"As
previously announced, Bank of America Home Loans plans to exit the
correspondent mortgage lending channel and focus entirely on retail
distribution for its mortgage products and services. After a comprehensive review of market opportunities, Bank of America
will close its Correspondent Lending channel by the end of 2011, following
an orderly transition with Clients. Effective immediately, no new Negotiated
Trade pool or flow trades will be offered. Best Efforts and Mandatory locks
will be accepted through close of business Monday, October 31. (All locks
during this time frame must be 45 days or less in duration. Existing extension,
relock, renegotiation, and trade extension/rolls policies will apply, but
commitments will not be allowed to extend beyond December 15.) AOT's and Direct
trades will be offered through close of business Monday, October 31. Impacted
Clients will receive a separate communication shortly with key dates. Loans
must be purchased by Correspondent Lending on or before December 15. Existing
locks extending beyond December 15 as of October 3 will be honored. Bank of
America will work closely with Correspondent Lending Clients to ensure an
orderly transition for customers with mortgage loans in the pipeline. All loans
currently in the pipeline will receive full support and continue through the
process. Bank of America Warehouse Lending is operating business as usual while
Bank of America evaluates opportunities for that line of business."
Straight from the horse's mouth, 'nuff said.
In talking & writing with loan agents, I continue to appraisal issues. Some comments are constructive, others not. For
example, here is someone trying to help solve the confusion on the coding used
in appraisals: "I am surprised by the number of appraisers who don't
understand (or maybe it's the software companies) the true meaning of some of the terms. Since the beginning of
September the number of appraisers who have taken what FNMA means differently
is amazing. Probably 3 out of 4 appraisals have the C - Contract date and
S - Settlement dates incorrect. Most appraisers take the C to mean Closed
Date and the S to mean listing status, thereby having the dates reversed as
FNMA specifically states C is CONTRACT DATE and S is SETTLEMENT Date. I
have actually had to send them the pages directly from FNMA guidelines to get
them to change the dates - just thought I would mention this coming from an
operations/underwriting point of view. Here's the reference, and a quick
look at pages 22-24 might help.
Others use math to illustrate examples of AMC
economics. "We have someone in our office that is an appraiser, so we
have a little better insight into how some of the AMC's work. Today he
received an order for a field review. What the order shows in nothing
short of ridiculous. The fee breakdown is as follows: Customer fee $460,
Vendor fee $125, AMC Mgmt fee $335. So 73% of the fee charged to customer is
being paid to the AMC for ordering the appraisal?! My question to you is to
find if there is any government agency to report this to? Is there even
any agency that cares?"
Mark Eastman from SouthEastern
Evaluation wrote to me. "Over the past several years Real Estate
Appraisers have been dealing with increased demands in the appraisal
report. This is called in the profession as "scope creep". Back in
the good old days when the appraiser received an appraisal request it seemed a
lot easier than it is now. The appraiser would do the research, put three
or four comps in the report and send it to the client and very rarely would
there ever be any questions. Now
days, with "scope creep," the appraiser's engagement letter reads like an
instruction manual for a new gas grill. Fannie Mae and Freddie Mac
have made substantial additions to the appraisal guidelines. In 2009-2010
the Fannie Mae introduced of the Market Condition Report (1004MC). This
report requires the appraiser to give marketing trends in increments:
7-12 months, 4-6 months and current - 3 months, Number of sales, absorption
rates, active listings and months of housing supply. Also the median
sales price, days on market, listing prices and the medium sales price as a
percent of average list price. All of this information in the time
increments listed above."
Mark continues, "Appraisers were told that no additional fees were
warranted as they were already researching this information. This is just
one of Fannie Mae and Freddie Mac new guidelines. This new requirement is
only part of the increased scope of work. Lenders typically have overlay appraisal requirements. These may
include: two comparable sales in the past 90 days, aerial photo of subject
property, if subject property appraises for more than one million it requires 4
comparables and two listings, urban properties report distances in blocks,
suburban in miles, zoning-make the determination if property destroyed more
than 50% can it be rebuilt, cost to cure on listed repairs, and a turnaround
time 4 days from when it was assigned.
"These are just a sample of the requirements from lenders and appraisal
management companies. Appraisers were very happy when they read the
section of Dodd Frank that addressed appraisal fees. Appraisers were to
be paid a fee that is "reasonable and customary". The verbiage in
the Dodd-Frank bill was very specific as to how to determine "reasonable and
customary appraisal fees". Reasonable and customary was to be
determined WITHOUT including fees paid by appraisal management companies.
Simply stated only fees paid directly to appraisers by banks, mortgage
companies, and other entities could determine what is "reasonable and customary." Appraisers
however were in for a surprise when the Interim Final Rules were
published. Suddenly the small paragraph about R/C was 18 pages of
verbiage with 2 presumptions of compliance. Presumption one allowed for
business as usual and that was the option that most AMC's used. For the
appraisers it was a disappointing revelation of how our government works with
lobbyists.
"No one in the appraisal profession wants to set fees, however between 60
-70% of all residential mortgages and appraisals flow through 5 or 6
companies. This represents an oligopoly. They set the appraisal fee
market. It is not reasonable to think an appraiser can effectively
negotiate with one of these multi-billion dollar banks. In my humble
opinion the best way is more transparency. AMC's owned by banks have
become profit centers for the bank. More immediate profits are derived by
paying the appraisers less money. Again, this is short sighted from the
banks perspective. The old adage you get what you pay for is true.
If an appraiser is paid a reasonable market fee it is reasonable to believe the
report will be a higher quality report.
"One of the quickest and best ways to fix this problem is
transparency. The AMC's scope of work and their fee should be negotiated
separately with the lender. This way there is no incentive to pay the
appraiser less money. The appraiser's fee should be determined as
detailed in the Dodd-Frank bill. Surveys commissioned by Universities,
trade organizations and/or government entities are good way to determine what
is "reasonable and customary".
The URAR was last updated in 2005. There are several new valuation
products on the market. These products can analyze years of sales data in
seconds. An appraiser skilled in regression analysis can produce a
statistically accurate property valuation with local market knowledge.
Fannie Mae and Freddie Mac are the drivers of the residential real estate
appraisal reports and acceptable methods. When they embrace this new
technology our profession will once again be a trusted part of mortgage
lending. There is no shortage of opinions on how to fix our
profession. There is no aspect of the mortgage business that is
easy. The Dodd-Frank bill is 2,300 pages of new regulations that touched
every aspect of the financial sector. We all have to deal with a
difficult changing environment." If you'd like to reach Mark, write him at
mchapman@see-amc.com.
Of course classes dealing with appraisals abound. For example, one is offered
by Streetlinks Lender Solutions. "Lenders today are faced with various
options for managing their appraisal process. Picking the right process that
will appeal to a marketplace's demand for speed, laser accuracy and competitive
costs can be daunting...in this webinar you will learn Process Styles: AMC vs.
Self-Managed appraisal solutions, Key Considerations: Understanding and
evaluating your own needs, What to Look for in a Provider: Key questions for
potential appraisal management partners" You can go to: https://www1.gotomeeting.com/register/540313873.
Lenders & investors are trying new things. For example, "To better
facilitate your appraisal request needs, Stearns
Wholesale has just added an alternative AMC. This now provides you
with an additional selection from the one that is accessible from the Stearns Wholesale
website." And last Thursday "Mountain
West Financial has partnered with AXIS Appraisal Management Solutions as an
additional appraisal resource option for your FHA and Conventional transactions."
Yesterday, despite the ISM Factory Index unexpectedly climbing, stocks dropped and bonds rallied. For those in the mortgage biz, the Fed's buying program commenced yesterday, which may have helped 10-yr T-notes rally more than a point and close near 1.79% although current coupon MBS prices ended the day "only" better by .375-.50. But what helped our rates more were the increased odds of a Greek default.
For fun today we have Chairman Bernanke's testimony on the "Economic Outlook and Recent Monetary Policy Actions" before the Joint Economic Committee beginning at 10AM EST, with the only economic release being Factory Orders. In the early going stocks are pointing lower (how are old folks supposed to retire when their stocks keep going down?) and rates are lower: the 10-yr is at 1.80% and MBS prices are worse.
Tom, an eighty-year-old rancher, was in town for his quarterly supply visit. He
had lost his wife and rumor had it that he was marrying a "mail order" bride.
Being a good friend, the banker asked Tom if the rumor was true. Tom said "yes"
and with a wink said, "And she'll be twenty-one before years out."
The banker knew the "appetite" of a young woman could not be satisfied by an
eighty-year-old.
The banker tactfully suggested that Tom should consider getting a hired hand to
help him out on the ranch (knowing nature would take its own course).
Tom thought this was a good idea, "I sure needed some help."
Four months later, Tom was in town again.
"How's the new wife?" asked the banker.
Tom proudly said, "Good - she's pregnant."
The banker, continued, "And the hired hand?"
Without hesitating, Tom said, "She's pregnant too."
NEVER underestimate old guys.