US property ‘undervalued’
Tuesday, March 16, 2010
Catherine Deshayes
Compared to global markets, nearly 20% of US residential property is undervalued, a new report has claimed.
States where properties are the most overvalued are Delaware, Montana and Oregon, as well as Washington DC, according to the information from independent macroeconomic research consultancy firm Capital Economics.
The firm’s US economist, Paul Dales, says in a separate report that prices will continue to fall, but that this will probably not trigger another economic downturn.
Dales also notes that prices on a national level increased on average 3 to 6% in 2009. But that trend will likely end, with prices falling another 5%, unless the government extends the homebuyer tax credit.
Dip in net wealth
The first report from the company’s chief property economist Ed Stansfield, found that in many countries, but not the US, the house price-to-earnings ratio remained above the levels required to sustain a healthy mortgage market.
But in US the economy is characterized by factors like growing unemployment, a dip in net wealth and an aversion to taking on debt, which outweigh potential market stimuli such as federal tax credits and low interest rates.
The situation is not the same in other global markets, potentially explaining why housing remains overvalued, despite an abundance of the population hurting during an extended period of global economic doldrums. Employment in the UK and Australia, for example, remains resilient.
‘If the tax credit wasn’t boosting demand, sales would not have accelerated so spectacularly in the months ahead of the original end of November expiration date and then collapsed in December,’ said Dales in his report.
A new approach
Meanwhile a new programme to stem the rising number of foreclosures in the US takes effect next month as concern increases about the estimated five million property owners who are behind with their payments. The new approach, which kicks in on April 5, will pay some home owners to sell amid fears that millions of foreclosures could delay or even reverse the US economy’s tentative recovery.
It will encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification programme to go through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
Under the new programme, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in ‘relocation assistance’.
Source: www.propertycommunity.com/
Mortgage Bonds Make a Comeback
Mortgage Bonds Make a Comeback
By ANTONY CURRIE and CHRISTOPHER SWANN
The market for private-label mortgage bonds in the United States might be ready for revival.
The housing-induced credit crisis has shut it down for almost two years. But a handful of firms, independently of each other, are working on deals that could hit the market by June. Any new issue of mortgage bonds lacking guarantees from the government-run agencies Fannie Mae and Freddie Mac will need to be squeaky clean — and the seller might lose money.
The bonds in the works would probably be backed by jumbo mortgages, loans mostly bigger than about $730,000, depending on location, that Fannie and Freddie won’t accept. If successful, it would be the first such deal since May 2008.
Buyers seem willing to consider moving away from standardized notes guaranteed by Freddie and Fannie, partly because those instruments now offer the lowest returns on record. Bonds backed by troubled loans from failed institutions that the Federal Deposit Insurance Corporation just sold were popular with investors. Admittedly, they came with a guarantee, but banks and other investors are starting to look for new places to invest.
Prospective buyers of new jumbo mortgage-backed securities will want assurances the loans have all the proper documents and proof of income. They’ll probably want borrowers to have put down as much as 40 percent of their own money. And they’ll expect that, even if house prices have dropped since the mortgage was made, the average loan balance is still no more than, say, 60 percent of the property’s value.
What’s more, any deal will have to be over-collateralized to withstand losses on the underlying mortgages of, say, at least 15 percent before investors in even the lowest-rated slug of bonds take any hit at all. New bonds might still need to be priced at a discount to entice buyers.
That poses a problem for institutions working on the deals: under those conditions, they’re likely to lose money. But the cost of reopening a key market could be worth it. While banks might not rush to securitize nonstandard mortgages right now, that should change as the market regains equilibrium. Those who pioneer its rehabilitation will be in line to help bring in future deals.
Brazilian Oil
A $5.6 billion stock offering by a firm with no profit evokes the Internet bubble era. But OSX Brasil is a chance for investors to bet on the country’s growing reserves and Eike Batista, the fastest riser on the Forbes list of wealthy individuals. The combination makes it sound more Amazon than Pets.com, the poster child of the dot-com bust.
A first glance at the company’s financials gives reason for pause. It posted an operating loss of $19.6 million. But it hardly reflects the promise. Even if Brazil’s oil reserves fail to justify the hype, there is still likely to be a need for OSX’s ships and drilling rigs. Mr. Batista’s oil and gas company, OGX, has a $4 billion budget to sink into exploration and production.
The incestuous relationship should help OSX lock up future orders. OGX has yet to drill a dry well but may be sitting on resources of 6.7 billion barrels of oil and gas — the equivalent of about three years of production at Exxon Mobil. The state-owned oil giant Petrobras has set aside about $30 billion to spend on drill ships and platforms. With the government giving preference to domestic suppliers, OSX can expect an inside track here too.
Then there’s Mr. Batista, just named the world’s eighth-richest man. He hasn’t disappointed investors yet. Of the four companies he has floated since mid-2006, three of them have been stock market stars, far outperforming Brazil’s benchmark index. Even the one initial disappointment, the electric utility MPX Energia, was turned into an image-booster as Mr. Batista donated his 30 percent stake in nine power plants to compensate investors for the company’s post-flotation slide.
Mr. Batista has also shown a knack for timing. The June 2008 listing of OGX came just a month before oil hit its $147 peak. The sluggish global market for stock offerings makes his latest foray seem odd. But the optimism for Brazilian crude and his reputation as a golden-boy entrepreneur should be enough for investors worried about OSX’s lack of profit to set aside any bad memories of online pet food that spring to mind, and reflect more on the river that runs through its home country. ANTONY CURRIE and CHRISTOPHER SWANN
Obama Sends “Volcker Rule” Proposal to Congress
President Barack Obama sent Congress a five-page proposed plan March 3 that would ban banks from hazardous trading and impose limits on how large they can
grow.
According to Bloomberg News, the proposal, which is named for its main proponent, former Federal Reserve Chairman and White House adviser Paul Volcker , is aimed at helping prevent a repeat of the worst financial crisis since the Great Depression by reducing risk-taking by banks.
Under the Volcker Rule, lenders would be prevented from trading solely for their own profit and stopped from acquiring more than 10 percent of the total liabilities in the banking system through acquisitions. The measure would instruct regulators to block mergers that would put bank market share over the limit, unless they were acquiring a failing bank with approval from regulators, as reported in the March 3 Bloomberg story.
Obama originally asked Congress in January to adopt the Volcker Rule to restrict risk-taking after financial companies worldwide reported more than $1.7 trillion in writedowns and credit losses following the subprime mortgage market collapse in 2007, according to Bloomberg. With the President’s submitted proposal, his administration is seeking a two-year transition period for banks to conform, which is shorter than the five-year transition period supported by House Financial Services Committee Chair Barney Frank, D-Mass.
In addition to placing caps on market share, the President’s proposal also would bar banks from owning or controlling hedge funds and private-equity firms. Furthermore, banks would be barred from acting as a prime broker to hedge funds they advise, according to Bloomberg.
Obama’s proposal has been added to the broader debate taking place in the Senate over a substantive regulatory reform bill. A proposal from the Senate Banking Committee is thought to be edging closer to completion and could see the light of day by mid-March or the end of the month.
Coester Featured in Mortgage Technology News as Appraisal compliance expert
Coester Featured in Mortgage Technology as HVCC Expert
CEO Brian Coester was recently featured in Mortgage Technology as an appraisal compliance expert.. The two page article titled “Is Uncle Sam Bullying You” gives expert advise on appraisal regulations as well as there place in the mortgage industry.
Appraisal Management Survey Sheds Light on Industry Propaganda
Coester Appraisal Group, a nationwide appraisal management company releases its
annual appraisal industry survey. Over 1,559 licensed and certified appraisers
completed the survey with the results shedding some insight into the appraisal
industry and what is really happening in the appraisal industry. The data was collected
directly from appraisers via SurveyMonkey, various websites, press releases and e‐mail.
After further analysis of the data from the Annual Coester Appraisal Group Vendor
Survey, it seems like many of the implications made regarding the state of the mortgage
industry as a whole have been debunked.
FINDINGS
A total of 1,569 appraisers completed the survey, with a majority of appraisers licensed
in one state and some as many as seven. Appraisers in all 50 states are represented in
the survey.
Distance – One‐third of respondents traveled an average of 15‐20 miles from the
appraiser’s place of business to an assignment with an additional 31.4% traveling 10‐15
miles. This is consistent with the TAVMA survey that indicated the average travel
distance for an appraiser is 13 miles ( TAVMA Survey can be found on their
website)
Response Time – As shown in Exhibit 1 and 1A, the average turnaround time of 2‐3 days
from assignment for a Conventional 1004/1073 and 4‐5 days from receipt of the order. This was consistent regardless of it was completed by an apraisal management company or directly to an appraiser.
Exhibit 1
Exhibit 1A
Fees ‐ Contrary to mainstream data reports, 64.65% of appraisers charge the same
amount whether contacted through an AMC or directly by the lender. Fees on
Conventional and FHA 1004/1073 appraisals ranged $350‐$450. One of the more
popular misconceptions in the industry is that AMC’s earn a huge margin by paying
appraisers $150‐$200 while charging the borrower $450‐$500. Our data proves this
wrong, showing that although appraisers quote lenders $350‐$450 for appraisals, they
net $250‐$300 for a Conventional appraisal and $300‐$350 for an FHA report. This
translates into appraisers receiving over 70% – 80% of their original quoted fee and the AMC
retaining the other 30% or 30 cents on the dollar.
Though many may not agree with the changes that the Home Valuation Code of
Conduct (“HVCC”) has brought to the industry including the proliferation of AMC’s,
71.1% of appraisers work for one or more appraisal management companies. This
appears to be a necessary “evil” in order to continue their career and livelihood. The
top AMC’s noted in the survey results are LSI (22.8%), Landsafe (19%), RELS Valuation
(27.59%), Quantrix (16.1%), Solidifi (6.9%), Appraisal Port (11.5%) and Coester Appraisal
Group (5.2%).
Overall, appraisers rate their AMC experience as simply “average.” The demand of
quick turn times coupled with reduced fees were prominently cited for the average
rating. Another reason was the abundance of report stips. The currently lending
environment can, of course, be the counter argument to the last point.
Payment ‐ A considerable number of comments regarding slow pay from AMC’s and
lenders alike were a revealed where 36.9% of appraisers would like to be compensated
on a net 15 payment schedule and 35.4% of appraisers preferring a direct deposit
method of payment. As a result of this survey, while Coester Appraisal Group currently
pays on a net 30 basis, we are currently making improvements to offer direct deposit to our vendors.
General Feedback ‐ The most prevalent feedback on AMC’s pertained to reduced or set
fees. Other concerns that ranked very high on the list are as follows:
1) Turnaround time expectations and pressure‐ Numerous appraisers state that this
is one of their main concerns (besides fees) when it comes to working with
AMC’s. They say that despite the enforcement of the HVCC, they still get
pressured from unknowledgeable staff to get the appraisal submitted
immediately. Appraisers feel as if AMC’s do not have staff members that are not
trained or licensed appraisers, therefore they are not aware of all the factors and
research that go into composing an appraisal report, especially in a rural area.
2) Too much follow‐up‐Appraisers feel that the time they spend answering phone
calls from AMC’s regarding status updates could be used doing more productive
things such as composing reports, doing inspections, etc. Although there are
some companies that may be a little excessive with checking on the status of a
report, but this topic is a double edged sword because there are plenty of
appraisers that do not take any initiative to call the AMC with an update before
they get the chance to call them. To be honest, the calls will stop when
appraisers start being proactive rather than reactive when it comes to the status
of a report. When AMC’s do not know what is going on with their files and the
lender is questioning their competency and reliability, it appears very
unprofessional, so phone calls must be made to the appraiser until an answer is
provided. Period.
3) Better communication‐ Respondents state that when it comes to getting
answers to questions from AMC’s, it definitely needs improvement. They are
disturbed about the fact that these companies expect them to answer questions
immediately, however when it comes to getting an inquiry response that is
imperative to the appraisal process, it is impossible to reach a staff member or
they reach someone who cannot speak proper English.
4) Lack of appraisal expertise/uneducated personnel‐As previously mentioned,
appraisers feel as if a majority of the staff is not competent when it comes to the
appraisal process, especially those that are in the review department. They feel
as if their appraisal reports are solely rated on a “checkbox” scale that AMC staff
is trained to use and that is the extent of their expertise.
5) Unfair/Non‐existence of rotation of assignments‐Appraisers are concerned with
the fact that they can never seem to get into the rotation to receive work from
AMC’s. They feel as if they are just another “fish in the sea” and no matter what
they do, appraisal management companies already have a selected pool of
appraisers that they give repeat business to.
6) Time it takes AMC’s to pay the appraisers‐Coester Appraisal Group is currently
paying appraisers on a Net 30 pay cycle. According to the data results above,
their preferred method of payment is on a Net 15 basis and some appraisers
report payment delivery times of six months after being quoted otherwise.
7) Broadcasting of Appraisal Orders‐Respondents also seem to be disappointed
with some of the methods used to assign appraisal orders, a main concern being
an appraisal “broadcast.” This is when a mass e‐mail is sent out to every
appraiser that services the subject area and the first one to respond to it gets to
complete the order. Appraisers feel as if this is the most impersonal way to do
business because you are not getting to know your vendors at all and some
appraisers even refuse to work with companies that choose to broadcast their
orders.
Global Disclaimer
Coester Appraisal Group specifically prohibits the redistribution of this material in whole or in part
without the written permission of Coester Appraisal Group and Coester Appraisal Group accepts no
liability whatsoever for the actions of third parties in this respect.
DOWNLOAD VENDOR SURVEY
Obama May Ban Foreclosures Without Review
The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.
The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,’’ according to a Treasury Department document outlining the plan.
“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,’’ Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.’’
She confirmed the authenticity of the document, which hasn’t been made public.
At present, lenders can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility.
Under current rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification.
The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.
The Treasury Department will soon release guidance “which will include a set of improved protections for borrowers’’ in HAMP, Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, said yesterday in testimony prepared for a House Oversight and Government Reform subcommittee. She didn’t provide details.
The proposal goes further than rules adopted amid the crisis by federally controlled mortgage finance companies Freddie Mac and Fannie Mae, which require lenders to review borrowers for a federal loan modification before a foreclosed property can be sold.
Foreclosure proceedings can still be initiated without a review, said Freddie Mac spokesman Doug Duvall. Fannie Mae spokeswoman Amy Bonitatibus said it adopted the same policy last March.
About 89 percent of outstanding residential mortgage loans are covered by the voluntary HAMP program.
About 2.82 million US homeowners lost properties to foreclosure last year and 4.5 million filings are expected in 2010, RealtyTrac Inc., an Irvine, Calif., data company, said last month.
Obama’s foreclosure prevention initiative, announced in February 2009 to help as many as 4 million Americans avert foreclosure, has modified 116,297 loans through steps such as lowering interest rates or lengthening repayment terms.
More than 830,000 borrowers received trial repayment plans through January, according to Treasury data.
“Foreclosure processes differ among states, and the process is often confusing to homeowners already facing distress,’’ Caldwell said in her prepared testimony.
“Treasury has been reviewing guidelines around outreach and the foreclosure process as part of its continual assessment of program effectiveness and transparency,’’ she said.
Foreclosures may reach as many as 7 million mortgages, and an additional 5 million are at risk of default because borrowers owe more than the property is worth, Laurie Goodman, senior managing director at Amherst Securities Group LP in New York, said in a Feb. 17 interview.
“This is a problem of mammoth proportions,’’ Goodman said. “You can’t throw 12 million people out of their homes, so you need a successful modification program. My fear is that this isn’t it, but I’m highly confident that the administration will continue to iterate until they succeed.’’
The Treasury proposal would require all borrowers who are 60 or more days delinquent on their mortgage to be sought out for participation in HAMP.
Mortgage companies would need to try to contact the borrower at least four times by phone and twice by certified mail over 30 or more days before going to foreclosure.
Under current Treasury policy, foreclosure proceedings are only halted when a borrower receives a permanent modification plan.
House Republicans criticized HAMP as a failure today, saying in a report that it is prolonging the economic crisis and harming homeowners.
Coester Appraisal Group adds Apprasier Distance to interactive map
Coester Appraisal Group one of the best nationwide appraisal management companies added an “appraiser distance” feature to its interactive mapping tool on its company website. The tool which will allow a visitor to enter a property address, the appraisers last name and license number and then automatically calculate the distance the appraiser traveled to get to the subject property. The database which was verified by the ASC.gov website to ensure the accuracy of the appraisers legal address. This innovative tool is designed to provide the mortgage community the ability to hold appraisers and appraisal management companies accountable for the appraisals they complete and assign. The utility is free for anyone and does not require a registration.You can use the tool by going to Coester’s website www.coesterappraisals.com
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 www.coesterappraisals.com.
Coester Appraisal Group adds appraiser search tool
Coester Appraisal Group a nationwide appraisal management company announced its addition of an appraiser search tool on its website. The search tool which enables a visitor to enter a property address on Coester’s home page and find nearby appraisers within a given market area is a great tool for the industry to verify if the distance traveled to the property is reasonable for the area. The interactive map was designed to aid the mortgage community in making sure appraisers distance traveled is reasonable for the market area by allowing a visitor to see how many appraisers are within a given market area and there distance to the subject property. The tool is free of charge and is as simple as entering the property address and selecting a radius to search. The database which doesn’t just include appraisers on Coester’s already extremely large national roster but rather is a database of every active appraiser in the united states and has been verified by the asc.gov website. CEO Brian Coester was quoted as saying “ensuring the most accurate appraiser by a local appraiser is our number one concern for the industry. By having the ability to not only see how far the appraiser has driven but to also see how many other appraisers are in the area paints a clear picture of what is happening on a particular file. It gives everyone piece of mind to know the appraiser is local and familiar with the market area or if there not then a clear statement as why they were chosen for the particular assignment”. The map can be found on Coester’s website which is www.coesterappraisals.com and is free for all to use.
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 www.coesterappraisals.com.
Best Appraisal Management Company
Coester Appraisal Group was ranked as one of the best appraisal management companies in the nation by a recent blind survey of over 15,000 mortgage professionals. The survey which was conducted by mortgage professionals found that It really just comes down to service and consistency and that’s were Coester Appraisal Group separates itself from the pack. We thank our clients and our vendors for all of the hard work as it is an honor.You can visit our website at www.coesterappraisals.com or call us at 888-485-1999
Understanding Appraisal Compliance
Appraisal compliance is a must for any company doing mortgage lending today. From the Home Valuation Code of Conduct, FHA’s recent appraisal changes as well as the OTS and OCC appraisal requirements there is simply no way of getting around ensuring an arm’s length appraisal process.One of the most important things about dealing with appraisal compliance is that because everyone has to play by the same rules now, as a mortgage lender you can truly have a competitive edge by knowing the rules and taking advantage of the level playing field.This guide is designed to give you the edge by educating you and your company on appraisal compliance, solutions available as well as a best practice guide to managing the appraisal process day-to-day.
Everyone who has been in the mortgage business for a few years can understand the conflict of interest associated with having a member of the production staff order an appraisal directly to an appraiser. Most of the production staff have little or no training in appraisals as well as the importance of an accurate appraisal and the negative ramifications of inaccurate or inflated values. Most production staff only care about that the number on the appraisal is at our above what is required to get the loan approved. The appraiser that enables them to make the most amount of money is the appraiser they will use. For obvious reasons this could be a problem if your goal as a financial institution and mortgage lender was for the most accurate valuation of a property for your loan portfolio or to sell. What appraisal compliance does is ensure there is no influence is placed on the appraiser to obtain a specific value, misrepresent the property or exclude certain things that an investor could or would want to know about when deciding on making a loan. In theory achieving appraisal compliance sounds very simple, essentially you are putting a wall between the production staff and appraiser to ensure an uninfluenced value. There are plenty of companies that offer appraisal compliance solutions which meet and exceed the industry regulations for appraisal compliance and we will go over these types of companies in a later chapter.
