June 2010

FANNIE AND FREDDIE SEEKING IMPROVED APPRAISAL DATA

The Uniform Mortgage Data Program, initiated by the Federal Housing Finance Agency (FHFA), which controls Fannie Mae and Freddie Mac, was launched May 24 for the purpose of improving data submitted to these GSEs about home loans they buy from lenders.

“This initiative is a major step toward meeting industry requests for uniformity in appraisal and loan data,” said Edward DeMarco, acting director of the FHFA. “Improvements in data quality will benefit all mortgage market participants and strengthen the housing finance system.”

This program will:

1. Establish a Uniform Appraisal Dataset, which will standardize key appraisal data,

2. Create a Uniform Collateral Data Portal, designed to provide a common boundary for Fannie’s and Freddie’s appraisal data collection, and

3. Implement a Uniform Loan Delivery Dataset to leverage the file format, data definitions and MISMO v. 3.0 Reference Model data elements.

Beginning next January 1, Fannie and Freddie will require increased data requirements on appraisals and loans, which will lead to slight changes in the forms. Appraisers, according to the FHFA, will be able to update their software to accommodate such requests.

“The Uniform Mortgage Data Program will help strengthen efforts throughout the industry to support sustainable homeownership and prudent risk management practices,” said Michael Williams, CEO and president of Fannie Mae. “A common GSE approach to improving the collection of electronic appraisals and other loan delivery data will also help our ability to manage risk and support market stability while streamlining business processes for our lender partners.”

ELLIOTT® PROVIDES APPRAISAL SERVICE IN 50 STATES

For more than 10 years, ELLIOTT® & Company Appraisers has been able to secure appraisals, evaluations, research, consultation and representation for real estate matters anywhere in the United States. We have been able to continue this despite the proliferation of appraisal management company (AMC) regulation that has become popular in many states.

At this writing, at least 15 states have passed laws that regulate AMCs, and some of them carry high price tags in the form of fees to these companies for being regulated. The cost of regulatory compliance to meet these new laws have discouraged some AMCs from operating in these states, especially the states that charge high fees.

“Our company remains committed to serving our clients in all 50 states of the United States,” said Charlie Elliott, MAI, SRA, ASA, and president of ELLIOTT® & Company Appraisers. “It is important for us to be able to serve our clients in all locations throughout the United States, and we are prepared to meet all regulatory requirements, nationwide, in order to make this possible.”

HOME VALUES GENERATE VICIOUS CYCLE

A recent article by Conor Dougherty, which appeared in the Wall Street Journal, documented how the continuing struggles in the real estate market are putting a damper on the economy’s attempt to recover.

“Despite clear signs of revival in the larger economy, including upturns in manufacturing and consumer spending, the nation’s market for homes and office buildings remains mired in foreclosures and oversupply,” Dougherty wrote in the article. “That imbalance will be worked out over time, but in the meantime, it is slowing the recovery in a myriad of ways.”

In the course of the article, the reporter pointed to fewer construction jobs, homeowners less financially secure because of the decrease value of their homes, the decreased ability of small businesses to borrow and cutbacks in government spending; all on account of the slump in the real estate market.

The article quoted Ethan Harris, a Bank of America Merrill Lynch economist, as saying, “The housing market, since it was the epicenter of the crisis, is also central to the feeble recovery.”

MORTGAGE FRAUD CONTINUES TO ESCALATE

According to Mortgage Asset Research Institute (MARI), fraud committed by professionals in the mortgage industry increased 7% last year. MARI had reported a 26% increase in mortgage fraud committed in 2008.

“We believe that mortgage fraud is significantly understated,” said MARI spokeswoman Jennifer Butts.

Foreclosure-rescue scams have accounted for a higher percentage of mortgage fraud since the financial meltdown of 2008. Like most mortgage scams, inflated appraisals are needed to make them complete. The higher rate of mortgage fraud leads to more foreclosures. RealtyTrac estimates that there will be more than 1 million residential foreclosures in the United States this year.

INFAMOUS AMITYVILLE HOUSE ON MARKET FOR $1.15 MILLION

The Long Island house in Amityville, N.Y., which has been the subject of many movies, books and Web sites, is once again for sale. The five-bedroom, Dutch Colonial Style house has had a history of violence and enough notoriety to make it one of the better known residences in the world.

In 1974, Ronald DeFeo Jr., who remains in prison, killed six members of his family in that house. Thirteen months later, George and Kathleen Lutz paid $80,000 for the house and moved in with their three children. After claiming to experience hearing voices, being awakened at 3:15 a.m. (said to be the time of the DeFeo murders) every day, watching slime ooze from walls and other frightening events, the Lutzes fled from the house after living in it only 28 days.

Based on the Lutz’s experience, at 112 Ocean Ave., author Jay Anson wrote The Amityville Horror: A True Story. The book, published in 1977, became a bestseller and inspired the movie, “The Amityville Horror,” which was a blockbuster upon its release in 1979. More than 10 movies of variations on that theme have been made since. Although none of them used that house for the filming, they all contain “Amityville” in the title. At least that many books, both fiction and nonfiction, have been written about the house.

As the house changed hands over the years, no other residents have reported unusual problems with it, other than curiosity seekers coming by, especially at Halloween. The address has been changed to 108 Ocean Ave. in an unsuccessful attempt to throw off these curiosity seekers. The house was last sold in 1997 for a reported $310,000.

BUILDERS ENGAGING IN ‘LAND RUSH’

One segment of the real estate market that seems to have taken a turn for the better is that of raw acreage and land lots.

“There’s been an absolute land rush,” said Gregory Watson, a partner in a real-estate fund, called McKinley Partners, based in California and specializing in working with builders.

Land sales are reportedly rising to the point that land prices are increasing in hard-hit real restate areas for the first time since 2006. This turnaround is credited to the actions of the larger builders, many of whom unloaded land at a fraction of what they paid for it during the real estate meltdown and are now scooping up land at what they see as a bargain price in anticipation of upcoming demand for new housing.

“We’re talking about a significant turn here,” said James McNeil, the chairman of residential development practice for Akerman Senterfitt, a law firm that represents builders. “The builders think this thing has turned and they’re making sizeable investments in both finished lots and raw land.”

ASK MARTITIA

QUESTION:  If a lender withholds the current pending sale contract while ordering an appraisal, can an appraiser perform an appraisal on the property and be in compliance with USPAP?

MARTITIA:  Yes; the Uniform Standards of Professional Appraisal Practice require appraisers to use all current sales agreements “if such information is available to the appraiser in the normal course of business.” USPAP does, however, require the appraiser to include a “statement on the efforts of the appraiser to obtain the information” in the appraisal report.

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

QUOTES  

“The distance between insanity and genius is measured only by success.” – Bruce Feirstein

“If you don’t drive your business, you will be driven out of business.” – B.C. Forbes

“Always remember that the future comes one day at a time.” – Dean Atcheson

“The worst thing in the world, next to anarchy, is government.” – Henry Ward Beecher

“Nolan Ryan is pitching much better since his curve ball has straightened out.” – Joe Garagiola
 

Newsletter Editor: kevin@elliottco.com
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