MetLife Home Loans to pay $123.5M in mortgage resolution

Admitted it knowingly made faulty mortgages

MetLife Home Loans agreed to pay $123.5 million to resolve allegations it knowingly made mortgages insured by the government that failed to meet federal underwriting standards, an article in The Wall Street Journal said.

The deal between the MetLife unit and the Justice Department involves loans insured by the U.S. Department of Housing and Urban Development’s Federal Housing Administration.

MetLife admitted as part of the settlement that its banking subsidiary had been aware that a substantial percentage of loans weren’t eligible for FHA mortgage insurance due to its own internal quality-control findings. These quality-control findings were routinely shared with MetLife Bank’s senior managers, including the chief executive officer and board of directors, the Justice Department said.

Mortgage Rates Rise for Third Consecutive Week

Mortgage rates rise for third consecutive month.

There is a lot of information out there about the Collateral Underwriter and how it will affect appraisals.  I thought it would be a great opportunity to contact appraisers about their questions and how it is going to affect the appraisal industry.

I reached out to Ryan Landquist about possibly hosting a webinar to answer the questions of appraisers and how to get prepared for this new change.

What I really think is that if you are already implementing common appraisal procedures you really should not be too worried about the upcoming changes.  By having a highly defensible report with explanations to your report and comparable property selections that you probably won’t have to worry about collateral underwriting conditions.

We really don’t know at this point if the AMCs are going to require specific explanations to your comparable selection.  I am sure there will be some companies that go overboard, and you will probably have to weed out the companies that are just not worth your time.

Some tidbits from Ryan’s article:

5 things to know about Fannie Mae’s Collateral Underwriter:

1. Fannie loans only: CU is only used for loans geared toward Fannie Mae, and not for divorce appraisals or any other private appraisals. CU is also not used on 2-4 unit properties or “drive-by” appraisals.
2. Not FHA/VA: CU is not used for FHA and VA loans (I’d be shocked if they didn’t adopt it later though).
3. Commentary: The CU tool does not read any of the commentary by the appraiser, which can be key to understanding comp selection, adjustments, and the final value.
4. Neighborhood boundaries: CU uses census block groups for data analysis instead of specific neighborhood boundaries that may be readily understood in the market. Pulling data from the right neighborhood can make a HUGE difference in a valuation, don’t you think?
5. Adjustments & comps: Fannie Mae has heaps of data to compare to any new appraisals that come into the system. Not only do they know about sales in the neighborhood, but they also know which comps other appraisers have used, and even value adjustments given by other appraisers. CU knows if an appraiser says a comp is in good condition (C3) in one report, but then says it is in fair condition (C5) in a different report. CU will pay special attention to comp selection, adjustments, and the final reconciliation of value.

So we are looking at a lot of Data Mining for information which will lead you to the potential impact of the Collateral Underwriting system:

Potential Impact of Fannie Mae’s Collateral Underwriter:

1. Unknown: The truth is we don’t really know how CU will impact the market. It could be a game-changer for the mortgage industry and appraisal profession, or it could feel like the same old same old.
2. Slower loan process: As CU is implemented, expect a learning curve, and thereby a slower loan processing time. It’s going to take some time for lenders, appraisers, and underwriters to work out the bugs.
3. More conservative appraisals: One of the unintended consequences of CU may be more conservative appraisals.
4. Headaches for appraisers: The fear among appraisers is that lender clients will now come back to say, “CU has identified 20 other comps in this census block. Why did the you not use these?” Hopefully that will not happen (assuming the appraiser did a good job of course), but increased scrutiny will be bound to cause appraisers to spend more time responding to CU.
5. Higher cost for consumers: If CU does end up putting more work on appraisers, it may lead to higher appraisal fees. After all, more work requires more time (which is money).

Ryan offers some advice in the following areas that I hope we can discuss in the future with a webinar to discuss all these topics:

1. Real Estate Agents: Make sure your clients know how strict the underwriting process has become for appraisals. I’m not saying you need to sit down with your clients and watch Fannie Mae’s CU tutorial (that’s probably a quick way to lose clients). All I’m saying is this is one more reason to price properties correctly since the appraisal is going to be even more scrutinized now. Also, if you accept an offer that is clearly out sync with neighborhood values, the lender is going to have a ton of data at their disposal about neighborhood values – even if the appraiser happens to “hit the number” somehow.
2. Appraisers: Many appraisers are gravely concerned about CU, though many lenders have been reaching out to say, “Hey, we’ve already been scrutinizing you, so don’t worry about this.” Only time will tell how this will impact business and the industry. All we can do is choose the best available comparables and make reasonable market-supported adjustments. There will be a learning curve to know how to avoid red flags so to speak, but explaining why we made adjustments and supporting those adjustments will be a big theme this year for lender work. The bottom line is appraisers will need to add more commentary in their reports. If you are making the same adjustments in every single report regardless of the location of the property, it’s time to stop that because adjustments vary depending on the neighborhood. If you are struggling to support adjustments, it may be a good year to find a mentor as well as take some quality continuing education. If you do not know how to graph sales, make that a top goal this year. On the other hand, if you are an experienced appraiser, find ways to be a mentor to other appraisers by answering their questions – whether on forums or in person. As I said in 10 things appraisers can do to improve the appraisal industry, “Too many appraisers think they are right about everything, but at the end of the day being right doesn’t help anyone grow. Find ways to share your knowledge and build others up.” Lastly, if it ends up costing you more time to do your work, it may be time to consider raising your rates.

If you would be interested in hearing a webinar discussing these topics, please use the comment function below. If you would like to read the entire article at Ryan’s website, please click here.

Thanks again!

Bryan

If you are looking for information regarding the new Collateral Underwriter System, I have compiled some links to articles and information:

Fannie Mae

https://www.fanniemae.com/singlefamily/collateral-underwriter

Fannie Mae Downloadable Faq

https://www.fanniemae.com/content/faq/collateral-underwriter-faqs.pdf

News:

http://nationalmortgageprofessional.com/news/52353/who%E2%80%99s-afraid-collateral-underwriter

http://www.fanniemae.com/portal/about-us/media/corporate-news/2014/6182.html

http://www.housingwire.com/blogs/1-rewired/post/32539-fannie-maes-new-appraisal-system-really-just-back-to-basics

http://www.housingwire.com/articles/32570-appraisers-worry-new-fannie-mae-program-could-bust-deals

http://www.inman.com/2014/12/29/new-appraisal-time-bomb-set-to-drop-or-a-case-of-chicken-little/

We really don’t know how this is going to affect all of us until it is implemented.  I really don’t want to add to the speculation at this point as it could be all for nothing.

Now we have another thing to watch out fore.  Informing the appraiser…

http://www.wsj.com/articles/when-a-mortgage-hinges-on-home-values-1418835033

Low appraisals are rare for Bank of America ’s jumbo mortgages compared with two years ago, says John Schleck, senior vice president, centralized sales executive for Bank of America. “With rates this low and values pretty stable, it may be a good time for a borrower to step in before values go higher,” he adds.

If an appraisal does come in lower than expected, here are a few tactics a borrower can try:

• Higher LTV jumbos. More lenders, including Bank of America and Wells Fargo , are offering jumbo mortgages at 85% loan-to-value ratio.

• Inform the appraiser. While federal regulations forbid lenders from interacting directly with an appraiser, a refinancing homeowner can drop the needed loan amount into conversation during an appraiser visit, Mr. Carson says. Real-estate agents also can provide information about a property to the appraiser.

• Rebuttal. A last recourse is for the lender to file a rebuttal to the appraisal- management company, pointing out errors and suggesting alternate comparables. However, these rarely result in an amended appraisal, Mr. Carson says.

By Jeff Lazerson, Special to USA TODAY

repost from: http://www.usatoday.com/story/money/personalfinance/2014/12/06/appraisal-real-estate/19906355/

Before the mortgage meltdown and the resulting Great Recession, you paid a reasonable price for an appraisal, and your loan officer typically received a reasonable opinion of value that led to your purchase or refinance getting funded.

Not so much anymore. Swift and furious post-crisis reaction from regulators gave birth to the 2009 Home Valuation Code of Conduct or HVCC, and the federal Dodd-Frank Law, passed in 2010, (which made HVCC statutorily mute) making things far worse for you in terms of appraisal cost and resulting valuations.

Appraisal charges have gone up roughly 33%. “Appraisals were $375 before, and since HVCC the prices went up to $500,” said Yorba Linda, Calif., appraiser Myles Lawson.

The Federal Housing Finance Agency, the Consumer Financial Protection Bureau and the Appraisal Subcommittee – a federal agency that reviews state regulators of appraisers -could not point to any post-crisis publicly available data on appraisal accuracy when contacted for this column.

Ask any veteran loan originator. The No. 1 reason that transactions fall apart is low-ball appraisals, not tight credit standards. …continue reading the rest of this post: Appraisal hypocrisy hits home

 Local low-cost home appraisal company now in 23 states

AppraisalSave began in September 2013 with financial help from Start Garden.

With the appeal dropped and the Bar Order in full effect, it is unlikely that any further claims against Chase will be pursued for the over five million dollars in unpaid appraisal and BPO fees.

Editor’s Note: The take away of this decision sheds doubt on how many interpret federal law when it comes to lenders and AMCs; the court held there was no agency relationship between Chase and its AMC, Evaluation Solutions/ES Appraisal Services (ESA)- leaving many appraisers with unpaid fees.

Case Closed: Appeal Dropped in ESA/Chase Bankruptcy
By Isaac Peck, Associate Editor

Many appraisers will remember the bankruptcy case of Evaluation Solutions/ES Appraisal Services (ESA), an AMC whose primary client was JPMorgan Chase. After ESA declared bankruptcy in January 2013 with $11 million in unpaid debts, a number of real estate appraisers, agents, and brokers tried to file lawsuits against …continue reading the rest of this post: Case Closed: Appeal Dropped in ESA/Chase Bankruptcy