Appraisal Trends & updates; Primer on Stock Market Moves vs. Bonds
The stock market is not the economy. That’s a simple financial truth, but it is hard to keep in mind during rallies or sell-offs. Especially when mainstream press seems to forget it. More on stock & bond prices several paragraphs down.
Change is afoot in the
appraisal business as the industry strives to alter the process for becoming an
appraiser, as there are 50 states with a myriad number of rules and
restrictions. Stay tuned on that, but in the meantime, let's see what various lenders and investors have
been doing regarding appraisal & collateral changes and assessing storm
The NAR's quarterly
survey of mortgage lenders came out and problems with
appraisers (or lack thereof) dominate the headaches. Over half of all
respondents reported issues in this area, with 11% characterizing them as
significant. One problem is the lack of new entrants, however 28% of lenders
won't accept an appraisal done by a trainee, and 44% require direct supervision
of all aspects performed by a trainee. Non-QM lending fell slightly during the
quarter, however investor demand for the product is rising. Rising rates are
expected to have some effect on purchase demand, however there is such tight
supply that it shouldn't affect volumes overall.
Some believe that the appraiser
shortage is clogging up the system,
at least until volumes sank. There were 2000 fewer appraisers in 2016 versus
2015, and the average age is 53. Many are looking to retire, and the pipeline
of new appraisers is shrinking. Regulatory challenges have largely caused the
problem, and the industry is looking for ways to attract new blood into the industry,
via waiving the degree requirement and shortening the number of apprentice
hours required. The ones that remain however have so much work that they don't
have the time to train anyone.
The newest update to the Fannie
Mae Selling Guide includes appraisal
policies related to property inspection by an appraiser trainee, appraisal
adjustments for sales concessions, and comps in new projects or subdivisions.
It also provides updated guidelines for confidentiality of information and data
breach, changes to seller/servicer financial eligibility requirements and
removes duplicative content in the Selling
Guide and Servicing Guide.
Fannie Mae Limited Reviews are
now permitted for condominiums under the Wells Fargo High Balance Conforming Loan Program
for Prior Approval Loans. In addition, Wells Fargo Funding Solar Panel System
Approval Request (Exhibit 9) has been updated to no longer require the two most
recent solar billing statements if the agreement is a Power Purchase Agreement.
The SunWest Mortgage disaster area policy is as follows:
For loans submitted with an appraisal dated on or before the incident period
end date or for those submitted without an appraisal, Sun West will require an
interior and exterior inspection prior-to-funding or purchase of any loans with
subject properties that are determined to be at risk. The inspection must
verify that the property is sound, habitable and in the same condition as when
it was appraised.
NewLeaf issued the following information
regarding active loans in the pipeline: Because of Severe Storms, Tornadoes,
and Straight-Line Winds occurring in Georgia from January 21, 2017 (incident start date) through January 22, 2017(incident end
date), the President issued a federal disaster declaration on January 26, 2017
for the following counties: Berrien, Cook, Crisp, Dougherty, Turner and Wilcox. All
subject properties in the areas impacted by the disaster require
evidence that the subject sustained no damage from the identified
disaster. If the subject property is located in an impacted area, with a
completed appraisal dated prior
to the incident start date, a 1004D re-inspection completed by the
Appraiser must certify that the property is free from the applicable natural
Per FAMC's Correspondent Lending Bulletin,
effective immediately, a buyer will be allowed to assume the seller's flood
insurance policy and retain the same rates provided the loan is not a
construction loan and the policy states it is transferrable. Please review the
updates to the Flood Disaster Protection Act chapter of the manual for specific
requirements. Also, FAMC has updated its
guidelines to align with FHA's current 4000.1 policy, as announced in FHA
INFO#16-64. The total amount of required repairs must not exceed $10,000 for
HUD REO properties insurable with a repair escrow.
In response to the severe
storms, tornadoes and Straight-line winds and in response to a Federal Disaster
enforce the Disaster Re-Inspection Policy for all Georgia properties located in
the counties of Berrien, Cook, Crisp, Dougherty, Turner, Wilcox. The same is
true for Mississippi Counties of Forrest, Lamar, Lauderdale, Perry.
Because of severe storms,
tornadoes and straight-line winds in Georgia (Georgia Severe Storms, Tornadoes,
and Straight-line Winds (DR-4294 and DR-4297), FEMA declared a major disaster
area. Loans scheduled to close in these areas may need to be delayed until
confirmation of the property's condition can be obtained. Plaza will reassess the collateral for these
loans and prepare them for closing as soon as possible.
Quicken Loans released its
monthly Home Price Perception Index (HPPI) and Home Value Index (HVI). The gap
between homeowner estimates and appraiser opinions widened for the first time
in six months. On average, appraised values were 1.33 percent less than what
homeowners estimated in December, per the National HPPI. The gap between the
appraisal and homeowner estimates widened slightly since the previous month
when appraiser opinions were 1.00 percent lower than homeowner expectations.
This widening of opinions between homeowner and appraiser is a reversal of the
narrowing trend that dominated the second half of 2016 as homeowner and
appraiser opinions had been moving steadily closer.
The average appraisal values
fell 1.19 percent from November to December, per the National HVI, but
increased 3.85 percent compared to the previous December. This growth, however,
is a slower pace than the 5.28 percent annual increase in November. Appraised
values showed strongest annual growth in the West, while the Midwest had the
between the opinions of buyers / sellers and appraisers isn't new. According to
Quicken loans, appraised values came in about 1.3% lower than owner
expectations in November. Interestingly, appraised values fell in November,
while house prices (at least per the home price indices) have been rising. That
said, appraisal values did increase almost 4% YOY, however that is much lower
than the 6% or so home price appreciation we have been seeing in the other
indices. That said, since appraisals use historical comparisons, some lag
is to be expected.
The stock and bond markets
do not have to move in opposite directions. Heck, just look at how both bond
and stock prices both improved throughout the 80's, 90's, and into this
century. Both incorporate future expectations. Typically, stock market moves
indicate investor's genuine hopes or anxieties about the future - or day
trader's hopes or anxieties about the future. But those hopes or anxieties have
surprisingly little to do with the current state of the American economy.
Often problems in China are
blamed when our stock market heads south. But exports to China are less than 1%
of our gross domestic product. So Chinese problems may squeeze a few companies
like Apple, Yum! Brands (Pizza Hut), and Iowa farmers, most American companies
would barely notice it. And the flow of goods we import from China is unlikely
to be affected by any Chinese downturn at all.
To say that the stock market
isn't the economy doesn't mean that stock market crisis can't become
contagious; they can dampen the "animal spirits" of managers and consumers,
leading them to cut back on investment and spending. Stock prices do have some
impact on consumer spending (the richer consumers feel, the more willing they
are to spend). Still, market moves need to severe and long-lasting to make a real
difference. The 1987 crash, for example, saw stocks drop more than twenty-two
percent in a single day. Yet it had no measurable impact on corporate
investment, and only a short-lived effect on consumer spending.
Turning to the bond market and
interest rates, plenty of NY bond traders stayed home Thursday due to the storm
and we began with treasury yields modestly higher vs. Wednesday's close as risk
assets (e.g., stocks) were poised for a positive open. Not much changed
throughout the day and the new 10-year note closed 1/2 point in price lower to
yield 2.40% while 5-year T-notes and agency MBS price declined about .250 in
This morning we've had
January's import prices: +.4%, a bit less than the prior month, and up 3.7%
over the year. Coming up is the University of Michigan Sentiment figures.
Hopefully it will be a quiet trading day, and we start it with the 10-year yielding 2.42% and
agency MBS prices worse about .125.
Jobs and Announcements
In servicing job news, Northpointe Bank is looking for a qualified individual to join its management team within the Mortgage Loan Servicing department. Primarily focused on mortgage lending, Northpointe, recognized as one of the top performing banks in the country, is a Fannie Mae, Freddie Mac and Ginnie Mae approved lender and the candidate must have extensive experience with the intricacies of servicing that each government agency has. If interested, please forward a resume to Sheri DuChemin, VP Human Resources, Northpointe Bank (616-974-8490).
An investment firm with $3 billion in assets under management is looking for acquisition opportunities in the residential retail origination channel. The firm has an experienced mortgage leadership team and is deploying significant long-term permanent capital in the mortgage space by building a portfolio of autonomously operated mortgage originators and complementary mortgage related businesses. The firm brings value-add activities to its portfolio companies through enhanced secondary execution, warehouse lending, operational/financial support and seeks to eliminate "de-motivating" factors for owners that occur in traditional M+A transactions, including lack of access to capital for growth, bureaucracy and change in culture. The ideal candidate companies are distributed retail originators producing more than $500 million per year in annual originations, have existing agency approvals, and be owned & operated by an individual looking for additional capital to expand their business. Retained servicing is a plus. Confidentiality is critical, and interested parties (principals only please) should send me a note for more information about the opportunity. (Please excuse delays in response due to travel.)
In personnel & hiring news, American Pacific Mortgage Corporation (APM), a top-15 independent mortgage bank, has promoted Michael Pankow to Executive Vice President of National Production. "Because of his standing in supporting our position in the market, I am confident that Michael will help drive this organization forward with the goals of making our branch managers and originators look good and helping create an extraordinary experience for our consumers," stated Bill Lowman, CEO of APM. "I am extremely honored for the opportunity to serve APM in this role. I am deeply committed to supporting our branch managers and loan officers with the culture and resources to provide a unique and great customer experience for our borrowers," Pankow said. Join a team that has been voted as one of the best places to work and earned the distinction as a leading mortgage company by producers year after year per Scotsman Guide & Mortgage Executive Magazine. Visit www.apmortgage.com/join today. NMLS #1850. Equal Housing Opportunity Lender.
And here's some good news! Banc of California, Inc. announced that the Special Committee of its Board of Directors has received the final report of the independent investigation into previously disclosed blogger allegations. The report concludes that there was no violation of law and that Jason Galanis had no indirect or direct control or undue influence over the Company. As you recall, in October an anonymous blog post raised questions about related party transactions and other issues with respect to the Company. In response to these allegations, the Board formed a Special Committee which commenced a process to identify and engage an independent law firm to review the allegations.
The Special Committee retained WilmerHale, a law firm with no prior relationship with the Banc of California, to conduct an independent investigation to address certain issues raised by the blog post, and items identified by the Special Committee, as well as other questions raised by an auditor. WilmerHale has made a final report to the Special Committee and KPMG and has confirmed its earlier conclusion that the inquiry has not found any violation of law.