Forthcoming Appraisal Regulations
At this point most loan agents, realtors, and brokers have heard of the HVCC (Home Valuation Code of Conduct), an agreement worked out between the state of New York and Fannie & Freddie (OFHEO). Originally slated to take affect January 1, 2009, the Appraisal Code’s implementation has been pushed back to (probably) April 1, 2009, but it is not expected to change from its original form. Although the terms are for conforming loans, it is generally expected that large investors, such as Chase and Citi, will use the policies and procedures for all of their loans, jumbos included. In addition, it is meant to regulate appraisers only, not automated valuation models.
AMC’s are set up, as over a hundred already have been, to act as an independent clearing house for appraisals. The unregulated AMC’s (Appraisal Management Company) in most cases are owned by the large investors, although ownership is supposedly capped at 20%. For example, Quantrix Valuation is closely associated with Chase. As I understand it, a typical broker would determine which investor was going to fund the loan, and then request an appraisal through that investor. The investor then contacts the AMC, who draws an appraiser from a blind pool. The appraiser knows the purchase price if it is a purchase; for a refi the appraiser supposedly is unaware of the borrower’s/broker’s estimated value. The appraiser completes the appraisal, which then is processed by the AMC, and passed on to the broker. If the value does not “come in”, an appeal can be made (for an additional fee).
Of course, this policy is not without its problems (depending on one’s viewpoint). The broker has no contact with the appraiser who has joined one or more AMC’s, nor does the appraiser know the estimated value. The appraisal is done in the lender’s name, so if the loan is moved to a different investor, a new appraisal must be ordered through that investor. In other words, the lender owns the appraisal, not the broker.
Given that these procedures had a 90 day opinion comment time, it is doubtful that many changes will be made. Many mortgage banks such are setting up appraisal processes. RPM Mortgage, for example, has set up a process that is beneficial for its agents, using local appraisers in the right areas, based or referrals and resumes. RPM is setting up an ordering system that conforms to the Appraisal Code’s guidelines, and the appraisal can be given back to agents to be used by portfolio lenders, or used with other investors.
Chase Lending Changes
Yesterday Chase implemented several changes. Effective November 19, 2008, Chase Correspondent Lending is making revisions to Agency and Non-Agency products including but not limited to the following: Agency Non-Owner Occupied properties are limited to a maximum LTV of 80%; Agency Second/Vacation Home Cash Out Refinance transactions are limited to a maximum LTV of 80%; Non-Agency Loans with LTVs > 80% no longer permit subordinate financing; Non-Agency Cash Out Refinance transactions are limited to a maximum LTV of 80%; Agency Amortizing and Interest Only Fixed and ARM Cash Out Refinance transactions in the State of Florida are limited to a maximum LTV of 80%.
Market Roundup 11/20/08
Back to the market! Everyone has noticed an entire disconnect between Treasury and mortgage rates. The news lately has done nothing but point to “negative” inflation and a weakening economy, which usually leads to lower Treasury rates. Treasury rates are indeed lower, but mortgages have seriously lagged. Both core and headline CPI show prices declining, energy prices are down, the Producer Price Index is down, the DOW is below 8,000 for the first time in 5 years. The auto industry is in dire straights, retail stores are closing across the nation, and many mortgages are delinquent.
This morning the number of U.S. workers filing new claims for jobless benefits hit their highest level in 16 years. Initial claims for state unemployment insurance benefits were a seasonally adjusted 542,000 in the week ended Nov. 15 from a revised 515,000 the previous week. That was higher than analysts’ forecast for a reading of 505,000 new claims. For “good” news, Citigroup’s largest individual investor – Saudi Prince Alwaleed bin Talal – plans to boost his stake in Citi from less than 4% up to 5%. We still have the Philly Fed and Leading Economic Indicators ahead. So the 10-yr is up almost 2 points, but mortgages are only up (better) between .250 and .5 in price. We are continuing to see the “flight to quality” exclude mortgages, and other debt instruments, as volatility and credit risk limit interest in anything but Treasuries.
Thank you to Greg E. for this one:
An Italian Mafia Don is dying and he calls his grandson to his bed!
“Lissin-a me. I wanna for you to taka my chrome plated 38 revolver so you will always remember me.”
“But grandpa, I really don’t lika guns. Howzabout you leava me your Rolex watch instead?”
“Shuddup an lissin. Somma day you gonna runna da business…..you gonna have a beautifula wife, lotsa money, a biga home and maybe a couple a bambinos”
“Somma day you gonna comma home and maybe find you wife inna bed with another man. Whadda you gonna do then……. pointa to you watch and say, “Time’s up!”