Monday, December 20, 2010

Uniform Appraisal Dataset Specs - FNMA

New reporting requirements for appraisals delivered to Fannie/Freddie effective March 19, 2012 have been published.

First quote from the document:

"Under the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac (the GSEs) have developed the Uniform Mortgage Data Program (UMDP) to enhance the accuracy and quality of loan data delivered to each GSE. The Uniform Appraisal Dataset (UAD) is a key component of the UMDP, defines all data points required for a complete appraisal report form, and standardizes key appraisal data elements for a subset of fields on the Fannie Mae and Freddie Mac uniform residential appraisal report forms.

For conventional loans delivered to the GSEs on or after March 19, 2012 (and with application dates on or after December 1, 2011), Fannie Mae and Freddie Mac will require lenders to deliver electronic appraisal data prior to the loan delivery date. The appraisal data must conform to UAD and be delivered through the Uniform Collateral Data Portal (UCDP). The UAD and UCDP will help lenders, the GSEs, and other industry participants manage collateral risk through efficient collection and use of high-quality appraisal data."

The rest from Michael Imes:

"If you are interested in letting FM know how you feel, the link for feedback is below. I also included my comments fyi. FNMA doesn’t have an email address or form I can find to send in comments. They obviously don’t want to hear from anyone. I wonder why?

Topic: UMDP

Why isn't there a comment period from the industry...say appraisers to begin with, then lenders who have to try and read their appraisals?!?

You are recreating a wheel that has already been created by Marshall and Swift (M&S). Why didn't you use things that are already in place? Your system has some issues.

1. You are trying to change something that doesn't need changed, just specified. M&S already has these categories, so it is obvious where you got them from, but why can't you go ahead and use what makes sense? The standard word descriptors or the numbering system M&S uses? This would make much more sense. Everyone would understand it and be able to use it without much change. Instead, you decide to create more hardship.

2. You are using a ranking system that is opposite from what is already in place. This is going to cause much confusion.

3. You didn't leave room for that property that fits in the middle. M&S has a numbering system I am sure you are aware of (1.0, 1.5, 2.0, etc.) that accounts for those properties that don't quit fit into either category. Maybe we ought to rethink your move here? This is going to create so many headaches with lenders and appraisers. It also begs the question, does the appraiser assume/round to the higher or lower designation? Oh yes, higher and lower don't mean anything now...better or worse designation?

4. Has anyone mentioned how a "subject to" appraisal should be notated? The guidelines tell appraisers to tell you the actual condition/quality. But what if it is subject to? Do they tell you the before or after? Many will ask, be prepared.

I suggest you reopen, excuse me, open it to public comment rather than be dictators. Try working with the industry instead of against it which is what this readily demonstrates. Doesn't everyone want something easier to use that is more transparent rather than more difficult with more chances of errors? I agree that you all need to make this move. I don't agree with how you have gone about doing it, or how you did it. Again, get some feedback from the industry. Work with others rather than against them.


Michael Imes, IFA"

Wednesday, December 15, 2010

Appraisal Buzz Survey re Interim Final Rules

The Appraisal Buzz Survey HERE ( )

Here is the text of the "survey," which you attest to with name, address, and so on:

In response to an invitation to comment on Interim Final Rules we, the undersigned, offer the following comments:

As currently presented the Interim Final Rules have an inherent conflict within “Presumptions 1 and 2” of Customary and Reasonable Fees. This inconsistency is evident by allowing the lender to be compliant by adherence to two diametrically opposed options:

o Presumption 1: Established market fees without specific exclusion of fees paid by AMC

o Presumption 2: Established market fees with specific exclusion of fees paid by AMC (as proposed by the Act)

The existence of Presumption 1 is in conflict with the Congressional intent of Title 14 of the Dodd-Frank Act.
In order to protect lenders and consumers, Congress recognized the critical importance of engaging appraisers at a fee that allows for thorough analysis and diligence by the most competent appraiser. Not engagement based on lowest fee and rushed completion expectations.

o Removal of Presumption 1 in order to remain compliant with original Congressional intent as defined in Presumption 2

o If removal of Presumption 1 is not an option: Clarification that 100% of the fee paid by the consumer is the fee to be paid to the appraiser. Appraisal Management Company fees must be paid by the institution receiving the benefit of these services, the lender, not the consumer. AMC management fees can be defined any number of ways and customarily by Request For Proposal.

Appraisers recognize the valuable services AMCs provide to the lending community, however, the benefits enjoyed by a lender from the AMC’s national coverage, loan underwriting functions, appraiser independence compliance, etc should not be borne by the appraiser through the reduced appraiser fees paid by AMC’s.

Credible appraisal reports play an integral role in the safety and soundness of the lending process. As intended by Congress, Presumption 2 will provide consumer and lender with valuations established by professional appraisers with the resources and time to complete a thorough valuation.

Appraisal Highjinx

From Michael Imes, an article from MSNBC: 'Have down payment, but stuck in appraisal hell - Sales being lost as lenders adopt much tougher rules for homes' worth"

Predictably, appraisers remain the perennial punching bag.

Letter From ACOW re: "Green" Valuation

Here are the comments on behalf of ACOW regarding the "Department of Commerce's 2011 Strategic Plan regarding Energy Efficiency," directed to Chuck Murray, Department of Commerce:

December 6, 2010

Chuck Murray
Department of Commerce
P.O. Box 42525
Olympia, WA 98504-2525

Re: Public Comment Draft—Department of Commerce 2011 Strategic Plan for Enhancing Energy Efficiency and Reducing Greenhouse Gas Emissions from Homes, Buildings, Districts and Neighborhoods

Dear Mr. Murray:

On behalf of the almost 4,000 real estate appraisers in Washington State, we would like to take this opportunity to provide comments on the issue relating to the valuation of green residential properties highlighted on Page 19 of the Public Comment Draft: Financing—Appraisals.

We applaud your effort to ensure that housing (and our community) is more energy efficient, healthy and environmentally sustainable. As professional appraisers, we are pleased to see attention being paid to the appraisal process by your department.

We are concerned about this proposal for a variety of reasons, 1) Cost doesn’t always equal value, 2) Appraisers need to have the information, and 3) Dictating value adjustments is inappropriate and jeopardizes the independence of the appraisal process. We are also concerned that input from the appraiser community was apparently overlooked in the four work groups, and we hope that this letter will rectify this oversight. It appears the work groups intend to elevate recognition of energy efficient items in the real estate appraisal process. While we support that goal, we believe your department should consider the following:

1. Many home owners or other property owners may not know that appraisers themselves do not establish the market for a property – the appraiser merely reflects and reports on the market, and uses empirical-based market data to estimate the market value of a property.

If the market and market participants (i.e., buyers) do not yet recognize and/or adequately account for the perceived benefits of a “green” building in the way of an enhancement to the market value of the property, then an appraiser cannot simply increase the estimated market value of the property in an appraisal report merely because some developers, builders, or lay persons “believe” or “feel” that the property “should be” worth more. All elements of value must be supported through and based on market activity (i.e., sales, predominantly, or through higher rents for example in commercial properties).

Unfortunately, despite the passion of “green” industry building representatives and advocates, in many or most cases, the greater market has not yet perceived a significant enhancement in the market value of “green” properties, and reflected that enhancement in the form of either higher sale prices and/or higher rents for properties sufficient to cover the added costs of this type of development.

It is critical and important for the lay person to bear in mind that “Cost” does NOT necessarily equal “Value” (i.e., “market value”). This is a fundamental appraisal issue, and that is why appraisers complete a highest and best use and/or feasibility analysis for many properties prior to their development – to answer the question as to whether the costs of a project will be recovered, inclusive of a developer’s profit, based on current market data. Just because a builder spends more money to construct a “green” (“energy-efficient”) home does NOT mean that the market will ultimately compensate for this in the form of a higher price for that home, or a price sufficiently higher to cover all costs (with or without a profit element).

2. We agree that providing information to appraisers “may also increase recognition of the value of the efficiency items”. The builders need to provide this information to the appraiser, and the appraiser needs to make the judgment as to the impact on value as evidenced by the market. An appraiser needs to have all of the information – from builder, realtor, home inspector, etc. – regarding energy efficient features in order to be able to consider this information as part of their analysis.

3. For the Department of Commerce to be coming up with set value adjustments for various energy efficient features is completely inappropriate and borders on inappropriate influence on the appraiser’s independent judgment. As I am sure that you are aware, pressuring appraisers to report values not supported by the market is illegal, and appraisers have been fighting this battle for years. An appraiser is required to be independent, objective, and unbiased. Appraisers are being blamed that – during the good economic times – they too often appraised properties “too high; now that the market has softened, and they are “too low.” With the passing of the Dodd-Frank Act earlier this year, there are sweeping new changes to “Appraisal Independence”; several agencies have recently released updated guidelines and announcements specific to this topic[1].

We would be pleased to meet with you or your staff to discuss alternative language that would achieve the goals of this task force in a way that is consistent with existing rules, regulations, methodologies, and current efforts underway.


Justin Slack, SRA
President, ACOW

[1] For mortgage transactions secured by a consumer’s principle dwelling, refer to 12 CFR 226.36(b) under Regulation Z (Truth in Lending) through March 31, 2011. Also refer to 12 CFR 226.42, which is mandatory beginning on April 1, 2011. Regulation Z also prohibits a creditor from extending credit when it knows that the appraiser independence standards have been violated, unless the creditor determines that the value of the property is not materially misstated. Page 4 of 45 Footnote 14: Interagency Appraisal and Evaluation Guidelines (December 2, 2010—FDIC)

Sunday, December 12, 2010

Help Shape Future of "Customary and Reasonable Fees"

On October 28th, the Board of Governors of the Federal Reserve System published an “Interim Final Rule” amending Regulation Z, Truth in Lending Act, or TILA. This interim rule implements Section 129E of the TILA which was enacted in July as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

As has reported, the “Customary and Reasonable Fees” provision bodes well for appraisers, with this part of the act scheduled to be implemented on April 1, 2011. This “Interim Final Rule” has language that concerns appraisers in regard to whether the provisions related to appraisal fees will be truly enacted and not be a bad April Fool’s joke.

A link to the Fed’s “Interim Final Rule” is found here: Part 226 Truth in Lending: Interim Final Rule

More importantly, a link where you can register your comments with the Fed is found below. The deadline for comments is December 27th so please take a few minutes to make your voice heard.

Federal Reserve Board: Electronic Comment Form

(Thank you, Michael Imes)

Thursday, December 9, 2010

3Q10 FDIC State Profiles

The Third Quarter 2010 FDIC State Profiles are now available on-line. The FDIC State Profiles are formatted as a quarterly data sheet summation of economic and banking conditions for all fifty states, Puerto Rico, and the Virgin Islands .

They are available in both HTML and PDF formats.

Saturday, December 4, 2010

Interagency Appraisal and Evaluation Guidelines

Joint Release
Board of Governors of the Federal Reserve System
Office of the Comptroller of the Currency
Federal Deposit Insurance Corporation
Office of Thrift Supervision
National Credit Union Administration

Agencies Issue Final Appraisal and Evaluation Guidelines

The federal financial regulatory agencies issued final supervisory guidance today on sound practices by financial institutions for real estate appraisals and evaluations.

Financial institutions use reliable appraisals and evaluations to determine the value of collateral for mortgages and other loans; appraisals and evaluations are integral to institutions' real estate lending. Institutions base credit decisions primarily on borrowers' ability to repay, but institutions also consider the value of real estate collateral as a secondary source of repayment.

The Interagency Appraisal and Evaluation Guidelines, which replace 1994 guidelines, explain the agencies' minimum regulatory standards for appraisals. The guidelines incorporate the agencies' recent supervisory issuances on appraisal practices, address advancements in information technology used in collateral valuation practices, and clarify standards for the industry's appropriate use of analytical methods and technological tools in developing evaluations. Financial institutions should review their appraisal and evaluation programs to ensure they are consistent with the guidelines.

The guidelines emphasize that financial institutions are responsible for selecting appraisers and people performing evaluations based on their competence, experience, and knowledge of the market and type of property being valued. Institutions should demonstrate the independence of their processes for obtaining property values, and adopt standards for appropriate communications and information-sharing with appraisers and people performing evaluations, according to the guidelines.

In promoting sound credit decisions, the guidelines emphasize the importance of institutions maintaining strong internal controls to ensure reliable appraisals and evaluations. Institutions also are responsible for monitoring and periodically updating valuations of collateral for existing real estate loans and for transactions, such as modifications and workouts, according to the guidelines.

The Dodd-Frank Wall Street Financial Reform and Consumer Protection Act of 2010 underscores the importance of sound real estate lending decisions; future revisions to the appraisal guidelines may be necessary after regulations are adopted to implement the Act.



Michael Imes, IFA

Friday, December 3, 2010

Home photos pulled from Island County website

Whidbey News Times Assistant editor

Responding the concerns about privacy and safety, Island County Assessor Dave Mattens decided to take down photographs of homes from the office's online database.
It's not the best or even a permanent solution, he said, but "a temporary stopgap measure."
"It didn't solve the problem, but just shifted the problem," Mattens said. "It's going to make some people happy, but it will upset other people."

Mattens spearheaded the acquisition this year of new software for the assessor and treasurer's office. When the mountains of data were transferred over to the new system, all of the photos that the appraisers had taken of houses ended up on the searchable online database.

A number of people in the community complained about the photos of their houses being online; they were especially concerned about images taken from backyards and places not visible from public areas.

Full Article HERE

Wednesday, December 1, 2010

NAR says agents still reporting sale failures due to low appraisals

“NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., clarified that several factors are restraining a housing recovery, even with great affordability conditions. “We’ll likely see some impact from the foreclosure moratorium in the months ahead, but overly-tight credit is making it difficult for some creditworthy borrowers to qualify for a mortgage, and we are continuing to deal with a notable share of appraisals coming in below a price negotiated between a buyer and seller,” he said.

“A return to common sense loan underwriting standards would go a long way toward achieving responsible, sustainable homeownership. In addition, all home valuations should be made by competent professionals with local expertise and full access to market data — there remains an elevated level of appraisals that fail to provide accurate valuation, which is causing a steady level of sales to be cancelled or postponed,” Phipps said.

A parallel NAR practitioner survey shows 10 percent of Realtors in October report they had a contract cancelled as a result of a low appraisal, and 13 percent report they had a contract delayed; 16 percent said a contract was negotiated to a lower sales price as a result of a low appraisal.”

According to FHFA, Fannie- and Freddie-backed mortgages that were recently originated show an outstanding performance, even better than during the pre-housing bubble years.

“A review of recently originated loans suggests that they have overly stringent underwriting standards, with only the highest creditworthy borrowers able to tap into historically low mortgage interest rates. There could be an upside surprise to sales activity if credit availability is opened to more qualified home buyers who are willing to stay well within budget,” Yun added.

Full article HERE.