Appraisal Scope

• low cost & limited-use opinions of value prior to the loan submission process
• review appraisals
• assistance in appealing a valuation
• understanding a complex property or unique situation

Check our home page for the details on this new service.

And we will continue to offer traditional summary appraisal reports for lending, litigation, and estates.

• Not all appraisals for mortgage loan transactions fall under the new HVCC and each lender has rolled out different guidelines for ordering and managing the appraisal process. 
• Many of you have requested that we sign up with the various AMCs with whom your lenders have become aligned.  We sincerely thank you for passing this information along; however what they fail to share with you is the fees they are paying appraisers.  Not all, but many AMCs expect us to work for 50% of our fee schedule, and as you can imagine we don't believe that we can provide the service you have come to expect at that hourly wage.  Therefore, we hope you understand our position to align ourselves with a very select few AMCs that recognize our services and compensate us accordingly.  Please call us directly if you have more questions about this.

Our world changes tomorrow, yet to what degree is still unknown.  What is certain is how much we have valued our clients over the years, professionally and personally.  We wish each of you the very best and hope to continue to work with you in new and emerging roles. 

“Bay Area Home Median Falls Below $300,000”

This is the headline from a story in the San Francisco Chronicle on Friday, March 20, 2009, and while it is an accurate statement, it brings to mind why now more than ever, experience in the field of real estate or appraising is really only half of what is needed to accurately value or list property. Equally important is the appraiser or realtor’s knowledge of the particular local market, which varies greatly from neighborhood to neighborhood, and then even within neighborhoods.

Let me give you a couple of examples of what I mean. The article did a pretty good job of describing how the counties in the Bay Area are facing very different levels of falling prices based primarily on the number of bank-owned properties in the area. But I would argue that the “real statistical story only begins to emerge” when you pull each county apart. In Marin, for example, the article stated that transactions tumbled by 26.9% and median sales prices fell 21% (not sure from when to when though) and that the median price of a home in Marin is now $640,000. Take a look at the chart below (values are in the 1000s) and there are a couple of note worthy comments:

• There is almost always a seasonal decline in Q4 and Q1 of every year.
• One of the things that makes appraising so difficult right now is trying to determine how much of the decline is seasonal versus how much of the decline has far reaching implications.
• Median DOM – days no market, though doubling in some quarters, has never hit above 100 days in Marin.

MARIN COUNTY Residential Sales (condos and single family).

Regardless though, I think we see a pretty bleak picture, one where in Quarter 2 of 2007, the median home sales price was at $950,000 and now in the first quarter of 2009 (though there are still a few days left) the median sales price is at $602,000.

Now let’s dig deeper into Marin:

While the same average decrease is apparent in most of the single family markets (many are seeing a 30% decrease from q1 2007 to q1 2009), it is not the case in Tiburon, for example. And it becomes apparent that the $640,000 median sales price quoted in the article does not apply to a majority of the county – as seen when you pull Novato out of the data. But some big questions remain: Will we see our traditional seasonal improvement to median home sale prices with quarters 2 and 3? Or are economic factors too great to provide our seasonal bounce?

San Rafael, also mentioned in the article as an “expensive community” having sales falling to “near record lows,” is an interesting study since the condo market there has dramatically skewed the overall residential data. But that is another story for a different blog.

As some of you are aware, I have become part-time at M&P these days due to a new and totally separate venture that I truly believe can help improve valuation services to lenders, brokers, and consumers while helping to reinstate more of appraisers' traditional fee schedule that many have found significantly eroded over the past year for a variety of factors, not the least of which is the HVCC.

At any rate, I realized that I have neglected the blog and yet still don’t have time to do it justice, what with the complex economic conditions surrounding us. I am working on some stats for a blog for next week though and thought for the mean time I would “steal” from my favorite blog, patrick.net, a list of housing and economic news from the past week as there are some really incredible stories and editorials that seem more fiction than reality.

Housing Crash News from patrick.net:

Senator suggests AIG execs should kill themselves (news.yahoo.com)
Grassley: AIG execs should repent, not kill selves (sfgate.com)
Once paid, AIG bonuses will be hard to recover (sfgate.com)
Real Scandal of AIG: executives accountable to no one (robertreich.blogspot.com)
Judge Rules Vallejo Can Void Union Contracts (Mish)
Freddie Mac: The Government's Next Black Hole? (time.com)
Bernanke's False Analogy of "A Burning House" (informationclearinghouse.info)
Bernanke's Witness Protection Program (patrick.net)
The Real Ponzi Scheme: Unreal Interest Rates (news.goldseek.com)
Chicago's Condo Market on Ice (chicagopublicradio.org)
Oahu rents likely to keep falling (honoluluadvertiser.com)
Good graphs of Las Vegas crash (lasvegassun.com)
Banks failures still relatively few (msnbc.msn.com)
Why bailout money goes to banks, not us (sfgate.com)
IRS Plans a Deduction for Madoff Victims (nytimes.com)
Residential mortgage fraud hit all-time high in 2008 (signonsandiego.com)
For Many Young Irish, First Taste of Hard Times (washingtonpost.com)
Financial Secrets of the Wizard of Oz (news.bbc.co.uk)
Golden Gate Economics (youtube.com)

Cities brace for losses as property "values" continue to drop (latimes.com)
Florida property tax hikes more permanent than house prices (patrick.net)
Two out of three foreclosures are house flippers (floridatoday.com)
Media struggles in search for legitimate "victims" (sacramentolanding.blogspot.com)
Sub-prime borrowers are milking the system (godlikeproductions.com)
Credit Cards Are the Next Credit Crunch (online.wsj.com)
Real estate woes seep into malls, office towers (features.csmonitor.com)
Property prices will have to fall further (guardian.co.uk)
Attack of the condo craters (blog.macleans.ca)
China Price Drop Spurs Deflation Fears (online.wsj.com)
Tim Geithner's Black Hole (mobile.washingtonpost.com)
Regulatory reports show 5 biggest banks face huge loss risk (mcclatchydc.com)
New Zealand PM Sees Productivity As The Solution (online.wsj.com)
Follow the Kiwi leader, not Obama (theaustralian.news.com.au)
Bad real estate advice from TV agents (walletpop.com)
Adviser invented $1B clients to lure investor (investmentnews.com)
What does one TRILLION dollars look like? (pagetutor.com)
Baltimore Board of Realtors President Bankrupt (citypaper.com)

Five Reasons Renting Still Beats Buying (realestate.yahoo.com)
Depression Dynamic Ensues as Markets Revisit 1930s (bloomberg.com)
More Debt Won't Rescue The Great American Ponzi (optionarmageddon.ml-implode.com)
Bankrupting Leverage: Are We A Zombie Nation? (yourmortgageoryourlife.wordpress.com)
Cleveland Commercial Loan Delinquencies Signal More (bloomberg.com)
San Francisco construction slows to a crawl (sfgate.com)
Forget About "Recovery" (jameshowardkunstler.typepad.com)
Letting go of your dream price is hard to do (boston.com)
Where Were The Media As Wall Street Imploded? (npr.org)
Public Transit Ridership Hits Highest Level in 52 Years (washingtonpost.com)
Buffett says nation will face higher unemployment (sfgate.com)
But FDIC Is Hiring! (fdic.gov)
Federal Reserve At Work

Since Thanksgiving Weekend, we have been backlogged with appraisal orders.  In this feast or famine industry, we went from being what amounted to part-time employees to literally working around the clock and still not keeping up with demand.  It's just today that we are on track again.  We definitely want to thank our long time clients for their patience during this period of longer turn times and scheduling conflicts. 

We also want to assure you that we have taken steps to keep turn times lower, regardless of future volume.  If the craziness comes back, we are more prepared with software and hardware solutions as well as additional office staff, and work flow procedures so as to avoid the delays that occurred over the past two months. 

So this morning, still used to a 4 a.m. start time, I came to work and realized the pressure was off a little and so I opened Bloomberg to find that clearly I had missed something over the past two months.  Bailout programs totaling $9.7 Trillion?  I was having a hard enough time with the concept of $800 billion times two.  So why had I not heard about the rest?  It is of course tied to lending and housing, and is very worth the read:

Bloomberg:  U.S. Taxpayers Risk $9.7 Trillion on Bailout Programs

We’ve spent so much time and energy focusing on “the Code” that other changes to the industry have received little to no attention. So I thought I’d devote this blog to how SAFE, coupled with a new FHFA requirement, affects many of our broker clients as well as appraisers.

1. Nationwide Mortgage Licensing System

While in California, brokers are already licensed, I was surprised that this is not the case in every state. Currently licensed mortgage loan originators (MLOs) have to comply with SAFE licensing by January 2011 and non-licensed MLOs must comply by July 31, 2010, although each state may choose deadlines that are before this national mandate. These requirements include background checks, testing, education, and several other components.

2. Registry System

As part of licensing, identifiers will be given to each individual mortgage loan originator.

3. FHFA Announces New Mortgage Data Requirements

Beginning January 1, 2010, Freddie Mac and Fannie Mae will be required to “obtain loan-level identifiers for the individual loan originator, loan originator company, field appraiser, and supervisory appraiser.” As a result of this change, FHFA will be able to monitor performance and trends in loans by appraiser and by loan originator. As Director Lockhardt stated in the press release, “If originators or appraisers have contributed to the incidences of mortgage fraud, these identifiers allow the Enterprises to get to the root of the problem and address the issues.”

So what does this mean and how will it look on a day-to-day basis? Again we are on the wait-and-see path. The goal of both the legislation and the FHFA mandate is to prevent fraud and restore confidence and transparency in the credit markets. I wonder if it will also address loans approved solely on data from AVMs and BPOs? Hope to hear from some of you on how this might impact our industry.

We've been answering quite a few questions over the past week about the new version of the HVCC.  So in addition to our prior blog that provides links to FAQs and "the Code" itself, I thought I'd share media links as they arise about this final version of "The Code." 

Please send additional links to us as you come across them, and I hear there may be a new local push to get our legislators to really think about the ramifications of this code...

Boston Herald:  Feds Set Code for Home Appraisers

SF Chronicle: New Rules Making Appraisers Angry

Rismedia.com:  Appraisers React to Fannie and Freddie Home Valuation Code of Conduct

Reuters:  Fannie, Freddie Agree to New Appraisal Guidelines

Miami Herald:  Appraisal Code Faces Scrutiny  (same article as in Chronicle)

Effective May 1, 2009, Freddie Mac & Fannie Mae will no longer purchase mortgages from Sellers that do not adopt the Code with respect to one to four unit single-family mortgages that are delivered to Freddie Mac or Fannie Mae.

Also, effective for single-family mortgages with loan application dates on or after May 1, 2009, Freddie Mac & Fannie Mae Seller/Servicers must represent and warrant that the appraisal report is obtained in a manner consistent with the Code.

For months we have been discussing the HVCC and its ramifications to the loan process for consumers, brokers, and appraisers. This final version of HVCC or “The Code” is now out and there are some substantial changes to the prior version. Here are what seem to be the most significant changes, which quite honestly reduce its effectiveness in meeting its original intent of providing a true barrier from appraiser to lender or appraiser to broker:

• Allowing lender use of appraisal reports prepared by settlement services providers, in-house appraisers, and affiliates as long as certain conditions are met.
• Allowing lenders, in connection with the loan being originated, to accept an appraisal prepared for a different lender that has adopted “The Code,” including when a mortgage broker facilitated the mortgage application but did not order the appraisal.  So brokers can switch gears and take a loan package elsewhere and use the appraisal developed by the first lender.
• Removing requirements that lenders maintain a toll-free telephone number and e-mail address to receive complaints regarding appraiser independence.
• Removing requirements that lenders provide reports of suspected appraisal misconduct to the Independent Valuation Protection Institute.
• Excluding “small banks,” if they would suffer hardship due to those restrictions. An institution qualifies as a “small bank” if it has aggregate assets of not more than $250,000,000 and meets the other criteria set forth in 12 U.S.C. Section 2908. Institutions excluded from the in-house appraiser restrictions must comply with the other provisions of the Code and must meet all appropriate standards of appraiser independence.
• Allowing lenders to order appraisals direct (and may use a pre-approved list or panel to select a residential appraiser, provided that there is complete separation from the loan production side of the business, and the appraisers are not selected by the brokers), without the use of an AMC while independent mortgage brokers are not allowed to order appraisals, even through a double blind system or AMC.

For many of our clients, this last bullet is critical to understand. And for many of our clients, there are a couple of other key components:

• No C.O.D! Appraisers may not collect the fees for an appraisal; it must be paid by the lender, although the lender may require the borrower to reimburse the lender for those fees.
• No specific value can be conditioned, desired, or estimated as part of ordering or pre-ordering an appraisal. So orders that come in as: “we need $500,000 to make this work,” or “if value is not $650,000 please cancel the appraisal,” are in violation of the code. This means no comp checks. Inevitably this part of the code will cost consumers more as Fannie and Freddie believe that such comments were meant to coerce the appraiser into meeting the value, whereas we never felt that pressure. We simply told clients that a value wasn’t there, saving the consumer an unnecessary fee.

Here is a link to the revised code as well as FAQs from Fannie and Freddie.

http://www.freddiemac.com/singlefamily/hvcc_faq.html

http://www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf

If you are a real estate agent or mortgage broker and would like a complimentary workshop for your office on “The Code” in its latest version, please contact Kim or Jan.

Well, at least the wondering is over...

FHFA has announced the final version of HVCC will be implemented by Fannie and Freddie as of May 1, 2009.  For those of you who have read our blog, you know that we have serious concerns about this agreement and on first read, the revised version does not address those concerns. 

If you are an independent mortgage broker, please take the time to read this final version NOW.  DO NOT WAIT UNTIL MAY TO DETERMINE HOW YOU WILL DEAL WITH THESE MAJOR CHANGES.  At Miller and Perotti, we have been providing one hour workshops, free-of-charge, to local mortgage brokers to assist them in understanding the agreement and it implications as well as how to implement the requirements.  If your offices would like to schedule a presentation, please call us.

Between the holidays, staff vacations, and an increase in appraisal requests, I don't have the minutes to develop a full rant on this news, so I am stealing from the National Association of Mortgage Brokers' press release.  Although I don't agree that "the problem" with the housing crisis is attributable to appraiser fraud as much as it is to loose underwriting and no-appraisal loans, I do agree that HVCC does nothing to deal with any of the underlying issues at the heart of our current housing crisis.  And I do agree with their other comments:

This agreement amounts to a de facto regulatory action which avoids the appropriate process. The law provides for a process to implement regulatory and policy changes such as those contemplated and specified in this agreement.

This agreement will increase costs to consumers and remove thousands of small business competitors from the marketplace. This will create a severe disadvantage to small business mortgage brokers, and prevent them from engaging competitively in the mortgage marketplace.

The Attorney General and GSEs disregarded many letters submitted by industry associations citing numerous laws and regulations already in place and for failing to make the necessary revisions in the new agreement to accurately address the problem of appraiser fraud.

The broad authorities in this legislation, when combined with existing regulatory authorities and resources, gives us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets.

– Secretary Henry M. Paulson, Jr., Oct. 3, 2008

For the past few mornings, while getting my morning caffeine fix, I have been searching the Internet in hopes of discovering exactly where $700 billion of borrowed money had gone. I found it curious that there was little delving in the news as to where the money had been spent. Then, over the weekend, I found several articles, explaining that it seems impossible to track the specifics of how this money has been utilized!

Impossible to track $700 billion (which was actually more – don’t forget the pork)!?! So much for the transparency the government promised. And banks aren’t even offering excuses for their lack of disclosure according to Yahoo News:

• "We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it,'" said Thomas Kelly, a spokesman for JPMorgan Chase. "We have not disclosed that to the public. We're declining to."

• The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest? None of the banks provided specific answers.

• "We're not providing dollar-in, dollar-out tracking," said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.

• We're choosing not to disclose that," said Kevin Heine, spokesman for Bank of New York Mellon, which received about $3 billion as well as an additional undisclosed amount of money for keeping the books. It is understandable, however that the bank is choosing not to disclose that its CEO, received a $66,748 stipend for financial planning services, $975,000 in salary, $178,879 expense for car and driver, $846,000 in relocation expenses, and $7.5 million in bonuses. How exactly does one receive bonuses at the same time the company requires federal assistance to get by? Conversely, Goldman Sachs is forgoing bonuses this year.

• Some banks said they simply didn't know where the money was going.

Sometimes I too lose a few bucks, unsure if I put it in my wallet, throw it in the bottom of my purse or tuck it in my pocket. But how can this be with billions? According to CNN, Citigroup, JPMorgan Chase and Wells Fargo each received $25 billion and Bank of America received $15 billion. But this number differs from the Propublica site’s list that shows Citigroup at $45 billion.

I love this map of where the money went. And here is a list of all the banks that have received or have been promised TARP money, though it does not provide details as to the intended use of the money.

What is also unknown is what the oversight of this poorly regulated money will cost the tax payers. For example, there are TARP jobs available. And the Bank of New York Mellon, which is the custodian of the bailout has yet to release any numbers on what the government will pay them for keeping the books on TARP.

What do we know for sure? Only $350 billion has been released to the Treasury Department to disburse. CBS reported that atleast 4 banks used the money to buy other banks. Creating a stronger bank oligopoly seems to fly in the face of the goals of TARP, or does it? ABC reported that $1.6 billion went to top bank executives. We know some of the money has been used to modify loans, and now we know that automakers have gotten their piece…a $17 billion loan package.

With so much ambiguity and so little oversight, it is understandable that Congress is considering refusing to release the second $350 billion. Elizabeth Warren, who chairs an oversight committee set up by Congress to oversee the bailout, says “It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry.” But will Congress or her committee actually force the issue? Paulson wants the second half already. Let’s hope Congress chooses to learn from past mistakes and tightens up the broad authorities for the second half…

What is a hero? Webster’s dictionary defines hero as, “a mythological or legendary figure often of divine descent endowed with great strength or ability; an illustrious warrior; a man admired for his achievements and noble qualities; one that shows great courage.”

I’d like to depart from our typical topics today to lament the loss of a dear friend to each of us at of Miller and Perotti and a true local hero, Jane Alexander.

Jane grew up in San Francisco and Marin, raised six children, and was married to the same man until his death in 1977. But her seemingly normal path in life deviated dramatically when, in 1983, her Aunt Gertrude was brutally murdered. The situation worsened when Jane suspected someone who she had loved and trusted was responsible. Rather than shut-down (as many of us might have), she worked indefatigably with law enforcement to see that he was convicted. From her first-hand experience as a victim in the criminal justice system, she dedicated the rest of her years to advocating for victims’ rights, pushing for the resolution of cold cases, lobbying for laws to keep our citizens safer, and campaigning to keep convicted killers behind bars rather than out on parole.

Her opinions and beliefs were not always politically correct, and she had many a legislative door slammed in her face, but she never stopped her selfless work, and in the end found that while she could not change the world, she could make her corner a little bit safer and could literally help thousands of families navigate a confusing system in which they had never intended to play a part.

While Webster’s definition is all well and good, I believe true heroicism comes in a thousand modest and selfless acts, and in doing what’s right in the face of adversity. And Jane Alexander was definitely a hero. Though not mythological herself, Jane was a recipient of the Minerva Award in 2006, an award begun by Maria Shriver to honor women of California who have made a difference in this state, though Jane would be the last person to tell you about this honor.

We are at a loss at the moment for how we will get on without her stubbornness, her humor, her tenacity, and her thoughtfulness. But I do hope we can all learn a lesson or two from an 86 year old woman who made life a little better for the rest of us, even when the legislative odds and voices of pessimism seemed insurmountable.

If you would like to learn more about Jane, there is a book, Citizen Jane, available at Amazon.com and the following news articles and press releases have also been written about her. Information about Citizens Against Homicide can be found at the CAH Website.

Citizens Against Homicide

Citizen Jane

California Women’s Website has a fabulous video clip of Jane

Maria Shriver’s web site has two links: a tribute to Jane and the Minerva Awards

News & Magazine Articles:

Marin IJ

San Diego Union Tribune

People Magazine

San Francisco Chronicle

Television:

CBS News

Hallmark Channel

Transcript from Larry King Live