April 2009

TALF LOANS MAY BE EXTENDED TO FIVE YEARS

Commercial real estate investors have been urging the Federal Reserve Board to extend the length of loans made through the Term Asset-Backed Securities Loan Facility (TALF), which has been formed as part of the federal stimulus package.

TALF had been offering three-year loans, but commercial property owners had been asking for loans of five years. These investors point to the fact that many commercial loans will be due in the next three years, and they contend that longer loans might stabilize the market. The Federal Reserve had been resisting this request because it regarded shorter loans as a hedge against inflation. Now there is talk that TALF might compromise by offering five-year loans at a higher interest rate.

“[Charging higher interest rates for longer terms], as a compromise, seems like it meets the needs of both sides,” said Kouis Crandall, chief economist at Wrightson ICAP. “It’s the certainty of the funding, and providing certainty goes a long way to address those concerns.”

ELLIOTT® HAS EXPERIENCE AND INDEPENDENCE AS AN AMC

Founded in 1980, ELLIOTT® & Company Appraisers began expanding into appraisal management about 10 years ago. With mortgages being prepared in states far from the borrowers residences and the collateral properties, we developed a system that enabled lenders throughout the United States to obtain prompt, quality appraisals at a reasonable price.

“Not everyone understands all of the responsibilities undertaken by appraisal management companies,” said Charlie Elliott, MAI, SRA and president of ELLIOTT® & Company Appraisers. “We take the order and edit it to ensure that it is understood by all concerned. We also select our best appraiser for the project, make the assignment and monitor the job’s progress to ensure timely delivery. In addition, we monitor fees to make certain that they are fair to all concerned. Upon completion of each project, we do a review to ensure quality, and when necessary, we request and monitor revisions. We also ship the product to the client, bill the client, pay the appraiser and, when necessary, answer all follow-up questions from the client.”

Over the years, ELLIOTT® has constantly made steps to improve and streamline the process of appraisal management. Customer service has always been at the top of our priorities. We have developed programs over the years designed to keep up with the changing face of the mortgage business, including our Compliance Plus program.

Some management companies are operated by people without an appraisal background. Not only is ELLIOTT® led by licensed and certified appraisers, it is operated by appraisers with the most prestigious designations, including MAI and SRA.

ELLIOTT® is also an independent management company. We have banks for clients, of course, but we are not owned by a bank.

Those seeking more information about our quality service in appraisal management, call our Client Services Department at (800) 854-5889 and find out what ELLIOTT® & Company Appraisers can do for you.

OBAMA PROMOTES REFINANCING

President Barack Obama is urging Americans to refinance their home loans.

“We are at a time where people can really take advantage of this,” Obama said during a ceremony for people who had just refinanced on the Making Home Affordable program.

Obama estimated that historically low interest rates could help 7 million to 9 million homeowners save $1,600 to $2,000 a year by refinancing their current mortgages.

“That is money in their pocket,” the president said “We want to send a message that if you are having problems with your mortgage, and even if you’re not and you just want to save some money, you can go to www.makinghomeaffordable.gov.”

BANKS RECEIVING TARP FUNDS MUST PARTICIPATE IN
‘MAKING HOME AFFORDABLE’

In other action to boost activity for the new government program, the Obama administration will require financial institutions that receive Troubled Asset Relief Program (TARP) funds to participate in its Making Home Affordable program. At this writing, only Fannie Mae and Freddie Mac are doing so.

“We are going to require as a condition of participation in TARP going forward that banks do participate in this,” Secretary of Housing and Urban Development Shaun Donovan said of the Making Home Affordable Program.

This new government program is designed to (1) get lenders to lower monthly payment requirements for 3 million to 4 million Americans by modifying the terms of their mortgage loans and (2) refinance the loans of 4 million to 5 million homeowners whose homes have dropped in value since the loans were originated. Making Home Affordable only applies to loans covered by Fannie Mae or Freddie Mac. Since the plan was presented in February, mortgage refinance activity has increased by 88%, according to Donovan.

“We’re certainly seeing some early good news,” the HUD secretary said. “It’s a sign that the administration’s plan is working.”

ONE IN NINE U.S. HOMES ARE VACANT

The U.S. Census Bureau reports that of every nine homes in this country one is unoccupied. As a result, leading economists are predicting it will take at least three years to get this country out of its current stage of excess housing.

According to the report, the number of U.S. housing units grew by 8.65 million from 2002 to 2007, while the number of households in this country grew by only 6.7 million. Economists expect about 500,000 units to be purposefully demolished or destroyed by disaster, but that would leave an excess of over 1.3 non-vacation residential units. Normally about 1.5 million American households are added annually, but effects of the recession and small number of Generation Xers should reduce that number.

Arthur Nelson, director of Metropolitan Research Center at the University of Utah, forecasts 700,000 homes will be built in the United States this year. He also predicts that the housing recovery will start later this year in the West and the South and that the Northeast and Midwest will recover later, possibly beyond 2012.

“Population is still growing,” said Robert Lang, co-director of the Metropolitan Institute at Virginia Tech. “And sooner or later, you’ll want to move out of your relatives’ basements.”

ASK MARTITIA

QUESTION:  The bank I work for is already required to comply with federal regulations on all appraisal matters. Does that exempt us from the Home Valuation Code of Conduct (HVCC)?

MARTITIA: It does not if the loans are going to be sold on the secondary market to either of the two major government sponsored enterprises or GSEs. Appraisals for all loans that are being sold to Fannie Mae and Freddie Mac must comply with the HVCC on addition to other government regulations.

Martitia Mortimer, Elliott’s executive vice president, answers appraisal questions on a regular basis in Elliott Real Estate News.

QUOTES

“There is nothing so easy to learn as experience and nothing so hard to apply.” -- Josh Billings

“We have a system that increasingly taxes work and subsidizes non-work.” -- Milton Friedman

“What the country needs are a few labor-making inventions.” -- Arthur Glasgow

“Whenever someone says ‘theoretically,’ they really mean ‘not really.’” -- Dave Parnas

“A computer once beat me at chess, but it was no match for me at kickboxing.” -- Emo Phillips
 

Newsletter Editor: kevin@elliottco.com
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