Appraisal Scoop

FHA Drops Two-Appraisal Requirement in Declining Markets: FHA Mortgage Letter 09-48ml

2009-11-19T05:56:38-06:00

A second-appraisal requirement that had been issued by the Federal Housing Administration at the height of the housing crisis has been repealed for loans that exceed $417,000 in declining markets and for cash-out refinances. A second-appraisal requirement will remain when a property is resold between 91 and 180 days following acquisition by the seller, if the resale price is 100 percent (or more) higher than the price paid by the seller when the property was acquired.

The policy changes can be found in FHA Mortgagee Letter 09-48, which rescinds two previous Mortgagee Letters on the subject.

In an interview with Mortgage Wire at the National Association of Realtors' convention Nov. 14-15 in San Diego, FHA Commissioner David Stevens said that the FHA had not seen any benefit from the two-appraisal mandate and that it “really slowed down the [FHA loan] process.”

The two-appraisal mandate, which required two appraisals prior to an underwriting decision, had long been opposed by industry groups such as the National Association of Realtors.

The removal of the two-appraisal mandate is effective immediately.

For a copy of the Mortgagee Letter, visit www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-48ml.pdf .

Source: Appraisal Institute "News & Advocacy"

Federal Regulators Issue Final Model Privacy Notice Form - Must Appraisers Comply?

2009-11-17T10:14:39-06:00

Eight federal regulatory agencies today released a final model privacy notice form that will make it easier for consumers to understand how financial institutions collect and share information about consumers.

Under the Gramm-Leach-Bliley Act (GLB Act), institutions must notify consumers of their information-sharing practices and inform consumers of their right to opt out of certain sharing practices. The model form issued today can be used by financial institutions to comply with these requirements.

In a previous Appraisal Scoop article, I asked:

What does G-L-B have to do with ME?
Hasn't that been around for a long time?
Why is it a HOT topic now?

The Financial Services Regulatory Relief Act of 2006 amended the GLB Act to require the agencies to propose a succinct and comprehensible model form that allows consumers to easily compare the privacy practices of different financial institutions, and has an easy-to-read font.

The agencies conducted extensive consumer research and testing in developing the model form issued today. Then they solicited public comments and considered those comments in developing a model form that is easier for consumers to understand and use.

The final rule provides that a financial institution that chooses to use the model form obtains a "safe harbor" and will satisfy the disclosure requirements for notices. The rule also removes, after a transition period, the sample clauses now included in the appendices of the agencies' privacy rules.

The final model privacy form was developed jointly by the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission.

A copy of the form and rule are attached. FDIC: PR-209-2009

Attachments Final Model Privacy Notice Form - PDF 1.29 MB (PDF Help)

Source: Board of Governors of the Federal Reserve System - Press Release

FHA boss: FHA is not the new subprime

2009-11-15T10:29:38-06:00

Federal Housing Administration Commissioner David Stevens said Saturday that concerns the agency is headed for the same financial trouble that snared Fannie Mae, Freddie Mac and the subprime sector are unwarranted.

Stevens made the remarks during a speech at the National Association of Realtors' annual conference and expo in San Diego.

His comments come days after the agency revealed its financial reserves have fallen to a dangerously low level due to more homeowners defaulting on their loans. The FHA does not make loans, but rather offers insurance against default.

Source: Business Week

Stigmatized Homes - Why Did Nicholas Cage Buy Haunted Houses

2009-11-15T10:23:18-06:00

According to the Examiner.com in Chicago (full article)

"It is believed that Cage bought the homes specifically due to their spooky past. Apparently he thought it was a good idea at the time or else he would not have done it."

[Cage claims a poor financial advisor directed him to buy the property selections he did, but most people would not follow advice on buying a home that they would always feel uneasy setting foot in due to claims of haunting.]

"However, as now evidenced by the current market value, buying stigmatized properties is seldom a good idea if you ever plan to resell for profit."

Haunted House Rumors Stigmatize Properties in New Orleans

The Examiner.com article says:

"The low sale amounts do not accurately reflect the value of the property based on location, unique features, or amenities. They do reflect the reduced value of stigmatized property, however.

Local folklore about the homes came up on the Zillow blog when one poster in the comments section asked why Cage didn't just sell the homes (implying he willingly let the homes foreclose). Another local reply came in from someone writing under the name Dr Bob, saying:

He [Nicholas Cage] didn’t sell the house on Royal because it is unsellable. The appraisal is based on a normal house not a severely haunted house in which over a hundred murders took place. The appraisal does not take into account that even though a similar house might sell for millions this house cannot be sold because of its history.

There is no word on why the second property did not sell, other than the homeowner tie."

Source: Examiner.com

NovaStar narrows loss, but liabilities outweigh assets - Counting on AMC StreetLinks

2009-11-14T10:55:55-06:00

NovaStar Financial Inc. greatly reduced its third-quarter loss compared with the same period last year, but its shareholders’ deficit reached more than $1 billion, and the company said its “ability to continue as a going concern” is in doubt.

In a Friday filing with the Securities and Exchange Commission, Kansas City-based NovaStar (Pink Sheets: NOVS) reported a loss of $17.6 million, or $2.29 a share, for the quarter that ended Sept. 30. This is an 87 percent improvement from a loss of $142.8 million, or $15.81 a share, last year.

The company said it plans use its cash on hand to develop new businesses such as StreetLinks National Appraisal Services LLC and Advent Financial Services LLC, which provides refund-anticipation loans and related services to low- and moderate-income customers.

“Management believes that StreetLinks is situated to take advantage of growth opportunities in the residential appraisal management business,” NovaStar said in the filing. “We have added significant new customers for StreetLinks during 2009, which have produced significant increases in revenue for StreetLinks during 2009.”

Click here for the full Kansas City Business Journal article.

Video Sneak Peek: a la mode's DaVinci for iPhone coming soon to the Apple App Store

2009-11-13T14:01:34-06:00

DaVinci for iPhone has been submitted to Apple by a la mode, inc., and they're waiting to hear when it will become available for download on the iTunes App Store (probably week or two).

To promote the pending release of DaVinci for iPhone, a la mode created a really slick commercial that was debuted at the Valuation 2009 trade show earlier this week.

They first announced they were working on DaVinci for iPhone this past Spring. Since then, it's received a ton of positive response from appraisers, primarily through its page on the a la mode labs

I've been testing the beta version of DaVinci for iPhone for several weeks and I think they've going to have a real winner on their hands. Watch their YouTube video to see what I mean.

Press Release: Average Distance Traveled by AMC Appraisers is 13 Miles

2009-11-11T16:11:05-06:00

PITTSBURGH -- November 10, 2009 -- Findings Reconfirm AMC's Strong Reliance on Local, Independent Appraisers -- The typical driving distance traveled by independent appraisers, retained by the nation's largest appraisal management companies (AMCs), averages 13 miles in urban and suburban areas this year, according to a new survey conducted by the Title Appraisal Vendor Management Association (TAVMA).

"Our members, the nation's largest appraisal management companies, track a variety of metrics, including for distances traveled," said Jeff Schurman, Executive Director of TAVMA. "We polled our AMC members in light of unsubstantiated statements that AMCs send out-of-market appraisers great distances to value properties. Based on what our members are reporting to us that's simply not the case. Going forward, we will survey and report on average driving distances quarterly."

Schurman added that AMCs typically use one of three methods for controlling how far appraisers travel: Geo-coding; zip code to zip code mapping; and/or order form instructions not to exceed defined distance parameters.

"That an appraiser services a particular area, how often, and how recently are three critical selection criteria that AMCs use in selecting the most appropriate appraiser for an assignment," said Steve Haslam, CEO, StreetLinks National Appraisal Services. "Does this mean that in Montana or Wyoming, some appraisers aren't driving further than 13 miles? Of course not. The United States has over 3.5 million square miles of land area and about 60 thousand residential appraisers; a land-to-appraiser ratio of 59:1. The nature of the business is that appraisers sometimes travel outside of their own neighborhood -- but that doesn't mean outside of their sphere of professional expertise. In many markets, our selection criteria divide heavily populated counties into smaller zones that we don't let appraisers cross."

Mr. Haslam added, "Remember that as licensed and certified appraisers, the appraisers who work with AMCs are required under their industry standards, known as USPAP, to refuse assignments where they are unfamiliar with the markets."

AMCs currently provide approximately 60% of all residential appraisals used in the mortgage industry, and TAVMA's 40 AMC members together account for more than 80% of this volume. Although some AMCs employ in-house appraisers, most assign orders to local independent appraisers. Schurman added, "When you consider a 2007 national survey reported that 63 percent of the appraisers in the country work with AMCs, it stands to reason that AMCs will have a deep pool of appraisers from which to choose. Plus, the economics of the industry give neither the AMCs nor the appraiser an incentive to go great distances to conduct an appraisal."

Source: TAVMA

About TAVMA
TAVMA, the Title/Appraisal Vendor Management Association, is a non-profit professional organization that represents more than 75 companies including more than 40 of the largest Appraisal Management Companies (AMCs) with combined market share of 85 percent of the AMC market. TAVMA promotes the vendor management industry and presents its members' positions to government and media, protects its members' rights to do business without unfair and anticompetitive legislation and regulations and provides useful information about issues impacting the real estate settlement services industry. For more information about the organization, visit the website at www.tavma.org.

KB Homes and Countrywide Financial Named in Class Action Complaint Alleging Inflated Appraisal and Inflated Appraisal Fee Schemes

2009-11-11T09:55:54-06:00

KB Home and Countrywide Financial Corp. have been named as defendants in a Class Action suit filed on October 30th, 2009 in the US Dist. Court for the Middle District of Florida - Orlando Division. The attached suit details alleged predatory practices in an attempt to dominate mortgage lending and corrupt the loan underwriting and approval process. Specifically, two schemes were identified.

Scheme 1 – Inflated Appraisals

According to the complaint, “Defendants KB Home, Countrywide and LandSafe, along with their network of staff and fee appraisers, formed and operated a criminal enterprise (the “KB-Countrywide Criminal Enterprise”) which through the “Inflated Appraisal Scheme” inflated the sale amounts of KB Home properties and loan amounts of Countrywide loans by corrupting the appraisals of KB home properties such that the appraisals would always indicate a value at or above the contracted sales price for the properties or were otherwise inflated.”

Scheme 2 – Inflated Appraisal Fee

According to the complaint, “Scheme 2 in this action arises from a scheme (the “Inflated Appraisal Fee Scheme”) between Countrywide and LandSafe to profit from:

(1) imposing marked-up appraisal fees on Countrywide borrowers; and (2) controlling the appraisal process and results.”

Scheme 2 works as follows:

According to the complaint, “Scheme 2 works because of:

1) Countrywide’s insistence that LandSafe be the appraisal firm that conducts the appraisal on the loan;

2) The secret agreement between Countrywide and Landsafe to mark up the actual cost of the appraisal and to have the actual appraisal done by a third party at a fraction of the cost listed on HUD-1 and final settlement statement; and

3) Concealment from consumers of the appraiser’s invoice to LandSafe. If Countrywide did not insist on LandSafe’s exclusivity, an independent appraiser would charge Countrywide the actual cost of the appraisal and Countrywide, through its subsidiary LandSafe, would be unable to skim off each appraisal hundreds of dollars for no services rendered.”

Click here to download and read the complete complaint: Download KBCountryWideComplaint

HUD Issues Mortgagee Letters on Condominium Approval (2009-46A & 2009-46B)

2009-11-09T16:41:48-06:00

November 6, 2009
MORTGAGEE LETTER 2009-46 A
TO: ALL APPROVED MORTGAGEES
SUBJECT: Temporary Guidance for Condominium Policy

In Mortgagee Letter 2009-46 B, the Federal Housing Administration (FHA) announced the permanent baseline guidance for condominium project eligibility. This Mortgagee Letter (ML) waives five provisions of that guidance and serves as a temporary directive to address current housing market conditions. This temporary guidance is effective for all FHA case numbers assigned on or after December 7, 2009 through December 31, 2010, except as noted for the “Spot Loan” Approval Process…

November 6, 2009

MORTGAGEE LETTER 2009-46 B
TO: ALL APPROVED MORTGAGEES
ALL FHA ROSTER APPRAISERS
SUBJECT: Condominium Approval Process for Single Family Housing

In accordance with the passage of the Housing and Economic Recovery Act of 2008 (HERA), the Federal Housing Administration (FHA) is implementing a new approval process for condominium projects and insurance requirements for mortgages on individual units, as authorized under Section 203(b) of the National Housing Act. The requirements of this Mortgagee Letter are effective for all case numbers assigned on or after December 7, 2009, except as noted. This Mortgagee Letter revises and consolidates existing guidance, and therefore replaces Mortgagee Letter 2009-19…

To read these mortgagee letters and any attachments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2009 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.

If you have questions about either of these new FHA Mortgagee Letters please email: info@fhaoutreach.com or visit: http://www.fhaoutreach.gov/FHAFAQ

Fannie Mae - Electronic Appraisal Delivery UPDATE - MISMO XML Standard

2009-11-09T10:03:07-06:00

Announcement 09-14, Electronic Appraisal Reports, Enhancements to the Loan Delivery File Format, and Mortgage Fraud Reporting, stated that Fannie Mae will require the submission of electronic appraisal reports and their addenda in an acceptable XML format for all loans requiring an appraisal report. The date lenders will be required to comply with this requirement has changed from March 1, 2010 to sometime on or after July 1, 2010 (effective date to be announced). Also, the acceptable submission format has changed to accommodate XML formats that are commonly used in the residential appraisal marketplace.

In support of electronic appraisal delivery, Fannie Mae is updating the 2000-Character Loan Delivery File Format. Knowing that many lenders are currently working on updates to the delivery format to accommodate other mortgage loan data requirements (as noted in Announcement 09-11 and revised by a recent Selling Notice dated October 6, 2009), Fannie Mae is advising lenders of the new data element that will be required to support electronic appraisal submissions.

New Delivery Field

The Document File Identifier is a 10-digit alphanumeric data element that will be assigned by the Collateral Data Delivery (CDD) system, Fannie Mae’s application that will be used for electronic appraisal data submissions. A unique identifier will be assigned at the time the electronic appraisal report data is successfully submitted to CDD, and will allow the lender to retrieve submission results and findings and make updates or corrections to the submitted appraisal data in CDD.

The lender will be required to deliver the Document File Identifier in a new field – Appraisal Document File Identifier – in Loan Delivery to enable Fannie Mae to match the delivered loan to the electronic appraisal in CDD. The updated 2000-Character Loan Delivery File Format and the corresponding Field Definitions documents are available on eFannieMae.com. Refer to field number 148 for additional information about delivery of the identifier.

Source : Fannie Mae - Electronic Appraisal Delivery Update - 11/4/09