Real estate markets cooled down in the fourth quarter of 2014, and despite historically low interest rates, refinance volumes dropped as well. The increasing pressure on lenders and real estate agents to maintain loan and sales volumes has brought about renewed interest in appraisal accuracy and increasing concern that residential real estate appraisals are inflated.
A recent Wall Street Journal article asserts that
“home appraisers are inflating the values of some properties they assess (appraise), often at the behest of loan officers and real estate agents, in what industry executives say is a return to practices seen before the financial crisis.”
This is a legitimate concern. It is widely believed that faulty appraisals (more…)
FNMA has released a new training video that helps lenders understand how to PROPERLY use Collateral Underwriter, which in some cases has not been happening since Jan. 26, 2015.
By reviewing this info, you can learn how to write reports that pass the CU evaluations, and make your reports more complete and accurate. But keep reading.
One thing I find interesting is CU assigns a unique ‘appraiser number’ for every appraiser who has reports submitted by Lenders to the CU. They don’t just use the appraiser’s license number by itself. (more…)
Whether you believe Fannie Mae’s comprehensive rollout of Collateral Underwriter will finally weed out the lazy form-fillers or it will end up euthanizing the aging residential leg of the profession once and for all, is not the subject of this article. There are plenty of blogs, articles, and seminars that are wrestling with the efficacy of CU and its long-term impact.
To be sure, the profession has entered the new age of big data. Residential appraisers will need to navigate regression analysis, heat maps, trend lines, oblique aerial images, and especially how to tie it all together into something meaningful.
From a regulator’s perspective, the new paradigm creates compliance challenges for appraisers and AMCs. Collateral Underwriter will be analyzing its own model data and data provided by an appraiser’s peers. Everyone needs to be aware that Fannie Mae’s label of “peer” is not necessarily synonymous with the USPAP definition of “peer”. (more…)
I recently received an AMC update and reminder about the need for and why actual comparable photos are necessary. My reply:
Original Comparable Photographs: Scope of Work Point 3: Inspection of the comparable sales from at least the street. This requirement does not tie the appraiser to a specific time for that inspection. Geographical competence would have the appraiser in the area of the comparables many times, and depending on the appraiser’s experience, for many years. Taking a photo a month, six months, a year or more after the sale, does not represent the sale’s condition at the time of the listing/sale. If the assignment is done in February in our Michigan area, what good are comp photos when there is two feet of snow covering the house and site? This archaic lender requirement should be brought to the technological times of today.
Point 2: Inspect the Neighborhood. Are we to photograph the entire neighborhood? If you have to in #3 why not in #2? The reason being we can get aerial photos from the internet. But wait, can’t we get comparable comp photos from the same place? The difference being??? (more…)
Philosopher George Santayana once said,
“Those who cannot remember the past are condemned to repeat it”.
In light of recent actions in the mortgage lending industry, we all may be able to experience the thrill ride of 2007-2009 all over again…soon. You may wonder what actions I am referring to so let me share a brief list of what I will call the top ten contributing factors to the downturn I see happening by July of 2017.
- By 2017 it will have been 10 years since the start of the last collapse in the real estate marketplace. Since institutional memory is roughly 10 years, most of the people in charge of the big banks and the GSEs in 2017 will not remember what happened in 2007.
- Virtually all government mortgage lending programs have reduced down payment requirements to 3% of the purchase price. This is simply not enough skin in the game to keep borrowers from taking on more debt than they can handle. Not that many years ago buyers were expected to put 20% down so how do we get to 3% and feel good about it?
- Wall Street firms, money center banks, large home builders, mortgage banks, and big real estate firms are (more…)
On Feb 6, the Appraisal Standards Board finalized the upcoming changes to the next issue of USPAP. See the PDF for the actual document.
The highlights are:
Revisions adopted for 2016-17 USPAP
The following changes were adopted by the Board in a public meeting on February 6, 2015, and will be incorporated in the 2016-17 edition of USPAP and associated guidance material with an effective date of January 1, 2016: (more…)
FNMA’s CU is causing a big industry ruckus. ICAP member Keith Wolf, SRA, AI-RRS, created a survey in January because opinions being posted across multiple message boards and blogs are fragmented. The results of this survey are out and show that a vast majority of appraisers believe Fannie Mae CU should be transparent. Nearly 70 percent of appraisers said that they will increase fees to cover the extra work CU may cause and 80 percent believe that CU risk scores will cause lenders and AMC clients to request appraisers to fit comps to the CU model. Also 73 percent believe that CU transparency violate Appraiser Independence by influencing choice of sales to get a better CU score. Below you will find the results of the survey. (more…)
New written instructions published by USDA ‘require’ a COST APPROACH for the condo being appraised.
Interestingly, the pre-printed 1073 Form has NO PLACE on it to complete a Cost Approach – for good reason! While not impossible, it would be extraordinarily difficult to calculate a CA for a typical condo in a multi-unit building, without supporting documentation and a gigantic pile of cost info for the various components.
And in fact, appraiser’s certification #4 on the 1073 form says that neither a Cost Approach nor an Income Approach are included unless the appraiser considers them necessary to arrive at a credible value conclusion. There is a place on the 1073 form for an Income Approach to be reported, because often condos are rented to the borrower’s unrelated clients. Makes me really wonder if the person or people who wrote this new USDA manual totally understand the difficulty of doing a proper CA for a typical condo assignment. (more…)
The most feared date in the appraisal industry has come. January 26, 2015 arrived with much trepidation and trembling amongst myself and my appraiser colleagues. The day of the Collateral Underwriter (CU) had finally arrived. Yet, it turned out to be a pretty typical day for most. We are now over a week removed from the CU and I have yet to receive even one CU-related revision request. I guess that means one of two things; either I am an incredibly talented appraiser who uses all the best comps and supports every one of my adjustments, or I work for awesome companies who realize the flaws in CU and have chosen not to implement it. For purposes of my daily ego-stroking exercises, I choose to believe it must be the former.
Humor aside, CU is a big deal. Though I may not have received any revision requests related to CU yet (and I stress the word “yet”), many of my peers have. My inbox has been flooded the past few weeks (even before the 26) with questions and complaints from my fellow appraisers about CU. They are finding more and more of these requests and it is making their lives a bit frustrating. I get it. Revision requests (especially those pesky ones which are silly and really have no bearing on the final value) take time. Time is money in the independent, fee-appraiser world. Though I have yet to experience CU directly, it is only a matter of time.
The most frequent question I am getting right now from other appraisers is “What are you doing differently now that CU is here?” (more…)
The latest FNMA Lender Letter was released on February 2, 2015 (see PDF below). You really should print and read this new letter.
It attempts to smooth over lots of ruffled feathers among appraisers, AMC’s, Lenders, Underwriters, etc. To be honest, I find a bunch of ‘pipe dream’ info in this document.
Items such as:
- CU is a Fannie Mae–only risk management tool.
==> Freddie Mac is said to be working to implement this or a similar process very soon
- CU does not accept or reject appraisal reports or characterize an appraisal as “good” or “bad.” ==> However (more…)
February 2, 2015 — San Diego, CA — Today, NDC (National Data Collective), a leading national provider of property data for real estate professionals, has released a new and improved export tool for a la mode customers only called Shift.
Shift allows NDC users to export NDC’s highly-rated collective property data directly into a la mode’s industry leading form filling software with just a push of a button. The tool is compatible with the legacy WinTOTAL system, TOTAL 2013, and the upcoming release of the next-generation TOTAL Titan.
“We’re excited to give our customers access to NDC’s national data,” said Sean Shiplet, Chief Operating Officer at a la mode. “Through our API integration, customers will have access to the critical information they need, from plat maps to property characteristics, to comp-specific Digital Workfile notes that other appraisers have opted to share. Accurate and timely data is more critical than ever and NDC delivers that with flying colors.” (more…)
Finally, you have an opportunity to get what you have been screaming for: customary and reasonable fees for your work.
On January 23, 2015, Senator Martin offered Senate Bill NO. 1445, requiring appraisal management companies to pay appraisers customary and reasonable fees. The bill mirrors the language in Dodd-Frank. A copy of Senate Bill NO. 1445 as introduced is attached. (more…)
Dear Real Estate Appraisers of America,
To date, each of you have invested years of your life and tens of thousands of dollars to create your real estate appraisal career. No small feat. You have sacrificed greatly to get to where you are. And, now you are feeling as if everything you have worked so hard for is being stolen away from you.
Tragically, over the last 5 years there has been a whirlwind of events that has resulted in a very frustrating situation for appraisers. AMCs who have been permitted to increase profits by driving down appraiser fees and constantly push for dangerous turnaround times, have largely taken control. Lenders, Fannie Mae, and the like continue to creep up the assignment requirements to dizzying levels.
In spite of this awful situation, there seemed to be no one on the offensive to directly attack the harmful onslaught. Who is out there making real moves to bring appraisers the changes they so desperately need? (more…)
Many of you know I scan various sources for appraiser/appraisal related info, and send out items I think are important.
Well, today Collateral Underwriter (the extraordinarily SECRET process developed by FNMA and given ONLY to LENDERS for report review) started.
As predicted by many appraisers, it already generated responses appraisers are forced to deal with, primarily because the reporting appraiser’s data (in the report) is different from “peer” reports.
As a poster to one of the forums said:
FNMA’s CU is causing a BIG industry ruckus. Opinions are fragmented, being posted across multiple message boards and blogs. Please complete the attached survey created by ICAP member Keith Wolf, SRA, AI-RRS so we can tabulate the responses and distribute to all. We are reaching out across the country, so please feel free to forward the survey. The survey will remain open until January 31, 2015.
The Appraisal Industry as a consolidated group thanks everyone for their participation in completing the survey. (more…)