Home prices to fall on liquidity concerns

The collapse of Lehman Brothers Holdings Inc (LEH.N) and takeover of Merrill Lynch & Co Inc (MER.N) will cause liquidity in the credit market to shrink, resulting in lower home prices, prominent U.S. banking analyst Meredith Whitney said.

The Oppenheimer & Co analyst also expects fewer mortgages to be available for prospective homeowners, as she sees no hope for the return of the mortgage securitization business.

"All this creates a recipe for meaningfully lower U.S. house prices," Whitney said.

The magnitude of houseprice declines in the next few years could likely exceed expectations of both the markets and the companies, she wrote in a note issued late Monday.

"The fact that all banks under our coverage have unrealistic HPA (housing price appreciation) assumptions will in our opinion lead to a material and protracted writedown and capital pressure scenario for banks well into 2009," Whitney said.

The rest of the article is here.

Mortgage rates drop after Fannie, Freddie takeover

By ALAN ZIBEL, AP Business Writer

WASHINGTON - Mortgage rates fell sharply Monday, as investors reacted to the government's takeover of Fannie Mae and Freddie Mac...

...The government's takeover of Fannie Mae and Freddie Mac — mortgage titans that own or guarantee about half of all U.S. mortgages — will help borrowers who had been nervously waiting for the best time to get out of the adjustable-rate mortgages they took out during the housing boom.

But it will do little to stem the dramatic rise in foreclosures. And so far, the government's other programs to assist distressed borrowers in refinancing have had minimal impact. And that has consumer advocates calling on Fannie and Freddie to do more.

Full article here.

Mortgage Applications Increase In Latest MBA Survey

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending August 29, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 453.1, an increase of 7.5 percent on a seasonally adjusted basis from 421.6 one week earlier. On an unadjusted basis, the Index increased 5.8 percent compared with the previous week and was down 27.0 percent compared with the same week one year earlier.

The Refinance Index increased 2.1 percent to 1059.7 from the previous week and the seasonally adjusted Purchase Index increased 10.5 percent to 349.0 from one week earlier. The Conventional Purchase Index increased 6.1 percent while the Government Purchase Index (largely FHA) increased 19.9 percent.The four week moving average for the seasonally adjusted Market Index is up 1.2 percent. The four week moving average for the seasonally adjusted Purchase index is up 2.7 percent, while this average is down 1.5 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 34.0 percent of total applications from 35.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.6 from 7.9 percent of total applications from the previous week.The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.39 percent from 6.44 percent, with points decreasing to 1.0 from 1.03 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

For additional information, visit MBA's Web site: www.mortgagebankers.org

AppraisalPort - What is a copy of an appraisal report?

Appraisers in Virginia are concerned that reports they transmitted through AppraisalPort were not the reports that the lenders received. They filed a petition with their appraisal board.

"The goal of the petition is to establish once and for all that appraisers have the right to deliver to a client an entire and complete appraiser report and that no one has the right to alter or convert it before the client receives it. If I'm responsible for a report, I have the right to send it to a client unadulterated" Dodd said.

What about appraiser liability?

AppraisalPort is not an appraisal client. They are a web portal or conduit for sending appraisals.

The new FNC agreement says nothing about appraisers' liability for their appraisals. Included was a section on general business liability.

Appraiser's E&O coverage only covers appraiser liability. Your business insurance (if you have any) covers contracts, such as the one FNC requires that you sign and agree to.

The real issue - what is a "copy" of an appraisal report?

What lenders do with the appraisal report data they receive from FNC is the issue. They do not want, or receive, a copy of the original PDF report. It is a similar issue when lenders use Lighthouse, which also extracts the data and has been in use for many years.

Appraisers have no control over what lenders do with their appraisal data once they receive it, or their appraisal reports. What type of report do they send to consumers? Is it a report that is in a different format than the standard forms, which are not easy to read and understand.

To read more, go here.

Mortgage Applications Increase Slightly

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending August 22, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 421.6, an increase of 0.5 percent on a seasonally adjusted basis from 419.3 one week earlier. On an unadjusted basis, the Index decreased 0.9 percent compared with the previous week and was down 31.2 percent compared with the same week one year earlier.

The Refinance Index increased 0.3 percent to 1038.0 from the previous week and the seasonally adjusted Purchase Index increased 0.6 percent to 315.9 from one week earlier. The Conventional Purchase Index decreased 0.6 percent while the Government Purchase Index (largely FHA) increased 3.3 percent.

The four week moving average for the seasonally adjusted Market Index is up 0.05 percent. The four week moving average for the seasonally adjusted Purchase index is up 0.51 percent, while this average is down 0.85 percent for the Refinance Index.

The refinance share of mortgage activity increased to 35.2 percent of total applications from 34.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.9 percent from 8.0 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.44 percent from 6.47 percent, with points decreasing to 1.03 from 1.10 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.94 percent from 5.99 percent, with points decreasing to 1.13 from 1.18 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs increased to 7.15 percent from 7.07 percent, with points decreasing to 0.36 from 0.42 (including the origination fee) for 80 percent LTV loans.

**SPECIAL NOTES**

The survey covers approximately 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site: www.mortgagebankers.org .

FBI Investigates Creative Home Builder Incentives

Homebuilders have been using incentives to sell homes as a marketing tool for many years, which is legal when properly structured and disclosed. However, the Federal Bureau of Investigation is looking into allegations that some homebuilders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers.

Interviews with real estate agents, homebuyers and former homebuilder employees describe an environment where competitive pressures led to creative giveaways in a final attempt to prevent price cuts. For example, to attract new buyers Centex Corp.’s Las Vegas division paid off car loans, credit-card bills and mortgage payments on existing homes. To qualify, the homebuilder required the buyer to use the company's in-house mortgage unit to originate the loan. The loan application included an incentive addendum that listed the incentives, which wasn't always disclosed to the lender. Other developers offered payments for buyers to receive home improvements. In some cases, developers gave inflated commissions to real-estate agents who then gave that money back to the buyer to use as they wish as long as the buyer paid the price the developer wanted.

According to housing analysts, creative incentive schemes prolonged the housing boom in hot markets and, consequently, have made the downturn even more severe. Currently, there are no strict limits on incentives, but they may conflict with federal regulations if they cause the mortgage to increase by more than the cost of the incentive. While stronger due diligence by banks might have caught some of these problems, banks say they rely on professional appraisal companies to ensure accurate property pricing. Appraisers in turn say they are not always aware of incentives as they rely on disclosure by the builders and other parties. Furthermore, mortgage-fraud experts say that some appraisers may have cooperated with builders in order to get business.

Source: Appraisal Institute

Indy Mac Fails

“IndyMac Bank, F.S.B., Pasadena, CA, was closed today by the Office of Thrift Supervision. The Federal Deposit Insurance Corporation (FDIC) was named conservator.

“Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 and $8 billion. IndyMac Bank, F.S.B. is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on February 7, 2003.”

Source here.


“The federal government took control of Pasadena-based IndyMac Bank today, in what regulators called the second-largest bank failure in U.S. history.”The Office of Thrift Supervision in Washington, the chief regulator of IndyMac, said it transferred control of the $32-billion bank to the Federal Deposit Insurance Corp.
Branches will be closed over the weekend, but the FDIC will reopen the bank Monday as IndyMac Federal Bank, the OTS said.”

Source here.

USDA Defers to Scope of Work for Rural Areas

"The Housing and Community Facilities Programs has clarified that in remote rural areas where the sales comparison approach is not necessary to develop a credible opinion or conclusion regarding value, the lender's appraiser may decide to use the Scope of Work Rule of the Uniform Standards of Professional Appraisal Practice and perform an appraisal without completing the sales comparison approach to value.

The Administrative Notice addresses the needs of remote areas that contain scattered or small pockets of substandard housing and where there is no market data available to support the cost of new construction. Remote rural areas are identified by the State Director and are defined as areas with all of the following characteristics:
• scattered population;
• low density of residences;
• not part of the Metropolitan Statistical Area;
• lack of basic shopping facilities;
• lack of community and public services and facilities; and
• lack of comparable sales data.

Areas typical of this situation include tribal lands, Appalachia, the Great Plains and the Delta.

The Scope of Work Rule states: For each appraisal, appraisal review, and appraisal consulting assignment, an appraiser must:
• identify the problem to be solved;
• determine and perform the scope of work necessary to develop credible assignment results; and
• disclose the scope of work in the report.

In cases in which the lender's appraiser accepts the assignment, the Scope of Work Rule requires the appraiser to explain the exclusion of the Sales Comparison approach to value. The appraiser must complete the assignment using the following instructions:
• Is not required to complete the sales comparison analysis on the Uniform Residential Appraisal Report (URAR)
• Must document unsuccessful efforts to obtain comparable market data for sales comparison analysis on URAR
• Must complete Form 1007, Marshall and Swift Square Foot Appraisal.
• Must document the results of the cost analysis on the URAR.
• Must not consider external depreciation based on the remoteness of the site.
• Must consider factors that impact the site such as immediate proximity to a feedlot, factory, etc.

After a market is established in the remote rural areas, appraisers should no longer invoke either the Departure Rule or the Scope of Work rule in lieu of the sales comparison approach. Once there is an established market, the cost approach section of the appraisal must be completed in its entirety when the dwelling is less than one year old. For dwellings more than one year old, the cost approach section of the appraisal need be completed only to the extent necessary to comply with the site value analysis and requirements of RD Instruction 1980-D, section 1920.313(e).

The notice is effective immediately and runs through April 30, 2009."

[Comment from Michael: On those rare occasions when you are asked to appraise, say, a new duplex on five acres of land in a Tribal area, the letter above provides an excellent suggestion for how to handle that appraisal problem.]

Bank Regulators Forcing Banks to Order New Appraisals

Bank examiners will direct management to obtain new appraisals when needed due to market or project changes, and to take necessary action should those appraisals indicate that loans are no longer adequately supported by collateral values. That announcement was made by John C. Dugan, Comptroller of the Currency, during a June 5 Senate Banking, Housing and Urban Affairs Committee hearing titled "The State of the Banking Industry."

Dugan said that in many cases, an adjustment by bank management to original appraisal assumptions to reflect current market conditions, rather than a full reappraisal, may be sufficient, but that examiners should give bankers reasonable time frames for obtaining updated appraisals and making their assessments. Dugan said the Treasury Department also reiterated the importance of maintaining open and constructive communications with bankers throughout this process.

The move comes in order to address the current state of the housing market. Dugan explained that “one of the most controversial practices” associated with the significant real estate downturn in the late 1980 arose in circumstances “where the sharp decline in markets meant that appraisals had become outdated.”

“In too many instances, because bankers were reluctant to adjust appraisals to reflect current market conditions, examiners were forced to unilaterally make such adjustments,” Dugan said.

The hearing was a follow up to the March 4, 2008, hearing of the same name. Other speakers included: Sheila Bair, chair, Federal Deposit Insurance Corporation; John Reich, director, Office of Thrift Supervision; JoAnn Johnson, chair, National Credit Union Administration; and Donald Kohn, vice chair, Board of Governors, Federal Reserve System.

Mortgage Applications Decrease

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending May 16, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 621.6, a decrease of 7.8 percent on a seasonally adjusted basis from 674.4 one week earlier.

The Refinance Index decreased 8.7 percent to 2210.5 from 2422.1 the previous week and the seasonally adjusted Purchase Index decreased 6.9 percent to 352.5 from 378.5 one week earlier. The Conventional Purchase Index decreased 6.8 percent while the Government Purchase Index (largely FHA) decreased 7.0 percent.

The four week moving average for the seasonally adjusted Market Index is down 0.6 percent to 629.6 from 633.6. The four week moving average is down 0.3 percent to 363.1 from 364.3 for the Purchase Index, while this average is down 0.9 percent to 2202.9 from 2221.8 for the Refinance Index.

The refinance share of mortgage activity decreased to 48.2 percent of total applications from 48.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.0 from 8.3 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.9 percent from 5.82 percent, with points decreasing to 1.12 from 1.23 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.42 percent from 5.38 percent, with points increasing to 1.14 from 1.09 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs increased to 6.71 percent from 6.60 percent, with points increasing to 1.35 from 1.31 (including the origination fee) for 80 percent LTV loans.

Refis, FHA Lead Increase in MBA Weekly Survey

The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending April 11, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 743.4, an increase of 2.5 percent on a seasonally adjusted basis from 725.6 one week earlier. On an unadjusted basis, the Index increased 2.7 percent compared with the previous week and was up 16.4 percent compared with the same week one year earlier.

The Refinance Index increased 5.2 percent to 2866.0 from 2724.7 the previous week and the seasonally adjusted Purchase Index decreased 0.8 percent to 381.6 from 384.7 one week earlier. The Conventional Purchase Index decreased 2.1 percent while the Government Purchase Index (largely FHA) increased 3.5 percent.

The four week moving average for the seasonally adjusted Market Index is up 3 percent to 780.8 from 758.0. The four week moving average is up 1.1 percent to 381.5 from 377.4 for the Purchase Index, while this average is up 4.4 percent to 3120.5 from 2987.8 for the Refinance Index.

The refinance share of mortgage activity increased to 53.5 percent of total applications from 52.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.0 from
6.5 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.74 percent from 5.78 percent, with points decreasing to 1.05 from 1.11 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.27 percent from 5.39 percent, with points increasing to 1.19 from 1.11 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs decreased to 7.02 percent from 7.06 percent, with points decreasing to 1.28 from 1.46 (including the origination fee) for 80 percent LTV loans.

MBA Survey - Mortgage Applications Down

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending March 28, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 688.3, a decrease of 28.7 percent on a seasonally adjusted basis from 965.9 one week earlier. On an unadjusted basis, the Index decreased 28.1 percent compared with the previous week and was up 4.8 percent compared with the same week one year earlier.

The Refinance Index decreased 38.1 percent to 2636.0 from 4255.2 the previous week and the seasonally adjusted Purchase Index decreased 11.8 percent to 356.0 from 403.7 one week earlier. The Conventional Purchase Index decreased 11.8 percent while the Government Purchase Index (largely FHA) decreased 11.8. On an unadjusted basis, the Purchase Index decreased 11.8 percent to 396.2 from 449.2 the previous week. The seasonally adjusted Conventional Index decreased 31.2 percent to 901.8 from 1310.4 the previous week, and the seasonally adjusted Government Index decreased 15.1 percent to 332.4 from 391.7 the previous week.

The four-week moving average for the seasonally adjusted Market Index is up 0.11 percent to 744.5 from 743.6. The four-week moving average is down 0.47 percent to 373.4 from 375.2 for the Purchase Index, while this average is up 0.58 percent to 2918.7 from 2901.9 for the Refinance Index.

The refinance share of mortgage activity decreased to 53.4 percent of total applications from 62.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.4 from 3.8 percent of total applications from the previous week.

Changes to Appraisal System Upcoming

By Ken Harney

Property appraisers have been warning about it for a decade, and the real estate market is reaping the whirlwind: The price declines underway around the country are partly the result of systemic, intentional overvaluations on home appraisals -- much at the behest of loan officers illegally influencing or threatening appraisers to "hit the number" needed to close the deal.

But if an extraordinary new legal settlement has its intended effect, that system will be changed radically in the coming months.

• Most lenders won't be able to fund new mortgages without guaranteeing that the underlying property valuations are free of influence or pressure, and fully conform to a new national quality code for appraisals.

• Appraisers and consumers will have new complaint hotlines to report any of a long list of prohibited forms of appraisal interference by loan officers, realty agents and others.

• Lenders who have in-house appraisal staffs or who have financial interests in appraisal management companies won't be allowed to use valuations generated by those services if they want to sell loans into the secondary mortgage market.

• Mortgage brokers, who originate anywhere from an estimated 50 percent to 60 percent of all home loans, will be cut out of the appraiser selection process altogether.

• National oversight of home real estate appraisals will be turned over to a new Independent Valuation Protection Institute that will monitor the accuracy of home appraisals and automated valuations, receive and mediate complaints, or forward them to federal and state regulators.

[By] using a 1921 securities fraud law that is unique to his state, New York Attorney General Andrew M. Cuomo brokered an agreement that transcends the normal reach of state governments -- one that could eventually touch almost every home mortgage transaction nationwide.

Source

Appreciation Rate - WA State

Currently, 5.4%

Latest MBA Weekly Survey

FHA Apps up, Purchase Apps Unchanged, Refi Apps Down in Latest MBA Weekly Survey

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending March 7, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 671.7, a decrease of 1.9 percent on a seasonally adjusted basis from 684.9 one week earlier. On an unadjusted basis, the Index decreased 1.4 percent compared with the previous week and was down 3.4 percent compared with the same week one year earlier.

The Refinance Index decreased 4.7 percent to 2448.2 from 2569.0 the previous week and the seasonally adjusted Purchase Index increased 1.6 percent to 368.8 from 363.1 one week earlier. The Conventional Purchase Index decreased 0.4 percent while the Government Purchase Index (largely FHA) increased 10.0 percent. On an unadjusted basis, the Purchase Index increased 2.3 percent to 410.8 from 401.6 the previous week. The seasonally adjusted Conventional Index decreased 3.3 percent to 898.0 from 929.0 the previous week, and the seasonally adjusted Government Index increased 6.0 percent to 294.5 from 277.8 the previous week.

The four-week moving average for the seasonally adjusted Market Index is down 12.1 percent to 711.1 from 809.1. The four-week moving average is down 2.4 percent to 361.9 from 370.7 for the Purchase Index, while this average is down 18.2 percent to 2752.5 from 3365.8 for the Refinance Index.

The refinance share of mortgage activity decreased to 50.6 percent of total applications from 52.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 15.5 from 17.3 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.37 percent from 5.98 percent, with points decreasing to 1.05 from 1.15 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Latest MBA National Delinquency Survey

Delinquencies and Foreclosures Increase in Latest MBA National Delinquency Survey

The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 5.82 percent of all loans outstanding in the fourth quarter of 2007 on a seasonally adjusted (SA) basis, up 23 basis points from the third quarter of 2007, and up 87 basis points from one year ago, according to MBA's National Delinquency Survey.

The delinquency rate does not include loans in the process of foreclosure.

The percentage of loans in the foreclosure process was 2.04 percent of all loans outstanding at the end of the fourth quarter, an increase of 35 basis points from the third quarter of 2007 and 85 basis points from one year ago. The rate of loans entering the foreclosure process was 0.83 percent on a seasonally adjusted basis, five basis points higher than the previous quarter and up 29 basis points from one year ago.

The total delinquency rate is the highest in the MBA survey since 1985. The rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever.

The increase in foreclosure starts was due to increases for both prime and subprime loans. From the previous quarter, prime fixed rate loan foreclosure starts remained unchanged at 0.22 percent, but prime ARM foreclosure starts increased four basis points to 1.06 percent.

Subprime fixed foreclosure starts increased 14 basis points to 1.52 percent and subprime ARM foreclosure starts increased 57 basis points to 5.29 percent. FHA foreclosure starts decreased 4 basis points to 0.91 percent and VA foreclosure starts remained unchanged at 0.39.

Since the fourth quarter of 2006, the foreclosure start rate for prime ARMs increased from 0.41 percent to 1.06 percent and the rate for subprime ARMs increased from 2.70 percent to 5.29 percent. The foreclosure start rate for prime fixed loans increased from 0.16 percent to 0.22 percent and the rate for subprime fixed loans increased from 1.09 percent to 1.52 percent.

While subprime ARMs represent 7 percent of the loans outstanding, they represent 42 percent of the foreclosures started during the fourth quarter. Prime ARMs represent 15 percent of the loans outstanding, but 20 percent of the foreclosures started.

California and Florida continue to represent a disproportionate share of the foreclosure starts in the country. Those two states represent 21 percent of all loans outstanding, but accounted for 30 percent of foreclosure starts in the US. More importantly, they accounted for 39 percent of all prime ARMs outstanding, but 47 percent of prime ARM foreclosure starts. Similarly, they represented 29 percent of all subprime ARMs, but 36 percent of subprime ARM foreclosure starts. The rate of foreclosure starts in Florida more than tripled between the fourth quarter of 2006 and the fourth quarter of 2007, while the rate in California more than doubled.

While Michigan, Ohio and Indiana continue to have the highest percentages of loans in foreclosure, and are among the states with the highest rates of new foreclosures, those states experienced comparatively little increase over the last year or last quarter in their rates of new foreclosures started.

"Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state," said Doug Duncan, MBA's Chief Economist and Senior Vice President of Research and Business Development. "In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell the homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face.

"In states like California, Florida, Nevada and Arizona, overbuilding of new homes created a surplus that will take some time to work through.

"Of significance, however, is that the rate reset issue on adjustable rate mortgages is becoming less of an issue. The 6-month LIBOR rate, the index rate used for many subprime ARMs, has come down around 2.5 percentage points since last September, greatly reducing the payment shock on many ARM resets."

Change from last quarter (third quarter of 2007)

The SA delinquency rate increased 12 basis points for prime loans (from3.12 percent to 3.24 percent), 100 basis points for subprime loans (from 16.31 percent to 17.31 percent), 13 basis points for FHA loans (from 12.92 percent to 13.05 percent), but decreased nine basis points for VA loans (from 6.58 percent to 6.49 percent).

The foreclosure inventory rate increased 17 basis points for prime loans (from 0.79 percent to 0.96 percent), and increased 176 basis points for subprime loans (from 6.89 percent to 8.65 percent). FHA loans saw a 12 basis point increase in foreclosure inventory rate (from 2.22 percent to 2.34 percent), while the foreclosure inventory rate for VA loans increased nine basis points (from 1.03 percent to 1.12 percent).

The SA foreclosure starts rate increased four basis points for prime loans (from 0.37 percent to 0.41 percent), 32 basis points for subprime loans (from 3.12 percent to 3.44 percent). The foreclosure starts rate decreased four basis points for FHA loans (from 0.95 percent to 0.91 percent) and was unchanged for VA loans (0.39 percent).

The seriously delinquent rate, the non-seasonally adjusted (NSA) percentage of loans that are 90 days or more delinquent, or in the process of foreclosure, was up from both last quarter and from last year. This measure is designed to account for inter-company differences on when a loan enters the foreclosure process.

During the fourth quarter, the seriously delinquent rate increased for all loan types. The rate increased 36 basis points for prime loans (from 1.31 percent to 1.67 percent), 306 basis points for subprime loans (from 11.38 to 14.44 percent), 46 basis points for FHA loans (from 5.54 percent to 6 percent) and 27 basis points for VA loans (from 2.56 to 2.83 percent).

Change from last year (fourth quarter of 2006)

On a year-over-year basis, the SA delinquency rate increased for prime and subprime loans, and decreased for FHA and VA loans. The delinquency rate increased 67 basis points for prime loans, increased 398 basis points for subprime loans, decreased 41 basis points for FHA loans, and decreased 33 basis points for VA loans.

Compared with the fourth quarter of 2006, the foreclosure inventory rate increased 46 basis points for prime loans and 412 basis points for subprime loans. The foreclosure inventory rate also increased 15 basis points for FHA loans and 11 basis points for VA loans.

The SA foreclosure starts rate increased 29 basis points overall, 17 basis points for prime loans, 144 basis points for subprime loans, and five basis points for VA loans. For FHA loans, the foreclosure starts rate decreased two basis points from the fourth quarter of 2006.

The seriously delinquent rate was 81 basis points higher for prime loans and 666 basis points higher for subprime loans. The rate also increased 22 basis points for FHA loans and 18 basis points for VA loans.

Home Appraisal Standards Stiffened

Fannie Mae and Freddie Mac, the home mortgage giants, said Monday that they would stop buying loans from lenders that do not use independent home appraisers, as part of an agreement with the attorney general of New York.

The shift, which will go into effect at the start of 2009, is expected to force large lenders like Countrywide Financial to sell or spin off their appraisal businesses. It will also create a new group to monitor the appraisal business.

The deal is significant victory for the attorney general, Andrew M. Cuomo, who has been investigating the mortgage industry for a year, and last year sued an appraisal company owned by the First American Corporation. Because Fannie Mae and Freddie Mac are buying most home loans being made today, the terms they dictate to banks and mortgage companies become de facto industry standards.

Mr. Cuomo, who was secretary of housing and urban development in the Clinton administration, said the new rules were important to restoring the confidence in the mortgage market. He has asserted that pressure from lenders, brokers and real estate agents has compromised the independence of appraisals, leading to overinflated home prices and adding to the riskiness of loans.

"The appraisal is the linchpin of the system,” he said. “But the appraisal was the most susceptible to pressure.”

Fannie Mae and Freddie Mac will also put up $24 million to create the Independent Valuation Protection Institute, a group that will accept complaints from consumers and appraisers. The institute will put the new rules into place and monitor their enforcement, reporting to Mr. Cuomo’s office and the Office of Federal Housing Enterprise Oversight, the regulator that monitors Fannie Mae and Freddie Mac.

Source

Additional article here.

Huge Changes May be Coming for Lenders and Appraisers

Bloomberg News reported on Wednesday that Fannie Mae is proposing to ban the use of appraisals by a lender's employees or those arranged by mortgage brokers.

The proposal was contained in what Bloomberg referred to as a "talking points" memo distributed to lenders this week in response to an investigation of the mortgage industry by New York Attorney General Andrew Cuomo.

In November the AG filed suit against First American, parent company of one of the country's largest appraisal management companies, charging them with folding under pressure from Washington Mutual, a major client, to use only those appraisers that provided property values acceptable to WaMu.

...The proposed change would mean that Fannie Mae would no longer authorize its lending partners to use appraisers employed by a wholly owned subsidiary and, while we have not seen the memo, apparently it contains reference to the eventual establishment of an appraisal clearinghouse which we assume would assign appraisers to a project.

Bloomberg quotes Jonathan Miller of a New York appraisal company Miller Samuel, Inc. as saying that about three quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes. Miller called the practice "laughable" because it creates a financial incentive for mortgage brokers to push appraisers toward higher valuations. Higher appraisals also mean more homeowners qualify to refinance their homes and take cash out, he said.

The appraisers themselves have long urged that appraisers be required to keep arms-length from the lenders. Many complain that honest appraisers who refuse to match the values that the lenders want soon find them selves without work and that they are frequently pressured by the loan officers who assigned them to a project to raise their values.

The proposed restrictions would apply to loans acquired after Sept. 1, according to the memo.

Source.

REFI Drop Drives Decline in Mortgage Apps, Purchase Apps Unchanged

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending February 22, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 665.1, a decrease of 19.2 percent on a seasonally adjusted basis from 822.8 one week earlier. On an unadjusted basis, the Index decreased 25.8 percent compared with the previous week and was up 5.1 percent compared with the same week one year earlier.

The Refinance Index decreased 30.4 percent to 2458.9 from 3533.8 the previous week and the seasonally adjusted Purchase Index increased 0.2 percent to 358.2 from 357.6 one week earlier. The Conventional Purchase Index decreased 1.5 percent while the Government Purchase Index (largely FHA) increased 8.4 percent. On an unadjusted basis, the Purchase Index decreased 7.1 percent to 350.7 from 377.3 the previous week. The seasonally adjusted Conventional Index decreased 21.4 percent to 907.1 from 1153.4 the previous week, and the seasonally adjusted Government Index decreased 3.8 percent to 261.5 from 271.8 the previous week.

The four-week moving average for the seasonally adjusted Market Index is down 9.7 percent to 909.5 from 1007.0. The four-week moving average is down 0.2 percent to 381.3 from 382.2 for the Purchase Index, while this average is down 14.2 percent to 3987.0 from 4648.2 for the Refinance Index.

The refinance share of mortgage activity decreased to 52.0 percent of total applications from 61.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 15.0 from 12.8 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.27 percent from 6.09 percent, with points increasing to 1.15 from 1.10 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Appraisers:

HAD PROBLEMS WITH WAMU, EAPPRAISEIT, OR LSI?

On January 10, 2008, Jeniffer Wertz, a California Office of Real EstateAppraisers (OREA) licensed real estate appraiser, has filed a 12 count lawsuit against Washington Mutual Bank, First American Corp., eAppraiseIT, Lenders Services (LSI), FNIS, Inc, and Susan Richter. She was kicked off their lists because she reported declining values.

Her attorney is working on a class action lawsuit. Even if you don’t have proof, call anyway. Calls are confidential and a free consultation is available.

Danz & Gerber
Stephen F. Danz SBN,
Attorney for plaintiff, Jeniffer Wertz
68318-13418 Ventura Blvd
Sherman Oaks, CA. 91423
Phone: 818-783-7300

He is only working against these companies, so he can’t help with blacklisting by other companies. Contact Jeniffer Wertz at realestatenocal@yahoo.com

Purchase Applications Increase

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending February 1, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 1086.6, an increase of 3.0 percent on a seasonally adjusted basis from 1054.9 one week earlier. On an unadjusted basis, the Index increased 4.4 percent compared with the previous week and was up 73.2 percent compared with the same week one year earlier.

The Refinance Index decreased 1.0 percent to 5054.0 from 5103.6 the previous week and the seasonally adjusted Purchase Index increased 12.0 percent to 405.3 from 362.0 one week earlier. The Conventional Purchase Index increased 10.4 percent while the Government Purchase Index (largely FHA) increased 20.9 percent. On an unadjusted basis, the Purchase Index increased 19.1 percent to 386.5 from 324.4 the previous week. The seasonally adjusted Conventional Index increased 1.0 percent to 1552.6 from 1537.6 the previous week, and the seasonally adjusted Government Index increased 23.7 percent to 309.5 from 250.2 the previous week.

The four-week moving average for the seasonally adjusted Market Index is up 10.4 percent to 1007.4 from 912.2. The four-week moving average is down 0.5 percent to 417.1 from 419.3 for the Purchase Index, while this average is up 16.7 percent to 4477.8 from 3837.9 for the Refinance Index.

The refinance share of mortgage activity decreased to 69.2 percent of total applications from 73.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 8.8 from 8.6 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.61 percent from 5.60 percent, with points decreasing to 0.98 from 1.06 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

U.S. existing-home sales, prices fall; King County prices rise

WASHINGTON — U.S. sales of existing homes fell in December, closing out a year in which sales of single-family homes plunged by the largest amount in 25 years. Nationally, the median home price dropped for the entire year, the first time that has occurred in four decades.

The National Association of Realtors reported that sales of single-family homes and condominiums dropped by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units.

King County followed that trend, as the sale of both new and resale houses and condominiums fell 34 percent year-over-year in December, according to the Northwest Multiple Listing Service.

For the year, sales nationwide of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982. In King County, they were down 15 percent.

The median price nationwide for a single-family home dropped 1.8 percent to $217,000That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors' chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.

King County's prices bucked the national pricing trend, posting 7.1 percent appreciation for single-family houses.

Article here.

Interest-rate drop spurs frenzy of refinancing calls

By E. Scott Reckard and Kathy M. Kristof - Los Angeles Times

“Homeowners deluged mortgage brokers with calls this past week, hoping to take advantage of sharply lower interest rates to refinance into cheaper loans.

“The frenzy was triggered by the Federal Reserve's surprise decision Tuesday to slash its benchmark lending rate to 3.5 percent, from 4.25 percent. That pushed rates on some 30-year, fixed-rate loans to as low as 5.125 percent, down from 5.5 percent the previous week and from 6.3 percent a year ago.

“Moreover, an appraisal must confirm that borrowers have at least 20 percent equity in their home after the refinance — a requirement that will exclude many struggling homeowners who have seen their properties decline in value.

"The transactions we are helping with are refinancings to lower the payment and switching adjustable-rates to fixed," he said. "It's also a good time to reduce the term of the loan — some people can drop from a 30-year mortgage to a 25-year or 20-year loan and see their payments stay about the same."

Entire Article Here

Assessor warns of largest property tax increase in state history

By Chris McGann

OLYMPIA -- It's an election-year, no-new-taxes, fiscal-responsibility legislative session, but that's not stopping lawmakers from contemplating a bill that could ultimately saddle homeowners with the largest property tax increase in state history.

House Bill 2977 and Senate Bill 6517 would make it easier to dispute local property tax assessments -- an easy sell in a region that has seen property taxes increase as real estate values have gone through the roof.

Sponsors, who include high-ranking Democrats and Republicans alike, say the change would provide a tool for overburdened taxpayers and protect property owners.

"This just lowers the bar for citizens who have to make their case if they think their valuation is too high," said House Majority Leader Lynn Kessler, D-Hoquiam.

But King County Assessor Scott Noble said the real impact is buried beneath the stated good intentions, and it would amount to a tax break for big business paid for by the state's homeowners, because the burden would simply shift.

"This change ... will produce the biggest property tax increase onto residential property owners in the history of the state of Washington," Noble said in an e-mailed warning last week to Finance Committee chairmen.

In King County alone, the change would shift as much as $200 million of taxes onto residential property owners, he said.

Source

Mortgage Applications Rise

The Mortgage Bankers Association MBA) released its Weekly Mortgage Applications Survey for the week ending January 11, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 906.4, an increase of 28.4 percent on a seasonally adjusted basis from 706.0 one week earlier. On an unadjusted basis, the Index increased 64.8 percent compared with the previous week which was shortened by the New Year’s holiday and was up 39.0 percent compared with the same week one year earlier.

The Refinance Index increased 43.4 percent to 3575.5 from 2494.2 the previous week which was shortened by the New Year’s holiday, and the seasonally adjusted Purchase Index increased 11.4 percent to 461.2 from 414.0 one week earlier. The Conventional Purchase Index increased 10.5 percent while the Government Purchase Index (largely FHA) jumped 17.6 percent. On an unadjusted basis, the Purchase Index increased 45.2 percent to 365.7 from 251.8 the previous week. The seasonally adjusted Conventional Index increased 28.6 percent to 1305.5 from 1015.3 the previous week, and the seasonally adjusted Government Index increased 26.7 percent to 241.2 from 190.4 the previous week.

The four-week moving average for the seasonally adjusted Market Index is up 10.1 percent to 687.5 from 624.4. The four-week moving average is up 2.5 percent to 407.6 from 397.9 for the Purchase Index, while this average is up 18.2 percent to 2401.5 from 2031.0 for the Refinance Index.

The refinance share of mortgage activity increased to 62.7 percent of total applications from 57.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 9.2 from 9.3 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.62 percent from 5.73 percent, with points decreasing to 0.94 from 1.10 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Mortgage Applications Decrease

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the Christmas holiday shortened week ending December 28, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 533.9, a decrease of 11.6 percent on a seasonally adjusted basis from 603.8 one week earlier. On an unadjusted basis, the Index decreased 47.2 percent compared with the previous week and was down 20 percent compared with the same week one year earlier.

The Refinance Index decreased 15.4 percent to 1620.9 from 1915.3 the previous week and the seasonally adjusted Purchase Index decreased 8.5 percent to 360.8 from 394.5 one week earlier. On an unadjusted basis, the Purchase Index decreased 44.9 percent to 161.2 from 292.3 the previous week. The seasonally adjusted Conventional Index decreased 11.8 percentto 757.4 from 859.1 the previous week, and the seasonally adjusted Government Index decreased 9.6 percent to 161.1 from 178.3 the previous week.

The four-week moving average for the seasonally adjusted Market Index is down 9.0 percent to 650.8 from 715.3. The four-week moving average is down 5.9 percent to 412.4 from 438.2 for the Purchase Index, while this average is down 11.8 percent to 2127.4 from 2412.5 for the Refinance Index.

The refinance share of mortgage activity decreased to 50.9 percent of total applications from 53.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 9.8 from 10.4 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.05 percent from 6.10 percent, with points unchanged at 1.05 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.61 percent from 5.66 percent, with points decreasing to 1.02 from 1.09 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs decreased to 6.00 percent from 6.03 percent, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent LTV loans.

**SPECIAL NOTES**The survey covers approximately 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.

Cost Vs. Value Report

The Hanley Wood LLC/Remodeling Magazine 2007 Remodeling Cost vs. ValueReport, compares construction costs with resale values for 29 midrange and upscale remodeling projects comprising additions, remodels and replacements in 60 markets across the country

In contrast with previous years, none of the increases in value were over the cost of the remodeling/updates.

Seattle area results are here. (http://www.costvsvalue.com/seattle.html )

Mortgage Apps Down

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending December 14, 2007.

The Market Composite Index, a measure of mortgage loan application volume, was 653.8, a decrease of 19.5 percent on a seasonally adjusted basis from 811.8 one week earlier. On an unadjusted basis, the Index decreased 21.3 percent compared with the previous week and was up 1.7 percent compared with the same week one year earlier.

The Refinance Index decreased 27.3 percent to 2093.6 from 2879.8 the previous week and the seasonally adjusted Purchase Index decreased 10.6 percent to 422.2 from 472.0 one week earlier. On an unadjusted basis, the Purchase Index decreased 13.1 percent to 317.1 from 364.8 the previous week. The seasonally adjusted Conventional Index decreased 20.3 percent to 932.8 from 1169.9 the previous week, and the seasonally adjusted Government Index decreased 12.2 percent to 188.7 from 214.9 the previous week.

The four-week moving average for the seasonally adjusted Market Index is down 1.0 percent to 725.9 from 732.9. The four-week moving average is down 0.1 percent to 440.4 from 440.9 for the Purchase Index, while this average is down 1.1 percent to 2456.9 from 2483.5 for the Refinance Index.

The refinance share of mortgage activity decreased to 53.2 percent of total applications from 57.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.9 from 9.4 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.18 percent from 6.07 percent, with points decreasing to 1.12 from 1.17 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.78 percent from 5.72 percent, with points increasing to 1.10 from 1.01 (including the origination fee) for 80 percent LTV loans.

FNMA Announcement 07-22

FANNIE MAE ANNOUNCEMENT 07-22:

MAXIMUM FINANCING IN DECLINING MARKETS

Current home price trends indicate that home values continue to decline in many markets across the country. As a result, and based on our continued monitoring of loan performance, Fannie Mae is reinstating a policy to restrict the maximum loan-to-value (LTV) ratio and combined loan-to-value (CLTV) ratio for properties located within a declining market to five percentage points less than the maximum permitted for the selected mortgage product."

Fannie Mae strongly encourages lenders to use supplemental sources and tools to independently assess current housing trends, unless the appraisal indicates that the subject property is located within a declining market.

When the appraisal notes that the subject property is in a declining market, the maximum financing policy must be applied. When the appraisal does not indicate that the subject property is located within a declining market, Fannie Mae strongly urges lenders to implement processes and apply supplemental sources and tools to validate current housing trends and not rely solely on the information reflected in the appraisal.

Source: link

Mortgage Applications Decrease

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending November 23, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 652.5, a decrease of 4.3 percent on a seasonally and holiday adjusted basis from 681.7 one week earlier.

On an unadjusted basis, the Index decreased 25.5 percent compared with the previous week reflecting the Thanksgiving holiday on November 22 and was up 24.6 percent compared with the same week one year earlier.

The Refinance Index decreased 15.3 percent to 1862.9 from 2199.9 the previous week and the seasonally adjusted Purchase Index increased 6.1 percent to 450.1 from 424.1 one week earlier. On an unadjusted basis, the Purchase Index decreased 18.7 percent to 303.8 from 373.7 the previous week. The seasonally adjusted Conventional Index decreased 3.4 percent to 944.4 from 977.4 the previous week, and the seasonally adjusted Government Index decreased 12.2 percent to 165.7 from 188.7 the previous week.

The four week moving average for the seasonally adjusted Market Index is down 1.1 percent to 678.0 from 685.3. The four week moving average is up 2.2 percent to 429.9 from 420.6 for the Purchase Index, while this average is down 4.3 percent to 2138.6 from 2235.2 for the Refinance Index.

The refinance share of mortgage activity decreased to 45.8 percent of total applications from 50.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 14.6 from 15.8 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.09 percent from 6.18 percent, with points increasing to 1.07 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Creative Financing

As the market continues to soften, builders are offering creative incentives to sell their completed properties.

A good example is in the Skagit Valley Herald (brought to my attention by appraiser Dave Towne): “Spectacular offer…best priced home on Burlington Hill! NO mortgage payments for 1 year (up to $30K maximum), FREE Jeep Cherokee Laredo! Offer expires 11/30/07! .”

With an approximate value of $30K for the Jeep, there is a possibility of up to $60K of concessions included in this offer! Those concessions need to be deducted from the sale price to arrive at a ‘cash equivalent’ price per the Market Value definition stated on appraisal reports.

Builders are free to use any legal and creative means to sell their properties. However, the Code of Federal Regulations, Title 12, Bank & Banking: Part 365-Real Estate Lending Standards, states that mortgage financing of personal property (Jeep) included with Real Estate is unlawful.

At times, builders have the view that appraisers should overlook the included personal property and other incentives, so the property can be sold, and the resulting sale recorded at the full sale price, without concessions included.

Builders also, on occasion, offer ‘cash back after closing’ to pay for the personal property, which is also unlawful. Appraisers are often expected to overlook unlawful activity, and be a ‘team player’ in order to close the sale.

NY AG Files Suit Against First American Corp & eAppraiseIT

eAppraiseIT, a subsidiary of First American Corporation, in a scheme detailed in numerous e-mails, caved to pressure from Washington Mutual to use a list of preferred “Proven Appraisers” who provided inflated appraisals on homes. The e-mails also show that executives at eAppraiseIT knew their behavior was illegal, but intentionally broke the law to secure future business with WaMu.

Attorney General Cuomo’s investigation uncovered a series of e-mails between executives at eAppraiseIT, First American, and WaMu that show eAppraiseIT officials were willingly violating state and federal appraisal independence regulations to comply with WaMu‘s demands:

On February 22, 2007, in response to a description of the WaMu “Proven Appraiser” program as one in which “we will now assign all Wamu‘s work to Wamu‘s ‘Proven Appraisers’… [and] Performance ratings to retain position as a Wamu Proven Appraiser will be based on how many come in on value,” eAppraiseIT‘s president told senior executives at First American: “we have agreed to roll over and just do it...”

On April 4, 2007, eAppraiseIT‘s executive vice president stated in an e-mail to First American: “we as an AMC [Appraisal Management Company] need to retain our independence from the lender or it will look like collusion… eAppraiseIT is clearly being directed who to select. The reasoning… is bogus for many reasons including the most obvious – the proven appraisers bring in the values.”

On April 17, 2007, eAppraiseIT‘s president wrote an e-mail to First American explaining why its conduct was illegal: “We view this as a violation of the OCC, OTS, FDIC and USPAP influencing regulation.”

E-mail evidence also shows that WaMu pressured eAppraiseIT to inflate appraisals as a condition for doing future business together. On September 27, 2006, First American‘s vice chairman reported that a WaMu executive told him: “if the appraisal issues are resolved and things are working well he would welcome conversations about expanding our relationship…”

Full article here.

Measurement Discrepancies

Dear Appraiser,

I am a Realtor who recently sold a home using the appraisal that my clients had done during the purchase of their home. We had it sold at the square footage stated in the appraisal at 2,143 square ft.

One week prior to closing the buyers bank appraiser came in and measured it at 1,800 square feet causing my clients to lose the sale. The live in a 2-story home with the upstairs having slanted ceilings.

Is there a specific industry standard to how these homes are measured? Our concern now is listing it again at the same square footage that my clients purchased the house for.

Do you have any suggestions to what our next step should be?

Thanks for your reply.

K,

Yes, there is a standard approved by ANSI. I have attached a copy for you.

The biggest cause of GLA discrepancies is the inclusion of basement space in the above ground calculation.

However, you said this is a two story, which suggests to me that perhaps the county records are incorrect, and the bank did an AVM, not an actual appraisal with a human being actually going out to verify the property.

In saying "slanted ceilings" do you mean a finished attic space? Living space in those instances is regarded as having a minimum of five feet of height. So, as the ceiling approaches the floor at the outside walls, it ceases to be "living space," even though you can put dressers or storage in that floor space.

In any event, you are talking about a difference of approximately 340 square feet, or something like a 24’ x 14’ space.

You might call the bank (specifically, the loan officer involved in the transaction) and try to find out what sort of appraisal was done. If it was an AVM, suspect a error in the county records. If it was an actual appraisal, try to find out what was included (or not included) in the final GLA calculations.

I hope I have been of help to you,

Michael Tabor
Hyperion Appraisal

Home-Price Indexes Don’t Match? Here’s Why

By Kenneth R. Harney
Saturday, September 8, 2007

How worried should homeowners or sellers be? Looking at two nationally quoted measures of house values, you might be perplexed.

At the end of August, Standard & Poor's Case-Shiller national home price index reported that prices fell by 3.2 percent from the second quarter of 2006 to the corresponding period this year. Declines in property values in some metropolitan areas were much more severe -- 11 percent in Detroit, 7.7 percent in Tampa, 7.3 percent in San Diego, 7 percent in Washington, 4 percent in San Francisco and 3.7 percent in Boston.

The sharp drop in the Case-Shiller index grabbed headlines, helped rattle Wall Street and fed fears that housing values might be unraveling in many of the country's biggest markets.

Two days after the Case-Shiller announcement, however, the Office of Federal Housing Enterprise Oversight, a federal agency that conducts home pricing surveys in more than 300 metropolitan areas, came out with its own quarterly report, and numbers startlingly different from S&P's. Rather than a 3.2 percent year-to-year decline, OFHEO's index found a 3.2 percent average gain in prices nationally. Although the agency reported price depreciation in 61 markets, prices were up in 226 others.

On a market-by-market comparison, OFHEO's numbers rarely agreed with the Case-Shiller findings: Prices in metropolitan Washington were up by 1.2 percent for the year, not down 7 percent. Chicago prices were up by an average 3.7 percent, not down by 0.7 percent. Los Angeles home prices gained by 2.1 percent, rather than dropping 4 percent. Miami homes didn't lose 4.8 percent but gained 7.5 percent.

In some parts of the country, the government's index moved in the same direction as Case-Shiller's, but by different magnitudes. Rather than San Diego's 7.3 percent decline as reported by the Case-Shiller index, OFHEO found a 3.3 percent drop. In San Francisco, rather than a 4 percent decline, OFHEO reported less than a 1 percent drop. Both indexes also reported price gains in Seattle, Dallas, Charlotte, Atlanta, and Portland, Ore.

So which has it right? How could major statistical surveys, covering hundreds of thousands of home transactions, come to such divergent conclusions?

Take a closer look: It's all about the underlying data and the purposes of the two indexes. The government's index taps into a vast housing database -- the combined new-loan and refinance transaction records of mortgage giants Fannie Mae and Freddie Mac -- but omits transactions on upper-bracket houses and jumbo loans, above $417,000.

It also omits government-insured loans (by the Federal Housing Administration and the Department of Veterans Affairs) and has only limited coverage of houses bought by people with subprime credit and home mortgages using various "exotic" terms that spurred sales in dozens of areas during the boom. OFHEO's data also include refinancings, which often have more generous appraisals than do actual home sales, but exclude condominiums.

The Case-Shiller index includes no refinancings and covers the full gamut of loan types, including the exotics, limited-documentation and subprime loans that Wall Street bought and packaged into securities. In that sense, the S&P database ranges more broadly across the home-loan universe.

However, the Case-Shiller index -- devised to facilitate creation of a trading marketplace for housing futures and financial hedging vehicles -- has its own limitations. For example, it contains no data from 13 states and has incomplete information from 29 states because of legal restrictions and lack of electronic records from local courthouses.

OFHEO chief economist Patrick Lawler considers that a critical difference. By his calculation, the 13 states missing from the Case-Shiller numbers "averaged 6.3 percent gains over the past four quarters -- these are now some of the strongest housing markets," he said, but they are nowhere reflected in the 3.2 percent national depreciation rate reported by S&P.

Lawler also notes that the Case-Shiller numbers are weighted -- a $700,000 house counts twice as much toward the index as a $350,000 house. The OFHEO numbers are not weighted.

Terry Loebs, managing director of MacroMarkets, said the missing states do not greatly affect the Case-Shiller index. For example, Wyoming, which OFHEO ranks as the second-fastest appreciating state with an average annual price gain around 13 percent, represents "just one-half of 1 percent" of the national housing value pool, Loebs said. Not having data from Wyoming "is not a significant drawback." Loebs also said his company's index "represents over 70 percent of the value of houses" nationwide, far beyond OFHEO's scope.

Bottom line: Don't overreact when you see big drops -- or jumps -- in these indexes. They are measuring different things, and no national index gets down to the nitty-gritty: what's happening to property values in your Zip code, micromarket or neighborhood.

This article can be found here: http://www.washingtonpost.com/wp-dyn/content/article/2007/09/07/AR2007090701163.html?sub=AR

Home sales sag, but prices remain up

But prices rose far less than previous double-digit rates

By Michelle Dunlop, Herald Writer

EVERETT — The number of homes listed for sale in Snohomish County mushroomed in August amid slow sales, though real estate prices remained slightly above this time last year.

In case there was any doubt the hot market for homes has cooled, consider this: There were almost 63 percent more single-family houses and condominiums on the market last month than a year ago, according to the Northwest Multiple Listing Service figures released Monday. Sales dropped 25 percent compared with the previous year.

And the days of double-digit percentage rises in home prices every year may be gone, too. In August, the combined median price for houses and condos was $352,475, about 4 percent above August 2006.

"The market is adjusting to a slower but steady pace," Dick Beeson, director of Northwest MLS, said in his discussion of the new figures.

He noted savvy buyers are finding real values because they know motivated sellers are more flexible than they've been in a long time.

In Snohomish County, the number of closed sales for single-family homes, which had a median price of $375,000, dropped 30 percent in August. Last year's median price was $358,875.

The county's condo market, which has held up in recent months despite the overall cooling trend in the housing market, may finally be slowing as well.

Through August, 1,866 condos had sold in 2007, compared with 1,872 at the same time last year. After a 7 percent increase in the number of condos sold during July compared with the previous year, sales dropped nearly 11 percent in August.

The median condo price of $242,639 was up more than $27,000 from last year, but lower than the $255,000 median price seen in July. The number of condos listed for sale ballooned by nearly 129 percent.

Nathan Gorton, with the Snohomish County-Camano Island Association of Realtors, says the new figures demonstrate that Snohomish County is not "condo county," as many might believe.

"There aren't nearly as many condos available as there are single-family homes," Gorton said.

Snohomish County has a ratio of approximately six detached homes to every one condo on the market, which might explain why single-family home prices are growing at a slower rate.

Single-family home prices would have to drop significantly, however, to compete with more moderately priced condos.

For the year, single-family home sales in Snohomish County lag behind last year's totals with 7,733 closings reported in 2007 compared with 9,636 in 2006. There were 6,841 homes and condos on sale in Snohomish County at the end of August.

And that isn't bad news if you're in the market to buy.

"I think it's a great buyers' market," Gorton said.

In Island County, the number of houses and condos for sale went up 27 percent, and pending sales were down 25 percent. The combined median price was $330,000, up 11 percent from a year ago.

Source: here

Holiday-Adjusted Mortgage Applications Increase

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending September 7, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 657.4, an increase of 5.5 percent on a seasonally adjusted basis from 622.9 one week earlier. The index includes an adjustment for the fact that banks were closed on Labor Day last week. On an unadjusted basis, the Index decreased 16.7 percent compared with the previous week and was up 0.1 percent compared with the same week one year earlier.

The Refinance Index, also adjusted for the Labor Day holiday, increased 6 percent to 1876.6 from 1770.2 the previous week and the seasonally and holiday adjusted Purchase Index increased 5.2 percent to 448 from 425.8 one week earlier. On an unadjusted basis, the Purchase Index decreased 17.7 percent to 354.9 from 431.1 the previous week. The seasonally adjusted Conventional Index increased 5.9 percent to 945.6 from 893.1 the previous week, and the seasonally adjusted Government Index increased 2.7 percent to 176.9 from 172.3 the previous week.

The four week moving average for the seasonally adjusted Market Index is down 0.8 percent to 634.2 from 639.5. The four week moving average is down 1 percent to 434.8 from 439.0 for the Purchase Index, while this average is down 0.7 percent to 1795.7 from 1808.9 for the Refinance Index.

The refinance share of mortgage activity increased to 42.1 percent of total applications from 41.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 13.2 from 12.6 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.25 percent from 6.42 percent, with points decreasing to 1 from 1.09 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.9 from 6.10 percent, with points decreasing to 1.03 from 1.16 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs decreased to 6.34 from 6.52 percent, with points remaining unchanged at 0.93 (including the origination fee) for 80 percent LTV loans.

Source

Mortgage Applications Decrease MBA Survey

The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending August 24, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 615.2, a decrease of 4.0 percent on a seasonally adjusted basis from 641.1 one week earlier. On an unadjusted basis, the Index decreased 5.3 percent compared with the previous week and was up 10.6 percent compared with the same week one year earlier.

The Refinance Index decreased 4.2 percent to 1729.6 from 1806.3 the previous week and the seasonally adjusted Purchase Index decreased 4.0 percent to 424.0 from 441.5 one week earlier. On an unadjusted basis, the Purchase Index decreased 6.0 percent to 439.5 from 467.5 the previous week. The seasonally adjusted Conventional Index decreased 4.5 percent to 890.5 from 932.0 the previous week, and the seasonally adjusted Government Index increased 0.1 percent to 156.1 from 156.0 the previous week.

The four week moving average for the seasonally adjusted Market Index is up 0.3 percent to 647.9 from 645.8. The four week moving average is up 0.4 percent to 444.4 from 442.6 for the Purchase Index, while this average is up 0.1 percent to 1836.6 from 1835.3 for the Refinance Index.

The refinance share of mortgage activity increased to 40.4 percent of total applications from 39.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 15.0 from 18.6 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.41 percent from 6.49 percent, with points remaining unchanged at 1.48 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Mortgage Applications Increase in Latest MBA Weekly Survey

The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending August 3, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 656.5, an increase of 8.1 percent on a seasonally adjusted basis from 607.1 one week earlier. On an unadjusted basis, the Index increased 7.7 percent compared with the previous week and was up 18.0 percent compared with the same week one year earlier.

The Refinance Index increased 9.1 percent to 1881.1 from 1724.1 the previous week and the seasonally adjusted Purchase Index increased 7.4 percent to 447.4 from 416.6 one week earlier. On an unadjusted basis, the Purchase Index increased 6.8 percent to 486.9 from 455.7 the previous week. The seasonally adjusted Conventional Index increased 8.0 percent to 958.5 from 887.2 the previous week, and the seasonally adjusted Government Index increased 9.3 percent to 152.9 from 139.9 the previous week.

The four-week moving average for the seasonally adjusted Market Index is up 1.2 percent to 626.0 from 618.5. The four-week moving average is down 0.4 percent to 433.7 from 435.3 for the Purchase Index, while this average is up 3.6 percent to 1753.9 from 1692.8 for the Refinance Index.

The refinance share of mortgage activity increased to 39.9 percent of total applications from 39.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 22.5 from 22.3 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.41 percent from 6.50 percent, with points decreasing to 1.62 from 1.66 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Indymac’s comments on the current market

Here’s an excerpt from an Email from Mike Perry, Chairman and CEO:Conditions in the Private Secondary Markets and Their Implications for our industry and Indymac.

“Unfortunately, the private secondary markets (excluding the GSEs and Ginnie Mae) continue to remain very panicked and illiquid. By way of example, it is currently difficult, at present, to trade even the AAA bond on any private MBS transaction. In addition, to give you an idea as to how unprecedented this market has become…I received a call from U.S. Senator Dodd this morning who seeking an understanding of “what is really going on and how can I and Congress help?” I also have talked to the Chairman of Fannie Mae this morning and have traded calls with the Chairman of Freddie Mac (Fannie Mae’s Chairman telling me that they are “prepared to step up and help the industry”).”

The full email is here.

Mortgage Applications Decrease in Latest MBA Weekly Survey

The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending July 27, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 607.1, a decrease of 0.3 percent on a seasonally adjusted basis from 609.0 one week earlier. On an unadjusted basis, the Index decreased 0.4 percent compared with the previous week and was up 14.2 percent compared with the same week one year earlier.

The Refinance Index increased 1.8 percent to 1724.1 from 1692.9 the previous week and the seasonally adjusted Purchase Index decreased 1.8 percent to 416.6 from 424.2 one week earlier. The seasonally adjusted Conventional Index decreased 0.5 percent to 887.2 from 892.1 the previous week, and the seasonally adjusted Government Index increased 2.2 percent to 139.9 from 136.9 the previous week.

The four-week moving average for the seasonally adjusted Market Index is down 0.5 percent to 618.5 from 621.6. The four-week moving average is down 1.2 percent to 435.3 from 440.5 for the Purchase Index, while this average is up 0.5 percent to 1692.8 from 1683.6 for the Refinance Index.

The refinance share of mortgage activity increased to 39.4 percent of total applications from 38.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 22.3 from 21.0 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.50 percent from 6.59 percent, with points increasing to 1.66 from 1.55 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

$100 billion in subprime losses?

Per Reuters News Service on July 18, U.S. Federal Reserve Chairman Ben Bernanke said on Thursday that subprime mortgage losses could hit $100 billion and threaten consumer spending, but he sought to reassure lawmakers that the central bank was working quickly to strengthen lending regulations.

"The credit losses associated with subprime have come to light and they are fairly significant," Bernanke told the Senate Banking Committee in a second day of testimony on the Fed's twice-yearly economic report.

"Some estimates are in the order of between $50 billion and $100 billion of losses associated with subprime credit problems," he said, referring to a segment of