggestion that certain assignments may be more involved and that the fee could be enhanced falls on deaf ears: I have never received an appraisal assignment from this AMC when requesting a higher fee than initially offered”.

JPMorgan Chase’s history under Jamie Dimon of utilizing AMCs with such poor track records in procuring and paying appraisers does not give us confidence at this time.

The nominee for Treasury Secretary, Steven Mnuchin, is a former partner of Goldman Sachs and ran OneWest (formerly known as IndyMac and before that as Countrywide Mortgage) from 2009 to 2015. Hopefully some of the issues about OneWest during Mr. Mnuchin’s tenure (such as allegations of robo-signing inaccuracies in foreclosures and foreclosing on active duty military families) aren’t indications of a mindset suggesting he might advocate for quicker, inferior appraisal substitutes such as AVMs or BPOs.

The verdict: while the jury is still out, it appears as though appraisers are in the back of the line behind banks, other financial institutions, real estate brokerage interests and others. Time will tell.

2) Just in case somebody in power is paying attention to appraiser’s opinions on changing Dodd-Frank, what do we want them to know?

Well, they could start by reading the answer to number one and remember that there is no substitute for the utilization of independent, licensed and certified professional appraisers who are given the proper time to complete an appraisal and fair compensation for their efforts. Having competent, independent, professional appraisers as a “backstop” provides insurance against a reoccurrence of the financial crash of 2008; any changes to Dodd-Frank related to appraisals and mortgage lending should not forget these fundamental principles.  

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Rates & Dates

Freddie Mac and the Mortgage Brokers Association (MBA) reported mixed results in the movement of mortgage interest rates last week.

In their survey on February 2nd, Freddie Mac reported that 30-year fixed-rate mortgages were unchanged from the previous week at 4.19%. They also noted that one year ago, the 30-year rate was at 3.72%.

Sean Becketti, the chief economist of Freddie Mac noted that:

“The 10-year Treasury yield fell 5 basis points this week following a tepid advance estimate of fourth-quarter GDP and the Fed’s decision to leave rates unchanged. The 30-year mortgage rate remained flat at 4.19 percent, starting the month 47 basis points higher than this time last year. Despite the uncertainty in the market, the pending home sales index increased 1.6 percent in December, up from a decline of 2.5 percent the month prior.”

The MBA reported on February 1st (for the week ending January 27th) that 30-year rates with conforming loan balances ($424,000 or less) rose from 4.35% to 4.39%.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,000) also moved up, from 4.28% to 4.32% and rates for FHA backed mortgages increased from 3.57% to 3.61%.

Mortgage applications fell by 3.2% from the previous period.  Refinance applications as a percentage of all applications declined from 50.0% to 49.4%. The FHA share of applications declined from 13.6% to 12.1% and the VA share rose from 12.2% to 12.4%.

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

Ask Angie

Angie would first like to acknowledge the winner of her last contest: California appraiser Ashley Clark.  She was the first to answer correctly that “a” (John Kenneth Galbraith) was the answer to both questions in the last newsletter: “The only function of economic forecasting is to make astrology look respectable”; and “The conventional view serves to protect us from the painful job of thinking.”

Today’s question:

Who are the following three quotes attributed to:

“Life is a tragedy when seen in close-up, but a comedy in long-shot”.

“Nothing is permanent in this wicked world – not even our troubles”.

“A day without laughter is a day wasted”.

a) Groucho Marx
b) Charlie Chaplin
c) Amy Schumer
d) Joan Rivers
e) None of the above

The first to respond with the correct answers wins:

One Free Regular Listing on AppraiserHelp.com

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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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