Appraisal Articles

If you have never heard of HVCC...You are in for a rude awakening!

In a nutshell, this new HVCC law starts now in May, so Mortgage Brokers, Realtors, Buyers and Sellers will have NO control over the appraisal process. Brokers can no longer order appraisals directly from appraisers. Realtors, Buyers and Sellers can no longer order an appraisal and then bring it to their lender or bank for a loan!

Banks are the only ones who can order the report directly from the appraiser or a third party will do the ordering hired by the Banks. These third parties are what we call Appraisal Management Companies (AMC's). The banks are hiring these companies to puts a layer in between the banks and the appraiser for more independence and less lender pressure on the appraisers to "make the value".

**Any of the above individuals CAN order an appraisal directly from the appraiser if their reason for the report is not for a LOAN, IE; to determine a listing or sales price, to obtain current value, a divorce, estate, tax rebuttal appraisal, PMI removal, etc. That is NOT prohibited and is actually encouraged in this ever changing market ***

But here is where REALTORS, buyer and sellers DO have control. Just the other day I was talking to an appraiser at Lake Lanier property in GA, she told me a condition that they add in the sales contract under the special stips page was the following statement ( change the language to suit your area then pass it on to other realtors):

"Buyer shall have all the rights and provisions manifested by the Appraisal Contingency provided that the appraiser the buyers lender selects has COMPETENCY to perform an accurate Lake Royale Property appraisal and has completed at least 10 appraisals on Lake Royale waterfront properties within the past 3 years. Said qualifications of any and all appraisers hired shall be provided to the Listing Agents in writing upon request."

This is an awesome idea! I would suggest SELLERS rights are also protected in the contract, by stating that if the buyer signs an appraisal contingency in the contract, they should also REQUIRE an experienced appraiser in the property be it Lake, Golf Course, even a particular neighborhood. I would also suggest that in the case of a special property like Lakefront that the experience be even greater at least 10% of their work is completion of this type of appraisal over the past 1 year, not 3 years as things have changed over the last year as you well know. Many lenders are requiring that the property appraised by the appraiser is no more than 30 miles from the appraiser's office. I would suggest that you narrow that down and state that the appraiser must live in the SAME COUNTY as the property being appraised.

I can't tell you how many times a lender sends someone from Raleigh to Lake Royale to appraise a property, and unless they have considerable experience on this lake, which most do not as their primary work is somewhere else, then you have a disaster waiting to happen when it comes to the appraisal!

So you DO have control and you need to start adding this type of language to every sales contract and making sure the banks comply because it is in the binding sales contract. Trust me when I tell you that Banks and especially the Appraisal Management Companies do not care about competency of the appraiser. They select the one that can do it the quickest and the cheapest and if that happens your DEALS will fall apart on a regular basis.

Please pass this along to every Realtor you know, repost it, blog about it NOW. If you do then you can take control back on this HVCC law when it comes to appraisals on your sales deals.

If you have any questions about this new law, let me know, it is time to take control of your profession back and make sure competent appraisers are used!.

Massive changes are a foot in the appraisal industry. Hold on to your hat and put some spring in your step!

Can You Believe It?

Most appraisers I talk to are leery of the new changes about to take place. I, for one, think you have two ways to look at things. Either you can drag around and go “woe is me” or you can actually start doing something. I have been taking classes and learning about the 1004MC. I have been reading up on lender compliance with the HVCC. I choose to do something that will help me get ahead in my profession instead of waiting for someone else to fix what they think is wrong. Will we all have jobs after the May 1st date? Yes, but from whom? I have no idea.

Will it be AMCs that take over the appraisal ordering? If so they are going to have an uphill battle with the new proposed draft legislation to regulate AMCs. Mind you I don’t care one way or the other, as long as they pay us our full fee, disclose their fees, and pay within 30 days (all of which is in the new NC legislation!)

Will it be third party processors? Are the banks loaning money out to mortgage brokers going to accept third party processing meets HVCC compliance and continue letting them borrow money to write loans… Or will they dictate that mortgage brokers must now use their list of AMC appraisers?

Will 40 to 50 percent or more of the independent Mortgage Brokers be out of business because they cannot compete on a local level with Banks who don’t have to work under the same set of rules?

Or will NARs attempt to delay the start of the HVCC help to parlay this mess into next year?

Truly only time will tell, good news is we only have a week or so to find out.

Comments? Email me.

This is the passage in question and here’s my interpretation of what this is saying.

Use of Supervisory Appraisers

Selling Guide, Part XI, Section 101.03: Use of Supervisory or Review Appraisers

Fannie Mae 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. Fannie Mae allows an unlicensed or uncertified appraiser who works as an employee or subcontractor of a licensed or certified appraiser to perform a significant amount of the appraisal (or the entire appraisal if he or she is qualified to do so)—as long as the appraisal report is signed by a licensed or certified supervisory or review appraiser and is acceptable under state law. This policy is updated to now require that if a supervisory appraiser signs the appraisal report as the appraiser, the supervisory appraiser must have performed the inspection of the subject property.

Many appraisers with trainees are concerned that this might be interpreted to mean we have to go and physically inspect every property for FNMA, that a trainee would be the appraiser on. My interpretation is that if you are signing the report as the appraiser, you sign on the left, and of course you would have to have seen the property. But if you are the supervisory appraiser, you are not signing as the appraiser. You would be signing as the ‘supervisory appraiser’ and signing on the right, and therefore checking ‘did not see’ is appropriate and still acceptable.

Any thoughts?

Everyone keeps asking me what I think of the new rule changes that are coming out April and May 1st, 2009 … My only answer is new year, new rules…

Can You Believe It?

Even if you have been in the appraisal business only a year, you soon know that the rules change all the time. You have to belong to several appraisal groups and RSS feeds just to stay in touch with all the changes taking place in our profession. Are they good changes? I am trying to stay positive here, but I will give you a brief opinion on what I think will happen over the next few months.

As for the 1004MC, I think FNMA pulled this one out of their, well let’s just say dustbin here to be nice. This is not a new form, this is an old form. This is the proverbial band aid to fix what they think is the problem. The real problem is too few of the people who just chose to use this form as the grand panacea, are not real full time appraisers who have to actually fill out and use it. They did build in a nice scapegoat in the instructions for the form, which is to say if the information is not available, just say so. And that will be my answer... that until MLS provides a system that appraisers actually can use to do 1-3, 4-6, 7-9, and 10-12 month active searches, then my answer will be N/A.

As for the HVCC, I think at least here in NC, there are more changes a foot that will help determine how at least NC will deal with the HVCC. For instance even the NCAB has put out an article in hopes to explain that lenders do not have to use an AMC. But too bad this information is not being sent out to the mortgage people and lenders though, who daily jump on board with AMCs in some desperate attempt to be compliant in time.

So my real answer is only time will tell, and since we have to play by the rules, we better get good at it quick...

Land of the free, home of…

The brave? How about, home of the financially responsible…

Not home of the free handout.

Can You Believe It?

I am all for life, liberty, and the pursuit of happiness. You have the right to pursue life. But there are no guarantees; and rest assured not one of us will get out of this life alive. You have the right to pursue liberty; but again, there are no guarantees that you will obtain it. And of course, you have the right to pursue happiness, but it is the most elusive of all.

Then there are those with the misguided assumption that not only are these things supposed to be obtainable, but if they are not also easily obtainable, then they should be given.

Given? How about earned.

What amazes me most is our country bailing out individuals who did not have the wherewithal to manage their funds better. What incentive do they have to perform better next time?

Personally, I do not think that owning a home is for everyone. If you can not manage your daily finances, perhaps you should be renting instead. And certainly these individuals should not have their errors rewarded with a payoff or forgiving the debt.

I would like for the free money ride to be over. In fact I think we should go back to the days of 30 to 50 % equity stakes. At the very least, 20% equity.

I believe that if you want to own a home, you should have a little skin in the game. You should have to save your money and amass a down payment. The process of saving is a lost art. And having 20% tied up in equity would get rid of the bail and burn attitude of the 100% financing.

When homeowners have nothing that they have paid in, they can just walk away: a bankruptcy or foreclosure is not enough of a deterrent any more. Let’s make it mean something to OWN a home.

Comments? Email me.

Fannie Mae Eases Credit To Aid Mortgage Lending

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups. (Read: increase the number of subprime loans to 50%!!!!!, forced by the CLINTON admin., my comment)
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.