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Full disclosure update 1/15/08

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Mark to market

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New Mexico
We seem to have beaten back the proposed full disclosure bill for this year. The Gov appears to be concentrating on his three pet projects, health care, health care and health care.

I suspect that there was enough opposition that the proposed bill would have been too contentious in a short 30-day legislative session.
 

Terrel L. Shields

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The best defense against lying agents is the disclosure laws. It gives verifiable information. I can imagine having a Realtor tell me one thing and telling another something else....then the two different values have to be argued out. Further, if you pz a Realtor off...don't expect to get any cooperation in the future. The disclosure law would bypass that issue. I really don't understand why any appraiser would oppose it.
 

Mark to market

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New Mexico
The best defense against lying agents is the disclosure laws. It gives verifiable information. I can imagine having a Realtor tell me one thing and telling another something else....then the two different values have to be argued out. Further, if you pz a Realtor off...don't expect to get any cooperation in the future. The disclosure law would bypass that issue. I really don't understand why any appraiser would oppose it.

Terrel,

Full disclosure would open the door for lending giants to replace interior inspection appraisals in New Mexico with computer valuations. These valuations, which could be performed in another state or even in another country do not account for seller concessions, sales that are not arms length or sold under duress, condition of the property, marketability, functionality, unique features, sudden changes in the market, school districts, views, or other variances in location. Instead they focus on mean averages, which generally does not represent the true market value of the property.

Risk managers in the banking industry are questioning the role of computer valuations in the sub prime crisis and it should be noted that the states which are facing the largest declining markets and contributing the most to one of the largest financial debacles in American history are full disclosure states with prolific use of computer valuations.

In addition to adding havoc to the lending industry, computer valuations have frequently misinformed FSBO homeowners with inaccurate (and costly) valuations for listing their homes.

Privacy concerns abound and many New Mexicans feel that the price they paid for their home is their business and that prospective employers, nosey co-workers and the public in general should not be privy to such information. Several voices have suggested that opening up private information on home purchases will aid and abet identity theft. In addition some full disclosure states require floor plans be made public which would certainly help potential criminals.

New Mexico is fairing the mortgage crisis well due in a large part to honest lenders, brokers, appraisers and being a non-disclosure state. Allowing large corporations with their focus on short-term profits to disrupt our economy thru lack of oversight is not in the interest of the New Mexico public. It would seem ill advised for New Mexico to change from a non-disclosure state before the facts on computer valuations are fully known.

It is a shame that people are not seeing the larger picture of lending entities being able to give value to their own loans without oversight.

Fannie is primarily a secondary market entity (which means it buys other loans and repackages them for resale). In fact their original charter mandated by Congress forbade them from originating loans in the primary market. Their Desktop Underwriter program skirted this mandate and allowed them to operate in the primary market in conjunction with the originator of the loan. Full disclosure opens the door for them to be able to use their proprietary AVMs to establish value for loans in the primary market. They would then take the loan into the secondary market, where they bundle it and sell it, thereby transferring risk to investors and liability to taxpayers without the oversight of an independent local appraiser doing an interior inspection.

Common sense would suggest that Fannie should only become involved with the loan after it closes in the primary market and that a conflict arises when compensation for an entity is tied to the value that it gives for a loan. If you can see that a situation like this could contribute to a mortgage crisis do not feel alone. Many people felt that Fannie being in the primary market could lead to just that and in 2005 Senators Hagel, Dole and Sununu tried to pass a bill (S.190) forbidding Fannie from any primary market activity at all. Unfortunately it did not pass.

A local board member has suggested that New Mexico should become full disclosure because local appraisers are cooking the appraisals and that full disclosure will allow AVMs to correct this problem. With all due respect to this board member my comment is first of all, if this is going on there are other ways to deal with it then becoming full disclosure. Second that full disclosure has not stopped bad appraisals in other states. Third, any damage done by rogue local appraisers would be very small when compared to the damage done by large lending entities in the current mortgage crisis (i.e. creating stated income loans and using AVMs to establish value for in house loans without oversight).

Appraisals and valuations should come from unbiased experts, not large corporations who by nature are concerned more about short term profit then the public welfare. Trusting the health of our economy to a company (Fannie) known for accounting malfeasance for profit is not wise. Full disclosure means lowering standards for appraisals (AVMs and drive-bys), and allowing Fannie Mae to operate without oversight. Considering the current mortgage crisis we should be tightening appraisal standards not loosening them.

Thanks, Mark
 
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Mark to market

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New Mexico
For those interested, I talked to our Attorney General Gary King last month. According to him full disclosure is on the table for next year.
 

Lobo Fan

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New Mexico
Did he tell you who is driving this thing? I saw the bill to spend $6 million to upgrade the computers in the assessor's offices failed. That will be the first step to implementing full dsclosure. I wonder how the AVMs will be able access places like Guadalupe county. They use their computers for e-mail and solitaire.
 

Mark to market

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No he did not, however he did invite the Appraisal Council to send a few members up to Santa Fe and discuss it with him.
I can tell you that in the past it has been the GSEs, major lenders and consumer advocacy tagalongs (who think that the public will benefit from cheaper appraisals) who have pushed for AVMs and full disclosure.
 

PropertyEconomics

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New Mexico
Did he tell you who is driving this thing? I saw the bill to spend $6 million to upgrade the computers in the assessor's offices failed. That will be the first step to implementing full dsclosure. I wonder how the AVMs will be able access places like Guadalupe county. They use their computers for e-mail and solitaire.


The Governors Task Force On Lending made the recommendation to the Governor that the state SHOULD adopt full disclosure. Among that task force were Realtors, Bankers, Public Members, and atleast one member of the Appraisal Board. To my understanding the vote was nearly unanimous with only the Realtor voting against the measure.
That should give you a bit better of an idea as to who was behind the measure.
 

Mark to market

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Entered twice by mistake.
 
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Mark to market

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Certified Residential Appraiser
State
New Mexico
Lobo Fan,

Without stepping on too many toes I will try to answer your question in more depth.

To see who is pushing for full disclosure one merely needs to look at who would benefit from it. Historically it has been the GSEs who want a public funded database for their AVMs. They have recently been joined by others who would benefit from an expanded database.

Last year the Governor set up a sub prime lending task force. The task force was composed of some respected names. John Howden board member and commercial appraiser was on it. My understanding is that there was input from the GSEs, who were backed by other major lenders. In addition there was a consumer advocacy group who was probably the same one that spoke on the mortgage bill.

Gary King’s office is taking the suggestions under consideration and my guess is that it will be his office that presents them to committee at the next legislative session. Unfortunately, as you can see, the task force was composed of all pro AVM/Full Disclosure voices (with the exception of the realtor). Their pro AVM/Full Disclosure argument is based on the following. 1) Full disclosure will allow lenders ready access to public funded data bases, this in turn will allow them to use their AVMs to double check appraisals. 3) AVMs will ultimately allow many consumers a cheaper appraisal. 3) A majority of the states have full disclosure so it must be a good thing.

Obviously the task force did not bother to talk to me (just joking). Hopefully, this year, instead of front page articles accusing the appraisal community of fraud, the AVM/Full Disclosure advocates will come up with some specific numbers on how many Fannie AVM loans went bad, how much AVMs contributed to the current mortgage crises across the country, how their personal needs for a data base out way the privacy concerns of the public and how joining the likes of California, Nevada, Arizona and Florida with their failing housing industry will benefit the NM public
 

Mark to market

Thread Starter
Junior Member
Joined
Nov 14, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
Did he tell you who is driving this thing? I saw the bill to spend $6 million to upgrade the computers in the assessor's offices failed. That will be the first step to implementing full dsclosure. I wonder how the AVMs will be able access places like Guadalupe county. They use their computers for e-mail and solitaire.

Another major force pushing full disclosure is political. This certainly appeared true in the mortgage/lending bill from the last legislative session and since we have many of the same players (Governor who sets up the task forces, AG’s office who ends up fielding the suggestions from the task force and presenting them to the House Business and Industry Committee, and consumer advocacy groups who sit in on the task force and
then act as props for the AG during the House Committee presentation), it may well be that we have a preordained political agenda.

How would this be a political benefit? Perhaps they wish to appear proactive, perhaps in their heart of hearts they really believe that NM citizens would be better off by coming up with money to fund a database for big banking. For those more cynical, perhaps this is partly motivated as a favor for one of the mortgage industries biggest political donors (Fannie Mae).

Whatever the reason, I also would like to know more about how the state and counties are going to fund these databases and then avoid responsibility when they are shown to be inaccurate. How will they deal with items like non-permitted additions and non-conforming zoning? What will be the affect on our market if they do not account for seller concessions, personal property or a host of other variances that may be included in a sales price?
 
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