Geographic competency for appraisers

Excerpt: From early 2018 through mid-October, the Freddie Mac – Fannie Mae UAD Working Group collected initial feedback from industry stakeholders…. (note: included appraisers and AMCs)

High level objectives:

1. Provide the industry with a higher degree of clarity of data that will be used to drive risk analytics and underwriting decisions.

2. Provide updates and additions to the existing data elements that are representative of the current appraisal technology environment, but flexible to support future changes in a timely manner.

3. Redesign the appraisal forms to improve usability for all stakeholders.

Download the Executive Summary and the Announcement here (top of page in blue box)and read both documents (very short).

Excerpt: Home appraisals are produced for millions of residential mortgage transactions each year, but appraised values are rarely below the purchase contract price: Some 30% of appraisals in our sample are exactly at the home price (with less than 10% of them below it). We lay out a basic theoretical framework to explain how appraisers’ incentives within the institutional framework that governs mortgage lending lead to information loss in appraisals (that is, appraisals set equal to the contract price)…

Click here to read this 54-page working paper

My comment: The 54-page paper does statistical analysis on big data sets and is a bit technical (has some math formulas), but can be understood by most appraisers.

I have been hearing about this issue since I started doing lender appraisals in 1986. I was warned by other appraisers that if I “came in” below sales price, there would be problems. I assume this had been going on for a long time. I had worked at an assessors office and was shocked by the value pressure. I’m sure I lost a some clients as I did not do this. That darn assessor’s office training!!

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Next month in my monthly paid newsletter, I will have an article on Litigation Support and Court Testimony.  I have been writing a lot about doing non-lender work. There are lots of options, but this is by far the most profitable with very little competition.

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WASHINGTON, D.C. (January 23, 2019) – Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 18, 2019.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3 percent compared with the previous week. The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 13 percent higher than the same week one year ago.

“Mortgage application activity cooled off last week after two consecutive weeks of sizeable increases. Both purchase and refinance applications saw declines but remained at healthy levels, with the purchase index remaining close to a nine-year high, and the refinance index hovering near its highest level since last spring,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Reversing the recent downward trend, rates increased for most loan types last week, due to better-than-expected unemployment claims, easing trade tensions and stabilization in the equity markets.”

The refinance share of mortgage activity decreased to 44.5 percent of total applications from 46.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.3 percent of total applications.

The FHA share of total applications decreased to 10.5 percent from 10.9 percent the week prior. The VA share of total applications decreased to 10.3 percent from 10.4 percent the week prior. The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.75 percent from 4.74 percent, with points decreasing to 0.44 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 4.59 percent from 4.53 percent, with points decreasing to 0.25 from 0.31 (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 increased to 4.82 percent from 4.76 percent, with points increasing to 0.62 from 0.52 (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 decreased to 4.12 percent from 4.13 percent, with points increasing to 0.53 from 0.45 (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 4.12 percent from 4.08 percent, with points increasing to 0.42 from 0.32 (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.