5-18-17// Newz, AVM/BPO Problems, Castles in America, Cherry Picking Comps

Excerpt:

In an interview, Andersen (the attorney/plaintiff) told me she is considering bringing the issue to the Illinois attorney general because it affects all property owners in the state. She has also been approached about turning the matter into a class action, which could touch millions of owners across the country.

My comment: Worth reading. This article is important as Harney’s articles are syndicated and published in many newspapers. Also, he understands and writes about appraisals regularly.

Excerpts:

Appraisers have responded to Fannie and Freddie’s new changes with a mix of shock, outrage, indifference, and a few “I told you so’s.” Richard Hagar, SRA argues that while change is coming to the industry, appraisers are and will remain an integral part of the valuation industry. “AVMs are not going to take over the job of an appraiser any time soon. Houses change: some get larger, some remodeled, some add an accessory dwelling unit (ADU), some have massive interior damage, while others burn down. County records rarely or very slowly reflect those changes,” Hagar says.

While AVMs won’t replace appraisers, Hagar notes they are by no means “useless” (as some appraisers argue) and their use can be expected to continue in the future. “AVMs have a place in a valid business model when it comes to providing yearly updates on the value of a block of loans held by banks, Fannie Mae and most private lenders.

My comment: The article is a discussion of what Fannie and Freddie are doing with using AVMs for valuation plus other issues. AVMs have been in use for decades by assessor’s offices. They started being used by lenders in the 1980s. In the mid-1970s, I worked for two California assessor’s offices that were converting to AVMs. Of course, the purpose was property tax equalization, not the value of a specific property by itself, which is what you do for other uses such as a mortgage loan.

Excerpts:

U.S. securities regulators are investigating whether bonds backed by single-family rental homes and sold by Wall Street’s biggest residential landlords used overvalued property assessments.

The agency has been looking at whether BPOs were wrongly inflated, and similar letters were sent to other companies, potentially serving as a starting point for an industrywide probe, said a person with knowledge of the matter. The SEC is scrutinizing how BPO providers compete for business and whether their customers shop for providers willing to put the highest value on their properties, said the person, who asked not to be identified discussing private matters.

My comment: Worth reading for lots more info. They are finally figuring out that real estate agents are sales people and want to give their clients what they want to get the listing. I saw that a lot when doing REO appraisals. Hassles from real estate agents who wanted low values so they could make the listings easier to sell. Or hassles from clients who wanted to be able to sell the homes for higher prices.

Appraisers are objective and can be deal killers. We are owed our fees, whether or not the deal goes through. Quite a different orientation from real estate agents. Maybe someday we can get acceptable alternate valuation products to compete with BPOs.

I have never read an article about a real estate agent going to jail or losing their license because of “bad” BPOs.

In upcoming issues of the paid Appraisal Today, Barry Bates, curmudgeon (and long time lender appraiser and manager) will discuss what is happening with alternate valuation products.

WASHINGTON, D.C. (May 17, 2017) – Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 12, 2017.

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 9 percent higher than the same week one year ago. 

The refinance share of mortgage activity decreased to 41.1 percent of total applications, the lowest level since September 2008, from 41.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.1 percent of total applications. The average loan size for purchase applications reached a survey high at $322,300.

The FHA share of total applications increased to 10.6 percent from 10.5 percent the week prior. The VA share of total applications decreased to 10.7 percent from 10.8 percent the week prior. The USDA share of total applications remained unchanged at 0.8 percent from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.23 percent, with points increasing to 0.37 from 0.31 (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 $424,100) increased to 4.23 percent from 4.22 percent, with points increasing to 0.30 from 0.28 (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 4.11 percent from 4.09 percent, with points increasing to 0.37 from 0.28 (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 3.51 percent from 3.50 percent, with points decreasing to 0.33 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.30 percent from 3.36 percent, with points increasing to 0.21 from 0.15 (including the origination fee) for 80 percent LTV loans. The effective rate decreased 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.