Sunday, May 24, 2009

New home appraisal rules: Good or bad for customers, appraisers?

New home appraisal rules: Good or bad for customers, appraisers?
BY COURTENAY EDELHART, Californian staff writer Friday, May 22 2009 12:34 PM

A new rule intended to prevent fraudulent appraisals has many in the real estate industry fuming, and some complain it's boosting the cost of having an expert evaluate a home.
At the urging of the New York State Attorney General, as of May 1, McLean, Va.,-based Freddie Mac and Washington, D.C.,-based Fannie Mae will no longer purchase mortgages from loan originators that do not adopt the Home Valuation Code of Conduct.

That's no small thing, because together the Federal National Mortgage Association, otherwise known as Fannie Mae; and the Federal Home Loan Mortgage Corp., or Freddie Mac, own or guarantee about half of the nation's home loans, or $5 trillion in mortgages.

The new code attempts to curb inflated appraisals by refusing reports from people selected, retained or compensated by mortgage brokers and real estate agents.

It applies only to conventional loans, not to Federal Housing Administration loans.
The idea is that brokers and agents have a vested interest in higher valuations because their pay hinges on a home's sale price or the size of the loan. During the housing boom, some unscrupulous people pressured some appraisers to say homes were worth more than they were. After the housing market crashed, those inflated valuations helped fuel massive foreclosures.
So now, appraisal management companies are acting as middlemen by hiring appraisers on behalf of banks and other clients, and reviewing appraisal reports.

"The idea is to build a firewall between brokers, Realtors and other third parties," said Freddie Mac spokesman Brad German.

That would seem to be a good idea, but some in the industry say it hurts consumers because adding that extra layer boosts the appraisal fee, and instead of rolling it into the mortgage with other closing costs, it may have to be paid separately.
Freddie Mac's German says he's heard "anecdotal evidence" that appraisals are more expensive now, but hasn't seen hard data.

Either way, many appraisers are angry.
"We're working about four times as hard for about half the money," said Jeff Sorrell of Accurate Appraisal Service in Bakersfield.

That's because appraisal management companies pocket much of the fee for appraisals, which typically cost $300 to $500. In some cases, the appraiser is only getting about half that fee.
Then, too, long-time appraisers are outraged that they've spent decades cultivating clients only to have those relationships washed away with the stroke of a pen.

"We're the only industry I know of that is not allowed to have direct contact with our clients," Sorrell said.

To add insult to injury, appraisal management companies often have contracts over wide regions, so appraisers they hire could come from anywhere and work in unfamiliar areas, said Kim Ryder of Kim Ryder Appraisal in Bakersfield.

"You could have some random appraiser from L.A. County or something, and they don't know this market. Even from city to city within the county, there's huge variation," she said.
Ryder also worries that the people reviewing her reports may not be local, and more than likely aren't licensed appraisers, so they may lack expertise to know if her work is fair and accurate.
But not all appraisers are unhappy with the change.

"I think, after everything that's gone on the last two years, it's a good idea," said Matt Anzaldo of Anzaldo Real Estate Appraising. "Let's be honest; there was pressure before to say certain things, and that pressure's not there anymore."

Anzaldo said his business has actually grown since the change took effect.

"I'm getting a little bit less than I was receiving before for each appraisal, but my volume is higher," he said.

Appraisers have merely traded one type of pressure for another, Sorrell said. Appraisal management companies charge him late fees if he doesn't file reports quickly, he said, so he feels rushed.

"If you're doing an older housing tract with only four models, it's easy to crank that out," he said. "But if you're doing a 5,000-square-foot house out on the river on five acres of land, there aren't a lot of comps for that, so you have to do a lot of research to do it right, and that takes time."
Sorrell said the new system penalizes good appraisers along with bad ones.

"A few bad apples are ruining it for all of us," he said.

Friday, February 20, 2009

Hope in the Housing Market: Lower Prices, Interest Rates Equal Opportunity for Buyers

Hope in the Housing Market: Lower Prices, Interest Rates Equal Opportunity for Buyers

By Jenny Shearer, The Bakersfield Californian

Jan. 31--Guadalupe and Ariana Sanchez represent hope in the housing market.
The 28-year-old couple with four children just bought their first home.

"We got it pretty cheap. Right now is the best time to buy," said Guadalupe Sanchez, a carpenter.

Sanchez toured 20 homes, bid on four, and landed a deal with a three-bedroom, two-bath house on Sherman Avenue in the southwest for $160,000.

"I told my wife, we're just throwing our money away by renting. Let's try to get a house," he said.

Low home prices and low interest rates -- coupled with inventory agents say that they're quickly moving -- are positive news for Bakersfield's real estate market.

For example, Ken Carter, president of Watson Touchstone ERA, said his agents sold 241 homes in December, a 56 percent increase from the 154 transactions in December 2007.
About half of the 241 sales were foreclosures, Carter said.

Bakersfield has "a big pile of properties that we have to work through, those properties that are in some state of default," Carter said, adding the market "can't be in great health until we work through those. The good news is we're working through those at a record pace."

Homes are moving every day, and buyers have choices. Friday morning, for example, 3,636 properties in Kern County -- single-family homes, condos, mobile and manufactured -- were marketed on the Multiple Listing Service, according to the Bakersfield Association of Realtors. Of those 3,636, there were 1,402 bank-owned properties and 1,126 were short sales, in which a lender accepts offers that are less than what a home is worth.

Real estate investor Mike Pope took a hiatus from buying in 2006 but returned to it last June. He looks for homes with solid structures in neighborhoods that could benefit from revitalization.
In June, he paid about $110,000 for a home on Teresa Court, near Pacheco Road and Hughes Lane, that last sold for $235,000 in 2005.

"It had graffiti inside and outside you would not believe," Pope, 55, said of the bank-owned house that needed new doors and windows.

Here's what Pope did: He spent $23,000 on materials for improvements and did most of the work himself. He has a tenant who wants to buy the house for about $180,000.
"My biggest reward on the one on Teresa (Court) is getting to know the neighbors. They would keep an eye on the house; I would have them over to see the progress," said Pope, who is on medical disability from a teaching job.

Those ready to buy may even be outbid on good buys as home prices approach pre-boom levels.
"What we have found in the association is that many of our membership are saying they're having a competitive bidding scenario again on some of these homes that are coming into the inventory ... that are REOs," said Nance Fillmore of Fillmore Realty and Financial Services. She's the president of the local Realtors Association.

Real estate experiences peak-trough cycles that take about eight years to 10 years to complete, said Mark Carrington, director of sales and support for First American CoreLogic, a Santa Ana-based real estate data firm.

It typically takes three years to four years for home values to decline, and six to seven for them to increase.

Home values peaked in July 2006, and "'07, '08 and '09 is the drop," Carrington said.
"So far right now, we're acting just like any other cycle has happened. It's a deeper, steeper drop than we've experienced in a long time, (but) the timeframe is pretty average so far."
Prices are down now, a benefit for buyers.

"That is of course an effect of the foreclosed properties that are pervasive in our market," Fillmore said. "If the homeowners can ride out this period of time, it will go back to a normal appreciation that we've experienced for many, many years in the past."

Certainly, some homeowners were in over their heads, or got there after a job loss or illness.
"A person loses his or her home because some type of trigger happens that is overwhelming," Carrington said.

Fillmore urges those who have trouble making payments to consult their lenders and take advantage of programs such as the federal government's Hope for Homeowners.
Last year, Warren Ash, broker at Bakersfield Realty Group, handled about 330 bank-owned properties.

"I've been told by more than one company to expect my inventory from that company to double or even triple in 2009," he said.

The industry is also watching the impact of option adjustable-rate mortgages, popular from 2003-06, which allowed borrowers to make minimum payments, paying less than both the principal and the interest that was owed. Homeowners could choose to make small, medium or large payments.

It seemed like a great idea when home values kept increasing.
"That five-year period for most of those loans is going to peak in 2010," Carrington said, adding modifications and refinancing may be available to help some folks keep their homes.
To see more of The Bakersfield Californian, or to subscribe to the newspaper, go to

10 worst real-estate markets for 2009

10 worst real-estate markets for 2009

9. Bakersfield, Calif.

2008 median house price: $227,2702009
projected change: -20.9%2010
projected change: -2.5%

This city north of Los Angeles had the ninth highest foreclosure rate in November, as one of the country's largest real estate bubbles continues to burst. Including Bakersfield, six of the ten worst foreclosure markets were in California.

Media Source:

Monday, October 27, 2008

Bakersfield No. 4 In 3rd Quarter Foreclosures

Bakersfield No. 4 In 3rd Quarter Foreclosures
Calif. Had 27 Percent Of Nation's Foreclosures

A new report says Bakersfield was No. 4 in the nation in foreclosure activity in the third quarter of this year.

U.S. Foreclosures Double as House Prices Decline

July 25 (Bloomberg) -- U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

One in every 171 households was foreclosed on, received a default notice or was warned of a pending auction. That was an increase of 121 percent from a year earlier and 14 percent from the first quarter, RealtyTrac Inc. said today in a statement. Almost 740,000 properties were in some stage of foreclosure, the most since the Irvine, California-based data company began reporting in January 2005.

``Rising foreclosures are putting downward pressure on prices, increasing the possibility that homeowners will go upside- down on their mortgages,'' said Sheryl King, U.S. economist at Merrill Lynch & Co. in New York. ``That will cause more losses in mortgage portfolios and less willingness from investors to securitize mortgages and therefore fewer mortgages.''
About 25 million U.S. homeowners risk owing more than the value of their homes, according to Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. That would make it impossible for them to negotiate better loan terms or sell their property without contributing cash to the transaction.

New Home Sales
The Commerce Department today reported that new home sales fell less than expected, and a Standard and Poor's measure of homebuilder stocks rose as much as 6.1 percent.
Sales of new homes fell 0.6 percent to a 530,000 pace from 533,000 in May, a reading higher than previously estimated, the Commerce Department said in Washington. The number of properties on the market dropped by the most in four decades, today's report showed, indicating builders are making some headway in clearing out inventories.
Economists had forecast sales would decline to a 503,000 pace, from a previously reported 512,000 for May, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from 480,000 to 530,000. The Standard and Poor's Supercomposite Homebuilding Index rose 4.2 percent at 11:14 am, lowering its loss for the past 12 months to 42 percent. Pulte Homes Inc., a builder based in Bloomfield Hills, Michigan, was the biggest gainer, climbing 80 cents, or 7.3 percent, to $11.83 at 11:16 a.m. in New York Stock Exchange composite trading. The shares have lost 43 percent of their value in the past 12 months.
Doubling Projections

Falling home values, led by states such as Nevada and California that have the biggest default rate, have prompted RealtyTrac to almost double the projected number of foreclosures this year to about 2.5 million, said Rick Sharga, executive vice president for marketing.

``The big variable here is what effect the housing bill now being considered by the Senate is going to have on foreclosure activity in general,'' Sharga said in an interview. ``Based on market conditions themselves, we are nowhere near the end of this trip. Best-case scenario, we're looking at another year of this.''

The housing bill aims to help 400,000 Americans with subprime home loans refinance into 30-year, fixed-rate mortgages backed by the government. The measure passed the House of Representatives and President George W. Bush has said he would sign it.

Subprime mortgages were available to borrowers with bad or incomplete credit histories and default at five times the rate of prime mortgages, according to the Mortgage Bankers Association in Washington.

Bank Seizures Rise
Bank seizures in the first half of the year increased by 154 percent to 370,179 from the same period in 2007, RealtyTrac said. Last year's second-quarter data on bank repossessions was not available, according to RealtyTrac.

Forty-eight of 50 states and 95 of the 100 largest U.S. metropolitan areas had year-over-year increases in foreclosure filings in the second quarter, RealtyTrac said.
Nevada was the state with the highest rate. One in every 43 households received a foreclosure notice in the quarter, four times the national average and an increase of 147 percent from a year earlier, according to RealtyTrac.

Foreclosure filings tripled in California, where one in every 65 households was affected, the second-highest rate among states. Arizona had the third-highest rate, with one every 70 households, a more than threefold increase from the second quarter of 2007, RealtyTrac said.
Florida, Colorado, Ohio, Michigan, Georgia, Massachusetts and Illinois rounded out RealtyTrac's top 10.

Fewer Mortgages Available
Lenders will cut in half the number of mortgages to purchase homes in 2008 compared with two years ago, said Guy Cecala, publisher of the Bethesda, Maryland-based trade publication Inside Mortgage Finance.

Bank repossessions, or REOs -- meaning ``real estate-owned'' -- accounted for 30 percent of total foreclosure activity in the second quarter, up from 24 percent of the total in the first quarter, RealtyTrac said.

Foreclosures push all home values down by an estimated 6 percent, and will contribute to national prices declining another 15 percent by the end of 2009, Ethan Harris and Michelle Meyer, Lehman Brothers Holdings Inc. economists in New York, said in a report yesterday.

``I believe a big part of the problem we're facing in the market right now is uncertainty,'' Sharga said. ``Buyers aren't sure if this is the right time to get in, lenders aren't sure where to lend, investors aren't sure where to put their money in an environment of depreciating assets. The psychology of the market is as responsible as the financial part of the market.''
Seven of the 11 metropolitan areas with the highest rates of foreclosure filings in the second quarter were in California, according to RealtyTrac. The Stockton area, in California's Central Valley, had the highest incidence, with one in 25 households receiving filings.
In Riverside-San Bernardino, known as the Inland Empire, where the California Association of Realtors said home prices plummeted 35 percent in May compared with a year earlier, one in 32 households entered foreclosure, according to RealtyTrac.
Bakersfield, Sacramento, Oakland, Fresno and San Diego were the other California metro areas in the top 11.

The Las Vegas area, where home values fell 27 percent in May compared with a year earlier, according to the S&P/Case-Shiller Home Price Index, had the third-highest foreclosure rate, with one in every 35 households, RealtyTrac said.
Fort Lauderdale, Florida, Phoenix and Miami were the other metropolitan areas in RealtyTrac's top 11.

New York filings increased 62 percent from a year earlier to 16,025, with one in every 493 households in a stage of foreclosure, the 30th-highest rate.
New Jersey filings rose 140 percent. One in every 201 households in the state received notice, the 12th-highest rate in the U.S.


Sunday, April 6, 2008


News from Attorney General Andrew M. Cuomo
Department of Law Department of Law120 Broadway The State Capitol
New York, NY 10271 Albany, NY 12224
FOR IMMEDIATE RELEASENew York City Press Office / 212-416-8060Albany Press Office /

NEW YORK ATTORNEY GENERAL CUOMO ANNOUNCES AGREEMENT WITH FANNIE MAE,FREDDIE MAC, AND OFHEO~Nation’s Two Largest Purchasers of Home Loans Agree to Only BuyMortgages From Banks That Meet Requirements of New Home Value ProtectionCode~Independent Institute Established with $24 Million from Fannie Mae andFreddie Mac to Implement and Monitor Code~Senator Schumer Praises Agreement
NEW YORK, NY (March 3, 2008) – Attorney General Andrew M. Cuomo todayannounced that the nation’s two largest purchasers of home loans,Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), have entered intocooperation agreements requiring them to only buy loans from banks thatmeet new standards designed to ensure independent and reliableappraisals.
The agreements, among the New York Attorney General, Fannie Mae,Freddie Mac and their federal regulator, the Office of Federal HousingEnterprise Oversight (OFHEO), also create an independent organization toimplement and monitor the new appraisal standards. Senator CharlesSchumer, Chair of the Senate Banking Committee’s Housing Subcommittee,praised the agreement and the reforms which he has supported.

“With this agreement, Fannie Mae and Freddie Mac have become leadersin transforming the mortgage industry,” said Cuomo. “Now nationalbanks have a clear choice: immediately adopt the new code and clean upappraisal fraud in the mortgage industry or stop doing business withFannie Mae and Freddie Mac – it is that simple.”

Fannie Mae and Freddie Mac, which purchase roughly 60 percent of allhome loans originated in the United States, have agreed to thefollowing:

● Establishment of the “New Home Valuation Protection Code,”(the “Code”), which creates requirements governing appraisalselection, solicitation, compensation, conflicts of interest andcorporate independence, among other reforms. (Full Code Attached). Underthe new Code:
o Mortgage Brokers will be prohibited from selecting appraisers;
o Lenders will be prohibited from using “in-house” staffappraisers to conduct initial appraisals and
o Lenders will be prohibited from using appraisal managementcompanies that they own or control.
● Banks will be required to adhere to Code. Beginning January 1,2009, Fannie Mae and Freddie Mac will require that lenders represent andwarrant that appraisals related to mortgage loans originated on or afterJanuary 1, 2009 conform to the code or they will not be purchased.
● Formation of the “Independent Valuation ProtectionInstitute,” (the “Institute”), a new organization which willimplement and monitor the Code. The Institute, which will be funded with$24 million from Fannie Mae and Freddie Mac, will also:
o Establish a complaint hotline for consumers nationwide to callif they believe the appraisal process has been tainted or if they havebeen harmed by appraisal fraud.
o Serve as a contact for appraisers themselves if they believetheir independence has been compromised. These complaints will behandled confidentially to protect appraisers from retaliation. TheInstitute will mediate complaints, or can forward them to theappropriate federal or state law enforcement agency or regulator.
o Report publicly on its activities to the New York AttorneyGeneral and OFHEA on a bi-annual basis.
o Appoint a Board of Directors which must be approved by both theNew York Attorney General and OFHEO.

“Today’s agreement with Fannie Mae and Freddie Mac begins to setright what had gone so horribly wrong in the mortgage industry –rampant appraisal fraud,” said Cuomo. “The integrity of our mortgagesystem depends on independent appraisals. Again and again ourindustry-wide investigation found that banks were putting pressure onappraisers to drive up the value of loans just to make a quick buck. Webelieve the new standards, and the new independent monitor agreed totoday, can begin to erase this problem from the industry. I want toparticularly thank Senator Schumer for all of his help in readying thisimportant agreement today.”
Senator Schumer worked with OFHEO to gain regulatory approval of theagreement. In January, Schumer wrote a letter to OFHEO Director JamesLockhart seeking the agency's cooperation with Cuomo's negotiations withthe GSEs. The final agreement reached today involves a major provisionof legislation introduced last May by Schumer that would imposefirst-of-its-kind regulations on mortgage brokers.

"This settlement represents one of the first major blows against thetypes of predatory lending that were so prevalent in the mortgagebusiness of the last few years. Appraisal fraud has left millions ofAmericans unable to afford their homes and has created a drag on theAmerican economy. This agreement will reduce the conflicts of interestand economic incentives that made appraisal abuse and fraud so easy andattractive to lenders," Senator Schumer said.
"Accurate, independent appraisals are very important to ensuring thesafety and soundness of Fannie Mae and Freddie Mac and the mortgagemarket," said OFHEO Director James Lockhart. “OFHEO is committed toworking closely with fellow regulators, the Attorney General, FannieMae, Freddie Mac, appraisers, lenders and other market participants toassure that the roll-out of the new code builds upon best practices,recognizes constructive comments to identify further refinements, andavoids unintended consequences."

“We are pleased to work with regulators to do our part to ensuresound, accurate, independent and reliable appraisals,” Fannie MaeGeneral Counsel Beth Wilkinson said. “As the nation’s leadingpurchaser of mortgage loans in the secondary market, Fannie Mae sharesthe interests of consumers in the integrity of the home valuationprocess, which is an important part of a well functioning market.”

"Accurate appraisals are fundamental to Freddie Mac's effective creditrisk management - as evidenced by our leadership in quality controlprograms and assistance with criminal prosecutions of mortgage fraud.The Code of Conduct announced today enhances the independence andaccuracy of the appraisal process. And it builds on our company'slong-standing efforts to fight mortgage fraud by providing strong newprotections for homebuyers, mortgage investors and the housing market.In addition, we look forward to working with the New York AttorneyGeneral, OFHEO, Fannie Mae and other mortgage market participants inlaunching the Independent Valuation Protection Institute. By fundingthe Institute, we are advancing the development and adoption of bestpractices in the appraisal process, " said Freddie Mac Executive VicePresident andGeneral Counsel Robert Bostrom.

For more than a year, the Attorney General’s office has conducted anindustry-wide investigation into mortgage fraud. On November 7, 2007,Cuomo announced he had issued Martin Act subpoenas to Fannie Mae andFreddie Mac seeking information on the mortgage loans the companiespurchased from banks, including Washington Mutual, the nation’slargest savings and loan. The subpoenas also sought information on thedue diligence practices of Fannie Mae and Freddie Mac, and theirvaluations of appraisals.

The subpoenas came on the heels of the filing of a lawsuit by theAttorney General against First American and its subsidiary eAppraiseIt.The lawsuit, announced on November 1, 2007, detailed a scheme innumerous e-mails showing First American and eAppraiseIT caved topressure from Washington Mutual to use appraisers who provided inflatedappraisals on homes. E-mails also show that executives at First Americanand eAppraiseIT knew their behavior was illegal, but intentionally brokethe law to secure future business with Washington Mutual. Between April2006 and October 2007, eAppraiseIT provided over 250,000 appraisals forWashington Mutual. The lawsuit is still pending, and the industry-wideinvestigation into mortgage fraud continues.

New California Appraisal Law is Good First Step to Protect Appraisers and Homeowners

RISMEDIA, Oct. 11, 2007-Last Friday, California Gov. Arnold Schwarzenegger signed into law, SB 223. This bill is an attempt to reform the system that puts pressure on appraisers to hit a predetermined value for a property, set by the mortgage brokers or homeowners to make a sale go through.

The American Society of Appraisers (ASA) believes that lender pressure is an ongoing problem for appraisers and is committed to supporting legislation to reform fraudulent practices in the mortgage lending industry.

The new law makes it a crime in California for any interested party in a real estate deal to pressure an appraiser to appraise a property for a predetermined amount.

“The new law in California is a good first step.” said Abel Morales, an Accredited Senior Appraiser of the American Society of Appraisers. “It recognizes that appraisers are often pressured from a variety interested parties in a real estate deal and they need to have some form of protection from that.” Morales continues “The system is so flawed that many appraisers risk being blacklisted, not paid for their work, or not being hired again if their appraisals are lower than the desired number.”

The reason it so important to have an unbiased appraisal is because the appraiser is the only objective third party involved in a real estate transaction. The appraiser can perform an important role in protecting the home buyer and financial institution by giving an accurate appraisal of a property’s value without pressure from the parties involved.

“Home buyers need to protect themselves by checking the credentials of everyone involved in the transaction and requesting that their assigned appraiser be state licensed and accredited by a national professional organization,” said Michael H. Evans, a Fellow of the American Society of Appraisers who practices in Chico, Calif. “Appraisers with advanced accreditations have more to lose if they succumb to pressure than appraisers who are new to the field or who only maintain the minimum certification required by law. They also have more experience dealing with this type of pressure and are not as affected by it.”

ASA reminds consumers to hire a qualified and professionally accredited appraiser. For information about real estate appraisals, or to find an accredited appraiser near you, log on to or call 1-800-ASA-VALU.