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Posts Tagged ‘appraiser’
Tuesday, September 22nd, 2009
 The FHA released four new mortgagee letters late last week that will have a significant impact on the way appraisals will be conducted in the future. Although the mortgagee letters will not go into effect until January 1, 2010, they will cause some of the following significant changes to occur:
- Reduce the amount of time an appraisal remains valid to four months from six months.
- Clarify rules regarding what happens to an appraisal when the borrower changes lenders.
- Reaffirm rules regarding appraiser independence, while adding some new requirements, including the lender’s responsibility for ensuring the correct appraiser is listed in FHA connection, and preventing the lender from using any appraiser who is selected, retained, or compenstated in any manner by the mortgage broker or any member of the lender’s staff who is tied to the loan on a commission basis.
The fourth mortgage letter, while not directly relating to reverse mortgages or appraisals, requires all FHA mortgagees to submit an annual audited financial statement.
Copies of all the letters can be found below. While reducing the amount of time an appraisal is valid to four months from six months could add an expense to borrowers when a loan gets held up in processing, hopefully the change will add some urgency to processing reverse mortgage loans in a timely fashion and will allow borrowers to get a more realistic appraisal in a rapidly changing housing market.
Mortgagee Letter 09-28
Mortgagee Letter 09-29
Mortgagee Letter 09-30
Mortgagee Letter 09-31
Tags: appraisal, appraisals, appraiser, breaking news, FHA, lender, mortgagee letter, mortgagee letters, reverse mortgage, reverse mortgages
Posted in Industry News | No Comments »
Wednesday, August 19th, 2009
 Appraisers are under pressure to inflate property values. Over the last two days, both the New York Times and the Wall Street Journal have published lengthy articles on the effects of the new Home Valuation Code of Conduct on appraisers. The Home Valuation Code of Conduct, which went into effect May 1, has made lenders responsible for ordering appraisals and negotiating with appraisers. As a result, appraisal companies are complaining that they are being paid less to do more work. In addition, appraisers are often required to travel farther to appraise homes, raising questions as to whether they are familiar enough with the area to provide a valid appraisal. A case highlighted in the Wall Street Journal article was that of a homeowner in Palm Beach Gardens, FL where the appraiser drove 44 miles to evaluate the home and came back with an appraisal that was around $70,000 less than the second appraisal. Furthermore, while the fees the appraisers are being paid have been decreasing, the cost to the consumer has risen by $100 in the past year, with most of the proceeds going to middle men.
Another concern raised by the industry is that being hired by lenders puts more pressure on the appraisers to return with a value that makes the deal possible. Appraisers need to keep the lenders happy to stay employed. If they demand fees that are higher than another appraiser or produce an unfavorable result, the lender may look elsewhere. As a result, some feel that the legislation risks putting ethical appraisers out of business.
Appraisal issues are common in reverse mortgages, and many of the issues raised in the article extend through both the conventional and reverse mortgage industries. As appraisals travel farther, there are more opportunities for mistakes. As appraisers worry about their fees and costs ride, the burden on consumers grows. Thus while the legislation has attempted to curb price inflation in appraisals and reduce the conflicts of interest, it appears to have arguably caused more problems than it has solved. Some in Washington are trying to get the legislation postponed until 2011.
Tags: appraisal, appraisals, appraiser, appraisers, Home valuation code of conduct, legislation, lender, lendsers, Mortgage, mortgages, New York Times, reverse mortgage, reverse mortgages, Wall Street Journal, Washington
Posted in Consumer News, Industry News | No Comments »
Monday, June 15th, 2009
 Many prospective reverse mortgage borrowers have questions about appraisals, and while statistics show that consumers’ valuations of their homes are beginning to fall more in line with the reality, there is still generally a gap between what a borrower thinks their home is worth and what an apparaiser thinks it is worth.
The NYTimes wrote an article on Friday highlighting how a neighbor’s foreclosure can dramatically affect home values. The article cites a report from the Center for Responsible Lending in Durham, NC, stating that about 69.5 million homes will have their home values decline this year due to the foreclosure of a neighbor. These homes will lose an average of $7,200, leading to a suspected loss of over $500 billion nationwide. Meanwhile, Credit Suisse projected that about 9 million homes will go into foreclosure from 2009-2011, leading to a ripple effect of declining prices on neighboring homes.
As Bill Tennant pointed out two weeks ago in his blog post on appraisals, one of the leading factors in an appariser’s valuation of a home is the recent sales of comparable homes in the vicinity. As the Center for Responsible Lending’s report shows, many borrowers are likely to take a greater hit due to the foreclosure crisis than they expected on the value of their homes. The Center for Responsible Lending predicted that borrowers will face a drop of 1.3% of their home’s value if they live within 300 ft. of a foreclosed home, and 0.6% of its value if they live between 300 and 500 ft.
Tags: appraisal, appraisals, appraiser, appraisers, borrower, borrowers, Center for Responsible Lending, Credit Suisse, foreclosure, foreclosure crisis, home value, home values, New York Times, NYTimes, reverse mortgage, reverse mortgages
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Thursday, June 4th, 2009
 Every day I talk to clients across the country confused on how appraisals work, and the ultimate value of their home. I am not an appraiser, just someone with experience reading hundreds of appraisals and understanding in broad terms how appraisers come to report the value of a home.
Today I spent twenty minutes on the phone with a pleasant woman, who is convinced that her home is worth at least $210,000. We spent much of the call going through every detail of her home, which sounds well-maintained and in great condition. I know the color of the carpets and walls in every room, the materials used in the updated kitchen, and the time that went into the landscaping.
This twenty minute tour of her home didn’t change the fact that two homes of similar square footage have sold on her street recently for under $150,000. The hard truth of the current market, full of foreclosures, and short-sales came crashing down on her Reverse Mortgage dreams. With so few retail sales recently, distress sales make up the bulk of the comparable sales and are exerting unprecedented influence on appraised values.
I am not writing this to tell horror stories about appraisals (although I have some that come to mind), only in the hope that we can all be a little more realistic about today’s real estate market. Appraisals can not take into consideration the beautifully decorated kitchen, except to perhaps slightly increase the value due to the homes great condition. Appraisers look at square footage, lot size, and overall condition of the property, number of bedrooms, number of bathrooms, and features, among many other factors. They look at comparable sales within the area within a certain time period. Unfortunately, that means that if a home down the street is the same model on the same lot as yours in similar condition it will reflect heavily on your value, even if they did not put the same amount of work into the landscaping or the interior of the home.
The appraiser’s job is not to assess the value of the upgrades made to the home, but only to compare your property’s overall condition to the overall condition of other sales in the area. Homes currently on the market have no bearing on the value until they have sold, providing a current comparable sale. Until then, the home on the market only increases property inventory which can actually reduce the value of your home.
Even experienced professionals in the real estate industry are often surprised lately by low appraisals. Please, heed my advice and research other sales in your area as well as similar properties that are pending sales to be sure you have an informed opinion of the value of your home to save much heartache and frustration, and in some cases money if the appraisal comes back lower than what is acceptable.
Bill Tennant is the Vice President of Access Reverse Mortgage in St. Petersburg, FL. He is a guest contributor to the site.
Tags: Access Reverse Mortgage, appraisal, appraisals, appraiser, appraisers, guest, home, home value, home values, homes, reverse mortgage, reverse mortgages
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