Bye-bye 1004MC, Hello Analysis

By Rachel Massey, SRA, AI-RRS
Excerpt: What does this mean to the residential practitioner operating in the mortgage space? It means that the requirement for analyzing the market remains, and it is now up to the practitioner to support their opinion, without the benefit of a flawed format. Appraisers can now choose how they present their analysis, which may include multiple sources to support an opinion. Fannie Mae is clear that the one-unit housing trends section should reflect properties that are directly competitive with the property being appraised. The following information relates to several different ways to support trends, but is not an exhaustive list.

Read the full article here:

My comment: FHA and VA still require 1004mc, plus some lenders and AMCs. Freddie is expected to drop the requirement.

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To read more of this 8-16-20 long blog post with many topics, click Read More Below!!


NOTE: Please scroll down to read the other topics in this long blog post on public trust, unusual homes, declining market, mortgage origination stats, etc.

How would you know if the market was starting to tank?

By Ryan Lundquist
Excerpts: How would you know if the market was sliding? I wish this was a 10-second answer, but it’s a big conversation, so let’s unpack some thoughts. Here are two of Ryan’s comments:

3) Word on the street: What are people saying? How does the market feel in the trenches? We can learn so much when talking with informed local buyers, sellers, agents, appraisers, and other real estate professionals. Ask things like, “What are you seeing out there?”, or “What’s the market doing?” This is important because before we see a change in stats we’ll hear of change in the trenches.

5) Price changes aren’t the big issue: When a market shifts directions we often look to prices to tell us if things are changing, but it takes time for prices to catch up with the trend. For example, in Sacramento in 2005 we saw housing inventory triple and sales volume drop 43% in one year. Yikes! Those are insane stats, but price changes weren’t all that dramatic during this time period.
Lots more info at:

My comment: I go on open house tour every week in Alameda. That’s where I hear info such as multiple offers are few or none, rents are going down, etc. I missed the last big crash. Even though the price of my home had declined about 10% in the previous year, I just assumed it was a fluke. Fortunately, I sold my house a few months before the crash for $900,000, lower than the $1,000,000 value a year previously. I was very lucky.
The 1004MC was adopted in January 2009. Finally, lenders could not harrass or “fire” appraisers who reported market condition changes. Unfortunately, many appraisers kept reporting stable markets for quite a while, as they had been trained to do for decades by the lenders.

The U.S. Will Gain 23 New $1 Million Cities Within the Next Year.

There are currently 197 cities in the U.S. with a median home value of $1 million or more, with 33 of those cities breaking the $1 million threshold in just the past year, including Alameda, CA

Excerpt:  “The number of million-dollar cities has doubled over the past five years. These markets tend to be affluent and exclusive suburbs with very strict building restrictions in communities adjacent to finance and tech hubs,” says Aaron Terrazas, Zillow senior economist. “Although home value growth is expected to slow over the next year, particularly at the high end of the housing market, the number of cities where more than half of homes are valued in the seven digits is expected to jump to a new all-time high over the next 12 months.”

Biltmore Forest, N.C., in the Asheville metro, is forecast to be the first $1 million city in North Carolina. The current median home value in Biltmore Forest is $978,900. Zillow forecasts the median home value in Biltmore Forest to rise 2.7 percent over the next year, to $1,005,018.
For more cities and more comments, go to:

My comments: I recently had lunch with a local Alameda appraiser, John Rusting. He reads these email newsletters and looks for something of interest to appraisers. He brought a copy of this article. Alameda was listed with a June 2018 median value of $1,069,030 (Note Zillow Accuracy). Wow!!

There have not been many detached homes available under $1,000,000 for awhile, except small 2 bedroom/1 bath homes. In my market, it is hard to get much over $1,200,000 unless unusually large or waterfront. I call this “price compression”. Prices in this range have been fairly stable for over a year. A few weeks ago, many agents started listing larger homes for $998,000 to encourage multiple offers over list.

East Palo Alto, another Bay Area city, was also on the list with a median price of $1,090,684. It is adjacent to Palo Alto, and close to other Silicon Valley cities. In the past it had high crime, poorly rated schools, etc. Then tech companies (and other companies) started building large office buildings. The median price in the adjacent Palo Alto is $3.3 million.
Course Title: NEW
FHA Appraisal Training
Thursday, September 13, 2018, 8:30 AM to 4:00 PM (Central)
Check-in begins 30 minutes before the start of the session.
Event Location:
U.S. Department of Housing and Urban Development
Wisconsin Field Office
310 West Wisconsin Ave, Suite 950 (West Tower)
Milwaukee, WI 53203
Jurisdictional Host:
Denver Homeownership Center
Registration Link:
This free, on-site training will cover FHA appraisal requirements, including appraisal protocol and updates to appraisal policy as outlined in FHA’s Single Family Housing Policy Handbook 4000.1. This training also takes an in-depth look at a variety of appraisal-related topics including: property acceptability criteria; minimum property requirements; property defects; appraiser responsibilities and requirements; and much more.
Although targeted primarily to appraisers, other industry professionals, including underwriters and processors, also benefit from attending.
Special Instructions:
Registration is required by September 6, 2018. Seats are limited and available on a first-come, first-served basis. Priority will be given to appraisers. Registrants must include their complete email address.
For more information, contact Deborah Byers via email at:; or via phone at 1-800-225-5342.
Course Title: NEW
FHA Appraiser and Appraisal Underwriting Training
Tuesday, September 18, 2018, 8:30 AM to 4:00 PM (Central)
Check-in begins 30 minutes before the start of the session.
Event Location:
U.S. Department of Housing and Urban Development
Ralph Metcalfe Federal Building
77 West Jackson Boulevard
Chicago, IL 60604
Jurisdictional Host:
Atlanta Homeownership Center
Registration Link:
This free, instructor-led, on-site training will address the most common questions about appraisal-related policies found in the Single Family Housing Policy Handbook 4000.1. Discussions to include: policy changes, clarifications, and updates on topics such as: property acceptability criteria; underwriting the appraisal; minimum property requirements; property defects; appraiser and underwriter responsibilities; programs and products, including 203(k); and much more.
This training is intended for appraisers and underwriters; however, loan officers, property inspectors, and other mortgage loan professionals may benefit from attending.
Special Instructions:
Registration is required by September 14, 2018. Seats are limited and available on a first-come, first-served basis. Lunch is on your own.
This free training is being held in a government facility. Be advised that the on-site security screening is similar to an airport security screening. Attendees must provide a valid, government-issued photo I.D. and course registration confirmation at the guard station. Please allow extra time to go through the screening process. For more information, contact


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Tips, Trends & Takeaways: What is Happening with E&O Insurance Today

Excerpt:  Tips and Reminders
* File Documentation-Feedback from claims examiners reinforces the need for a well-documented appraisal file as the first line of defense against a claim.
– Photographs-more rather than fewer, including pictures of comps that you did not select and the reasons why you rejected them.
– Confirm in writing-changes that are requested and approved, especially if you are dealing with more than one person on the client side.
– Established procedures-even if you are a staff of one. Solid procedures help to make sure a step in the process is not overlooked.
– Guard your passwords and signature controls. Identity theft rears its ugly head in this field on a regular basis.
– Stick to your areas of expertise-whether geographic or types of appraisals, you are selling your professional expertise. Make sure it really qualifies as expert.
– As a follow-up to the previous tip, by all means develop new areas of proficiency, but do so after appropriate study, education, and guidance from a good mentor.
– Choose your words carefully. Terms like “as is” and “as improved” can have different meanings to different people.
– Don’t forget common sense-Do the numbers add up? Does my reasoning make sense? Are there any red flags that cause me to take a second look or double-check that fact?
– When an appraisal is questioned or challenged-don’t fire off a response without carefully reviewing and researching the file. Consult your E&O provider if necessary. Some programs offer a risk management hotline service for this purpose.
* Read your E&O policy carefully-if there are terms or conditions that you do not understand, ask your agent or broker to explain.
One final suggestion: Avoid including a copy of your E&O declaration page in with the appraisal. First of all, it is not professional. If you hire a lawyer to draft a contract for you, does he or she attach a copy of the firm’s E&O to your letter of engagement? No, of course not, and it is not recommended for appraisers either. Your client-the lender or management company or whoever-should be responsible for verifying your credentials.
In the July 2018 issue of the paid Appraisal Today, available to paid subscribers.  
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Strange Homes: 25 Oddities of the Real Estate Market

Excerpt: If price were no option, what would you buy?

You could go for the more traditional luxury home with all the normal bells and whistles. Or you could have the most peculiar property in town.

From a ranch where aliens visit to a Hobbit house to a gigantic nuclear missile silo, these houses will have you scratching your head and imagining what life there might be like.

Here are a few more of them:
  • A Castle in the Bronx
  • The Majority of a Condominium Complex
  • This House with an Insane Indoor Pool
  • Tennis Court House
Check out the other Strange Homes – photos and text at:

My comment: AKA Appraisals From Hell ;>  If an AMC calls, Just Say No!!


The Public Trust. A Failed Goal?

By George Dell, MAI, SRA
Excerpts: Presumably, “public trust” is the foundational test. Have our institutions, rules, regulations, standards, and social expectations failed us?

The nitty-gritty goal of appraisal is “market value.” It is exampled in USPAP Advisory Opinion AO-22.

So… prior to our “great recession,” what was the reality? Is it possible we were ignoring one or more of the… seven parts of “market value”?

The truth, during this time period:
  • Buyer and seller are each acting speculatively with exuberance;
  • Price is affected by universal euphoria;
  • Buyer and seller are avariciously motivated and biased;
 Read the full article, plus more “truths” at:

Canary in the coal mine? Impac mortgage originations plummet in second quarter

Originations fall 42% from last year thanks to rising rates

Excerpts: According to Impac, in Q2 2017, the company originated $1.79 billion in mortgages through its various channels. In the same time period this year, Impac originated $1.03 billion in mortgages.
That’s a drop of 42% in just one year.

And the news wasn’t much better when looking at the second quarter of this year compared to the first quarter. According to Impac, its originations fell 22% from the first quarter of 2018 to the second quarter

… Rising interest rates are hitting Impac hard. Time will tell if it’s an isolated case or a sign of more trouble to come.
My comment: I hope none of the AMCs you work for have Impac as a primary client :< Keep a very close watch on your AMC clients’ accounts receivable!!!
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 
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 or send an email to . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

Mortgage applications decreased 2.0 percent from one week earlier

WASHINGTON, D.C. (August 15, 2018) – Mortgage applications decreased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 10, 2018.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.0 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 remained unchanged from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 3 percent lower than the same week one year ago.

The refinance share of mortgage activity increased to 37.6 percent of total applications from 36.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.2 percent of total applications.

The FHA share of total applications remained unchanged from 10.4 percent the week prior. The VA share of total applications remained unchanged from 10.6 percent the week prior. The USDA share of total applications remained unchanged from 0.8 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.81 percent from 4.84 percent, with points decreasing to 0.43 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) decreased to 4.73 percent from 4.74 percent, with points decreasing to 0.29 from 0.39 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.77 percent from 4.83 percent, with points decreasing to 0.68 from 0.76 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.27 percent from 4.26 percent, with points increasing to 0.52 from 0.48 (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 decreased to 4.06 percent from 4.07 percent, with points increasing to 0.48 from 0.42 (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.

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

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