Appraiser Income

MCLEAN, Va., Sept. 24, 2018 (GLOBE NEWSWIRE) — Even with slightly improving inventory conditions and relenting home price pressures, home sales this year are now expected come in just below last year’s level, according to Freddie Mac’s (OTCQB: FMCC) September Forecast.

Although the U.S. economy and job market are firing on nearly all cylinders, the housing market has essentially stalled. Weaker affordability, homebuilder constraints and ongoing supply and demand imbalances over the summer resulted in fewer home sales and less home construction compared to earlier this year.

Freddie Mac expects many prospective homebuyers to continue to have difficulty reaching the market through the rest of the year. Total home sales (new and existing) are now forecasted to decrease 0.9 percent, and home price growth is expected to moderate to 5.5 percent.

“The spring and summer home buying and selling season ultimately ended up being a letdown, despite a faster growing economy and healthy demand for buying a home,” said Freddie Mac Chief Economist Sam Khater. “Unfortunately, too many would-be buyers continue to be tripped up by not enough affordable supply and the one-two punch of much higher home prices and mortgage rates.”

Added Khater, “Prospective buyers are being squeezed the most where demand is the strongest: the entry-level portion of the market. While price appreciation is welcomingly starting to ease in many markets, weakening affordability continues to hamper overall activity.”

Forecast Highlights

• The U.S. economy during the second quarter grew at its fastest pace (4.2 percent) in nearly four years. Solid consumer spending and business investment should keep the economy on a very strong growth path of 3.0 percent this year.
• Mortgage rates inched backward over the summer, but have most recently started to trend higher again. Overall, the 30-year fixed-rate mortgage is expected to average 4.5 percent this year and 5.1 percent in 2019.
• Weakening affordability and not enough moderately-priced homes on the market continue to affect housing activity. Total home sales (new and existing) are now forecasted to decline modestly this year to 6.07 million (6.12 million in 2017), while prices are expected to moderate, but still at a pace above inflation.
• Decreasing refinance activity and home sales from a year ago are expected to cause single-family first-lien mortgage originations to slide around 9 percent this year to $1.65 trillion.
• The share of cash-out refinances last quarter was the highest since the third quarter of 2008 (78 percent). However, the total dollar volume of cash-out refinance activity remains much lower than the peak seen more than a decade ago. An estimated $15.5 billion in net home equity was cashed out last quarter, which is substantially less than the peak cash-out refinance volume of $102.3 billion in the second quarter of 2006.

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.

MEDIA CONTACT: Adam DeSanctis
703-903-2786
Adam_DeSanctis@freddiemac.com

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/dd173e75-3bac-4f90-ac02-dbdbab16983f

New policy designed to reduce ‘appraisal inflation’

WASHINGTON – The Federal Housing Administration (FHA) today announced that it will begin requiring lenders originating new Home Equity Conversion Mortgages (HECMs), commonly referred to as reverse mortgages, to provide a second property appraisal under certain circumstances. FHA is instructing lenders to provide a second independent property appraisal in cases where FHA determines there may be inflated property valuations.

FHA’s new requirement takes effect for case numbers assigned on or after October 1, 2018 through September 30, 2019. FHA will periodically review this guidance and, based on the results, may renew these requirements beyond fiscal year 2019. Read FHA’s Mortgagee Letter.

FHA will perform a risk assessment of appraisals submitted for use in new HECM originations.  Based on the outcome of that assessment, FHA may require a second appraisal be obtained prior to approving the reverse mortgage for an insurance endorsement. Under the new policy, lenders must not approve or close a HECM before FHA has performed the collateral risk assessment and, if required, a second appraisal is obtained. Where a second appraisal is required by FHA, lenders must use the lower value of the two appraisals.

The appraisal validation policy announced today will further reduce risks to FHA’s Mutual Mortgage Insurance Fund (MMIF) and protect the health of the HECM program. The financial soundness of FHA’s reverse mortgage program is contingent on an accurate determination of a property’s value and condition. The property value is used to determine the amount of equity that is available to the borrower and it is also used by FHA to determine the amount of insurance benefits paid to a mortgagee.

In a 2017 evaluation, the U.S. Department of Housing and Urban Development (HUD) found higher-than-expected losses in the HECM program could be attributed in part to “optimistic estimates of collateral value driven by exaggerated property appraisals when the loan was originated.” Read Reverse Mortgage Collateral: Undermaintenance or Overappraisal?.

FHA is addressing the accuracy of appraised property values due to continuing volatility in the HECM program. Last year, FHA’s Fiscal Year 2018 Annual Report to Congress found the agency’s reverse mortgage portfolio had a negative capital ratio of 19.84 percent and a negative net worth of $14.5 billion. To begin to address the financial solvency of the program, FHA instituted several reforms to the HECM program to improve its financial health and to ensure reverse mortgages remain a resource to allow senior borrowers to remain in their homes and age in place. FHA is continuing to analyze the impact of these reforms and expects to provide an assessment in its Annual Report on the financial status of the MMIF.

MCLEAN, Va., Sept. 27, 2018 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey^® (PMMS^®), showing that mortgage rates in the past week surged to their highest level in over seven years.

Sam Khater, Freddie Mac’s chief economist, says the 30-year fixed-rate mortgage rose for the fifth consecutive week to 4.72 percent – a high not seen since April 28, 2011 (4.78 percent). “The robust economy, rising Treasury yields and the anticipation of more short-term rate hikes caused mortgage rates to move up,” he said. “Even with these higher borrowing costs, it’s encouraging to see that prospective buyers appear to be having a little more success. With inventory constraints and home prices starting to ease, purchase applications have now trended higher on an annual basis for six straight weeks.”

Added Khater, “Consumer confidence is at an 18-year high, and job gains are holding steady. These two factors should keep demand up in coming months, but at the same time, home shoppers will likely deal with even higher mortgage rates.”

News Facts

• 30-year fixed-rate mortgage (FRM) averaged 4.72 percent with an average 0.5 point for the week ending September 27, 2018, up from last week when it averaged 4.65 percent. A year ago at this time, the 30-year FRM averaged 3.83 percent.
• 15-year FRM this week averaged 4.16 percent with an average 0.5 point, up from last week when it averaged 4.11 percent. A year ago at this time, the 15-year FRM averaged 3.13 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.97 percent with an average 0.3 point, up from last week when it averaged 3.92 percent. A year ago at this time, the 5-year ARM averaged 3.20 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.

MEDIA CONTACT: Adam DeSanctis
703-903-2786
Adam_DeSanctis@freddiemac.com

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/393afe40-c2da-4183-9b1f-bbedda97898c

The FHFA has released a new paper, authored by Jessica Shui and Shriya Murthy, that examines how appraisals conducted by appraisal management companies compare to those conducted by lenders themselves. What’s the verdict? According to the FHFA paper, “the results indicate no clear evidence of any systematic quality differences between appraisals associated and unassociated with AMCs.” In other words, the FHFA data suggests that the appraisal results provided by AMCs are statistically very similar to those provided by lenders working without a middleman. …continue reading the rest of this post: FHFA Working Paper Compares AMC, Non-AMC Appraisals

The Appraisal Subcommittee unanimously rejected a temporary waiver request from TriStar Bank of Dickson, Tennessee, during a special meeting April 23 in Washington. The Appraisal Institute led industry efforts opposing the bank’s request for a waiver of certification requirements, which would have allowed appraisals to be completed by non-certified appraisers. …continue reading the rest of this post: The Appraisal Subcommittee Denies Bank’s Request for Appraisal Waiver

Federal Agencies Approve Rule Doubling Appraisal Threshold for CRE

The Federal Deposit Insurance Corporation on March 20 approved a final rule that will double the appraisal threshold for commercial real estate transactions. The Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System are expected to adopt the rule soon.

The federal banking regulatory agencies maintained the $250,000 threshold level for one- to four-unit single family residential loans. They also maintained the $1 million threshold level for business (owner occupied commercial real estate) loans. …continue reading the rest of this post: Appraisals are not required for commercial real estate transactions from $250,000 to $500,000