The times have certainly changed! Just a few short years ago no one would even have thought of applying online for a mortgage. A recent study by the American Bankers Association showed that 60% of real estate borrowers today prefer to apply in person for their mortgage instead of applying online. I’m not surprised that it’s 60%, I’m surprised that 40% of today’s borrowers would choose NOT to be face to face with their banker. That same survey revealed that 66% of today’s borrowers are not confident with their knowledge of the mortgage process. Could be a fairly strong correlation and the reason the borrower would want a ‘real’ person helping them.
CoreLogic recently showed that the value of home equity has doubled in the past five years. Most of that is not from borrowers paying down on the principle but in the added value of real estate. The value has gone from $6 trillion five years ago to $13 trillion this year. Not only that, but CoreLogic is predicting another $1 trillion additional being added to the equity side in this year alone! Now there is a wide variation depending on what part of the country you are in, but everyone has gained equity.
The New York district Federal Reserve came out with a very interesting report, household debt has hit a level that is above the peak level of 2008! Does this mean we’re in trouble? I don’t think so. Household debt level includes credit cards, consumer loans (such as autos), student loans and also real estate (or home loans).
Real Estate loans have dropped from a 2008 high of 73% to 68%, and with the tougher lending requirements since 2008, those real estate loans are in good position credit wise. The real difference in credit from 2008 is student loans and auto loans. Those categories are significantly higher.
Total delinquency for all loans was flat for the last quarter at 4.8%. This is the lowest since the recession. Student loans represent the highest delinquency rate at 11%. The growing household debt shows that most of those people who struggled through the ‘Great Recession’ have reestablished their credit and are borrowing again. That’s good!
The week after Comptroller of the Currency closed First NBC Bank of New Orleans another billion dollar plus bank was closed, Guaranty Bank of Milwaukee, Wisconsin.
Bad loans seemed to be the primary cause but Guaranty Bank also had an insane number of branches located in grocery stores. Out of 119 branches, 107 were located in grocery or similar retail outlets.
I have often discussed Efficiency Ratios (non-interest expense/net income) and how important it is for a bank’s profitability. A strong cost foundation is the most significant influence on sustained profitability. The best performing banks run around 52% efficiency ratios, while medium performing banks run around 75%. That’s a large difference and I bet Guaranty Bank with all of their overhead was running significantly higher.
One benefit of a community bank working with SAMCO is lowering a bank’s non-interest expense, thus improving their efficiency ratio. The lower the ratio the more profit a bank will generate. Call us if you would like to know more.
Contract Amendments; When? (Illinois Appraiser Newsletter – January 2017) Was an excellent article that describes the appraiser record keeping requirement and the issues that many appraisers face by having access to all versions of a report that they have produced. The appraiser's work file is required to be complete and contain all copies of revised reports. That can be a little hard depending on your software and your tracking system. Many appraisers already have their method down for complete record keeping,but just in case you miss one, let me point out that the SAMCO system keeps all versions of your reports. They are date and time stamped and available in our system as soon as you upload your report. The appraiser also has access to the communication history log in each assignment as well. While we do not want to be your primary record keeping log, we are a great tool and resource for you to utilize if you work with us.
The updated Fannie Mae Selling Guide released in January clearly states (see below) that a Supervisory appraiser is not required to inspect the subject property or comparable sales.
B4-1.1-03, Appraiser Selection Criteria (01/31/2017)
As noted in the License and Certification section in this topic, Fannie Mae allows an unlicensed or uncertified appraiser, or trainee (or other similar classification) that works as an employee or subcontractor of a licensed or certified appraiser, to perform a significant amount of the appraisal (or the entire appraisal if he or she is qualified to do so), as long as the appraisal report is signed by a licensed or certified supervisory or review appraiser and is acceptable under state law.
If a supervisory appraiser is used, the supervisory appraiser does not need to physically inspect the subject property or comparables but must sign the right side of the report and certify that he or she
• directly supervised the appraiser that prepared the appraisal report,
• has reviewed the appraisal report,
• agrees with the statements and conclusions of the appraiser,
• agrees to be bound by certifications as set forth in Fannie Mae’s appraisal report forms, and
• takes full responsibility for the appraisal report.
A supervisory appraiser may not sign the left-hand side of the appraisal report unless he or she has met the requirements of the appraiser as noted in the License and Certification section in this topic.
For more related information go to https://www.fanniemae.com/content/announcement/sel1701.pdf
The Federal Reserve Bank of Chicago reported in their latest AgLetter that Midwest land values suffered a third consecutive annual decrease. Granted, the 2016 decrease was only 1% overall, much smaller than the previous two years. 2015 and 2014 both has 3% decreases for both years.
Record harvests of corn and soybeans were produced in 2016 for the five states that make up the Chicago district. According to USDA corn yields increased 11% and soybeans 8.7% from 2015 levels. National corn production for 2016 established a new record of 15.1 billion bushels, up 11% from 2015. U.S. soybean output for 2016 set a record of 4.3 billion bushels, up 9.7 % from the previous year.
The AgLetter is a quarterly newsletter produced by the Federal Reserve Bank of Chicago and provides in depth reporting and information for the agricultural credit market.