Appraisal News and Business Tips

5-24-18 Newz//UAD and Fannie Form Changes, Floating Island, Refis dropping

It’ll never sell that high (but then it did)

Excerpt: There’s no way it’s going to sell that high. Have you ever thought that in real estate? Well, let’s talk about a property that many said would never sell at $4.1M, but then it did. I definitely have some takeaways about this lofty condo in Downtown Sacramento (CA), and I hope non-locals will relate to the commentary. (My note: median home sale price is $367,500)

Details and lots of graphs at:

My comment: The median home sale price is $367,500. This is definitely an outlier for the area.

A floating Pacific island is in the works with its own government, cryptocurrency and 300 houses

Just For Fun!!

Excerpts: The Floating Island Project plans to create off-shore housing that uses its own currency and operates outside of government regulations.
– The project is a pilot program in partnership with the government of French Polynesia.
– A long-term vision for the project is hundreds of new countries floating on the ocean.

As well as offering a home for the displaced, the self-contained islands are designed to function as business centers that are beyond the influence of government regulation.

Check out the video and lots more details at:

Independent Contractors – Appraisal firms and AMCs – new CA court ruling

California Supreme Court Turns Independent Contractor Law On Its Head Making It As Easy As “ABC”
Excerpts: In Dynamex Operations v. Superior Court, the California Supreme Court made a significant change in independent contractor law, adopting an “ABC” test for determining whether an individual is an employee under the Wage Orders.1   Although other states use the ABC test, its wording varies from jurisdiction to jurisdiction.  Here, the Court adopted a version that tracks Massachusetts’ ABC test.  The net effect is that it makes it significantly more difficult for California employers to show workers qualify as independent contractors.  Employers should now re-assess their workers’ classification and decide whether they should reclassify their workers as employees…

B) the worker performs work outside the usual course of the hiring entity’s business.  For example, a plumber providing plumbing services to a bakery is outside the usual course of the bakery’s business; but a cake decorator hired to decorate the bakery’s cakes is not outside the usual course of business…

Discusses other states’ laws
—————-
Appraisal Firms and “Hybrid” AMCs: Beware of the Dynamex Decision and Its Impact on Classifying Appraisers as Independent Contractors in California
By Peter Christensen
Excerpt: While the full effect of the decision may take some time to settle in, and while the decision also doesn’t resolve employee/contractor determination for every purpose (such as reimbursement of expenses), I expect that we will soon see something of a wave of litigation against appraisal firms that treat staff appraisers as independent contractors in California.

Copy of the opinion plus more details on the case and how it affects appraisal firms and AMCs who have staff appraisers classified as ICs.

My comment: A few states have A-B-C type IC regulations. I have been writing about appraisal businesses and independent contractors for over 25 years. Lots of issues. IRS regs not always clear. This ABC test is short and clear.

Freddie Mac: Mortgage rates hit seven-year high

The highest level since 2011

Excerpt: “While this year’s higher mortgage rates have not caused much of a ripple in the strong demand levels for buying a home seen in most markets, inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers,” Freddie Mac Chief Economist Sam Khater said.

My comment: definitely affects refis significantly. See below. Refis are optional. I am never giving up my 3.5% interest rate!!!

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Weekly mortgage refinances drop to an 18-year low as rates jump

Excerpt: A sharp rise in interest rates last week meant far fewer homeowners could benefit from a mortgage refinance.

That was the primary driver behind a 2.6 percent drop in total mortgage application volume last week, according to the Mortgage Bankers Association’s seasonally adjusted report. Volume was 10.5 percent lower than a year ago.
Refinance volume has been falling for the past month as rates rise, dipping another 4 percent last week to the lowest level since December 2000.
Refinances are 27 percent lower than a year ago and now make up just under 36 percent of mortgage application volume. Most borrowers who were able to qualify, refinanced during the last five years, as rates stalled near record lows.

https://www.cnbc.com/2018/05/23/weekly-mortgage-refinances-drop-to-an-18-year-low-as-rates-jump.html

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Highest and Best Use: Reviewers and State Boards Want More Than Just a “Check Box”

In the paid Appraisal Today

Examples of when HBU analysis is needed, with sample statements:
– Fixer needing repair- market weak
– Older home needing updates- stable market
– Renovated home – market strong with nearby new construction
– Three adjacent parcels needing valuations for estate purposes in a suburban neighborhood of $1,000,000+ homes
Residential appraisers can get into big trouble if they do not understand when the current use may not be the highest and best use. This article can help. In the February 2017 issue of the paid Appraisal Today, available to paid subscribers.  
To read the full article, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
 
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Industry Sounds Off on Dodd-Frank Reform Bill (approval now pending from President Trump)

Excerpt: The House of Representatives on Tuesday voted in favor of S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. The bill seeks to evolve and streamline regulations put in place by the 2010 Dodd-Frank Act. The final vote in the House was 258-159.

Both pro and con opinions at:
Click here to see what appraisal organizations said:

My comment: Effect on appraisals? Not clear, but lending is already moving away from requiring appraisals. Changes to UAD (see below) will significantly accelerate this move.

Fannie Mae and Freddie Mac will update appraisal dataset and forms

Excerpt: Fannie Mae and Freddie Mac (the GSEs) have launched an initiative to update the Uniform Appraisal Dataset (UAD) and uniform appraisal reporting forms. The UAD and Forms Redesign initiative will leverage extensive stakeholder input to update the appraisal dataset, align it with the industry-standard MISMO® Reference Model Version 3.X, and overhaul the uniform appraisal forms to establish a more flexible, dynamic structure for appraisal reporting. This work is designed to provide greater clarity to lenders, borrowers, and investors; simplify appraisal reporting and reviewing; and build a foundation for appraisal modernization.

The UAD was implemented in 2011, introducing the first-ever standardization and common requirements for appraisal data. This work represented a significant step forward, driving improved data quality and consistency, supporting analysis to drive more effective risk management, and enabling innovation.
The GSEs are working together, at the direction of the Federal Housing Finance Agency (FHFA), to assess and, as appropriate, begin implementation of strategies to redesign the UAD. Under the auspices of the Uniform Mortgage Data Program (UMDP)*, the initiative will focus on modernization of the current UAD dataset and residential appraisal forms. The initial stages of the multi-year initiative will explore options and make recommendations regarding changes to the UAD and appraisal forms that will support emerging technologies and data updates, and provide a foundation for appraisal process modernization.

The first phase of the project involves collection of input from industry stakeholders. The GSEs have begun conversations with appraisal software and forms vendors, and in the coming months will engage lenders; appraisers and appraisal management companies (AMCs); industry groups and trade associations; and government agencies and departments. The GSEs will provide periodic updates and progress notifications

Click here to see the original notice and a timeline

My comment: I assume appraisers will have some sort of input. I knew this was coming – UAD only applies now to relatively little data on the forms. They were set up in 2005, before UAD was adopted and Big Data took off.

Don’t Ask, Don’t Tell About “The Weed”

By Jonathan Miller
Excerpt: On March 15, 2018, CoreLogic Valuation Solutions will update the lender specific instructions for all Bank of America products. As a result, a new engagement letter will be generated for any open CoreLogic Valuation Solutions appraisal assignments in AppraisalPort.

New Marijuana Cultivation Appraisal Guidelines to be added in Bank of America Engagement Letter:

If marijuana cultivation is observed during the appraisal property inspection, it shall not preclude the assignment from being completed and delivered to Bank of America. In these instances, do not inquire specifically as to the purpose/legality of any cultivation activities. Do not request any specific information (such as grow permit/license) from the owner/occupant/entry contact regarding any cultivation activities.

The appraiser should photograph all areas required by the assignment type and report/analyze physical changes/conditions/characteristics that impact value/marketability of the property, as applicable.

If you have any questions, please contact the scheduler listed on your engagement letter.

Thank you,
Corelogic Valuation Solutions
Read more plus the 39 (or more) appraiser comments.

My comment: I have seen a few home grown marijuana plants for over 20 years here in the Bay Area, before and after it was legal to grow for your own use. What do I think? It is not my job to report this to my lender client. However, I have a friend who rented a home for “indoor grow” and converted two bedrooms. This is significant as it required modifications to the home. There can also be some issues with inadequate power. He called me and said an appraiser was coming by as the owner was doing a refi. I told him to remove everything before the appraiser arrived and make the rooms look like bedrooms.

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 paid monthly 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 info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

Mortgage applications decreased 2.6 percent from one week earlier

WASHINGTON, D.C. (May 23, 2018) – Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 18, 2018.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week to its lowest level since December 2000. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 3 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 35.7 percent of total applications from 35.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.8 percent of total applications.

The FHA share of total applications remained unchanged at 10.3 percent from the week prior. The VA share of total applications decreased to 9.8 percent from 10.3 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 ($453,100 or less) increased to its highest level since April 2011, 4.86 percent, from 4.77 percent, with points increasing to 0.52 from 0.50 (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 $453,100) increased to its highest level since September 2013, 4.81 percent from 4.73 percent, with points increasing to 0.42 from 0.35 (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 its highest level since May 2011, 4.90 percent from 4.78 percent, with points increasing to 0.85 from 0.76 (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 its highest level since February 2011, 4.31 percent from 4.20 percent, with points increasing to 0.56 from 0.53 (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 its highest level in the history of the survey, 4.12 percent from 4.09 percent, with points decreasing to 0.46 from 0.56 (including the origination fee) for 80 percent LTV loans. The effective rate remained unchanged 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.

Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
2033 Clement Ave. Suite 105
Alameda, CA 94501 Phone 510-865-8041
Fax 510-523-1138
Email   ann@appraisaltoday.com

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