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Impact of AMC Rule; Big Data Problems

April 7th, 2014

Waiting For The Fallout

In our last newsletter, we discussed the just released proposed rule by the six federal agencies (FHFA, CFPB, FDIC, OCC, NCUA and Federal Reserve Board of Governors) which “would implement minimum requirements for state registration and supervision of appraisal management companies (AMCs)”.  This rule includes some requirements regarding state registration of AMCs, utilization of state-certified or licensed appraisers only for federally related transactions and obligations that AMCs need to ensure the usage of competent, independent appraisers.

While this rule gives AMCs a considerable time period to comply, it is safe to say that many will calculate the cost of compliance to be so burdensome that they will be forced to close, sell or merge with another AMC.  The prevailing thought is that smaller AMCs will be under the greatest pressure but it is our thought that some of the biggest AMCs (appraisers know who they are) will also face great difficulties changing the wretched business practices that have defined their operations for many years.  These practices have been profitable up to now for AMCs (at the expense of appraisers) but will no longer meet the approval of regulators and pose huge liability risks for said AMCs.

Since the proposed rule was released two weeks ago, several AMCs have already announced changes.  Last Wednesday, Stewart Lender Services announced that they were acquiring DataQuick Lending Solution’s “…robust suite of collateral valuation products including appraisal, broker price opinion, and hybrid valuation products”.  The announcement noted that these “valuation products” would be a complement to the company’s already existing home equity and first mortgage products. It was also announced last week that Equity National was closing its Valuations Division.  Changes such as this are just the beginning.

For those appraisers who missed the announcement of the proposed rule in our last newsletter, here is a link to the joint release (which includes the full name of the five agencies identified by acronyms above):
Agency Issues Proposed Rule on Minimum Requirements for Appraisal Management Companies

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"Eight (No, Nine) Problems With Big Data"

Sunday’s New York Times Op-Ed pages carried an article by Gary Marcus and Ernest Davis with the above title. Some of the problems that the authors describe:

~While Big Data is good at detecting correlations, it is deficient in telling us which are meaningful.
~Tools based on Big Data can be “gamed” and many times the results are not as convincing as they might first appear.
~Big Data can suffer from an “echo-chamber” effect where initial web based errors are magnified (what we used to call “garbage in, garbage out”).
~A risk of “too many correlations” can result in “bogus correlations that appear statistically significant”. With inadequate oversight, meaningless correlations can be erroneously given credibility.
~Big Data can work well with common situations but has difficulties with less common ones (this may be the biggest problem appraisers have with the Big Data applications they have experienced).

The last problem the Times’ authors cite: the hype. They conclude by saying: “Big data is here to stay, as it should be. But let’s be realistic: It’s an important resource for anyone analyzing data, not a silver bullet”.

A link to the entire article is found here:
Eight (No, Nine!) Problems With Big Data

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Reader Comments

A Michigan appraiser summed up in one sentence the (lengthy) comments that we received from appraisers around the country regarding our last (lengthy) newsletter:

“Looks like Big Data is taking over, more risk for appraisers…”

Many appraisers have asked us to withhold their names out of fears that comments critical of for example AMCs might result in a loss of business.  An Alabama appraiser writes:

“Thanks for replying and taking interest in my email. As much as I would love to put my name on this email, unfortunately, I am not at a point where I could survive losing any one of my clients. If any one of my few remaining clients happen to see it and takes the comments, context or intentions the wrong way it could/would be very detrimental to my business. And I have more than just myself to think about. At this point, without a stronger united appraiser front and representation/voice, I fell certain I would be left standing alone. Yes I know it sounds cowardly. And trust me, it feels that way too! But again I have my family to think about and not just me. Wow! Something else just occurred to me as I was writing. In all my years of appraising I have never felt scared to voice my concerns, even directly to my clients. Sad!

However you are more than welcome to use any or all it for a news letter but I just can’t take the chance of putting my name on it. Hope you can somewhat understand.”

South Carolina appraiser Susan Traywick writes:

“…my comments are meant for your editorial team, not your readers so much. I am not overly optimistic about the appraisal profession but my professional situation is not nearly as bad as you consistently make things out to be, at least in my part of the world. I have worked fulltime residentially for 28 yrs in a small community and have always received a full fee for my work. My clients are our local banks as well as individuals and attorneys and less than 10% of my work is for AMCs, but the ones I do work for pay a full fee. I have never compromised my integrity or my profession by providing the desired number and that part of our profession has actually improved tremendously in the past 5 yrs. NOBODY pressures me to make a contract work, period, nor do I hear any other appraisers complaining about that. 

I just wish you could say something positive in your newsletter – it really has become a kind of ‘The sky is falling” mentality’.

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Newly Released!

Appraiser Help has Released its 2014 Directory of AMC’s and National Appraisal Companies. Click the link above to learn more and to download your copy today!


Recent Real Estate Reports

Last Thursday, CoreLogic released their National Foreclosure Report for February.  CoreLogic reported annual drops of 35% in foreclosure inventory from February of last year and a 23% in shadow inventory from January 2013.  Anand Nallathambi, CoreLogic’s president and CEO noted that “The stock of seriously delinquent homes and the foreclosure rate are back to levels last seen in the final quarter of 2008”.

Getting even bigger: While Stewart Lending Services was acquiring Data Quick’s “valuation products”, CoreLogic acquired Data Quick’s information division along with completing the acquisition of Marshall & Swift/Boeckh. 

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AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.

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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 reported that mortgage interest rates had increased slightly in their most recent surveys. 

On April 3rd, Freddie Mac reported that 30-year fixed-rate mortgages rose to 4.41% from 4.40% the previous week. They also noted that last year at this time the 30-year rate was at 3.54%. 

One week earlier, Freddie Mac rolled out another housing market indicator which they call the “Multi-Indicator Market Index” (nicknamed MiMi).  Notwithstanding the strained attempt at a memorable nickname, this index will likely be useful to appraisers with its focus on local markets. A link to the news release announcing this index along with the inaugural report is found here:
Freddie Mac’s New Multi-Indicator Market Index Measures Stability of Metro, State and National Housing Markets

The Mortgage Bankers Association (MBA) reported on April 2nd (for the week ending March 28th) that 30-year rates with conforming loan balances ($417,500 or less) were unchanged from the previous week at 4.56%.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) rose to 4.46% from the previous week’s rate of 4.45%.  Rates for FHA backed mortgages also increased, to 4.21% from 4.16% the previous week.  Mortgage applications were down by 1.2% from the prior week’s figure.  The share of refinance applications as a percentage of all applications dropped for the eighth straight week to 53%.

On April 4th, HSH Market Trends reported that 30-year mortgage rates rose to 4.49% from 4.48% the previous week. Rates for FHA-backed mortgages also increased, from 4.14% to 4.16%.

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: Chris Moore of Appraisal and More in Fairfield, California.  Appraisal and More covers the north-central California counties of Alameda, Contra Costa, Napa, Sacramento, Sonoma and Solano.  Chris was the first to answer correctly that William James was the author of the quote “Act as if what you do makes a difference. It does”; Oscar Wilde was the author of the quote “A writer is someone who has taught his mind to misbehave”; and Benjamin Franklin is responsible for “We are all born ignorant, but one must work hard to remain stupid." Today’s Questions:

1. Who said: "Big data is like teenage [you know]everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it…."

a) Ruth Westheimer
b) Alfred Kinsey
c) Dan Ariely, Duke University Professor
d) Masters and Johnson
e) None of the above

2. Who said: "The best way to predict the future is to invent it."

a) Steve Jobs
b) Albert Einstein
c) Alan Kay
d) Jeff Bradford
e) None of the above

3. Who said: "Baseball is ninety percent mental and the other half is physical."

a) Derek Jeter
b) Casey Stengel
c) Yogi Berra
d) Howard Cosell
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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