WHY MORE
REGULATION IS NOT THE ANSWER
By Charlie Elliott, MAI, SRA
 Today
in the mortgage industry, there does not appear to be any shortage
of new regulation, both proposed and enacted. We are seeing it at
the state and federal levels in our legislatures, as well as
through our government sponsored enterprises (GSEs).
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Recently, we have seen Fannie Mae and Freddie
Mac impose a whole slew of new regulations that must be followed
by those selling them loans. This is called the Home Valuation
Code of Conduct (HVCC). Among the many rules created by it is
one prohibiting mortgage brokers from ordering appraisals.
-
At the time of this writing, three states this
year have enacted appraisal management company (AMC) regulatory
legislation, and we are told that as many as 13 states are
considering some form of AMC regulation.
-
There is proposed new federal legislation in the
form of the Mortgage Reform and Anti-Predatory Lending Act. This
law, proposed by U.S. Reps. Brad Miller, Mel Watt and Barney
Frank, purports to protect consumers and will substantially
affect lenders, appraisers and AMCs.
This is in addition to all of the existing state
and federal legislation, which is designed to protect borrowers,
taxpayers and the integrity of the mortgage banking system. These
include, but certainly not limited to, the Real Estate Settlement
Procedures Act
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FANNIE AND
FREDDIE IMPLEMENT NEW APPRAISAL RULES WITH HVCC
 The
Home Valuation Code of Conduct (HVCC) was implemented earlier
this month. It contains strict rules on the ordering of real
estate appraisals on any home loans that are to be sold to
Fannie Mae or Freddie Mac.
ELLIOTT® & Company Appraisers now offers an appraiser firewall
service for financial institutions that wish to ensure they
are in compliance with the HVCC. This appraisal management
service, “Compliance Plus,” is tailor-made for financial
institutions that wish to distance themselves from the issue
of appraiser-pressure and the associated regulatory and market
demands.
Clients who take advantage of Compliance Plus are relieved of
the concern of any need to develop an in-house system or worry
about difficult-to-implement policies on this complex
situation.
ELLIOTT® welcomes any lender with HVCC-compliance concerns to
call Carlyle Holt at (800) 854-5889 or e-mail him at carlyle@elliottco.com.
UNCLE SAM
READY TO STIMULATE
COMMERCIAL REAL ESTATE MARKET
The U.S. Treasury Department had good news for
Realtors attending their Midyear Legislative Meeting in
Washington. Seth Wheeler, the Treasury’s deputy assistant
secretary for federal finance, said his department has plans
to inject stimulus funds into the commercial real estate
lending market.
“What we’re trying to do is provide a pull channel for
financing,” Wheeler told the Realtors. “It will take some
time, but we hope to see a return of liquidity.”
The Treasury has already indicated its plans to include
commercial mortgage-backed securities in its Term Asset-Backed
Securities Loan Facility (TALF) program, which, as previously
announced, could amount to $1 trillion. Some of the Realtors
let Wheeler know that previously distributed stimulus funds
have not done much to help small businesses or consumers,
which are very important to the success of commercial real
estate.
“We understand how important the issue is,” Wheeler said. “We
want to move as quickly as possible to form a policy
response.”
FIRST
QUARTER BRINGS STEEP RENT DECLINE
According to Reis Inc., office rents in the
United States dropped in the first quarter of 2009 at the
highest rate in seven years. The research firm estimates that
there will be 47.7 million square feet of surplus office space
in this country by the end of the year, and some economists
say that there will be more than that.
J.P. Morgan reports that commercial property values have
declined 22% since 2007, when they were at their peak and that
the commercial real estate vacancy rate increased 15.2% during
the first quarter.
Reis also reported a drop in average apartment-rent prices in
64 of the 79 markets it tracks. Victor Calanog, director of
research for Reis, noted that half of the apartment buildings
in tracks dropped rent prices in the first quarter from what
they were the fourth quarter of 2008. The markets with the
largest drop in effective rent percentages are San Francisco
(2.8%), New York (2.3%), San Jose (2.5%), Long Island (2.3%),
Charlotte (1.3%) and Chicago (1.2%).
These figures are very disturbing to Calanog, who said, “It’s
really sobering to see that even though we’re technically at
the beginning of this downturn, the magnitudes of declines
[and] the fact that they’re registering historical levels is
really sobering.”
ASK MARTITIA
QUESTION: Is a mortgage broker allowed to choose
which appraisal management company (AMC) to use on a loan to
be sold to Fannie Mae or Freddie Mac?
MARTITIA: No. Under
the Home Valuation Code of Conduct, a bank funding a loan must
directly purchase and pay for appraisals when loans are to be
sold to Fannie Mae and Freddie Mac. If the bank elects to use
an AMC, it selects a service provider and the AMC chooses the
appraiser.
Martitia Mortimer, Elliott’s executive vice president, answers
appraisal questions on a regular basis in Elliott Real Estate
News.
QUOTES
 “In
order to make dreams come into reality it takes an awful lot
of determination, dedication, self-discipline and effort.”
-- Jesse Owens
“A diplomat is a man who always remembers a woman’s birthday,
but never remembers her age.”
-- Robert Frost
“I pity the man who cannot feel the whip upon the other man’s
back.” -- Abraham Lincoln
“Indifference is harder to fight than hostility.” --
Crystal Eastman
“Laws are like sausages; it is better not to see them being
made.” -- Otto von Bismarck
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