Appraisal and Property Related Frequently Asked Questions (FAQs)
February 12, 2016
This FAQ document provides responses to common questions related to Fannie Mae’s property eligibility and appraisal policies. Following the FAQs, the Attachment on page 10 provides Guidelines for Using Market Conditions Addendum to the Appraisal Report (Form 1004MC).
My comments: This document does not have a lot of new material, but it is always good to read this so you can cut and paste some of Fannie’s comments into your reports as an explanation. In this month’s paid Appraisal Today I had two articles on the 1004mc form:
1004MC – the good, the bad, and what Fannie says
Statistical errors in the 1004MC by George Dell, MAI, SRA – He has been fighting with Fannie since the form was first required in April 2009
More articles are coming soon in the paid Appraisal Today on how to handle the issues.
Tiny ‘Harry Potter-looking’ homes under construction in North Texas
Builder Rudy Rivas’ newest house would fit inside the master bedroom of the custom homes he constructs in North Texas.
The average new home being built in America is more than 2,700 square feet – the biggest ever.
So why’s a Dallas custom builder starting a 180-square-foot house?
It’s part of the “tiny house” movement that’s catching folks’ fancy all across the country.
“I guess I’ve gotten bored building the big ones,” joked Rivas, whose M. Christopher Homes built more than 59 houses in North Texas last year.
Most of them averaged 4,500 square feet or more and sold for almost $1 million.
Rivas’ first tiny house, now under construction in Lucas just east of Allen, will start in price at around $40,000 but could cost a lot more depending on what features a buyer wants.
Check out the photos etc. Click Here
My comment: Just something fun for you!!
Black Knight on The ‘Refi Revival’
The sharp drop in interest rates that began 2016 has had a very real impact on the so-called “refinanceable” population of homeowners. Black Knight Financial Services says that the 30 basis point decline the market experienced in the first six weeks of the year increased the numbers of those who potentially could qualify and benefit from refinancing by 30 percent, to 6.7 million potential borrowers. If they decided to act they could save $20 billion per year, an average of $3,000 per homeowner. Black Knight bases its estimate on the number of existing mortgages with rates in the 4.5 percent range.
Check out the graphs and stats at:
My comment: I can’t believe that rates are still around 3.5%, historic low, after so many years!! I still have friends paying much higher rates. They “just don’t want to hassle” with a refi…
AMCs, of course, are complaining about an appraisal shortage. They forget to mention that it is because of their excessive requirements and low fees. Fees may be more reasonable in rural areas but there are more questions, etc. as they are seldom conforming tract homes with recent comps. Plus treating appraisers like they don’t know what they are doing.
THE PROBLEM IS HANDLING THE WIDE SWINGS IN VOLUME IN MORTGAGE LENDING REQUIRING THAT ARMIES OF TRAINEES BE HIRED WHEN THERE IS LOTS OF WORK AND LAID OFF WHEN WORK DIES OFF.
THE ONLY ANSWER IS LETTING TRAINEES SIGN ON THEIR OWN AFTER PERIOD OF TIME LESS THAN 2,000 HOURS, exept for FHA loans, which require certified appraisers.
A few direct lenders let trainees sign on their own. State regulators have varying requirements for how many appraisals must be completed with direct supervision.
There are some lenders that accept licensed appraisers without college degrees, except for FHA loans. That would help some.
For decades, before licensing, when most appraisers were employees of lenders, they trained, hired and fired appraisers.
Then, soon after licensing, many studies showed that it was cheaper to let mortgage brokers do origination and hire fee appraisers. Fee appraisers hired armies of trainees when busy and let them go when work died off.
Now, there is no way for trainees to complete appraisals on their own until certified because lenders will not this. Fee appraisers are not set up to do this, even if fees are acceptable.
COLLEGE DEGREE There are lots of underemployed and unemployed people with college degrees. Most college degrees, even today, are not in engineering, computer science, math, etc. For those with student loans, some payments can be reduced when income is low, such as when you are an appraiser trainee. There are
LOW FEES Prior to HVCC many trainees were paid low fees, worked for free, or even paid their trainers to get “hours”.
Supporting adjustments: Lets be reasonable!
Why CU and AVMs cannot replace appraisers
by Denis DeSaix, SRA
Published in the paid Appraisal Today
Not every difference needs an adjustment
Identify the significant components of value and focus on analyzing their impact. The technical term for what we adjust for in the grid is elements of comparison.
The typical buyer for a house cares about house size, condition/upgrades, location-influences, and sometimes site-area differences.
In my practice, I try to focus on the significant elements that affect value. Those are the items that, if I get right, I’m confident that my value conclusion will be reasonable and credible
Don’t sweat the small stuff
Ask yourself the question for your market, “Does a buyer really care about a fireplace, and if so, can I reasonably estimate its contributory value?” Does the market react to smaller differences in lot size?
Some of us may have been trained that such adjustments are necessary. We need to break-out of this mindset and consider focusing on adjustments for those items that make a difference.
Explain why there is no adjustment if you think someone else would ask
This goes to client’s expectations. Sometimes I spend more time explaining why an adjustment is not applied than I do discussing the analysis for an adjustment I did apply.
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Pulling permits poll
Another Interesting poll from www.appraisalport.com
My comment: Interesting results on this controversial topic. FYI, there are online services that provide permit histories if they are available to the public online, with permission from the municipality. Fannie and lenders have access. I assume AMCs do also. They are online in my city but only available back to about 1980. Since most homes were built prior to 1940, it does not have all permits online. But, I get what they have. If necessary, I pay $15 for the old records going back many years. There are lots of homes here built prior to 1910. The old records are a bit amusing: “remodeling” or “plumbing”, etc. with no details.
Smoke & Mirrors? Could it be as easy as updating your fee schedule?
I got an email from an appraiser today. The only thing the email said was “Call Me 804-XXX-XXXX”. The email had a read receipt attached to it . My first thought, “What did I do now?”. With hesitation, I called the number. The appraiser said, I have to share something with you, but you have to promise not to mention my name or the AMC. I agreed.
The appraiser received an order request from an AMC for a fee that was low, but not nearly the lowest we have ever seen. As Virginia just passed the Veterans Administration Fee Schedule as a base guideline for determining customary and reasonable fees, the appraiser accepted the order and then called the AMC. The discussion went like this:
Click here to read more, read the comments and post your own comment!!
HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to www.mbaa.org
Note: I publish a graph of this data every month in my printed newsletter, Appraisal Today. For more information or get a FREE sample issue go to https://www.appraisaltoday.com/products.htm or send an email to firstname.lastname@example.org email@example.com Or call 800-839-0227, MTW 8AM to noon, Pacific time.
Mortgage applications increased 0.2 percent from one week earlier
WASHINGTON, D.C. (March 9, 2016) – , according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 4, 2016.
The Market Composite Index, a measure of mortgage loan application volume, increased 0.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 4 percent to the highest level since January 2016. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 30 percent higher than the same week one year ago.
The refinance share of mortgage activity decreased to 56.7 percent of total applications from 58.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.2 percent of total applications.
The FHA share of total applications remained unchanged at 12.0 percent from the week prior. The VA share of total applications increased to 12.6 percent from 12.1 percent the week prior. The USDA share of total applications increased to 0.8 percent from 0.7 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.89 percent from 3.83 percent, with points decreasing to 0.38 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 3.81 percent from 3.75 percent, with points remaining unchanged at 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.71 percent from 3.67 percent, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.14 percent from 3.13 percent, with points increasing to 0.41 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 3.20 percent from 3.02 percent, with points increasing to 0.32 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.