‘FED’s Say NO to BPO’ – Updated Appraisal Newscast.
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Census Bureau: 130.6 Million Housing Units in the US; 18.9 Million are Vacant
by Adam Quinones:
The Census Bureau today released the Report on Residential Vacancies and Homeownership. This data covered fourth quarter 2009.
From the release…
* National vacancy rates in the fourth quarter 2009 were 10.7 percent for rental housing and 2.7 percent for homeowner housing.
* The rental vacancy rate was higher than the fourth quarter 2008 rate (10.1 percent) and not statistically different from the rate last quarter (11.1 percent).
* For homeowner vacancies, the current rate was not statistically different from the fourth quarter 2008 rate (2.9 percent) or from the rate last quarter (2.6 percent).
* The homeownership rate at 67.2 percent for the current quarter was not statistically different from the fourth quarter 2008 rate (67.5 percent), but it was lower than last quarter’s rate (67.6 percent).
HOUSING VACANCY AND HOME OWNERSHIP DEFINITIONS
Housing Unit. A housing unit is a house, an apartment, a group of rooms, or a single room occupied or intended for occupancy as separate living quarters. For vacant units, the criteria of separateness and direct access are applied to the intended occupants whenever possible.
The householder refers to the person (or one of the persons) in whose name the housing unit is owned or rented or, if there is no such person, any adult member, excluding roomers, boarders, or paid employees.
Vacant Housing Units. A housing unit is vacant if no one is living in it at the time of the interview, unless its occupants are only temporarily absent. No mention of how a homeowner waiting on an eviction is applied to this data.
At the end of the fourth quarter of 2009, there were 130.58 million housing units in the US. Compare that to the end of 2008 when there were 129.45 million. This is a one year increase of 1.14 million (+0.88%) total housing units. Of total inventory, 85.5 percent or 111.71 million housing units were occupied. 75.04 million, or 57.5 percent, were owner occupied and 36.67 million, or 28.1 percent, were rented. 18.88 million of 130.58 million housing units were vacant (make sure you read the definition above). This is 14.5% of total housing units.
Of vacant homes:
* 14.25 million were for rent
* 2.09 million were for sale only
* 7.69 million were “other” Many foreclosures will be in the “other” category, because they are neither for sale or for rent – they are still in the foreclosure process and tied up in legal proceedings, or being held off the market until the legal owner of the property decides what to do.
In addition, it is possible the unit could be undergoing repair for future use. Also included in the “vacant other” category are units “for occasional use” and units “temporarily occupied by persons with usual residence elsewhere”, both of which may contain foreclosures. Foreclosures could also be included in the seasonal category, depending on the specific situation. The South had the highest vacancy rates. The rental vacancy in that region was 13.7 percent compared to 13.1 percent in 2008. The rate in the Northeast was the lowest at 7.2 percent but this was an increase over the 6.3 percent reported a year earlier. The homeowner vacancy was also highest in the South at 2.9 percent but this was down slightly from 3.1 percent in 2008. The Northeast had the lowest in this category as well; 1.9 percent compared to 2.2 percent a year earlier. Ownership is highest among those 65 years of age and over; 80.2 percent are homeowners. The percentage of homeownership declines with each younger age category. Ownership among people under 35 is only 40.4 percent. As might be expected it was also highest among those households with the highest incomes. Where family income was greater than or equal to the median family income the ownership rate was 81.8 percent. This was lower than the 82.9 percent in this category in 2008.
Personal Income, Expenditures Rises Modestly
Kan, Joel
Personal income increased by 0.4 percent, disposable personal income increased by 0.4 percent and personal consumption expenditures increased by 0.2 percent in December, the Bureau of Economic Analysis reported yesterday.
December data built on November’s increases, when personal income increased by 0.5 percent, DPI increased by 0.5 percent and PCE increased by 0.7 percent, based on revised estimates.
Real disposable income increased by 0.3 percent in December, matching November’s increase, while real PCE increased by 0.1 percent in December, compared to an increase of 0.4 percent in November.
Personal savings as a percentage of disposable personal income stood at 4.8 percent in December, compared to 4.5 percent in November. The December saving rate brings the fourth quarter average to 4.6 percent. Coupled with the 5.4 percent and 4.5 percent saving rates seen in the second and third quarter of 2009, respectively, this is the first time since the late 1990s that we have seen three consecutive quarters of a personal saving rate above 4 percent.
Real DPI–adjusted to remove price changes–increased by 0.3 percent in December, the same as in November.
Real PCE–adjusted to remove price changes–increased by 0.1 percent in December, compared to an increase of 0.4 percent in November, propped up by purchases of services and durable goods. Purchases of services in December increased by 0.4 percent, in contrast to a decrease of less than 0.1 percent in November. Purchases of durable goods increased 0.2 percent, compared to an increase of 2.3 percent in November, while purchases of nondurable goods in December decreased by 0.8 percent, compared to an increase of 1.0 percent the previous month.
The price index for PCE increased by 0.1 percent in December, compared to an increase of 0.3 percent in November. The PCE price index excluding food and energy, sometimes known as the Core PCE price index, increased by 0.1 percent compared to an increase of less than 0.1 percent in November.
Private wage and salary disbursements increased by $6.3 billion in December, compared to an increase of $25.1 billion in November. Goods-producing industries’ payrolls decreased by $5.2 billion compared to an increase of $2.9 billion the previous month. Manufacturing payrolls decreased by $2.2 billion in December, compared to an increase of $3.5 billion last month, and remained close to the historical low seen in June 2009. In contrast, services-producing industries’ payrolls increased for the ninth consecutive month, increasing by $11.5 billion, compared to an increase of $22.3 billion last month. Government wage and salary disbursements increased by $2.9 billion, compared to an increase of $1.8 billion.
(Joel Kan is associate director of research and business development with the Mortgage Bankers Association. He can be reached at jkan@mortgagebankers.org.)
Federal Reserve: Commercial BPOs Do Not Satisfy the Definition of “Evaluation”
In response to clarification requests from the Appraisal Institute, the Federal Reserve’s Board of Governors issued a Jan. 14 letter confirming that a broker price opinion “does not satisfy the definition of an appraisal in the Board’s appraisal regulation.”
The Fed’s clarification was addressed to the Appraisal Institute and came in direct response to an Oct. 26, 2009, letter sent to the Fed by the nation’s four largest appraiser organizations that asked the Fed about its policy on the use of BPOs in valuing land and other real property collateralizing commercial loans.
“In response to your question as to the use of BPOs, it is the position of the Federal Reserve staff that a BPO does not satisfy the definition of an appraisal in the Board’s appraisal regulation,” the agency’s letter read. “Therefore, a regulated institution would not be able to utilize a BPO to originate a loan secured by commercial real estate when the loan requires an appraisal in accordance with the appraisal regulation.”
In its letter, the Fed added: “With regard to the use of BPOs as an evaluation, Federal Reserve staff has taken the position that a BPO does not provide sufficient detail on a commercial property’s condition, occupancy, and use to meet the guidelines’ requirements for an evaluation.”
Bill Garber, director of government and external relations of the Appraisal Institute, said: “We applaud the diligent position taken by the staff of the Federal Reserve Board, and we believe it is one that should be taken by all of the federal financial institution regulatory agencies.”
The Appraisal Institute and fellow appraiser organizations had sought clarification after reports that BPOs had been ordered by regulated financial institutions to satisfy the “evaluation” requirements for renewals of commercial loans and refinancing transactions. As the appraiser organizations had pointed out in their October letter, “[C]ommercial BPOs typically lack details on a commercial property’s conditions, occupancy and use as stipulated by the Interagency Guidelines. As such, any use by regulated or supervised institutions would constitute a violation of the Interagency Appraisal and Evaluation Guidelines and, we believe, are inconsistent with written Federal Reserve policies.”
The Federal Reserve’s Board of Governors responsible for policy is composed of five members: Chairman Ben Bernanke, Vice-Chairman Donald Kohn, Kevin Warsh, Elizabeth Duke and Daniel Tarullo.
For the appraiser organizations’ letter to the Fed, visit www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2010/AI-ASA-ASFMRA-NAIFA_CommercialBPOs-Final.pdf .
For the Fed’s response letter, which was signed by Director Patrick M. Parkinson, visit www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2010/Fed_Response.pdf .
BofA Lends $758bn in 2009
Bank of America (BAC: 14.62 -2.53%) said it extended more than $758bn in credit in 2009, including nearly $180bn in Q409. BofA originated $87bn in first mortgages to fund purchase or refinance loans for more than 400,000 borrowers in Q409. That total includes $23bn in mortgages made to 151,000 low- and moderate-income borrowers. For the year, BofA originated $378bn in first mortgages for more than 1.7m customers, including $87bn in mortgages to more than 561,000 low- and moderate-income borrowers. In Q409, BofA originated $3bn in home equity and reverse mortgage loans, bringing the total for 2009 to $13bn. In addition, BofA’s servicing unit extended trial mortgage modifications to more than 200,000 borrowers through the Making Home Affordable Modification Program (HAMP) and in total, made 260,000 loan modifications in 2009. “Bank of America can only succeed by doing all we can to contribute to the success of our customers, clients and the communities we serve,” said Bank of America president and chief executive officer Brian Moynihan. “The state of the national economy will continue to have a tremendous influence on our shared progress.” BofA extended $16bn in credit to small businesses and provided modified payment structures to more than 60,000 of its small business clients to improve the companies monthly cash flows “to help ride out the recession,” the Charlotte-based bank said. In addition, BofA said it will increase small- and medium-size business lending by $5bn in 2010. The bank said it lent $1bn to Community Development Financial Institutions (CDFIs), which extend credit to low-income and disadvantaged communities for small business microlending, housing, charter schools, childcare centers, and new primary health care facilities. In December, BofA repaid the US Treasury Department’s $45bn investment from the Troubled Asset Relief Program (TARP). Write to Austin Kilgore. The author held no relevant investments.
‘AppraisalNEWSCAST – Let the Countdown Begin’
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AppraisalNEWSCAST – Coester Appraisal Group – Appraisal Management Company – FHA and HVCC Compliance
Coester Appraisal Group Expands FHA Appraisal Compliant Platform
Coester Appraisal Group is pleased to announce an additional release of its national HVCC compliant appraisal management platform specifically targeted towards upcoming FHA Appraisal changes effective Feb, 15 2010 when FHA adopts similar guidelines to the HVCC. CEO Brian Coester was quoted as saying “FHA delaying the rollout was a blessing in disguise as it gives us more time to improve what we rolled out in November. FHA is over 60% of lending today and with the adoption of the similar guidelines to the HVCC, it is imperative the lending community receives the same level of customer service our clients are accustomed to.” The firm, who specializes in nationwide appraisal management services, assists clients of all sizes with a custom appraisal management services giving them the ability to effectively monitor their appraisal process without getting involved in the day-to-day tasks. The new platform will automatically route the appraiser’s license information past the production staff to the lender’s designated staff member to pull the FHA case number after assignment. This ensures a proper protocol for FHA and safeguards that no undue influence is placed on the appraiser, which can occur when the loan origination staff is notified of who the appraiser is. Coester will also release automated mapping tools on its website to map the appraisers distance from the property as well as see how many other appraisers are within proximity to the subject. Additional changes include FHA specific review criteria from their state of the art MARS review technology, as well as a custom web portal for clients who want a “branded” feel to their appraisal management company.
The release, launched ahead of schedule, is definitely timely as the industry braces for the biggest change in history is right around the corner in the way real estate is valued for lending purposes. The president of Coester Appraisal Group, John Coester, was quoted as saying, “Our clients rely on us not only for appraisals, but their livelihood. This is something we take very seriously. We have worked very hard on ensuring that our staff, review appraisers, vendors, and clients are ready for the switch.”
About Coester Appraisal Group Headquartered in Gaithersburg, Maryland, Coester Appraisal group has been providing quality real estate appraisals since 1970. Clients that depend on Coester’s appraisals, BPO’s, AVM’s and property valuation tools include banks, credit unions, mortgage companies, hedge funds, attorneys and government agencies. Their experienced staff provides a quality valuation completed in a timely manner with a correct estimation of market value. Each appraisal is manually reviewed by a staff appraiser for quality and compliance with lender’s underwriter guidelines and is certified HVCC and USPAP compliant. For additional information about the company and its services, please visit their website at http://www.coesterappraisals.com.
Contact:
Brian King
Coester Appraisal Group
Gaithersburg, MD
856-417-3443
Home Prices Increase Slightly; Consumer Confidence Grows
Kan, Joel; Sorohan, Mike
Two reports on housing prices yesterday showed slight increases, while a key gauge of consumer confidence continued to show catuious improvement.
The Federal Housing Finance Agency said U.S. house prices rose 0.7 percent on a seasonally adjusted basis in November from the previous month. FHFA’s monthly purchase-only House Price Index also showed house prices rose by 0.5 percent on a year-over-year basis.
Despite the increase, U.S. house prices remain well below their April 2007 peak, when prices averaged 10.3 percent higher. October’s previously reported 0.6 percent increase was revised downward to a 0.4 percent increase. On a year-over-year basis.
Regionally, the Pacific region showed a 2.3 percent increase from the previous month and a 2.9 percent increase from the same month last year. The next largest increase was the South Atlantic region with a 2.0 percent increase from the previous month, although this was down by 0.1 percent from a year ago. The East South Central region had the largest decrease, showing an 0.4 percent decrease in house prices, although this was still 1.5 percent higher than a year ago. The New England region was next with a 0.3 percent decrease, and this was 0.3 percent higher than the same month last year.
In other house price news, the Standard & Poor’s Case Shiller Home Price Indices showed mixed results. On a seasonally adjusted basis, the 10-City Index declined by 0.2 percent in November after remaining unchanged in October, while the 20-City Index showed a monthly increase of 0.2 percent, following a 0.3 percent increase in October. On a year-over-year basis, the 10-City Index declined by 4.5 percent from November 2008, while the 20-City Index declined by 5.3 percent from November 2008.
This represented the 10th month of improved readings, beginning in early 2009, and is the third consecutive month in which the decreases have been in the single digits. This follows 20 consecutive months of double digit declines in both indexes.
Charlotte, Las Vegas, Seattle and Tampa posted new lows as measured by the past four years, and any gains they might have seen in recent months have been erased; November is now considered their current low. On the other hand, Los Angeles, Phoenix, San Diego and San Francisco have seen prices increase for at least six consecutive months. Based on the annual data, Dallas, Denver, San Diego and San Francisco have entered positive territory, a result not seen in at least two years in most markets.
Finally, the Conference Board Consumer Confidence Index, which had increased in December, improved further in January. The Index now stands at 55.9, up from 53.6 in December. The Present Situation Index increased to 25.0 from 20.2. The Expectations Index increased to 76.5 from 75.9 last month.
Lynn Franco, director of the Conference Board Consumer Research Center, cautioned that outlook and reality could have different meanings.
“Consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in the coming months,” Franco said. “Regarding their financial situation, while consumers were less dire about their income prospects than in December, the number of pessimists continues to outnumber the optimists.”
Consumers’ assessment of present-day conditions was, on the whole, more positive than last month. Those stating business conditions are “good” increased to 9.0 percent from 7.5 percent, however, those stating business conditions are “bad” increased to 46.1 percent from 45.7 percent. Consumers’ assessment of the labor market improved moderately. Those claiming jobs are “hard to get” declined to 47.4 percent from 48.1 percent, while those claiming jobs are “plentiful” increased to 4.3 percent from 3.1 percent.
The Conference Board said consumers’ short-term outlook, while overall more positive, was somewhat mixed. The percentage of consumers expecting an improvement in business conditions over the next six months decreased to 20.9 percent from 21.2 percent, while those anticipating conditions will worsen increased to 12.7 percent from 11.8 percent. Regarding the outlook for the labor market, those expecting fewer jobs decreased to 18.9 percent from 20.6 percent. However, those expecting more jobs to become available in the months ahead declined to 15.5 percent from 16.4 percent. The proportion of consumers anticipating a decrease in their incomes declined to 16.2 percent from 18.4 percent.
(Joel Kan is associate director of research and business development with the Mortgage Bankers Association. He can be reached at jkan@mortgagebankers.org.)
Flagstar Bancorp Inc. raises $300 million in stock offering
Troy-based Flagstar Bancorp Inc. (NYSE: FBC) announced Thursday it has raised $300 million through a previously announced rights offering that ends Feb. 8.
The money was raised through the purchase of $422.5 million shares of stock by the bank’s majority owner, MP Thrift Investments L.P. of New York.
MP Thrift retains the right to purchase another $140.8 million shares.
The bank also announced it has entered into an agreement with the U.S. Office of Thrift Services to address the federal regulator’s concerns over past practices.
“We believe this investment by MP Thrift reflects continuing confidence in the bank franchise as well as in our executive management team,” said Chairman and CEO Joseph Campanelli in a press release. “With a solid capital position, we will be better able to execute on our business plan.”
Flagstar also announced that Todd McGowan has joined it as chief risk officer. McGowan was previously the regional quality risk management partner at Deloitte Touche.
