Appraiser Income

Bill ConerlyContributorLeadership StrategyI connect the dots between the economy … and business!

GDP decline in recessionsDR. BILL CONERLY BASED ON DATA FROM NATIONAL BUREAU OF ECONOMIC RESEARCH AND BUREAU OF ECONOMIC ANALYSIS

Don’t expect the economy to crash in 2019, but be prepared for a possible recession.

Plenty of people are asking about the chance of a crash, which I interpret as a pretty severe recession, like 2008-09. The primary trigger of a full-blown crash would be a financial crisis, when many companies, consumers and other entities have borrowed short to fund long-term assets which start looking dodgy. I don’t think that’s in the cards.

Household finances are improving. Over the last four quarters, their real estate equity is up 10.0%, financial assets up 8.0%, debt up only 3.4%, for a gain in net worth of 8.2%, based on Federal Reserve data.

FICO announced its new credit score model earlier this week, but will it revolutionize the lending industry, or fall through the cracks?

While time may be the only true way to tell the answer to that question, HousingWire spoke to FICO executives in order to determine the vision and capabilities of the new model, UltraFICO.

As we previously reported, UltraFICO has the potential to increase the FICO score for millions of consumers, that is, if they opt in. The new model depends on consumers to “build their own credit score,” and give permission for access to their bank records.

Once this permission is given, FICO, Experian and Finicity team up to provide a score that looks not just at the applicant’s credit file, but also how they manage their personal finances.

FICO explained that this could be a tool to increase homeownership by boosting the score of applicants with thin files, those who have previous marks against them but are working to improve their score or even those who are credit invisible (consumers who have no credit file whatsoever.)

A few weeks ago, we cautioned both lenders and appraisers that with decreased volume, AMCs would be under financial stress. In spite of regulatory guidance to the contrary, lenders still believed they could outsource all risk to their third parties. The guidance has been clear: the use of third parties actually increases risk, not decreases it.

Just for a refresher, here is the OCC Bulletin that can be used as the basis for writing your policies. 

It would appear that the mere act of AMC registration at the state level has created a class of AMCs that, in some cases, are not real businesses. Minimum AMC requirements to register has proffered an air of legitimacy. And when States don’t audit for fundamental business activities, the public trust is violated.

The next 12 months are going to be messy.

Consumers are going to be trapped in many instances where appraisers will refuse to deliver reports based on past due invoices. Appraisers will be stuck once again for lack of third party oversight, mostly by nonbank lenders, and will be left with millions of dollars in unpaid invoices. Lenders lacking in basic understanding of compliance will find themselves at the center of the wrath of the blogosphere. That is headline risk. Tangible losses will occur when appraisers file complaints with state lending regulators against the lenders and also seek judgments in their local courts. My advice to lenders is to get out early on these issues and pay appraisers promptly.

Appraisers are in a very tough position. It is extremely difficult for appraisers to be in a position to properly vet the AMCs with whom they have no prior history. Proceed with caution. Look at the type of clients the AMC has, how long they have been in business, their payment history with others, and the terms and conditions of their payment schedules.

Be careful, folks.

Mortgage application volume fell nearly 10% during the final two weeks of 2018, despite the fact that mortgage rates continued to fall.

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, total application volume decreased 9.8% on a seasonally adjusted basis during the two-week period ended December 28.

Applications for refinances fell 12% while applications for purchases decreased 8%.

On an unadjusted basis, total volume decreased 46%. Applications for purchases decreased 46% on an unadjusted basis and were down 6% compared with the same two-week period one year earlier.

The average rate for a 30-year fixed-rate mortgage fell to 4.84%, down from 4.86%.

“Mortgage applications fell over the past two weeks – even as the 30-year fixed-rate mortgage decreased to 4.84 percent, its lowest since September 2018,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “Investors continued to show a preference for safer U.S. Treasuries, as concerns over U.S. and global economic growth, along with uncertainty over the current government shutdown, drove rates lower.

“Even with lower borrowing costs, both purchase and refinance applications decreased over the two-week holiday period, as both conventional and government applications dropped,” he adds. “Part of the decline in mortgage applications was possibly because of the government shutdown, as concerns over delays in FHA application processing times likely contributed to the weakness in activity.” 

The refinance share of mortgage activity fell to 42.7% of total applications.

The adjustable-rate mortgage (ARM) share of activity remained unchanged at 7.6%.

You only have until 02/05/2019

• E-mail: regs.comments@occ.treas.gov.  Include in subject line: “Docket ID OCC-2018-0038 and RIN 3064-AE87 – Real Estate Appraisals”
• E-mail: regs.comments@federalreserve.gov. Include in subject line: “Docket ID OCC-2018-0038 and RIN 3064-AE87 – Real Estate Appraisals”
• E-mail: Comments@FDIC.gov. Include in subject line: “Docket ID OCC-2018-0038 and RIN 3064-AE87 – Real Estate Appraisals”

Supporting Materials:Primary Mortgage Market Survey®PDF Version

MCLEAN, Va., Jan. 03, 2019 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey^® (PMMS^®), showing that the new year started with lower rates across the board. 

Sam Khater, Freddie Mac’s chief economist, says, “Mortgage rates declined to start the new year with the 30-year fixed-rate mortgage dipping to 4.51 percent. Low mortgage rates combined with decelerating home price growth should get prospective homebuyers excited to buy. However, it will be interesting to see how the recent turmoil in the stock market will affect homebuying activity in the coming months.”

News Facts

• 30-year fixed-rate mortgage (FRM) averaged 4.51 percent with an average 0.5 point for the week ending January 3, 2019, down from last week when it averaged 4.55 percent. A year ago at this time, the 30-year FRM averaged 3.95 percent. 
• 15-year FRM this week averaged 3.99 percent with an average 0.4 point, down from last week when it averaged 4.01 percent. A year ago at this time, the 15-year FRM averaged 3.38 percent. 
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.98 percent with an average 0.2 point, down from last week when it averaged 4.00 percent. A year ago at this time, the 5-year ARM averaged 3.45 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

The Appraisal Institute is seeking the names of AI professionals interested in serving as the organization’s 2020 vice president. The 2020 vice president will succeed to the office of president-elect in 2021, president in 2022 and immediate past president in 2023. 

The deadline for submission is Feb. 8. 

View the qualifications for 2020 vice president. Nominees cannot serve as a member of the National Nominating Committee at any time during the year in which their candidacy would be considered. This requirement does not preclude consideration for the office in future years. 

AI professionals wishing to serve or interested in recommending someone for the position should submit information in writing to: 

James L. Murrett, MAI, SRAChair, 2019 National Nominating Committeec/o Joan Barngrover

Appraisal Institute

200 W. Madison Avenue Suite 1500

Chicago, IL 60606 

Or email your recommendation to: jbarngrover@appraisalinstitute.org 

The National Nominating Committee is scheduled to meet in Chicago on May 6-8.

The partial federal government shutdown is complicating the already complicated process of getting and managing a mortgage. For one thing, the political storm is like severe weather at a major airport: You can expect minor delays or worse. Also, it could mean financial hardship for some federal government employees facing mortgage payments without their regular paychecks.

Here’s how the shutdown is affecting appraisers and home buyers.

If you’re getting a Federal Housing Administration or Department of Veterans Affairs loan, it’s likely you can expect delays in the underwriting process, and it’s possible your closing date will be pushed back as well.

There’s good news for most FHA-qualified home buyers: Single-family FHA loans are being funded, even during the shutdown. FHA home equity conversion mortgages (known as reverse mortgages) and FHA Title I loans (financing for permanent property improvements and renovations) are the exception — and won’t be processed during the shutdown. The processing of VA loans will continue, according to the Mortgage Bankers Association, but you may have to wait.