Every unusual home has appraisal comps

Excerpt: While MBA supports this proposal, we are also mindful of the need to ensure that the loan origination process-including property valuation-is undertaken in a manner that does not compromise bank safety and soundness.

The validity of the data used in alternative evaluations is highly predicated on the quality of the information found in prior appraisals. Should banking institutions over-utilize exemptions, resulting in significantly fewer physical appraisals, the integrity of the data and the quality of loan portfolios may be diminished. Therefore, it may be appropriate for the agencies to consider additional best practices for their regulated institutions, including the establishment of a cap on the share of loans within the portfolio for which the appraisal exemption is used. Such a practice, for example, would align bank standards more closely with the appraisal waiver standards currently required of Fannie Mae and Freddie Mac- the government-sponsored enterprises (GSEs).

My comments: The approximately 31-page report and intro letter to FDIC, Federal Reserve and OCC discusses their support of the increased deminimus but they have concerns about AVM risks.

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Excerpt: Appraisals cost money at a time when the Internet is driving the price of information toward zero.

The real estate market has had a good run during the past few years, but for one group the story has been different. Appraisers are facing tough times. Their job numbers are in decline, business is being lost to high-tech competitors, management companies are cannibalizing fees, and HUD has questioned the accuracy appraisals provide. To make matters worse, federal regulators have proposed new rules to make residential appraisals unnecessary for huge numbers of transactions.

The oddity is that no one doubts or denies the importance of independent valuations. Instead, appraisers are losing out to new technologies, lower costs, and faster prep times. The need for valuations is there but that need is increasingly filled by big data and artificial intelligence (AI).\

The real estate market has had a good run during the past few years, but for one group the story has been different. Appraisers are facing tough times. Their job numbers are in decline, business is being lost to high-tech competitors, management companies are cannibalizing fees, and HUD has questioned the accuracy appraisals provide. To make matters worse, federal regulators have proposed new rules to make residential appraisals unnecessary for huge numbers of transactions.

I regularly get calls and emails from paid subscribers with questions. Yesterday, I spoke with an appraiser about the issues below. I did not want to write articles about these topics in my paid newsletter, as it has long articles on a specific topic, so I decided to write brief summaries for this free newsletter.

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An easy way to look at it “as if” the owner was renting one or more rooms in a house. This income is not considered in an appraisal. “Technically” it is considered business income. Airbnb regulations are changing in cities all over the country. I am so glad I don’t have to try to figure out what it means ;>

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I am surprised how few appraisers have web sites.

If you don’t have one, you are missing appraisal orders. Half my business is from Internet searches, looking for an appraiser in my city, or a nearby city. When they go to my web site, they can see my qualifications, location, resume, what types of appraisals I do, etc. Plus they can get my email address, which is on every page of my web site.

I get very few calls on my business phone lines. The number of calls, except junk calls, has been dramatically increasing. What do people use? Email.

Yesterday, I saw a Facebook question about a topic I have written about. But, I did not want to reply on Facebook – too much chit chat. Instead I sent an email to the appraiser. However, I did not have his current email address and it bounced. He did not have a web site, but was listed in a lot of old online directories, Linkedin, etc. None of them have email addresses. I could have called him but it was too much hassle. So, he did not get the information, including a copy of the paid newsletter with the article.

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I am waiting for someone to say what has changed, if anything, for appraisals ;> Any volunteers?? Dave Towne, our usual Commenter, is on vacation. Darn!

WASHINGTON, D.C. (April 3, 2019) – Mortgage applications increased 18.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 29, 2019.

The Market Composite Index, a measure of mortgage loan application volume, increased 18.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 18 percent compared with the previous week. The Refinance Index increased 39 percent from the previous week, and was at its highest level since November 2016. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 10 percent higher than the same week one year ago.

“There was a tremendous surge in overall applications activity, as mortgage rates fell for the fourth week in a row – with rates for some loan types reaching their lowest levels since January 2018. Refinance borrowers with larger loan balances continue to benefit, as we saw another sizeable increase in the average refinance loan size to $438,900 – a new survey record,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “We had expected factors such as the ongoing strong job market and favorable demographics to help lift purchase activity this year, and the further decline in rates is providing another tailwind. Purchase applications were almost 10 percent higher than a year ago.”

Added Kan, “The average loan size for purchase loans declined slightly, as applications for smaller purchase loan sizes exceeded that of higher loan sizes – a positive sign that first-time buyers were increasingly active in the market.”

The refinance share of mortgage activity increased to 47.4 percent of total applications from 40.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.5 percent of total applications.

The FHA share of total applications decreased to 8.8 percent from 9.3 percent the week prior. The VA share of total applications remained unchanged from 10.4 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.36 percent from 4.45 percent, with points increasing to 0.44 from 0.39 (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 $484,350) decreased to 4.21 percent from 4.35 percent, with points decreasing to 0.25 from 0.27 (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 4.41 percent from 4.48 percent, with points remaining unchanged at 0.48 (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 decreased to 3.78 percent from 3.87 percent, with points decreasing to 0.40 from 0.47 (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 remained unchanged at 3.77 percent, with points increasing to 0.38 from 0.30 (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.