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Big Changes Coming With Financial Reform Bill, Growing “Shadow Inventory” of REOs

Sean Collins — Mon, 16 Aug 2010 23:39:33 +0000

In This Issue:

Defaults, Foreclosures, Missed Payments Lead to Shadow Inventory
Defaults in Commercial Mortgage-Backed Securities Rapidly Increasing
Response to Last Newsletter
Declines in Market Value Found in Small Businesses as well as Real Estate
What’s Next for Appraisers with the Passage of the Financial Reform Bill
Rates & Dates
Ask Angie
Tell us what you think!
Closing Remarks

Defaults, Foreclosures, Missed Payments Lead to Shadow Inventory

Shadow Inventory: A CNBC report on August 13th, noted that the number of REOs (real estate owned or repossessed properties) that will be coming to market is not precisely known as they are not reported by the government. CNBC attempted to come up with a reasonable estimate as follows:

Fannie Mae’s second quarter REO inventory stood at 129,310, Freddie Mac’s at 62,178 and FHA’s at 44,850. This totaled 236,338 homes (up 13% from the first quarter of 2010 and 74 percent from the second quarter of 2009.

Big banks: CNBC noted that this is “…harder to track because they report REOs in their quarterly earnings reports, but only as values of the properties, not actual numbers of properties. Thomas Lawler, an economist and housing consultant, estimates that by Q1 of this year banks owned $14.5 billion worth of REOs. If you assume a median price of $150,000 for each home, which I think is a bit high but he’s assuming, then you get 97,000 properties.”

Private label holdings: CNBC utilized Moody’s estimate of 203,665, which when tallied exceeds 537,000. CNBC noted that this does not include other smaller banks and whose numbers are not found in these categories. They reported that Mr. Lawler’s “best guess” is that the total number of REOs is just under 600,000 but rising.

The CNBC report noted that the National Association of Realtors reported that 564,000 homes were sold in June (a figure which included all homes, not just distressed homes) which meant that fewer homes sold than exist in REO. They went on to note that the number of distressed sales each month were approximately 150,000 meaning that there is a four month supply just of foreclosed properties. CNBC concluded that:

“Yes, there are plenty of cash buyers out there, looking to scoop them up, but they will do so only at very reduced prices. So here we go again on price pressure.”

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Defaults in Commercial Mortgage-Backed Securities Rapidly Increasing

MBA NewsLink reported August 2nd that Fitch Ratings, a leading global rating agency, stated that cumulative defaults in commercial mortgage-backed securities (CMBS) increased to 9.48 percent in June and that Fitch projected that CMBS defaults would reach 11 percent by the end of this year.

A “master servicer” oversees the administration of the underlying loan in a CMBS and has an administrative function which includes the handling and disposition of problematic loans. When a loan in a CMBS deal is deemed to not have performed as expected, the master servicer sends the loan to a “special servicer.” This special servicer has considerable powers to either foreclose on the loan or modify its terms and conditions. In their “CMBS 2Q10 Servicing Update”, Fitch reported that:

“The number of loans transferring to special servicing is growing exponentially. As of June 30, 2010, there was close to $92 billion (5,207 loans) in special servicing, representing 12% of total outstanding commercial mortgage-backed securities (CMBS). This is a 25% increase from the $74 billion (4,435 loans) as of year-end 2009 and a 475% increase from the $16 billion (2,019 loans) at year-end 2008. Fitch Ratings expects 15% of the outstanding CMBS, or approximately $110 billion, to be in special servicing by year-end 2010.” The report noted that the 2005-2007 vintage loans accounted for 84% of all specially serviced loans, by balance and were defaulting at much higher rates than pre 2005 loans.

The Fitch report indicated the following active special service loans by these indicated “trigger events”: 63.2% imminent default, 16.6% monetary default, 3.0% maturity default, 8.4% imminent maturity default, 5.9% bankruptcy, 2.9% other.

By property type, Fitch reported: 30.5% office, 20.6% multi-family, 20.3% retail, 19.7% lodging, 2.8% industrial, 6.1% other.

Additional information about Fitch Ratings can be found by going to: www.fitchratings.com

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Valuation 2010-say yes if you literally want the t-shirt! Luxor Las Vegas, NV – November 8-10 – www.valuationexpo.com

All early registrants will get an amazing early-early bird rate and the “I am a real estate appraiser and it’s not my fault” t-shirt. In order to qualify email us your name and phone number to yes@valuationexpo.com.

Response to Last Newsletter

Barry Wilson, Board Member, Appraisers’ Coalition of Washington, sent us the following email in response to the article titled “Is it Really Possible That Some Mortgage Brokers Could Be Criminals?”

“Bill–
When the Washington Mortgage Brokers Practices Act was amended in 2006 to require Bill licensing of Loan Originators, the Washington Assoc of Mortgage Brokers was fairly confident that there were approximately 15,000 LO’s working. There are now approximately 4500-5000.

Many did not apply because they knew they could not pass the background investigation. Many were rejected after the BI was completed, either because of the nature of their criminal history or their history would not have disqualified them, but they lied on the application.

And I understand that Kansas, Colorado and several other states had similar results when they licensed LO’s.

I wonder how many left mortgage brokers and went to bank jobs so they wouldn’t need to submit fingerprint cards. Under the federal SAFE act, ALL residential LO’s now have to be in the national registry, which requires a BI with fingerprint card.”

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Declines in Market Value Found in Small Businesses as well as Real Estate

On August 8th, the New York Times reported on the problems and concerns of many small business owners related to declining business values. A link to this article is found here: Finding an Alternative to Selling and Retiring

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Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

What’s Next for Appraisers with the Passage of the Financial Reform Bill

Several weeks ago, the Appraisal Institute hosted the 2010 Washington Appraisal Summit which involved panel discussion amongst more than 230 appraisers, lenders, and government officials on a variety of valuation policy matters, including the Dodd-Frank Bill. Gary Crabtree, an SRA designated appraiser with Affiliated Appraisers in Bakersfield, California took part in this discussion and has kindly agreed to share his thoughts with AppraiserNews.com regarding the implementation of this bill and what appraisers can expect:

“APPRAISAL REFORM IS LAW – WHAT’S NEXT?

With the passage of the Dodd-Frank Financial Reform bill, the appraisal profession has seen the most meaningful reform since the passage of Title XI of FIRREA almost 20 years ago. The bill has been discussed at length by all parties involved with varying interpretations. At the Appraisal Institute’s Washington Summit last month, almost all of the “players” were in attendance and actively “networking” to hear interpretations by each of the impact on the affected parties. The appraisal profession was “giddy” over the results, the banks and AMC’s were in denial and seemed somewhat shocked that this legislation was now law and the Federal Agencies were “in a fog” on how they were going to implement this “monster”. What’s next? Over the next 3 months, the “rulemaking” will begin. This procedure is where the real battle will take place. How will the law be interpreted by the “rule makers”? Who are the “rule makers”? In an announcement yesterday, the FDIC announced yesterday, that there will be an “open door policy” that will make it easier for the public to give input to the rulemaking process via their financial reform webpage at www.fdic.gov/financialreform/ . Through this site, the appraisal profession can provide comments. The more comments on a subject, the more likely the “rule makers” will pay attention to the issues addressed. On the other hand, the Obama Administration announced yesterday that the Treasury will host a Housing Finance Forum to solicit input from the industry stakeholders to guide the administration in shaping the new housing finance system. A source indicated that the White House controlled the guest list, which include the CIO of PIMCO, the world’s largest mutual fund, the president of Bank of America Home Loans, the co-president of Wells Fargo Home Mortgage, the chief economist of Moody’s Analytics and representatives of the National Urban League, the MacArthur Foundation, and the American Enterprise Institute. What is even more interesting is who was not invited. They include industry trade groups such as the Mortgage Bankers Assn, the American Bankers Assn, the National Association of Realtors and the Appraisal Institute or any other group representing the appraisal profession. The administration even “snubbed” its own “quasi-public” agency, the Appraisal Subcommittee and members of the Appraisal Foundation who is responsible for the determination of education requirements and appraisal standards. It appears to me that someone is “speaking with forked tongue”

Probably, the “hottest” topic contained in Title XIV of the Dodd-Frank bill is the definition and determination of “customary and reasonable” appraisal fees. I’m sure that this rule will be the most contested of any other item in the bill. The bill calls for such fees to be established by objective third-party information, such as government agency fee schedules (Veteran’s Administration), academic studies (of which none exist and will take forever to develop, much less fund) and independent private sector surveys (Ala Mode’s recent fee survey). All of the above have flaws and will be contested by some group via a law suit that will end up in the court system and not be resolved for years. May I be so bold as to suggest a simple solution to the problem. According to a source, Fannie is putting the final touches to a ”new” appraisal form, that will include “drop down” boxes for certain fields and a new field for the name of the AMC that ordered the appraisal, in addition to the lender/client. All that need be done, is the addition of “one” additional field. That field is the amount of the fee that the appraiser received to complete the assignment. That field could be “mined” by an appropriate government agency (FHFA or the new Consumer Protection Agency), and a non-biased report of customary and reasonable fees could be published for every MSA in the country. The reporting could be accomplished by Freddie, Fannie, FHA and VA and would encompass almost all of the appraisals performed for “federally related” transactions. Since there would be a separate field for the name of the AMC who ordered the report, those fees could be segregated to comply with the law. My sense is that FHA, VA and the GSE’s will “push back” very hard with respect to this solution. Why? Because it is too simple and logical and they don’t want to get involved with implementation of any law, albeit a federal one. I find it more that interesting, that FHA, VA and the GSE’s can establish rules of what and how appraise real property, but will not get involved in the protection on the very profession that is established to protect the public trust. “

Rates & Dates

Historically low interest rates are still available. Freddie Mac reported that rates for 30-year fixed-rate mortgages declined slightly to 4.44% for the week ending August 12th from the 4.49% of the prior week.

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending August 6th reported a slight increase to 4.60% from the previous week’s average of 4.57%.

A CNBC report on August 10th noted that while these low interest rates have provided a boost to refinances, it has not been sufficient by itself to bring about increases in the home purchase market, and refinances accounted for 78% of residential mortgage applications. Many other reports have noted the drag on both refinance and purchase markets created by the combination of stricter credit requirements, property owners who are “underwater” on their mortgages along with those who have tarnished credit ratings due to problems related to economic conditions.

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: Mortgage Bankers Association – Research and Forecasts

Ask Angie

We want to congratulate our most recent winner: Jacob C. Dore, a Certified Residential Appraiser with D.S. Murphy & Associates in Suwanee, Georgia. Jake was the first person who responded correctly that Oscar Wilde was the author of the quote: “Experience is simply the name we give our mistakes.”

Jake chose to receive a copy of our Directory of Appraisal Management Companies for FHA Appraisers as his prize. He recently sent me the following note: “Thanks so much-the guide has been a great help so far as I have contacted several companies and have submitted my paperwork to be on their fee appraiser panel”.

Today’s questions:

Who said: “You can have everything in life that you want if you will just help enough other people get what they want.”

a) Zig Ziglar

b) Dale Carnegie

c) Warren Buffett

d) Andrew Cuomo

e) None of the above

And, who said “If the doors of perception were cleansed everything would appear to man as it is, infinite.”

a)Vincent Van Gogh

b) Aldous Huxley

c) Albert Einstein

d) William Blake

e) None of the above

The first person to respond with the correct answer wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Board of Trustees of The Appraisal Foundation Passes Resolutions Sanctioning the Appraisal Institute

Appraisal Institute SANCTIONED by Appraisal Foundation

Sean Collins — Tue, 03 Aug 2010 01:11:37 +0000

In This Issue:

Appraisers Leaving the Profession En Masse? Or Not?

Mortgage Brokers Could Be Criminals?

Damned if They Do, Doomed if They Don’t. What is The Fed to Do With Their Inventory of Mortgage-Backed Securities?

Some Community Bankers Support the Financial Reform Bill

What do Alan Greenspan and Robert Shiller Think About Our Current Economic Situation?

Underwater in Manhattan: The Big Ciy Learns About Short Sales

Fannie Mae Prepares Defenses Against Strategic Defaults

Rates and Dates

Ask Angie

Tell us what you think!

Closing Remarks

TUESDAY, august 3rd, 2010

Board of Trustees of The Appraisal Foundation Passes Resolutions Sanctioning the Appraisal Institute

On July 12th, the Board of Trustees of the Appraisal Foundation adopted three resolutions related to “…allegations that the Appraisal Institute had engaged in conduct detrimental to the interests of The Appraisal Foundation.” The Board released a “Statement to the Sponsoring Organizations of the Appraisal Foundation” in which they “…concluded that the Appraisal Institute engaged in conduct materially and seriously prejudicial to the purposes and interests of the Foundation” and determined that the Appraisal Institute would be sanctioned in two ways:

“1) The Appraisal Institute shall be suspended as an Appraisal Sponsor effective September 15, 2010 and ending on April 15, 2011;

2) Permission by The Appraisal Foundation to the Appraisal Institute to reproduce the Uniform Standards of Professional Appraisal Practice (USPAP) without charge and (b) its discount on the purchase price of USPAP shall be revoked for a period commencing September 15, 2010 and ending on July 1, 2012.

It is understood that the Appraisal Institute is preparing a response to these allegations and will have a formal statement in the near future. The Appraisal Foundation has set a September 1st date for a hearing, if one is requested by the Appraisal Institute. Their resolution stated that only the suspension, not the USPAP reproduction limitation, would be appealable.

A link to the full text of the statement can be found here: Statement to the Sponsoring Organization fo the Appraisal Foundation

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Appraisers Leaving the Profession En Masse? Or Not?

On July 30th at 5:00 A.M. the Appraisal Subcommittee (ASC) released the names of 4,593 appraisers who were no longer on the National Registry. Shortly after noon on the same day an amended list of 1,642 appraisers was released. We were left wondering if 2,951 appraisers had somehow changed their minds (perhaps anticipating improvements in the profession in coming months?) and become re-instated until just before 7:00 P.M. when the ASC released a statement that “Due to an error in an external system that delivers license expiration and disciplinary notices to subscribers for the ASC, some license renewals were not reflected in the emails generated on this date, and therefore the listserv notice contained inaccuracies.”

It appears as though even the ASC can have a bad day.

Mortgage Brokers Could Be Criminals?

Also on July 21st, Bloomberg.com discussed the additional scrutiny that mortgage brokers were now subject to after the many disclosures of fraudulent activities noted in recent years. As an example, Bloomberg.com described the case of Sean McConville, who operated a mortgage brokerage known as ALG Capital Inc. in Mission Hills, California, from 2006 to 2008. Mr. McConville, who was a convicted armed robber without a broker’s license, was charged in June 2010 with “…61 criminal counts of grand theft, forgery and elder abuse for conspiring to lure borrowers into refinancing their homes on false promises of low interest rates and minimal fees.”

The article noted that the Bureau of Labor Statistics reported in May of this year that the number of mortgage brokers had declined to 246,900, a figure that was less than 50% from the peak of 504,400 reported in February of 2006. The article did not report on how many of these mortgage brokers were in jail in relation to the number selling used cars, working for AMCs or making loud, annoying videos. A link to this article is found here:

US Mortgage Brokers Get Criminal Check, Tests Under New Rules

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Damned if They Do, Doomed if They Don’t. What is The Fed to Do With Their Inventory of Mortgage-Backed Securities?

On July 22nd, the New York Times discussed the challenges facing the Federal Reserve in managing its large supply of mortgage-backed securities, which increased by more than $1 trillion last year as it effectively provided most of the money for new mortgages in support of the weak housing market and economic climate. The article noted that: “While officials and economists generally regard the program as successful in supporting the housing market, it has left the Fed holding a vast pile of mortgage securities — basically i.o.u.’s from homeowners — that it does not want and cannot sell.”

This article can be read in its entirety by clicking on the following link: Mortgage Securities It Holds Pose Sticky Problem for Fed

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Some Community Bankers Support the Financial Reform Bill

CNBC.com released a video on July 21st in which Camden Fine of the Independent Community Bankers of America spoke favorably of the Dodd-Frank bill which was signed into law later that day and a link to this interview is found here: Community Banker on FinReg

What do Alan Greenspan and Robert Shiller Think About Our Current Economic Situation?

On NBC’s “Meet the Press” August 1st, Alan Greenspan discussed his concerns of another economic contraction if home prices decline. He discussed his concerns that we have a “distorted economy” and Bloomberg.com quoted him as saying on the show that:

“Any recovery has mostly been limited to large banks, large businesses and “high-income individuals who have just had $800 billion added to their 401(k)s, and are spending it and are carrying what consumption there is… The rest of the economy, small business, small banks, and a very significant amount of the labor force, which is in tragic unemployment, long term unemployment — that is pulling the economy apart”.

The New York Times reported on Robert Shiller’s most recent thoughts on July 31st . While he notes that stimulating the economy and encouraging business expansion is an important goal, he also notes the apparent disconnect with job creation and reducing unemployment and suggests: “Why not use government policy to directly create jobs — labor-intensive service jobs in fields like education, public health and safety, urban infrastructure maintenance, youth programs, elder care, conservation, arts and letters, and scientific research?” Mr. Shiller compares the current attempts at economic stimulus with efforts of Franklin D. Roosevelt during the New Deal which focused directly on job creation.

Links to these articles in their entirety are found here: Greenspan Says Drop in Home Prices Might Bring Back Recession

What Would Roosevelt Do?

Underwater in Manhattan: The Big Ciy Learns About Short Sales

On July 23rd, the New York Times reported on the state of the real estate market which they described as generally being approximately 30% down from the market peak. Anecdotal evidence along with lis pendens filings, which doubled in 2009, suggested that the growing number of short sales was not likely to end soon. A link to this article is found here: The Roller-Coaster Ride Called a Short Sale

Fannie Mae Prepares Defenses Against Strategic Defaults

Also on July 23rd, the New York Times described the efforts that Fannie Mae was taking to prevent borrowers from simply walking away from their mortgages even when they were still affordable, so called “strategic defaults”. Citing an Experian study, the article noted that “…in the Northeast, strategic defaults in 2009 reached 11 times their 2005 levels. In California, by comparison, strategic defaults last year were 80 times their 2005 levels.” A link to this article follows: Seeking to Close Off an Exit

Rates & Dates

Historically low interest rates are still reportedly available even if the conditions attached to them and ability to obtain them are tougher. Freddie Mac reported that rates for 30-year fixed-rate mortgages declined slightly to 4.54% for the week ending July 29th from the 4.56% of the prior week.

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending July 23rd reported a decline to 4.59% from the previous week’s average of 4.69%.

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

We want to congratulate our most recent winner: Richard T. Kimball Jr.,, a Certified Residential Appraiser with G.N.O. Appraisal Services, in Jefferson, Louisiana.

Today’s question:

Who said: “Experience is simply the name we give our mistakes.”

1. Oscar Wilde

2. Mark Twain

3. Sarah Palin

4. Tony Hayward

5. None of the above

The first person to respond with the correct answer wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Appraisers Win (Finally!) With New Legislation

Sean Collins — Tue, 20 Jul 2010 00:39:01 +0000

TUESDAY, JULY 20TH, 2010

President to Sign Financial Reform into Law Wednesday with Appraiser Friendly Provisions
Higher Appraisal Fees!
HVCC to End!
New Regulations for AMCs!
Limitations on BPOs!
The Bottom Line
What Should Appraisers do Right Now to Take Advanage of the Upcoming Changes?
FHFA Issues 64 Subpoenas Seeking Loan Documents in Mortgage Fraud Investigation
Troubling Housing News
Rates and Dates
Ask Angie
Tell us what you think!
Closing Remarks

President to Sign Financial Reform into Law Wednesday with Appraiser Friendly Provisions

On Thursday, the Senate passed the Dodd-Frank bill by a 60 to 39 vote, sending this appraiser-friendly measure to the President for his signature, which will occur on Wednesday.

This bill appears to have provisions which promise to improve the working conditions and financial prospects for many appraisers. The significance of this bill makes it worth repeating much of the information from our last newsletter since many readers may have missed it while on vacation or ignored it figuring that some last minute change would make it less appraiser-friendly (we do have skeptics amongst us after these last several years).

Good news is worth repeating, so here it is. Besides, who wants to read all the troubling new predictions for the residential and commercial real estate markets anyway on a nice summer day? Well, we won’t totally ignore the flurry of bad reports but we’ll place them at the end of the newsletter!

Here is a link to the Dodd-Frank bill, all 2,319 pages worth. Dodd-Frank Wall Street Reform and Consumer Protection Act

Learn more about discounted McKissock Continuing Education Courses by clicking here. Please act soon (prior to 7/31/2010) to ensure you get the best discount available.

Higher Appraisal Fees!

The congressional bill appears to take some of the language from the FHA (see FHA Mortgagee Letter 2009-28) regarding appraiser compensation and expands upon the mandates of that letter. It includes the following language on page 2215:

Sec. 1472 APPRAISAL INDEPENDENCE REQUIREMENTS

“Customary and Reasonable Fee:

IN GENERAL—Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.”

The bill, however, goes further than the FHA mandate in describing manners in which customary and reasonable fees are to be determined:

“Evidence for such fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments ordered by known appraisal management companies.” Please note that we have added italics to this last sentence to emphasize its importance.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Valuation 2010-say yes if you literally want the t-shirt! Luxor Las Vegas, NV – November 8-10 – www.valuationexpo.com

HVCC to End!

Page 2216 in the bill has this to say about the HVCC:

“SUNSET. Effective on the date the interim final regulations are promulgated pursuant to subsection (g), the Home Valuation Code of Conduct announced by the Federal Housing Finance Agency on December 23, 2008, shall have no force or effect.”

What does this mean exactly? It doesn’t mean very much as many of the provisions of the HVCC are included in this bill. But, there are many pro-appraiser provisions in this bill which is something we haven’t had many opportunities to say during recent years. We have been most interested in the bill’s impact on appraisers and have not analyzed it carefully as to its impact on other industry groups such as mortgage brokers and AMCs but it does not appear as though these two groups will find much to like about it from their vantage point.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

New Regulations for AMCs!

Page 2223 of the congressional bill contains the following language regarding Appraisal Management Companies:

‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM

REQUIREMENTS.

(a) IN GENERAL.—The Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, the Federal Housing Finance Agency, and the Bureau of Consumer Financial Protection shall jointly, by rule, establish minimum requirements to be applied by a State in the registration of appraisal management companies. Such requirements shall include a requirement that such companies—

(1) register with and be subject to supervision by a State appraiser certifying and licensing agency in each State in which such company operates;

(2) verify that only licensed or certified appraisers are used for federally related transactions;

(3) require that appraisals coordinated by an appraisal management company comply with the Uniform Standards of Professional Appraisal Practice; and

(4) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence

standards established under section 129E of theTruth in Lending Act.”

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Limitations on BPOs!

While this does not go far enough and excludes many current uses of BPOs, the congressional bill contains the following provision regarding Broker Price Opinions on page 2241:

‘‘SEC. 1126. BROKER PRICE OPINIONS.

(a) GENERAL PROHIBITION.—In conjunction with the purchase of a consumer’s principal dwelling, broker price opinions may not be used as the primary basis to
determine the value of a piece of property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property.

(b) BROKER PRICE OPINION DEFINED.—For purposes of this section, the term ‘broker price opinion’ means an estimate prepared by a real estate broker, agent, or sales person that details the probable selling price of a particular piece of real estate property and provides a varying level of detail about the property’s condition, market, and neighborhood, and information on comparable sales, but does not include an automated valuation model, as defined in section 1125(c).’’

Once again, we at Appraiser Help want to note our support for the positions taken by the four appraisal organizations which authored the March 8th and April 20th letters that we have previously discussed opposing the use of both BPOs and BOVs (Broker Opinions of Value of Commercial Real Estate). Links to these two letters are here:

Letter Regarding BPOs.

We also again request that Andrew Cuomo take one final action as Attorney General, before his coronation as Governor of New York, to read our letter dating back to August 4, 2009 (go to www.EndBPOsNow.com to see) and use the powers at his disposal to help bring an end to these unseemly financial practices.

The Bottom Line

After the President signs the bill into law Wednesday it appears likely that many of the appraiser friendly provisions will begin to take effect before the end of the year. Other parts of the bill, such as the AMC registration, will not be fully implemented for an extended time.

What Should Appraisers do Right Now to Take Advanage of the Upcoming Changes?

As always, a diversified real estate appraisal practice is the goal and marketing your services to attorneys, accountants, property owners, municipalities, etc. for private appraisal business is recommended along with efforts to build a better mortgage appraisal business. It is too early to predict how the flow of mortgage appraisals will change and who will win and lose amongst the AMCs but appraisers should consider introducing themselves to some new AMCs with the prospects of better fees on the horizon.

FHFA Issues 64 Subpoenas Seeking Loan Documents in Mortgage Fraud Investigation

The New York Times first reported on July 12th about the efforts being undertaken by the FHFA to recover some of the losses taken by Fannie Mae and Freddie Mac and followed up this article with another on July 16th in which they stated that there was now a “…strong cop on the Fannie and Freddie beat…”. This second article reported that the subpoenas

“…went to companies that act as trustees for mortgage pools or that service the loans in them. The housing finance agency wants to see loan files and transaction documents related to those pools, including mortgage applications and property appraisals. Recipients of the subpoenas have 30 days to produce the requested documents. Additional subpoenas may follow…”

Links to these articles are found here:

Gov’t Tries to Recoup Some Fannie, Freddie Losses

Holding Bankers’ Feet to the Fire

It seems as though there may be an increasing need for retrospective appraisals in the coming years…

Troubling Housing News

Ahead of Commerce Department data due out today, Bloomberg News reported on July 18th that the housing market retrenched in June as construction and purchases dropped. Bloomberg News cited growing pessimism in July as reported by the National Association of Home Builders/Wells Fargo confidence index along with a decline of 11% in Standard & Poor’s supercomposite homebuilders index. A link to the Bloomberg News story in its entirety is found here:

Housing, Leading Index in US Probably Slumping in Sign Recovery Slowing

On July 14th, the New York Times reported on the decline in homeownership rates nationally as foreclosures have risen and a link to this article is found here: A Falling Homeownership Rate

What about homeowners who are better off than the average middle class subdivision dweller? On July 8th, the New York Times reported that one out of every seven homeowners with a mortgage over $1 million is seriously delinquent, according to CoreLogic. A link to this article is found here: Biggest Defaulters on Mortgages Are the Rich

Rates and Dates

Freddie Mac reported that rates for 30-year fixed-rate mortgages remained at the previous week’s rate of 4.57% for the week ending July 15th.

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending July 9th reported an average rate for 30-year fixed-rate mortgages of 4.69%, essentially unchanged from the prior week’s average of 4.69%.

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: Mortgage Bankers Association Research and Forecasts

Ask Angie

We want to congratulate our most recent winner: Marvin Kaleky, a Certified Residential Appraiser with Able Appraisals, in North Lauderdale, Florida.

Today’s question:

Who said: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

1. Timothy Geitner

2. Barney Frank

3. Kenneth Feinberg

4. Upton Sinclair

5. None of the above

The first person to respond with the correct answer wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Learn more about discounted McKissock Continuing Education Courses by clicking here.

Better Days For Appraisers, Higher Fees Ahead

Sean Collins — Tue, 06 Jul 2010 03:50:18 +0000

TUESDAY, JULY 6TH, 2010

Dodd-Frank Wall Street Reform and Consumer Protection Act Passed in House, Moves On to Senate

As we reported in our Special Edition last week, after several years of reporting about difficult times for appraisers, many provisions in the Dodd-Frank bill promise to help bring positive changes to the appraisal profession.

Here is a link to the Dodd-Frank bill, all 2,319 pages worth. Dodd-Frank Wall Street Reform and Consumer Protection Act

For those of you who don’t wish to read the entire document, we will summarize some of these provisions as we did last week with our Special Edition as many appraisers may have missed it during the holiday week.

Higher Appraisal Fees!

Sec. 1472 APPRAISAL INDEPENDENCE REQUIREMENTS

“Customary and Reasonable Fee:

The bill, however, goes further than the FHA mandate in describing manners in which customary and reasonable fees are to be determined:

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HVCC to End!

Page 2216 in the bill has this to say about the HVCC:

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New Regulations for AMCs!

Page 2223 of the congressional bill contains the following language regarding Appraisal Management Companies:

‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM
REQUIREMENTS.

(1) register with and be subject to supervision by a State appraiser certifying and licensing agency in each State in which such company operates;
(2) verify that only licensed or certified appraisers are used for federally related transactions;
(3) require that appraisals coordinated by an appraisal management company comply with the Uniform Standards of Professional Appraisal Practice; and
(4) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence
standards established under section 129E of theTruth in Lending Act.”

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Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Limitations on BPOs!

While this does not go far enough and excludes many current uses of BPOs, the congressional bill contains the following provision regarding Broker Price Opinions on page 2241:

‘‘SEC. 1126. BROKER PRICE OPINIONS.
(a) GENERAL PROHIBITION.—In conjunction with the purchase of a consumer’s principal dwelling, broker price opinions may not be used as the primary basis to
determine the value of a piece of property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property.

The Bottom Line

First, the Senate needs to pass the measure and send it to the President for his signature.

Assuming that this takes place within the next couple of weeks, it appears likely that many of the appraiser friendly provisions will begin to take effect before the end of the year. Other parts of the bill, such as the AMC registration, will not be fully implemented for an extended time.

A Positive Report Regarding Commercial Real Estate Loans?

On June 30th, the New York Times discussed some signs of life in the dormant market for commercial real estate backed securities and a link to this article is found here: Commercial Mortgage-Backed Bonds Make a Comeback

Other News

Amidst talk of a double dip recession, CNBC.com and Zillow recently posted two reports regarding 1) areas where the real estate market has declined significantly after a period of improvement and 2) those U.S. cities with the most underwater mortgages. Links to these articles are found here:
America’s Double-Dip Real Estate Markets
US Cities With The Most Underwater Mortgages

The negative impact of high property taxes on home sales was discussed in the New York Times on June 27th and a link to this article is found here:
Property Taxes Inhibit Sales in West Orange

On July 2nd, approximately two weeks after the delisting of Fannie Mae and Freddie Mac, CNBC.com discussed some of the possible consequences if the two mortgage giants were disbanded. A link to this is found here: Who Would Finance Mortgages If Fannie, Freddie Disbanded?

CNBC.com also put out a special report titled “The Housing Fix”, a link to which follows: The Housing Fix

Rates & Dates

Freddie Mac reported that rates for 30-year fixed-rate mortgages had dropped to 4.58% for the week ending July 1st from 4.69% during the previous week.

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending June 25th also reported a decline in the average rate for 30-year fixed-rate mortgages to 4.67% from the previous week’s rate of 4.75%.

On July 1st, CNBC.com discussed the lack of mortgage loan activity even with mortgage rates at 50 year lows: Mortgage Rates Drop to Lowest Rate in 50 Years

Additional information from Freddie Mac can be found by going to: Freddie Mac – Primary Mortgage Market Survey PMMS

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Ask Angie

First, we want to congratulate our most recent winner: Scott D. Hammond, a Certified Residential Appraiser with Hammond Appraisal Services, LLC, in Grand Junction, Colorado.

Today’s questions:

Question 1) Who said:
“I don’t see much of (my husband) anymore since he got so interested in sex.”

1. Mrs. Sigmund Freud
2. Mrs. Alfred Kinsey
3. Mrs. Albert Gore
4. Mrs. Tiger Woods
5. None of the above

Question 2) Who said:
“I think the free enterprise system is absolutely too important to be left to the voluntary action of the marketplace.”

1. Congressman Richard Kelly
2. John Maynard Keynes, economic thinker
3. Congressman Barney Frank
4. Paul Krugman, New York Times columnist
5. None of the above

The first person to respond with both correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:
Suzanne Fahien
Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Breaking News: HVCC ENDS, BPOs Weakened, Higher Appraisal Fees

Sean Collins — Mon, 28 Jun 2010 01:49:59 +0000

BREAKING NEWS FINALLY-Good News for Appraisers in Financial Reform Bill Agreed to by House-Senate Conference Committee

It appears as though we may have some good news to report to real estate appraisers who have suffered through so many days of bad news during the past several years. While we are attempting to verify the final language adopted in the version agreed to by the committee and sent back to Congress for ratification, we want to share some of the highlights.

Learn more about discounted McKissock Continuing Education Courses by clicking here.

Higher Appraisal Fees!

The congressional bill appears to take some of the language from the FHA (see FHA Mortgagee Letter 2009-28) regarding appraiser compensation and includes the following language:

“Customary and Reasonable Fee:

The bill, however, goes further than the FHA mandate in describing manners in which customary and reasonable fees are to be determined:

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Narrative1 is a turn-key system for writing narrative real estate appraisal reports using Microsoft Word and Excel.

HVCC to End!

What does this mean exactly? Well, it does not mean that real estate and mortgage brokers can go back to playing “pick an appraiser who will hit the number”. The congressional bill contains numerous provisions mandating protection for appraisers to prevent pressure from mortgage lenders or their agents. We will have more to say about this in future newsletters.

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New Regulations for AMCs!

The congressional bill contains the following language regarding Appraisal Management Companies:

‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM

REQUIREMENTS.

(1) register with and be subject to supervision by a State appraiser certifying and licensing agency in each State in which such company operates;

(2) verify that only licensed or certified appraisers are used for federally related transactions;

(3) require that appraisals coordinated by an appraisal management company comply with the Uniform Standards of Professional Appraisal Practice; and

(4) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence

standards established under section 129E of theTruth in Lending Act.”

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Limitations on BPOs!

While this does not go far enough and excludes many current uses of BPOs, the congressional bill appears to have following provision regarding Broker Price Opinions:

‘‘SEC. 1126. BROKER PRICE OPINIONS.

Letter Regarding BPOs.

The Bottom Line

First, we need to receive confirmation that the various provisions outlined above which impact appraisers have made it through the committee as indicated.

Second, both branches of Congress need to ratify this legislation and the President has to sign the measure.

Third, we need to have some patience while these measures are implemented and work with our various appraisal organizations to make sure that the good portions of this legislation are not weakened and that additional measures (i.e. ending all forms of BPOs and BOVs) are taken in the future.

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!

Regards,

Bill Collins, Appraiser Help Inc.

Business Appraisers Online Business Valuation Community

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Appraiser News: Fannie and Freddie Delisted, “Flopping,” Fraud & BPOs

Sean Collins — Tue, 22 Jun 2010 00:21:52 +0000

BusinessAppraisers.com Announces Launch

BusinessAppraisers.com announced Monday that they are officially accepting new listings from Business Appraisers and valuation experts for their new online directory, BusinessAppraisers.com. ”While there is a vibrant community of business appraisers and valuation experts in the U.S., we found that there was no comprehensive directory by which new clients could find them quickly and easily” said Bill Collins, one of the developers of the site.

The site serves a number of purposes for both business appraisers and their customers. For the business appraisers, it provides a professional and easy to use venue to connect with new clients, and create a comprehensive web presence complete with full contact information and even a place to publish articles and share them. For the prospective client, it provides valuable education tools to help acquaint them with the business valuation process, teaches them what to expect, and finally, helps them to find the right business appraiser for their needs.

Any business appraiser interested in learning more can visit www.businessappraisers.com to find out more information. Special introductory pricing is available until July 31, 2010

Learn more about discounted McKissock Continuing Education Courses by clicking here.

“Flopping,” Fraud & BPOs

On June 10th, Bloomberg.com published a hard-hitting report about “flopping” (which they described as a “…scheme” in which “…investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit…”.

Bloomberg quoted Ann Fulmer, vice president of Interthinx (a California company that sells mortgage fraud detection software) as saying that: “Investors often use real estate broker opinions, which may rely on drive-by inspections instead of full appraisals, to persuade lenders to sell at a low price”. Ms. Fulmer illustrated her point by suggesting an Internet search for “How to influence a broker price opinion”. The article suggested that this search yielded 74,800 results. When we made this search on Google, it yielded 54,600 results; however, when we made the search “How to influence a BPO” it yielded 188,000 results!

The Bloomberg.com article noted that the special inspector general for the Troubled Asset Relief Program (TARP), Neil Barofsky, reported to Congress that by allowing BPOs, taxpayers were exposed to $49 billion of government bailouts for housing. Bloomberg quoted Mr. Barofsky as saying that: “As constituted now, the program permits home valuation, the key vulnerability point for a flopping scheme, without a true appraisal…No program of this type and scale can be considered well designed without robust protection of taxpayer funds against the predation of criminals, particularly given the inconsistent treatment of home valuation.”

The Bloomberg.com article describes a Connecticut case in which two real estate agents pled guilty in a fraudulent scheme and the entire article can be viewed by clicking on the following link:

Banks Face Short-Sale Fraud as Home “Flopping” Spreads

Letter to State Appraiser Board Chairs

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Subprime Lending and the “Working Poor:” Many Financial Institutions are Profiting Nicely with “Payday Loans” and Similar Products

The Huffington Post “Named Names” and provided details on the growth of this industry, now estimated at $40 billion per year, in an article on June 16th. A link to this article can be found here: Naming Names: Every Bank and Business That Is a Subprime Lender

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Debt Settlement Firms Putting Debtors in Bigger Holes, Including Some Appraisers

Lots of attention has been given to some of the unsavory practices of many debt settlement firms and action is being taken by a number of consumer protection agencies and state attorneys-general. An article in the New York Times on June 18th discussed the case of Linda Robertson, a former appraiser licensed in Arizona, and how the collapse of her real estate appraisal practice led to a bankruptcy filing, with the “assistance” of a debt settlement firm. A link to this article can be found here: Peddling Relief, Firms Put Debtors in Deeper Hole

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Not just for FHA Appraisers – Connect with over150 AMCs with updated information.

Continuing Concerns Regarding the Commercial Real Estate Market

In a commentary on Moody’s Economy.com on June 15th, Ed Friedman wrote about how the difficulties obtaining financing would delay recovery of the commercial real estate market. In the article he noted that:

-“Low prices, high vacancy rates, and rising delinquencies will curb lenders’ appetite for commercial real estate.

-Major sources of CRE investment face problems of their own, further limiting funding.

-A revival in commercial mortgage-backed securities is on hold until Washington reforms financial regulation.

Commercial real estate faces continued difficulty obtaining financing despite the U.S. economic recovery. On the demand side, borrowers are less able to show economic fundamentals that would be acceptable to lenders, and this situation will persist for a long time. On the supply side, sources of funding that were abundant over the past decade are now limited, and this too will not reverse in the near term. As a result, commercial real estate will lag the rest of the economy longer than it otherwise would have.

A tidal wave of corporate bankruptcies, takeovers, and simple corporate downsizings has led to a huge decline in office use. This has been particularly apparent in the financial industry, where two major investment banks vanished forever and two of the largest deposit-taking institutions were taken over, with many branch offices closed around the country. Additionally, mortgage lending companies large and small went out of business or were taken over. The financial industry was not alone, moreover, with consolidation occurring among airlines, business IT services, and other industries.”

Mr. Friedman noted that because of this, the declines in the commercial real estate market have been greater than those in the residential real estate market. This article can be viewed by clicking on the following link: Finance Will Delay Commercial Real Estate Recovery

Commercial Real Estate Brokerage Firms Struggling in Wake of Declines in Commercial Real Estate Market

On June 15th, the New York Times discussed the difficulties and challenges facing commercial real estate brokerage firms in what they called a “Post-Boom World”. In particular, they noted the problems facing Cushman and Wakefield, the world’s third largest commercial real estate brokerage. A link to this article is found here: Commercial Firms Fight Back in a Post-Boom World

Rates & Dates

Freddie Mac reported that rates for 30-year fixed-rate mortgages were at 4.75% for the week ending June 17th, essentially unchanged from 4.72% during the previous week.

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending June 11th reported that the average rate for 30-year fixed-rate mortgages was also basically unchanged at 4.81% after the previous week’s rate of 4.82% during the prior week.

The MBA, in their Mortgage Finance Commentary for June 2010, noted the fragility of the housing market saying that:

“Early data from MBA’s Weekly Application Survey continue to suggest a fairly sharp pullback in home sales following the expiration of the homebuyer tax credit. We expect that sales will revive, putting the housing market back on track for a long, slow uphill climb to a more normal pace of activity. In the meantime, the steady additions to supply from foreclosed properties, coupled with the minimal number of new units on the market, and the occasional bursts of listings from current owners, will be sufficient to keep downward pressure on home prices for the near term. Given a gloomier macroeconomic outlook, we expect that national home prices will now bottom towards the end of next year before seeing some stabilization in 2012. We also expect greater differentiation in markets, with the strongest markets showing increases in prices this year.

On a seasonally adjusted basis, purchase applications declined by 18.1 percent over the month. Refinance applications increased by 34.8 percent relative to the prior month.

We predict that mortgage originations will fall to $1.4 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase originations will fall slightly to $725 billion, as home prices continue to fall and the effect from the homebuyer tax credits wane. Refinance originations will fall to $717 billion in 2010 from $1.4 trillion in 2009, but we continue to mark up our refinance origination forecast given the sharp drop in mortgage rates.”

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

Fannie Mae & Freddie Mac Delisted From the New York Stock Exchange

The Federal Housing Finance Agency (FHFA), conservator for Fannie Mae and Freddie Mac, announced on June 16th that shares of the two companies would be delisted from the New York Stock Exchange. This move was not considered to be a surprise since shares of Fannie have been below $1 for 30 trading days and the NYSE requires companies to take action to boost their shares or delist. Bloomberg.com discussed this matter on June 16th and a link to that report is found here:

Fannie, Freddie Stock To Be Delisted from NYSE

Ask Angie

We want to congratulate our two most recent winners: Virginia Buchanan-Furr, a Certified Residential Appraiser with Ginny Furr Appraisal Service in Trinity Center, California, and Donna K. Jones, a Certified Residential Appraiser with Donna Jones Appraisals, Hickory Creek, Texas.

Today’s questions:

Question 1) Who said:

“A well-functioning market economy can make a huge contribution to the growth of incomes and living standards. In the absence of sensible regulations, the market can also yield a complete disaster. What we have to work for now is to seek an appropriate combination of activities of the market and of the state.”

1. Paul Krugman, New York Time columnist

2. Adam Smith

3. Amartya Sen, Nobel laureate in economics

4. Timothy Geitner, Treasury Secretary

5. None of the above

Question 2) Who said:

“I am, or I was, an expert in kissing on stage and on screen. How did I prepare for this? Well most of my preparation took place in my suburban high school, or rather behind my suburban high school, in New Jersey.”

Meryl Streep

Dick Cheney

Liz Cheney

Lindsay Lohan

Madonna

The first person to respond with both correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

BP and BPOs, the New Toxic Twins

Sean Collins — Mon, 07 Jun 2010 21:41:29 +0000

What Do BP and BPOs Have In Common?

Long-standing, cozy relationships between the oil industry and those charged with regulating it have become all too apparent with the tragic oil spill in the Gulf.

After the financial crisis, attention became focused on similar “all too friendly” relationships between regulators and some of the big players in the real estate and financial sectors. There are many areas that need reform and many different ideas on how to do so. However, there is one area where all appraisers and informed decision-makers can agree: BPOs (Broker Price Opinions of residential real estate) and BOVs (Broker Opinions of Value of commercial real estate) need to end before they contribute to another collapse of the real estate market and a new crisis.

Once again, we at Appraiser Help want to note our support for the positions taken by the four appraisal organizations which authored the March 8th and April 20th letters that we have previously discussed opposing the use of both BPOs and BOVs. Links to these two letters are here: Letter From Appraisal Organizations Regarding BPOs and BOVs.

Valuation 2010-say yes if you literally want the t-shirt! Luxor Las Vegas, NV – November 8-10 – www.valuation2010.com

US Financial Crisis Inquiry Questions Moody’s CEO and Warren Buffett

On June 2nd Bloomberg.com reported on the written testimony of Moody’s Corp. Chief Executive Raymond McDaniel, in which he stated that his company’s ratings during the past several years of CDOs (collateralized debt obligations) and residential mortgage securities were “…deeply disappointing.” The report went on to say that Mr. McDaniel described the housing market collapse and economic troubles “were of a magnitude that many of us would have once thought unimaginable…Moody’s is certainly not satisfied with the performance of these ratings.”

The Chairman of the Commission, Phil Angelides, was reported by Bloomberg.com to have said: “To be blunt, the picture is not pretty…Moody’s did very well. The investors who relied on Moody’s ratings did not do so well.”

Also on June 2nd, the New York Times reported on the testimony of Warren Buffett, CEO of Berkshire Hathaway which is the largest stockholder of Moody’s. Apparently seeking to distance himself from Moody’s, the “Oracle of Omaha” who was testifying before the Commission under subpoena after first declining to appear, essentially admitted that he does not know everything. “I’ve never been to Moody’s,” he said, adding that “I don’t even know where they’re located. I just know that their business model is extraordinary.”

In another televised interview, Mr. Buffett said that he would not recognize the head of Moody’s if he was standing next to him. The Times report also quoted Mr. Buffett as saying that: “The entire American public was caught up in the belief that housing prices could not fall dramatically…” and that Moody’s “made the wrong call” and admitted that he “…was wrong on it, too.” Wikipedia’s online dictionary describes an oracle as: “A person… considered to be a source of wise counsel or prophetic opinion.” Perhaps we need a new nickname for Mr. Buffett (maybe “Bubblehead”, considering his now regrettable comment just prior to the real estate collapse, which he referred to as a “Bubble-ette”).

Links to the Bloomberg.com report and the New York Times article are found here:

Questions for Moody’s and Buffett

Moody’s Chief Says CDO Ratings ‘Deeply Disappointing’

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Anointing a New Oracle: Robert Shiller

Maybe it’s time for Mr. Buffett to pass the baton to Yale University professor of economics and finance (and housing guru) Robert Shiller, who has consistently recognized underlying patterns and accurately predicted home price movements. Bloomberg.com most recently interviewed him on May 26th where he expressed some of his current concerns. This interview can be heard by clicking on the following link: Bloomberg News – Yale’s Shiller Interview on Home Prices

On June 1st, the New York Times reported on the increasing number of underwater homeowners who are taking advantage of drawn out foreclosure proceedings to otherwise stabilize their financial picture and a link to that article is found here: Owners Stop Paying Mortgages, and Stop Fretting

Appraisers save as much as 25% off of Continuing Education Courses – Come see what we offer today!

Big Banks Agree, Who Wants to Buyback This Stuff?

One additional Times article from June 4th described the banks lack of enthusiasm when approached by Fannie Mae and Freddie Mac to buyback loans considered to be predatory or fraudulently underwritten and a link to this article is found here: Banks Say No. Too Bad Taxpayers Can’t.

Some of the prevailing anti-bank sentiment was “comically” presented in the Huffington Post on June 4th, a link to which is found here: Financial Crisis Explained Through Comics

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Numerous Concerns Regarding the Commercial Real Estate Market

On May 25th the New York Times discussed reports from several sources describing a so-called “shadow inventory” of commercial space that is empty due to layoffs and consolidations. This space, which is not currently offered for rent or recorded anywhere, will be “backfilled” if and when the economy and employment picks up resulting in a lack of leasing activity. A link to this article is found here: Empty Desks May Slow Upturn in Real Estate

On June 2nd, the Wall Street Journal discussed the looming problems with commercial mortgage backed securities. It noted their popularity at the height of the real estate market and reported that approximately $700 billion of these securities are outstanding which is an amount greater than securitized credit card debt, student loans and auto loans combined. The Journal noted that the delinquency rate with these loans increased to 8.4% in June, more than triple that of the previous year as reported by Trepp LLC, a provider of commercial real estate backed security information. The article also reported research by Fitch Ratings which project a loss rate of 10% for commercial securities issued in 2007 at the height of the commercial real estate boom. Howard Chin, a managing director of Guardian Life Insurance Co. of America which oversees a portfolio of commercial mortgage backed securities is quoted in the article as saying that “The worst is yet to come.”

Another Journal article stated that Moody’s Investors Service Inc. reported that commercial property values were down 42% from the market peak in October 2007 while other reports by Moody’s and Real Capital Analytics Inc. indicated that as of March 2010, industrial and office prices had declined 32% during the prior two years with retail space down 28%. The Journal article noted that: “…because banks remain wary of commercial real estate loans, landing financing to make such a purchase can be time consuming and tedious.”

The Wall Street Journal reported yesterday that GE Capital planned to reduce its commercial real estate by 50% because that business “…has proved a huge headache in the wake of the credit crisis.” No time frame was delineated for accomplishing this but the Journal reported that the market value of commercial buildings owned by GE Capital has fallen by nearly 40% since 2008.

Rates & Dates

The Wall Street Journal reported yesterday that mortgages insured by the FHA are “…falling into delinquency at a lower rate than they have in the past..In April, nearly 8.5% of loans backed by the agency were 90 days or more past due. While that was still higher than a year earlier, April marked the third consecutive month in which delinquencies, which peaked at 9.4% in January, declined.” This improved performance was attributed largely to a tightening of standards by lenders.

Freddie Mac reported that rates were essentially unchanged with 30-year fixed-rate mortgages at 4.79% for the week ending June 3rd, up from 4.78% during the previous week.

Additional information from Freddie Mac can be found by going to: Freddie Mac Primary Mortgage Market Survey PMMS

How Many Appraisers Are Left in The US?

The Appraisal Subcommittee currently reports that there are 114,192 certified or licensed appraisers in the United States with 33% of them Certified General Appraisers, 50% Certified Residential Appraisers and 17% Licensed Appraisers. While this number may appear higher than many appraisers would expect in consideration of the difficulties in the appraisal profession, it appears as though it contains many appraisers who no longer appraise full time but retain their license, possibly in the hope that industry conditions might improve. A state by state breakdown can be viewed by clicking on the following link: Active Appraisal Credentials – ASC – Appraisal Subcommittee

Ask Angie

We want to congratulate our two most recent winners: Timothy Faso, a Certified Residential Appraiser with Fort Neck Real Estate Appraisal in Seaford, New York.

Today’s questions:

Question 1) Who said:

“Our greatest glory is not in never falling, but in getting up every time we do.”

1. Confucius

2. Sonny Liston

3. Richard Nixon

4. Lindsay Lohan

5. None of the above

Question 2) Who said:

“One original thought is worth a thousand mindless quotings”

1. Plato

2. Bill Gates

3. Auguste Rodin

4. Diogenes of Sinope

5. None of the above

The first person to respond with both correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

AMC Love and Hate, Cuomo For Governor?

Sean Collins — Tue, 25 May 2010 08:45:20 +0000

Working With Some AMCs to Survive

Robert L. Martin was interviewed for this article. He is a Certified Residential Appraiser from Paso Robles, California, who practices solely in San Luis Obispo County.

Bob began his working career in 1977 immediately after graduating with a degree in real estate and property management. During the ensuing decades, he has worked for Bank of America in both lender and appraiser positions as well as working as an independent fee appraiser and as a real estate broker. Along the way, Bob worked to receive the SRA designation from the Appraisal Institute and established his own appraisal practice.

During the 1990’s, Bob had two appraisers working under him and built a healthy practice. Most of Bob’s business was mortgage related residential appraisal work and the business thrived for many years up through the middle portion of this past decade.

During the past year, however, all of this changed as several banks Bob worked with on a regular basis either failed or were acquired by other lending institutions and, in combination with the advent of the HVCC, appraisal orders dramatically declined along with the fees for assignments.

When I spoke with Bob recently, he was unsure of whether he was going to continue in the appraisal business and was considering a career switch to an agricultural business since he lives on a ranch in what is largely a rural area. He is currently working with several small community banks along with several AMCs but indicated that he’s “running a little bit scared” with revenues substantially down from previous years.

While the bottom line is always about money, Bob not only complained about being offered fees for appraisals that were far below the amount required to complete complex assignments properly but also felt insulted by the “babysitting” service performed by AMCs. He offered one example: an AMC called him and offered him $125 for an appraisal assignment for a property along the coast that had the potential to be a complex job with many hours needed to complete the research to perform the job properly. Of course, he declined the offer to appraise the property after which the AMC upped their offer to $180 before eventually agreeing to a fee of $350. Bob then explained to the AMC that his customary fee for an appraisal of a property similar to this within this beachfront community was from $475 to $500 and would not agree to anything less. Bob subsequently did not hear back from this management company.

Bob also spoke of other appraisers he knew who were considering options outside of the appraisal field and concluded our discussion by saying “Why do we need to run the most experienced appraisers out of the business?”

Valuation 2010-say yes if you literally want the t-shirt!
Luxor Las Vegas, NV – November 8-10 – www.valuation2010.com

Working with AMCs and Thriving

Debra Urianek is a Certified Residential Appraiser from East Islip, NY and is co-owner of Orion Appraisals and Management with her husband Bill. Debbie and Bill have an appraisal practice which includes rural and suburban portions of Long Island as well as urban areas in the outer boroughs of New York City.

Debbie has been practicing as an appraiser for more than twenty years and has been working with AMCs for most of her appraisal career. Approximately 90 to 95% of her appraisal assignments currently are from AMCs, as opposed to approximately 85% one year ago. Most of the AMCs that she deals with are larger firms, although she deals with a number of smaller AMCs too, and some of these working relationships go back almost to the beginning of her appraisal career. During this past year she reports little change in her price structure with the exception of across the board increases with the advent of Form 1004MC and one AMC which immediately increased fees for FHA appraisals by $100 on February 15th in response to the FHA’s Mortgagee Letter 2009-28 (which includes the mandate that “FHA-approved lenders have new responsibilities to ensure that FHA appraisers are ‘…compensated at a rate that is customary and reasonable for appraisal services in the market area…”)

Debbie has been a friend of mine for about 15 years and she is serious about providing quality appraisals and knows her market area well. She is not only one of the hardest working appraisers I have met but she is also honest and very direct in her communications. During the “sub-prime craziness” earlier in this decade I would not have wanted my Mom to hear Debbie’s response to a mortgage broker asking her to push values! Debbie does not tolerate attempts to influence her value opinions and reports to me that the AMCs that she has long-standing relationships with do not pressure her; I would expect that any new AMCs that tried to do so would have a rude awakening.

Debbie has a good support staff and attempts to maintain clear channels of communications with the AMCs that she deals with. Many appraisers new to working with AMCs understandably lose patience with uninformed, non-appraiser employees (“phone slaves” as they are sometimes derogatively called) but Debbie and her staff try to be proactive by efficiently processing orders and providing “statuses” in a timely manner to their clients.

Debbie mentioned one bad experience receiving payment from AMCs. Several years ago when Express Financial Service shut down, Orion Appraisal was owed more than $20,000 in appraisal fees. After a lengthy period of time and a number of court filings, she was able to recover approximately 1/3 of the money owed. Except for this one instance, Debbie reports that the AMCs she deals with adhere to their payment schedules with some paying every two weeks, some on 30 day cycles and others paying either immediately upon the appraisal clearing a review process. A link to an article about Express Financial Service and the problems appraisers had is found here:

Express Financial’s Shutdown Wallops Real Estate Contractors

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New Bills Passed to Regulate AMCs

The Appraisal Institute reported in their online newsletter on May 19th that four additional states have enacted laws to regulate AMCs. With the addition of these four states (Arizona, Vermont, Florida and Minnesota), fourteen states now have laws to regulate AMCs (the previous ten consisting of Arkansas, California, Indiana, Louisiana, Nevada, New Mexico, Oregon, Utah, Virginia and Washington).

Regarding these four most recent states to enact AMC bills, the Appraisal Institute article stated that:
“Under each of the new laws, AMCs operating in each state will be required to register with, and be overseen by, the state appraisal boards. AMCs operating in each state will be prohibited from influencing or attempting to influence the development, reporting, result or review of a real estate appraisal through coercion, extortion or collusion by withholding or threatening to withhold timely payment of future business from an appraiser”. The Appraisal Institute article notes that the Arizona law requires appraisers to be paid within 45 days of the date the appraisal is completed while the Vermont statute requires that AMC review appraisers have a licensing or certification status equal to, or greater than, that required to complete the appraisal assignment.

Additional information about the Appraisal Institute can be found by visiting their website at: www.AppraisalInstitute.org

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Freddie and Fannie to Implement Tweaked HVCC Provision

On May 19th, Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), conservator of Fannie Mae and Freddie Mac, wrote to New York State Attorney General Andrew M. Cuomo regarding the HVCC’s provision that Fannie Mae and Freddie Mac (the “Enterprises”) were to establish and fund an entity to be called the Independent Valuation Protection Institute (IVPI). Noting that the HVCC was agreed to prior to the FHFA’s placement of the Enterprises into conservatorship, Mr. DeMarco stated that he has decided not to proceed with this portion of the agreement for reasons related to unnecessary expenditure of taxpayer funds.

In a press release dated May 20th, the FHFA described what would take the place of the functions of the never instituted IVPI:

“Fannie Mae and Freddie Mac will deploy a complaint process to address suspected code violations including a mechanism for providing pertinent information to state and federal regulatory and enforcement departments. The process will be put in place within the next few weeks.”

A link to Mr. DeMarco’s letter to Andrew Cuomo as well as the FHFA news release is found here: Fannie Mae, Freddie Mac to Deploy Appraisal Complaint Process

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Governor Cuomo? Last Chance for Action to End BPOs and BOVs

By now, most appraisers around the nation have heard about Andrew Cuomo’s May 22nd announcement that he was entering the race for New York State Governor. Many pollsters have him in a favorable position at this point but before entering the Governor’s mansion, we think that it is not asking too much for him to read our letter dating back to August 4, 2009 (go to www.EndBPOsNow.com to see) and take one final action as Attorney General to use the powers at his disposal to help end BPOs (Broker Price Opinions of residential real estate) and BOVs (Broker Opinions of Value of commercial real estate).

Letter to State Appraiser Board Chairs from Leading Appraisal Organizations

Concerns Over Property Tax Assessments and Real Estate Taxes in Philadelphia

The Philadelphia Inquirer, in an article on May 14th, discussed the problems in the assessment system in Philadelphia which led to budgetary shortfalls and an almost 10% increase in property taxes. A link to that article is here:

Council Approves Proposed Real Estate Tax Hike

As we reported in our last newsletter, opportunities abound in many areas of the country for appraisers performing appraisals for property assessment and tax grievances. We would like to repeat three points from the last newsletter:

1. Licensed and certified appraisers are logically the professionals who should be involved in providing the most accurate, unbiased market value estimates to homeowners and commercial property owners concerned about property tax assessments that are overblown.

2. In many areas, property owners and departments of assessment recognize the contribution provided by appraisals provided by licensed and certified appraisers. Why, however, is the number of grievances still such a tiny percentage of the overall number of over-assessed properties and why aren’t appraisals by licensed and certified appraisers used more frequently?

3. Final question: Why aren’t appraisers doing more to promote the importance of their services in property tax assessment matters for both residential and commercial real estate?

Rates & Dates

The Mortgage Bankers Association (MBA), in its most recent Weekly Mortgage Applications Survey for the week ending May 14th, reported that the average rate for 30-year fixed-rate mortgages dropped to 4.83% from the previous week’s rate of 4.96%. Freddie Mac reported a decline to 4.84% in their most recent report for the week ending May 20th, down from the 4.93% during the previous week.

While Bloomberg.com reported on May 19th that mortgage applications (particularly for purchases) fell overall even with these declining mortgage rates, the Wall Street Journal reported yesterday that anecdotal evidence from mortgage professionals suggested that refinance activity may have surged last week. They reported that the financial turmoil in Europe was the big factor contributing to low mortgage rates since “…international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year…Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market. Instead, many in the industry now say rates could drift as low as 4.5% this summer…instead of rising to 6% as some economists projected…”

New Thoughts on a Double Dip Recession

On May 14th in the New York Times, Yale University professor of economics and finance (and housing guru) Robert Shiller had some interesting and disquieting thoughts about the (long term) possibility of a double dip recession in an article titled “Fear of a Double Dip Could Cause One,” a link to which is found here: Feat of a Double Dip Could Cause One

Bloomberg.com reported yesterday that while home sales rose in April, inventories rose at a faster pace leading to concerns that property values may decline further. It is noted that the Case-Shiller report will be coming out later today. A link to the Bloomberg.com article is found here:

US Economy: Home Purchases, Inventories Increase

Additional information from the Mortgage Bankers Association can be found by going to their site at: MBA Research and Forecasts

Additional information from Freddie Mac can be found by going to: Weekly Primary Mortgage Market Survey PMMS – Freddie Mac

New Concerns in Commercial / Multi-Family Real Estate

Bloomberg.com reported yesterday that defaults in mortgages backed by apartment buildings jumped to a new high of 4.6% during the first quarter of 2010, approximately twice that of the year earlier level. They cited a report by Real Capital Analytics which stated that borrowers were failing in their payments in regard to mortgages approved near the peak of the market. The report also indicated that defaults rose during the first quarter for mortgages backed by office, retail, hotel and industrial real estate. It quoted Sam Chandan, Real Capital’s global chief economist as saying that:

“Apartment defaults are leading other commercial real estate. Banks tended to make more aggressively underwritten apartment loans earlier during this last cycle. Credit and pricing reached their peaks for office properties and other commercial assets later.”

A link to the entire Bloomberg.com article is found here: Defaults on Apartment-Building Loans Set Record for U.S. Banks

“The Girl Who Kicked the Hornet’s Nest” is Released Today

In a previous newsletter we discussed the late author Stieg Larsson’s book “The Girl with the Dragon Tattoo” and its coincidental publication in the United States during the same week in September 2008 that Lehman Brothers collapsed and the financial system was shaken. We noted an article by Frank Rich in the New York Times which stated that:

“What’s remarkable is that Larsson wrote all this in a book completed years before the meltdown of 2008 — and was referring only to Sweden. And yet the overlap with our recent history is profound — so much so that surely both his prescience and the universal resonance of his villains account for some of his novel’s marathon ride through the zeitgeist, its ability to touch the nerves of so many readers in America and throughout the West.

If anything, the animus driving “Dragon Tattoo” seems more timely every day.”

Well, she’s back! Book three in Larsson’s trilogy, “The Girl Who Kicked the Hornet’s Nest” is being released today. Fans of “The Girl” might be interested in a New York Times article from May 20th and a short biography of the author from May 22nd, links to which are found below:

The Afterlife of Stieg Larsson

The Life of Stieg Larsson

Ask Angie

We want to congratulate our two most recent winners: Benjamin B. Sadtler, a Certified Residential Appraiser with the Northern Appraisal Group in Richmond, Virginia and Holly M. Chaffee, a Certified Residential Appraiser from Las Vegas, Nevada.

Today’s questions:

Question 1) Who said:

“Beware of the man of one book”

1. Stieg Larsson

2. James Patterson

3. Plato

4. St. Thomas Aquinas

5. None of the above

Question 2) Who said:

“All I can say is, beware of geeks bearing formulas”

1. Warren Buffett

2. Bill O’Reilly

3. Albert Einstein

4. Rachel Madow

5. None of the above

The first person to respond with both correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.

Fair Game – Ignoring the Elephant in the Bailout

Appraiser News: HVCC Anniversary, Appraisers Holding On

Sean Collins — Tue, 11 May 2010 00:08:08 +0000

TUESDAY, MAY 11TH, 2010

Fannie Mae & Freddie Mac Report Large First Quarter Losses

We know all about the Wall Street Journal’s concern for what they call the “toxic twins.” Most recently in their editorial on May 6th, they stated “from the 2008 meltdown through 2020, the toxic twins will cost taxpayers close to $380 billion, according to the Congressional Budget Office’s cautious estimate.” On May 7th, in a New York Times article titled “Ignoring the Elephant in the Bailout,” Gretchen Morgenson notes that Freddie Mac’s first quarter report, which reported a $6.7 billion loss, “…caused nary a ripple in the placid Washington scene…” She notes Freddie’s statement that its credit losses would likely continue throughout the year with the substantial number of underwater borrowers contributing largely to the loss. Ms. Morgenson quotes Dean Baker, co- director of the Center for Economic and Policy Research in Washington, as stating: “I don’t understand why people are not talking about it…” The article points out the conflicting roles by Fannie and Freddie which are charged with supporting the mortgage market by purchasing loans from banks while at the same time working to minimize credit losses. A link to the New York Times Article is found here:

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Stories of Foreclosure From Around the Country

Nevada & California, courtesy of the Huffington Post on May 3rd:

Harry and the Homeowners

Southern California, courtesy of CNNMoney.com on May 5th:

Drowning in Home Debt

Florida, amongst the more well-off, from CNNMoney.com on May 4th:

Foreclosure is Hitting Well-Off Families, Too

And here is one of the bearers of bad tidings in Illinois, from the New York Times May 7th:

As Homeowners’ Dreams Die, He’s the Undertaker

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Broker Price Opinions (BPOs) and Broker Opinions of Value (BOVs): The New Toxic Twins

We want to thank the many appraisers who have taken actions in one way or another to help publicize the dangers of BPOs and BOVs. Once again, we at Appraiser Help want to note our support for the positions taken by the four appraisal organizations which authored the March 8th and April 20th letters opposing the use of both BPOs and BOVs.

Please visit our website www.EndBPOsNow.com for additional information and for contact information if you would like to join the effort to End BPOs Now!

The entire April 20th letter from the four appraisal organizations regarding their concerns can be viewed by clicking on the following link:

Letter to State Appraiser Board Chairs

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Mixed Messages Regarding Commercial Real Estate and Multi-Family Housing

Various commercial lenders and other analysts have been issuing their first quarter reports with the overall message essentially being downbeat but maybe less so than several months earlier. On April 28th, an article by Mark Heschmeyer of CoStar Group titled “1Q Bank Results: Potential for CRE Armageddon Fading” included a number of comments from various market participants and a link to this article is here: 1Q Bank Results: Potential for Commercial Real Estate Armageddon Fading

Readers interested in learning more about CoStar can visit their site at www.CoStar.com

Moodys Investors Services at the same time reported that an improving economy was boosting apartment demand resulting in higher rents, greater occupancy rates and an improved outlook for owners of multi-family housing.

The New National Pastime; Grieving Property Tax Assessments

The New York Times on May 7th, in an article titled “Seeking Lower Property Taxes on a House of Sinking Value” discussed how grieving property taxes “…is becoming a national sport.” It provides illustrations from different areas, such as Lakewood, NJ, Westchester, NY and Cobb County, Georgia. In the latter instance, Phillip Hogsed, Cobb County’s director and chief appraiser in the assessor’s office, reportedly indicated that 16,200 homeowners filed notices that they wanted a review of their property taxes between January 1st and April 1st, up from last year’s figure of about 12,000 and the previous year’s averages of approximately 5,000. The article indicated that this was out of a total number of 250,000 real estate parcels in Cobb County.

The article quotes the owner of a property tax reduction company who works on a contingent basis as sayin that “I do my own appraisals. Some others might charge you for an appraisal, and that can run you hundreds of dollars.” It also quotes Peter Sepp, Executive Vice President of the National Taxpayers Union (NTU), as saying that the process of grieving taxes is so simple that homeowners shouldn’t pay anyone to do it.

Some thoughts:

Like the flat earth theorists and flat tax proponents (an idea espoused by the NTU), it is nonsensical to suggest that homeowners shouldn’t consider using professionals to review and assist them in the process of grieving tax assessments, a process which differs tremendously from one municipality to the next.

Licensed and certified appraisers are logically the professionals who should be involved in providing the most accurate, unbiased market value estimates to homeowners concerned about property tax assessments that are overblown.

In many areas, property owners and departments of assessment recognize the contribution provided by appraisals provided by licensed and certified appraisers. Why, however, is the number of grievances still such a tiny percentage of the overall number of over-assessed properties, and why aren’t appraisals by licensed and certified appraisers used more frequently?

Final question: Why aren’t appraisers doing more to promote the importance of their services in property tax assessment matters? By the way, this is generally full-fee work with turn times measured more in weeks than in days or hours.

A link to the New York Times article is found here: Seeking Lower Property Taxes on a House of Sinking Value

Rates & Dates

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending April 30th reported that the average rate for 30-year fixed-rate mortgages rose to 5.08% from the previous week’s rate of 5.02%. Freddie Mac reported a decline to 5.0% in their most recent report for the week ending May 6th, down from the 5.06% during the previous week.

Freddie Mac’s Chief Economist, Frank Nothaft, in his weekly commentary from May 6th noted that:
“Rates for both the 30-year and 15-year fixed-rate mortgages were the lowest in six weeks; initial rates on 5/1 hybrid ARMs hit an all-time low since they were added to the survey in the beginning of 2005.

The homebuyer tax credit helped support home sales in March, and anecdotal reports point to strong April sales as well. Pending existing home sales rose for the second consecutive month in March to the strongest pace since October 2009, just before the original deadline for the credit, based on figures published by the National Association of Realtors. Three of the four Census regions showed an uptick in sales, led by the South with a 12.7 percent gain, while sales in the Northeast fell 3.3 percent. To receive the federal tax credit, homebuyers had to sign contracts by April 30th…”

In an interview on CNBC on April 30th, Robert Shiller of Case-Shiller and Richard Smith of Realogy discussed the question of whether the housing rebound will continue showing signs of recovery. Essentially they had serious questions whether a recovery would continue, with the exception of the high end market which Mr. Smith said was strongly rebounding. This discussion between Mr. Shiller and Mr. Smith on CNBC can be viewed by clicking on the following link: Honing In On Housing

Additional information from the Mortgage Bankers Association can be found by going to their site at: Mortgage Bankers Association Research and Forecasts

Additional information from Freddie Mac can be found by going to: Freddie Mac Primary Mortgage Market Survey PMMS

Where Has All The Money Gone?

Also on April 30th, in an article in the New York Times, Uwe E. Reinhardt noted that on the previous Sunday’s Meet the Press, Senator Christopher Dodd stated that “We’ve lost almost $11trillion of household wealth in the last 17 or 18 months”. Mr. Reinhardt raised the obvious question of “Where did all this wealth go?”

He illustrates the assumptions made as to discount rates related to future cash flows in commercial real estate to show how sensitive value estimates are to even small changes in these assumptions and states:
“It is here that mood enters the picture.

If investors are exuberantly optimistic about the future growth of the economy and future rental rates, and if they believe there is little risk in such long-term investments, the risk premiums they demand tend to be low and real estate values correspondingly high. Completely irrational exuberance of the sort we have seen in recent years can easily lead to serious “underpricing of risk” and, thus, to real estate bubbles.

On the other hand, if investors are very pessimistic and worried about the risk inherent in such investments, their risk premiums rise and asset values fall. Irrational despondency can lead to overpricing risk and underpricing real estate.

Now, what is true for real estate also applies to other assets — home values, stock prices, bond prices and so on.

So let’s go back to the lost $11 trillion in wealth lamented by Senator Dodd. Where did it go? For the most part, I suspect, it just went up in smoke. It represents a loss of wealth that once exuberant folks imagined to have had and now imagine they no longer have.”

A link to this article is found here: Where All That Money Went

What Will $450,000 Buy in Boulder, Colorado, Tuscon, Arizona and Marlborough, Connecticut?

Fun slide show from the May 7th New York Times shows what is available in some of my favorite places: Properties for $450,000 – Slide Show – NYTimes.com

Ask Angie

We want to acknowledge the consistently poor performance of Mr. Gerard D. Snover in Angie’s contest. An example of this is his answer to Angie’s question on March 16th “Who said ‘You never know what is enough unless you know what is more than enough.’”
In this contest Mr. Snover, a Certified General Real Estate Appraiser from Babylon, New York, answered “Pamela Anderson.” Mr. Snover, one of the most intelligent and articulate appraisers in the United States who has practiced (it is rumored) for more than half a century, appears to be auditioning for his next career as a comedian (or maybe he could help assist in a rewrite of Fannie Mae Form 1004MC).

Today’s questions:

Question 1) Who said: “If I had asked people what they wanted, they would have said faster horses”

1. Secretariat

2. John P. Chrysler

3. Henry Ford

4. Jonathan Schwin

5. None of the above

Question 2) Who said:
“Without music, life would be a mistake”

1. Leonard Bernstein

2. Nietzsche

3. Jim Morrison

4. Johann Sebastian Bach

5. None of the above

The first person to respond with all three correct answers wins a choice of either:

One Free Trade Show Pass or $199 off a Full Conference Pass to Valuation 2010 or

A Highlighted Listing for one year on www.AppraiserHelp.com and either www.FHAAppraisers.com or www.TaxGrievanceAppraisers.com (including other Appraiser Help membership benefits, up to a $225 value)

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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!

Regards,

Bill Collins, Appraiser Help Inc.