By Aaron Kessler - Sarasota Herald Tribune - Published: Monday, August 31, 2009
SURVEY: Listing, and selling, prices continue to disappoint
A new survey by Calif.-based HomeGain shows that a disconnect still remains between what sellers in Florida think their homes are worth and what buyers are willing to pay.
The third-quarter survey of Florida real estate agents, released last week by HomeGain, found that the vast majority of sellers -- some 70 percent -- continued to believe their homes were worth more than even their own Realtors were telling them.
The percentage of buyers who believed that home prices were "fairly valued" increased in the third quarter, to 24 percent. That was up from 18 percent in the second quarter, and 15 percent in the first quarter of 2009.
But it would appear many Florida sellers have yet to come to grips with the reality of the market.
The HomeGain survey found that 35 percent of sellers thought their homes were worth 10 percent to 20 percent more than the listing price recommended by their Realtors.
Seventeen percent were even more bullish (or deluded, depending on your perspective) and thought their homes should fetch 21 percent to 30 percent more, and 6 percent thought their property should be priced 30 percent higher.
Conversely, only 1 percent of sellers thought their home was worth 10 percent to 20 percent less than their agents recommended; 3 percent of sellers, 21 percent to 30 percent less; and 4 percent, more than 30 percent less.
Only 15 percent of Florida homeowners in the third quarter agreed with the listing price their Realtors recommended. Though that number has been steadily rising all year -- up from 10 percent in the second quarter and 5 percent in the first quarter -- a possible indication that some sellers are more willing to listen to their sales agents when it comes to price.
Overall, however, an overwhelming 70 percent of Florida sellers thought their homes were worth more than their listing price.
Florida sellers were not alone in their sentiment -- the national numbers released by HomeGain found that 74 percent of sellers in the United States as a whole thought their homes were worth more than the recommended listing price.
In terms of what buyers are looking for, and getting, in the Florida market, it was almost always a discount from the asking price, the survey found. In fact, an average of only 5 percent of buyers purchased a home for its listed price in the third quarter.
Eighty-four percent of buyers paid less, in some cases considerably less. On average, half of the homes sold went for a discount of between 5 percent and 10 percent less than their listing prices, the survey found. Thirty-two percent of homes sold for between 11 percent to 20 percent off the listing price, and 2 percent went for a discount of 21 percent to 30 percent.
Florida's Realtors actually grew more pessimistic in the third quarter about where prices could be headed: Of the agents surveyed, nearly half, 46 percent, believed that home values will fall in the next six months. At the end of the second quarter, only 24 percent believed that.
In terms of how the value of their clients' home values have fared over the last year, 93 percent of the real estate agents said prices have decreased. That was up from 82 percent at the end of the second quarter.
The percentage of agents who reported their clients' home values have stayed the same in the last year shrunk to only 4 percent, down from 13 percent in the second quarter.
Only 3 percent of agents reported the values of the homes they had listed actually increased since last year.
Monday, August 31, 2009
Monday, August 24, 2009
New Home Valuation Code of Conduct cures some ills, creates new ones
By James Thorner, St. Petersburg Times Staff Writer, Sunday, August 23, 2009
Builder Charlie Hannah thought he was being generous when he agreed to sell a new 5,000-square-foot home for $1.15 million in the Tree Tops neighborhood near Tampa's Westchase.
But the appraiser returned an appraised value of $1 million on the lakeside house in June. Two months later, the sale remains in limbo and Hannah remains indignant.
Four other homes Hannah built in the same neighborhood recently sold for much more per square foot than the $1.15 million home. But the appraiser found a comparable home sale miles away in Odessa to justify what Hannah considers to be a low-ball valuation.
"I was floored by this. I still don't know how the appraiser could have done this," Hannah said. "I'm trying to rescue the deal now. But it's requiring 10 to 20 times the work it used to."
That message has reverberated through the Tampa Bay real estate community ever since the government's antifraud rules went into effect in May. The reform, though well intended, has inadvertently made it harder to sell and refinance homes in the Tampa Bay area. And it couldn't have come at a worse time as the housing market tries to shed the lead boots it has worn since 2006.
The new rules, called the Home Valuation Code of Conduct, forbid mortgage brokers, banks and Realtors from working directly or sharing information with appraisers. They typically work through appraisal management companies, middlemen whose job it is to hire appraisers from a pool.
Real estate professionals complain that appraisers have become discount commodities who are strangers to the neighborhoods they're evaluating. And since they're often allowed only 48 hours to complete an appraisal — about half the average time compared to before the reforms — the result can be hack work that ends up squelching a home sale.
"Appraisal management companies, with very few exceptions, select by price and turnaround times," said Frank Gregoire, a Pinellas appraiser with 30 years experience. "Rarely is their highest criteria the quality of the appraisal."
No one denies that reform was needed. Manipulation, and sometimes bribery, of appraisers helped doom the real estate market to its prolonged purgatory. By working too closely with appraisers, con artists stole billions of dollars through mortgage fraud during the years of the real estate boom. Tampa has ranked among the top 10 cities for mortgage fraud, represented by criminals such as Matthew Cox, serving a 26-year prison term for stealing $12 million from lenders.
"There was an egregious wrong perpetrated on the public," Hannah said. "The reforms were done for the right reasons. But we need a more thought-out system to do what it was intended to do.''
Residential appraisers work by tracking similar property sales — called comparisons or comps for short — to suggest the market value of a home that is for sale. Usually they use at least three comps; the more recent the sale the better. Factors weighed include age of the home, size, location and condition, but also whether the sale involved a foreclosed home or a non-distressed property.
Since the new rules took effect, the law of unintended consequences has upended real estate deals. St. Petersburg Realtor Nancy Riley blames sloppy appraisals. She had a buyer for a sixth floor Feather Sound condo overlooking the water and golf course. Both parties agreed to the $200,000 purchase price.
But the lender, using an appraisal management company, got an out-of-county appraiser. The disappointed buyer and seller learned the condo appraised at only $157,000. As two of his comps, the appraiser used a unit in a former assisted living facility and a single story condo without a view.
Riley tried to challenge the appraiser's findings — which included wrong photos attached to the wrong properties — but got a cold shoulder from the bank. She's still trying to salvage the deal.
"I sent them two pages of things wrong with the appraisal. They refused to listen," Riley said. "I got one or two snippy responses."
Mortgage refinancing — the centerpiece of the government's antiforeclosure efforts — has also suffered. Gregoire noted a case involving a house in upscale Tierra Verde. The home owner sought a reverse mortgage to pull cash from the home. Taking into account the recent depreciation, the home owner estimated the 2,000-square-foot home at $400,000. The initial quick-hit appraisal, using a $10 computer-generated valuation that isn't as good at distinguishing some of the nuances of real estate valuations like the differences between nearby neighborhoods, delivered a market price of $252,000.
When a real appraiser went to work on the house after driving up from Fort Myers, he, too, concluded the house was worth $252,000. Gregoire assumes the appraiser shoe-horned in comparable sales to make his numbers match the computer-generated price.
"That happens with appraisers who lack geographic confidence,'' Gregoire said. "I've been doing appraisals 30 years, but I don't go outside of Pinellas County. The most important thing is to know neighborhoods and submarkets.''
Safety Harbor-based appraiser Ed Walter blames part of the problem on rookie appraisers who work for peanuts. Walter charges $325 for his work. The appraiser management companies charge more, sometimes hundreds of dollars more. But they share only $150 to $200 of their fee with the appraiser from the pool. The consumer pays more but gets cut-rate work.
"The industry has lost a lot of good appraisers. There are lots of newbies willing to work for cheap and travel 50 to 100 miles," he said. "They're coming from Citrus County to do an appraisal in Hillsborough County. It's making a big difference.''
Disgruntled real estate professionals are proposing reforms to the reforms, including an 18-month moratorium on the Home Valuation Code of Conduct. Hannah would like to build a database, fed by Realtors, to ensure accuracy.
For example, some homes with dead lawns and ratty roofs sell cheaply, but by the time the appraiser uses them as comps they've been repaired. The appraiser might assume the home was pristine at the time it was sold, and that it's low price was reflective of the overall market.
One further wrinkle: To win the business of banks, some of the appraisal management companies offer clients guarantees that homes they appraise won't fall into mortgage default. That means it's sometimes better to err on the low side.
"It seems to me like the banks don't want to lend in Florida," Riley said. "We're being red-lined and boycotted.''
Friday, August 21, 2009
In Appraisal Shift, Lenders Gain Power and Critics
By David Streitfeld, New York Times, Published, August 18th, 2009
Mike Kennedy, a real estate appraiser in Monroe, N.Y., was examining a suburban house a few years ago when he discovered five feet of water in the basement. The mortgage broker arranging the owner’s refinancing asked him to pretend it was not there.
Brokers, real estate agents and banks asked appraisers to do a lot of pretending during the housing boom, pumping up values while ignoring defects. While Mr. Kennedy says he never complied, many appraisers did, some of them thinking they had no choice if they wanted work. A profession that should have been a brake on the spiral in home prices instead became a big contributor.
On May 1, a sweeping change took effect that was meant to reduce the conflicts of interest in home appraisals while safeguarding the independence of the people who do them.
Brokers and real estate agents can no longer order appraisals. Lenders now control the entire process.
The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.
The agents, maintaining that the changes are effectively blocking home sales by encouraging the use of inexperienced appraisers, are asking Washington to suspend the code until 2011. For their part, appraisers acknowledge that the change may have been well intentioned but contend that it has no teeth and is undermining the economics of their profession.
“We’ve been begging for years for enforcement of existing state and federal laws regulating appraising,” said Mr. Kennedy, a leader in the appraisal community. “We thought we were finally going to get that. But the code is doing nothing except putting ethical appraisers out of business.”
Financial change is one of the most contentious issues in Washington, and efforts to fix even widely acknowledged problems seem stalled. The attempt to change the appraisal system is an example of how difficult it can be to adopt changes that are good in theory and also work in practice — while simultaneously winning support from warring interest groups.
“The real estate industry is incredibly complex,” said Josh Denney, a lobbyist with the Mortgage Bankers Association. “If you take one piece and tinker with it, it causes friction throughout the process.”
The Home Valuation Code of Conduct had an unusual origin. It was developed by the New York attorney general, Andrew M. Cuomo, who persuaded the big federal mortgage agencies, Fannie Mae and Freddie Mac, to adopt it. That has effectively made it national policy.
Putting appraisals completely in the hands of lenders may sound like a good idea in principle, because it is supposed to be lenders who are putting their money at risk in a home loan.
But the reality is that many companies that write home loans these days do not have much incentive to worry about the accuracy of appraisals. That is because the companies do not keep the loans on their own books, instead selling them to Fannie Mae or Freddie Mac.
“The code is a formula for continued problems with fraud,” said David Callahan, a senior fellow with the public policy group Demos who has studied appraisals. “Appraisers have been asking for a long time for a reliable firewall between themselves and lenders, and are further from it than ever.”
Appraisers Pressured
Before real estate prices went out of control, appraisal work was straightforward. The appraiser examined a property inside and out, judging it against the prices that similar properties in the neighborhood were fetching. If the appraisal value matched the sales price, the lender financed the loan.
As lending standards collapsed during the housing boom, appraisers were pressured from all sides. When the appraiser did not deliver a satisfactory price, the deal did not get done, and the broker, agent and lender did not get their fees. Homeowners also loved inflated appraisals, using them to take out as much as possible when they refinanced.
“I got daily calls from lenders and brokers saying, ‘Here’s the address. Can you get me $400,000?’ ” said Mr. Kennedy, who has been in the business since 1993.
When he responded that it was illegal for him to supply an unsupported value — or when he noted in his report defects that the client hoped he would ignore, like a flooded basement — the broker or lender dropped him for a more compliant appraiser.
Petition Notes Abuses
The honest appraisers saw that the situation was helping to drive housing prices beyond reason. A petition they started a decade ago, just as the long boom was getting under way, warned of “the potential for great financial loss” to the economy if the penalties for pressuring appraisers were not enforced. The petition also complained that honest appraisers were being blacklisted. It drew 11,000 signatures.
Regulators and lawmakers did nothing. A rising market covered all sins. Then the market turned, and the lawsuits began.
In late 2007, Mr. Cuomo filed suit in New York Supreme Court against the data company First American and its subsidiary eAppraiseIT for fraud.
EAppraiseIT is an appraisal management company, which means lenders hire it to hire appraisers. This method, First American stressed in its annual report, produced “unbiased valuations” that benefited “not only the homeowner and lender, but our nation’s economy.”
Washington Mutual, based in Seattle, was the biggest client of eAppraiseIT. (Mr. Cuomo could not sue Washington Mutual for jurisdictional reasons.) The suit, still in court, charges that eAppraiseIT let itself be pressured by Washington Mutual to revise appraisals upward to match the value of deals.
Washington Mutual collapsed last fall, the largest bank failure in the nation’s history.
Mr. Cuomo, convinced that the troubles with appraisals went far beyond a single case, began an inquiry into Fannie and Freddie’s role in the buying of fraudulent mortgages. Before that investigation could be concluded, the two finance companies agreed they would buy mortgages only from lenders that abided by a new code of conduct.
In its original draft, the code froze out brokers and agents and placed severe restrictions on lenders. They were forbidden from using their staff appraisers or an appraisal management company in which they had more than a 20 percent interest.
The American Bankers Association and the Mortgage Bankers Association fought the restrictions, saying they would increase costs to consumers. The lenders also argued that Mr. Cuomo had no jurisdiction over their federally chartered operations. Banking regulators, who saw their authority being usurped, agreed.
The final version of the code gives much greater leeway to lenders. For instance, lenders can hire their own appraisers if they “recognize” that complaints will be forwarded to regulators.
The appraisal world was stunned. Dave Biggers, the chief executive of A La Mode, a maker of software for appraisers, said, “It’s like telling me I can steal as long as I ‘recognize’ that complaints will be directed to the police.”
Benjamin Lawsky, a special assistant to Mr. Cuomo, defended the revised version. “Our goal was always for the code to eliminate the causes of appraisal inflation while minimizing any disruptive impact on the industry,” he said. “We believe we accomplished this.”
Since national lenders cannot maintain lists of appraisers in every community, they long ago began outsourcing the process to the management companies, who had claimed about 30 percent of the market before the code took effect. Now that the lenders are the ones ordering all the appraisals, the management companies are expanding their share.
Real estate groups say the management companies, with the competition from brokers and agents eliminated, are now trying to fatten their profit margins by hiring appraisers as cheaply as possible.
These inexperienced appraisers, often traveling many miles to a market they do not know well, are scuttling legitimate deals, the agents claim. This argument has resonated in Congress, where 55 legislators have sponsored a bill calling for an 18-month moratorium on the code.
Appraisal management companies and lenders say the agents’ charges are not true.
“We’re an easy scapegoat,” said Donald Blanchard, chief compliance officer of Lender Processing Services Inc., which works with 20,000 appraisers. “We’ve yet to see any quantifiable proof as to the problems that management companies are supposedly causing.”
The real source of trouble for independent appraisers, he suggested, is not the code but a changing economy.
“Appraisers want to go back to the way it used to be,” Mr. Blanchard said. “But it’s good business for us to demand more for less.”
Fees Decline
Terry and Andrea Hartlieb, longtime appraisers in Fort Collins, Colo., miss the old days.
Instead of developing relationships with brokers and agents, the Hartliebs must wait for a lender or appraisal management company to call. A year ago, they would make $350 for an appraisal that would take about five hours. Now the management companies offer as little as half that. The couple has laid off four appraisers who used to work for them.
One recent call was about a complex property that would take additional time. Mr. Hartlieb asked for a bigger fee. The response: “We can get it done faster and for less elsewhere.”
Mrs. Hartlieb said, “Buying a house is the largest expense of your life. Don’t you want the best professional advice about its value, not the cheapest?”
Appraisers might be earning less, but consumers are being asked to pay more. The cost of an appraisal is now about $500, up from $400, appraisers say, because of the management companies’ share.
Moreover, if the goal of the code is to lessen pressure on appraisers, it is not clear that is happening.
A memo from U.S. Bancorp, which is based in Minneapolis, was posted recently on Appraisers’ Forum, an online discussion group. The memo bluntly urged the lender’s appraisers to “try and get the value we need the first time.” (A U.S. Bancorp spokeswoman said the memo was “not an official document.”)
In an online poll of 2,250 appraisers by Working RE magazine, half the respondents said they sometimes felt that management companies were ordering them to come up with a value that would make the deal work.
Banks and appraisal management companies say appraisers can be hypersensitive. “To some appraisers, the fact that we call you and ask a question is pressure,” said Mr. Blanchard of Lender Processing Services.
Under the code, the role of deciding what is pressure is assigned to a new entity called the Independent Valuation Protection Institute. If appraiser complaints are deemed valid, the institute is supposed to forward them to regulators.
Seventeen months after it was announced, the institute has no staff and no appraiser complaint hotline. All that exists is a single Web page.
Mr. Callahan, who wrote about the trouble with appraisals during the boom, is dismayed that the problem cannot be fixed even during the bust.
“Appraisers play a key role in keeping real estate transactions honest,” he said. “But we as a society have done very little to support them and ensure their independence.”
Mike Kennedy, a real estate appraiser in Monroe, N.Y., was examining a suburban house a few years ago when he discovered five feet of water in the basement. The mortgage broker arranging the owner’s refinancing asked him to pretend it was not there.
Brokers, real estate agents and banks asked appraisers to do a lot of pretending during the housing boom, pumping up values while ignoring defects. While Mr. Kennedy says he never complied, many appraisers did, some of them thinking they had no choice if they wanted work. A profession that should have been a brake on the spiral in home prices instead became a big contributor.
On May 1, a sweeping change took effect that was meant to reduce the conflicts of interest in home appraisals while safeguarding the independence of the people who do them.
Brokers and real estate agents can no longer order appraisals. Lenders now control the entire process.
The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.
The agents, maintaining that the changes are effectively blocking home sales by encouraging the use of inexperienced appraisers, are asking Washington to suspend the code until 2011. For their part, appraisers acknowledge that the change may have been well intentioned but contend that it has no teeth and is undermining the economics of their profession.
“We’ve been begging for years for enforcement of existing state and federal laws regulating appraising,” said Mr. Kennedy, a leader in the appraisal community. “We thought we were finally going to get that. But the code is doing nothing except putting ethical appraisers out of business.”
Financial change is one of the most contentious issues in Washington, and efforts to fix even widely acknowledged problems seem stalled. The attempt to change the appraisal system is an example of how difficult it can be to adopt changes that are good in theory and also work in practice — while simultaneously winning support from warring interest groups.
“The real estate industry is incredibly complex,” said Josh Denney, a lobbyist with the Mortgage Bankers Association. “If you take one piece and tinker with it, it causes friction throughout the process.”
The Home Valuation Code of Conduct had an unusual origin. It was developed by the New York attorney general, Andrew M. Cuomo, who persuaded the big federal mortgage agencies, Fannie Mae and Freddie Mac, to adopt it. That has effectively made it national policy.
Putting appraisals completely in the hands of lenders may sound like a good idea in principle, because it is supposed to be lenders who are putting their money at risk in a home loan.
But the reality is that many companies that write home loans these days do not have much incentive to worry about the accuracy of appraisals. That is because the companies do not keep the loans on their own books, instead selling them to Fannie Mae or Freddie Mac.
“The code is a formula for continued problems with fraud,” said David Callahan, a senior fellow with the public policy group Demos who has studied appraisals. “Appraisers have been asking for a long time for a reliable firewall between themselves and lenders, and are further from it than ever.”
Appraisers Pressured
Before real estate prices went out of control, appraisal work was straightforward. The appraiser examined a property inside and out, judging it against the prices that similar properties in the neighborhood were fetching. If the appraisal value matched the sales price, the lender financed the loan.
As lending standards collapsed during the housing boom, appraisers were pressured from all sides. When the appraiser did not deliver a satisfactory price, the deal did not get done, and the broker, agent and lender did not get their fees. Homeowners also loved inflated appraisals, using them to take out as much as possible when they refinanced.
“I got daily calls from lenders and brokers saying, ‘Here’s the address. Can you get me $400,000?’ ” said Mr. Kennedy, who has been in the business since 1993.
When he responded that it was illegal for him to supply an unsupported value — or when he noted in his report defects that the client hoped he would ignore, like a flooded basement — the broker or lender dropped him for a more compliant appraiser.
Petition Notes Abuses
The honest appraisers saw that the situation was helping to drive housing prices beyond reason. A petition they started a decade ago, just as the long boom was getting under way, warned of “the potential for great financial loss” to the economy if the penalties for pressuring appraisers were not enforced. The petition also complained that honest appraisers were being blacklisted. It drew 11,000 signatures.
Regulators and lawmakers did nothing. A rising market covered all sins. Then the market turned, and the lawsuits began.
In late 2007, Mr. Cuomo filed suit in New York Supreme Court against the data company First American and its subsidiary eAppraiseIT for fraud.
EAppraiseIT is an appraisal management company, which means lenders hire it to hire appraisers. This method, First American stressed in its annual report, produced “unbiased valuations” that benefited “not only the homeowner and lender, but our nation’s economy.”
Washington Mutual, based in Seattle, was the biggest client of eAppraiseIT. (Mr. Cuomo could not sue Washington Mutual for jurisdictional reasons.) The suit, still in court, charges that eAppraiseIT let itself be pressured by Washington Mutual to revise appraisals upward to match the value of deals.
Washington Mutual collapsed last fall, the largest bank failure in the nation’s history.
Mr. Cuomo, convinced that the troubles with appraisals went far beyond a single case, began an inquiry into Fannie and Freddie’s role in the buying of fraudulent mortgages. Before that investigation could be concluded, the two finance companies agreed they would buy mortgages only from lenders that abided by a new code of conduct.
In its original draft, the code froze out brokers and agents and placed severe restrictions on lenders. They were forbidden from using their staff appraisers or an appraisal management company in which they had more than a 20 percent interest.
The American Bankers Association and the Mortgage Bankers Association fought the restrictions, saying they would increase costs to consumers. The lenders also argued that Mr. Cuomo had no jurisdiction over their federally chartered operations. Banking regulators, who saw their authority being usurped, agreed.
The final version of the code gives much greater leeway to lenders. For instance, lenders can hire their own appraisers if they “recognize” that complaints will be forwarded to regulators.
The appraisal world was stunned. Dave Biggers, the chief executive of A La Mode, a maker of software for appraisers, said, “It’s like telling me I can steal as long as I ‘recognize’ that complaints will be directed to the police.”
Benjamin Lawsky, a special assistant to Mr. Cuomo, defended the revised version. “Our goal was always for the code to eliminate the causes of appraisal inflation while minimizing any disruptive impact on the industry,” he said. “We believe we accomplished this.”
Since national lenders cannot maintain lists of appraisers in every community, they long ago began outsourcing the process to the management companies, who had claimed about 30 percent of the market before the code took effect. Now that the lenders are the ones ordering all the appraisals, the management companies are expanding their share.
Real estate groups say the management companies, with the competition from brokers and agents eliminated, are now trying to fatten their profit margins by hiring appraisers as cheaply as possible.
These inexperienced appraisers, often traveling many miles to a market they do not know well, are scuttling legitimate deals, the agents claim. This argument has resonated in Congress, where 55 legislators have sponsored a bill calling for an 18-month moratorium on the code.
Appraisal management companies and lenders say the agents’ charges are not true.
“We’re an easy scapegoat,” said Donald Blanchard, chief compliance officer of Lender Processing Services Inc., which works with 20,000 appraisers. “We’ve yet to see any quantifiable proof as to the problems that management companies are supposedly causing.”
The real source of trouble for independent appraisers, he suggested, is not the code but a changing economy.
“Appraisers want to go back to the way it used to be,” Mr. Blanchard said. “But it’s good business for us to demand more for less.”
Fees Decline
Terry and Andrea Hartlieb, longtime appraisers in Fort Collins, Colo., miss the old days.
Instead of developing relationships with brokers and agents, the Hartliebs must wait for a lender or appraisal management company to call. A year ago, they would make $350 for an appraisal that would take about five hours. Now the management companies offer as little as half that. The couple has laid off four appraisers who used to work for them.
One recent call was about a complex property that would take additional time. Mr. Hartlieb asked for a bigger fee. The response: “We can get it done faster and for less elsewhere.”
Mrs. Hartlieb said, “Buying a house is the largest expense of your life. Don’t you want the best professional advice about its value, not the cheapest?”
Appraisers might be earning less, but consumers are being asked to pay more. The cost of an appraisal is now about $500, up from $400, appraisers say, because of the management companies’ share.
Moreover, if the goal of the code is to lessen pressure on appraisers, it is not clear that is happening.
A memo from U.S. Bancorp, which is based in Minneapolis, was posted recently on Appraisers’ Forum, an online discussion group. The memo bluntly urged the lender’s appraisers to “try and get the value we need the first time.” (A U.S. Bancorp spokeswoman said the memo was “not an official document.”)
In an online poll of 2,250 appraisers by Working RE magazine, half the respondents said they sometimes felt that management companies were ordering them to come up with a value that would make the deal work.
Banks and appraisal management companies say appraisers can be hypersensitive. “To some appraisers, the fact that we call you and ask a question is pressure,” said Mr. Blanchard of Lender Processing Services.
Under the code, the role of deciding what is pressure is assigned to a new entity called the Independent Valuation Protection Institute. If appraiser complaints are deemed valid, the institute is supposed to forward them to regulators.
Seventeen months after it was announced, the institute has no staff and no appraiser complaint hotline. All that exists is a single Web page.
Mr. Callahan, who wrote about the trouble with appraisals during the boom, is dismayed that the problem cannot be fixed even during the bust.
“Appraisers play a key role in keeping real estate transactions honest,” he said. “But we as a society have done very little to support them and ensure their independence.”
Florida tops again in late mortgages
By DUANE MARSTELLER, Bradenton Herald, Friday, August 21st, 2009
Florida’s mortgage-delinquency rate remains the country’s highest, a national bankers group said in a report released Thursday.
More than one in five Florida mortgages either were at least one payment behind or in foreclosure as of June 30, almost twice the U.S. rate, the Mortgage Bankers Association said in a quarterly delinquency report.
“Florida continues to establish itself as the worst state in the union for mortgage performance,” said Jay Brinkmann, the trade group’s chief economist.
“Clearly we have not seen the bottom in Florida,” he said in a later interview.
The state led the nation with 12 percent of mortgages somewhere in the foreclosure process at the end of June. Another 10.8 percent were at least 30 days behind in payments, with nearly half of those more than 90 days overdue.
In contrast, just 4.3 percent of U.S. mortgages were in foreclosure and another 8.9 percent were delinquent but not yet in foreclosure. Still, the combined U.S. foreclosure/delinquency rate is the highest since the association began tracking it in 1972.
Observers attributed Florida’s weak showing to rising unemployment, falling home values and a higher percentage of non-primary homeowners.
“It’s getting to the point where we’re deeper into the recession, and people have hung on as long as they could possibly hang on and no longer can afford to keep paying their mortgages,” said Bob Stobaugh, a senior lender at Sentinel Mortgage Co. and president of the Gulf Coast Mortgage Bankers Association.
Some can’t pay because they’ve lost their jobs: Florida’s unemployment rate was 10.6 percent in June, the latest month for which figures were available.
For others, it’s because a foreclosure-fueled drop in home values has left them “under water” on their mortgages, Stobaugh said. Nearly half of Florida homeowners owed more than their homes are worth as of June 30, tracking service First American CoreLogic said in a recent report. Florida also is seeing more delinquencies and foreclosures involving second homes and investor-owned properties because it has more of them and foreclosure-relief efforts are focusing on primary homeowners, Stobaugh said. About 27.4 percent of single-family homes in Manatee do not have homestead exemptions, according to the Manatee County Property Appraiser’s Office.
The report said the mortgage crisis, which began with subprime loans taken out by those with spotty credit, also continued to spread. One in three new foreclosures between April and June was from a prime, fixed-rate loan, up from one in five a year earlier. Last year, subprime adjustable-rate loans caused the largest share of foreclosures.
“The rise in prime delinquencies . . . is a clear indication that employment is the driver of mortgage performance, with the worst performance coming in those areas that are combining jobs losses with large drops in home values like California and Florida,” Brinkmann said. “We won’t see a turnaround in delinquencies until we see improvements in employment, most likely the middle of next year.”
Stobaugh agreed, but wasn’t sure when that would happen. “Sooner or later this downward spiral will stop,” he said. “When, no one knows.”
McClatchy and the Associated Press contributed to this report.
Florida’s mortgage-delinquency rate remains the country’s highest, a national bankers group said in a report released Thursday.
More than one in five Florida mortgages either were at least one payment behind or in foreclosure as of June 30, almost twice the U.S. rate, the Mortgage Bankers Association said in a quarterly delinquency report.
“Florida continues to establish itself as the worst state in the union for mortgage performance,” said Jay Brinkmann, the trade group’s chief economist.
“Clearly we have not seen the bottom in Florida,” he said in a later interview.
The state led the nation with 12 percent of mortgages somewhere in the foreclosure process at the end of June. Another 10.8 percent were at least 30 days behind in payments, with nearly half of those more than 90 days overdue.
In contrast, just 4.3 percent of U.S. mortgages were in foreclosure and another 8.9 percent were delinquent but not yet in foreclosure. Still, the combined U.S. foreclosure/delinquency rate is the highest since the association began tracking it in 1972.
Observers attributed Florida’s weak showing to rising unemployment, falling home values and a higher percentage of non-primary homeowners.
“It’s getting to the point where we’re deeper into the recession, and people have hung on as long as they could possibly hang on and no longer can afford to keep paying their mortgages,” said Bob Stobaugh, a senior lender at Sentinel Mortgage Co. and president of the Gulf Coast Mortgage Bankers Association.
Some can’t pay because they’ve lost their jobs: Florida’s unemployment rate was 10.6 percent in June, the latest month for which figures were available.
For others, it’s because a foreclosure-fueled drop in home values has left them “under water” on their mortgages, Stobaugh said. Nearly half of Florida homeowners owed more than their homes are worth as of June 30, tracking service First American CoreLogic said in a recent report. Florida also is seeing more delinquencies and foreclosures involving second homes and investor-owned properties because it has more of them and foreclosure-relief efforts are focusing on primary homeowners, Stobaugh said. About 27.4 percent of single-family homes in Manatee do not have homestead exemptions, according to the Manatee County Property Appraiser’s Office.
The report said the mortgage crisis, which began with subprime loans taken out by those with spotty credit, also continued to spread. One in three new foreclosures between April and June was from a prime, fixed-rate loan, up from one in five a year earlier. Last year, subprime adjustable-rate loans caused the largest share of foreclosures.
“The rise in prime delinquencies . . . is a clear indication that employment is the driver of mortgage performance, with the worst performance coming in those areas that are combining jobs losses with large drops in home values like California and Florida,” Brinkmann said. “We won’t see a turnaround in delinquencies until we see improvements in employment, most likely the middle of next year.”
Stobaugh agreed, but wasn’t sure when that would happen. “Sooner or later this downward spiral will stop,” he said. “When, no one knows.”
McClatchy and the Associated Press contributed to this report.
Thursday, August 20, 2009
House: Let foreclosed homeowners rent
By Kenneth R. Harney, Special to the St. Petersburg Times - Saturday, August 15, 2009
WASHINGTON — Here are two questions getting a lot of attention on Capitol Hill and from the Obama administration: When homeowners lose their houses to foreclosure, should they be able to stay in the property, leasing it back at fair market rent from the lender?
Should they also get an option to purchase the house from the bank at the end of the lease term, assuming they have the income to afford it?
Before leaving for their August break, Democrats and Republicans in the House took a rare, unanimous stand on both questions by passing the Neighborhood Preservation Act by voice vote. The bill was co-sponsored by Reps. Gary Miller, R-Calif., and Joe Donnelly, D-Ind.
The bill would remove legal impediments blocking federally regulated banks from entering into long-term leases — up to five years — with the former owners of foreclosed houses. It would also allow banks to negotiate option-to-purchase agreements permitting former owners to buy back their houses.
The idea, said Miller, is, "at no cost to the taxpayer," to "reduce the number of houses coming into the housing inventory and preserve the physical condition of foreclosed properties," which ultimately should help stabilize values in neighborhoods with large numbers of distressed sales and underwater real estate.
If the bill is approved by the Senate, participation by banks would be purely voluntary. But the legislation might encourage banks to calculate whether they would do better financially taking an immediate loss at foreclosure, or by collecting rents and then selling the property at a higher price in four or five years.
Though it was not opposed by banking lobbies, the bill quickly attracted critics. The Center for Economic and Policy Research, a Washington think tank, said a key flaw is to leave decisions about leasebacks solely to banks.
"If Congress does want to give homeowners the option to stay in their homes as renters," said the group, "it will be necessary to pass legislation that explicitly gives them this right."
Some private-industry proponents of short sales — where the bank negotiates a price that's typically less than the owners owe on their note — say turning banks into landlords won't work well, either for the banks or foreclosed owners who want to stay in their houses.
Al Hackman, a San Diego realty broker with extensive experience in commercial transactions, argues that leasebacks with options to buy are the way to go — but not if banks run the show.
Hackman and a partner, Troy Huerta, have recently begun putting together what they call "seamless short sales" as alternatives for banks and property owners. Their short sales and leasebacks are "seamless" because the financially distressed homeowners remain in their properties, before and after the settlement.
Here's how they work: First, the bank agrees to a short sale to a private investor, just as they often do now. In the seamless version, however, the investor is contractually bound to lease back the house on a "triple net" basis — the tenants pay taxes, insurance and utilities — for two to three years.
The former owners only qualify if they have sufficient income to afford a fair market rent and can handle the other expenses, including maintaining the property. The deal comes with a preset buyout price after the leaseback period. That price is higher than the short-sale price paid by the investor, but lower than the original price of the house paid by the foreclosed owners.
Hackman and Huerta already are doing seamless short-sale transactions. Here is one that Hackman says is "real life" and moving toward escrow: A family purchased a house for $725,000 with 20 percent down in 2005, then made substantial improvements with the help of an equity line of $72,500. The house now is valued around $500,000, but is saddled with $625,000 in mortgage debts.
Enter the seamless short sale: Hackman has brought in a private investor who is willing to buy the house at current value, all cash. As part of the deal, the investor has agreed to lease back the house at $25,000 a year, triple net. In three years, assuming they've been good tenants, the original owners have the option to buy back the property for $550,000.
Hackman says the internal rate of return to investors can be raised or lowered based on rents and the buyback price, but typically are in the 8 to 10 percent range.
"It's a win-win," he says. "The owners stay in their houses. Private investors get a moderate return on what should be a safe investment."
Plus the banks are out of the equation.
Wednesday, August 19, 2009
Housing slowdown prompted big changes
By Tom Bayles, Sarasota Herald Tribune, Monday, August,17, 2009
In North Port, it is at a complete halt: As the Herald-Tribune's John Davis found out, no new home permits were issued in North Port during July.
Things have gotten so bad that the area two builders' groups recently merged into one to swell the new organization's ranks.
In April, the Home Builders Association of Manatee County and the Sarasota Building Industry Association merged into the the Home Builders Association of Manatee-Sarasota with about 600 members.
Membership in the Florida Home Builders Association, which is included with membership in the regional groups, dropped from roughly 22,000 at the height of the housing boom in summer 2005 to about 14,000 now.
Self-billed as the "Grammys of the Home Building Industry," a pair of local builders garnered several Aurora Awards at the recent 2009 Southeast Building Conference in Orlando.
Manatee County's Neal Communities took home three awards for a pair of models in River Sound, one for company's Lake Cottage model, which ranges from 947- to 1648-square-feet, and two for the 1,200-square-foot Rose Cottage design.
"This is important recognition for our company and the many professionals who work with us," builder Pat Neal said in a statement.
Lakewood Ranch's John Cannon Homes won two awards, one for the Kaleeya, a 5,164-square-foot model home located in Rive Isle in Parrish and another for the Brisbane, a 4,287-square-foot model home in Antigua Cove in Ruskin.
The awards recognize excellence in several categories of construction by home builders, remodelers, commercial complexes and in architectural design.
"The Aurora Awards are the Grammys of the home building profession," Stephanie Henley, the chairwomen of this year's contest, said in a statement.
Builder offers money back if new home loses value
National builder Taylor Morrison has rolled out a home buyer's assurance program, which offers a refund of a down payment -- up to 10 percent of the original purchase price -- should their home decrease in value in five years.
Called "Total Assurance," the guarantee is designed to sell homes, of course, but also to let buyers who may be on the fence worrying about the direction of the housing market take advantage of today's low mortgage-interest rates.
"With Total Assurance we've made buying a new home easier than ever," Steve Kempton, division president for Taylor Morrison in South Florida, said in a statement. "We believe we have the best product out there and this program helps us demonstrate that to our customers."
The guarantee is available on new homes in Taylor Morrison's single-family home communities in Sarasota, Bradenton, Tampa, Fort Myers and Naples.
In this region, Taylor Morrison offers five new-home communities -- one of them starting in the $80,000s: Aberdeen and River Plantation in Parrish; Bradford Manor in Sarasota; Crystal Lakes in Palmetto and Palma Sola Trace (coach homes in that subdivision exempted) in Bradenton.
The fine print says a buyer must buy a Taylor Morrison home, live in it as their primary residence for five consecutive years, maintain it and stay current on any homeowners association dues to be eligible for the refund.
It is a tough time to be a home builder or subcontractor these days with new home construction in Southwest Florida at a near-standstill.
In North Port, it is at a complete halt: As the Herald-Tribune's John Davis found out, no new home permits were issued in North Port during July.
Davis also noted that construction in Sarasota County was at a 20-year low in 2008, with $318 million worth compared to $2 billion worth just before the boom went bust in 2006. In Manatee County, building for the first seven months of this year was down 36 percent compared with the same time frame last year.
Things have gotten so bad that the area two builders' groups recently merged into one to swell the new organization's ranks.
In April, the Home Builders Association of Manatee County and the Sarasota Building Industry Association merged into the the Home Builders Association of Manatee-Sarasota with about 600 members.
Membership in the Florida Home Builders Association, which is included with membership in the regional groups, dropped from roughly 22,000 at the height of the housing boom in summer 2005 to about 14,000 now.
So against that backdrop, it is nice to be able to report some positive news about some local builders and of an incentive plan to protect people who buy new homes against a decline in value.
Local builders garner industry awards
Self-billed as the "Grammys of the Home Building Industry," a pair of local builders garnered several Aurora Awards at the recent 2009 Southeast Building Conference in Orlando.
Manatee County's Neal Communities took home three awards for a pair of models in River Sound, one for company's Lake Cottage model, which ranges from 947- to 1648-square-feet, and two for the 1,200-square-foot Rose Cottage design.
"This is important recognition for our company and the many professionals who work with us," builder Pat Neal said in a statement.
Lakewood Ranch's John Cannon Homes won two awards, one for the Kaleeya, a 5,164-square-foot model home located in Rive Isle in Parrish and another for the Brisbane, a 4,287-square-foot model home in Antigua Cove in Ruskin.
The awards recognize excellence in several categories of construction by home builders, remodelers, commercial complexes and in architectural design.
"The Aurora Awards are the Grammys of the home building profession," Stephanie Henley, the chairwomen of this year's contest, said in a statement.
"The Aurora symbolizes tremendous achievement, honor and distinction among building industry professionals."
Builder offers money back if new home loses value
Called "Total Assurance," the guarantee is designed to sell homes, of course, but also to let buyers who may be on the fence worrying about the direction of the housing market take advantage of today's low mortgage-interest rates.
"With Total Assurance we've made buying a new home easier than ever," Steve Kempton, division president for Taylor Morrison in South Florida, said in a statement. "We believe we have the best product out there and this program helps us demonstrate that to our customers."
The guarantee is available on new homes in Taylor Morrison's single-family home communities in Sarasota, Bradenton, Tampa, Fort Myers and Naples.
In this region, Taylor Morrison offers five new-home communities -- one of them starting in the $80,000s: Aberdeen and River Plantation in Parrish; Bradford Manor in Sarasota; Crystal Lakes in Palmetto and Palma Sola Trace (coach homes in that subdivision exempted) in Bradenton.
The fine print says a buyer must buy a Taylor Morrison home, live in it as their primary residence for five consecutive years, maintain it and stay current on any homeowners association dues to be eligible for the refund.
Wednesday, August 12, 2009
Tips for homeowners with Taylor, Bean & Whitaker loans
By Jeff Harrington, St. Petersburg Times Staff Writer - Wednesday, August 12, 2009
Taylor, Bean & Whitaker's sudden closure last week continues to send ripples through the mortgage industry, causing its customers frustration and government regulators angst.
Freddie Mac said the collapse of the Ocala-based mortgage lender may cause it "significant" losses. Taylor Bean accounted for about 5.2 percent of Freddie Mac's single-family mortgage purchases last year, according to a regulatory filing.
Meanwhile, some who have FHA mortgage loans through Taylor Bean or were in the midst of closing have complained that they haven't been able to post their mortgage payments or reach anyone at the company.
The U.S. Department of Housing and Urban Development is urging patience. Bank of America will be taking over the servicing of Taylor Bean's loans.
"You will receive a letter from BAC Home Loans Servicing (a Bank of America subsidiary) confirming this transfer and welcoming you as a valued customer within two weeks of your loan being added to their systems," HUD said.
Other governmental advice:
• Federal loan guarantor Ginnie Mae is telling customers to make payments directly to BAC Home Loans Servicing LP, Payment Processing, P.O. Box 10334, Van Nuys, CA 91410-0334. For additional questions about loan servicing, contact Bank of America Home Loans Customer Service toll-free at 1-800-669-6607.
• If you're falling behind on payments, call HUD's National Servicing Center toll-free at 1-888-297-8685. Or you may seek help directly from a HUD-approved Housing Counseling Agency. To find one near you, call toll-free 1-800-569-4287.
• If you had a loan application in the pipeline and are unsure of its status, contact your mortgage broker or bank. You may need to seek a new FHA-approved lender.
• If you had an appraisal completed as part of an uncompleted loan application, your loan file (including the appraisal) could be transferred to another lender. FHA appraisals are valid for six months.
Thursday, August 6, 2009
Ocala mortgage lender Taylor, Bean and Whitaker shuts down
St. Petersburg Times Staff Writer - Aug 05, 2009
Ocala's Taylor, Bean and Whitaker Mortgage Corp., 12th-largest mortgage lender in the country, has shut down its lending operations after the Federal Housing Administration barred it from making loans that the agency insures.
In an e-mail — with the subject line "The saddest day of my life" — posted on the Ocala Star-Banner newspaper's Web site, Taylor Bean chairman Lee Farkas said Wednesday would be the company's last day of operations. "I have done everything possible to try to save it, but I couldn't," Farkas stated. "Since 1991, we have provided excellence in mortgage banking. We did our best for a very long time. I apologize to everyone." Farkas added that all staff except "essential employees" would be terminated Wednesday.
The closure came a day after the FHA punished Taylor Bean for failing to submit a required annual financial report, and "misrepresenting" its dealings with an auditor that had discovered "irregular transactions that raised concerns of fraud."
Ocala's Taylor, Bean and Whitaker Mortgage Corp., 12th-largest mortgage lender in the country, has shut down its lending operations after the Federal Housing Administration barred it from making loans that the agency insures.
In an e-mail — with the subject line "The saddest day of my life" — posted on the Ocala Star-Banner newspaper's Web site, Taylor Bean chairman Lee Farkas said Wednesday would be the company's last day of operations. "I have done everything possible to try to save it, but I couldn't," Farkas stated. "Since 1991, we have provided excellence in mortgage banking. We did our best for a very long time. I apologize to everyone." Farkas added that all staff except "essential employees" would be terminated Wednesday.
The closure came a day after the FHA punished Taylor Bean for failing to submit a required annual financial report, and "misrepresenting" its dealings with an auditor that had discovered "irregular transactions that raised concerns of fraud."
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