Maybe I read somewhere that the average age of a loan officer is 76. Maybe not. (Actually, my visits with companies informally indicate that overall ages seem to be dropping as I see “new blood” entering the arena, often at lower comp plans with greater upside to compete with companies with very low basis points.) As Hurricane Michael approaches, I am reminded that there are plenty of older LOs, and people, in Florida (“God’s waiting room”) and other locales. There is actually a group that ranks active adult communities not only in Florida but around the U.S. based on location, residential types, amenities, price range, and lifestyle opportunities. (Who doesn’t want to live someplace that’s active? Ever seen a “sedate adult community” advertised?)
Appraisal and Valuation Trends
Investors are particularly interested in making sure they’re not lending $300,000 on a house worth $250,000 – we don’t need to go through that again. There is plenty of news directed at the appraisal industry, but what should lenders be aware of? The median price per square foot has risen in the nation’s leading new-home markets, but the drivers behind that growth vary. Here’s a good summary of what drives the price per square foot.
Here’s the new app (Upraze) that allows homeowners to appraise their home. As Jeremy Potter points out, “Mortgage and real estate professionals scoffed or mocked this app recently, but the digital/automation movement is on. How will your business respond to tech advancements like this?”
There are move Appraisal Management Companies (AMCs) than there are countries in the United Nations. The last time Joan Trice (Clearbox) was asked about it, she believed that there are 539 AMCs of which 485 have websites! The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 requires that states enact comprehensive AMC oversight and registration programs. More than forty states have enacted comprehensive state AMC laws with the belief that state AMC legislation promotes public trust and consumer protection and establishes oversight and enforcement. The states had until August 8th to enact an Appraisal Management Company (“AMCs”) registration & oversight regime. If a state fails to enact such a regime, AMCs are prohibited from providing services on Federally Regulated Transactions (i.e. non-conforming loans).
What is the appraisal industry’s take on this? Michael Simmons, Co-President of AXIS AMC, wrote a note to me saying, “Rob - Not unlike what takes place in the lending realm, late fall spawns some of the biggest and most important appraisal industry events of the year. In the last three weeks I’ve attended three: the Appraisal Summit, the Collateral Risk Network, and Valuation Expo. All were distinctive, but some consistent themes emerged.
“Foremost among the presenters at each venue were the GSEs. Over the past two years, Fannie and Freddie have adopted a higher level of visibility to match the dynamic changes rippling through our industry. Within the last month Fannie re-named the PIW (Property Inspection Waiver) for what it really is: an Appraisal Waiver. At Val Expo during a panel discussion, Fannie revealed that 11% of all loan submissions were eligible for an Appraisal Waiver but, interestingly, only 8% were accepted. A big reason was borrowers wanted to know what their property was worth – and an appraisal provided that while a waiver didn’t.
“Meanwhile, both GSEs have expanded the criteria for eligibility of Appraisal Waivers. Part of that is at the behest of lenders who want to compress time and be insured against a buyback due to any collateral issues, but I think there’s another reason. I think it’s about capture rate. When an Appraisal Waiver is issued (and accepted), there’s only one place that loan can go – to the GSE that granted it. The lender then loses an opportunity to sell that loan to a better priced investor since that waiver is neither transferrable nor acceptable as an appraisal.
“But there were other notable topics. One centered around the growing use and demand for Gap Products whose application are evolving from the stratification of risk in our markets. They include various iterations of Desktop Appraisals, other alternative valuation products, e-Valuations and AVM’s with enhanced inspections. Some of these products do not qualify as an appraisal nor require an appraiser. This becomes problematical at some point because the data and information – and the knowledge that appraisers provide – powers the very products that are replacing appraisals.
“But the real elephant in the room is bifurcation. It involves the outsourcing of the inspection piece to someone other than the appraiser. The concept has been around for a long time in the form of an appraisal trainee but fell into decline for both good and bad (and wrong) reasons. Now the term as the GSEs are defining it could include any third-party inspector, from appraisal trainees to real estate agents to property inspectors … to your neighbor’s kid once he (or she) has finished cutting the lawn. Even to a homeowner doing their own inspection!
“First, let me say that I believe much of this is inexorable. Our industry needs to better shape our responses – and products - to fit a digital world. What we don’t need to do is abandon the standards that underlie how collateral is gathered and developed. Here at AXIS we were instrumental in creating a program – The START Program - that established real standards for the inspection process. We designed it for trainees (and their Supervising Appraisers) to assist and encourage a new generation of appraisers to enter the profession. The added benefits will help appraisers improve their efficiency and delivery speed (and profitability) – and better match the needs and requirements of today’s lending models without sacrificing quality.
“Change brings opportunity. Our challenge in the collateral space requires us to build solutions that match market needs. That includes using all the tools available while protecting our lending partners, our appraisers, their customers and our communities. We accept the challenge.”
Lots more appraisal news from lenders and investors tomorrow.
Offering a bid tape AOT loan sale execution has rapidly become a priority for leading correspondent investors, with AmeriHome and PennyMac joining Wells Fargo among those providing the programs. This execution combines the granularity of price available via bid tape with the cash benefits of assigning the trade, which have historically been mutually exclusive. MCT has announced automation of the tri-party agreements required for these newly launched executions and is proud to be developing technology and process improvements through its Bid Auction Manager (BAM) whole loan trading platform. For example, Penny Mac’s bid-tape AOT pilot program has been released to MCT clients. Learn about the benefits and challenges of bid tape AOT delivery in a complimentary industry webinar hosted by Phil Rasori, MCT’s COO and Head Trader, on Thursday, October 11, at 11AM Pacific.
With bond markets closed yesterday, rates took a respite from their meteoric rise last week. After toying around towards the 3% level for weeks, the U.S. 10-year closed the week at 3.23%. Well that may not be the best news for originators with a large percentage of refinance business, we did have some positive news on to close the week, including the unemployment Rate (3.7%) falling to its lowest level since 1969. Despite the U.S. market closure, international markets were open for business yesterday, and deepening U.S.-China tensions are causing investors to shift money around the globe. Investors sold a net $1.4 billion of domestic Chinese shares as the U.S. Treasury department weighs whether to label China a currency manipulator. Major headlines this week include the IMF and World Bank meetings from Bali and the start of earnings reports for U.S. banks.
The NFIB Small Business Optimism Index for September kicked off today’s calendar, down .9 to 107.9. We have also already had some Fed speak with Dallas Fed President Kaplan delivering remarks before Chicago’s Evans opines later this morning. Philadelphia’s Harker and NY’s Williams make appearances later in the day. Back to economic releases, the September Employment Trends Index is due out at 8AM MT.
Tomorrow brings the weekly MBA Mortgage Applications Index (prior 0.0%), September PPI figures, and August Wholesale Inventories before Thursday’s CPI and jobless claims readings. The week closes with September import/export prices and Preliminary October Michigan Consumer Sentiment Index. Tuesday begins with rates a shade higher versus Friday afternoon: the US 10-year is yielding 3.24% and 30-year agency MBS prices are down/worse a few ticks.
Lender Products and Services
The MBA is projecting $1.64 trillion in originations for 2019. IMBs continue to face challenges with tightening margins and have a renewed focus on managing liquidity. On October 15th during MBA’s Annual Convention, join in with a panel of experts including Tom Millon, CEO of Capital Markets Cooperative, who will provide practical advice on Managing and Modeling Your Liquidity Position. Topics will include balancing cash holdings vs warehouse lines, retain/release decisions, current MSR trends and more. This informative session will be extremely helpful as IMBs are formulating their 2019 plans.
Cultural Outreach has announced its speaking engagement and webinar topic list for 2019. The 100%-woman owned company provides marketing, online and on-site training and strategy to companies looking to reach young and diverse consumer markets. Cultural Outreach believes the more companies can build an authentic connection with consumers, the stronger profits will be in creating long-lasting and loyal relationships. Speaking engagements and webinars offer knowledge, strategies and tools diving beyond the surface of trendy buzzwords and identifying real solutions to implement and maintain. Common topics for Cultural Outreach trainings include millennial marketing, cross-cultural communication, reaching diverse markets and social media. Founder/CEO Kristin Messerli, has spoken at more than 100 conferences across the country and will be speaking at the upcoming mPower and mPact events at the national MBA conference in DC. To reserve your speaker or learn more about online training, contact Cultural Outreach at email@example.com or call direct to 918-324-6271.
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Moves and Promotions
“By the end of 2018” came fast as Fannie Mae announced that it has appointed Hugh Frater as Interim CEO. “Frater’s appointment will be effective on October 16, 2018, subject to final FHFA approval. He will succeed Tim Mayopoulos, who in July announced his intention to depart Fannie by the end of 2018 but will leave the company on October 15.” Congrats to Hugh!
American Financial Resources, Inc. (AFR) announced two key executive promotions. Laura Brandao has been promoted to President and Bill Packer is now COO of the NJ-based leading niche lender.