Concerns Regarding Declining Mortgage Applications

Freddie Mac reported a few weeks ago that 30-year fixed-rate mortgages fell to their lowest point in 2014. Even with these (surprisingly) low mortgage interest rates, the Mortgage Bankers Association (MBA) reported last week that purchase mortgage applications were at a six month low. They also reported that while purchase mortgage applications were nominally up (1.4%) from the previous week, total applications (including refinance) for government mortgages declined by 5.9% with VA applications falling 8% and FHA applications down 5%.

GETTING BACK TO BANKING

Less time spent on appraisal mortgage compliance means more time with your customers

Worry list: CFPB compliance; USPAP/Appraisal Standard compliance; Inter Agency compliance; firewall between loan production staff and real estate appraiser; Fannie/Freddie cram downs; customary and reasonable fees; RESPA compliance; documented quality control/appraisal review; vendor maintenance; HELOC evaluations; and commercial appraisal order management/review.

From the Wall Street Journal

Dodd-Frank-mandated rules on providing more information on the quality of the mortgages and other loans that back securities are expected to be finalized Wednesday. The Securities and Exchange Commission's rules on asset-backed securities will require banks to provide data to investors like borrowers' credit scores and debt levels. The idea is to help investors rely less on credit ratings.

Times Are Changing (have I said that before?)

Up until this year Fannie/Freddie reviewed a very small fraction of the loans it funded every year.  An incredible amount of bad appraisals slipped through the door, with the resulting huge financial losses to both those GSE’s.  Well, that has changed. 

NEWS REPORTS THIS WEEK

Housing Rebound? The Wall Street Journal commented on a new release from the National Association of Realtors, which stated that single-family housing prices rose 4.4% in the 12 month-period that ended in the second quarter; the slowest annual pace since 2012.  Basically the Journal said good news for buyers, bad news for underwater homeowners. 

The Financial Times found in a study that the income gap between the richest and poorest U.S. metro areas has widened to its largest-ever margin, also slowing any type of housing recovery. 

PENDULUM SWINGING!

Yes, it looks like the pendulum is swinging again, this time with changes that may allow more loan applicants to qualify for their mortgages.  A recent Consumer Financial Protection Bureau study found that some consumer’s credit ratings were being unfairly penalized for paid and unpaid medical debts.  As a result of this study, FICO, the most used credit-scoring system, announced they were changing some of their criteria.  This should allow some borrowers scores to change significantly over this next year. A borrower whose only major issue is an unpaid medical bill could see their score improve by 25 points. It will be a long process and will take time, so those borrowers should be patient before moving towards a purchase of a home. 

2014 Surprising Everyone!

There were 49,000 completed foreclosures in June, down 35 percent nationally from a year ago, while the seriously delinquent rate is at 4.3 percent, the lowest since August 2008 reported CoreLogic this week.  But even with this good news, and mortgage rates remaining stable, the first mortgage market is in the doldrums.

While the top 10 funders of second-lien mortgages wrote $4.6 billion of such loans in the first quarter, up 44% from a year earlier, according to MortgageStats.com.  Incredible!

Community bankers surveyed lately reflect the fact that banking on the local level has not changed, improving the customer’s experience and meeting their customers changing needs is still the priority, according to the advisory firm KPMG.   

Eliminate ‘Additional Comparable’ Requests

Don't you hate it when you get a Request for Revision that says find another comparable? It  would be "nice" or possibly "convenient" for everyone looking over the appraisal report to just trust that you located the "best" comparable sales, but that isn’t your job, your job is to PROVE that the comparable sales chosen were the best available. So how do you do that?

 

Residential Housing Stalled

The housing market is showing mixed signals, in a report recently sent out by Freddie Mac.  The report showed that the low of the residential market was in November of 2010.  Today’s numbers still reflect a weak market, and that market has actually declined recently from April to May. 

What got my attention was when I saw only 13 states out of 50 (plus D.C.) are now in the stable category!

 The states ranking on top are:

  • North Dakota
  • Washington, D.C.
  • Wyoming
  • Alaska
  • Montana

Eight of the 50 metro areas tracked also are in their stable range by historical standards. Ranking in the top five:

Basic Appraisal Standards

15% - 25%, Site adjust’s., 12 Months
There are to be no comparable adjustments that exceed 15% net and 25% gross. This is an
absolute, and one of SAMCO’s more firm requirements. If an appraisal is submitted with
excessive net and gross adjustments, an additional comparable that meets guidelines will be
requested. You can bet on it! In addition, SAMCO will lower your quality ranking, affecting
future assignment opportunities. Are there times when there just isn’t any other way to write the
report? Absolutely! But those are few and far between. But utilizing Search Parameters &
Results as we suggest will clearly show the reader of your report what is available in the

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SAMCO Appraisal Management Company is a nationwide appraisal management service for community banks. We provide regulatory compliance and save our clients actual dollars at the end of the day.

SAMCO is committed to earning your loyalty one appraisal at a time.

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