Fannie Mae Announcement! - More of the Same

In a breathtaking SELLING POLICY UPDATE, Fannie Mae announces:

"Selling Notice: New Appraiser Independence Requirements Being Developed"

Fannie Mae has issued the following Notice (the entire text of the Notice is included in this e-mail):

Fannie Mae is working with the Federal Housing Finance Agency (FHFA) to develop and adopt appraiser independence requirements that will replace the Home Valuation Code of Conduct (HVCC). Until the revised requirements are released, the existing HVCC provisions in the Fannie Mae Selling Guide continue to apply. Updated requirements are expected to be substantially similar to the current provisions.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, HVCC will sunset when interim final regulations are released to implement the appraisal independence-related provisions of the Act, which is expected to occur on or about October 21, 2010.

Fannie Mae is committed to supporting strong appraiser independence requirements. The revised requirements will maintain the spirit and intent of HVCC, and continue to provide important protections for mortgage investors, home buyers, and the housing market.

The revised appraiser independence requirements will be based on Fannie Mae's experience under the HVCC and will continue to support the integrity of the appraisal process. As part of the process to develop the revised requirements, Fannie Mae has received input from key industry participants.

Fannie Mae expects to announce the revised appraiser independence requirements in an upcoming Selling Guide announcement.

No surprise in this release. About a month ago, in a post providing my view of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, this prediction was made:

Modifications to the TILA include the appraisal independence standards, portability of appraisals, customary and reasonable appraisal fees and sunset of the HVCC. Although it may appear as though appraisers will benefit from this section of the new law, it’s a bit early to get our hopes up. In all likelihood, the new rules for selection and retention of appraisers will look much like the HVCC.

Let's see if my low expectations for the balance of the "reforms" are on target.

More on The Appraisal Foundation Side - Jonathan Miller Interviews David Wilkes

Sure, this is inside baseball, but it IS important to appraisers and the appraisal profession. Jonathan Miller has an regular feature on his blog, MATRIX, and iTunes, The Housing Helix. He interviews a variety of folks about timely topics of interest to anyone involved in real estate. This week's podcast is with David Wilkes, Chairman of The Appraisal Foundation Board of Trustees.

It's important to hear about the kerfuffle from The Appraisal Foundation's point of view. Mr. Wilkes answers some tough questions and pulls no punches. It's worth your time.

Appraisers, Dust Off the Crystal Ball - UPDATED - Realty Trac Release

Scroll down for UPDATE

Although residential real estate markets are local, granular and segmented, they are most certainly subject to national events and circumstances. These days, appraisers' clients are looking for an explanation of the condition of the current market in the appraisal report, and are less interested in reading about what "has happened in the area.

Here's a couple of articles with a national view. It might be wise to consider the implications in your local market.

From the Wall Street Journal:

Banks Plans for Foreclosed Homes Will Drive Market

The speed at which house prices fall over the next few months could depend less on mortgage rates and Americans' appetite for home buying than on how banks decide to manage the huge number of foreclosed homes they own or may take from delinquent borrowers in the near future.


Unlike home owners, banks often are much quicker to slash prices to unload properties quickly.


The upshot is that, the more homes being sold by lenders, the faster prices tend to fall. That pattern was clear over the past two years: Price declines that began four years ago accelerated rapidly in 2008 as banks dumped foreclosed properties at fire-sale prices. By January 2009, the share of distressed sales had soared to 45% of all sales nationally; it was even higher in hard-hit markets such as Phoenix, according to analysts at Barclays Capital.
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The Home Affordable Modification Program has fallen short of its goals. So far, fewer than 500,000 loans have been modified, below the target of three million to four million. Yet the program served as a "closet moratorium" on foreclosures that stanched the flow of bank-owned homes to the market, said Ronald Temple, portfolio manager at Lazard Asset Management.


The result: The share of distressed sales fell by November to 25% of home sales, and prices stabilized. After rising in the winter, the distressed share fell to 22% in June, before bouncing to 30% in July.


The problem is that these measures are wearing off. Demand plunged this summer after tax credits expired, and unsold homes are piling up. More foreclosures could move onto the market as borrowers fall out of the loan-modification program.


"We see the perfect storm brewing with rising supply and falling demand," said Ivy Zelman, chief executive of research firm Zelman & Associates and one of the first to warn of trouble five years ago. She estimated that distressed sales could account for half of the market by year-end if traditional sales didn't rebound

Read it all HERE.

And from the Huffington Post?:

Home Prices Set to Fall Further

Speaking at the Barclays Capital 2010 Global Financial Services Conference, Capital One CEO Richard Fairbank was pessimistic about the housing market and about consumer demand -- but optimistic about his bank's prospects.


Fairbank, in remarks that were broadcast on the web, was asked by an audience member whether there will be a double-dip in the housing market. He chose his words carefully. "I think we feel very cautious about the housing market," Fairbank said. "I think that even despite some of the recent months where home prices have gone up, I think it's a very plausible case for home prices to go back down again."

Full article HERE.


It would be wise to pay close attention to changes in housing supply in your local market, as well as the source of that supply.

Be careful out there.

UPDATE - Realty Trac News Release: Foreclosure Activity Increases 4 Percent in August

It looks like the Crystal Ball was working. In a press release, Realty Trac notes:

“The trend lines of decreasing default notices and increasing bank repossessions converged in August, with virtually the same number of new default notices and bank repossessions for the month — a clear indication that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers,” said James J. Saccacio, chief executive officer of RealtyTrac. “On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate, while on the back end the dammed-up inventory of properties already in foreclosure is moving to REO in steady stream rather than a flood — presumably to prevent further erosion of home prices.”

Full release HERE.

The Appraisal Foundation Comments on AI Resignation

In the interest of equal time, HERE is a link to a communication from The Appraisal Foundation explaining what happened between them and the Appraisal Institute.

Below is a brief series of Q&A designed to reflect The Appraisal Foundation’s position with respect to the September 7, 2010 decision by the Appraisal Institute to withdraw as a Sponsor of The Appraisal Foundation.

Question: Why did the Appraisal Institute choose to withdraw as a Sponsoring Organization of The Appraisal Foundation?

Answer: Obviously, only the Appraisal Institute can provide their full reasoning for this decision. However, the simple response to this question is the Appraisal Institute was unwilling to accept sanctions imposed by The Appraisal Foundation as a result of their conduct as a Sponsoring Organization.

Question: What did the Appraisal Institute do or not do that The Appraisal Foundation objected to?

Answer: In simplest terms, The Appraisal Foundation expects its Sponsoring Organizations to communicate with it first regarding any matters that have a direct or indirect impact on our organization. The Appraisal Institute failed to comply with this expectation.

Read it all HERE

My only comment: Do you find the format of communications from the Appraisal Foundation as annoying as I?

It's ON!! - Appraisal Institute Withdraws Sponsorship from TAF

The letter speaks for itself. Although Appraiser Active has not had much to say on the kerfuffle between the Appraisal Institute and The Appraisal Foundation, that does not mean I do not have any opinions on the matter. My belief that The Appraisal Foundation has morphed into a behemoth far beyond what had been envisioned by the original Appraisal Sponsoring Organizations is well known.

This action by the Appraisal Institute will have far reaching and lasting consequences. I applaud their testicular fortitude.

The Foundation, not so much. IMNSHO, their actions are typical of the bullying tactics usually reserved for comments to state appraiser regulatory boards.


AI Withdraws Sponsorship from TAF

TAVMA to FED: Please Delay Rule on "Customary and Reasonable Fee" -UPDATED

It was inevitable, but the plea from TAVMA's Executive Director, Jeff Schurman to Federal Reserve Board Chairman Ben S. Bemanke is remarkably lame and pitiful.

In an August 25, 2010 letter to the Federal Reserve Chairman, TAVMA begs the FRB to delay consideration of  the “customary and reasonable” fee provision that would be part of the proposed interim final rule required by Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As Appraiser Active described in a recent posts (HERE and HERE), The Federal Reserve has the chore of  translating the legislative language into interim rules that will govern how brokers, lenders, appraisers and appraisal management companies will operate. Final rules will be developed by the federal banking agencies.

TAVMA is concerned about this section of the Dodd-Frank Act:
....and goes on with this claim:

(1) In General.-Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. Evidence for such fees may be established by objective third party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments offered by known appraisal management companies.

At present it is unclear whether the “customary and reasonable” provision should be adopted in the 90 day interim final regulations. TAVMA believes that the effective date should be delayed under Title XIV Section 1400(c)(3) until after a formal rule making process. Additionally, we believe that the provision should not be adopted yet, because the “customary and reasonable fees” requirement is not an appraisal independence requirement. Further, the fee provision was added late in the Congressional Conference Committee process and never received any meaningful legislative discussion or clarification.

It's amusing to read TAVMA's claim that AMC compensation of appraisers is the "predominate fee model now in use." The only reason it may be is because of the Home Valuation Code of Conduct. Appraisal Management Companies did not gain their share of the market by competition with appraisers; it was handed to them on a silver platter. TAVMA, your "predominate fee model now in use" is not market based, has no relationship to reality, and the new statutory requirement to ignore it in the determination of customary and reasonable for appraisal services is one of the few high points in the dismal legislation. Quit whining!

Of course, this bothers TAVMA and the 58 "appraisal transaction management companies" counted among its members. TAVMA says:

The wording of 129E(i) Appraisal independence requirements, “Customary and Reasonable Fees” seems to either ignore or outright reject FHA’s and HUD’s prior interpretation; however, it fails to provide any direction or guidance about what the term means and/or how it is to be calculated other than that fees negotiated with AMCs should be excluded from the determination, i.e., that market participants should ignore the predominate fee model now in use. It is unreasonable given this history and marketplace realities to expect the FRB to formulate a definition of “reasonable and customary fees” within the few weeks leading up to the October 20, 2010 effective date of the interim, final rule.

TAVMA's plea to Bernake becomes REALLY desperate with their offering of this reason for delay:

Appraiser Trainees. Fee parity (non-negotiated fees) will create a preponderance of “experienced appraisers,” which on one hand is good in that the most experienced appraisers will compete on quality and service for assignments; however, what will be the impact on appraiser-trainee development? Will appraisal firms have any motivation to train new appraisers, and will less experienced appraisers be able to compete for appraisal work if fees are not a factor?

Where was all this concern for appraiser-trainees in the past? How many appraiser readers of this post are willing to provide engagement letters or orders from TAVMA members with the wording "Trainee Appraisers cannot sign the appraisal", or word to that effect.
 
TAVMA, get off your knees and get with the program.

My fellow appraisers, it's time to fire up the letter writing machine and let Ben Bernake know what the real story is.

More on this subject, along with a slew of comments at Appraisal Scoop. Brian Davis has a particularly good one:

Maybe someone can explain to me why we need studies and surveys on customary and reasonable fees when appraisal fees have been reported for years on the HUD closing statements? I've always assumed that the information on the HUD form was collected and databased somewhere?

If this hasn't been done in the past . . .it could certainly be implemented NOW. The HUD form shows exactly what the borrower was CHARGED for the appraisal . . . right?

Well said, Brian. This aint brain surgery.

UPDATE - From several sources comes this tidbit:

The direct contact person at the Federal Reserve Board where you can send a letter to discuss your personal AMC and Customary and Reasonable Fee situations, or anything else having to do with appraiser independence. (Can include Stips and mandatory comparable requirements and mandatory Cost Approach).


Please do so in the next few days, as new appraisal regulations are being drafted now, with implementation set for October, or perhaps sooner.


Here is the contact information for the person at the Fed that is handling the Interim rulemaking on appraiser independence (including customary & reasonable fees):


Ms. Sandra Braunstein, Director
Division of Consumer and Community Affairs
Federal Reserve Board
1709 New York Avenue, NW
Washington, DC 20006

I strongly suggest you provide your own letter in your own words, rather than rely on ‘template’ content from another source. Keep it short and to the point.