Appraisal Scoop

Press Release: Fannie Mae Announces Single National Down Payment Policy; Replaces Policy Regarding Markets Where Home Prices are Declining

WASHINGTON, DC -- May 16, 2008 -- Fannie Mae (FNM/NYSE) today announced a new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee.

Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter^® (DU^®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States.

The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.

"As another part of our 'Keys to Recovery^TM' initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions," Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."

The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.

Click here to continue reading . . .

Press Release: ACI Strengthens Offering to Appraisers with ACI Sketch™

May 15, 2008, Palm Coast, FL. ACI, a leading innovator in providing technology solutions for the appraisal industry announced today that it has acquired the source code of the RapidSketch™ floorplan software from Buffalo-based Utilant, LLC. RapidSketch is one of the most popular software applications for creating accurate floorplan layouts and is used by tens of thousands of appraisal and insurance professionals throughout North America.

RapidSketch, which has already been integrated with ACI’s entire product line is now enhanced and re-branded as ACI Sketch™. ACI Sketch works on the desktop, tablet, and web, and incorporates numerous productivity-enhancing features:

• Mouse and keyboard drawing with precision settings
• Extensive drag-and-drop symbols library
• Editor to create custom symbols
• Library of stock labels
• Drag center point of any line to quickly create an arc
• Copy-and-paste cloning
• Undo and Redo feature
• Rectangle tool to draw the most common floor plan shape
• Shapes tool for drawing octagonal decks, pentagonal sun-rooms, and geodesic domes
• Image or blueprint tracing with auto-scaling
• Angle, Rise & Run Display
• Standard or metric support for U.S. and Canada appraisers
• Display decimals or inches, or fractions of inches
• Online help with video tutorials

According to ACI president Dave Roberts, "The acquisition of RapidSketch as the foundation for ACI Sketch complements our strategy of providing clients with a full-range of appraisal technology. While we will continue to offer appraisers a variety of sketch options, we have developed ACI Sketch to stand head-to-head with any product in the market. By owning the technology, we can develop and support the application without relying on any third party--translating into a better product wtih tighter integration and lower cost for ACI customers."

“ACI Sketch is one of the best new efficiency products for appraisers,” said Jay Delich, President of Arizona Appraisal, LLC. “We use it in the office and on our tablet PC’s in the field, both with great success. We are particularly impressed with the free-form approach that ACI Sketch brings to creating floorplans.”

Interested parties may contact ACI Sales online at www.aciweb.com

Daily Market Activity: What Does It Mean, and How Do We Use It?

AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training.  Phone:          909-798-8855      

Today, after 6:00 P.M. I logged onto one of the local MLS systems, this one the Desert Area MLS (California). It is part of the Rappitoni system. When you log in, before you do a search, you get a view of Daily Activity. Daily Activity is a good thing.

It is good to know what is happening daily. In this market, Price Reductions lead the market activity, followed by New Listings, then Expired Listings, then Sold, Inactive, Contingent, Back on Market and Price Increases.

All are Market Data. The key is in knowing how to use them, how to process or adjust them into a meaningful indicator of value.

In soft or declining markets, sales are a small part of the activity.  That being the case, a sale may be the least meaningful indicator of value. Price Reduced properties might be a good source to contact their agents and find out where they see the market, if they have had any Offers, where they see it selling, how they compare to your subject, etc, etc. They are very talkative.

The agents with the worst memories are ones who spent their commission months ago. Those who are Pending, have a keen sense of detail. Those with over priced Listings are good candidates to talk to.

Housing Markets are generally dynamic, not stable. Talking to participants or their authorized agents is the way appraisers can learn what is happening in the Market. Staring at comparable books or computer runs of what has Closed months ago, is just the recent History of the Housing Market.

What is going on today will not be revealed by something that closed 2 months ago. One needs to be talking with those who are in the market today. Six interviews per day is enough to know what is actually happening, as opposed to reporting on recent history. 

We all build our reputations, every day with every job. How do we want to be known, as an aware, skilled, astute appraiser? The choice is ours individually. 

Those who do 4-5 appraisals per day cannot be aware of what is happening. They must keep blinders on and not talk to a living soul actually involved in the Housing Market. They cannot make Market Derived adjustments or have a basis in fact for their Market Analysis. All of that takes time and primary research and real analysis.

AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training.  Phone:          909-798-8855      

Sen. Dole (NC) Drafts "Appraisal Regulation" Proposal - End Run Around Cuomo?

Sen. Elizabeth Dole, a North Carolina Republican, plans to offer an amendment to legislation aimed at strengthening regulation of government-sponsored mortgage investors Fannie Mae and Freddie Mac. The amendment, favored by some banks, would direct the companies' regulator to write new rules on appraisal standards for home loans purchased or guaranteed by Fannie and Freddie.   Download Dole_draft.pdf

That regulation would supersede an appraisal code of conduct negotiated by Mr. Cuomo, Fannie and Freddie earlier this year. The companies accepted Mr. Cuomo's terms to avoid the threat of a lawsuit over their alleged failure to ensure that appraisers are protected from pressure to inflate appraisals. Because Fannie and Freddie buy or guarantee the bulk of all U.S. mortgages, the code would become in essence a national standard.

The code would bar brokers or bank employees involved in making loans from choosing appraisers, and lenders couldn't make loans on the basis of appraisals from their employees or companies they control.

Sen. Charles Schumer, a New York Democrat, vowed to resist the amendment, calling it a "step backwards."   

Download Talking_Points_on_the_Appraisal_Amendment.doc

Click here to read the "Talking Points" . . .

How To End Appraiser Pressure Once and for All

In the May 2008 issue of Mortgage Banking, Robert Murphy, Chairman of ValuAmerica, Inc. and founder of Lender's Service, Inc. (LSI) outs many of the well know (by appraisers) issues with lender and loan broker pressures on appraisers.   Download How_To_End_Appraisal_Pressure.pdf

Mr. Murphy says: "As long as commissioned loan officers or mortgage brokers pick and talk to appraisers, there will be appraiser pressure, inflated values and mortgage meltdowns like the one we have just experienced."

As the founder of two vendor-management companies (Lender’s Service Inc. and ValuAmerica ), I have discussed this issue regularly with clients over three decades, and no one ever disagreed—at least in theory. But when the push back came—and it always did—it would come from the same place: retail lending. Loan officers would complain about new appraisal ordering procedures, and their managers would acquiesce rather than risk losing their star performers.

Download How_To_End_Appraisal_Pressure.pdf by Robert Murphy

RUNT RANTS - Mr. Big and a la mode deserve applause!

AUTHOR: Ken Verrett is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA

I was a little surprised and disappointed at the lack of appraiser response to the David Biggers, CEO of a la mode, announcement that a la mode intended to create an order assignment feature on their web site at a very low fee for the service.  The announcement was featured here.  A La Mode Announces new feature

Mr. Biggers announced something BIG.  Something that could save appraisers thousands of dollars a year.  Something that could change the landscape for appraiser marketing if they choose to use it. Yet there were only five comments to that announcement here on Appraisal Scoop!

Maybe appraisers didn’t take the time to read what Mr. Big announced?  Maybe appraisers didn’t think through the implications?  Maybe…they don’t care?

Let's Look At The Situation

Let me see if I can illustrate the proposal in a different way….stick with me here…I’ll be short and succinct for a change.  Consider the following three models.

• Green is what the Fee Appraiser receives from his local clients currently. 
• Yellow is what the Fee Appraiser receives from the typical AMC currently. 
• Blue is what Mr. Biggers proposes to offer as an alternative to the yellow.

What Those Three Senarios Mean

If the Cuomo Agreements were to survive as currently written (a debatable assumption, but still we should consider it as a possibility) local lenders will be forced to find an intermediary to order appraisals for their loan applications. The most likely intermediary is an AMC. That’s the business they are in…to order appraisals for lenders.

If the Cuomo Agreements survive, there will be pressure in the next few months for your local clients to begin moving business away from you directly and instead through an intermediary.  (The drop dead deadline in early fall….that’s to allow for the pipeline…it takes around sixty to ninety days to process a loan in many instances, so an application taken in October will likely go to the lender after Jan 1^st at which time an intermediary will be required.)

Business that you currently get under the green scenario will begin moving to the yellow scenario.  You will be doing the same appraisal, you will be doing your same quality control, you will be proving the same service that you do now…but your fee will be $105 less….30 percent less!

Got that?! The same service, the same quality, the same appraisal, but your fee will have dropped from $350 to $245. Multiply that by the number of local lender assignments you receive monthly.

If that calculation gets your attention, you should re-read Mr. Biggers announcement.

Click here to continue reading . . .

Eight Major Lending Organizations Issue Joint Response in Opposition to the HVCC

The American Bankers Association, American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Housing Policy Council, The Financial Services Roundtable, Independent Community Bankers of America, Mortgage Bankers Association, Real Estate Services Providers Council, Inc. (RESPRO®) issued a joint letter of response to the Director of the OFHEO.  Download Joint_Lender_Response_HVCC.pdf 

Dear Director Lockhart:

The undersigned are writing to register our concern with the serious legal and policy questions that are raised by the proposed Home Valuation Code ("Code"), which Fannie Mae and Freddie Mac (the "GSEs") have agreed to adopt, pursuant to a written agreement ("Agreement") with the Office of Federal Housing Enterprise Oversight ("OFHEO") and the New York Attorney General (NYAG). We agree that accurate appraisals are a critically important component of sound mortgage lending and that appraisal fraud is a factor in many cases of mortgage fraud.

We have very serious concerns with both the manner in which the Agreement and the Code have been mandated by OFHEO and the NYAG as well as the substance of the documents. (For simplicity purposes, reference herein to the "Agreement" shall include the Code.) We believe that OFHEO should withdraw its assent to the Agreement, should not permit the GSEs to implement the Agreement, and should take steps to assure that this type of rulemaking by settlement does not occur in the future. The Agreement is in violation of Title XI of FIRREA and permits the NYAG to unlawfully exercise authority that resides exclusively with the Federal Government. The method of imposition of the agreement is in violation of the Administrative Procedure Act and constitutes an unlawful delegation of authority by OFHEO to a third party. For a variety of reasons, the Agreement is not consistent with the best interests of the GSEs, the housing finance markets, and other aspects of public policy.

Source of House Data Skews Loan Losses

The WSJ.com article Source of House Data Skews Loan Losses by Marshall Eckblad on May 8, 2008 says,

"Expected mortgage losses at Wachovia Corp. and Washington Mutual Inc. might not look as steep as those at rival lenders."

The reason: In recent weeks, Wachovia and WaMu have cited housing data from the Office of Federal Housing Enterprise Oversight when detailing their exposure to the U.S. housing market. A different index relied on by other banks, the S&P/Case-Shiller Home Price Indices, is gloomier..

Related Articles on Appraisal Scoop:

• How's The Housing Market Doing? - Housing Price Index -HPI Analysis
• Measuring Supportable Demand for Residential Properties
• Declining Market: Freddie Mac Issues Specific Guidance Regarding Use Of OFHEO House Price Index (HPI)
• Wachovia Mortgage Issues "Market Analysis" Requirements
• Real Estate Demographics: Identifying and capitalizing on market trends

Outside The Boxes (Patrick Egger)

• Part 1: Outside The Boxes: What Does Fannie Mae Want To Know?
• Part 2: Outside The Boxes: Cycles, Trends, and Perspectives
• Part 3: Outside The Boxes: Down Cycling - Trends at the Neighborhood and subject property level
• Part 4: Outside the Boxes: Covering Your Fannie
• Part 6: Outside the Boxes: The Economic Indicator Matrix

RELS Altering Appraisal Reports?

I'm a member of the Alabama Independent Fee Appraisers email forum which is a discussion group for Members of The National Association of Independent Fee Appraisers and others.  It was there that I read a surprising report this morning by Dennis Greene, a USDA Rural Development Appraisal Reviewer.  Download RELS_Valuation.png

Dennis alleges that RELS has begun a practice of altering appraisal reports.

The following is from the AlabamaIFA Forum:

As most of you know I am a review appraiser with USDA Rural Development. In the past few weeks I have noticed a change in some appraisals I am getting to review. These appraisal have old material in them and some blank pages added.

After talking with an appraiser yesterday I found out that RELS Valuation is changing some of your appraisals before they get to me to review. I believe that they are changing most appraisals without your knowledge. They are adding additional comment pages and moving some additional comments. They are adding additional comp pages and additional comp picture pages. Some of the data moved does not match up with what is in the appraisal report.

Worst of all they are adding the old 1004B Limiting Conditions page and putting the appraisers signature on it.

At this point I do not know how or when it can be stopped but I will be working on getting to the right people at RELS Valuation and Wells Fargo to get this stopped.

Your help in this matter will be greatly appreciated.

I would suggest you monitor your appraisals for final content.

Dennis R. Greene

Office: dennis.greene@al.usda.gov 

Is Cuomo’s Appraisal Fix Destined for Court?

Will Andrew Cuomo’s “appraisal code of conduct” — the set of guidelines for mortgage lenders to follow to avoid inflated home appraisals — ever see the light of day? If it does, reports the WSJ’s James Hagerty today, it may well see a whole lot of litigation first.

And what would that litigation look like? Some argue that the code of conduct is tantamount to federal regulation and so is subject to the Administrative Procedures Act. The act requires federal agencies seeking to make new rules to first publish a proposal and solicit public comments on it.

But in an interview, Mr. Cuomo said he was “totally confident in the legal process used.” Both he and Ofheo’s director, James Lockhart, promised to consider suggestions for changes in the code.

Click here for the complete Wall Street Journal story.