Appraisal News and Business Tips

10-25-19 Newz: Fannie Waivers – No Bifurcates? – Market Cycles

We Don’t Need No Stinking Bifurcates… Do We?

By Tim Andersen, MAI

Excerpt: QUESTION: I’ve heard so much lately about hybrid appraisals. I really don’t understand them. I guess, though, my biggest question about them is whether they are USPAP compliant. Some heavy hitters in appraisal have said they are not USPAP compliant, they pollute the industry, they will degrade us appraisers to the point we are no longer necessary. Some equally heavy hitters have said none of that is true, and that appraisers should be doing them since clients want, to coin a phrase, a painter to paint their house (cheap & fast), not Michelangelo to create an immortal work of art in it (expensive & slow). Since hybrid appraisals do not require me to inspect the property, how can a hybrid appraisal report be USPAP compliant? Do I have to list the inspector in the Certification since inspecting the property is significant appraisal assistance? How are state boards going to look at hybrid appraisals? I do not know what to think. Help!

To read Tim’s answer, click here

My comment: I love Tim’s blog postings. He has been writing articles for the paid Appraisal Today on evaluations, suing state boards, and What’s changed in USPAP 2020-2021? (coming in the Dec. issue) He is definitely a USPAP expert!!

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Are appraisal waivers good news or bad news?

Excerpts: You save money when Fannie Mae and Freddie Mac don’t require an appraisal for a new mortgage. But an inaccurate value estimate can cost you, too.

There are both advantages and disadvantages.

On the one hand, you save money on appraisal fees.

On the other, you could be paying too much to refinance your loan without confirmation of your home’s value. If your home is worth more – meaning you have more equity in your property – your rate and costs can be lower.

For example, let’s say a borrower has a 699 middle FICO score, owes $480,000 on his condo and thinks he has 20% equity (or a value of $600,000).

But the property is really worth $640,000 or 25% equity. The pricing difference can be either .375% better in rate or 1.25 points lower in loan origination points.

Fan and Fred’s system requires your lender to plug in a property value (either purchase price or estimated value for a refinance)….

To read more, click here

My comment: The article is written for borrowers, but it is good for us to see what borrowers are reading. The November issue of the paid Appraisal Today (available Nov.1) has an update on what Fannie is up to “What is Fannie doing now and what is the future plan? UAD, Forms, Bifurcated”. It is hard to keep track of the changes, who is doing what, terminology changes (PDC, PIW, etc.), delays, etc. I spent a lot of time, and spoke with a lot of people. It is an update of my very long article from June, 2019.

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By Ryan Lundquist

Excerpt: The market changes every seven years. And now it’s ready to take a big turn. Have you heard that? Is there really such a thing as a “seven-year rule”? Is it legitimate? Let’s talk about it.

A few things to consider

1) Behavior: The market doesn’t have to behave a certain way every seven years. Bottom line. Case-in-point: We’ve had almost eight years of price growth in Sacramento in the current price cycle.

2) There is a cycle: Sometimes we only hear about the market being “hot”, but there really is a rhythm over years where prices go up and down. In many locations the market tends to change every decade or so, so I get why people believe in the seven-year rule. But keep in mind some markets are more flat over time rather than super cyclical like California (big point)….

To read more, click here

My comments: Ryan’s blog posts are written for local real estate agents, as they should be, with lots of local data and graphs, . It is Most Excellent Marketing for his appraisal business.

Fortunately for us, he often includes info for appraisers – how it relates to doing his analyses in your local market. I live 80 miles from Sacramento and 10 miles from San Francisco, but my local market is very different – much more volatile prices. Our median price is around $850,000. People ask me often about buying a home. I tell them to buy when the market collapses, as it always does, and no one wants to buy. Prices declined here from 30% to 80% in the recent downturn. I have local data back to 1980 and will do some graphs for my market. Ryan includes a video on how to do it.

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The Penny… A Classic Example of Cost Not Equaling Value

Excerpt: According to bestcoin.com’s Coin Values Pricing Guide, “there are at least three values of a coin.”

1. “The price the owner thinks it’s worth.”

2. “The Value based upon a coin price guide, or a pricing book lists it as.”

3. “The actual price you can sell it for to a dealer, buyer or at an auction.”

Interestingly, that is true of real estate also…

To read lots more, click here

My comment: I have been reading about penny costs for awhile. Never thought about this for Cost vs. Value!Getting too many ad-only emails?

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2019 E&O Insurance Update – Where to Get E&O Insurance, State Board Complaints, Your Biggest Risks, Etc.

Excerpt: What about appraisers who are thinking about quitting appraising or retiring?

If you qualify, you can get lifetime coverage for free from some E&O

companies. Landy, LIA and Intercorp offer this. Requirements vary widely – number of years with company, years of experience, etc. Check with your E&O company. The cost is typically 3 times the price of your last year’s coverage. Be sure to get 5 years. A one year policy is not worth much. Check with your E&O company.

Unfortunately, very few of the appraisers who are quitting the business get “tail coverage”. They just let their insurance lapse. This means that they are self-insuring for all claims for appraisals done before they quit paying for insurance.

What if you’re not renewing now?

The appraiser E&O market is fairly stable now, so much of the information will be useful until next year’s update. I only do this update once a year, but the phone numbers and Web site links

should still be accurate. It is also a useful source of information for topics such as what is a claim, how to handle communication with an upset borrower, tips on liability reduction, etc.

To read the full article in the July 2019 issue, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

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What’s the Statute of Limitations for Suing a Real Estate Appraiser?

by Peter Christensen

Excerpt: This is a common question that I’m asked because many lawsuits against appraisers are filed years after the appraisal was performed by the appraiser, sometimes 10 or more years later. The reason for this is that the plaintiff suing an appraiser may not have known there was a problem with the appraisal at the time it was received or may not have suffered any damages as a result of the alleged appraisal error until a loan default or other event has occurred years down the road. This plaintiff might be a lender who recently foreclosed on a loan or might be a borrower who believes they paid too much or borrowed too much based on a deficient appraisal.

For more info, click here

My comment: Post includes a link to all 50 states for statues of limitation.

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Flood and Fire Risks for Homes 

FEMA Bought 44,000 Flood-Prone Homes. They May Have to Buy Millions More

Excerpt: Few Americans have voluntarily sold properties to the government to avoid future flood damage. That’s likely to change.

As the climate crisis worsens, more Americans will be forced from their homes. Many won’t be able to afford it, and the U.S. isn’t prepared for a massive, government-subsidized migration away from flood-prone areas, according to the first comprehensive analysis of Federal Emergency Management Agency data.

In the end, it is the nation’s poorest who may be left behind…

To read more, click here

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2019 CoreLogic Wildfire Risk Report Highlights U.S. Wildfire Vulnerability, Finding Nearly 776,000 Homes at Extreme Risk of Wildfire Damage This Year

Excerpt: The CoreLogic Wildfire Risk report analyzes homes currently at risk of wildfire damage in the western United States, including Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oklahoma, Oregon, Texas, Utah, Washington and Wyoming. The report also provides a breakdown of the significant wildfire events of 2017 and 2018.

To read more, click here

My comments: Get ready. You can only live 3 days without water!! Floods, fire, volcanoes, earthquake, etc… I live in earthquake country with maybe a few second warnings. I have food and water ready, plus solar charger for iphone, radio with crank charger, etc.. Emergency stuff in my car if I am stranded (first aid kit, water, food, mylar blanket, radio, etc.). Previously lived in the Santa Cruz mountains – very high fire risk with regular electrical outages for 1-3 weeks. We prepared for it. I also lived in Tornado Alley in Oklahoma. I don’t know which is worse: tornadoes with warnings or earthquakes with a few seconds warning, maybe.

Major earthquakes are relatively rare here, so most people are not very prepared. But fire, floods, hurricane and tornadoes are much more common. Preparation is definitely needed.

I don’t really know where you can go to be safe. An appraiser friend is moving to a small town in Montana. Risks are flooding from a nearby river and Yellowstone, one of the biggest volcano risks in the world.

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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 11.9 percent from one week earlier

WASHINGTON, D.C. (October 23, 2019) – Mortgage applications decreased 11.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 18, 2019.

The Market Composite Index, a measure of mortgage loan application volume, decreased 11.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12 percent compared with the previous week. The Refinance Index decreased 17 percent from the previous week and was 126 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 6 percent higher than the same week one year ago.

“Interest rates continue to be volatile, with Brexit votes and ongoing trade negotiations swinging rates higher or lower on any given day. Last week, mortgage rates jumped 10 basis points and were above 4 percent for the first time since September,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The increase in mortgage rates caused refinance applications to drop 17 percent, and by more than 20 percent for conventional loans. Borrowers with larger loans are the most sensitive to rate changes, and with rates climbing higher last week, the average size of a refinance loan application fell to its lowest level this year.”

Added Fratantoni, “Although purchase applications declined, application volume is still running about 6 percent ahead of this time last year. Low mortgage rates continue to fuel buyer interest, but supply and affordability challenges persist.”

The refinance share of mortgage activity decreased to 58.5 percent of total applications from 62.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.8 percent of total applications.

The FHA share of total applications increased to 12.1 percent from 11.3 percent the week prior. The VA share of total applications increased to 13.5 percent from 12.9 percent the week prior. The USDA share of total applications increased to 0.5 percent from 0.4 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 4.02 percent from 3.92 percent, with points increasing to 0.38 from 0.35 (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 $484,350) increased to 3.96 percent from 3.90 percent, with points increasing to 0.30 from 0.23

(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 3.79 percent from 3.77 percent, with points increasing to 0.26 from 0.19 (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 3.39 percent from 3.32 percent, with points increasing to 0.35 from 0.31 (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 3.29 percent from 3.37 percent, with points increasing to 0.35 from 0.23 (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.

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Ann O’Rourke, MAI, SRA, MBA

Appraiser and Publisher Appraisal Today

2033 Clement Ave. Suite 105, Alameda, CA 94501

Phone 510-865-8041

Email  ann@appraisaltoday.com

www.appraisaltoday.com

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