Newz: FHFA Waiver Expansion, AMC Appraisal Fees, Appraising Kitchens
November 1, 2024
What’s in This Newsletter (In Order, Scroll Down)
- Construction Progress Inspection Reports: Claims Involving ADUs and Remodels
- Appraising Kitchens: Understanding Trends, Functionality, and Market Expectations
- Lake Tahoe Ranch Hits the Market for $188 Million, Making It One of the Priciest Listings in the U.S.
- FHFA’s Appraisal Waivers Expansion
- The Great Debate on Appraisal Fees
- Updated UAD redesign timeline with specific implementation dates
- Mortgage applications decreased 0.1 percent from one week earlier
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Appraising Kitchens: Understanding Trends, Functionality, and Market Expectations
Excerpts: When it comes to real estate appraising, kitchens often play a pivotal role in determining a home’s value. A well-appointed kitchen can significantly enhance a property’s appeal and marketability. As an appraiser, understanding the nuances of kitchens is essential to providing credible and insightful valuations. Let’s dive into appraising kitchens and how the room impacts market value.
Functional Obsolescence and Price Point
If a back corner kitchen or a galley kitchen does not align with current market preferences for homes of a similar age, it might be considered outdated and impact marketability. However, this does not necessarily rise to the level of functional obsolescence that must be remedied. An outdated but functional kitchen might not be a major concern in lower price ranges.
Conversely, in high-end homes, buyers expect the latest designs, features and finishes; and therefore, an outdated kitchen may be considered as functional obsolescence.
Appeal & Functionality Count when Appraising Kitchens
In conclusion, appraising kitchens requires a thoughtful, balanced analysis of market trends, quality, and functionality. While it’s important to understand current design preferences, the value of a kitchen is ultimately determined by how well it meets the expectations of buyers in a particular market.
A homeowner may have invested heavily in a kitchen renovation, but it is the appraiser’s responsibility to carefully consider factors such as conformity, local market preferences, and house style and price range when valuing the subject property. Remember, ultimately a kitchen’s value lies in its ability to enhance the overall appeal and functionality of the home, not its initial cost or the cost of renovation.
To read more, Click Here
My comments: This is the best analysis I have read on kitchens. Worth reading. Kitchens are a very important factor when buying a home. What is popular changes over time. Of course, appraisers see all types of kitchens.
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Lake Tahoe Ranch Hits the Market for $188 Million, Making It One of the Priciest Listings in the U.S.
Excerpts: sprawling Lake Tahoe estate known as Shakespeare Ranch hit the market on Monday for $188 million.
Not only is that a price tag that makes it the most expensive property on the market in Nevada, it’s also one of the priciest in the entire U.S., bested only by a small handful of homes in Los Angeles and South Florida.
Named after the nearby Shakespeare Rock, a nearby outcropping that is said to resemble the playwright, the property spans 130 acres on the eastern shores of Lake Tahoe and includes a colossal selection of amenities, from multiple properties and a historic barn to its own rodeo ground and private pier.
The ranch dates to the late 1800s, and its multiple properties include a 4,980-square-foot lakefront home with a waterside cabana, an under-construction 7,713-square-foot architect-designed residence and a number of cabins.
he historic barn on the property was built in 1873 and is currently outfitted with a commercial kitchen, a game center and a wine room.
The property also has a pool house with an indoor pool and spa, a gym, lawns, gardens, an office suite, a staging kitchen for catering, two boat lifts, 14 buoys and a boat house.
To read more, Click Here
For video, photos, and more information and to see the listing, Click Here
My comments: I live within driving distance to Lake Tahoe and have been there many times. A beach with a dock and a boat house is a premium feature.
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FHFA’s Appraisal Waivers Expansion
Excerpts: The recent announcement from the FHFA Deputy Director Naa Awaa Tagoe regarding the expansion of appraisal waiver eligibility for purchase loans is a significant development that has sparked debate and controversy within the mortgage industry. By increasing the maximum allowable loan-to-value (LTV) ratio for full appraisal waivers from 80% to 90%, and for inspection-based appraisal waivers from 80% to 97%, the FHFA is taking a risky and potentially irresponsible step that could have far-reaching consequences. As former FHFA Director Mark Calabria aptly pointed out, this decision is truly “dumb and irresponsible” and deeply disappointing.
The potential ramifications of this policy shift are dire. When the inevitable happens and the overinflated housing market comes crashing down, the FHFA and its decision-makers will have no one to blame but themselves. Appraisers, who have long been the scapegoats for industry missteps, will not be the ones to bear the brunt of the blame this time.
The responsibility will squarely fall on the FHFA’s shoulders for implementing such a reckless and short-sighted policy, one that undermines the essential role of professional appraisers and puts the entire housing market at risk of another catastrophic collapse.
The FHFA’s attempt to marginalize appraisers and remove them from the equation entirely is a dangerous gamble that could have dire consequences for the entire economy, and the agency will have no one to blame but itself when the inevitable happens.
To read more plus appraiser comments, Click Here
My comments: Links to the original FHFA document plus other useful links are in this blog post. In my opinion, this definitely increases risk for consumers, GSEs, the economy and the real estate market. The Wall Street Down graphic above is for the 2008 crash.
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New in the November 2024 issue of Appraisal Today
- A brief AMC history from 1967 to now – from 5% to over 80% of the appraisal market
- Lets talk about subpoenas, By Claudia Gaglione, Esq.
- Using the subject as a comp – When and Why, By Timothy Andersen, MAI
AMC history helps understand how they changed over the years, most significantly after 2008. When business picks up, hopefully in early 2025, you need to start thinking about which AMCs you want to work for.
Subpoenas for a large number of appraisal documents – what to do.
Many appraisers think that you can never use the subject for a comp. Tim, the USPAP Expert goes over all issues, looking at GSEs, Appraisal text books and other sources.
To read more about these topics, plus 2+ years of previous issues, subscribe to the paid Appraisal Today at www.appraisaltoday.com/order .
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The Great Debate on Appraisal Fees
Excerpts: The Consumer Financial Protection Bureau (CFPB) recently issued a Request for Information Regarding Fees Imposed in Residential Mortgage Transactions [Docket No. CFPB-2024-0021] in which it solicited feedback from the public and industry stakeholders on the fees charged to consumers by mortgage providers and related settlement services. The CFPB framed it as an inquiry into “junk fees” in the mortgage space, writing that it wants to “understand why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered.”
“The CFPB is looking for ways to reduce anticompetitive fees that harm both homebuyers and lenders,” said CFPB Director Rohit Chopra. The real estate appraisal profession responded—with nearly 100 comments submitted that addressed appraisal fees in some way. Appraisers spoke up, alongside many of the national appraisal organizations, highlighting the need for regulatory action and greater transparency around appraisal and appraisal management company (AMC) fees.
Specifically, a key point of contention is how the current TILA-RESPA Integrated Disclosure (TRID) allows for a “bundled appraisal fee” that includes both the AMC’s fee and the appraisal fee. Many believe this bundled fee is one of the main reasons there is so much animosity between AMCs and appraisers; and that it has a seriously negative effect on market transparency, free market competition, appraisal quality, and the total cost to consumers.
Separating the AMC fee and the appraisal fee on consumer mortgage disclosures is something several national appraisal organizations have been trying to accomplish for the last 15 years, arguing that it would bring much needed transparency for all stakeholders and remove the incentive for an AMC to seek the cheapest appraiser it can find for an assignment instead of properly focusing on the “appraiser’s qualifications and credentials.”
Now, the CFPB’s request for comment has sparked a national debate on what can or should be done to address appraisal fees and the current AMC appraiser dynamic.
My comments: My opinion on the issue: No one cares much about appraisers. Many people confuse us with real estate agents.
THE BEST WAY TO FIGHT BACK IS TO EMPHAIZE THAT CONSUMERS ARE PAYING TOO MUCH FOR APPRAISALS BECAUSE AMCs ARE TAKING A BIG CUT OF THE APPRAISAL FEE.
Comprehensive article on the fee issue, with comments from appraisers, appraiser organizations AMCs, MBA and many more organizations. This was published in the Fall 2024 issue of WorkingRE magazine and was posted recently in on the WRE web site.
To read more, Click Here
In the September 6 issue I wrote about “Appraisal Regulation Compliance Council Exposes Disturbing AMC Violations” including reliable analysis from Appraisal Regulation Compliance Council (ARCC)
To read this newsletter issue, Click Here
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Updated UAD redesign timeline with specific implementation dates
October 28, 2024
Updated UAD Redesign Timeline with Specific Implementation Dates
Fannie Mae and Freddie Mac (the GSEs) have published a detailed implementation timeline for the industry migration to the Uniform Appraisal Dataset (UAD) 3.6 and dynamic Uniform Residential Appraisal Report (URAR) that provides specific implementation dates. While the timeline has not changed, we’ve updated previously provided quarters with specific dates to help the industry develop more detailed plans for implementation activities.
Highlights include:
- Industry Prep (ongoing) Industry training available on GSE websites: November 18, 2024
- GSEs publish policy updates: June 4, 2025
- ULDD Mandate: July 28, 2025
- Limited Production: September 8, 2025 – January 25, 2026
- Broad Production: January 26, 2026 – November 1, 2026
- UAD 3.6 Mandate: November 2, 2026
- UAD 2.6 Retirement: May 3, 2027
Shorter list
- 2024 Appraisers go mobile.
- 2024-2025 Software companies, lenders, AMCs built for the new UAD.
- Early 2025 Appraiser training starts.
- Late 2025 GSE pilot with specific lenders.
- Early 2026 New UAD in full production.
- 2027 & beyond New UAD fully required.
Per the announcement:
Training Available: – Appraiser-specific training for continuing education (CE) credit will be available through appraisal education providers beginning in 2025.
Mandate: November 2, 2026
All lenders must use UAD 3.6 in the production environment. Revisions will be allowed for previously submitted appraisals that used UAD 2.6.
To read the announcement and see the time line graphic Click Here
My comments: Now is the time to start learning how to use a smartphone or tablet for your appraisals. You will need to use a them to use the for new online software being developed by forms software companies because of the complicated data entry with many new fields. Using a clipboard manually will be extremely difficult.
Your current “forms” software vendor provides updates on what is happening and what they are doing about the new UAD online software.
Thanks to NAA for sending the above highlights list in a recent email. The GSEs had a recent “train the trainer” event and classes will be coming.
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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, Click Here.
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 go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.
My comments: Rates are going up and down. After early 2025, rates will drop. We are all waiting!
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Mortgage applications decreased 0.1 percent from one week earlier
WASHINGTON, D.C. (October 30, 2024) — Mortgage applications decreased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 25, 2024.
The Market Composite Index, a measure of mortgage loan application volume, decreased 0.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week and was 84 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 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.
“Mortgage applications were essentially flat last week as rates increased for the fourth time in five weeks, driven by bond market volatility in advance of the presidential election and the next FOMC meeting. The 30-year fixed rate, at 6.73 percent, was at its highest level since July 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “After a brief burst of activity in September when rates were almost 60 basis points lower, overall applications have declined 27 percent, driven by a pullback in refinances. Government refinances accounted for a large part of the decrease, dropping 12 percent over last week.”
Added Kan, “Purchase applications increased compared to a holiday-shortened week and were 10 percent higher than a year ago. While near-term purchase application activity has weakened, we continue to expect housing demand from younger homebuyers to support purchase growth over the next few years as for-sale inventory loosens gradually.”
The refinance share of mortgage activity decreased to 43.1 percent of total applications from 45.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.4 percent of total applications.
The FHA share of total applications decreased to 16.4 percent from 16.9 percent the week prior. The VA share of total applications decreased to 14.6 percent from 15.8 percent the week prior. The USDA share of total applications remained unchanged at 0.4 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.73 percent from 6.52 percent, with points increasing to 0.69 from 0.64 (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 $766,550) increased to 6.77 percent from 6.73 percent, with points decreasing to 0.49 from 0.57 (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 6.55 percent from 6.29 percent, with points increasing to 0.94 from 0.86 (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 6.27 percent from 5.98 percent, with points increasing to 0.77 from 0.66 (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 6.20 percent from 6.12 percent, with points increasing to 0.59 from 0.56 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers U.S. closed-end residential mortgage applications originated through retail and consumer direct channels. The survey has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, thrifts, and credit unions. Base period and value for all indexes is March 16, 1990=100.>
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Ann O’Rourke, MAI, SRA, MBA
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