Bankrate: Mortgage Rates Rise for the Fourth Consecutive Week

The average conforming 30-year fixed mortgage increased this week to 5.24 percent, according to Bankrate.com's weekly national survey. The average 30-year fixed mortgage has an average of 0.45 discount and origination points.

The average 15-year fixed mortgage moved higher, to 4.62 percent while the larger jumbo 30-year fixed rate inched upward to 6.16 percent. Adjustable rate mortgages were mixed, with the average 1-year ARM falling to 5.10 percent and the 5-year ARM climbing to 4.70 percent.

Mortgage rates are lower than they were one year ago. This week last year, the average 30-year fixed mortgage rate was 5.64 percent, meaning a $200,000 loan would have carried a monthly payment of $1,153.21. With the average rate now 5.24 percent, the monthly payment for the same size loan would be $1,103.17, a savings of $50 per month for a homeowner refinancing now.

SURVEY RESULTS

30-year fixed: 5.24% -- up from 5.13% last week (avg. points: 0.45)

15-year fixed: 4.62% -- up from 4.53% last week (avg. points: 0.45)

5/1 ARM: 4.70% -- up from 4.60% last week (avg. points: 0.41)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate's weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. It's almost evenly split among those predicting a rise and those forecasting a fall. This week, almost half of the panelists believe mortgage rates will rise over the next 35 to 45 days. A little more than half think rates will fall. No one predicted that rates will remain relatively unchanged (plus or minus 2 basis points).

For the full mortgage Rate Trend Index, go to http://www.bankrate.com/RTI

To see mortgage rates in your area, go to http://www.bankrate.com/funnel/mortgages/

About Bankrate, Inc.

The Bankrate network of companies includes Bankrate.com, Interest.com, Mortgage-calc.com, Nationwide Card Services, Savingforcollege.com, Fee Disclosure, InsureMe CreditCardGuide.com and Bankaholic. Each of these businesses helps consumers to make informed decisions about their personal finance matters. The company's flagship brand, Bankrate.com is a destination site of personal finance channels, including banking, investing, taxes, debt management and college finance. Bankrate.com is the leading aggregator of rates and other information on more than 300 financial products, including mortgages, credit cards, new and used auto loans, money market accounts and CDs, checking and ATM fees, home equity loans and online banking fees. Bankrate.com reviews more than 4,800 financial institutions in 575 markets in 50 states. In 2008, Bankrate.com had nearly 72 million unique visitors. Bankrate.com provides financial applications and information to a network of more than 75 partners, including Yahoo! (NASDAQ:YHOO) , America Online (NYSE: AOL) , The Wall Street Journal and The New York Times (NYSE:NYT) . Bankrate.com's information is also distributed through more than 500 newspapers. Bankrate, Inc. was acquired by Apax Partners, one of the world's leading private equity investment group, in September 2009. Apax operates across the United States, Europe and Asia and has more than 30 years of investing experience. For more information on Apax, visit: www.Apax.com.

For more information contact:

Kayleen Yates

Senior Director, Corporate Communications

kyates@bankrate.com

GA to lag national recovery through 2011

Georgia’s economic recovery will lag behind the rest of the nation in 2010-2011, but the slow start will give way to more robust growth that will outpace the nation in the years ahead, according to Albert Niemi, dean of the Cox School of Business at Southern Methodist University.

Niemi, speaking Tuesday at the 17th annual Bank of North Georgia Economic Forecast 2010 at the Cobb Energy & Performing Arts Centre, said unemployment will not peak nationwide until April 2010, when it will crest at 10.5 percent, and remain above 10 percent until late fourth quarter next year.

The United States’ economy will grow by only 2.5 percent to 2.7 percent in 2010, he said.

“It is a jobless recovery,” Niemi said in an interview following the presentation.

Unfortunately for Georgia, the state will lag behind the recovery experienced by the rest of the nation. Georgia will underperform in jobs and economic growth through 2011.

Niemi, 67, the former dean of the Terry College of Business at the University of Georgia, said it is unprecedented in his lifetime for the Peach State to fall behind the nation in terms of economic growth.

“This is foreign territory,” he said.

Georgia maintains the fundamentals necessary for job and population growth, including relatively low costs of labor and land, a high quality of life and a global transportation hub in Hartsfield-Jackson Atlanta International Airport.

But the state’s manufacturing base is tied to construction, and both housing and commercial real estate development have fallen off a cliff and the state is choked with a glut of supply.

Housing starts in metro Atlanta that once exceeded 110,000 per year at their peak, have been cut by 80 percent.

Oversupply of housing, retail space and commercial office space will continue to weigh on Georgia until the excess supply has been filled. Cheap real estate will eventually become a plus for the region in attracting investment, but in the short term, it will continue to dog the region.

Long-term, Niemi said Georgia will add 1 million people through 2015, and overtake Michigan as the nation’s eighth-most populous state.

Niemi forecasts strong growth after 2012, and Georgia will become on of the nation’s Top Five or Six states in terms of economic growth through 2030.

Georgia is also favorably positioned for a return of a manufacturing base; one that is more diverse, as shown by the opening of the Kia Motors plant in West Point and the position of a manufacturing plant by NCR Corp.

Atlanta and Dallas, Tex., will be among the nation’s rising stars for the next two decades. Georgia, North Carolina, Texas and Utah will be among the fastest-growing states post-recession and through 2030.

Niemi's visit to Atlanta is part of a series of lectures, which will continue Dec. 2 at the Atlanta Athletic Club and Dec. 3 at Eagles Landing in Stockbridge.

Peachtree Center Athletic Club closing

Dec 1, 2009 - The Atlanta Business Chronicle

The Peachtree Center Athletic Club will close Dec. 31 after more than two decades in business, the club said in a message posted on its Web site.

In a letter posted Tuesday, the PCAC said it has “been experiencing significant challenges due to the aging facility and the current economic climate.”

The 72,000-square-foot facility, which is attached to the massive downtown office complex, becomes yet another victim of an economy that has hit businesses reliant upon discretionary dollars.

“It has recently become clear that the current operating model will no longer support the needs of the business,” the club said on its site.

PCAC is operated by Plus One Health Management.

In a letter to its members, the club said management has arranged for discount memberships at downtown locations of Resolution Fitness and Gold’s Gym.

Current Sales Stats

These were based on sale prices from $100,000 to $250,000 and located in Bartow, Floyd and Polk Counties from May 1,2009 to December 3, 2009.

GA construction jobs decline 18 percent

Georgia continued to shed construction jobs in October, according new analysis by the Associated General Contractors of America of government employment figures.

The Peach State had 161,800 construction jobs in October, compared with $197,300 in October 2008 and 161,400 in September 2009. Georgia ranked 43rd among the states for the 18 percent year-over-year loss.

Every state but one, North Dakota, lost construction jobs in October.

“A shockingly large portion of the construction industry’s workforce has simply evaporated,” said Ken Simonson, chief economist for the association.

He added that the national construction unemployment rate of 18.7 percent was the highest of any sector in October and the industry accounted for one-fifth of all job losses in the past year, even though construction only employs one out of 20 workers.

The five biggest percentage losses in construction employment over the year occurred in Nevada (26.9 percent, or 30,200 jobs), Arizona (24.2 percent, or 42,600 jobs), Tennessee (22.3 percent, or 29,300 jobs), Kentucky (20.8 percent, or 17,600 jobs) and Connecticut (19.3 percent or 12,500 jobs).

The largest monthly gains were a 4.6 percent rise in Michigan (5,400 jobs); 3.4 percent in Wisconsin (3,500 jobs), 3.3 percent in Indiana (4,000 jobs), 2.6 percent in West Virginia (900 jobs) and 2.3 percent in Rhode Island (400 jobs). The largest percentage losses for the month were a 3.7 percent decline in Mississippi (2,000 jobs), a 3.4 percent decline in North Carolina (6,600 jobs), a 2.9 percent decline in Idaho (1,100 jobs), a 2.8 percent decline in Colorado (3,700 jobs), and a 2.4 percent decline in Oregon (1,900 jobs).

“Because construction workers have carried the burden of the downturn’s job losses, the easiest way to cut unemployment and boost the economy is to get America building again,” said Stephen E. Sandherr, the association’s CEO, in a statement. “Increasing investments in highway, transit and infrastructure construction must be the core component to the ‘jobs’ bill that Washington officials are committing to pass soon.”

Wells Fargo CEO sees hope in Atlanta

Nov 20, 2009 - The Atlanta Business Chronicle

The CEO of Wells Fargo & Co. sees hope, and a little pain, in the Atlanta market as early signs point toward a long and slow economic recovery.

In a wide-ranging interview with Atlanta Business Chronicle, John Stumpf, the head boss of Wells Fargo (NYSE: WFC), and its merger partner, Wachovia Bank, talked about the state of commercial real estate, the bank’s plan for the Big Peach, when its Wachovia branches will switch from blue and green waves to Wells Fargo’s red and gold, and future bank regulation.

When Wells Fargo (NYSE: WFC) acquired Wachovia, Atlanta became a Top Three market for the San Francisco-based financial services and banking conglomerate. Stumpf, here for meetings with key corporate clients and top regional management, said the company is seeing some positives signs in the local economy.

A looming danger for Atlanta and much of the nation, is the bursting of the commercial real estate bubble. Signs of the fallout have begun, as office towers and retail centers have fallen into default and foreclosure

Atlanta’s Buckhead submarket has the highest office vacancy rate in the nation, and vacancies in Midtown and Buckhead are climbing to historic highs.

Stumpf said it is not yet clear how much pain the industry will suffer in commercial real estate.

Nearly 9 percent of commercial real estate loans held by banks nationwide were in delinquency during the second quarter, according to the Federal Reserve, double the same quarter last year. More than 16 percent of construction and development loans were delinquent.

Nearly $500 billion in commercial real estate loans will mature in each of the next few years.

“One reason you’re seeing less pain is because interest rates are so low,” Stumpf said. “The carrying costs of these properties are at record low levels. That being said, you can’t carry it forever if there’s no cash flow on these properties.”

Atlanta, Stumpf said, is not as challenged as Florida, particularly in things such as condo lending.

Wachovia appears to be picking up steam in its foreclosures of commercial properties, industry insiders say. Stumpf said he could not comment specifically about troubled projects in Atlanta, but he did admit that in general the Wachovia portfolio has steeper challenges than legacy Wells Fargo.

“On the Wells side, while like other banks, ours has taken bumps, but I think it’s the finest underwritten commercial loan portfolio in the country,” he said. “On the Wachovia side there was more risk in the portfolio, but at the time of the merger we wrote that down we took big substantial hits on that portfolio. So in many cases our losses are already behind us.”

Much of the pain to be felt will hinge of the recovery of the consumer, Stumpf said.

“At the end of the day, all commercial real estate has a consumer component to it. It serves the consumer one way or another, most businesses do,” he said.

Wachovia is the second largest bank in metro Atlanta and the state in terms of deposits behind rival SunTrust Banks Inc. (NYSE: STI).

“This is a big part of our company, we have some of our best leaders here, we have a big market share here,” Stumpf said. The company is in the process of hiring 200 bankers in the metro area.

Despite an overall decline of $1 billion in deposits in the metro area, the CEO said most were high-priced CDs that were allowed to expire.

“When you look at the transaction accounts, not hot money, we’re growing share here,” he said. “And that’s happening across the company.”

Wachovia has more than 280 branches in Georgia, and more than 500 ATMs that ultimately will be rebranded Wells Fargo. The bank isn’t in any hurry, and is focusing its rebranding on markets like California, Nevada and Texas where the banks competed head-to-head. Colorado has already seen its Wachovia branches converted to Wells Fargo.

“We can say this definitively, the name will change, it will be Wells Fargo, it will most likely happen in the next two years,” he said. “…I don’t know that we even know when Atlanta and greater Georgia will fit into all that.”

Stumpf, who became familiar with and “fell in love with” Atlanta during his time financing Spaghetti Junction, said he was impressed with the region’s resiliency.

“What’s impressed me about Atlanta, even though unemployment is higher than the national average and home prices have gone down more than the national average,” he said, “I wouldn’t bet against Atlanta. I’d bet with Atlanta all day long.”

Atlanta’s place as a logistics hub and its affordable real estate—made more affordable by the fallout of the real estate market—should continue to make it an attractive place to do business.

Stumpf cited First Data and Sony Ericsson’s respective recent decisions to relocate headquarters to the metro Atlanta as proof.

There are other signs of hope. Loan volume for October and November among mid-sized companies ($2 million to $25 million in revenues) was more than $50 million, more than the previous nine months combined.

“We’ve got our team marching double time looking for loans,” Stumpf said. “You hear from time to time that banks aren’t lending money, we’re lending all the money we can.”

Industry wide, loan demand is down as businesses retrench. Since the start of the credit crunch, some in business and in government have complained about the lack of bank liquidity, but bankers have generally been quick to counter that they are making loans to creditworthy borrowers, though standards have tightened.

“As an industry I think one of the biggest challenges will be not enough earning assets, not enough loans.”

Stumpf said the banks are one-third of the way into their three-year integration process. Wells Fargo expected $60 billion in losses over those three years as it came to grips with soured loans within the combined Wells Fargo-Wachovia portfolio. Much of that, about $41 billion, was realized in the first year, as planned.

“We’re still in same zip code with those numbers,” he said, adding that synergies from merged operations are being realized a faster clip than originally planned, and losses from legacy Wachovia’s risky option-arm Pick & Pay mortgage portfolio are actually not as steep as originally feared, despite deepening financial gloom.

“We’re on track, we’re on schedule and we’re under budget,” Stumpf said. I couldn’t be happier, I couldn’t be more excited.”

The bank’s mortgage origination business, he said, “is booming.” The company originates about one in four U.S. mortgages and services one in six.

Georgia is one of the nation’s leading centers of the foreclosure crisis, but Stumpf said the state has fared better than many areas, including Florida.

“On residential side, seeing signs, especially on the lower end, we’ve reached the bottom,” he said.

The bank has seen home prices rebound from the bottom in California, but losses are continuing in regions like the Sunshine State.

Wachovia and Wells Fargo have modified 400,000 home loans and refinanced 1.1 million loans Stumpf said. Overall, the mortgages on its balance sheet, he said, “have held up exceedingly well.”

In October, Wachovia played host to a mortgage modification event at the Georgia World Congress Center, and met with 2,600 borrowers in distress.

“What most people miss on real estate is people want to repay their bills,” he said. “Most people love their homes, they want to stay there but losses are higher today because of the job situation.”

Commercial Mortgage News

OAKLAND, CA-The total delinquency rate for commercial mortgages expanded 60 basis points in the third quarter to 4.7%, according to an early estimate by locally based Foresight Analytics. While final figures for the third quarter are not due out until late November, the real estate market analysis and forecasting specialist uses earnings reports and call report filings from many smaller banks to produce its quarterly estimates.

The commercial mortgage delinquency rate has been rising at an accelerated rate ever since Lehman Brothers’ collapse in September 2008 and the ensuing severe credit crunch and economic downturn. While more than double the commercial mortgage delinquency rate from the same year-earlier period, the 4.7% delinquency rate is still well below the 8% rate in the third quarter of 2001. However, given a weak economy, severely constrained credit availability and a high volume of commercial mortgages coming due during the next several years, Foresight Analytics principal Matthew Anderson calls the increasing delinquency rate "worrisome."

The delinquency rate for other commercial and industrial loans--loans to businesses typically unsecured and separate from commercial mortgage lending--rose 50 basis points in the third quarter to 4.2%. Anderson says the rate has been trending up by 50 basis points a quarter as the The lack of credit is most apparent in the C&I loan category," Anderson says. "We estimate a 6% decline in the volume of loans outstanding during Q3, following several quarters of contraction. The volume of loans outstanding has contracted by approximately 15% since peaking in Q3 2008."

The delinquency rate in construction lending, including both residential and commercial, jumped 190 basis points in the third quarter to 18.2%. The last recession's peak came in the first quarter of 2001 when construction loan delinquency hit 19.2%, according to AA.

"While for-sale residential construction loans [single family and condo] are by far the main source of problems, our estimates indicate that delinquency rates for other construction sectors, including apartments and commercial properties, are on the rise, too," Anderson says. "Worsening fundamentals and reduced liquidity in the commercial real estate sector will likely contribute to further rises in the delinquency rate."

Residential mortgage delinquencies rose 80 basis points in the third quarter to 11%. Aside from an approximately 200 basis point increase in the final three months of 2008, the delinquency rate has been rising by approximately 100 basis points per quarter since the first quarter of 2008. One year ago the rate was 6.4%.

"We have been expecting the rate of increase to slow, but clearly this has not yet occurred," Anderson says. Weak economy and reduced credit availability have put pressure on borrowers’ finances.

Source Loopnet

Market Commentary

RealtyRates.com Investor Survey Cap Rate Indices Increase For All Property Types During 2nd Quarter 2009

Consistent with a 42 basis point jump in Treasury rates to which most commercial mortgage interest rates are indexed, the RealtyRates.comTM Investor Survey Weighted Composite (Cap Rate) IndexTM increased 23 basis points, from 9.62% to 9.85% during the 2nd Quarter of 2009.

All 11 property sectors surveyed recorded quarter-over-quarter index increases with the greatest recorded by the Golf sector, up 27 basis points, followed by the Lodging sector, up 26 basis points.

The smallest increases were recorded by the Industrial and Mobile Home/RV Park/Campground sectors, both up 21 basis points from the previous quarter.

The deterioration in the commercial real estate market, as evidenced by the indicated increase in the Weighted Composite (Cap Rate) Index™ during the 2nd quarter, was further compounded by continuing declines in net operating income across virtually all markets, nationwide.

Press Releases

Ameris Bank, Moultrie, Georgia, Assumes All of the Deposits of American United Bank, Lawrenceville, Georgia

American United Bank, Lawrenceville, Georgia, was closed today by the Georgia Department of Banking & Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Ameris Bank, Moultrie, Georgia, to assume all of the deposits of American United Bank.

The sole branch of American United Bank will reopen on Monday as a branch of Ameris Bank. Depositors of American United Bank will automatically become depositors of Ameris Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until they receive notice from Ameris Bank that it has completed systems changes to allow other Ameris Bank branches to process their accounts as well.

This evening and over the weekend, depositors of American United Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of August 11, 2009, American United Bank had total assets of $111 million and total deposits of approximately $101 million. Ameris Bank will pay the FDIC a premium of 1.02 percent to assume all of the deposits of American United Bank. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets.

The FDIC and Ameris Bank entered into a loss-share transaction on approximately $92 million of American United Bank's assets. Ameris Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-800-913-3058. The phone number will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/americanunited.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $44 million. Ameris Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. American United Bank is the 101st FDIC-insured institution to fail in the Nation this year, and the twentieth in Georgia. The last FDIC-insured institution closed in the state was Georgian Bank, Atlanta, on September 25, 2009.

On October 1, all appraisers who are currently approved to perform FHA appraisals and licensed, but not certified, will be removed from the FHA Appraiser Roster. HUD officials say that the Housing and Economic Recovery Act of 2008 forced this requirement upon them. Last October, HUD stopped taking applications by licensed, but not certified appraisers, wishing to be placed on the FHA roster.

“This is a statutory requirement that does not provide for grandfathering and cannot be waived by the FHA,” read an announcement from HUD on the subject. “However, appraisers that subsequently meet certification requirements may apply for reinstatement to the FHA appraiser roster.”

OFFICE SPACE

As in the case of most commercial real estate, the market for office space is still in a tailspin. According to Colliers International, a leading real estate information firm, office vacancies in the United States rose 1% to 15.45% in the second quarter of this year.

Office rents have continued to decline and are, on the average, over 10% below what they were at the beginning of the year.

Chris Moore, director of economic research at Colliers, expects this trend to continue for the rest of the year, as he said, “Firms have little appetite for expansion and instead remain focused on reducing costs and watching their bottom lines.”

FED EXTENDS TALF

The Federal Reserve Board and the U.S. Treasury Department have announced the extension of the Term Asset-Backed Loan Facility (TALF). Created in the wake of last year’s financial meltdown, this program was slated to end December 31.

“To promote the flow of credit to businesses and households and to facilitate the financing of commercial properties, the Federal Reserve and Treasury approved extending TALF loans against newly listed ABS (asset-backed securities) and legacy CMBS (commercial mortgage-backed securities) through March 31, 2010,” the Federal Reserve reported in a press release. “Because the new CMBS deals can take a significant amount of time to arrange, the Federal Reserve and Treasury approved TALF lending against newly issued CMBS through June 30, 2010. “

The Fed stated it did not expect to expand the variety of collateral eligible for this program, but that could change in the future. In fact, the TALF program could be extended further, according to the press release, which said, “The Board will continue to monitor financial conditions and will consider in the future whether unusual and exigent circumstances warrant a further extension of the TALF to help promote financial stability and economic growth.”

For those of you who have interest in the Health Reform Bill (HR3200) I have posted a link below to the last version of that bill on this site below. Best I can figure this bill cost about a Billion dollars a page. Seems to me we are in the wrong profession. We need to get into writing bills.

 http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/~c111e5W6oV

Links to Actual Bill, Good reading congress hasn't read it but you might want to. The part I find interesting is the 57 + new federal agencies it creates. Now thats change you can believe in!

As far as other news>>>>>>>>>>> Latest FDIC News In Georgia

Press Releases

State Bank and Trust Company, Pinehurst, Georgia, Assumes All of the Deposits of the Six Bank Subsidiaries of Security Bank Corporation, Macon, Georgia

FOR IMMEDIATE RELEASE July 24, 2009

Media Contact: David Barr Office Phone: (202) 898-6992 Cell Phone: (703) 622-4790 Email: dbarr@fdic.gov

The six bank subsidiaries of Security Bank Corporation, Macon, Georgia, were closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with State Bank and Trust Company, Pinehurst, Georgia, to assume all of the deposits of the six bank subsidiaries of Security Bank Corporation.

The six banks involved in today's transaction are: Security Bank of Bibb County, Macon, GA, with $1.2 billion in total assets and $1 billion in deposits; Security Bank of Houston County, Perry, GA, with $383 million in assets and $320 million in deposits; Security Bank of Jones County, Gray, GA, with $453 million in assets and $387 million in deposits; Security Bank of Gwinnett County, Suwanee, GA, with $322 million in assets and $292 million in deposits; Security Bank of North Metro, Woodstock, GA, with $224 million in assets and $212 million in deposits; and Security Bank of North Fulton, Alpharetta, GA, with $209 million in assets and $191 million in deposits.

The six banks had a total of 20 branches, which will reopen during normal business hours beginning tomorrow as branches of State Bank and Trust Company. Depositors of the six banks will automatically become depositors of State Bank and Trust Company. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until State Bank and Trust Company can fully integrate the deposit records of the six failed banks.

Over the weekend, depositors of the six banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 31, 2009, the six banks had total assets of $2.8 billion and total deposits of approximately $2.4 billion. In addition to assuming all of the deposits of the failed bank, State Bank and Trust Company will acquire $2.4 billion in assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and State Bank and Trust Company entered into a loss-share transaction on approximately $1.7 billion of the six banks' assets. State Bank and Trust Company will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today's transaction can contact the FDIC as follows:

Failed Bank	FDIC Toll-Free Phone Number	FDIC Website
Security Bank of Bibb County	1-800-822-0412	http://www.fdic.gov/bank/individual/failed/sb-bibb.html
Security Bank of Houston County	1-800-822-7182	http://www.fdic.gov/bank/individual/failed/sb-houston.html
Security Bank of Jones County	1-800-822-9247	http://www.fdic.gov/bank/individual/failed/sb-jones.html
Security Bank of Gwinnett County	1-800-822-1918	http://www.fdic.gov/bank/individual/failed/sb-gwinnett.html
Security Bank of North Metro	1-800-823-4939	http://www.fdic.gov/bank/individual/failed/sb-metro.html
Security Bank of North Fulton	1-800-823-3215	http://www.fdic.gov/bank/individual/failed/sb-fulton.html

The phone numbers will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT.

To assume all of the deposits and purchase assets from the FDIC as receiver, State Bank and Trust Company received a $300 million capital infusion from a group of 26 investors, led by Joseph Evans.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $807 million. State Bank and Trust Company's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. The failure of the six banks brings the nation's total number this year to 64, and the total for Georgia to 16. The last FDIC-insured institution to be closed in the state was First Piedmont Bank, Winder, on July 17, 2009.

 We are going to clean up the entire world by ourselves>

House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman's co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

Associated Press

Henry Waxman

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Note also that the CBO analysis is an average for the country as a whole. It doesn't take into account the fact that certain regions and populations will be more severely hit than others -- manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

Printed in The Wall Street Journal, page A12

MGIC Investment Corporation announced on Thursday that it plans to reorganize its operations in response to widening losses from its core business.

MGIC and its subsidiary Mortgage Guaranty Insurance Corporation reported a net loss for the quarter ended June 30 of $339.8 million or $2.74 per diluted share. Losses during the same quarter of 2008 were $99.9 million or $0.81 a share.

The company's losses thus far in 2009 total $524.4 million compared to $134.4 million last year. On a diluted share basis the loss rose from $1.29 to $4.22.

MGIC is a leading issuer of Private Mortgage Insurance (PMI). These are policies written on individual residential mortgages when borrowers do not provide a 20 percent down payment. The policies are purchased by the home owner but insure the lender bank against loss.

Curt S. Culver, chairman and chief executive officer blamed MGIC's growing financial difficulties on mounting delinquencies and foreclosures of residential mortgages insured by the company due to the weakening economy, job losses, and falling home values but said that the company has adequate resources to cover its obligations on its current book of business.

Delinquent loans, including bulk loans increased to 14.97 percent of the companies' portfolio from 8.6 percent the year before.

Under the announced reorganization, MGIC plans to shift writing of new policies to another subsidiary, MGIC Indemnity Corporation and cease writing any new business within the parent company. To this end, MGIC has reached an agreement with the Wisconsin Commissioner of Insurance that will allow it to contribute up to $1 billion to MGIC Indemnity in two installments starting this month.

If MGIC must continue to write policies through the parent company it will need either additional capital or relief from capital requirements in 16 of the states in which it does business. To that end, the company has also had talks with the U.S. Department of the Treasury about a capital investment.

Even with the funds transfer agreement from the home state insurance commissioner, MGIC has a long way to go to effect the planned reorganization. Wisconsin authorities have not yet given permission for the subsidiary to actually write policies and similar permission must be obtained from each of the states. The indemnity company must also be approved as an eligible insurer by Freddie Mac and/or Fannie Mae.

The company stated, "We cannot predict whether these approvals will be obtained and if so on what conditions. If we cannot execute that plan we will need to re-evaluate these other options."

After the companies' financials were announced, Fitch Ratings downgraded its ratings for MGIC from "BBB" to "BBB-" and placed it on Ratings Watch Negative. The BBB- rating is the lowest investment ratings grade.

After an initial drop early in the day, the company's stock was trading near the close at $4.88, up $0.94 from Wednesday's close.

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Mortgage rates took another step higher yesterday following a 3% rally in the stock market. Tame inflation and “not as bad” industrial production numbers have resparked the green shoots theory of a quick economic recovery. Market participants, not wanting to miss out on the rally, quickly sold their fixed income investments to move their money into the higher risk but higher return equity markets. In total, mortgage backed securities moved lower in price (as price moves lower, rates move higher) by 75 basis points which forced all lenders to reprice for the worse with some issuing a couple reprices as the losses snowballed into close. Losing much more was MBS’s closest relative, the benchmark 10 year note, which sold off and moved to a higher yield of 3.63. Just a few days ago, the 10 year note was trading under 3.30 in yield. After mortgage rates briefly touched 4.875% the other day, they have quickly turned and by day’s end yesterday par was sitting at 5.25%.

JP Morgan reported much better than expected earnings this morning. Analysts had expected a 5 cents per share earnings but they reported 2nd quarter earnings of 28 cents per share or $2.7 billion. After the much better than expected earnings from Goldman Sachs earlier this week, many anticipated similar results from JP Morgan which fueled the rally in equities.

The U.S. Department of Labor this morning released the weekly jobless claims for unemployment insurance report. This data set calculates the number of Americans who filed for first time unemployment benefits in the prior week. Today's report indicates that jobless claims fell from last week’s upwardly revised 569,000 to 522,000. Estimates from economists were for 535,000 first time claims. Continuing claims, which reports how many people continue to file due to lack of finding a new job, fell by 642,000 ? its largest amount in history ? from 6.883 million to 6.273 million. The Labor Department is warning that the better than expected numbers are being distorted by seasonal issues owing to the fact that layoffs in manufacturing happened earlier than usual.

The final report of the day comes from our friends at the Federal Reserve Bank of Philadelphia with the release of the Philly Fed Survey. This survey lets market participants know the strength of manufacturing around the Philadelphia region. Last month’s survey improved by a large margin moving from -22.6 to -2.2 which was the best reading since September of 2008 and far exceeded estimates. Readings below 0 indicate that business conditions are contracting while readings above 0 indicate expansion. Economists surveyed for this month’s survey were expecting a slight decline to -5.0. The survey in fact showed business conditions in the region contracting more than expected at a -7.5 read. Following the release, both MBS and treasuries moved to their best price of the day.

So far today, the fixed income sector is trying to rebound from the beating they took yesterday. Currently, the benchmark 10 year treasury note is rallying and is currently trading at a yield of 3.51 after closing yesterday at 3.63. MBS are moving higher in price as well and are currently recapturing over half of yesterday’s losses. Since MBS are moving higher, if you are currently floating continue to do so until later today. This will allow time for lenders to pass along the improvements, but things can change very quickly so we must remain defensive. You can check MBS prices by clicking over to Mortgage News Daily’s Mortgage Rates page.

Reports from fellow mortgage professionals are indicating that the par 30 year fixed rate conventional loan is in the 5.125% to 5.375% range for the best qualified consumers. If you are securing government financing, FHA or VA, expect your rate to be about .25% higher. The sell off yesterday in MBS should have resulted in higher mortgage rates this morning; however, there are two things helping rates. First, AQ informs me that most lenders locked in their pipelines in early July at the highs of MBS price which allows them to pass along pricing based on last week’s MBS price. Secondly, the move higher in interest rates last month has lessened the supply of mortgage applications for lenders to underwrite. How can a lender encourage more loan applications to be submitted? That’s right, offer better pricing.

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By: Diana Olick
CNBC Real Estate Reporter

I hate to say I told you so, but on May 1st and again on June 1st, I told you about the potential negative ramifications of the Home Valuation Code of Conduct. Today the Realtors confirmed what I had been hearing all across the mortgage industry.

“In the past month, we have suddenly been bombarded with many stories of, at the last moment, transactions falling apart because appraisals are coming in unrealistically low,” said National Association of Realtors Chief Economist Lawrence Yun. “As a result it opens up a new round of negotiations between a buyer and a seller or in many cases the buyer just steps away.”

The HVCC went into effect at the beginning of May, an outgrowth of a lawsuit by New York State Attorney General Andrew Cuomo against Washington Mutual. Fannie Mae [FNM 0.64 0.02 (+3.23%) ] and Freddie Mac [FRE 0.71 0.06 (+9.23%) ] agreed not to buy any loans that didn’t comply with the code.

The HVCC forces a firewall between lenders/brokers and home appraisers. Gone are longstanding relationships between a local mortgage broker or lender and a local appraiser.

Now, lenders and brokers are forced to use appraisal management companies (ironically – or maybe not so ironically—many of which are owned by the big banks). These companies hire independent appraisers across the country and call on them to do the local appraisals.

Realtors say some of these appraisers are not only not local, they don’t even have access to the local MLS. They are doing appraisals using computer models, often incorporating distressed sales as comps, and often not even knowing that the home had extensive renovations or an addition. As a result, the appraisals are coming in far lower than the agreed-upon purchase price.

It is affecting new purchases as well as refinances.

“The new HVCC is certainly increasing processing times, raising costs for consumers, and in often cases bringing in valuations that don't appear to be correct as a result of lesser experienced appraisers from outside the area appraising properties at potentially lower valuations,” says Craig Strent of Bethesda, Maryland’s Apex Home Loans. “When that happens that throws the refinance or the purchase mortgage out of whack of course and creates fairly large problems for the financing, so we're seeing some really negative effects as a result of this HVCC.”

The point of the HVCC was to take fraud out of the appraisal process, and let’s face it, there was plenty of that. But they may be throwing out the baby with the bathwater here. Interestingly, after I discussed this on CNBC this morning (see video), we got a call from a Congressional office asking for the transcript of my report.

By: Diana Olick
CNBC Real Estate Reporter

With mortgage interest rates creeping higher again (and yes, I realize by historical standards, they’re still low, but as a housing stimulus they would need to be below 4 percent), a new idea is floating around industry associations and Capitol Hill. It’s another home buyer tax credit. The current $8000 credit for first time home buyers only expires November 30th. The new proposal is for a $15,000 tax credit for all home buyers.

A new bill from Sen. Johnny Isakson (R-GA), who used to be in the real estate business, would not only offer a bigger credit to a wider swath of potential home buyers, it would also removed the income caps ($75,000) that kept a lot of buyers out of the current credit.

It’s debatable just how much the first time home buyer tax credit juiced the spring housing market. It certainly didn’t hurt, but some say it wasn’t nearly enough, given its limitations. Even allowing borrowers to monetize the credit up front, which HUD recently announced, left a lot of earlier potential buyers out.

“Stimulating the housing market is one of the best ways Congress can help accelerate the recovery of our national economy,” said David Kittle, Chairman of the Mortgage Bankers Association in a press release. Obviously everyone, from the builders to the Realtors support the proposal.

“Due to expire at the end of November, the current $8,000 first-time home buyer tax credit has proved to be an effective policy targeted toward a specific demographic group that is showing tangible results,” chimes NAHB Chairman Joe Robson. “Enhancing this credit would help to stoke the economic engine at a key point in our recovery.”

The question is: At what cost? A letter to Sen. Isakson from the Joint Committee on Taxation provides a revenue estimate for Isakson’s bill, S.1230, the “Home Buyer Tax Credit Act of 2009.”

Assuming an enactment date of July 1, 2009, we estimate that your proposal would have the following effect on Federal fiscal year budget receipts:

I’m not arguing either way for the credit, I just think we should have our eyes wide open as this debate begins.

A new report shows foreclosure starts among the 30.4 million first-lien residential mortgages owned or guaranteed by Fannie Mae and Freddie Mac -- most of them prime loans -- jumped 63 percent during the first three months of the year, to 243,800.

The sharp increase in the number of homes entering the foreclosure process compared to the previous quarter outpaced the 20 percent increase in foreclosure prevention actions by Fannie and Freddie's 3,000 loan servicers. Those actions, including loan modifications, forbearance and repayment plans, and short sales, totaled 87,000.

Fannie Mae and Freddie Mac own or guarantee 56 percent of outstanding mortgages, and about 84 percent of them are considered prime loans. The 151,600 foreclosure starts on prime borrowers in the first quarter of 2009 represented a 260 percent increase from a year ago, while foreclosure starts on nonprime borrowers nearly doubled, to 92,200.

Completed foreclosure sales and third-party sales were also up 17 percent from the fourth quarter of 2008, to 41,800, despite a temporary suspension of foreclosure sales on owner-occupied properties in effect during parts of the quarter.

In announcing the release of the latest quarterly report on Fannie and Freddie's foreclosure prevention efforts, the Federal Housing Finance Agency emphasized a 57 percent increase in loan modifications from the fourth quarter of 2008 to the first quarter of 2009, to 37,300.

FHFA also noted that the Obama administration's Making Home Affordable loan modification and refinance programs were still in development in March, the final month covered in the report.

The percentage of loans 60 days or more past due, however, continued to climb, reaching 3.6 percent by the end of the first quarter, up from 3 percent the previous quarter and 1.5 percent a year ago. That compares with a 9.2 percent industry average, and 10.2 percent for loans backed by the Federal Housing Administration (FHA). The report said 9.7 percent of Fannie and Freddie's nonprime loans were delinquent by 60 days or more. And the delinquency rate of prime loans has more than doubled in the last year, reaching 2.5 percent.

By the end of March, 1.1 million loans owned or guaranteed by Fannie and Freddie were late by 60 days or more, a 19 percent increase from the end of 2008.

The performance of mortgages modified by the 3,000 loan servicers employed by Fannie Mae and Freddie Mac was also an area of concern. The percentage of loans current six months after modification fell from 43 percent to 37 percent.

FHFA expects that more recent loan modifications will perform better, since 83 percent of loans modifications completed in the first quarter of 2009 resulted in lower payments for borrowers, compared with 16 percent in the first quarter of 2008.

Fannie and Freddie's loan servicers also managed to boost the number of short sales by 31 percent from quarter to quarter and by 353 percent from a year ago. The number of short sales -- 8,054 -- represented less than one-tenth of foreclosure-prevention actions.

Last month, the Obama administration announced an expansion of the Making Home Affordable program to provide incentives for borrowers and loan servicers to engage in short sales and deeds-in-lieu of foreclosure.

During the past several months there has been quite a lot of confusion about what is and what is not true about the Home Valuation Code of Conduct. We as appraisers have been confused ourselves. Some of the past updates we have posted may have been incorrect based on the current clarifications published by the Appraisal Institute, Fannie Mae and others. Many lenders have established appraisal management companies for the purpose of complying with what was perceived as correct. I have attached below an article from the appraisal institute that outlines some of the myths and concerns hopefully to clarify what is true and what is not. I hope this will be of help in understanding the guidelines of the HVCC.    

© Home Valuation Code of Conduct

Myth: The HVCC requires lenders to use Appraisal Management Companies. Reality: Use of appraisal management companies is not required under the Home Valuation Code of Conduct (HVCC). Lenders may engage appraisers directly without the use of third parties. Myth: Mortgage sellers cannot achieve compliance without outsourcing the appraisal function. Reality: Sellers may achieve compliance by establishing meaningful risk management practices, including separation between risk management (appraisal) and loan production. The Code requires that loan production staff not be involved in ordering the appraisal. This separation is currently required under existing federal bank regulation. Myth: "Loan Correspondents" or "correspondent lenders" are the same as mortgage brokers and they too cannot order appraisals. Reality: Unlike mortgage brokers, loan correspondents fund loans in their own name and, therefore, have "skin in the game." They are allowed to order appraisals on loans sold to Fannie Mae and Freddie Mac like other sellers that fund loans in their own name or with their own funds. Mortgage brokers no longer will be able to engage real estate appraisers directly. Myth: Sellers cannot maintain the appraisal function internally (as an in-house operation), without loan production involvement. Reality: There are several ways in which sellers may staff appraisal functions internally without outsourcing the function to a third party, so long as they maintain separation between risk management functions and loan production staff. To achieve compliance the appraisal function should report to an individual or department outside of loan production. Some examples of eligible individuals or entities within institutions include, but are not limited to, the following:

Myth: Loan Production staff is prohibited from communicating with appraisers. Reality: Loan production staff may communicate with the appraisers, but they cannot be involved in selecting, retaining, recommending or influencing the selection of any appraiser for a particular appraisal assignment. Further, loan production staff cannot have any "substantive communications with an appraiser or appraisal management company relating to or having an impact on valuation, including ordering or managing an appraisal assignment." Myth: Outsourcing appraisal functions to an appraisal management company can reduce costs. Reality: Given the diversity in the size and structure of lending institutions, it is difficult to conclude that outsourcing necessarily will reduce costs. Lenders incur costs for appraisal risk management whether done in-house or outsourced. Lenders should consider all the costs of compliance, including the costs associated with ensuring appraiser competence and appraisal quality, before making a decision to outsource their risk management functions. Myth: Outsourcing appraisal management to a third party reduces lender risk.

Reality: Federal bank regulatory agencies have cautioned against reliance on third-party relationships by reaffirming that such relationships may significantly increase a bank’s risk profile, notably its strategic, reputation, compliance and transaction risks1. According to federal banking guidelines, "Increased risk most often arises from poor planning, oversight and control on the part of the bank and inferior performance or service on the part of the third party, and may result in legal costs or loss of business. To control these risks, management and the board must exercise appropriate due diligence prior to entering the third-party relationship and effective oversight and controls afterward." Myth: Use of third party vendors ensures the use of competent appraisers. Reality: Lenders traditionally have been responsible for ensuring the competency of the appraisers and reliability of the appraisals they use for credit decisions. However, the competency of an appraiser is not measured by scoring compliance with seller servicer guidelines. Processing appraisal orders is a separate function that does not specifically include a review of competency. The function of competency review is best performed by individuals with significant education in appraisal standards and theory.

Further, institutions should consider any potential reductions in quality that might result from outsourcing the appraisal function. To this point, federal bank regulatory agencies recently reminded institutions to consider an appraiser’s competency for any given appraisal assignment.2

Myth: The licensing of an appraiser ensures his or her competency. Reality: Licensing does not necessarily ensure the competency of an appraiser. The Fannie Mae and Freddie Mac Selling Guides require lenders to review the appraiser’s education and experience. Specifically, the Fannie Mae Selling Guides state:

"A lender must not assume—simply based on the fact that an appraiser is state-licensed or state-certified—that the appraiser is qualified and knowledgeable about a market area or is aware of the appropriate market data sources for the area and will be able to obtain access to them. If an appraiser is not knowledgeable about a particular location, is not experienced in appraising a particular type of property, or is not familiar with (or does not have access to) the appropriate data sources, a lender should not give the appraiser assignments in that market area or for that particular type of property."3 Myth: Professional appraisal designations cannot be used when evaluating the qualifications, education and experience of an appraiser. Reality: The Fannie Mae Selling Guides state that designations may be helpful in evaluating an appraiser's qualifications, particularly when the designation is from a nationally recognized organization. Specifically, the Fannie Mae Selling Guide states:

"Professional appraisal designations can be helpful to the lender in evaluating an appraiser’s qualifications, particularly when the designation is from a nationally recognized organization that has formal experience, education, and ethics requirements that are strongly administered. If the lender considers an appraisal designation in its evaluation, it should be familiar with the appraisal organization’s specific requirements to ensure that the designation is evaluated appropriately."4 Myth: "Comp checks" ? which are prohibited under the HVCC without an engaged appraisal assignment ? are the only way to determine if there is sufficient value in the collateral before proceeding with a loan application. Reality: Lenders often want to know if there is sufficient value in the collateral before proceeding with a loan application. To determine this in the past, lenders and brokers would request "comp checks" of the appraiser. The HVCC bars lenders from ordering "comp checks" without engaging an appraiser in an appraisal assignment. Lenders may engage appraisers in appraisal assignments that involve a scope of work that is significantly narrow. For example, the appraiser could provide an answer to the question "is the property worth at least $XX" or "is it within a certain range," rather than a single point value estimate? This still would be an appraisal; the appraiser would need to complete the necessary research and analysis to answer such a question, and would have to document that analysis properly. Alternatively, the appraiser could be engaged in a consulting assignment to provide raw data to the client to help with their analysis.

Final Note: The HVCC is intended to promote independence in the appraisal process and, thus, help ensure that appraisers and the appraisal process may be relied upon as part of sound underwriting for financial institutions.

Are the new appraisal rules hurting or helping the consumer?

Bad appraisals hurting sales and costing consumers

By Susan Taylor Martin, Times Senior Correspondent

Two years ago, Florida regulators permanently revoked the license of Clearwater appraiser Larry Holzer because he had approved a home appraisal that contained glaring errors:

It said the house was on an asphalt road when it was really on a dirt road.

It said the house had public water and sewer when in fact it had a well and septic tank.

It said the property was in an area 75 percent developed, not the actual 25 to 50 percent.

The license revocation barred Holzer from appraising property in Florida. But it hasn't kept him out of the appraisal business.

Last year, Holzer started Global Appraisal Solutions, one of a growing number of "appraisal management companies'' that hire appraisers to determine market values. Though the appraisers are licensed, the management companies are totally unregulated. And they are at the heart of a controversy over a new federal policy that critics say is costing borrowers more money and resulting in rushed, poor-quality appraisals that can thwart home sales as the market struggles to recover.

"The agents I talk to, a lot of us are bemoaning the fact that we're finally putting deals together only to have them blown apart by appraisals,'' says Lance Williams, a Tampa real estate agent. "That's discouraging, especially at a time when the government says it's here to help us.''

Fast and flawed

Although they've been around for years, appraisal management companies are profiting from efforts to prevent the kind of appraisal-related fraud that contributed to the real estate bust. In 2007, New York Attorney General Andrew Cuomo filed suit alleging that Washington Mutual had pressured appraisers to inflate home values so WaMu could make bigger loans.

The suit led to a Home Valuation Code of Conduct that took effect May 1. With some exceptions, it bars direct contact between appraisers and loan originators, meaning appraisals must now be arranged by a third party — typically, an appraisal management company.

Under the new code, the lender contacts a management company, which then hires the appraiser. The borrower pays the appraisal cost, which is divided between company and appraiser.

"The whole goal of the code is a laudable one — to prohibit pressure on appraisers to achieve a desired valuation,'' say Francois Gregoire, a St. Petersburg appraiser and former chairman of the Florida Real Estate Appraisal Board.

But Gregoire and others say the top priority of most management companies is maximizing their fees, not getting the best-quality appraisal. As a result, they often hire less experienced appraisers and require them to rush their reports.

"There's no way in the world I'm going to do work for a (management company) because I don't believe you can turn around an appraisal report in 24 or 48 hours even if you're intimately familiar with the market and do a credible job,'' Gregoire says. He has taken as long as 11 days to put together a report, which includes photographs, market analyses, and interviews with buyers and sellers.

Critics say appraisers hired by third-party companies often know little about the area where the property is located and come up with appraisals wildly out of whack. Some examples:

• Although there are many appraisers far closer, an appraiser from Crystal River went 50 miles to Tarpon Springs to value a unit in a new townhouse development where frequent "flipping'' suggested mortgage fraud. He appraised the unit at $1.2 million — nearly $800,000 more than what an identical unit had recently sold for.

• In another suspicious case, an appraiser sent by a management company from the Fort Lauderdale area all the way to Key Largo appraised a unit for $750,000. Other units were listed at no more than $299,000.

• At the other end of the spectrum, Wells Fargo bank recently agreed to take $290,000 for a house that originally cost $420,000 in a prime area north of Gandy Boulevard. But the appraiser, from Pasco County, set a value of just $245,000 by using "comparable'' sales from a less desirable area south of Gandy.

Wells Fargo agreed to sell at $245,000 "but mercifully that was a case where we could put a deal together because the bank just wanted to be done with it,'' said Williams, the Tampa agent. "But when you have a seller who is the primary owner of the property, that deal's probably not going to go through.''

By steering more work through third parties, the new code of conduct is also increasing costs to consumers because both the appraiser and the management company are getting paid. However, borrowers don't know that because the closing statement shows only the appraiser.

"I think the consumer needs to know that they're not paying Joni's Appraisal Service $500 for an appraisal but maybe $250, and that the rest is going to a management company,'' says Joni Herndon, current chairman of the real estate appraisal board. "It has to be a profitable business venture or they wouldn't be in it.

Improper pressure?

Critics say the problems with management companies are epitomized by firms like Global Appraisal Solutions and its founder, Holzer.

Holzer, 41, ran afoul of state regulators for inadequately supervising a trainee who had done a flawed appraisal in 2003 on a $250,000 Lake County house. Full of errors, the report didn't even have photos of the right house.

In an affidavit, Holzer said it was an isolated incident that occurred at a time he was "impaired'' because of treatment for depression following a divorce. Nonetheless, he surrendered his license, which was permanently revoked in 2007. The trainee and other employees under Holzer's supervision also lost their licenses.

A year later, Holzer started Global Appraisal Solutions. Touted on its Web site as "one of the most trusted providers of real estate valuations in the nation,'' it promises "guaranteed same-day inspections'' by certified appraisers with delivery of reports "within 24 hours.''

A veteran Illinois appraiser, Donald Martin, says he refused an assignment from Global Appraisal Solutions because he felt Holzer was pressuring him to come up with a certain valuation on a house — something the new code of conduct was specifically designed to prevent.

"They asked me to call them if the value wasn't going to be there,'' said Martin, who spoke with Holzer by phone. "In my opinion he is shopping for an appraiser that will make his client happy. It's because of appraisers like he was that we now have the code of conduct.''

In another recent instance, Global Appraisal Solutions e-mailed an appraiser in Colorado with this request: "We need you to take a look and see if an additional $5,000 in value is justified.''

Holzer says there is nothing improper about his business practices.

"The reality is that many appraisers are not competent, and many are undervaluing properties to the detriment of consumers,'' he says. "The job of the appraisal manager is to hold appraisers accountable.''

Holzer also says that problems in his background are irrelevant to his current work. He has a long arrest history that includes convictions for marijuana possession, harassing phone calls, obstructing an officer without violence and violating a domestic violence protection injunction.

"Because I had a successful appraisal company, the state of Florida wanted to crucify me,'' he says. "They see if you're successful at what you do and they crucify you.''

Neither federal regulators nor the New York Attorney General's Office returned calls seeking comment on whether the new code of conduct is working as intended. But a bill now before Congress would regulate Global Appraisal Solutions and similar companies — a move long overdue, critics say.

"I think it goes hand-in-hand with the regulation of appraisers and also the licensing of appraisers and Realtors,'' says Herndon of the state appraisal board. "These are third-party brokers of appraisal services, and consumers should know who they are.''

Susan Taylor Martin can be contacted at susan@sptimes.com.

From: Greg Shelley

06/10/2009

Lenders might want to try the Mercury Network it has links to Appraisers in the area of their subject property and you can view their websites for information about the appraiser you chose. This ordering method complies with the HVCC rules.

Click on this link to visit their site:

http://www.mercuryvmp.com/lender/

A personal note:

Due to the recent implementation of the Home Valuation Code of Conduct, there have been numerous so-called appraisal management services opening up their doors for business. By utilizing portals such as the Mercury Network, Appraisal Port and a few others that serve as a conduit between the appraiser and the lender you can save time and money for the borrower and receive a better quality report than using these new Appraisal Management companies that have no oversight by any regulatory agency. These companies pay the lowest fees in order to retain as much of the appraisal fee possible. The results are substandard appraisals, as the majority of good honest appraisers will not work for these low fees, as they know the scope of work required is not the same for every assignment they accept. I encourage each lender to try these aforementioned report ordering and delivery portals for their appraisal needs. I think you might like the results.

By Renae Merle
Washington Post Staff Writer
Friday, May 29, 2009

Rising unemployment levels helped push record numbers of homeowners into delinquency or foreclosure during the first quarter, according to industry data released yesterday.

Government efforts to cut foreclosure rates have not been enough to offset the impact of the recession on struggling borrowers, the data from the Mortgage Bankers Association showed. And borrowers once considered reliable are now helping drive the foreclosure crisis, which looks likely to extend into next year.

About 12.07 percent of mortgage loans were delinquent or in the foreclosure process during the quarter, according to a survey by the industry group. That is the highest level ever recorded by the survey, which has been conducted since 1972. It is up from about 8 percent during the first quarter of 2008.

"The increase in the foreclosure number is sobering but not unexpected," said Jay Brinkmann, the group's chief economist.

Lenders who held off while the Obama administration unveiled its foreclosure prevention program earlier this year are now working their way through a backlog of troubled loans, economists said. And the recession has become a major factor in the foreclosure crisis. For example, for the first time, prime loans, which are traditionally considered safer, represented the largest share of foreclosures during the first quarter, according to the data.

Of the loans in foreclosure during the first quarter, 49.8 percent were prime loans and 43.2 percent were subprime.

"More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults," Brinkmann said. "Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve."

And it may be months before the impact of the Obama administration foreclosure prevention plan, Making Home Affordable, becomes clear, said John Taylor, president of the National Community Reinvestment Coalition. Early intervention in the housing crisis could have forestalled some of the current problems, he said. But "the problem has deepened so badly since then and become compounded by rising unemployment." .

The majority of the foreclosure problems remain centered in four states: California, Nevada, Arizona and Florida, where home prices spiked the highest and are now in freefall. They account for 56 percent of the increase in foreclosure starts.

Delinquency rates in the Washington region have also risen. In the District, 5.07 percent of loans included in the survey were seriously delinquent or in foreclosure, compared with 2.39 percent a year ago.

Locally, the rate was lowest in Virginia where 4.41 percent of loans were in trouble, up from 2.52 percent last year. It was highest in Maryland where 6.49 percent of loans were seriously delinquent or in foreclosure, up from 3.02 percent in the first quarter of 2008.

Meanwhile, the market for new homes remains weak. In April, new-home sales were flat, up 0.3 percent compared with March, to an annualized rate of 352,000 sales, according to a Commerce Department report released yesterday. But sales were down 34 percent compared with April 2008.

The market is weakest in the West, where sales fell 3.8 percent last month. Sales were unchanged in the Midwest and Northeast. In the South, the region that includes the Washington metro area, sales increased 1.9 percent.

As builders compete against a backlog of foreclosed properties on the market, median new home prices fell to $209,700 in April, compared with $246,400 a year ago.

It would take 10.1 months to sell all the homes on the market at the current rate, according to the Commerce Department figures. But that is a slight improvement, said David Crowe, chief economist for the National Association of Home Builders. The backlog has been falling as builders curtail production and there are now fewer than 300,000 new homes on the market, the smallest inventory since 2001, said Crowe.

The market should begin to show improvement soon, he said. "It won't be a significant, rapid rise, but it will be an increase, which right now, is a whole lot better than a decrease," Crowe said.

• REAL ESTATE
• MAY 29, 2009

Mortgage Rates Surge, Sap Hopes

Home-mortgage rates have surged to their highest level in more than three months, threatening prospects for quick rebounds in the housing market and consumer spending.

The average rate for 30-year fixed-rate loans jumped to 5.44% on Thursday, the highest level since early February, according to a survey by HSH Associates, a financial publisher. That was up from 5.29% Wednesday and 5.03% Tuesday.

Mortgage rates are being pushed up in part by a steep increase in yields on long-term Treasury bonds, which have a strong influence on the cost of home loans.

"The spike in rates has the potential to derail a lot of things," said Mahesh Swaminathan, a mortgage strategist at Credit Suisse Group in New York. Higher rates make it less likely that homeowners will be able to lower their monthly payments by refinancing, which could put a crimp on consumer spending. They could also mean lower earnings for banks, which have profited from increased refinancing.

In addition, higher rates are likely to put more downward pressure on home prices and sales. In terms of the burden on home buyers, Credit Suisse estimates that each rise of 0.10 percentage point in mortgage rates is equivalent to a 1% rise in home prices. Home sales have stabilized at low levels in recent months as bargain hunters seek out foreclosed properties. The S&P/Case-Shiller national home-price index in the first quarter was down 19% from a year earlier, largely due to those distressed sales.

Some borrowers were stunned by the sudden move in rates. "I about choked," said Kristen Caywood, who had been preparing to lock in a rate this week to refinance the mortgage on her $525,000 home in Avon, Conn., before rates spiked. The 41-year-old graphic designer, who currently has a 6.875% rate, contacted her broker in February after mortgage rates began to drop. She spent months ironing out wrinkles in her mortgage application to boost her chances of getting the lowest rate possible. Now she plans to wait at least a few days in hopes that rates will fall again.

Michael Menatian, a mortgage banker in West Hartford, Conn., said he has about 50 clients who have completed their appraisals and are finalizing their applications to refinance but who won't close at current rates because it's not cost effective.

Developments Blog

• 'Catastrophic time' for higher mortgage rates.
• Unemployment fuels defaults, not mortgage payments
• Home price declines spread to stable markets
• Do loan modifications work?

At J.P. Morgan Chase & Co., mortgage applications started dropping off last Friday as rates started to move upward and dropped off more sharply after Wednesday's rate increase, a spokesman said.

Rates are still down from a peak of about 6.5% in late October. They fell considerably starting in late November, when the Federal Reserve announced plans for heavy purchases of mortgage securities. Higher demand for such securities tends to push down rates for consumers.

Meanwhile, rising unemployment is fueling a continuing steady increase in mortgage delinquencies and defaults. About 12.1% of first-lien home mortgages in the U.S. were overdue or in the foreclosure process at the end of March, the Mortgage Bankers Association reported. That's the highest ever recorded in the MBA survey and up from 8.1% a year earlier and 11.9% at the end of 2008.

People who lose their jobs and find that they owe far more than the current value of their homes are more likely to give up on making payments. "The economy is driving it," said Jay Brinkmann, chief economist at the trade group.

About 5.7% of prime fixed-rate loans were overdue or in foreclosure, up from 3.2% a year earlier. Among subprime adjustable-rate loans, the figure jumped to 49% from 37%. The prime category includes many loans that started with minimal monthly payments but exposed borrowers to big increases later.

MAY 27, 2009

Is Your Home A Good Investment?

As assets, homes provide only modest annual returns in the long run.

• By BRETT ARENDS

There's the usual talk about what the latest Case-Shiller house price data mean for the next short term move in the real estate market. Has housing bottomed? If not, has the rate of decline slowed? And when will we see an upturn?

Human nature likes the short term. Which is why so little attention is paid to something that is probably more important, if less urgent: What the latest data show about the long-term of the real estate market.

And it's startling.

We have just been through the biggest boom in real estate in American history. The subsequent bust surely hasn't finished.

Bloomberg News

Dropping home prices are only one of the factors that keep the annual returns on homes low.

Yet look at the numbers. Since 1987, when the Case-Shiller index of 10 major cities begins, it's risen from an index value of 63 to 151. Annual return: Just 4.1% a year. During that period, according to the Bureau of Labor Statistics, consumer prices rose by 3% a year. Net result: Home prices produced a real return of just 1.15% a year over inflation over that time.

Critics may point out that the analysis is unfair -- after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle.

Not necessarily. Since then the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That's still only a real return of 2.2% a year above inflation.

You can often do better on long-term inflation protected government bonds.

And real estate often costs 2% or more a year in property taxes, condo fees, maintenance, insurance and the like.

Why Your Mortgage Won't Make You Rich

Conventional wisdom long held that home ownership was a route to wealth, and the imputed rent -- in other words, the right to live in your home -- was just part of the value you got from it. Under that widespread view, the recent housing bust was simply a temporary, though deep, pothole.

Yet for very many people, even over the past 15 or 20 years, the imputed rent may have been all, or nearly all, the real value they actually got from their home.

Yes, it's only recent data. And it's only ten cities. But there's some reason to suspect these numbers may, if anything, flatter real estate performance. After all, it's hard to look at the data and figure the bust is now over. And if they fall further, those long-term return figures will fall too.

Prices weren't just down 19% over the past year. They fell 2% just between February and March. And it's not the worst-hit markets that worry me the most -- Phoenix is down 53% from its peak, Miami 47%. That smells of capitulation. It's the other markets. New York and Boston are only down 20%. Denver's only down 14%.

Overall the ten- and 20-city Case-Shiller indices are merely back to mid-2003 levels. After the biggest boom and bust on record, history suggests things don't stop getting worse until they've gotten a lot worse than that.

Revised Home Valuation Code of Conduct

Myths and Realities of HVCC

Local Banks can be HVCC Compliant by using the Mecury Network 

The Mecury Network lets lenders utilize a secure portal to order appraisals and locate an appraiser in the area and field of expertise that suits there needs. 

Current News

Government Announces Public-Private Plan to Buy Toxic Assets

The Obama administration unveiled its plan to help banks rid their balance sheets of real-estate related securities that are now difficult to value. The plan relies on a public-private partnership to purchase toxic assets in order to stabilize the economy while limiting taxpayer risk. “We believe that this is one more element that is going to be absolutely critical in getting credit flowing again,” President Barack Obama said. “It’s not going to happen overnight. There’s still great fragility in the financial systems. But we think we are moving in the right direction.”

Officials said the plan will combine private investments and loans from the Federal Deposit Insurance Corp. and the Federal Reserve with $75 billion to $100 billion from the government’s $700 billion Troubled Asset Relief Program to generate $500 billion in purchasing power. Treasury Secretary Timothy Geithner said as much as $1 trillion in toxic subprime mortgages, mortgage-backed securities and other troubled assets may be purchased. To attract private investors, the government plans to offer subsidies in the form of low-interest loans.

The program is designed to help set values on distressed mortgage loans and other toxic securities. If the securities increase in value, the investors and taxpayers would share in the gains. If values fall, the government and investors would incur losses. “A principal virtue of this mechanism is to use the financial interests of investors to help set the price. Because they have money at risk, they’re going to make better judgments about how to set the price for these assets than the government could hope to make,” Geithner said.

The Treasury Department hopes to launch the program within the next few weeks after details are finalized.

Frank Prepares Bill to Revamp Fannie, Freddie; Requests Bonuses be Rescinded

Calling the current model “broken,” Rep. Barney Frank, D-Ma., chairman of the House Financial Services Committee, has indicated that he plans to introduce legislation later this year that would restructure government-backed mortgage investors Fannie Mae and Freddie Mac.

Speaking at a recent meeting hosted by the Center for American Progress, Frank asked housing-related organizations to send him their ideas for ways to revamp the government sponsored enterprises. Among the ideas currently being floated is a plan in which Fannie and Freddie would be separated into distinct entities to serve two functions: to ensure adequate funding for the home-mortgage market as a whole and to provide government subsidies for housing low-income people.

Fannie and Freddie, the biggest providers of funding for U.S. home loans, were seized by federal regulators last September after the Treasury was forced to pump massive amounts of capital into the GSEs to keep them operating. The combined losses reported by Fannie and Freddie for 2008 totaled about $108 billion.

As he announced his plan to introduce legislation to reconfigure Fannie and Freddie, Frank last week also called on the GSEs to cancel planned bonuses for executives. Coming on the heels of the controversy in which AIG executives were awarded $165 million in bonuses, Frank is asking Federal Housing Finance Agency Director James Lockhart to “rescind the retention bonus programs at Fannie Mae and Freddie Mac, prohibit any further payment of bonuses to executives under that program, and pursue repayment of any already-paid bonuses.”

As Frank stated in his letter, “I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea. Further, in this troubled economy, and in this job market, it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave.”

Fannie Mae Tightens Conditions for Backing Condo Mortgages

As of March 1, Fannie Mae instituted new restrictions that will make it more difficult for condo developers to sell their units. Under the new Fannie restrictions, the government-sponsored enterprise has stopped guaranteeing mortgages in condo buildings where fewer than 70 percent of the units have been sold, which is up from 51 percent previously. In addition, Fannie announced that it will no longer back loans for sales in buildings where 15 percent of current owners are delinquent on association fees or where more than 10 percent of units are owned by a single-entity.

Fannie believes the implementation of new restrictions will protect borrowers from risky investments and safeguard taxpayers (who now own Fannie Mae and Freddie Mac under the government’s conservatorship) from losing money on unstable developments.

Condo developers, however, are concerned that the new restrictions may lead to the early failure of projects and that the now-effective rules will slow down the recovery of the nation’s housing markets.

As of press time, Freddie has yet to adopt Fannie’s new guidelines, though most lenders have already implemented the restrictions. In the coming month, both GSEs are expected to increase fees on condo buyers, meaning that buyers without at least a 25 percent down payment will have to pay closing-cost fees equal to 0.75 percent of their loan, regardless of the borrower's credit score. Fannie and Freddie contend that these raised fees are necessary to protect against higher default rates.

Fannie, Freddie REO Inventory Swells

While Fannie Mae and Freddie Mac boosted their loan modifications by 76 percent in the last three months of 2008, the government-sponsored enterprises also nearly doubled their inventories of real estate-owned properties over the course of the year as they seized properties faster than they could sell them. Such were the findings of a report issued last week, by the Federal Housing Finance Agency, which detailed to lawmakers the actions the GSEs have taken to prevent unnecessary foreclosures.

In addition, the report showed that among the 30.7 million residential mortgages owned or guaranteed by Fannie and Freddie, the percentage of loans delinquent by 60 days or more doubled from March to December of 2008, to 3.02 percent.

The report also showed that the temporary moratoriums on foreclosure sales and evictions announced in November were successful. In December, the percentage of 60-day delinquent loans completing the foreclosure process fell to 0.37 percent, down from the peak of 2.89 percent in July.

The moratoriums, which are intended to give loan servicers time to employ streamlined loan modification criteria developed by the Bush administration, were extended into 2009 as Fannie and Freddie developed new policies on rentals of REO properties.

The moratoriums on evictions will remain in place through March 31. On April 1, the Obama administration is scheduled to launch its "Making Home Affordable" loan modification and refinance program, which has been billed as a comprehensive strategy to get the housing market back on track. Through the Making Home Affordable Program, up to 9 million American families may be eligible to refinance or modify their loans to a payment that is affordable now and into the future.

To view the Federal Housing Finance Agency’s report to lawmakers, visit www.fhfa.gov/webfiles/1656/FederalPropertyMgrreportMarch200931709.pdf.

FHA Releases New Cash-Out Refi Rules

In its latest mortgagee letter, the Department of Housing and Urban Development has issued new rules setting limits on cash-out refinances. Effective April 1, 2009, the loan-to-value of any cash-out refinance to be insured by the FHA may not exceed 85 percent of the appraiser’s estimate of value.

The FHA’s reduction to the maximum LTV for cash-out refinances is being implemented to safeguard the agency from exposure to undue risk. According to the HUD mortgagee letter, the reduction will be instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken.

The new underwriting and eligibility requirements for cash-out refinances feature several new rules, including:

- Length of ownership definitions, which, depending on the duration of ownership of a primary residence, allows the borrower to obtain the maximum 85 percent of the appraiser’s estimate of value in the new mortgage.

- Second appraisal requirements for high-balance cash-out refinances, which will require a second appraisal on cash-out refinances that will exceed $417,000 on a property that is in a declining area.

- Non-approved broker fee guidelines, which stipulate that loan origination services may not be performed by a non-FHA approved broker and that the FHA-approved mortgagee shall not compensate the broker for such services.

For more information regarding HUD’s latest Mortgagee Letter, contact the FHA Resource Center at 800-225-5342. Persons with hearing or speech impairments may access this number via TDD/TTY by calling 877-833-2483.

FDIC Testifies before House on Investigating Appraisal Involvement

In testimony last week before the House Financial Services Committee, Federal Deposit Insurance Corporation Vice Chairman Martin Gruenberg called for those responsible for the current housing crisis to be held accountable.

“Immediately following the closing of every failed institution – regardless of size, circumstances or primary federal regulator – our investigations staff and our attorneys who specialize in professional liability issues together begin an investigation,” testified Gruenberg. “The purpose of the investigation is to determine, among other things, whether the failed institution’s directors, officers and professionals, such as accountants, appraisers and brokers, were responsible for its losses, and, if so, to hold them accountable.”

Gruenberg noted that there are currently 4,375 mortgage fraud claims under investigation and an additional 900 civil mortgage fraud lawsuits are expected to be filed over the next three years. The FDIC representative informed the committee that defendants in civil lawsuit cases have primarily been mortgage brokers, appraisers, closing attorneys and other closing agents, as well as title companies, title insurance companies, and other third parties that participated in mortgage fraud against FDIC-insured banks and thrifts.

Under the Federal Deposit Insurance Act, the FDIC may pursue enforcement actions against insured depository institutions and third parties or independent contractors to those institutions, which encompasses appraisers.

To view Gruenberg’s testimony in its entirety, visit www.house.gov/apps/list/hearing/financialsvcs_dem/fdic_-_gruenberg.pdf.

Fannie Mae’s Refinance Volume Triples to $41 Billion

With homeowners taking advantage of lower interest rates and higher loan limits, Fannie Mae’s refinancing volume jumped to more than $41 billion in February—nearly three times January’s volume—the company reported. The company said that it was the largest volume in almost a year.

“Borrowers are increasingly taking advantage of the low mortgage rates available in the market today,” said Tom Lund, executive vice president for Fannie Mae’s Single-Family Mortgage Business. “We anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance under the President’s Making Home Affordable plan. Providing broader access to affordable, sustainable mortgages through expanded refinancing opportunities is a critical part of preventing future foreclosures and hastening recovery,” Lund said.

Since the announcement of the Obama Administration’s Making Home Affordable plan, more than 150,000 borrowers have contacted Fannie Mae to inquire about eligibility.

FHA Commitment Authority Jumps to $315 Billion

As part of the $410 billion omnibus spending bill recently signed by President Obama, Congress raised the Federal Housing Administration’s commitment authority limit to $315 billion to guarantee single-family loans during fiscal year 2009 within the agency’s Mutual Mortgage Insurance Program account. This compares to the agency’s 2008 limit of $185 billion. Ginnie Mae, which securitizes FHA and other government-backed mortgages, also received a $100 billion increase in its commitment level to $300 billion.

Last week, the Senate approved final passage of the FY 2009 omnibus appropriations, which was unfinished business left over from the last year's Congress. And President Obama signed the massive spending bill. The president is expected to unveil details of his FY 2010 budget in April. The FY 2009 appropriations bill includes a 7 percent increase in the Department of Housing and Urban Development's budget to $41.8 billion. The appropriators also allotted $120 million to the HUD inspector general, including $13 million to keep a closer watch on the FHA single-family program. The appropriators also instructed the Government Accountability Office to determine whether the inspector general's office has enough resources to audit FHA's "expanded role" in refinancing subprime, alt-A and other home mortgages.

During 2008, FHA’s mortgage insurance covered $534 billion in single-family loans. Of those loans, 6.82 percent were 90 days or more past due, an increase of 0.84 percent from the same time last year.

Reviewing the FHA Neighborhood Watch data – which detects lenders with abnormally high early default rates – FHA consultant Brian Chappelle reported that newly originated FHA loan performance has deteriorated since June 2008. In addition, the default and claim rate on loan refinances reached 4.75 percent in January 2009, 20 basis points higher than the overall rate for all FHA loans originated over the previous 24 months. Chappelle says it is the first time in the 10-year history of Neighborhood Watch that loan refinances have underperformed recent loan originations.

Mortgage Fraud Reports Increase 26 Percent

Rhode Island made its first appearance as the nation’s top fraud hot spot, according to a study released by the Mortgage Asset Research Institute, with inflated home appraisals being the most prevalent type of fraud in that state. MARI reported a 26 percent increase in the number of mortgage fraud incidents last year compared to the prior year, with fraud on mortgage applications being the most common type of fraud overall.

Rhode Island’s rate, the report said, was three times expected levels. Florida, which ranked first for two straight years, dropped to second, Illinois ranked third, followed by Georgia, Maryland, New York, Michigan, California, Missouri and Colorado.

The increase came as lenders dramatically tightened their standards, making it more difficult for borrowers to qualify for home loans without large down payments, solid credit and proof of their incomes. With credit far tighter, about $1.4 trillion in home loans were made last year, down about a third from a year earlier, according to trade publication Inside Mortgage Finance.

The recession has also increased pressure on shady mortgage lenders and brokers — as well as borrowers — to lie on loan applications, according to the fraud report. More than 60 percent of mortgage fraud cases last year stemmed from falsified applications, while 28 percent came from tax returns or financial statements, and 22 percent came from appraisals, the study said.

“This study illustrates why it is important for lenders to hire and work with professional appraisers,” said Bill Garber, Director of Government and External Relations for the Appraisal Institute. “Lenders can mitigate concerns about mortgage fraud by hiring competent real estate appraisers, such as those who participate in professional appraisal organizations and earned professional appraisal designations like the MAI, SRPA, and SRA from the Appraisal Institute.

As awareness of the mortgage fraud problem grows, law enforcement agencies are stepping up their efforts to combat it. The FBI created a Washington-based national mortgage fraud team in December and has more than 1,600 open mortgage fraud investigations, more than double the number of such cases just two years ago. With so many ongoing cases, FBI investigators are not focusing on individual borrowers, but industry professionals generating fraud schemes that could total as much as hundreds of millions of dollars.

Despite Moratoriums, February Foreclosures Rise Six Percent

According to data released by RealtyTrac, foreclosures in February surged six percent from January levels, and were up 30 percent from the same time last year. “The increase in foreclosure activity from January to February is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through most of February as well,” said RealtyTrac chief executive officer James Saccacio.

More than 74,000 homes across the country were repossessed during February, up from January’s figure 67,000, and nearly 291,000 homeowners received at least one foreclosure filing compared to nearly 275,000 in January.

Nevada continued to lead the nation in foreclosures in February with one in every 70 homeowners receiving a foreclosure filing. Arizona posted the second highest with one in every 147 homes receiving a filing. Other states ranking among the top 10 in foreclosures were California, Florida, Idaho, Michigan, Illinois, Georgia, Oregon and Ohio. States with the lowest foreclosure rates included Vermont, West Virginia, South Dakota and North Dakota.

The struggling economy has caused the housing crisis to spread. As reported by the Mortgage Bankers Association, nearly 12 percent of homeowners with mortgages were at least one month behind in payment or in foreclosure at the end of 2008. Since the foreclosure crisis hit in August 2007, nearly 1.2 million homes have been foreclosed.

Housing Data Shows Increase in Building Activity, Sales

February housing starts experienced an increase from January levels, due in part to a large spike in apartment building activity. In a March 19 release, Hanley Wood Market Intelligence reports that total housing starts increased 22.2 percent from January levels to a seasonally adjusted annual rate of 583,000 units. Single-family starts rose 1.1 percent from January while the multi-family sector increased 82.3 percent. Moreover, total building permit activity increased 3.0 percent from January to 547,000 units, with single-family permits reporting an 11.0 percent increase.

As reported by the National Association of Realtors, existing home sales in February had its largest jump since July 2003, increasing 5.1 percent from the previous month to an annual rate of 4.72 million units. However, the number of unsold homes on the market increased 5.2 percent in February to 3.8 million. February’s median sales price dropped to $165,400, down 15.5 percent from the same time last year. Prices are now about 28 percent lower than the peak reached in July 2006.

In the week ending March 13, the MBA’s seasonally adjusted Purchase Index increased 1.5 percent to 257.1 from the previous week’s figure of 253.3. This data shows a 29.56 percent decline from the same period last year. According to Freddie Mac’s March 19 Primary Mortgage Market Survey, average mortgage rates fell 4.98 percent from the previous week. Rates are now slightly higher than the record lows reached in January.

New Appraisal Regulations Under Fire
Beginning May 1, the responsibility for managing home appraisals will move to a middleman, known as appraisal management companies or AMCs.

Under new federal regulations, mortgage brokers and loan officers can’t directly order appraisals. Instead, they are expected to go through third-party AMCs, which are supposed to prevent them from pressuring appraisers.

But critics of the new plan say nobody is watching the AMCs.

“[The new rules] have transferred the [improper influence] problem to these appraisal management companies, which are not regulated by anybody," says Bill Garber, director of government affairs at the Appraisal Institute, a nonprofit trade group.

"[The marketplace is] still vulnerable to appraiser pressure because the incentives are still there to get deals done and collect the fees," says Susan M. Wachter, professor of real estate at the University of Pennsylvania's Wharton School.

Federal housing officials, who helped write the new laws, say they will hold AMCs accountable.

James B. Lockhart, director of the Federal Housing Finance Agency, which oversees Fannie and Freddie, says, "If [AMCs] are applying undue pressure, that would be a violation of Fannie and Freddie rules, and we would take action.”

 Appraisal Institute Urges Congress to Address Feeble Oversight

In testifying before Congress on March 11, the Appraisal Institute told lawmakers that mortgage reform legislation is needed to address structural weaknesses in mortgage industry regulation. Calling current regulatory oversight “feeble,” the Appraisal Institute called upon Congress to provide state and federal appraisal oversight agencies with greater enforcement power, the lack of which has contributed significantly to mortgage fraud.

“Too often, the appraisal has been relegated to a formality in mortgage lending, a gimmick to push a deal, rather than an essential element of risk-management. It is a dangerous precedent for lenders to outsource their risk management functions,” Jim Amorin, MAI, SRA, President of the Appraisal Institute, noted in his testimony. “Confidence in our financial system will be restored only when serious attention is devoted to prudent lending practices.”

To address weaknesses plaguing the mortgage lending industry, Amorin presented the U.S. House of Representatives Subcommittee on Financial Institutions and Consumer Credit with a short list of recommendations that the Appraisal Institute believes will protect the safety and soundness of mortgage transactions. His recommendations included the following:



· The introduction and passage of mortgage reform legislation addressing the inappropriate pressure of appraisers, providing greater accountability of federal and state appraiser regulators, and promoting professionalism among appraisers.

· The establishment of a high-level agency Chief Appraiser position for collateral valuation review, with oversight of all appraisal and valuation issues across the financial spectrum, including the mortgage and secondary markets, and all financial, mortgage and real estate-related financial instruments.

· The undertaking of an immediate review of the new loan modification guidelines (Home Affordable Modification) released by the Treasury Department last week, to ensure that consumers and neighborhoods are being protected and that proper valuation is being utilized, including questioning the allowance of broker price opinions in lieu of appraisals.



In addition, Amorin identified automated valuation models and broker price opinions as unregulated methods of obtaining opinions of value that undermine federally created appraisal standards. Lenders’ use of these unregulated methods put both banks and consumers at risk of receiving inaccurate valuations.

“Our organization is concerned by the Administration’s decision to rely heavily on unregulated valuation services such as brokers,” said Amorin. “Frankly, we are shocked. Once again, we are not treating the valuation process seriously. Computer-generated analyses cannot approach the valuations prepared locally by hands-on appraisers who are experts in their communities.”

Amorin also voiced the need to regulate appraisal management companies. “Currently operating as unregulated institutions, AMCs act as a conduit between bankers and appraisers, but often fail to inform the consumer that the company retains as much as 60 percent of an appraisal fee. As a result, such practices typically attract new and less qualified appraisers,” he said.



“With the rise of AMCs, we are concerned that the appraiser independence problem simply may be diverted from one formerly unregulated entity (mortgage brokers) to a new one (AMCs),” concluded Amorin.



For the full testimony, visit www.appraisalinstitute.org/newsadvocacy/letrs_tstimny.aspx#Testimony. For more information on this and other government affairs issues, contact Bill Garber at 202-298-5586 or bgarber@appraisalinstitute.org.




Over 75 Industry Leaders Converge on D.C. for First Collateral Matters Congress

In its commitment to helping shape the industry, the Appraisal Institute hosted the first-ever Collateral Matters Congress March 8-10, in Washington, D.C. At the event, over 75 appraisers and members of related professions brainstormed solutions to a variety of problems facing the industry today.



Led by independent moderator Duke Kuehn, Congress participants broke into breakout groups, which then navigated through topics such as: regulation and licensing; appraisal practice, methods and theory; systemic issues regarding collateral; and the appraisal profession and the Appraisal Institute. The groups then reconvened to present their findings and ideas to the rest of the Congress, who then asked questions to flesh out the concepts presented. These were then made into recommendations for actions going forward.



Prior to the breakout sessions, a panel gave an overview of some hot topics from their individual perspective, including Rachel Dollar, Esq., who runs www.MortgageFraudBlog.com; Joseph Swartz, Director of Securities of Deutsche Bank, who provided the secondary market perspective; Jeff Bradford, President of Bradford Technologies; Tim Doyle, Vice President of Conference of State Bank Supervisors, who spoke on the SAFE Act; and Alfred Pollard, General Counsel of the Federal Housing Finance Agency.



To help facilitate openness among the participants, all of their comments during the Congress were “off the record.” However, Appraiser News Online and Valuation magazine will provide further coverage of the recommendations as details become available.


"Cramdown" Bill Passes

In a move sure to rile the financial industry, the House of Representatives last week passed H.R. 1106, the Helping Families Save Their Homes Act of 2009, a bill designed to protect America’s families that also contains a controversial provision which would allow bankruptcy judges to modify the terms of troubled homeowners’ mortgages.



The bankruptcy provision, considered “cramdown” language by lenders, has been strongly opposed by the financial services industry for granting bankruptcy judges the power to reduce the principal owed on a primary-residence mortgage and order other modifications in mortgage terms – moves the banking industry believes will force banks to summarily raise interest rates.



Passed by a 234-191 vote in the House, H.R. 1106 now sits with the Senate, which could vote as early as this week – although opposition from Republicans and conservative democrats is expected to be strong.



In addition to the aforementioned cramdown language, the Helping Families Save Their Homes Act contains provisions that would: give mortgage servicers that rework mortgages a “safe harbor” from lawsuits if a homeowner defaults on a revised loan or appears likely to default; overhaul the Hope for Homeowners program; and permanently increase the limit on deposits insured by the Federal Deposit Insurance Corporation and the National Credit Union Administration to $250,000.


Appraisal Organizations Respond to Treasury Plan

In response to the underwriting details released by the Treasury Department outlining the Obama administration’s “Making Home Affordable” program, the nation’s four largest professional appraisal organizations issued a joint statement in which the groups criticized the Treasury’s loan modification plan for including inadequate home valuation requirements that could leave taxpayers exposed to unnecessary losses.



According to the appraisal organizations’ March 4 statement,”[We are] deeply troubled that the Treasury Department’s $75 billion government guaranteed modification program fails to protect taxpayers from avoidable losses when reworked loans default in the future, as some of them inevitably will; and fails to protect homeowners from mistakenly being declared ineligible for modification because they are told, erroneously, that the current market values of their homes do not meet plan underwriting criteria. Further, the plan retreats from prudent and long-standing banking regulations that encourage the use of appraisals in loan modifications and refinancings.”



The appraisal organizations have stressed that reliable appraisals of the current values of homes are central to the success of the Treasury’s plan. The groups are also in opposition to valuation loopholes in the plan that would allow for opinions of value to be derived via AVMs and BPOs.



“For reasons we find inexplicable, the Treasury’s plan… relies on computer-generated values and the opinions of real estate agents who are not subject to nationally accepted appraisal qualifications and standards to safeguard taxpayers and determine whether homeowners are or are not eligible to decrease their mortgage burden,” reads the appraisal organizations’ statement. “The Treasury should do everything in its power to encourage the use of products prepared by regulated professionals in accordance with industry standards that have the force of law, particularly where there have been material changes in market conditions, as we see in many parts of the country today.”



The joint letter to the Treasury was signed by the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers. To view the letter in its entirety, visit

www.appraisalinstitute.org/newsadvocacy/letrs_tstimny.aspx#Comments.



Bernanke Calls for Overarching Regulator

Federal Reserve Chairman Ben Bernanke said the U.S. needs to have a powerful overarching regulator in order to prevent a repeat of the risks that built up in the banking system, leading to the financial crisis. Bernanke proposed that the central bank should either take the lead or at least be involved. "This crisis has revealed some rather shocking gaps," Bernanke said. "Who was overseeing the subprime lenders, for example? Who was overseeing AIG? There simply wasn't enough adequate oversight in those cases."



Bernanke’s comments came in a March 10 speech to the Council on Foreign Relations on "Financial Reform to Address Systemic Risk." He touched on four key elements of such a strategy, including addressing the problem of financial institutions that are deemed too big—or perhaps too interconnected—to fail; strengthening the financial infrastructure to ensure that it will perform well under stress; reviewing regulatory policies and accounting rules to ensure that they do not “overly magnify the ups and downs in the financial system and the economy”; and considering whether the creation of “an authority specifically charged with monitoring and addressing systemic risks would help protect the system from financial crises like the one we are currently experiencing.”



For more of Bernanke’s remarks, visit www.reuters.com/article/businessNews/idUSTRE52939S20090310.



FDIC: Bank Deposit Insurance Fund May Become Insolvent by Year End

Federal Deposit Insurance Corp. Chair Sheila Bair warned that the fund insuring bank deposits could be wiped out this year because of the anticipated increase of bank failures over the next few months. The fund is at its lowest level in nearly 75 years, dropping from $52.4 billion at the end of 2007 to $18.9 billion at the end of 2008. To replenish the fund, the FDIC recently approved a one-time emergency fee increase, along with other assessments, on U.S. banks and thrifts. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,” Bair said.


Bair rejects the idea of using government aid to restore the fund. “Some have suggested that we should turn to taxpayers for funding. But banks—not taxpayers—are expected to fund the system, and I believe Congress would look skeptically on such a course of action,” Bair said. The emergency premium imposed on banks and thrifts will increase from 6.3 cents for every $100 in deposits to 20 cents for every $100. The FDIC also raised the insurance premium range from 12–14 cents for every $100 in deposits to 12–16 cents for every $100. The agency estimates that the fees may generate $27 billion this year.


Banks and thrifts believe the additional fees will place an additional hardship on an already struggling industry. Small community banks have expressed concerns about the additional fees saying that an unfair burden is being placed on them. According to Camden Fine, president of the Independent Community Bankers of America, the one-time fee could cost smaller banks 50 to 100 percent of their 2009 earnings. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” Fine said.



FDIC Pursuing Brokers

Blaming mortgage brokers and unscrupulous lenders for contributing to the current housing crisis, the head of the Federal Deposit Insurance Corporation announced last week that the agency is gearing up to pursue more than 100 home mortgage fraud cases and is investigating some 4,000 more potential cases against mortgage brokers and other parties. FDIC Chair Sheila Bair justified the upcoming legal actions by stressing how borrowers are looking to government regulators and law enforcement to protect their money. Her remarks came at a meeting of the National Association of Attorneys General in Washington, D.C.



The surge in civil cases against mortgage brokers and other third parties that defrauded lenders will be coordinated by the FDIC’s professional liability group, which handles claims in connection with failed banks.



According to Bair, “Cracking down on mortgage fraud in particular is a safety and soundness issue for both the banking industry and the housing markets."



Suspicious Activity Reports on Mortgage Fraud up 44 Percent; Expansion Proposed

Suspicious activity reports on suspected mortgage fraud cases increased by 44 percent through June 30, 2008, compared to the previous year, the Financial Crimes Enforcement Network reported. The 62,084 cases represent nine percent of all depository institution SARs filed during the period starting July 1, 2007. As a result of the increase in mortgage fraud cases, FinCEN released revised rules and new guidance intended to expand the ability of financial institutions to share suspicious activity reports. While the proposal focuses on depository institutions, brokers/dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities, the proposed rule and guidance could have broader implications for mortgage bankers.



FinCEN Director James Freis Jr. said fraudsters continue to try new methods to dupe mortgage lenders. One trend involves mortgage purchasers sending home loans back to originators for repurchase. Filing institutions referenced repurchase demands in eight percent of SAR filings. Filing institutions referenced foreclosures in 13 percent of their SAR filings, insurers in eight percent and early default payments in two percent of filings as indications of suspected fraud. The report said these patterns generally involved detection of suspected fraud after the mortgage had been granted.



The report also noted an increase in the percentage of SARs filed prior to granting the loan, 34 percent compared to 31 percent the previous year. The complete report can be found at www.fincen.gov/news_room/nr/pdf/20090225a.pdf.


FinCEN’s proposed rules and guidance would permit financial institutions to share a SAR, or information that would reveal the existence of the SAR, with an affiliate, provided that affiliate is subject to a SAR regulation issued by FinCEN or the federal banking agencies, said Freis.



FinCEN seeks comment on whether the guidance should be applied to include other financial institutions, such as mortgage bankers, subject to Bank Secrecy Act regulations. The proposed rule and guidance has been submitted to the Federal Register, with the comment period to run 90 days from date of publication.



Morgan Stanley Warns Investors of Large Write-Down for CRE Fund

In a letter to investors, Morgan Stanley warned that a write down of as much as 60 percent is needed for an $8.8 billion commercial real estate fund’s fourth quarter 2008 equity. The fund, MSREF VI International, was considered the largest real estate fund when it debuted in 2007. The vehicle, which made high-level commercial real estate investments in Japan, Germany, China and Australia, was projected to have an average annual return of 22.4 percent. Within 18 months, however, the fund lost about two thirds of its $6.5 billion in invested capital.


Over the past five years, opportunity funds, including Morgan Stanley’s MSREF fund, were among several tempting investment vehicles sold to large institutions. Unlike traditional real estate investments that leverage about 50 percent of borrowed money for purchases, opportunity funds leveraged up to 70 percent, making it more profitable when values rise. However, falling values can quickly wipe out a fund’s equity. Several buildings that MSREF invested in are now worth less than their mortgages. Moreover, some of the buildings no longer produce enough revenue to cover debts, which could lead to foreclosures.


Other investment banks, including Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc., offered opportunity funds as well, touting annual returns in excess of 30 percent. However, Colony Capital LLC recently wrote down its Colony Investors VIII fund by 45 percent for the first three quarters of 2008. According to Colony CEO Tom Barrack, more turbulence is expected. Industry experts say write-downs in excess of 50 percent will be typical for 2008.


RICS: Quarterly Survey Shows Global Commercial Market Meltdown

Commercial real estate values are declining in every region around the world, according to the Royal Institution of Chartered Surveyors’ fourth quarter 2008 Global Commercial Property Survey. “The effects of the global economic downturn are clearly illustrated by the impact it is having on commercial property markets around the globe, with all sectors—retail, industrial and office—experiencing tremendous difficulties. No geographic area has escaped the wrath of the recession and the current sentiment suggests that worse is yet to come,” said Simon Rubinsohn, RICS Chief Economist.



For the first time since data collection began, commercial space availability has risen across all sectors. As a result, property owners are offering higher incentives as well as shorter lease lengths in an attempt to fill vacant space. Purchasing activity declined at a slower pace in fourth quarter 2008 compared with the previous quarter, with the office sector experiencing the greatest drop. Capital values, however, declined at a faster pace in the fourth quarter compared to the third quarter. Capital values in the United Arab Emirates, which previously had a strong performance record, experienced significant declines. Because of concerns over macro stability, Russia has experienced reductions in commercial investments and capital values. Latin America has seen prices fall across all sectors except in the rental market. Investment demand for commercial real estate in the emerging Europe and the emerging Asia regions has been particularly weak.



With the tight credit market and the faltering economic climate in the United States, investor interest in commercial real estate has taken a beating in fourth quarter 2008. Tenant demand has deteriorated, which can be seen with increasing space availability, further increases in tenant incentives and declining rents. Moreover, capital values have plummeted while property yields and capitalization rates continue to increase.

S&P Takes Rating Actions on REITs

Standard & Poor's recently downgraded two Real Estate Investment Trusts and placed nine on credit watch, which affects roughly 16 percent of the 62 companies it rates. The firm’s actions were prompted by reduced cash flow as well as limited access to debt and equity capital. Because REITs need to maintain liquidity, S&P said they place close attention on an REIT’s balance sheet strength.



According to S&P, most property sectors will come under stress this year because of the deteriorating economic conditions. With the sharp drop in consumer spending, the retail sector has been hit especially hard, which has caused the tenant default risk and net-lease REIT portfolios to increase. Moreover, the increase in employment may now be contributing negatively to the multifamily and self-storage sectors. Healthcare REITs appear to be positioned well but could come under pressure if government and private insurer reimbursement models are negatively altered.



As the recession continues to deepen, S&P expects that more REITs will come under pressure. However, in an effort to retain more capital, several REITs are either cutting dividends or considering stock dividends. Moreover, although property transaction volumes continue to decrease, higher-quality REIT property holdings have enabled many companies to continue to sell assets and secure attractive mortgage financing.


New Distressed Commercial Appraising Seminar to Debut March 13

To help appraisers keep abreast of the cyclical nature of the commercial real estate market, the Appraisal Institute is premiering a new seminar, Appraising Distressed Commercial Real Estate: Here We Go Again. Designed for appraisers, lenders and investors, this one-day seminar provides critical insights on valuing distressed commercial real estate in the current economic downturn.



After a four-city rollout – March 13 in San Francisco; April 1 in Ft. Washington, Penn; April 17 in Sandy, Utah; and May 20 in San Diego – the seminar will be offered nationwide through various chapters.



Participants will learn how to analyze current trends affecting real estate values, develop methods for arriving at a market-supported “as is” value forecast and explore how to evaluate land values accurately with limited direct comparables.



Appraising Distressed Commercial Real Estate: Here We Go Again is approved for seven continuing education hours. Cost is $139 for members, $239 for non-members. For more information and to register, visit www.appraisalinstitute.org/education/seminar_descrb/Default.aspx?sem_nbr=809&key_type=S or call 312-335-4140.



Appraisal Institute Welcomes 4,000 New Members

In 2008, the Appraisal Institute welcomed 4,000 new members, more new members than in any year since the former American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers merged to form AI in 1991. The new members who joined AI last year brings the membership total to more than 25,000 members, the most since 1995.



“Our aggressive marketing campaign to recruit individuals into the profession, particularly younger appraisers, was a tremendous success,” said Jim Amorin, MAI, SRA, president of the Appraisal Institute. “It is encouraging to see so many young professionals who care about their careers and who want to take advantage of all the great benefits the Appraisal Institute offers its members. Best of all, we expect this ‘flight to quality’ to continue in 2009” as appraisers seek to become the trusted advisors to their clients, he said.



The record-breaking recruiting effort, which includes new Associate and Affiliate members added since the beginning of 2008, was brought on by special membership categories created for those just getting started in the profession. The Trainee Associate Membership category was established for individuals pursuing an appraisal career, while the Affiliate Membership category was expanded to include university and college students.



In addition to welcoming 4,000 new members, the Appraisal Institute also awarded a high number of MAI and SRA designations to members. Last year, 173 members were awarded the MAI designation and 146 members were awarded the SRA designation.



For more information on Appraisal Institute membership categories, visit www.appraisalinstitute.org/membership.



AI Tenant Credit Analysis Webinar Set for March 25

The Appraisal Institute will present a webinar addressing commercial vacancy rate increases and how to analyze tenants and their creditworthiness for commercial appraisal assignments. The March 25 Tenant Credit Analysis webinar will cover topics including tenant credit, tenant creditworthiness, warning signals that indicate potential credit problems and how credit impacts real estate valuations.



Presenters David Thiele, MAI, Director, Appraisal Services, TIAA-CREF; Marv Wolverton, PhD., MAI, Senior Director, Dispute Analysis and Litigation Support, Cushman & Wakefield of Texas, Inc.; and Timothy Mardell, MAI,CCIM, Principal, Mardell Partners Inc. will discuss correct financial modeling of tenants in order to provide reliable commercial appraisal reports.



The 60-minute webinar will be presented at 10 a.m. PT on March 25. Cost is $25 for members; $75 for non-members. To register or for more information, visit www.appraisalinstitute.org/education/more_info.aspx?id=13436. 



URS Corporation Hosts Free Green Building Strategies Webinar on March 18

URS Corporation will present a free March 18 webinar titled Cost-Effective Green Building Strategies: Healthcare and Federal Government Applications during which, the company will demonstrate its multi-disciplinary approach to implementing sustainable and holistic strategies on several projects.



Speakers Jeff Hammond, Senior Architect, Facility Planning and Development Department, Spectrum Health; Ryan Archer, Sustainable Designer, URS Corporation; Angela Rivera, Sustainable Designer, URS Corporation; and Mark Wutz, Senior Mechanical Engineer/Project Manager, URS Corporation will discuss design techniques and cost-effective strategies that achieve sustainability and energy-efficiency.



The 90-minute webinar will be presented at 10 a.m. PT on March 18. There is no fee for this webinar. To register or for more information, visit www.xtalks.com/events/xto326urscorp/reg1.html. 



Administration Releases Loan Modification Guidelines; Drops Ball on Appraisals

The Obama Administration released guidelines outlining policies for the Home Affordable Refinance program for four to five million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac and the Home Affordable Modification program, which intends to help between three and four million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. The program details can be found at www.ustreas.gov/press/releases/tg48.htm.



Elements of the overall program contain appraisal and valuation components for participation. For loans refinance program administered by Fannie Mae or Freddie Mac, the program will allow borrowers that currently owe up to 105 percent of the value of their home to refinance their mortgages. With respect to the determination of property value for a refinance, the seller may elect one of the following three options provided the applicable requirements are met:



· Option 1 – Fannie Mae or Freddie Mac’s internal AVM

· Option 2 - New appraisal or AVM

· Option 3 - Appraisal or AVM from the Mortgage being refinanced



The other part of the program – a national loan modification effort – the Treasury Department released guidelines that are intended to standardize loan modification procedures with the program, effective immediately and through December 31, 2012. Participating lenders will be required to consider refinancing through FHA’s Hope for Homeowners program and then conduct a standard “waterfall” test with regard to the loan modification. Part of this process involves a cost-benefit analysis on whether to foreclose or modify the loan. As part of this test, the current property value is a factor, and because no new monies are being conveyed, the agencies are, apparently, applying an exemption to Title XI of FIRREA that allows for the use of evaluations or appraisals to establish value.



According to the guidelines, the servicer may use, at its discretion, either one of the government sponsored enterprises automated valuation models – provided that the AVM renders a reliable confidence score – or a broker price opinion. As an alternative, the servicer may rely on the AVM it uses internally provided that (i) the servicer is subject to supervision by a federal regulatory agency, (ii) the servicer’s primary federal regulatory agency has reviewed the model and/or its validation and (iii) the AVM renders a reliable confidence score.



According to the guidelines, “If the GSE or servicer AVM is unable to render a value with a reliable confidence score, the servicer must obtain an assessment of the property value utilizing a property valuation method acceptable to the servicer’s federal regulatory agency, e.g. in accordance with the Interagency Appraisal and Evaluation Guidelines (as though such guidelines apply to loan modifications), or a BPO.” In all cases, the property valuation may not be more than 60 days old.



Bill Garber, Director of Government Relations for the Appraisal Institute commented, “Questions of value are best addressed by qualified real estate appraisers, and as such, members offering residential related services should reach out to lender and loan service clients to discuss the range of services that can be provided by appraisers.”



Garber expressed concern, however, about the administration’s decision to rely heavily on unregulated valuation products in the loan modification program, when streamlined appraisal products are readily available in the marketplace. “The Interagency Appraisal and Evaluation Guidelines have consistently encouraged lenders to obtain appraisals where there have been material changes in market conditions, even in cases of loan modification where no new monies have been conveyed,” said Garber. “Today’s announcement rolls the dice on every homeowner’s equity as it retreats from meaningful bank regulations in favor of unregulated and exotic valuation products.”



Garber pointed out that professional real estate appraisers deliver a diverse menu of valuation services with many designed specifically to address distressed properties and others that can be used for most non-complex transactions. Examples of the types of products that appraisers can deliver for loan modification or distressed asset purchases include:

· appraisal updates and reviews, or updates to existing appraisals

· drive-by appraisals, or appraisals of the exterior of the property

· desktop appraisals, or appraisals performed from the appraiser’s desktop without any exterior or interior inspection



Today’s technology and current methodology allow real estate appraisers to deliver necessary services quickly and securely. Given the advances in technology, these services are very cost effective and affordable with delivery from the thousands of designated, certified, and licensed appraisers in every community in the country.



“Treasury should do everything in its power to encourage the use of products prepared by regulated individuals in accordance with industry standards that have the force of law, particularly where there have been material changes in market conditions, as we see in many parts of the country today,” Garber said.



Appraisal Amendment Added to 'Cramdown' Bill; Vote Delayed

The House of Representatives has delayed to later this week consideration of H.R. 1106, a foreclosure mitigation bill. Among the language included in the bill is a recently added appraisal amendment that would “require courts to use FHA appraisal guidelines where the fair market value of a home is in dispute; and deny relief to individuals who can afford to repay their mortgages without judicial mortgage modification.”



Additionally, leaders and lawmakers reached agreement March 3 on a revised version of the “cramdown” provision, adding limits designed to make it more likely that the courts intervene only as a last resort. Speaker Nancy Pelosi, D-Calif., worked with fellow Democrats who had raised concerns about the scope of the provision, which would allow bankruptcy judges to modify the mortgages on the primary residences of homeowners who are in jeopardy of foreclosure. Under current law, bankruptcy judges are permitted to modify mortgages on second homes, including through reductions in loan principal, but not on primary residences.



The banking industry has lobbied against the proposal to extend the authority to primary homes, asserting that it could raise mortgage interest rates for typical homebuyers and cause a rush to bankruptcy by some struggling homeowners. Proponents argue that the move is needed to encourage lenders to rework loans before a court intervenes and to help stem the rising tide of foreclosures that is continuing to hamper the economy. Opponents are pushing for “voluntary” modifications wherever necessary.



To view H.R. 1106 in its entirety, visit http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1106ih.txt.pdf. 



“Bad Bank” Plan Gets Fleshed Out

In conjunction with the Federal Reserve’s Term Asset-Backed Lending Facility program – launched March 3 and aimed at spurring consumer lending in areas such as credit cards and home loans – the Obama administration said it plans to partner with the private sector to buy $500 billion to $1 trillion of distressed assets as part of last month’s revamping of the $700 billion bank bailout.



Under TALF, the Fed will offer cheap loans to investors to purchase securities backed by consumer debt like car loans and credit-card receivables. The Fed may expand TALF to existing distressed assets, such as distressed mortgage-backed securities or commercial real-estate loans.



The Treasury has agreed to provide up to $100 billion of capital to the TALF, and the Fed will lend up to $1 trillion through the program. No decision has been made on the final structure of what the administration is calling a private-public financing partnership, which grew out of the "bad bank" concept, an idea popular among some economists that would have required the government alone to buy up the troubled assets, but less popular among the public. Instead, the government wants to encourage private investors to buy up the assets in a way that would come closer to setting a market price where no market currently exists. Some within the administration believe establishing multiple funds could help with that goal. The funds would most likely target all types of assets, such as mortgage-backed securities, rather than focusing on one specific type of distressed security.



The TALF, which was announced in November, has taken months to get off the ground. To date, no deals have been done under the program. The first is expected to be launched later this month.



CitiGroup to Lower Mortgages for Jobless

Citigroup Inc. says it expects thousands of unemployed homeowners may qualify for assistance under its new Homeowner Unemployment Assist program, unveiled March 3. The program allows those who are 60 days or more past due on their mortgages or in foreclosure to pay a reduced amount – $500 on average – for three months.



Those who partake in the program and are still without jobs after three months will have their mortgages handled on a case-by-case basis to come up with the best payment option, Citigroup said. Others that find work within the three-month period can go back to paying their original mortgage amount or receive a long-term loan modification if qualified. The program may also be expanded to include customers that are in early delinquency stages or are current on their mortgage at a later point in time once an initial evaluation of the program is complete.



Citigroup’s new mortgage efforts also come on the heels of the latest attempt to bail out the company, which includes the U.S. government’s exchange of up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and Citigroup represents the third rescue attempt for the bank in the past five months. 


Obama Calls for Increased Scrutiny in New Regulatory Structure

House Financial Services Chairman Barney Frank, D-Mass., said both houses will soon begin working on overhauling the supervision of the U.S. financial system with the goal of reaching an "agreement in concept" by the end of the month. The announcement came in response to a February 25 directive from President Barack Obama to move swiftly to create a new regulatory structure for 21st-century markets, a process many predict will insert the federal government more deeply into the economy.


At the February 25 meeting, Obama was short on specific details and instead offered a set of broad principles he would like to see expressed in legislation, including greater transparency, more-uniform supervision of financial products, "strict accountability" for market players who engage in risky behavior; and perhaps merging or killing off ineffective regulatory agencies.


Even if Frank’s timeline is met, the legislation could take months to wend through Congress. Frank said he expects the effort will be done in stages, with action first on a bill that will empower a regulator, likely the Federal Reserve, to regulate risk across the financial system. "It's either the Fed or you start from scratch," Frank said.


Banks Take Aim at Obama Plan to End Deduction

The banking industry is preparing to fight key provisions of President Obama's budget plan. Chief among the industry's concerns is a provision that would eliminate a tax deduction on mortgage interest for filers who earn more than $250,000 a year. The proposal, which the White House says would save nearly $180 billion in the next nine years, is in line with President Obama's repeated promises to fix financial markets by tackling income inequality. But bankers argue that the plan would essentially make homeownership unattractive. Officials from the Treasury Department said the tax code retains other incentives for homeownership.



The Obama administration's inaugural budget also calls for a reduced role for the private sector in student lending and sets aside an additional $250 billion that may be needed to stabilize markets through the Troubled Asset Relief Program. But the phaseout of the tax deductions, which would begin in 2011, could be especially problematic for financial institutions. Rep. Michele Bachmann, R-Minn., said getting rid of the deduction would introduce more uncertainty into mortgage markets.



Chris Low, the chief economist for First Horizon National Corp.'s FTN Financial Capital Markets, said ending the deductions could end up hurting the quality of the mortgage market. "It's going to provide an incentive for higher-income individuals to pay down their loans," he said. "If the pool of total loans shrinks and the good ones are paid off, then the ratio of bad loans is going to be higher, and bad loans are already at the heart of our banking crisis."



While not committing to the number, the administration set aside $250 billion in additional government funds, saying it could help spur purchases of $750 billion worth of toxic assets from banks. Provisions for the Small Business Administration include a $50 million increase from last year's budget.


Treasury Finds Fault with OTS Appraisal Oversight

The Treasury Department’s Office of the Inspector General claims that the Office of Thrift Supervision was too slow to react to the high-risk lending practices of IndyMac Bank and did not take aggressive enough actions to stop such practices from continuing to proliferate. The Treasury’s audit report, released February 26, presented a review of the failure of IndyMac Bank and the supervision of the institution by the OTS.



According to the audit report’s findings, the OTS viewed growth and profitability as evidence that IndyMac management was capable of success while failing to recognize the unsafe and unsound manner in which the thrift was operated.



In addition, included in the Inspector General’s report were the findings that IndyMac relied too heavily on appraisals that were often supported by weak underlying collateral. According to the audit report, the Inspector General identified several instances in which a borrower’s qualifications were not properly reviewed; where IndyMac officials accepted appraisals that were not in compliance with USPAP; and when the borrower was allowed to select the appraiser.



The Inspector General’s material loss review of IndyMac is the second such review the Treasury Department has performed of an OTS-regulated financial institution during the current financial crisis. In its first material loss review, of NetBank, FSB, the Treasury Department was critical of the OTS for not taking stronger action when problems noted by examiners remained uncorrected through several examination cycles. There were also several problems noted by examiners with regard to the business practices of IndyMac, however, these too went mostly uncorrected.



To read the Inspector General’s audit report, visit www.ustreas.gov/inspector-general/audit-reports/2009/oig09032.pdf.


AARO Executive Committee, ICAP Urges Caution on BPOs

The Executive Committee of Association of Appraiser Regulatory Officials and the Illinois Coalition of Appraisal Professionals have issued separate letters to Treasury Secretary Timothy Geithner voicing concerns about federal regulations and policies that allow Broker Price Opinions to be used in establishing real property collateral values for mortgage modifications.



Of primary concern to both groups is the lack of required valuation qualifications needed by individuals who perform BPOs. As the AARO Executive Committee stated in their letter to the Treasury, “Individuals performing BPOs lack meaningful (or sometime, any) valuations qualifications, may not be objective, and unbiased or even independent of the transaction for which they’re opining a value, and are not properly accountable to anyone for their BPO work.”



ICAP expressed similar sentiments in their letter, available at www.icapweb.com/upload/09%20Treasury%20ICAP.pdf, saying that they are “concerned that the use of shortcuts or alternate valuation products (like BPOs) by individuals lacking professional or regulatory oversight poses an unacceptable risk to the financial industry, taxpayers, and the public.”



The AARO Executive Committee and ICAP letters add additional concern to a letter sent by the Appraisal Institute and other appraisal organizations to the Treasury Secretary last month that cautioned the government against the acceptance of BPOs and advocated the use of professional, federally regulated real estate appraisers to perform all valuation assignments. To view the Appraisal Institute’s letter, visit www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2009/Homeowner_Stability_Plan.pdf.



New Legislative Coalition Formed in Nevada

The two Appraisal Institute chapters in Nevada – Las Vegas and Reno/Carson/Tahoe – have become founding sponsors of the Coalition of Appraisers in Nevada, which also includes representatives of several other real estate appraisal industry organizations. The broad-based coalition was formed to give the real estate appraisal community a unified voice during the 2009 session of the Nevada legislature.



According to President Pamela Kinkade, SRA, CAN has identified as its first three major issues to address: 1) formalizing last year’s agreement regarding limiting the ability of brokers and sales people to perform brokers’ price opinions. The agreement was reached with the real estate sales groups and the real estate regulators last year; 2) prohibiting anyone involved in a real estate transaction from improperly influencing the work of an appraiser; and 3) requiring appraisal management companies operating in Nevada to be registered with, and overseen by, the Real Estate Division.



Prior to formalizing its structure, CAN had prepared draft legislation for the issues, and has now approached several legislators about the possibility of sponsoring the legislation. The BPO issue has also been under discussion by the BPO Task Force for several months. The newly elected leadership of CAN has also developed an aggressive fundraising strategy to ensure that the group has all of the money that it needs to be successful in its aggressive legislative program.



In order to assist the group in achieving its legislative goals, they have hired a well known lobbyist in Carson City, who has engaged in substantive discussions on behalf of CAN with key legislators regarding support for the group’s legislative efforts.



For more information on the Coalition of Appraisers in Nevada, go to www.nvappraisers.net/home.



South Dakota Passes Appraiser Independence Legislation

A bill to prohibit improper influence regarding real estate appraisals in South Dakota was recently signed into law by Gov. Mike Rounds. The new law, H.B 1124, prohibits certain practices by mortgage brokers including bribery, extortion, coercion, withholding payment for an appraisal that did not reach a predetermined level, or removing an appraiser from a panel if a requested value is not met. H.B 1124 also prohibits a supervising appraiser in South Dakota from improperly influencing an entry-level appraiser during their initial mentoring period. Appraiser independence legislation, in one form or another, has now been signed into law in 20 states and is being considered in another 21 states.



Craig Steinely, SRA, indicated that the legislation is important to protect consumer safeguards. “The appraiser and home inspector, if one is involved, are often the only professionals in a real estate transaction whose compensation does not depend upon whether it closes. Both are hired to help guide consumers and lenders in making informed real decisions and any act that threatens an appraiser’s independence ultimately puts both at a severe disadvantage,” said Steinely.



Appraisal Institute associate member Jim Dunlap echoes Steinely’s view. “Whether the property is a residence in Mobridge, a commercial building in Sioux Falls, or a 20,000-acre ranch outside of Pierre, all parties should expect that the real estate appraiser has not been improperly influenced by anyone involved in the transaction.”



The legislation also clarifies the types of interactions between a mortgage broker and a real estate appraiser that are considered proper. For example, asking an appraiser to correct errors in a report or to consider additional comparable information, providing an appraiser with a copy of the purchase agreement, or withholding payment for an appraisal in the event of a legitimate business dispute are all considered proper actions.



H.B. 1124, which takes effect July 1, grants the South Dakota Division of Banking, which regulates mortgage brokers, and the Appraiser Certification Program, which regulates appraisers, authority to discipline mortgage brokers or appraisers that violate the act. Disciplinary action can include corrective education, fines, suspension or revocation of a mortgage broker or appraiser license. 



Military Outlines its Base Closure Procedure

In a statement to the Committee on House Armed Services Subcommittee on Readiness, Deputy Undersecretary of Defense for Installations and Environment Wayne Arny outlined to Congressional representatives how the Department of Defense carries out authorized land acquisitions and the role of the appraisal in such real estate transactions. In addition to explaining the procedures in place to ensure that owners of real property to be acquired for federal and federally-assisted projects are treated fairly and consistently, Arny noted how appraisals are used before the negotiation process begins.

“Before the initiation of negotiations, DoD establishes the amount it believes is just compensation, which is not less than the approved appraisal of fair market value,” stated Arny. “That appraisal is prepared under the Uniform Standards of Professional Appraisal Practice published by The Appraisal Foundation, and the Uniform Appraisal Standards for Federal Land Acquisitions, published by the Interagency Land Acquisition Conference and promulgated by the Department of Justice.”



Arny also explained the DoD’s base closure procedure, noting how it is the DoD’s policy to “fully utilize all appropriate means to transfer property at installations closed or realigned under a base closure law.”

The Committee on House Armed Services Subcommittee on Readiness held its hearing to reinforce the nation’s need for space to train members of its armed services. As stated in the opening statement of Solomon Ortiz, chairman of the committee, “The need to train as we fight is fundamental to our armed forces. To this end, I am surprised that the Department is just now realizing that our ground forces are significantly short of adequate training space.”



Bill Introduced to Help Military Families Weather the Housing Storm

Congress has included language in the economic stimulus package to compensate service members who sell their home at a loss or have been foreclosed upon because they were forced to move after a base closure, reassignment or a combat wound required them to be relocated near a health facility. The program also covers surviving spouses of those killed in combat. The program does not cover all military members facing a loss because of a home sale.



Under the new provision, the government will cover 95 percent of a loss if a service member is forced to sell. The government can also choose to acquire the home’s title by paying off the balance of a service member's mortgage or paying the owner up to 90 percent of the home's previous value. No dollar ceiling has been set.



The $555 million undertaking expands the Defense Department's Homeowners Assistance Program. In an attempt to limit the number of claims, the program applies only to a service member's primary residence, and only to homes purchased before July 1, 2006, roughly the time the market began its free-fall. The Army Corps of Engineers said it has not determined what proportion of families will be eligible.



Bill Garber, Appraisal Institute Director of Government and External Relations for the Appraisal Institute, said he expects increased demand for the services of professional real estate appraisers as a result of the program. “The professional appraisal community is prepared to deliver the appraisal services required by the Army Corps of Engineers, the scope of which involves a significant number of appraisal assignments,” Garber said.



Freddie Mac’s CEO Moffett Resigns After Six Months

Freddie Mac Chief Executive Officer David Moffett resigned six months after being tapped by the government to lead the second-largest U.S. mortgage finance company amid the housing slump.



Freddie said that Moffett “indicated that he wants to return to a role in the financial-services sector,” and a spokeswoman said he wasn’t asked to step down by the company’s regulator or the Obama administration. A former Carlyle Group executive who was once vice chairman of U.S. Bancorp, Moffett joined Freddie shortly after its September 7, 2008, takeover. Moffett replaced former CEO Richard Syron.



The exit leaves Freddie without a leader as the company – along with larger competitor Fannie Mae – struggle with deteriorating credit quality that is forcing them to seek U.S. aid. Both were taken over by regulators last year as their losses threatened to further roil the housing market, and Fannie said it is having trouble meeting the “potentially conflicting” objectives under U.S. control.



The Federal Housing Finance Agency, the company’s regulator, “will work with the Freddie Mac board and management team to ensure a smooth transition and continuation of their important mission of supporting the housing market,” FHFA Director James Lockhart said. Freddie expects to name an interim replacement before March 13. 


Appraisal Institute Scholarship Deadlines Approaching Quickly

The Appraisal Institute Education Trust Scholarship and the Minority and Women Educational Scholarship deadlines are March 15 and April 15, respectively.



The Appraisal Institute Education Trust Scholarship is open to graduate and undergraduate students majoring in real estate appraisal, land economics, real estate or allied fields who are enrolled as full-time students for the academic year beginning August 2009 through June 2010. The scholarship is primarily awarded on the basis of academic excellence and is intended to help finance the educational endeavors of individuals concentrating their studies in the aforementioned areas.



The Minority and Women Educational Scholarship is awarded to minority and women college students who are enrolled as full-time or part-time students in real estate related courses in real estate or a related field within a degree granting college, university or junior college. The applicant must have a demonstrated financial need.



To view the application, eligibility requirements and criteria, visit www.appraisalinstitute.org/education/scholarship.aspx. For more information, contact Hillary Richmond, Diversity Committee Staff Liaison, at hrichmond@appraisalinstitute.org.


Moody's: Subprime-Mortgage Defaults to Surge Further

Amid continued deterioration in home prices, rising losses on liquidated loans and elevated default rates, Moody's Investors Service raised its loss estimates for $680 billion in U.S. subprime residential mortgage-backed securities issued between 2005 and 2007 and put them on risk for possible downgrade. The ratings agency also said by the end of the year, one-third of subprime borrowers who are currently paying on their mortgages will become delinquent and eventually default, representing 19 percent of outstanding loans. Subprime loans have seen the highest levels of delinquencies and defaults.



Moody's revised its loss projection for 2006-vintage RMBS to 28 percent to 32 percent of the original balance of the securities, up from its prior estimate of 22 percent. For 2005 RMBS Moody's expects losses from 12 percent to 14 percent of the original balance, and for 2007 it sees losses of 33 percent to 37 percent.



Moody's said that 42 percent of outstanding 2006-vintage subprime loans are at least 60 days delinquent, in foreclosure or held for sale. Without intervention, it said nearly all of those loans will eventually default. Furthermore, it said an additional 22 percent of current non-delinquent loans would default after this year. When added to the defaults expected from existing delinquencies and those expected by year-end, Moody's expects a total default rate on existing subprime loans to reach 72 percent for 2006-vintage loans.



Moody's said President Barack Obama's homeowner plan, details of which were released March 4 (see top story), will likely mitigate some of the loss estimates.


Hanley Wood: New Home Sales Fall to Record Low

As reported in last week’s issue of Appraiser News Online, January’s existing home sales fell 5.3 percent to an annual rate of 4.49 million units. In a February 27 release, Hanley Wood Market Intelligence reports that new home sales also dropped in January by 10.2 percent to a seasonally adjusted rate of 309,000 units, the lowest level since data collection began in 1963.



New home inventories declined in January to 341,000 units from December’s figure of 354,000 units, their lowest level since April 2003. However, the slow sales pace – attributed to rising unemployment and an unstable economy – means a new all-time high of inventory, at 13.3 months. The number of existing homes available for sale at the end of January fell 2.7 percent to 3.60 million units, representing a 9.6-month supply.



Because of a high level of distressed home sales, the national medium existing sale price for all home types decreased in January to $170,300, down by 14.8 percent from last year’s median price of $199,800. Median new home prices in January fell 9.9 percent from December’s figure of $223,200 to $201,100, the lowest they have been since December 2003.



The national average mortgage rates increased for the first time in three weeks to 5.07 percent according to Freddie Mac’s February 26 Primary Mortgage Market Survey. However, rates are still near the record levels achieved in January.


S&P: Housing Values Continue to Decline, Future Questionable

December 2008 home prices set record declines according to the latest Standard & Poor’s/Case-Shiller Home Price Indices released in February. Home prices dropped 18.2 percent in the fourth quarter of 2008 versus the same period in 2007, the largest drop since data collection began 21 years ago. Both the 10-and 20-city composites also set record losses, declining 19.2 percent and 18.5 percent, respectively. From the housing market’s peak in 2006, home prices are down by 26.7 percent. Home prices are now at similar levels to what they were in the third quarter of 2003.



“The broad downturn in the residential real estate market continues,” said David Blitzer, chairman of Standard & Poor’s Index Committee. “There are very few, if any, pockets of turnaround that one can see in the data. Most of the nation appears to remain on a downward path.”



Denver, Dallas, Cleveland and Boston reported the lowest annual declines, with drops of only 4.0 percent, 4.3 percent, 6.1 percent and 7.0 percent, respectively. The worst performing cities reporting year-over-year declines continue to be from the Sunbelt, with Phoenix down 34 percent, Las Vegas down 33 percent and San Francisco down 31.2 percent.



In a news conference following the index’s release, Karl Case of Case-Shiller noted that the markets having the most significant declines experienced the biggest increases during the boom. According to Case, the residential market may not contain much positive news for the near future. “We’ll learn more in the spring market. Sales should pick up and we’ll begin to see how well the president’s program is working. There’s no evidence in the data to tell us that home prices will bottom out.”



Winter 2009 Appraisal Journal Spotlights Special Property Topics

The winter 2009 issue of The Appraisal Journal examines the distinctive characteristics of landfills and how they affect property values. Other articles in the winter issue look at techniques for valuing ground lease reversions, discount rates, leased fees in custom-built commercial properties, and the component elements that make up overall property value.



The cover article in the winter issue, “Evaluating the Potential Impact of a Proposed Landfill,” by Shawn E. Wilson, MAI, is intended as a roadmap for appraisers who have landfill consulting assignments. Appraisers are sometimes called on to present evidence and/or testimony for clients who support or oppose landfill improvements. The author shows how to gather landfill and market data for this type of assignment.



The feature article “A Reality Check on Ground Lease Reversions,” by David Rothermich, MAI, discusses valuations involving leased fee interests. It examines condominium projects in Hawaii as situations where the economic life of the improvements is likely to extend well beyond the terms of the ground lease. In leased fee valuation, conventional appraisal practice often disregards the potential contributory value of improvements in the reversion. However, Rothermich shows that land-only reversion scenarios are often inconsistent with the probable outcome and contrary to the known facts about physical, legal or economic characteristics of the subject property, which means that under the Uniform Standards of Professional Appraisal Practice, appraisers must disclose the land-only reversion as a hypothetical condition.



Another feature article that addresses leased fee interests, “You Can’t Get the Value Right If You Get the Rights Wrong” by David C. Lennhoff, MAI, SRA, looks at how market value opinions are developed for the fee interest in custom-built commercial properties. Lennhoff cautions that in these assignments, appraisers must understand the nuances between value in use and market value, and between fee simple estates and leased fees. Custom-built properties, such as a Walgreens or an LA Fitness, have value to the original tenant that is not representative of the market value to other users. The cost to build and worth to the initial owner or tenant exceeds what the property would be able to command for either lease sale on the market. The article reviews the approaches to value and discusses the misconceptions that lead to the wrong value for the property interest.



Rounding out the articles in the winter issue are “Bridging the Gap between Discount Rate Theory and Investor Surveys,” by Donald Sonneman and “Relationships between the Overall Property and Its Parts, and the Three Approaches to Value,” by Mark Pomykacz, MAI.



The Appraisal Journal, published quarterly by the Appraisal Institute, serves as a forum for advancing appraisal theories and practices. Containing articles, columns and letters written by experienced appraisers and educators. The Appraisal Journal presents ideas, concepts and analytical techniques to be considered. Each issue offers alternative valuation methods for serious thinkers seeking creative solutions to appraisal problems, appealing to appraisers, educators and other real estate professionals.


For more information about The Appraisal Journal, visit www.appraisalinstute.org/taj. 

ARES Co-Founder Jim Webb, 61, Dies

James R. Webb, Ph.D., past president and co-founder of the American Real Estate Society, died February 27. He was 61. Helping start ARES 25 years ago, Webb drafted their original constitution and bylaws, was the second President, the first and long-serving Executive Director, and the Director of Development of ARES. Furthermore, he began the ARES Foundation, an organization dedicated to assisting doctoral students and academics throughout the world, and has been its only Executive Director. In recognition, ARES had recently named the Foundation after Webb. In addition, Webb helped found sister societies and academic journals all over the globe as well as the International Real Estate Society of which he was President.



Webb was born in Granite City, Ill., and grew up in Central and Northern Illinois. He received his B.S. and M.B.A. from Northern Illinois University and his Ph.D. in Finance from the University of Illinois. He taught at Kent State University, University of Akron, University of Texas, Austin and most recently at Cleveland State University. He was also Director of the Real Estate Institute at CSU.



Webb was an avid reader, amateur philosopher and an enthusiastic horticulturist with a love for all plants and flowers. He is survived by his wife of 30 years Anais (nee Brown); sons, Clinton of Chicago, and Stuart of Durham, N.C.; and a daughter, Carissa of Hudson, Ohio.



In lieu of flowers, memorials may be made to James R. Webb Foundation of American Real Estate Society, 10806 River Terrace, Austin, Texas 10806 or Children International, P.O. Box 219055, Kansas City, Missouri 64121.

2008 Tax Rebate Stimulus Package Explained

AIG Gets More Aid After Record $61.7 Billion Loss

Fannie Mae and the HVCC Frequently asked Questions.

Appraisal Press Response to the HVCC

You have questions we will answer just drop us a email.

TALF TO INCLUDE COMMERCIAL REAL ESTATE IN RESCUE PACKAGE

In an effort to curb the developing crisis mentioned in the above article, the U.S. Treasury announced on February 12 that commercial mortgage-backed securities are now eligible collateral for the Term Asset-Backed Loan Facility, better known as TALF.

TALF was created last November by the Federal Reserve Board in an effort to stimulate the credit flow following the economic downturn. At the time of creation, TALF authorized the Federal Reserve Bank of New York to lend up to $200 billion to holders of AAA-rated asset-backed securities collateralized by credit card loans, automobile loans, student loans and loans guaranteed by the Small Business Administration. The National Association of Realtors (NAR), through its subsidiary, Realtors Commercial Alliance (RCA), has been advocating the inclusion of commercial mortgage-backed securities in the group of loan securities backed by TALF.

“Expanding the TALF and opening it up to commercial mortgage-backed securities is a movement in the right direction and welcome news for the American economy,” said NAR President Charles McMillan.

“Though much still remains to be done, this policy decision will help reassure investors in the vital commercial real estate sector,” added RCA Chairman Robert Toothaker. “NAR will continue to work with Congress and the regulatory agencies as further options are considered to address the crisis in the credit market and ensure overall economic recovery.”

New from the Appraisal Institute

Investor Updates

Loopnet Commercial

Real Estate Valuation mag Online

Google Maps Click on the Little Man and Walk up and down the street.

BOA gets even more money?

Need a Mortgage Call A Judge

Madoffs Scam Revealed

The Newser Mag

Mortgage Daily News

FHA Loans

Applications Slow Down

Mr. Mortgage

Fannie Mae

Realty Times

News From the Appraisal Institute

Answered Questions on the 1004MC Form

Barcodes Indicate country of origin. Don't know if is true or not.

Barcode Identifies Country of Origin
Another "nice to know item…"

The whole world is scared of China-made 'black hearted goods'. Can you differentiate which one is made in the USA , Philippines , Taiwan or China ? Here's how... the first 3 digits of the barcode is the country code wherein the product was made.

Example: All barcodes that start with 690, 691, 692, thru 695 are all MADE IN CHINA.
Barcode items starting with 471 are Made in Taiwan

This is our human right to know, but the government and related department never educate the public, therefore we have to RESCUE ourselves.

Nowadays, Chinese businessmen know that consumers do not prefer products 'Made in China ', so they don't show from which country it originates.

However, you may now refer to the barcode. Remember if the first 3 digits are in the range 690-695, then it is Made in China .

00 ~ 13 USA & CANADA
30 ~ 37 FRANCE
40 ~ 44 GERMANY
49 ~ JAPAN
50 ~ UK
57 ~ Denmark
64 ~ Finland
76 ~ Switzerland and Lienchtenstein

471 ~ Taiwan

480 ~ Philippines

628 ~ Saudi Arabia
629 ~ United Arab Emirates

740-741-742-743-744-745 ~ Central America
690-691-692-693-694-695 ~ CHINA

Please inform your family and friends if you wish

This is really helpful and cool

Here's a number worth putting in your cell phone, or your home phone speed
dial: 1-800-goog411.

1-800-4664-411.

This is an awesome service from Google, and it's free -- great when you are
on the road.

Don't waste your money on information calls and don't waste your time
manually dialing the number. I am driving along in my car and I need to call the
golf course and I don't know the number. I hit the speed dial for
information that I have programmed.

The voice at the other end says, "City & State." I say, "
Garland , Texas ." He says, "Business Name or Type of Service." I
say, "Firewheel Golf Course." He says, "Connecting" and
Firewheel answers the phone. How great is that? This is nationwide and it is
absolutely free!

Click on the link below and watch the short clip for a quick demonstration.

http://www.google.com/goog411/  

 Friday, November 21, 2008

Copy of the New Fannie Mae Guidlines can be found Here. This is a PDF File.

New Fannie Mae Rules for 2009

Foreclosures Suspended By Fannie Mae

Countrywide Bad Santa

HUD Modifies Hope Program