Spotlight: Appraiser Capacity During the Pandemic
June 16, 2021
By Danny Wiley, Senior Director of valuation for Single-Family Credit Risk Management
Excerpt: 2020 – and the early part of 2021 – have shone a bright light on a topic that’s been a growing concern – appraiser capacity. While the scope of that concern has been different throughout the country in recent years, it’s now been brought to the forefront for every state. The pandemic fueled regulation which lowered already-low interest rates and, for a portion of homeowners, home-improvement-related refinances combined with additional factors to create a perfect storm for record appraisal volume – without a corresponding increase in the number of licensed appraisers.
The majority of the states comprising the list of the top 10 highest average GSE appraisals per appraiser were often situated in the western part of the country – and also, not surprisingly, included some of the more populated states, including California, Texas, Michigan, Arizona and Colorado. This group ranged from Ohio (165 average appraisals per appraiser), Illinois (171) and New Jersey (174) at the low end to Utah (233) and Texas (207) at the top end. Overall, the appraisers on this list were averaging about 14-19 appraisal per month from 2012-2019.
As you can see, the workload quickly escalates at this end of the spectrum – and, as you’ll find out below, 2020 showed us that a perfect storm of factors can make the situation much worse.
To see more graphs and read more, click here
My comments: Maybe someday lenders will allow trainees to sign. The Very Best Way to solve the appraiser shortage. The significant AMC hassles mean appraisals take more time.
A subscriber called me recently. She got a request for an appraisal of a home with a subsidized purchase price (Low-moderate income). The AMC appraisal request did not disclose this. She left messages to 5 of the AMC reviewers and did not get a callback. I suggested telling the AMC to get another appraiser. The easiest reason is usually to say she is not competent as the reason.
I have appraised them before. They are complicated. Typical restrictions on price if sold, etc. I was working for a local lender and contacted the very experienced chief appraiser to see what they needed and if they want to lend on these types of properties. Many appraisers are giving up on working for AMCs and quitting or retiring.
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To read more of this 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 unusual homes, marketing, appraisal bias,mortgage origination stats, etc.
Drug Dealers Marketing Tips for Appraisers
by Richard Hagar, SRA
Excerpts: I teach a class called Real Estate, Mortgage, and Appraisal Fraud to various departments of Homeland Security; one of the departments is the Drug Enforcement Agency (DEA). Several years ago, I was teaching the class, and some of the DEA agents suggested that I stick around the next day and attend their class on drug dealers and organized crime.
In the class, among other things, I learned that the average drug dealer earns $35,000 per year peddling drugs from a street corner. Of course, the dealer must deal with obtaining their product, marketing, and delivery, as well as guns, violence, and the probability of being arrested. And on top of it all, massive competition — not the best of business models.
The DEA training officer told the audience that the street corner hustlers had amazing marketing skills. Well, this focused my attention. What marketing skills could a drug dealer have?
To read what this means for appraisers, click here
My comments: Lots of good marketing reminders. Appraisal clients come and go. We all need new ones! I have known Richard Hagar for a long time. He is one of the best appraisal instructors I know. An ad for his excellent adjustment class is after the article.
The Coolest Beach House: 85 ft. Tall Water Tower in Seal Beach CA
Excerpts: Four bedrooms and 3.5 bathrooms, 85 ft. tall, totally renovated, with 2,828 square feet of very vertical living space. It dates to the 1880s when it used to service steam engines coming through for the railroad. A replacement for the original was built in the 1940s.
After a failed round of restoration, the structure was left in disrepair. The current owners helped rescue it from demolition in 2016 and transformed it into what it is today.
To read more and see lots of photos, click here
My comment: My first question was how many steps to walk up to the top. Yes, there is an elevator!!Getting too many ad-only emails?
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It is Good Business to Drop an Onion Ring in Your Fries!
By Jamie Owen
Excerpts: As usual, I’ve started yet another post talking about a random thing that has nothing to do with real estate. That’s just how I am wired! But wait, perhaps there is something we can learn from this alleged marketing tactic.
This situation reminds us of the importance of taking advantage of opportunities to let others know about real estate services that we offer, above and beyond completing an appraisal. There are several ways to do so. I think one of the easiest ways is with business cards. Leaving a business card with those we meet, in a professional setting, can be beneficial in several ways.
To read more (and see fun videos and animated gifs), click here
My comment: Don’t miss the animated gif of a guy in a business suit using a huge onion ring as a hula hoop!! Plus lots of tips on business cards. I give them out on every appraisal inspection. I get referrals from them sometimes many years after I appraised the house!
Home Valuation Bias Event June 15, 2021, 2 hour recording
Consumer Financial Protection Bureau (CFPB)
Acting Director Dave Uejio hosts discussions with civil rights organizations, housing policy experts, and other federal agencies to explore how home appraisal bias in housing appraisals and automated valuation models may occur and what steps can be taken in response.
A few email comments (from National Appraisers Forum) by appraisers who watched the first part of the testimony:
– Appraisers work within the mortgage-finance arena, and lenders dominate that arena. He (Jim Parks, close to the end of his testimony) suggested that if one really wants to get to the root of the problem, that path is going to have to include an examination of the influence lenders have and look at the practical consequences of that influence.
– If you are concerned or scared about this racism in appraisals issue and how it’s going to affect MAJOR changes within the profession now, then you will be after you watch it. The residential appraiser is underway more of an attack than just claims of bias.
– (Michael Neal, is an economist with the Urban Institute, near the end of testimony) Appraiser comments: He then said based on his analysis, it turns out that Race was a factor and it is statistically significant. Consequently, some of the remedies he calls for is for AVM developers to devise a way for AVMs to compensate for the race of the the neighborhood. In other words, it looks like if you are in a black neighborhood, the AVM is going to undervalue the home more so than it would if you were in a white neighborhood; therefore, we need to tweak the algorithm, so this is addressed: Race becomes part of the calculation, and it impacts the AVM’s value upward to adjust for the racial composition of the neighborhood.
To listen to the recording, click here
My comments: You can hear what people say, pro and con, on this very controversial issue. I have not had time to watch the full video yet. Once again, appraisers are an easy target. Real estate agents have NAR. Who speaks for appraisers??
These issues are widely discussed on tv and radio, but I have never heard anyone speaking for appraisers live. I recently listened to a podcast about this topic. The moderator said she asked the Appraisal Institute to speak but just received a written comment. She read a few sentences. Everyone else commented verbally.
Independent Fee Appraisers Under Attack
By Dave Towne
Excerpts: Housing discrimination started with GOVERNMENT actions to a great deal, which forced individual citizen and neighborhood changes, perpetuated by prevailing citizen attitudes across the country. All races and indigenous peoples have been affected.
Independent Fee Appraisers did not cause housing discrimination, nor have ‘we’ selectively oppressed vast numbers of races as have GOVERNMENT officials – for nearly 2.5 centuries in the US. This has been going on between peoples for as long as humans have been on this planet, roughly 6-8 THOUSAND years.
Independent Fee Appraisers have only been recognized in this country since the 1930s.
… not discussed often by the ‘blame appraiser pundits’ are the vast number of non-appraiser, electronic algorithm AVM’s being used for lending purposes, and for the mass appraisals jurisdiction assessors use. Where do those get their data from? Do they choose to use properties from higher-value neighborhoods when establishing their computerized property value in a low-value neighborhood? Probably not. And neither do experienced Independent Fee Appraisers.
To read more, click here
My comment: Why is no one looking at the lenders who hire the appraisers, have long lists of requirements, and review the appraisals? See comments above on a recent bias event above.
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 firstname.lastname@example.org . Or call 800-839-0227, MTW 7 AM to noon, Pacific time.
Mortgage applications increased 4.2 percent from one week earlier
WASHINGTON, D.C. (June 16, 2021) – Mortgage applications increased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 11, 2021. The previous week’s results included an adjustment for the Memorial Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 4.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15 percent compared with the previous week. The Refinance Index increased 6 percent from the previous week and was 22 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index increased 11 percent compared with the previous week and was 17 percent lower than the same week one year ago.
“Mortgage applications bounced back after three weeks of declines, increasing over 4 percent last week. Both purchase and refinance applications were up, including a 5.5 percent gain in refinances. The jump in refinances was the result of the 30-year fixed rate falling for the third straight week to 3.11 percent – the lowest since early May. U.S. Treasury yields have slid because of the uncertainty in the financial markets regarding inflation and how the Federal Reserve may act over the next few months,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase activity also rebounded, even as supply constraints continue to slow the housing market. An almost 5 percent increase in government purchase applications drove most of last week’s gain while also tempering the recent growth in loan sizes. Purchase applications were still down 17 percent from a year ago, which was when the mortgage market started seeing large post-shutdown increases in activity.”
The refinance share of mortgage activity increased to 61.7 percent of total applications from 60.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.8 percent of total applications.
The FHA share of total applications increased to 9.6 percent from 9.5 percent the week prior. The VA share of total applications increased to 11.5 percent from 11.2 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 ($548,250 or less) decreased to 3.11 percent from 3.15 percent, with points increasing to 0.36 from 0.34 (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 $548,250) decreased to 3.20 percent from 3.29 percent, with points increasing to 0.46 from 0.32 (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 3.14 percent from 3.12 percent, with points decreasing to 0.33 from 0.34 (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 2.49 percent from 2.52 percent, with points decreasing to 0.25 from 0.29 (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 increased to 2.69 percent from 2.54 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.
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501