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Addressing new lender requirements.

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cbosshog79

Thread Starter
Freshman Member
Joined
Aug 28, 2008
Professional Status
Certified General Appraiser
State
Texas
I have been asked to meet with a panel of local realtors in a month or so to discuss new lender requirements and concerns effecting appraisals within the previous few months. The primary focus of the panel is residential properties.

I am in the process of studying up on what to talk about, and any input would be greatly appreciated. As I am in a rural area and a certified general the majority of my work is farm / ranch and commercial, particularrly in the previous two to three month period.

For those of you who have handled a large quantity of residential appraisal work in the past few months, what is your largest (new) concern?

Thanks,
Cody
 
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VolcanoLvr

Senior Member
Joined
Oct 30, 2003
Professional Status
Certified Residential Appraiser
State
Washington
"Aging" of comps is the latest buzz from u/w's..........they want 'em to be w/in the past 90 days, or else write a bunch of explanation as to why an extended time search was necessary.

Appraising in suburban/rural areas presents situations that may not comply with the above 'requirement.'

Realistic pricing. In some cases RE agents list & sell properties at prices that are not supported by past sales, and existing listings/pendings. Competent appraisers will report an OMV below the contract sales price, which could impact the sale.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Here are a few that jump to mind:

Over-supply of inventory
Solds to listed/expired/withdrawn ratios
Accurate measuring of declining market values
Limited numbers of "relevant" sales available to use as comps
REO and short sale impact on values
Accuracy of MLS data regarding listed properties and selling terms/conditions. (always a concern for any appraiser)

***************

In short, as a residential appraiser using the FNMA 1004/2055 forms to report on, I would address those areas specifically that have become troublesome to the clients. Since most residential appraisals are completed on these forms, it is essentially those items on the reporting form that one has to address. Clients rarely stray from wanting to know anything that is not covered on either of these forms. You may want to talk to some local residential appraisers to see if there are specific items.
 

Craig Farr

Junior Member
Joined
Sep 26, 2004
Professional Status
Certified Residential Appraiser
State
Arizona
You should do MUCH homework on the emerging storm of AMCs battling for a few big lenders by promising quick turn-times, high quality and low fees.

This terrible situation will have THE MOST IMPACT on residential marketing, lending and appraising over the next couple of years until it collapses due to, yes, "quick turn-times, high quality and low fees".

Cody, do you get the picture yet? The new laws forcing the mortgage industry to use AMCs has the high possibility of destroying the residential appraisal industry. What kind of "high quality" appraisal can be expected when the AMCs offer $125 to skippy appraisers dancing like a guy in the old western movies while somebody shoots bullets at his feet?

Cody, tell the Realtors to expect, for the next year at least, appraisals to hit the sale price every time. The skippy appraisers doing full 1004 appraisals for $125 don't have time to (A) do a good job and (B) defend a good appraisal that doesn't hit the sale price.

This is an ugly picture, Cody. Don't put any rose-colored lens on it. Tell it like it is. Explain to the Realtors that their dream of destroying the appraisal industry is almost at hand. When that happens they will have another grand bubble of unrestrained selling and lending.......which will inevitably collapse into economic devestation that will make the current mess look like a single missed pay-day.
 

Michael Tipton

Senior Member
Joined
Sep 25, 2005
Professional Status
Certified Residential Appraiser
State
Florida
I would review and reference the following:

FNMA announcements 07-11 and 08-16
FHA mortgagee letters 07-11, 08-09 and 08-25.

Appraising in a declining market is partially addressed in the above referenced documents that can be downloaded. Comments regarding HVCC would be minimal on my part as we are still awaiting changes associated with the comment period.
 

Calvin the Airedale

Elite Member
Gold Supporting Member
Joined
Aug 17, 2004
Professional Status
Certified General Appraiser
State
Ohio
IMO, Wall street can't sell a mortgage backed bond to save its life. Investors are like the chief of police in Casablanca, "shocked to find that these bonds contained mortgages."

I understand it. Mortgage back bonds have taken a drubbing and investors are loathe to continue that bet until they see the bottom in housing. Therefore the national piplelines for all types of conventional product has frozen. This accounts for the acute drop in lending over the past three months, as many on the forum can attest.

FHA and VA lending is still taking place but at a much slower pace.

The good news nationally is that all those community banks and thrifts that got passed by in market share because of the large nationals in lending and deposit competition will see a resurgance. They are the only ones lending now though the loans are thoroughly straight laced.

Conforming credits, lower LTVs, shorter amortizations will prevail over the next few years.

The bad news, is that, aside from foreclosures generated from the Alt-A credit reset cycle, transaction volumes will fall. Aside from foreclosures, there will be fewer deals for both Realtors and appraisers, probably until 2011.

Expect industry fallout rates in the range of 40% to 60%. The lending industry has already thinned by more. Appraisers and Realtors have also, but this will continue into the next decade. In other terms, for every 10 Realtors or appraisers doing business in 2Q06, except only from 4 to 6 to survive.

The formerly active single family rehab, flipping and investment market is fast becoming a cash market. Nobody wants to extend credit for this activity, except for "hard money" lenders, which apparently, is the new euphemism for usurous lending.

In terms of what lenders want, expect to go back to the old days: a borrower is going to have to prove he doesn't need the money before anyone will give it to him. That will play out on both the credit and collateral side of each lending decision.
 
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Workbox

Elite Member
Joined
Mar 2, 2005
Professional Status
Certified Residential Appraiser
State
Colorado
I agree with all post, you should utilize them all and make your presentation. I would try to use positive working to explain the negative to these folks though, they are not trained to think like us and can not handle the truth. But to tell it like it is in the most academic way possible.

What part of Texas are you at?
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
great opportunity to partner with an experienced Cert.Res. who can address the Residential aspects from strength.
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
great opportunity to partner with an experienced Cert.Res. who can address the Residential aspects from strength.

I agree with Mike K on that.

I think most RE agents still think that market value is defined as the HIGHEST price a property will bring....etc. rather the the most probable selling price...etc. That is how most agents get their listings.
 
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