Fannie appraisal deal questioned

Fannie Mae (FNM) and Freddie Mac (FRE) are back under the spotlight. A federal bank regulator is questioning agreements the government-sponsored mortgage investors struck back in March in what was billed as a sweeping reform of the house-appraisal process.

The March agreements would allow Fannie and Freddie, the nation’s largest mortgage buyers, to buy loans only from banks that agree to certain standards of appraiser independence. The deal, stuck with New York attorney general Andrew Cuomo, came after Cuomo subpoenaed Fannie and Freddie in a lawsuit against an appraisal firm, seeking information on their due diligence practices.

But John Dugan, the comptroller of the currency, wrote Tuesday in a letter to the companies’ regulator that the new guidelines “violate or conflict with federal law in fundamental respects.” Dugan said the parties involved in the Fannie-Freddie deal - their regulator, the Office of Federal Housing Enterprise Oversight, and the office of New York’s attorney general - have no authority to dictate the internal structures of federally regulated banks. Moreover, Dugan says, the new rules would impose new costs on borrowers while providing no benefits. He says the best way to regulate the appraisal business is through thorough enforcement of existing federal laws, or by congressional action.

OFHEO said it forwarded Dugan’s comments to Fannie and Freddie and expects them to take action to “address unintended consequences” of the settlements. In the meantime, it says, “OFHEO will be overseeing this process and will continue to communicate with the banking regulators to ensure that their comments receive the highest attention.”

Posted by David Gebert on June 2nd, 2008 9:13 AMPost a Comment (0)

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The Home Valuation Code of Conduct (HVCC) Official Write In Period Has Ended

May 8th, 2008 1:31 PM

Now that the Home Valuation Code of Conduct (HVCC) write in period to hear from industry participants has officially ended, all appraisers and appraisal management companies are forced to play the wait and see game before we learn what will come next in the "let's make sure we bring back the true independent appraisal" saga.

Seriously, do we think the language of the agreement, as written will change that much? Given the spirit of the agreement focuses on eliminating any opportunity for collusion between and lender and an appraiser, my thought is the language will be tweaked, but appraisers will unlikely see any change from the agreement's original intent. I have spoken to may appraisers across the nation and most share the same opinion. The housing industry is in the tank and there is public pressure on legislators to fix what they perceive is wrong and most of the blame is being directed at appraisers.

With the rules about to change, what is a lender to do when it comes to ordering an appraisal? Large lenders will likely line up with large existing AMC's, while local lenders will likely be looking regionally to ensure they do not end up getting caught in the large numbers game when it comes to personalized service. My recommendation is to check out the small AMC's, see if they can meet your appraisal needs before jumping on board with the bank-owned AMC's (who, by the way, have to divest their ownership interest down to no more than 20% by year-end).

The final language is likely going to be released sometime in June or July. In the interim, we all patiently wait to see what will play out - will appraisers be able to influence decision makers and protect their ability to build local relationships? or will everyone have to go through a "middle man", an AMC? Only time will tell, but my guess is the AMC world is about to proliferate.

Stay tuned.

Posted by David Gebert on May 8th, 2008 1:31 PMPost a Comment (0)

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Assessed vs. Appraised: How to Estimate the Value of Your Home

March 12th, 2008 8:55 PM

Assessed vs. Appraised: How to Estimate the Value of Your Home

Assessing the value of your home can be confusing when there are different approaches to estimating value. Below is a breakdown of assessed and appraised values, and how they can effect your listing price and the current market value of your home.

Assessed Value:

Assessed value is a value placed on a home by the town's assessor strictly for tax purposes and is used to create and gradually raise the town's tax revenue. An entire town will be assessed yearly with values determined by a qualified team who'll ideally survey numerous properties in different neighborhoods and look at recent sales. The calculated tax rate will be based on the combined assessed value of all the town properties. Ideally this assessed value should reflect the going market value of the properties in your town, and neighborhood. But while tax assessors are required to determine the value of properties in their jurisdictions each year, they're not required to adjust the assessed value of those properties to reflect market value. Also, different town's may have different parameters for determining assessed values, such that it's possible that the assessed value will not reflect the true market value of a home. In this case, the only way to better determine the possible worth of your home is to have it appraised.

Appraised Value:

An appraiser will complete a report on your home to determine it's value. This is called an appraisal. In a situation where you're asking to use a home or other real estate as security for a loan, a lender will require a certified appraisal to make sure that the property will sell for at least the amount of money it's lending. Likewise, an appraisal is an accurate way to determine the market value of your home.

Generally an appraiser will use a combination of approaches to accurately determine a fair and current value of your home.The Market Approach, is one method whereby an appraiser will compare recently sold, similar properties and make adjustments between the subject properties and it's comparables.The Cost Approach is a method where the appraiser will determine the cost to re-build the property in question. Lastly, the Income Approach is a method that relates to income-producing property. It is based on the theory that part of a home's value is the present worth of the income stream which the property is capable of producing when developed to it's highest and best use. The net operating income from the property is capitalized into value by an appropriate method and rate. Generally, an appraiser will use a combination of results from all three of these methods to complete your home's appraisal.

So, before you assume that your home's assessed value is a fair representation of it's market value, consider hiring an appraiser to get a better look into the current worth of your home.

Posted by David Gebert on March 12th, 2008 8:55 PMPost a Comment (0)

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How to Choose a Real Estate Appraiser

March 12th, 2008 8:31 PM

Choosing A Reputable Real Estate Appraiser

By: Nicole Soltau

When you are considering purchasing a property; either for investment or personal use you will need to hire a real estate appraiser. If you are financing the purchase through your credit union or another financial institution will most likely be required to hire a real estate appraiser to perform an appraisal on the property. This is because your Credit Union (CreditUnionRate.com)wants to ensure that your dream home doesnâ€™t become a nightmare and that the purchase they are financing is really worth the amount loaned.

In the best case scenarios the appraisal is returned indicating that the fair market value of the home meets or exceeds the sales price. The problem comes in when the appraisal indicates that the fair market value of the home is less than the sales price. In the latter case, the prospective buyer would either need to drop the deal or renegotiate the sales price with the seller.

As you can see, it is critically important that you find a reputable and competent real estate appraiser. That one appraisal can easily make or break a deal. Even if you are not financing the purchase through a lending institution it is still worth the effort to insure that the property you are investing in is really worth the amount of the purchase. If you should hire a less than competent real estate appraiser you find out the hard way later on that the property you purchased was not really worth the amount that you paid.

Real estate appraisers perform an evaluation of a property and then provide a written evaluation after consulting standardized checklists and comparing the property in question to county land value sources and sales information on nearby similar properties. The estimation of replacement costs is also taken into consideration. Finally, real estate appraisers must be able to verify legal land descriptions. As you can see, there is quite a bit of work involved in performing a competent real estate appraisal and it is important that each step be performed accurately.

You real estate agent will most likely be able to suggest a real estate appraiser but this does not necessarily mean this is the right person for the job; it merely means this is the person they most often work with. To get the job done right you need to find a real estate appraiser who is able to perform a completely objective evaluation.

Look for someone who has been formally trained and who possess a license with the state real estate commission to perform such appraisals. Also look for someone who possesses adequate experience in performing real estate appraisals and who is knowledgeable about the local real estate market. Some states require real estate appraisers to have experience as a real estate agent and to hold a current real estate license; even if your state is not one of these it may be a good idea to look for someone with these qualities anyway because they probably have their finger on the pulse of the local real estate market.

Like real estate agents, appraisers commonly specialize in certain types of real estate. Some specialize in commercial properties while others work only in residential properties. Some appraisers even specialize in only high end or luxury properties. Many consumers find it beneficial to select a real estate appraiser who specializes in the specific type of property they wish to have appraised. Finally, donâ€™t forget to ask for references and/or recommendations from any real estate appraiser you consider.

About the Author

Nicole Soltau is the President and Founder of CreditUnionRate.com. The Leading Credit Union Directory.
Search, Find, Join. http://CreditUnionRate.com

Posted by David Gebert on March 12th, 2008 8:31 PMPost a Comment (0)

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Mortgage Rates on the Rise

February 26th, 2008 10:15 PM

Rising Mortgage Rates & Declining Mortgage Applications

Mortgage rates are on the rise again hitting a seven week high for fixed rate mortgages. As the mortgage rates continue to increase, mortgage applications for refinancing begin their steady decline.

The 30 year fixed rate mortgage rose 0.32 of a percent just this week alone and now sits at an average of 6.04 percent. The 15 year fixed rate mortgage climbed 0.39 of a percent stabilizing at an average of 5.64 percent.

With mortgage rates on the rise, mortgage applications have fallen in dramatic fashion by 22.6 percent last week. With mortgage rates even higher this week the number of mortgage applications is surely to fall once again.

With the Fed expected to cut mortgage rates again in March many homeowners are waiting and hoping to take advantage of another dip in mortgage rates. The reality is, even if the Fed does cut mortgage rates it does not necessarily mean that mortgage rates will decrease. When the Fed cuts rates they are cutting the rates at which banks lend to one another.

With banks and lenders losing money like wildfire on mortgage investments, it is likely we will continue to see mortgage rates increase, even with the Feds cutting rates. It is also expected that banks and lenders will tighten their lending guidelines even more and raising rates so they may get a better grip on the mortgage industry.

Posted by David Gebert on February 26th, 2008 10:15 PMPost a Comment (0)

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Declining Market by Zip Code (Web-Tool)

February 26th, 2008 9:51 PM

I just picked up the following post from Michael Tarabaotto (Certified Appraiser), CA from the ActiveRain Real Estate Network Site. This is a neat tool given the decline in values in our area:

Homecomings Financial(SM), one of nation's largest wholesale channels today released a nifty Webtool (compliments of parent company GMAC) that determines if a property is in a "declining market" by zip code, and the magnitude of the decline based on a new A, B, C, D grading system. Mind you, these are internal ratings that are not to be construed as fact nor endorsed by this author. Here's a link to the webtool and a portion of today's memo that accompanied it:

Homecomings Financial(SM) announces a revision to the declining market values policy effective February 12, 2008. This revision supersedes the policy that was described in the Special Announcement sent on January 17, 2008. This revised policy applies to non-conforming programs only, including 1st and 2nd liens. The previous policy, described in the Special Announcement sent on January 17, continues to be applicable for conforming (agency) loans.

Market Definitions
Homecomings will classify a property as being located in an A, B, C or D market. This classification will appear on the Assetwise Findings report and is also available through our Declining Markets Policy Tool.

Properties designated in an "A" or "B" market are considered low risk and do not require maximum financing restrictions.

Properties designated in a "C" or "D" market are considered high risk and must follow the LTV/CLTV requirements in the tables below (for non-conforming programs). In addition to the Declining Markets Policy Tool and as noted on the Assetwise findings report, properties may also be considered a "D" market as follows:

If more than one comparable used in the appraisal report is over six months old
The appraiser indicates on the appraisal report that the property is located in a declining market

©2008 Homecomings Financial, LLC. Homecomings Financial and Assetwise Direct are service marks of Residential Funding Company, LLC. GMAC is a registered service mark of General Motors Acceptance Corporation. Information subject to change without notice.

Posted by David Gebert on February 26th, 2008 9:51 PMPost a Comment (0)

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