Appraisal Scoop

Fannie Proposes Ban on Lenders' In-House Appraisers

Bloomber.com's story "Fannie Proposes Ban on Lenders' In-House Appraisers (Update 1)" says:

"Fannie Mae, the biggest source of financing for U.S. home loans, told lenders it will probably ban their use of appraisals by in-house employees or those arranged by brokers."

• The proposed changes include banning Fannie Mae's partners from using appraisers employed by their wholly owned subsidiaries. Mortgage lenders that own appraisal companies include Countrywide Financial Corp., the nation's largest home- loan originator.
• The restrictions would apply to loans acquired after Sept. 1, according to the memo. Fannie also told lenders that an independent appraisal clearinghouse likely would be established.

Jonathan Miller, CEO, Miller Samuel Inc. and real estate blogger (Soapbox) "It would be a monumental change because it would require a shift in the way that the lending industry does business. I think it would be tremendous."  Click here for National Appraisal Clearinghouse "Talking Points" by Jonathan Miller.

Click here for the complete article.

Related Stories:

• Huge Changes May be Coming for Lenders and Appraisers - Mortgage News Daily
• Appraisal Clearinghouse Concept Not A Clear Picture - Soapbox Blog

Appraisal Institute's Relationship with NAR Questioned By Past Presidents of AI

In early 2007, the National Association of Realtors (NAR) approached the Appraisal Institute (AI) regarding possible affiliation. Following an initial meeting with AI Executive Committee members, a project team was appointed and a second meeting with the NAR was held.

The project team briefed the Board on this meeting and the Board directed that the project team continue to meet with NAR representatives in 2008 to further explore possible affiliation. Please note that those discussions with the NAR are independent of unification efforts with the ASA and ASFMRA.

The Appraisal Institutes memo "Update on Possible AI-NAR Affiliation" ( Download AI_NAR_Affiliation_Update.pdf ) dated 2/25/2008 says:

Several key points were acknowledged during these meetings.  Because this would be an affiliation, rather than a merger, it was acknowledged that the AI would retain certain autonomy within the NAR structure under the terms of this new relationship.

Another key acknowledgment pertained to ownership of appraisal designations. As an affiliate, the AI would retain ownership of its designations and exercise sole authority to confer the MAI and SRA designations.

The memo indicates that the AI will solicit the membership’s views through extensive surveys, meetings and dialog with all 92 chapters through the AI’s 10 regions. Once this information is gathered, the project team is to report its findings to the Board of Directors for its consideration and review at its next meeting in Austin, TX, June 24-25, 2008.

In response to this and many other issues, ten AI members (including past presidents) have issued a scathing letter questioning many of the policies of the current AI leadership.

Click here for more . . .

Need for National Appraisal Database Now in the Spotlight

Zaio Inc., responded yesterday to a Wall Street Journal story [ Deal Nears to Curb Home-Appraisal Abuse ] that highlighted the need to establish a national appraisal database repository, remarkably similar to the database already being built by Zaio.  Click here for the full Zaio Press Release.   Download Deal_Nears_to_Curb_Home-Appraisal_Abuse_WSJ.pdf

Appraisal Scoop has gathered a collection of articles from various new sources that disclose possible settlement talks, between New York Attorney General Cuomo and Fannie and Freddie, which might include the requirement to establish a national appraisal database.   

Zaio Corp. believes that it is the only corporation in America that has been building a national appraisal database and believes it is the only way to defeat mortgage fraud and has provided what it believes are "five compelling competitive strengths" to its national database.

"In addition to building what is believed to be among the first national appraisal databases, Zaio’s national appraisal database has five compelling competitive strengths"  - Click here

NY Attorney General Gets Close to Fannie, Freddie Deal - Appraisal Clearinghouse? Consumer Hotline? "Assessor" Based Home Appraisals?

According to a Reuters report (click here)

"U.S. mortgage firms Fannie Mae and Freddie Mac would require their mortgage lending partners to have independent appraisals of home values under a deal being thrashed out with New York's attorney general, sources familiar with a draft deal said on late Monday."

"Home appraisals would have to come from assessors that do not have formal ties with a lender or mortgage broker, according to sources familiar with negotiations over a deal that could be finalized as soon as Tuesday."

Details of the plan were first reported by the American Banker in its Tuesday edition.

Fannie Mae and Freddie Mac would create a clearinghouse of appraiser information conduct and activity, according to the plan, sources familiar with a draft said on Monday.

"All lenders will be required to provide post-purchase copies of appraisal documents to the Clearinghouse," according to a Fannie outline of the plan. "It will be an independent entity with an executive and board of directors (and) It will staff a hotline for industry and consumer complaints."

From the Implode/Explode forum (click here):

The best part is the complaint line for consumers . . .Oh yeah that should work! What kind of a complaint do you think they are going to get? "Yeah my neighbor sold his house for $10,000 more than they say mine is worth. The appraiser didn't even take into account the wirlpool tub we installed, or the fact that our grass is always greener than the neighbors". What on earth does this help? The total lack of understanding of the industry inside and out just makes me cringe.

Click here for more details!

Declining Market: Freddie Mac Issues Specific Guidance Regarding Use Of OFHEO House Price Index (HPI)

The following is an excerpt from the February 21, 2008 Freddie Mac Seller and Servicers Bulletin:

Freddie Mac expects Sellers to be aware of home price trends in their lending areas. Decisions that Mortgages are acceptable for purchase by Freddie Mac are based not only on Borrower credit reputation and capacity, but also on the adequacy of the Mortgaged Premises to secure the transaction.

Accurate property values are essential, and the fact that a property is located in a market where house prices are declining is an important indication that the value of a specific property may be declining.

In our special November 15, 2007 Bulletin we advised Sellers that we use the OFHEO House Price Index (the OFHEO Index) (available on the OFHEO web site at:  http://www.ofheo.gov/hpi_download.aspx as a tool to help identify markets where home prices may be declining.

To further assist our Seller/Servicers as they assess property value and determine whether a reduction in maximum financing amounts is necessary, we are providing specific guidance on how to use the OFHEO index when originating Mortgages for sale to Freddie Mac.

Using the OFHEO Index, subject to the Seller completing the analysis described below, Sellers should consider that home prices are declining in the Metropolitan Statistical Area (MSA) in which a property is located if either of the following is true:

• The overall decline in the OFHEO Index for the MSA for the most recent two quarters is greater than 1%; or
• There is an overall decline in the OFHEO Index for the MSA year-over-year, unless there is overall growth in the OFHEO Index for the MSA in the most recent two quarters.

For purposes of performing these calculations, Freddie Mac does not round.

Using the criteria above, home prices in the MSA in which a property is located may be declining; however, there may be smaller geographic areas within the MSA that have stable or increasing property values.

Freddie Mac expects Sellers to examine the appraisal and other information sources with care and perform a rigorous analysis to determine whether in fact the property is located in a geographic area within the MSA where home prices are declining.

If the Seller uses the OFHEO Index and the Index shows the property is located in a declining MSA, and the Seller after a rigorous analysis determines property values in the smaller geographic area in which the property is located are stable or increasing, the Seller may offer maximum financing if:

• The Seller cites specific factual evidence that clearly supports its determination of stable or increasing values, and
• The Seller retains documentation in the Mortgage file supporting its conclusion.

Regardless of the results of the OFHEO Index, if the appraisal indicates or the Seller has other evidence that the property is located in a declining market, the Seller may not offer maximum financing.

Using the OFHEO tool, a rigorous analysis of smaller geographic areas, and the appraisal, a Seller must determine whether a property is located in a declining market. When a Seller determines that a property is located in a declining market, the Seller must reduce the maximum financing amount in accordance with the requirements of Section 23.5, as modified by this Bulletin.

Freddie Mac holds the Seller accountable for the quality, integrity and accuracy of the property valuation and LTV, TLTV and HTLTV ratios for Mortgages sold to us.

FULL BULLETIN: Download Freddie_Mac_022108_Declining_Market_Bulletin.pdf

Outside the Boxes: Part 14 - 12 Tips To Increase Your "ODDS" ... Observe, Disclose, Disclaim & Specify

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at [email protected] 

As licensed professionals, appraisers are required to "promote and protect the public trust" in our profession. Clients and the public have a right to expect ethics, competency and consistency from all appraisers, even when many of those same clients contribute to problems in the market.  We are expected to provide a "credible appraisal", one that is "worthy of belief".

Over the next several years, "odds are the profession will change", perhaps dramatically. During this time appraisers will become the "odd man (or woman) out" as some of the blame for market conditions will be laid at our doorstep and rightfully so as many in our profession were willing participants of "housing gone wild".

The initiatives and actions we take from this point forth will determine the trust placed in the appraisal profession by clients and the public. The real estate industry that we are part of has lost credibility and to restore the confidence, we need to be pro-active and using the "ODDS Rule" will help. 

• Observe the property and the market.
• Disclose to the client what you did and did not do.
• Disclaim that to which you are not qualified to evaluate.
• Specify your reasons and logic.

Often, clients, underwriters, loan officers, buyers and sellers have questions. Some are reasonable and some are absurd, however all are important. We can't become a "culture of no". We must take the steps necessary to respond appropriately since our responses reflect on our profession as well as ourselves. 

Click here to continue reading . . .

Humor: How The Internet Brings Us Together

First American / eAppraiseIT Withdraws Suit Against Pamela Crowley

As previously reported on Appraisal Scoop: eAppraiseIT, LLC vs Pamela Crowley - Transcript of Proceedings Released and from the FloridaToday.com story by Keyonna Summer and Wayne T. Price:

"A Brevard County judge on Thursday refused to shut down a Palm Bay appraiser's Web site that contained comments critical of the California-based appraisal management company First American eAppraiseIT." [See Appraisal Scoop]

Today Pamela posted the following comments to Appraisal Scoop:

Mr. Merlo, former President and CEO of First American eAppraiseIT, would schedule to be deposed by us, then back out a day or two before the deposition, then schedule again and back out again....

Now, rather than allow us to depose him or others, they have withdrawn the suit against me without so much as a "sorry for all the time, trouble, MONEY, LARGE target we painted on your back, and extreme emotional turmoil we have caused you".

Time to go forward on the Offensive!!!!! First American eAppraiseIT will not be the only one in the spotlight now.

Pamela Crowley - [email protected]  - http://www.MortgageFraudWatchList.org

Click here for Jennifer Wertz's comments on Pam's victory . . .

"A Brevard County judge on Thursday refused to shut down a Palm Bay appraiser's Web site that contained comments critical of the California-based appraisal management company First American eAppraiseIT." [See Appraisal Scoop]

On The Road: Google Maps - Don't Leave Home Without Them! (Video)

AUTHOR: Richard D Ferris - AmcAppraisalsinc.com -  Servicing all of Lake, Orange, Osceola, Polk, and Seminole Counties. Also servicing Deltona, Deland, and Orange City in Volusia County. - Phone 877-789-5249or email me: [email protected]

I recently purchased a Tilt from AT&T as my central tool for field data collection.  Using the Tilt, I am able to carry all of my appointments, contacts, and files in one device.  It takes some getting used to - typing or writing on a smaller screen!  But there are some definite benefits to utilizing mobile technology!

The other day, I was traveling from Florida to South Carolina, and forgot to print out my maps from Google or Microsoft Streets and Trips as I usually do.  Instead of turning around, or finding a Kinko's to get online - I took a look at the features in my Tilt.

One of the applications I downloaded was Google Maps.  I actually downloaded this from the web browser on the phone, so I knew I was getting the mobile application.  I then learned that my Tilt actually has a built in GPS!  Although scary to the paranoid conspiracy theory side of my brain - the tech geek in me viewed this as a BIG plus!

Click here to continue reading and video link . . .

Picher, OK - Superfund Buyout Appraisers "Dogged By Complaints"

The buyout and relocation of families from the Tar Creek Superfund Site in Northeast Oklahoma is the culmination of more than 30 years of struggle for the people of Picher and Cardin. The Picher Mining Field, one of the richest lead and zinc deposits in the world, was the site of intense underground mining nearly 100 years ago. The mining took place during a time when environmental regulations were virtually non-existent.

When the mining companies ceased operations in the 1970s, the region was left with an uncertain legacy of pollution problems that impacted the health of local residents. Children were especially vulnerable to a toxic mix of heavy metals. The lead-poisoning rate among children at one time was as high as 30 percent.

A $100 million effort by the U.S. Environmental Protection Agency to remove lead from residential yards damaged many homes. The region¹s status as a Superfund site further devalued properties. A recent federal study by the U.S. Army Corps of Engineers found that large areas in Picher and Cardin could collapse at any time. That finding triggered the $50 million buyout of more than 700 properties that is now under way.

Picher's Peril: Some claim buyout undervaluing homes by Wally Kennedy of The Joplin Globe  (JOPLIN, Mo.) describes in detail many of the stories the Picher, OK families have with regards to the way their properties have been valued for the trust. 

Though trust members and a state official overseeing the buyout have repeatedly said the acceptance rate on offers is as high as 95 percent and that only a vocal minority is causing trouble, records show the independent appraisers hired by the primary contractor, Cinnabar Services of Tulsa, have been dogged by complaints from the start of the buyout process last year.

Some residents say they are accepting whatever is offered because their properties in Picher and Cardin essentially have no value because of where they live. Any offer to get out is a good offer because it is likely to be the only offer they will get.

“It’s desperation. It’s like having a gun held to your head,” said Missy Beets, who believes her house was undervalued by thousands of dollars even after a review appraiser increased the offer from $70,000 to $75,000.

ARTICLE UPDATE: 2/23/2008 - Nearly 100 people attended an organizational meeting Saturday morning in the community room at the Picher Housing Authority.

The group intends to create a database of written examples of how they felt they were treated unfairly by the appraisers and the trust. Several attending the meeting said the appraisers hired by Cinnabar spent no more than five to 10 minutes at their properties. Others said the appraisers didn’t even go into their homes and instead relied heavily on often outdated descriptions of properties on record with the county appraiser.