Appraisal Scoop

Outside the Boxes Part 5 - What's in your addendum and why?

This is the fifth in a series on the URAR from the course "Inside & Outside the Boxes: Developing and Communicating the URAR.  Each week I'll be covering different topics related to residential appraisal development and reporting. - Patrick Egger

Top-down perspective - The first in the "Outside the Boxes" series was "Definition of the Problem." There was a reason for that. Do we think about "definition of the problem" from the client's perspective? What do clients need (beyond value to do the deal) and what can we provide to satisfy that need?

While appraisal forms present the basics on the subject and neighborhood, they are woefully inadequate for anything other than a basic house in a balanced market. Difficult properties, fluctuating market conditions and FNMA guidelines require the appraiser, to go beyond any limitations of the forms, with additional comments and exhibits being used if they are needed to adequately describe the subject property, document the analysis and valuation process, or support the appraiser's conclusions."

To supplement the form, we often include page after page of stats, facts, overviews and narrative on the market, economy, etc.

Is that what the reader needs, ten additional pages to read and somehow figure out what it means and how it applies to the subject property?

Certainly various issues require expanded comments, however imagine a processor or underwriter, with limited or no appraisal training, attempting to scan the report and validate that all requirements of the secondary market, especially those for difficult housing markets, have been addressed.

While we're trying to cover the bases, are we leading the reader to the same conclusions we came to or are we actually making it more difficult for the reader? Should we be addressing the client's needs in a different way?

Click here to continue reading . .

Wachovia Mortgage Issues "Market Analysis" Requirements

Wachovia Mortgage, FSB's Appraisal Department has issued an Important Information on Market Analysis Requirements memo to all of their Wachovia Independent Contractors (WIC's). Download wachovia_mortgage_market_analysis_requirements.pdf

Here are a few excerpts from their memo:

Now, more than ever, with all the press about the “mortgage crisis” and declining markets throughout much of the nation, market analysis has achieved a new level of visibility. In fact, as you may know, Fannie Mae announced an amendment to their selling guide on December 5, 2007 regarding declining markets. Fannie, Freddie, (VA) and other secondary market purchasers are using the state of the market to help establish loan level acceptability.

We believe that property values, demand/supply models, and marketing time are all related. Therefore, when discussing a market, we want you to analyze the market based on sales, listings, pending sales, withdrawn, expired listings, etc.

The tables below are examples of how Wachovia Staff Appraisers must report market statistics on their appraisals. We recommend that you adapt these for your use or provide similar, clearly stated, and easily understandable statistics for the appraisals you complete for Wachovia.  This will save you and us time in not having to contact you to discuss your reporting of the markets.

Click here for more . . .

2008 National Uniform Licensing and Certification Examinations

The Appraisal Foundation has published some very helpful information on their website (click here) regarding the effectiveness of the examinations used for state licensing and certification purposes.

The AQB made minor enhancements to the Criteria over the years, but the revisions that will become effective on January 1, 2008, significantly increase the hours and the specificity of education required to become a state licensed or certified appraiser. Appraisal education, beginning in 2008, will require, for the first time that the total hours be attributable to specific topic areas, known as a Required Core Curriculum. And each educational topic area in the Required Core Curriculum requires successful completion of an exam.

Since specific appraisal topics will be taught and tested within the education requirement, the 2008 state licensing and certification examinations can focus on a candidate’s ability to apply the knowledge learned rather than simply testing a candidate’s ability to recall information learned in coursework.

State appraiser licensing and certification examinations offered prior to January 1, 2008, essentially test a candidate’s ability to recall information learned in qualifying educational offerings. The National Uniform Licensing and Certification Examinations offered as of January 1, 2008, will test a candidate’s ability to apply the knowledge (and possibly experience) they have obtained.

This difference may be best illustrated by looking at examples of the type of questions that could appear under each exam (Click Here)

FNMA Announcement 07-25: Use of Automated Valuation Models (AVMs) to Support the Cancellation of Mortgage Insurance Coverage

Fannie Mae's Announcement 07-25 addresses five Fannie Mae Selling and/or Servicing Guide topics to update and/or clarify existing requirements, and communicates new requirements, as itemized below:

• Expansion of the eligibility parameters to include 2-family to 4-family principal residence and investment properties when the borrower is an revocable trust;
• Update to the flood insurance coverage requirements for mortgages secured by one-family to four-family properties;
• Clarification that the value provided by an Automated Valuation Model (AVM) may not be used to support cancellation of mortgage insurance (MI) coverage;
• Update to the policy for postponed improvements; and
• Clarification of the appraisal requirements for manually underwritten mortgages;
• New requirements for servicers on reporting delinquency status for regular servicing option loans.

Download FNMA_Announcement_07_25.pdf

Click below for an excerpt . . .

Outside The Boxes - Part 4: Covering Your Fannie

This is the fourth in a series on the URAR from the course "Inside & Outside the Boxes: Developing and Communicating the URAR.  Each week I'll be covering different topics related to residential appraisal development and reporting. - Patrick Egger

The Federal National Mortgage Association (FNMA) represents a major part of the secondary market. FNMA is the "government sponsored entity" referred to in the Scope of Work, Limiting Conditions and Certifications in the URAR. Their guidelines are the "yardstick" by which mortgages are measured.

FNMA's Appraisal Guidelines - Key Issues

There is one reoccurring theme throughout the FNMA Guidelines. The lender and the appraiser are responsible for the reliability of the value opinion. In FNMA Announcement 07-11, "Collateral Valuation Practices and Declining Markets", FNMA restated its emphasis on the lender's and the appraiser's responsibilities.

• The lender has sole responsibility for managing the appraiser relationship and the activities of the appraiser it selects.
• The lender must have appropriate business controls in place to avoid actions that may compromise the accuracy of the appraisal report.
• Provide objective assessments of market conditions; describe reasons for these trends and indicate what impact these trends have on the subject property.

While some appraisers looked upon the direction in the memo as "new policy", it was neither new nor clear and merely a restatement of existing guidelines. Essentially, what FNMA wants today is the same thing they always wanted, risk free loans.

Resources:

• Fannie Mae Announcement 07-11: Overstating Property Values In Declining Markets
• FAQs for Announcement 07-11, Collateral Valuation Practices and ...

FNMA & Hedging

FNMA hedged their bet by transferring full appraisal responsibility to the lender and appraiser. The lender has a mortgage buy-back clause while the appraiser is required to have errors and omission insurance. Should a loan go bad, FNMA will look to the lender and the lender in turn, will look to the appraiser.

Click here to continue reading . . .

2008-2009 USPAP Frequently Asked Questions

USPAP Frequently Asked Questions (“USPAP FAQ”) is a form of guidance issued by the ASB to respond to questions raised by appraisers, enforcement officials, users of appraisal services and the public to illustrate the applicability of USPAP in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems.

Throughout USPAP Frequently Asked Questions, titles of questions and responses that are new for this 2008-2009 edition are identified in italics. 

I've collected just those FAQs that are new to this edition AND apply specifically to real property appraisers:

• Conduct 11. Don't Accept Unless You Can Appraise for...
• Ethics 30. Discounted Appraisal Fees
• Ethics 34. Appraisal Fee Paid at Close of Financing Transaction
• Ethics 52. Workfile Retention with More Than One Appraiser
• Ethics 54. Trainee Access to Workfiles
• Ethics 59. Jurisdictional Exception and Workfile Retention
• Appraisal Dev. - Client 74. Readdress or Transfer
• Appraisal Dev. - Client 76. Identification of Intended Users
• Appraisal Dev. - Client 79. Engaged Directly by the Homeowner
• Appraisal Dev. - Client 80. Client Approval for Future Assignments

Click here to continue reading . . . .

2008-2009 USPAP Now Available On-Line

The Appraisal Foundation, a congressionally-authorized nonprofit organization that fosters professionalism among appraisers by setting qualifications and standards, announced the availability of the on-line edition of Uniform Standards of Professional Appraisal Practice (USPAP), which will be effective for 2008 and 2009.

The new edition of USPAP includes guidance from the ASB in the form of the USPAP Advisory Opinions and the USPAP Frequently Asked Questions (FAQs), previously published separately, featuring a compilation of more than 200 questions and answers.

Click here to access the 2008-2009 USPAP On-line edition.

Special Thanks to Appraisal Today!

Last week I posted It's CONTAGIOUS! 10 Tips For Getting Started With VIRAL Appraiser Marketing where I talked about the value of free email newsletters, market reports and notifications being a great opt-in way of staying in contact with clients and property owners.

For appraisers, the Queen of opt-in marketing HAS to be Ann O'Rourke, MAI, SRA of Appraisal Today!  Her free email newsletter reaches 10,300 opted-in appraisers across the nation.  Ann has been very kind to include links to Appraisal Scoop articles in her weekly newsletter, which always result in a bump to our readership!  Thanks Ann!

If you're not already on Ann's mailing list you're missing some great Appraisal Today articles and news stories.  To subscribe - visit http://www.appraisaltoday.com/free.htm

Also, don't forget the you can also use FeedBlitz to subscribe to the Appraisal Scoop blog too!  Just enter your email address in the [Get eMail Updates] box on the top left of this blog.  That way, you'll receive the latest updates via email, Skype, or AOL IM.  Don't miss a single story!

SEC probes WaMu on mortgage appraisals

According to the seattlepi.com story, SEC starts inquiry of WaMu, by reporter Bill Virgin; "The Securities and Exchange Commission is looking into Washington Mutual Inc.'s mortgage lending practices, deepening a controversy over whether the Seattle-based company pressured appraisers to come up with inflated values to justify making home loans."

The appraisal controversy, which has figured in several shareholder lawsuits, is one more headache for a company that is already dealing with the slumping housing and mortgage markets. WaMu recently announced thousands of layoffs, concentrated in its home loan business; a write-down in that business that will lead to a fourth-quarter loss; and a 73 percent cut in the dividend. Its stock price is down 68 percent from its close on the last day of trading in 2006. Shares closed Thursday at $14.67.

According to the Wall Street Journal story SEC Probes WaMu on Appraisals :

The SEC's inquiry is in its infancy and involves several possible issues, including whether WaMu accurately disclosed to investors of mortgage-backed securities how its loans were appraised as well as whether the company properly accounted for its loans in financial disclosures to investors of the company, according to the people familiar with the situation.

Fannie Mae deems Denver a "Declining Market"

The following is an excerpt from the Denver Post article Fannie Mae deems Denver a "Declining Market" by By Aldo Svaldi

Experts say the designation as a declining market could put off a recovery in housing by making it more difficult for some people to get mortgages.

Fannie Mae and its brother agency Freddie Mac have relied on appraisers to determine if a home was in an area with declining values.

Too many appraisers, under pressure to not derail a purchase, were marking the "stable" box instead of the one that said "declining," said Wolfe, who works with Freddie Mac on appraisal-fraud cases.

Appraisers also have failed to properly account for concessions from sellers, which inflate the value of a home.

Under pressure from rising defaults and needing to raise more capital, Fannie Mae has tightened its standards, and Freddie Mac is expected to do the same.

"We need to conservatively manage our business and risks through prudent pricing and underwriting in order to provide sustainable liquidity to our lender customers and stability to the markets," Fannie Mae spokesman Brian Faith said last week in a statement.

Click here for the full article

Additional Fannie Mae "Declining Market" Resources:

Announcement 07-22, Maximum Financing in Declining Markets
(.pdf, 166K, 3 pages)
Frequently Asked Questions (Announcement 07-22)
(.pdf, 43K, 4 pages)
Announcement 07-11, Collateral Valuation Practices and Declining Markets
(.pdf, 114K, 5 pages)
Frequently Asked Questions (Announcement 07-11)
(.pdf, 34K, 4 pages)