Appraisal Scoop

How Many of you Have $10,000 Just Lying Around? - S. 2452 Home Ownership Preservation and Protection Act

I read one of Pat Egger's articles up here a few weeks ago and it had a Marvel Comics image and spoke of appraisers picking a side.  The Homeownership Preservation and Protection act seems to be at face value, a good thing. 

Here is a break down using the Library of Congresses Thomas system:

The following summary is provided by the Congressional Research Service, which is a nonpartisan government entity that serves Congress and is run by the Library of Congress.  The summary is taken from the official website THOMAS.  This is the date introduced to the committee.  It is still in its very beginning stages.

Home Ownership Preservation and Protection Act of 2007 - Amends the Truth in Lending Act to redefine high-cost mortgages and attendant lending practices.  Sets forth a new formula for points and fees for open-end loans, and provides for bona fide discount points.

Sounds harmless at this point, like most things written by politicians you have to dig into the meat of the bill to see who is at the short end of the stick. 

Prohibits: (1) prepayment penalties; (2) balloon payments; (3) yield spread premiums; (4) acceleration or debt; (5) evasions, structuring of transactions, and reciprocal arrangements; and (6) modification and deferral fees.

Here again, sounds like it has the consumer at heart.  God knows the entire home owning public was set out to dry with these types of problems. 

Prohibits creditors from financing, in connection with a high-cost mortgage, any prepayment fee or penalty, or any points or fees.

Since many homeowners are not savvy enough to catch these things, I can see why this would be a good thing.  It will result in lower profit margins for the lenders, but they make excessively much money as it is.

Prohibits an originator from making or arranging a high-cost mortgage loan that involves a refinancing of a prior existing home mortgage loan unless the new loan will provide a net tangible benefit to the consumer.

It is sad that common sense like this is required of a bill, but obviously lenders are predatory and one sided in regards to profit

Click Here To Continue Reading . . . .

Connecting the Dots…The Importance of Timely and Effective Suspicious Activity Reports

There is often a financial connection to crime, and Suspicious Activity Reports (SARs) play a critical role in exposing the financial links to illicit activities and fighting financial crimes. For the suspicious activity reporting system to be effective, SARs must be complete, accurate, and timely.

Download Connecting_the_Dots_SARs.pdf

This article highlights the importance of SARs, provides examples of how various agencies use SARs, discusses common deficiencies in SAR filings, and provides tips on what makes an effective SAR.

Source: Connecting the Dots…The Importance of Timely and Effective Suspicious Activity Reports

Title Insurance: Actions Needed to Improve Oversight of the Title Industry and Better Protect Consumers

The GAO's investigation of competition in the title industry report has been released, and its results are staggering. The 74-page report digs deep into the competitive issues surrounding the real estate industry, with title insurance serving as a jumping-off point for a detailed discussion of affiliated arrangements and referral practices among all of the players.

The report also looks at enforcement from the state and federal level and finds it to be lacking. Click here to look at what changes the GAO is recommending to Congress and HUD and how RESPA is at the heart of them all.

• Click here for an Abstract of the report.
• Click here for the complete report.

Connecticut gives kickback disclosure law the nod

A Connecticut bill that would require real estate agents to provide every homebuyer with a disclosure stating that they are not receiving any kickbacks on the transaction is moving forward, as a House Committee has recently voted unanimously to pass the bill. Read on to learn what the industry had to say about the legislation at a recent public hearing.

Click here to read the full story.

Lender Urges Creation of "National Valuation Registry"

It is "up to us as an industry, to take a lot of action ourselves," says Richard Wohl, president, IndyMac Bank, Pasadena, Calif., noting that this is both a "good time and a bad time to be addressing mortgage fraud." The industry is in a "pronounced down cycle," says Wohl, conceding: "I've seen deals that we push in our shop that should never have come through the front door."

In arguing for better data sharing, he says the industry needs to create a national valuation registry, like MERS (Mortgage Electronic Registry Service); a national database where appraisal information would be attached to each file."

The mortgage industry spends $3 billion to $4 billion on appraisals, compared with $6 billion in fraud losses each year, figures Wohl, so "doesn't it makes sense to share that $3 billion of work product to help prevent that $6 billion in losses?"

Click here to read the complete Inman News Article.

Are real estate appraisals outmoded?

The real estate appraisal system is broken and needs to be fixed . . .according to Marcie Geffner, a real estate reporter in Los Angeles, and contributor to Inman News.  In her recent article Real estate appraisals are outmoded she says:

"The fundamental problem is the conflict of interest among the lender who selects the appraiser, the borrower who pays for the appraisal and the investor who relies on the adequacy of the appraiser's opinion. Lenders are in a powerful position to pressure the appraiser to "hit" pre-ordained numbers since, as a group, lenders don't suffer the consequences of inflated valuations. Rather, the loans are sold to investors, who have become so mesmerized by the prospect of high returns that they've willingly ignored the reality that too many of the loans are justified by fictional appraisals."

Offered as solutions to the problems, she suggests :

• Allowing buyers to directly select the appraiser and pay for the appraisal
• Using In-house appraisers that are employees of the lender
• More enforcement of current laws and increased regulatory audits
• Rethinking of "traditional" appraisal methods in favor of more sophisticated analysis.

See if you agree or disagree with her assessment of the appraisal industry and the direction it should take!  Click here for the complete article.

Mortgage Fraud Scams: Chunking, Skimming, Flipping, Phantom - Are you an unwitting participant?

According to the Fraud Problem blog: "Agents, appraisers, mortgage brokers and loan originators are going to prison in record numbers so the term "We've always done it this way" is just fine if jail is your desired destination, otherwise it's time to learn and stop the fraud problem."

The Fraud Problem blog lists common mortgage fraud scams, who you should complain to and provides education that may prevent you or your town from becoming victims of bad mortgage practices.

The most common responses/defenses they hear are:

• "How can that be, everybody in my office does it?"
• "We've always done it this way"
• "Well as long as we disclose, it can't be wrong"
• "It's just a bank application"
• "Nobody's harmed. The borrower got the cash, so who was hurt?"
• "That rule doesn't apply to us, it's an appraisal problem"
• "I asked the banker and he said they do it all the time, so it must be OK...."

Click below to read a couple of highlights from the Information & Updates section . . .

Runts Rants: Appraisal Fees Under Pressure! A Red Herring?

Was it five years ago appraisers when appraisal fees were under pressure because closing costs were so high?  Remember that?

Actually it was four years ago...just about the same time that RESPA was beginning to make headlines.  RESPA is of course the regulatory effort to revamp the real estate loan settlement process.  The spotlight and pressure was shifted at that time to Appraisal Fees. 

A CNNMoney article suggests that closing costs have increased 800 percent in the last forty years, this despite all of the productivity improvements which are made possible by personal computers and micro chips during the same period.  Eight hundred percent!

Just wondering....how much have your fees gone up in the last 20 years.  What did you say?!  Your fees are flat or decreasing?  Goodness!  Looks like you've missed the boat again.....

It might be interesting and enlightening to visit the RESPA web site.  Look around, especially at the white papers.  In those white papers you'll find estimates of 6-8 million residential home sales occurring each year.  You'll also find that the RESPA 2002 estimates of the closing cost savings resulting from the proposed new process is $6.7 to 10.3 billion. 

Let's see if I can do some simple arithmetic with all those zeros....let's take the mid point of each of those RESPA estimates; $8.5 billion in savings over 7 million residential sales.  WOW!  That's a projected savings of $1,200 in closing costs on each of those loans!

But how does that number relate to the current average cost of closings?  Is it significant?

CRAV Releases White Paper Challenging Lenders & Mortgage Brokers To Promote Accurate Appraisals In Residential Markets

The Center for Responsible Appraisal and Valuations (CRAV), founded in 2005 by the National Community Reinvestment Coalition, released a compliance white paper today entitled, Residential Mortgage Originators, Securitizers, AMC’s and the Mortgage Broker, critical of the role of mortgage brokers in the wholesale mortgage marketplace.   The report explores lender compliance – or lack thereof - and liability with FIRREA in mortgage markets dominated by mortgage brokers. 

Click here to download.

The paper is intended to provide a clear understanding of the duties and responsibilities that a lender must comply with when performing their fiduciary duties involving real estate-related financial transactions, including the utilization of mortgage brokers. Appraisal professionals who serve on the CRAV’s Partner’s Council identified this issue for discussion, collaboration and as legislative and regulatory policy priority for the new Center.   READ ON . . .

Appraisal Fee - Markup or Kickback? - Part 3

Appraiser Question: "I received an order from an Appraisal Management Company (AMC) that requested I bill the client $75 more than my standard fee and return $75 to them. I've never heard of this before, but I haven't worked with many management companies. Is this common?" "Do I need to make a statement in the appraisal report that I have paid $75 to the AMC?" "Are there any other USPAP or legal concerns that I should consider to cover myself?"

Part 2 of this series answered the our appraiser's question from the perspective of USPAP - The Uniform Standards of Professional Appraisal Practice - but left us with a question about whether a RESPA violation may come into play. Why? Because it "appears" the appraiser is involved with collecting or paying additional fees for which "appraisal services" have not been provided.

Just What IS a "Markup"? Markups involve the practice of ordering services for a customer from a third-party vendor and then, without providing an additional service, adding an additional fee to the vendor's charge.   READ ON . . . .