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Lender automatically reducing value 5% in Los Angeles area !

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John Taylor

Thread Starter
Freshman Member
Joined
Feb 28, 2003
Professional Status
Certified General Appraiser
State
Mississippi
Anyone else aware of this ? from Cit to mortgage broker...

To All:

Effective tomorrow Friday January 18th, Los Angeles will be affected by the local depreciating market situation. All registrations on and after this date will have a 5% maximum LTV reduction. Los Angeles County is the last one to be affected by this. We will honor all loans that were locked prior to this date. Thank you very much and if you have any questions please feel free to contact me.
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
They're not changing the value, only the LTV. Seems very prudent to build another 5% worth of caution into one of the craziest markets in the country.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I spoke with a manager for a large lender's branch today and he told me it was a Fannie directive for all locations listed as "softening" or "declining". In my area that means Hillsborough County, Pasco, Pinellas and Sarasota. The only county not affected is Polk, which is funny because that is where the prices are depreciating most quickly now, based on my research.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
A 5% reduction in LTV means the value has to go up to offset. More pressure on the appraiser to make the deal work.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
But on the flip side, Fannie might be raising their maximum loan amounts to $600,000, which would automatically adjust FHA to around $318,000 from the $222,000 or so it is now. Plus FHA is hoping to increase their loan amount even higher and increase their LTV from 97.75% to 98.5%. FHA doesn't have the same LTV guidelines Fannie has for declining markets and a lot of LOs will be able to push their clients that way, without adding any pressure.

Plus, it is not so much pressure from the lenders I worry about. LOs are sales people, and putting on a little pressure is part of their nature. I worry about the appraisers who acquiesce.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Anyone else aware of this ? from Cit to mortgage broker...

To All:

Effective tomorrow Friday January 18th, Los Angeles will be affected by the local depreciating market situation. All registrations on and after this date will have a 5% maximum LTV reduction. Los Angeles County is the last one to be affected by this. We will honor all loans that were locked prior to this date. Thank you very much and if you have any questions please feel free to contact me.

So...effective Jan. 19th, MBs will be ratcheting-up the ever-present pressure on appraisers to "make value".
 

JSmith43

Elite Member
Joined
May 5, 2003
Professional Status
Certified General Appraiser
State
California
Anyone else with a "directive" story from an investor? Staff appraisers? Please share with us the goodies:)
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
So, which activity is likely to increase if the issuance of cautious and conservative loans (or "fixed" bad-mortgages) is the intention in certain markets of the country ?.....

Will there be an increase in the demand for multiple comp checks before selecting an appraiser, or will we see the prudent ordering of one, or maybe two, fully-USPAP-compliant Desktop Reports before selecting the appraiser to produce the final report ?.......and, oh by the way, when we say we need that URAR to come in at $zzz or above we mean $zzz or above. Got it ?

How else are financially stressed property owners in declining markets and in properties worth less than the amount of mortgage balance still owed going to get the help that is truly needed.....than to (once again) get appraisers to stretch the facts so that an 80% (yeah, right), or a 90% or even a 98.5% mortgage becomes a possibility. How can it really be seen as helping anybody unless a way is found to give people some equity which is not there now.

Laissez faire ?.....and the provision of unbiased opinions of value ?......I guess it depends on who is placing the orders to the appraiser and whether, or not, the client truly wants to know what a property is really worth ! That truth will once again "kill deals", and the merry-go-round goes round and round.
 

JSmith43

Elite Member
Joined
May 5, 2003
Professional Status
Certified General Appraiser
State
California
There are some posters that hint at stealth manipulation of appraisal methodologies. A staffer posted a few days ago about a mandated absorption analysis. The methodology was also dictated:huh:

If we get enough pieces of information, it will be possible to reverse engineer what is happening. I can guess, but I bet we'd all like more data to leak out.
 

moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
I read somewhere that GSEs have issued a new guineline for their LTV approval. If they used to approve a loan with 90% LTV in the past, now they look at the S&P/case/shiller index to find out the price trend in that area and reduce the LTV according to that index. If the index says the price in that county has declined 5% and their LTV was 90%, now they bring the LTV down to 85% even if the appraiser says it is stable. So, instead of changing LTV from 90% to 85%, they reduce the appraised value by 5% which is going to be the same thing.
If the index says the price trend is stable but the appraiser says it has declined, they bring it down to 85% too or reduce the value by 5%.
 
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