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BPOs in the News

May 16th, 2017 by Bill Collins No comments »

“SEC Investigation “In the Matter of Certain Single Family Residential Securitizations”

Last week, Bloomberg’s Denise Pellegrini reported on the indicated SEC investigation of Green River Capital (amongst others) related to their usage of BPOs (Broker Price Opinions) on properties they included in single family rental securitization packages. Green River Capital is wholly owned by Clayton Holdings LLC, a subsidiary of Radian Group Inc.

On their website, Green River Capital is described as providing:

“Expertise in valuing, marketing and selling REO assets to obtain the best return for our clients” along with “REO Asset Management, Single Family Rental (SFR) Origination Fulfillment” and “SFR Valuation & Due Diligence”.

Ms. Pellegrini stated that the investigation involves “…whether bonds sold by some of Wall Street’s biggest residential landlords used inflated property appraisals”. Her colleague at Bloomberg, Matt Scully, noted that the investigation is looking into “…something that is similar to a home appraisal that is a less stringent version, a cheaper version…so called Broker Price Opinions to help assess what they think the properties are worth”.

On numerous occasions, AppraiserNews has attempted to shed light on “these scurrilous, feeble appraisal substitutes known as BPOs” (August 26, 2013 issue). Interestingly, Wikopedia provides the following definition of Broker’s Price Opinion: “…the process used by a hired sales agent to determine the potential selling price or estimated value of a real estate property. A BPO is popularly used in situations where a financial institution believes the expense and delay of an appraisal is unnecessary”.  BPOs can cost as little as $25 to $50, in some cases real estate brokers perform them for free in return for a favor such as possibly getting a listing.

In August of 2013, New Jersey Governor Chris Christie surprised many with his veto of a New Jersey Senate bill which would have expanded the use of BPOs in his state. While we have not agreed with many other positions Mr. Christie has taken, his letter to the New Jersey Senate accompanying the veto is exemplary and here it is in its entirety.

“Pursuant to Article V, Section I, Paragraph 14 of the New Jersey Constitution, I am returning Senate Bill No. 2551 (First Reprint) without my approval.

This bill permits licensed real estate brokers and brokersalespersons to prepare a ‘broker price opinion’ or ‘comparative market analysis’. As defined by this bill, these two different terms cover seemingly same the service: an estimate that details the probable selling price of a particular piece of real property. Currently, New Jersey’s Real Estate Appraisers Act mandates that appraisals of various real properties situated in New Jersey must be performed by State licensed or certified appraisers. The bill seeks to distinguish both ‘broker price opinions’ or ‘comparative market analyses’ from real estate appraisals.

While I appreciate the desire to facilitate additional business for real estate licensees in the State of New Jersey, I am concerned about potential consumer confusion. This bill would explicitly differentiate both ‘broker price opinions’ and ‘comparative market analyses’ from appraisals, so that real estate licensees who are not licensed appraisers could perform these other services.

Determining the precise value of real estate is a complex process, crucial to the sale of a residential home. This bill will unwisely introduce confusion into that process, with sellers struggling to determine when and why to use broker price opinions, comparative market analyses, or appraisals. At a time when New Jersey’s residential home sales are rebounding, and many first-time buyers and sellers are entering the real estate market, upsetting our State’s traditional method of home appraisals demands a clear necessity, and a compelling justification. This bill falls short on both, and accordingly, I herewith return Senate Bill No. 2551 (First Reprint) without my approval”.

The National Association of Realtors (NAR) has issued warnings to real estate brokers and agents regarding conducting BPOs. In April of 2009, at a time where BPO usage was increasing substantially, they warned Realtors regarding:

~The lack of policy: many real estate offices had no policy related to who could perform BPOs in their office and how records would be kept.

~Utilization of proper technology: “making sure that third parties aren’t calling your BPO a “market valuation,” which is the work of appraisers”.

~Breaking state laws: “State regulations governing BPOs vary greatly. Nevada, for example, permits real estate licensees to prepare BPOs for clients only in a sales transaction. Many states don’t allow fee-based BPOs. Some states require that BPOs include a disclaimer that they are not appraisals and are not to be used for lending purposes. Certain laws also require that only appraisers provide an opinion of market value, and that BPOs must be limited to determining a purchase or sales price. Be sure to investigate what’s legal in your state”.

Along with AMC laws, legislation related to BPOs and the use of unlicensed appraisers is of critical importance to appraisers and the focus of many of the State Appraiser Coalitions. Our future depends on appraisers speaking out against the improper and illegal practices they see in their states and helping to build awareness of the dangers this poses to the housing market and economy. 

Appraiser Health Month: Tick Warning for Appraisers

Not only is May “Appraiser Health Month” but it is also “Lime Disease Awareness Month”.

Lyme disease is a serious concern to appraisers in many parts of the country. The states from Maine to Virginia are particularly at risk along with states in the upper Midwest (i.e. Wisconsin, Minnesota and a part of Illinois). Areas of emerging concern include  the Illinois-Indiana border, the New York-Vermont border, southwestern Michigan, parts of Ohio and eastern North Dakota.  Here on Long Island, I know several appraisers who have succumbed to the disease after a tick bite: it is a major concern in wooded areas on the east end of Long Island.

It is projected that this may be a very bad year for ticks with some reporting stations indicating a sharp increase in the tick population early in the season.

Fox61 in Connecticut recently summarized The Center for Disease Control recommendations to follow to avoid getting a tick bite:

~Avoid wooded and brushy areas with high grass and leaf litter.

~Walk in the center of trails.

~Use repellents that contain 20 to 30 percent DEET on exposed skin and clothing for protection that lasts up to several hours.

~Use products that contain permethrin on clothing.

~Bathe or shower as soon as possible after coming indoors (preferably within two hours) to wash off and more easily find ticks that are crawling on you.

~Conduct a full-body tick check using a hand-held or full-length mirror to view all parts of your body upon return from tick-infested areas.

~Examine gear and pets. Ticks can ride into the home on clothing and pets, then attach to a person later, so carefully examine pets, coats, and day packs.

Recent Real Estate Reports

The home investment company Unison released their “Unison Home Affordability Report” earlier today which highlighted the tremendous variability in home affordability from one section (or city) of the country to another. In general, the report indicates that the Midwest and portions of the southwest and west have greater affordability while cities along both coasts rank among the least affordable.

The five most affordable cities out of the 20 studied (with the median home price and income required for a 10% down mortgage): Pittsburgh ($133,142/$22,081), San Antonio ($140,934/$23,373), New Orleans ($188,055/$31,188), Charlotte ($193,403/$32,075) and Phoenix ($198,679/$32,950).

The five least affordable cities: San Francisco ($1,296,916/$215,089), New York ($637,703/$105,761), Boston ($584,622/$96,957), Los Angeles ($555,073/$92,057) and Seattle ($528,387/$87,631).

Unison Home Affordability Report

The Federal Housing Finance Agency (FHFA) today reported that with interest rates remaining above 2016 levels, refinances fell to just over 510,000 during the first quarter of 2017; this is down from more than 750,000 in the fourth quarter of 2016.

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Rates & Dates

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

In their survey on May 11th, Freddie Mac reported that 30-year fixed-rate mortgages rose from 4.02% the previous week to 4.05%. They also noted that one year ago, the 30-year rate was at 3.57%.

Sean Becketti, the chief economist for Freddie Mac noted:

“The 10-year Treasury yield jumped 8 basis points this week while the 30-year mortgage rate rose 3 basis points to 4.05 percent. Mixed economic reports over the last few weeks have anchored the 30-year mortgage rate around the 4 percent mark.”

The MBA reported on May 10th (for the week ending May 5th) that 30-year rates with conforming loan balances ($424,100 or less) were unchanged at 4.23%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) increased from 4.18% to 4.22% while FHA backed 30-year mortgage rates rose from 4.06% to 4.09%.

Mortgage applications rose by 2.4% from the previous week.  Refinance applications as a percentage of all applications rose from 41.6% to 41.9%. The FHA share of applications increased from 10.4% to 10.5% while the VA share remained unchanged from the previous week at 10.8%.

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

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

Ask Angie

Angie would first like to acknowledge the winners of her last contest: Virginia appraiser Tom Martin, Idaho appraiser Jack Van Wyk and New Jersey appraiser Louis Retort. They were the first to answer correctly that Benjamin Franklin was the author of all three quotes in the last newsletter: “Early to bed and early to rise makes a man healthy, wealthy and wise”; “Tell me and I forget. Teach me and I remember. Involve me and I learn”; and “Time is money”.

Today’s questions:

Who said all of the following:

1. “By failing to prepare, you are preparing to fail.”

2. “Energy and persistence conquer all things.”

3. “Honesty is the best policy”

a) Benjamin Franklin
b) Mark Twain
c) Ernest Hemingway

d) None of the above

The first to respond with the correct answers wins:

One Free Regular Listing on AppraiserHelp.com

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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