Declining Market - Final Chapter?

[Rob Lentz]

Lender sends three requests in the last week - local bank client. Two are secondary market, one in-house.

First one finished, and sent in.

Second and third scheduled for Saturday.

First appraisal states DECLINING market. My local data shows approx. 6.5% decline in past 12 months. Guess what? Standard and Poors Price index concurs...So does OFHEO.

LO says UW will never go with that and that she may have to pull the other two orders (COERCION). Further, she informs me that other appraisers in the area don't mark declining. We discuss the market and she agrees that its in decline, that its common knowledge - just that she doesn't think she can keep sending me work if I'm going to mark it that way. I say...Fannie/Freddie buy loans in declining markets everyday. 14 states are known to be in decline. Michigan is one of them. I encourage her to send it on to UW and if needed I'll answer any questions they may have. One comp sold this month - so no time adjustment. Comp 1 is 6 mo. old - -3% time adj., Comp 2 is 5 mo. old - -3% time adj. The declining market has been documented, reported, analyzed, and comps adjusted to reflect value as of effective date (depreciation).

Later...UW says everything is fine...LO says keep the appointments on the other two.

You CAN stand above the fray, especially if you've done your homework and you support your analysis.

Hope this helps some of you who fear the ramifications of reporting your declining market as it is.



Sincerely,
Rob Lentz


ps-
If the other orders had been pulled, I would be calling the bank pres. and/or the appraisal manager to let them know how their LO's are behaving. I can afford to lose a client - I can't afford to lose my license.

 

[Carnivore]

I congratulate you for your efforts. This is good news, to hear about someone winning the good fight.


hoo ray, hooo aaahh, yippee kia cowboy :new_multi:

 

[hastalavista]

I have yet to have a client tell me that they will not send any more work to our office because we are marking "declining" if that is what the market indicates (and, that is what the market is indicating about 90% of the time).

Rob-
Kudos to you for supporting your analysis.
Another Forumite who I attended a class with mentioned to me that Freddie (and Fannie, apparently, reversing their previous position) are giving 5% LTV haircuts to loans that are in declining market, so maybe this is where some of the concern from the loan agents is coming from.
However, Freddie and Fannie are not idiots and they know the markets are declining- these loans are going to get kicked back anyway if the appraisal indicates inaccurate market data.

Of all the fights to fight with clients/lenders/brokers, this one should be one of the easiest- the market "is what it is".

 

[CANative]

Whether the appraiser marks declining or not, Fannie Mae is going to restrict maximum financing (LTV/CLTV) to 95%.

And they apparently don't trust appraisers. Their most recent announcement (yesterday) states that if the appraisal is not marked declining they must verify this using other sources.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2007/0722.pdf

 

[Ajax in CA]

Thanks!

Lender sends three requests in the last week - local bank client. Two are secondary market, one in-house.

First one finished, and sent in.

Second and third scheduled for Saturday.

First appraisal states DECLINING market. My local data shows approx. 6.5% decline in past 12 months. Guess what? Standard and Poors Price index concurs...So does OFHEO.

LO says UW will never go with that and that she may have to pull the other two orders (COERCION). Further, she informs me that other appraisers in the area don't mark declining. We discuss the market and she agrees that its in decline, that its common knowledge - just that she doesn't think she can keep sending me work if I'm going to mark it that way. I say...Fannie/Freddie buy loans in declining markets everyday. 14 states are known to be in decline. Michigan is one of them. I encourage her to send it on to UW and if needed I'll answer any questions they may have. One comp sold this month - so no time adjustment. Comp 1 is 6 mo. old - -3% time adj., Comp 2 is 5 mo. old - -3% time adj. The declining market has been documented, reported, analyzed, and comps adjusted to reflect value as of effective date (depreciation).

Later...UW says everything is fine...LO says keep the appointments on the other two.

You CAN stand above the fray, especially if you've done your homework and you support your analysis.

Hope this helps some of you who fear the ramifications of reporting your declining market as it is.



Sincerely,
Rob Lentz


ps-
If the other orders had been pulled, I would be calling the bank pres. and/or the appraisal manager to let them know how their LO's are behaving. I can afford to lose a client - I can't afford to lose my license.

Thanks, I had my first appraisal today where I had to mark the declining box and justify my reasons. We can't go on pretending that everything is just fine and the market is stable. If more of us played by the rules and ethics of appraising it would make it easier on the honest appraisers. We can't ignore the elephant in the room any longer.

:new_xmas:

 

[Carnivore]

useful link to place in your reports:

http://www.ofheo.gov/calculator/Default.aspx

It only goes as low as MSA but hey that might work for you. Take florida. The whole state has declined. North Carolina the whole state has increased.

 

[TJSum]

Thanks for the link Greg, if lenders complain I will just forward the link to them However, so far I have had no complaints when using the declining statements...

 

[Rob Lentz]

Greg -
You always seem to know when these things come out. Are you on a notification list or something or do you just check for these announcements on a regular basis? Thanks for the link...I will be forwarding this to clients so we can stop playing these games.

I'd also like to know exactly who, in my market, is not reporting it the way it is....its folks like that that make the feds not trust the whole lot of us anymore. If appraisals were worth the paper their printed on....aww don't get me started.

Recently, an aquaintance had a house for sale - didn't sell after 6 months (best selling months of the year) at $90k. Was appraised immediately after the house expired for 15k more than the list price. Really? Appraisal 101, people. No wonder they don't trust the majority of appraisers. He asked me was it legit? I returned the ?-what's your gut tell you? He shook his head in agreement...BS Appraisal...no its not worth that.

In the above scenario, borrower is happy to have rolled 1st and 2nd together, L/O is happy to have made some money, and the appraiser comes off like some freakin' hero-plus he's guaranteed his invoice will be paid. AND the L/O knows that they can do it all again on the next deal...its simple prostitution.

 

[Abzntminded]

useful link to place in your reports:

http://www.ofheo.gov/calculator/Default.aspx

It only goes as low as MSA but hey that might work for you. Take florida. The whole state has declined. North Carolina the whole state has increased.

It doesn't seem to get MSA specific, at least not for Ca - any MSA I plug in gives exactly the same calculations as any other, which just happens to be the same number for the entire state.

 

[jfalco1]

Michigan Appraiser too.

I'm in Michigan too. Been marking declining for some time now. Lost some clients, but all in all, most of my clients have kept me. Good to hear of another Michigan appraiser checking the decline box. If we stick to our integrity maybe the others will follow.