Facetime with your banker

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.

What’s in your wallet (or home equity)?

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.

Household debt

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! 

Feds close Wisconsin Bank

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. 

Ohio House Bill # 463 Plywood vs. Polycarbonate Sheeting

Ohio recently enacted a ban on the use of plywood when boarding up vacant properties. Ohio is also the first state to enact a ban of this type. Property preservation has been a significant issue for many states that have areas of abandoned properties. To see a neighborhood of boarded-up houses creates a neighborhood blight issue that is hard to overcome.

Polycarbonate clear boarding is the board up the material of choice. While it resembles glass, It is also extremely hard to break and secures property without standing out, which creates less of an abandoned look. The cost is a key factor of polycarbonate vs. plywood. The cost of a typical 4 x 8 sheet of plywood is usually $ 20.00 to $30.00, while a polycarbonate sheet is closer to $115.00 - $150.00 a sheet.

Fannie Mae was an early adopter of this home preservation method. In the last several years they have retrofitted over 4,000 houses and over 11,000 properties with this type of home preservation. The official start date for Fannie Mae’s use of alternatives to plywood was November 9, 2016.

There is some opinion that the cost of polycarbonate alternative is prohibitive to lenders with REO / Banked owned properties. The other side of the argument is that this solution presents a more amenable, aesthetically pleasing option to controlling neighborhood blight. As an appraiser, a lender, or just a neighbor, what are your thoughts? Should other states be looking at this option? Is this a viable way to offset the issue of neighborhood blight that every state seems to be battling?


Video: Product Demonstration-City of Warren Oh

Source: DSNews.com – "Ohio Governor Signs Plywood Ban Into Law."

Source: Dayton Daily News – " Ohio’s new plywood ban on vacant houses could change Dayton’s blight."

March 2017 Origination Insight Report - EllieMae

Ellie Mae recently provided information on the loans flowing through their platform. They are a software provider that was founded in 1997 that many community banks utilize. Right now, they are handling almost a quarter of the loans made in the United States. That’s a decent % and the data they provide is a good reflection of the actual mortgage market.

The March data looks like this: 63% of their mortgages were purchase, and 37% were refi, a significant change from the past nine months. Refi’s had been running in the mid to high 40’s. The time to close (all days) was an across the board 43 days.

What I found really interesting was the FICO scores. The average score on all closed loans increased slightly in March to 721. Below are graphs of the average FICO score distribution for All Purchase, Conventional, Refinance, and FHA.

So compare this info to what your bank is doing. In my experience community banks tend to lead on performance for closing days. Service, like SAMCO, is what they provide and sell!


See full reports from EllieMae: Origination Insight Reports

Where Did All of the Appraisers Go?

I’ve been in the industry for 37 years and, until recently, have not ever had an issue with finding appraisers for assignments. But, boy has that changed, especially in rural areas!

There are several reasons, and they are intertwined. Did you know that the average appraiser’s age in 63? If that’s the average, the past years have seen more and more appraisers retiring. Their shoes haven’t been filled and for a good reason. The number of appraisers nationally has shrunk over 20% since 2007, and it will continue to drop. Some estimates are that there will be an additional 25 to 30 percent drop in the next 10 years. If we think it’s hard to find an appraiser now, it will only be worse in the future!

In the past 10 years, the requirements to become an appraiser have greatly intensified. Required to become a Certified Residential Appraiser is a bachelor’s degree, a minimum of 200 specialized education hours, and 2,500 hours of training under the supervision of a Certified Appraiser.

Part of the challenge is economic. For almost 10 years, the Supervisory Appraiser has had to complete a physical inspection of the subject property, in addition to the Trainee. There just isn’t enough fee for both to be paid adequately. In addition, there has been increased concern over the liability to the Supervisory Appraiser. In the end, there isn’t enough incentive for an experienced appraiser to take on a Trainee.

There are rumblings of change happening. The Appraisal Qualifications Board, they set the national training standards for appraisers, has started reviewing options for change. That’s good. The GSE’s (Fannie and Freddie) are moving to allow trainee’s to inspect without the Supervisor if they have enough experience. All this change takes time, but in the end, the shortage of appraisers will balance out.

Utilizing SAMCO as an Appraiser Resource

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.

Source: http://www.idfpr.com/DRE/ApprNewsletter.asp

Fannie Mae Selling Guide allows trainee’s to write full report.

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)

Supervisory Appraiser

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. 


About Us

In everything we do, we believe in open and honest relationships. In knowing our client, the community banker, the way they know their customers and community. 

The way we achieve that client relationship is by always being available, improving our client's service to their customer, providing regulatory compliance, and saving our client actual dollars. This is accomplished through working together as a team, being completely open and frank to our SAMCO teammates/clients, and by taking personal responsibility.