Appraiser & AMC Blog

Some market volatility was evident in the most recent weekly reports issued by Freddie Mac and the Mortgage Bankers Association (MBA).

Freddie Mac reported that rates for 30-year fixed-rate mortgages declined to 4.11% for the week ending October 20th in comparison with 4.12% for the week ending October 13th. Frank Nothaft, vice president and chief economist for Freddie Mac noted that:
“Mortgage rates remained relatively unchanged this week amid mixed economic data reports. Retail sales were up 1.1 percent in September, almost four times the pace set in August, but consumer sentiment was down in October, according to the Thomson Reuters/University of Michigan index. Finally, in its October 9th regional economic review, the Federal Reserve reported that overall economic activity continued to expand in September, but contacts noted weaker or less certain outlooks for business conditions.

"The home construction industry had some good news for a change. The National Association of Home Builders/Wells Fargo Housing Market Index jumped four points in October, the largest one-month gain since April 2010. Housing starts sprang up 15 percent in September, largely driven by a spike in multifamily starts to a level last seen in 2008. Building permits on 5-or-more unit buildings fell by 13 percent, however, suggesting that the multifamily building pickup may be temporary.”

The MBA in its most recent Weekly Mortgage Applications Survey for the week ending October 14th reported that 30 year rates increased to 4.33% from 4.25% during the previous week.

In their press release of October 19th, the MBA also reported a 14.9% drop in mortgage applications during this most recent week with refinance activity accounting for 77.6% of applications.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

The Obama Administration yesterday released some details regarding an expansion of the Home Affordable Refinance Program, a three year old program which originally targeted five million borrowers but has to date helped less than 900,000. The program currently allows borrowers to take new loans up to 125% of their home value but the proposed changes would remove any loan to value limits (i.e. the loan can be double the market value of the house) providing the borrowers had made at least six consecutive monthly payments.

Bloomberg’s Lorraine Woellert reported yesterday that early projections were that the changes would result in help to anywhere from 600,000 to 1,000,000 homeowners. Initial reports indicated that appraisers might benefit little from the program, however, with Binyamin Appelbaum of the New York Times writing yesterday that the plan dispenses “…with the need for an appraisal in many cases.” A link to yesterday’s Times report is found here: Administration Proposes Changes to Mortgage Refinancing Program

The housing boom created a rich climate for mortgage fraud and while the bust that followed the boom has changed the nature of the crime, it has provided continued opportunities which the Federal Bureau of Investigation (FBI) is attempting to quantify.  The Bureau has released a study that attempts to quantify the breadth and depth of mortgage fraud in 2010 so FBI program managers and the general public can better understand the current threat.

The report says that fraud continued in 2010 at elevated levels that were consistent with those seen in 2009.  Mortgage fraud enables high profits through illicit activity while posing a relative low risk for discovery.  The FBI notes that mortgage fraud schemes are particularly resilient and readily adapt to economic changes and modifications in lending practices.  Thus current economic conditions with tightened underwriting, fewer loan originations, increased delinquencies and foreclosures, high unemployment, demands for debt counseling and loan modifications have all provided opportunities that can be manipulated and motives for doing so.

Mortgage fraud perpetrators include lenders, mortgage brokers whether licensed/registered or not, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives.  

There have been numerous instances in which various organized criminal groups were involved in mortgage fraud activity. Asian, Balkan, Armenian, La Cosa Nostra, Russian, and Eurasian organized crime groups have been linked to various mortgage fraud schemes, such as short sale fraud and loan origination schemes.

Mortgage fraud perpetrators have a high level of access to financial documents, systems, mortgage origination software, notary seals, and professional licensure information necessary to commit mortgage fraud and have demonstrated their ability to adapt to changes in legislation and mortgage lending regulations to modify existing schemes or create new ones.

The losses attributable to mortgage fraud are unknown, but the FBI quotes CoreLogic estimates that between $12 and $15 billion in fraudulent loans were originated in each of the last three years.  In 2006, the peak year identified by CoreLogic, there were $27 billion in fraudulent loans originated.

By Jann Swanson
Mortgage News Daily

http://www.mortgagenewsdaily.com/08182011_mortgge_fraud.asp

To improve the quality and consistency of appraisal data on loans delivered to the GSEs, Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency (FHFA), have developed the Uniform Appraisal Dataset (UAD), which defines all fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for a key subset of fields.

For appraisals with an effective date (date of inspection) on or after September 1, 2011, the appraisal report must be completed in compliance with the UAD for conventional mortgage loans sold to Fannie Mae or Freddie Mac.

The UAD is a component of the Uniform Mortgage Data Program, jointly established by Fannie Mae and Freddie Mac under the direction of our regulator, the Federal Housing Finance Agency, to provide common requirements for appraisal and loan delivery data.

• UAD Overview (.pdf)
• UAD FAQs (.pdf)
• UAD Tutorial
• UAD Interactive Resource Manual
• Uniform Mortgage Data Program (UMDP)

UAD Business Resources for Lender Underwriting and Property Valuation Staff

The UAD Field-Specific Standardization Requirements are designed to assist those in any organization who are responsible for creating and reviewing appraisal reports during the property inspection, underwriting, property valuation, or quality control processes to assess the impact of the UAD requirements on those processes.

• UAD Field-Specific Standardization Requirements (.pdf)

UAD Technical Resources for Lender/Vendor Technology Development Teams

The UAD Technical Specification and supporting documents will help map the current appraisal forms to the new appraisal dataset. This information will be most relevant to appraisal software/forms vendors, lenders who use appraisal data in their business processes, and other organizations such as appraisal management companies (AMCs) that will work with electronic appraisal form data.

• UAD Specification (.pdf)
• UAD Specification Appendix A, GSE Appraisal Forms Mapping (.pdf)
• UAD Specification Appendix B, GSE Appraisal Forms Mapping (.xls)
• UAD Specification Appendix C, Appraisal Forms with Numbered Fields v1.1 (.zip)
• UAD Specification Appendix D, Field-Specific Standardization Requirements (.pdf)
• UAD Specification Appendix E, PDF Rendering and Parsing Instructions (.pdf)
• UAD Specification Appendix F, Property Information Valuation Response v2.6 GSE Extension Schema (.zip)

In the Spring 2011 issue of the FHA Appraiser newsletter, HUD confirmed what many appraisers already suspected – compliance with the Uniform Appraisal Dataset (UAD) will be required for FHA appraisals reported on the 1004 (URAR) form and the 1073 (Condo) form. Appraisals reported on other forms, such as the 1025 and 1004C, will not be required to be UAD compliant.

The UAD is part of an appraisal quality initiative created by Fannie Mae and Freddie Mac, and is intended to standardize many specific data points in appraisal reports. Appraisers are required to use the UAD starting on September 1, 2011 for conventional loans. The FHA Appraiser newsletter did not provide a specific date for UAD implementation for FHA loans; it stated that FHA plans to release additional UAD guidance later this year.

The Federal Housing Administration (FHA) today announced several significant policy changes that are intended to improve their exposure to risk.  The changes, effective January 1, include:

• Modification of Procedures for Streamline Refinance Transactions
• Adoption of Home Valuation Code of Conduct Guidelines (some not all)
  
• Updated Appraisal Validity Period
• New Appraisal Portability Regs
• New Requirement of Lenders to Submit of Audited Financial Statements for Review
• Adjustments to the Approval Process for Participation in FHA Loan Origination
• Increased Net-Worth Requirements for Lenders

Grabbing the attention of mortgage professionals was FHA's decision to adopt language from HVCC appraisal guidelines. The HVCC, which has been the subject of heated debate within the industry, was implemented by Fannie Mae and Freddie Mac on May 1, 2009. At that time the FHA decided not to adhere to the policy. This undoubtedly increased demand for FHA loan products as originators quickly learned of the multitude of problems associated with HVCC. The new requirements will prohibit any commissioned based lender staff member from ordering an FHA appraisal.

FHA will not require the use of AMCs or other third party organizations for appraisal ordering, if lenders do use AMCs and/or other third party organizations FHA-approved lenders must ensure that:

• FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report.
• FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.  
• The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal.  
• Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing.
• AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised.