Appraisal Scoop

NAMB - HVCC Call To Action

To: All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers

From: Marc Savitt, President- National Association of Mortgage Brokers

After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, Director of FHFA (GSE Regulator) James Lockhart, and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.

In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing everyday, until advised to stop by NAMB. This will NOT be a one day action!

We have received hundreds of e-mails through the hvcc@namb.org  e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.

Who will you be contacting?

• NY Attorney General Andrew Cuomo’s Office: (212) 416-8000, Internet Complaint
• Federal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
• Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
• Freddie Mac: (703) 903-2000, Internet Complaint
• Senators, Representatives and Governors: Click here for contact information.

Also, please contact your local TV and Newspaper outlets. Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties.

For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

Talking Points:

1) NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.

2) Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.

3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.

4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

5) No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

Click here to continue reading . . . .

Fannie Mae Announcement 09-19 - Clarification of Announcement 08-30, Appraisal-Related Policy Changes and Clarifications

Fannie Mae's Announcement 09-19 updates and clarifies the following appraisal and property-related topic: Clarification of Announcement 08-30, Appraisal-Related Policy Changes and Clarifications Updates to Announcement 08-30, Appraisal-Related Policy Changes and Clarifications.

Market Conditions Addendum to the Appraisal Report

 In Announcement 08-30, Fannie Mae introduced the Market Conditions Addendum to the Appraisal Report (Form 1004MC) to further enhance the transparency of the conclusions made by the appraiser related to market trends and conditions.

To add clarity, Fannie Mae has added several shaded areas to the form to recognize that all the requested data may not be available from the data sources used by the appraiser and therefore the information may not be provided. The lack of completion of these areas is acceptable as long as the appraiser provides an explanation as to why these sections of the form are not complete. However, if the data is available, the appraiser must include the data in the analysis.

Fannie Mae is also modifying the requirement for the “Median List-to-Sale Price Ratio” to now label it as “Median Sale Price as a Percentage of List Price.” Additional research indicated that this figure is typically provided by data sources as a percentage. The revised form is dated March 2009 and is available on eFannieMae.com. It was also provided to the major form software vendors. Lenders are encouraged to use the updated version immediately; however, it will be required for all one- to four-unit appraisals dated on or after July 1, 2009.

Use of Supervisory Appraisers

 Announcement 08-30 provides additional policy and guidance on the use of supervisory appraisers when they sign an appraisal report on the left-hand side of the form as the “appraiser.” Fannie Mae is providing the following clarification.

The Fannie Mae Selling Guide defines the appraiser as “the individual, who personally inspected the property being appraised, inspected the exterior of the comparables, performed the analysis, and prepared and signed the appraisal report as the appraiser.” The Announcement was intended to address instances where a trainee or unlicensed appraiser (who does not sign the report and where it is allowable by state law) completes the inspection, but the supervisory appraiser signs on the left-hand side of the appraisal as the “appraiser,” when they have never inspected the subject property.

In Announcement 8-30, Fannie Mae was conveying that this practice is unacceptable. Any appraiser signing on the left-hand side as the “Appraiser” must perform the level of inspection required by the assignment.

This guidance does not require the supervisory appraiser to inspect the subject property in all instances.

Time Adjustments on the Appraisal Report

Announcement 08-30 clarified that time adjustments may be either positive or negative. It also stated the adjustments must reflect the difference in market conditions between the date of sale of the comparable and the effective date of the appraisal for the subject property. The term “date of sale” was used in lieu of “contract date.” The correct terminology as stated in the Selling Guide is “contract date.”

Download FNMA_Announcement_0919

Key Highlights of Announcement 08-30:

•  New Market Condition Addendum form 1004MC

• Supervisory appraisers must now inspect the subject property

• Reporting prior sales and listing history

• Appraising a property on sites over 5 acres

• Effective age adjustments

• Cost approach for insurance purposes

Assuring Accurate Appraisals, Part II: What's A Consumer To Do?

According to Broderick Perkin's first article article Assuring Accurate Appraisals Part I:

"During the height of the housing boom, appraisers were pressured to up the value of homes. Now, during the housing downturn, appraisers are being pressured to lower the value of homes."

In the follow-up article, Assuring Accurate Appraisals, Part II: What's A Consumer To Do? , Perkins says:

"Appraisers are typically hired by the lender to protect its stake in a home buying transaction. That means the appraiser is beholden to his or her employee -- the lender -- not necessarily the buyer nor the seller.

However, both the seller and the buyer can play a role in the appraisal process through a process of due diligence known as looking over the lender's shoulder."

 

Click Here for the full Realty Times article by Broderick Perkins

Next Week: What's a consumer to do? How consumers can play a leading role in the appraisal process.

Feds Propose Nationwide Mortgage Licensing System and Registry Database (S.A.F.E. Act)

Federal Agencies Propose Rule to Implement S.A.F.E. Act Mortgage Loan Originator Registration Requirement

WASHINGTON — The Federal financial institution regulatory agencies (the Agencies) are together issuing for public comment proposed rules requiring mortgage loan originators who are employees of Agency-regulated institutions to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act).

The S.A.F.E. Act requires the Agencies to jointly develop and maintain a system for registering residential mortgage loan originators who are employees of Agency-regulated institutions, including national and State banks, savings associations, credit unions, and Farm Credit System institutions, and certain of their subsidiaries.

These mortgage loan originators must be registered with the Nationwide Mortgage Licensing System and Registry (Registry), a database established by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the States.

As part of this registration process, mortgage loan originators must furnish to the Registry background information and fingerprints for a background check. The S.A.F.E. Act generally prohibits employees of an Agency-regulated institution from originating residential mortgage loans without first registering with the Registry.

The proposal, which is being issued jointly by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, Farm Credit Administration, and National Credit Union Administration, establishes the registration requirements for mortgage loan originators employed by Agency-regulated institutions as well as requirements for these institutions, including the adoption of policies and procedures to ensure compliance with the S.A.F.E Act and final rule.

As required by the law, the proposal also requires these mortgage loan originators to obtain a unique identifier through the Registry that will remain with that originator, regardless of changes in employment. When the system is fully operational, consumers will be able to use the unique identifiers to access employment and other background information of registered mortgage loan originators.

Pursuant to the S.A.F.E. Act, the proposal further requires these mortgage loan originators to provide their unique identifiers to consumers in certain circumstances and Agency-regulated institutions to make them available to consumers.

Because modification of the Registry to accept Federal registrations involves complex technical issues, the proposed rule provides for a delay in implementation of the registration requirements until 180 days after the Registry becomes operational and available for initial Federal registrations.

The Federal Register notice and proposed rule are attached. The proposal will soon be published in the Federal Register and the comment period will end 30 days thereafter.

Source Document:  http://www.occ.treas.gov/ftp/release/2009-58a.pdf  

OCC News Release: http://www.occ.treas.gov/ftp/release/2009-58.htm

HUD Releases New 4155.2, Lender’s Guide to the Single Family Mortgage Insurance Process

HUD recently released a new handbook - HUD 4155.2, Lender’s Guide to the Single Family Mortgage Insurance Process.

Click here or the link below to view handbook. Pay particular attention to Chapter 4 - Property Valuation and Appraisals.

The new FHA (Federal Housing Administration) portal contains the online version of the new Information Mapped Handbooks as well as links to corresponding forms and resources on the HUD (Housing and Urban Development) website.

The online 4155.1 and 4155.2 handbooks incorporate and consolidate guidance from Handbooks 4155.1 REV5, 4000.2 REV-3, 4000.4 REV-1, 4165.1 REV-2 and related Mortgagee Letters through ML 08-39. Although these Handbooks are available for informational purposes only at this time, you are encouraged to become familiar with how to use them.

Lots of good info for FHA appraisers.

I recommend you take the time to print out this Chapter or place it on your Internet favorite list.

http://www.fhaoutreach.gov/FHAHandbook/prod/contents.asp?address=4155-2 

Source: http://www.ICAPweb.com  

Veterans Benefits Administration Circular 26-09-4 Announces VA To Require 1004MC in ALL VA Reports

Veterans Benefits Administration

Circular 26-09-4

Department of Veterans Affairs

March 27, 2009 Washington, DC 20420

MARKET CONDITIONS ADDENDUM TO VA APPRAISAL

1. PURPOSE. The purpose of this circular is to announce that, effective no later than April 1, 2009, VA will require appraisers to include Fannie Mae Market Conditions Addendum, Form 1004MC, in all VA appraisal reports.

2. DETAILS. Due to current conditions in the real estate market, Fannie Mae recently announced that it is establishing additional appraisal requirements to supplement the minimum standards set forth in the Uniform Standards of Professional Appraisal Practice. Specifically, Fannie Mae is requiring appraisers to document an overview of neighborhood market conditions and trends in using Fannie Mae Market Conditions Addendum, Form1004MC.

Instructions for completing this form may be found in Fannie Mae s Announcement 08-30, dated November 14, 2008, at https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf.

Following suit with the industry, VA will require appraisers to include this form in all VA appraisal reports. VA will monitor the impact of this new industry requirement on appraisal fee and make adjustments as appropriate.

3. RESCISSION: This circular is rescinded January 1, 2012. By Direction of the Under Secretary for Benefits Mark Bologna, Director Loan Guaranty Service

Source: Download 1004MC.eml (7.11 KB)

MBA Calls for Uniform National Regulation of Mortgage Lending - FMRA - Federal Mortgage Regulatory Agency

WASHINGTON, D.C. (March 24, 2009) - The Mortgage Bankers Association (MBA) sent a letter today to the Chairmen and Ranking Members of the House Financial Services and Senate Banking Committees calling for legislation that would establish a tough, new federal regulatory framework for mortgage lending to protect borrowers nationwide. In the letter, MBA offered an outline of proposed legislation, titled the Mortgage Improvement and Regulation Act (MIRA), that would establish new uniform national lending standards to replace the current patchwork of state and federal lending laws and that would also establish a new federal regulator to implement and enforce these standards.

"In order to restore confidence in the housing and mortgage markets, we need to ensure that many of the excesses that led to the current crisis aren't repeated," said John A. Courson, President and CEO of MBA. "For this reason, we are calling on Congress to create a new national regulatory framework to regularize the mortgage market and better protect consumers."

MBA's plan is centered on the creation of new lending standards and a new regulator, the Federal Mortgage Regulatory Agency (FMRA). MIRA would establish, and FMRA would be responsible for implementing and updating, the new mortgage lending and servicing standards as well as regulating independent mortgage bankers and mortgage brokers in partnership with state regulators.

"Under our proposal, we are calling for one federal regulator to implement the standards and oversee all mortgage bankers and brokers," said Courson. "That regulator would work with the appropriate federal and state regulatory bodies to effectively enforce these tough new requirements."

 Among the components that MBA is calling for in the new national lending standard are:

• Many of the recently promulgated HOEPA regulations, including those requiring a determination of a borrower's ability to repay, documentation of income and assets, limits on prepayment penalties and establishment of escrow accounts for borrowers' tax and insurance payments; 
• Improvements to the mortgage origination, servicing and appraisal processes some of which had been included in H.R. 3915 (which passed the House of Representatives in 2007);
• A new duty of care for mortgage bankers and mortgage brokers to assure that consumers get the facts they need to know about the loan options available and the costs of their loan transaction, including compensation to the mortgage broker; and
• A requirement that a borrower affirmatively opt-in, in writing, to a nontraditional mortgage product.

 "MBA has long advocated for uniform national lending standards to protect borrowers coast to coast. One standard for all borrowers to learn and understand, and one standard for all lenders to follow will offer much better protection to consumers in every state and will help to lower costs. It will also significantly cut down on the confusing and often contradictory patchwork of state laws and regulations," added Courson.

As part of MIRA, HUD and the Federal Reserve would be required to work together in consultation with the new regulator to develop greatly simplified consumer disclosure forms, including combining Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures to help consumers better navigate the mortgage process. Additionally, MIRA would increase resources for investigating and prosecuting mortgage fraud and establish a national financial literacy and counseling program. As part of that program, MBA suggests there should be pre-purchase counseling required on certain mortgage products, primarily for first-time homebuyers.

A copy of the letter and an executive summary of the bill, as well as a more detailed outline, can be found at http://www.mortgagebankers.org/MIRA

Source: MBA Calls for Uniform National Regulation of Mortgage Lending

Letter: National Association of Mortgage Brokers CONTINUES to seek injunction to block the HVCC

Dear NAMB Member,

As you know, on February 23, 2009, NAMB filed a lawsuit against the Federal Housing Finance Agency (FHFA) over the controversial HVCC included in agreements between New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac (GSEs), and their regulator, the FHFA.  Click here for a copy of the lawsuit.

This week, the litigation took a major step forward as NAMB filed its initial brief outlining why the HVCC is unlawful and should be disallowed. The 45 page document was supported by numerous affidavits, exhibits, and other materials which demonstrated the grave problems created by the HVCC. NAMB is asking the U.S. District Court for the District of Columbia to take any one of several actions that would invalidate the HVCC.

As expected, the court declined to rule immediately that the HVCC should be withdrawn without first permitting FHFA to present its arguments, and thus the court has denied NAMB's request for an immediate Temporary Restraining Order. However, in doing so, the court expressly reserved judgment on the merits of NAMB's position, which the court has yet to address.  Download Motion for Preliminary Injunction filed 3 19 09

What does this mean?

The District Court may block implementation of the HVCC through an immediate Temporary Restraining Order (TRO), a Temporary Injunction, or a Permanent Injunction. A TRO is rarely granted—it requires a showing that a party faces immediate and irreparable harm if a TRO is not granted and, when granted, typically is in effect only for a matter of days. Because the District Court did not find that there would be immediate and irreparable harm done to appraisers or mortgage brokers within the next few days if a TRO was not granted, the court ruled that a TRO was not appropriate.

That decision does NOT mean that the District Court denied NAMB's claim. To the contrary, the litigation is now proceeding to the next stage, when NAMB will have an opportunity to present its case to the court, which will then make a ruling.

NAMB has requested an expedited hearing process given the close proximity of the HVCC effective date. NAMB continues to seek both a temporary injunction and permanent injunction blocking implementation of the HVCC, and is seeking resolution of the matter in the coming weeks.

Despite the initial good news, there is much more to be done! NAMB is so grateful for your support thus far, but we still need your help! Please continue to circulate the donation letters to appraisers and real estate agents, and contact your fellow NAMB members and urge them to contribute. More than ever, the time to act is NOW.

If you have any questions, please send an email to GovernmentAffairs@namb.org.

Sincerely, Marc Savitt, CRMS NAMB President

Source: The Inland CA Appraisers Forum

FHFA - "Examining the Making Home Affordable Plan" - Net Present Value Model

FHFA has just released the "Examining the Making Home Affordable Plan" testimony by Patrick J. Lawler, Chief Economist for the FHFA.   

Mr. Lawler said in his opening remarks,

"The Making Home Affordable plan is a critical component of President Obama’s financial stability plan. The affordability plan reaches out to millions of American homeowners who are trying to keep their homes in these difficult economic times to help them refinance or modify their mortgages so that they will have more affordable mortgage payments. My testimony today will summarize the prominent role of Fannie Mae and Freddie Mac in this plan and progress made in implementing the plan."

In a later section Lawler said,

"If we are going to stabilize the housing market, we have to address that 50 percent, which comprises mostly subprime and alt-A loans. We believe Fannie Mae and Freddie Mac must be leaders in improving, promoting, and enforcing industry standards and best practices for all mortgages, and their roles in Making Home Affordable reflect that"

The section of his testimony that might be of most interest to appraisers is under the heading "Implementation of the Making Home Affordable Plan".    There, they use the terms:

• Net Present Value model
• Acceptable discount rates
• property valuation methodologies (government-speak for AVMs?)
• house price appreciation assumptions

The other section that I find interesting deals with the "Incentives" that are paid to "Servicers"for modifying these troubled loans.    Are they rewarding bad lending practices by paying incentives to the same people (Servicers) that made the bad loan in the first place?  

How kewl is THAT?!  I'm sure appraisers would like to be paid an "incentive" to re-appraise properties that people now claim were "Over-valued".    Nope . . .Instead they create the HVCC that effectively institutionalizes the need for AMC middle-men which hack appraiser's fees to the bone!

Click here for the complete testimony.

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.

Click here to continue reading . . .