Appraisal Scoop

Reliable Valuations Of Mortgaged Properties Are Key to Success of Administration’s Foreclosure Relief Plan

WASHINGTON, D.C. – The nation’s four largest organizations of professional real estate appraisers—the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and National Association of Independent Fee Appraisers—delivered the second of two letters to Treasury Secretary Timothy Geithner urging the Administration to protect homeowners and taxpayers by requiring that the market values of homes under President’s Obama’s Homeowners Stability Program be determined by professional appraisers who are state certified and licensed.

Current bank agencies guidelines require new appraisals in restructuring loans when a material change in market conditions exists. In the letter, the groups affirm that reliable valuation and appraisal products are available from professional appraisers in every community in the country. There are more than 100,000 certified or licensed real estate appraisers in the United States. Because of new technologies and methodologies, these professionals are prepared to deliver a wide variety of necessary services quickly, including summary and streamlined appraisals that are cost effective and highly reliable.

To ensure that all parties have accurate and reliable information when restructuring loans, the letter cautions against the use of real estate sales people to provide broker price opinions. These individuals have no valuation training, do not observe uniform valuation standards, are accountable to no one for their estimates of home prices and may sometimes have an economic interest in whether loans are modified or defaults occur requiring a resale of the property to another buyer. By contrast, all 50 states license, certify and supervise the work of appraisers; and 23 states specifically prohibit realtors from valuing properties for any mortgage related purpose, including loan modifications.

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Geek's Corner - 12 Mega-Pixel, 24mm Ultra-Wide Angle Compact Digital Camera

On Feb 23, 2009 Samsung Electronics America unveiled a new 12 mega-pixel compact digital camera boasting a 24mm ultra-wide angle Schneider lense.

Good quality, ultra-wide, compact cameras have been hard to come by recently . . .so this is a welcome announcement for appraisers!

Featuring a brushed stainless steel finish, the TL320 is as stylish as it is advanced. The camera offers a compact form factor highlighted by two analog dials found on top of the TL320’s body. The two dials give the TL320 a retro look and provide users with the ability to quickly glance down at the camera for an approximate readout of remaining battery life and memory capacity. 

 

The TL320 features a Schneider lens, renowned for quality and trusted by professionals worldwide, and offers consumers a more versatile 24mm ultra-wide angle focal length paired with a powerful 5x optical zoom.

Utilizing the same advanced technologies found in its revolutionary AMOLED televisions, Samsung was able to incorporate a three-inch, 460,000-dot HVGA AMOLED screen in the new TL320, the largest AMOLED screen on a digital camera to date.

Samsung’s new TL320 also offers advanced high-definition video recording at a resolution of 720p, as well as HDMI connectivity through the use of a cradle to view one’s video and photos in HD clarity on an HDTV.

For added stability and blur-free images, Samsung has outfitted the TL320 with both Optical and Digital Image Stabilization. The shooter has the option of simply using Optical Image Stabilization or choosing Dual Image Stabilization, combining the strengths of Optical and Digital Image Stabilization.

For the more advanced user who prefers to have more control over camera settings, the TL320 offers aperture priority, shutter priority, full manual shooting, as well as Samsung’s unique Advanced Picture Mode. For users looking for simplicity when it comes to taking digital images, the TL320 offers a comprehensive suite of automatic controls designed to help them capture better images with ease, including the camera’s Smart Auto mode.

In addition to Smart Auto, the TL320 also incorporates Samsung’s proprietary Smart Album program. Smart Album is useful tool which allows users to easily search for a specific image they have saved on their memory card. Users can also take advantage of the TL320’s Face Detection, Blink Detection, Smile Shot, and Beauty Shot technologies. Designed to help capture better portraits and group shots of family and friends.

Source: http://tinyurl.com/cll9q3 

 

AARO sends warning letter to FED on the use of BPO's

The Executive Committee of the Association of Appraiser Regulatory Officials, (AARO), has issued a letter of warning to the Secretary of the Treasury regarding the use of Realtor BPO's instead of appraisals by State licensed appraisers for establishing values on mortgage modifications.

Click here read the AARO letter: Download AARO BPO Letter to Treasury

Source: ICAP - Illinois Coaliton of Appraisal Professionals

The HVCC is nigh upon us. What will your Mortgage Broker clients do?

The HVCC is nigh upon us. What will your Mortgage Broker clients do?

Will they roll over and die? Will they quit the business? Will they all submit employment applications to direct lenders so they can work on salary?  Will they file a lawsuit to try and halt the HVCC?

Some of them may choose one of the above, but I'm betting that many of them will choose "none of the above". The incentives for a productive loan originator are substantial; and let's be real here - many of them have no viable options outside of what they're already doing.

What about the direct lenders? Are they all going to close their wholesale lines and migrate to a retail-only loan production programs? Again, some will but many of them will try to avoid it if they can figure out a way to do so. After all, hiring and employing a loan production staff involves a lot of work and a lot of overhead. These are costs that are difficult to justify even when volumes are high - and can easily gut the bottom line volumes are down. There's a lot of work involved in trying to constantly balance capacity with demand. All else being comparable (which is not the same thing as being equal), it's more cost effective to run a wholesale line where they only pay on what they fund.

Okay, so the HVCC doesn't necessarily have to result in the demise of the wholesale production lines at these lenders. What does that mean to fee appraisers?

In a word - opportunity.Depending on how fee appraisers choose to approach new environment we may be looking at the beginning of a new market niche for residential appraisers. The effects of the HVCC are ostensibly intended to remove the loan originators from the mortgage lending appraisal engagement loop. However, just because these loan originators lose control of the appraisal doesn't mean they have to lose control over their borrower. It only means they won't be able to know in advance whether their loan package will fund. They have to build their package, submit it to their target lender, and wait for the lender's appraisal to be completed before the collateral value is "known."

What's tough about this for the loan originators is that they have to put out the same amount of time and effort to build the loan package without having any idea whether there's any equity or what program will best suit the borrower+collateral combo in that deal.

Unless....

They get their own valuation that's specific to their decision making process. This is a completely different type of intended use than what we assert for mortgage lending appraisal assignments. A loan originator won't be seeking an appraisal that will actually be used to underwrite the loan; they'll be seeking an appraisal to help them decide whether to spend their time and resources to build a wholesale loan package, how to price that loan application, and what programs would best fit their situation. When compared to an appraisal that is intended to be used to actually underwrite a lending decision, this pre-loan package appraisal involves very little risk to the loan originator - all that is at stake is the time and overhead it costs them to build and submit a loan package, not the collateral of the loan itself.

Now these loan originators have options when it comes to the "valuations" they will use. Some will obviously decide to go commando and fore go all valuations; some will go with AVMs, some will go with BPOs. These all present varying degrees of reliability that will detract from their odds of successfully landing the big fish. Some loan originators will choose to roll the dice and go with a less reliable "guess". But some loan originators may be open to increasing their odds. They might consider obtaining an appraisal from a competent local appraiser, including those appraisers with whom they already have relationships. Like you.

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NAMB Files Lawsuit Over Controversial Home Valuation Code of Conduct (HVCC)

McLean, VA – The National Association of Mortgage Brokers (NAMB), with the support of Baker & Hostetler LLP, filed a lawsuit today with the United States District Court for the District of Columbia against the Federal Housing Finance Agency (FHFA) Director James B. Lockhart over the controversial Home Valuation Code of Conduct (HVCC) included in the appraisal agreements between the FHFA, Fannie Mae and Freddie Mac (GSEs), and New York Attorney General Andrew Cuomo.

“The HVCC does nothing but drive up costs for consumers and push small businesses out of the market,” said NAMB President, Marc Savitt. “The HVCC will drastically reduce the ability of mortgage brokers to provide consumers with an efficient and cost-effective means of obtaining a mortgage.”

NAMB strongly supports policy initiatives that seek to ban coercion of appraisers. However, NAMB believes it is critical for mortgage and real estate professionals to maintain an appropriate level of contact with appraisers to ensure appraisal quality and independence. NAMB argues the HVCC is a “de facto” regulation and holds the FHFA in violation of the Administrative Procedures Act of 1992. The HVCC is arbitrary and capricious, contrary to the intent of Congress and in direct conflict with regulations, policies and guidelines regarding appraisal standards already issued.

“Despite strong opposition by numerous industry representatives, the FHFA, GSEs and New York Attorney General fail to consider the unavoidable increase in costs to consumers should the agreements take effect,” said Savitt. “The lawsuit is the only remaining option to protect small businesses mortgage professionals from the severe competitive disadvantages caused by the agreement. The agreements will also have significant negative consequences for consumers.”

  For a copy of the lawsuit, please click here.

The National Association of Mortgage Brokers is the voice of the mortgage broker industry, representing the interests of mortgage brokers and homebuyers since 1973. The Association is committed to promoting the highest degree of professionalism and ethical standards for its members. In addition to mandating members adhere to a professional code of ethics, NAMB provides mortgage brokers with professional education opportunities, and offers rigorous certification programs to recognize members with the highest levels of professional knowledge and education.

Appraisal Foundation Request For Comments - White Paper on Appraiser Regulatory Reform

On Feb. 12th, 2009, David Bunton, President of The Appraisal Foundation issued the attached memorandum: Download Foundation White Paper Request to its Board of Trustees, the ASC, AQB, Advisory Councils and Appraisal Foundation Sponsors.  The recommendations include: regulating AMCs, restrictions on AVMs and BPOs, State enforcement, and "Best Practices" for appraisers performing federally related transactions.

REQUEST FOR COMMENTS: The Appraisal Foundation is in the process of identifying issues and recommendations that should be included in a regulatory white paper that it intends to develop in the near future and distribute to key government officials. As an individual affiliated with the Foundation, we are seeking your opinion on what improvements could be made to the existing appraiser regulatory system. This memorandum contains a series of possible recommendations. You are encouraged to comment on these recommendations and are invited to offer others as well.

 

POSSIBLE RECOMMENDATIONS

Below is a list of possible recommendations. While not all-inclusive, it was developed for the purpose of facilitating comment and discussion.

1) Broader enforcement powers for the ASC:

• Provide the ASC with more regulatory options by giving it the authority to fine, suspend, etc. 
• Explore the idea of giving the ASC grant making authority to the states, with a corresponding increase in the registry fee.

2) Require greater due diligence from federal financial institutions:

• Lower the de minimus amount from the existing level of $250,000 to $50,000. Many of the problem subprime loans were below the current de minimus level and were therefore outside of the appraisal requirements.
• Require the use of state certified appraisers for all transactions involving federal or state funds of $50,000 or more or for all complex transactions. Complex transactions should be clearly defined.
• Place restrictions on the use of Automated Valuation Models (AVMs) and Broker Price Opinions (BPOs).
• Define and establish minimum standards for evaluations (BPOs, AVMs, etc).
• Require the federal regulatory agencies to report to Congress (through the ASC or individually) the result of their appraisal audits and their recommendations for improvement.
• Require every federal banking agency to establish a “Chief Appraiser” position that has independent reporting authority.

3) Improve enforcement among the states:

• Allow state appraiser regulatory agencies to make better use of their licensure fees by prohibiting states from “sweeping” appraiser fees into the general fund.
• All fines collected by the state appraiser regulators should be earmarked for use by the enforcement division.
• Provide funding to states, possibly through the ASC, by requiring lenders to pay a small amount (i.e. $0.50) for each lending transaction involving federal or state funds.
• Require state board members and investigators to meet some level of minimum qualification criteria.
• Require states to immediately report adjudications to the ASC.

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Video - Inside the Meltdown: PBS Documentary

Mortgage News Daily (http://www.MortgageNewsDaily.com ) has done a great job of putting together a series of video segments from the PBS Documentary - "Inside The Meltdown"

"Many Americans still don't understand what has happened to the economy," FRONTLINE producer/director Michael Kirk says. "How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown."

Click here for the video segments by Mortgage News Daily.

Appraisal Co. Answering Machine . . . If you are still on the line... how can I help you?

You've reached Your Local Appraisal Company.

• If you are calling to schedule an appraisal please press 1.
• If English is your second language and you are calling for status on a report for the 2nd, 3rd, or 4th time today please press 2.  

Caller please note: By pressing 2 you will be charged $3.95 per minute for the call. To not be charged for this call, hang up now.

• If you are a mortgage broker and just need a comp check please press 3 and your call will be promptly forwarded to Zillow.
• If you are a underwriter and are calling to request additional comparable sales that have miraculously closed within 90 days and within 1 mile of the subject, and are a model match, please press 4 and enter the subject's address when prompted.

You will be promptly transferred to a local real estate agency which will give you an opportunity to purchase those needed sales comparables. Reminder, please be sure to let us know when your purchases have been completed so that we may update your report.

If you are still on the line... how can I help you?

AUTHOR: Kathleen "Kat" Bryce - State Certified Residential Real Estate Appraiser RD-4424, , Fort Myers, FL -  http://www.leecountyappraisals.com .   Email: appraiserkat@earthlink.net  Phone: 239-940-2225  Fax 239-275-4130

1004MC TOTAL SOLUTION© IS coming!

[Editor's Note - David Braun, MAI, SRA has been working on the development of a new Market Conditions Analysis (MCA) form that runs in Excel and will be available from http://www.ScoopGear.com ]

UPDATE ON THE 1004MC TOTAL SOLUTION©

As this project is nearing completion, I want to provide an update and some information on this project. Those of you who have purchased and use the USL Documenter II and the Regression Plus for Real estate Professionals programs know that AVT strives for excellence. The success of these products goes beyond good programming to being timely to the appraiser. The foremost consideration in any project that AVT takes on is the resulting effectiveness, but more importantly it efficiency (simple & quick). These are the same parameters governing the 1004MC Total Solution© (Solution) project.

Can an appraiser meet the following three goals; better, faster, and cheaper? This is hard to do unless the work is highly automated. After all, automation can reduce errors and do the work faster. Faster means cheaper because cheaper is really the dollar per hour ratio that the appraiser is receiving.

Let’s talk about a couple of things that the Solution does to help the appraiser. First, it breaks the analysis into eight equal time periods over two years. Because of automation it takes no longer to trend eight periods than it does to trend the three periods on the 1004MC. See the sample below which depicts a portion of the appraiser’s worksheet.

The trend is reported for both, the first and the second year. Second, the computer automatically sets the trend as either “stable, increasing, or declining”, however, the appraiser can over-ride it. The worksheet information is automatically transferred to the official 1004mc form. However, this form would be omitted from a report where the secondary market is not involved and the worksheet would be included in the appraisal report.

This program will be quick, but being correct is also necessary. Let’s discuss how some appraisers may inadvertently use “bad” data in the analysis. The “Total Number of Comparable Active Listings” is a good example of how things could go wrong. First, many appraisers may state that the data is not available from their MLS system as they cannot search for past “active listings”. However, the MLS lists the number of days on market and the days on market for each listing. Therefore, a computer program can count the number of listings that were active for the time periods in question. It is my belief that many automated systems will go this far, but will still get the wrong answer.

Let’s consider an example. Over a 90 day period there were seven listings. However, two of them were actively listed over the entire 90 days, two were listed for 45 days during the period, and three were listed for 30 days each. On average, there were only four active listings during the period at any one time. Many automated systems will report that there were seven listings during the period, and there were; but this would not be the correct information needed to accurately calculate the “Months of Housing Supply”. The result would be to make the market conditions seem worse than they really are.

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Appraisers Busy Again? Time to Fire and Hire Clients!

  Have you ever fired a client? It feels really good. This is a difficult concept to wrap your arms around; however when you are busy is the best time to secure new business. This is the most appropriate time to take on new clients and fire the bad ones. Think about it, when times are slow everyone is calling on clients, offering to take them to lunch and bringing in donuts. But when times are busy they can’t find an appraiser to take on any more assignments in a timely fashion.

Out with the Bad  - Surely you have some clients that are slow to pay, require additional sales or want frequent addendums. How about this: Do you have any better comps? Isn’t that the most asinine question a processor or underwriter could ask? Don’t get me wrong if I am asked “Do you have any additional sales to further support your opinion?” I don’t take as much offense but when asked for better sales I want to respond “yes I do, but we hold on to those until you call and ask for them” or as George K. Cox, MAI, SRA once said “Yes I do, the houses on either side of the subject and the one directly across the street just sold but you can’t have them, I’m keeping them.” This is the time to replace bad clients with good ones.

In with the Good  - One thing you can count on is change. Back in the mid 80’s the interest rates were 15%-18%. With current rates at an unbelievable low, in an effort to jump start the economy, we have entered another refinance wave and most appraisers are extremely busy again. Seek out clients that value your service and don’t treat appraisers as a commodity. There are still several good clients that want quality work and not just low fees and quick turn times.

Also consider diversifying, as this refinance wave will not last indefinitely. What type of work is interest rate safe? With more than ½ of marriages ending in the big D appraisers in this type of litigation support should remain busy. Relocation work, department of transportation, foreclosure, estates, is other areas to explore. Regardless of the interest rates people will continue to get divorced, roads will be constructed or widen, employees will be relocated, foreclosures will probably continue to soar and people will die.

Ride the refi wave and have a good one, but consider expanding your business while times are busy.

AUTHOR: Bryan S. Reynolds is a Certified General Real Property Appraiser and an AQB Certified USPAP Instructor. Mr. Reynolds serves as an adjunct faculty member of The Columbia Institute, and is an approved appraisal instructor in 30 states.

Reynolds is the owner of Reynolds Appraisal Service in Owensboro, KY, providing various residential and commercial valuation services, consulting and litigation support services throughout the area. He can be contacted at (270) 929-3088 or by email at bryan@reynoldsappraisalservice.com.