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01/08/2020

Mortgage Economic Review January 2020
Summary and Review of Key Economic Data that affects the Mortgage and Real Estate Business

Welcome to the ValPros Yearly Review:

Hello 2020 !  Not only is it a New Year, but it’s also a New Decade – the 20s. One hundred years ago started the Roaring 20s – a decade of massive Economic expansion. Are we at the start of another Roaring 20s? Stay tuned – we’ll find out in 10 short years.

2019 was an incredible year for the Mortgage Business, the Economy, and the Stock Market. The unofficial early estimate for Total Mortgage Originations is around $2.1 Trillion. Political gridlock and infighting continue in Washington after the House of Representatives impeached President Trump. The Stock Markets hit record highs. The Trade War with China is de-escalating as the two sides are beginning to agree on basic issues. Wages are increasing, and there are 7,500,000 unfilled jobs in the US. Inflation is tame, Interest Rates are low, and the Economy continues to chug along fueled by robust Consumer Spending. The Recession that was hyped in the media never materialized, and there is no sign it will this year. To top it off – it’s an election year. 2020 is going to be a wild ride. Buckle up and enjoy the thrills because it could get bumpy along the way.

2019 Net Net: It was a very good year. The US was, is, and will continue as the Global Economic Dynamo with a prosperous Consumer, solid Labor Market, low Inflation, and low Interest Rates.

Key Economic Data and Events in December 2019
• Record highs for the Stock Market – the DOW passed 28,000 for the first time
• The House of Representatives voted to Impeach President Trump but has not sent the Articles of Impeachment to the Senate
• Mortgage Originations for 2019: early estimates are about $2.1 Trillion
• The US Economy grew at a 2.1% GDP annualized rate in the 3rd quarter of 2019
• Inflation is tame with the CPI rising 0.35% in November, now 2.3% YoY
• The Economy added 266,000 New Jobs during November
• USMCA Trade Deal agreed to by the US, Canada, and Mexico

Interest Rates and Fed Watch
The Fed wrapped up the year with the last FOMC Meeting of 2019 on December 11th. As everyone expected, they left Interest Rates unchanged, which looks like that is what they intend to do for quite a while – maybe for all of 2020. The Fed Statement that was released after the meeting said: Economic activity is rising at a moderate rate, Inflation pressure remains low, and Economic risks appear balanced. The Fed cited a strong Labor Market and robust Consumer Spending. They feel that the current monetary policy is appropriate to maintain Economic growth and their Inflation target of 2.0%. Overall, it looks like the Fed will keep the target for Fed Funds Rate at 1.50% – 1.75% for the near future. The next FOMC Meeting is January 28th & 29th. Most Economists don’t expect any changes to Interest Rates, so the odds of a rate cut are running at 0.0%.

Housing Market Data Released in December 2019
There was mostly green in the December Housing data. New Home Sales, Pending Home Sales, Housing Starts, Housing Permits – were all up thanks to low Interest Rates and an upswing in Household Formation. Home Prices continue to rise but at a slower pace. Existing Home Sales was down slightly, mostly due to a lack of available homes for sale. Economists expect the demand for homes to continue into 2020. Home Builders have ramped up their efforts to build more homes but are hampered by a shortage of skilled labor and available land.
• Existing Home Sales (closed deals in November) fell 1.7% to an annual rate of 5,350,000 homes, now up 2.7% in the last 12 months. The median price for all types of homes is now $271,300 – up 5.3% from a year ago. The median Single Family Home price is $274,000 and $248,200 for a condo. First Time Buyers were 32%, Investors 16%, Cash Buyers 20%. Homes were on the market an average of 38 days, and 45% were on the market for less than a month. Currently, 1,640,000 homes are for sale, down 5.7% from 1,740,000 units a year ago.
• New Home Sales (signed contracts in November) rose 1.3% to a seasonally adjusted annual rate of 719,0000 homes – up 16.9% YoY. The median New Home price was $330,800, and the average New Home price was $388,200. The number of New Homes for sale rose to 323,000 from 322,000 units the previous month, which represents a 5.4 month supply.
• Pending Home Sales Index (signed contracts in November) rose 1.2% to 108.5 from 106.7 the prior month (up 7.4% YoY).
• Housing Starts (excavation began in November) rose 3.2% to a seasonally adjusted annual rate of 1,365,000 units – up 13.6% YoY. Single-Family Starts rose 2.4% to an annual pace of 938,000 units – up 16.7% YoY.
• Building Permits (issued in November) rose 1.4% to an annual adjusted rate of 1,482,000 – up 11.1% YoY. Single Family permits rose 0.8% to 918,000 units – up 8.9% YoY.
• Housing Completions (completed in November) fell 6.6% to an annual rate of 1,188,000 units – up 7.3% in the last 12 months. Single Family Completions fell 3.6% to 883,000 units – up 13.5% YoY.
• S&P/Case-Shiller 20 City Composite Home Price Index rose 0.4% in October – up 2.1% YoY.
• FHFA Home Price Index rose 0.2 % in October, now up 5.0% YoY.

Labor Market Economic Data Released in December 2019
The November Jobs Report surprised everyone with the Economy adding 266,000 new jobs. The Labor Market is solid with continued job creation, record low Unemployment, and strong wage growth – despite the ongoing Trade War. Notable job gains were in education, healthcare, professional services, technical services, and even manufacturing. However, some of the manufacturing data was influenced when GM employees returned to work from their strike.
• The Economy added 266,000 New Jobs in November
• The Unemployment Rate fell to 3.5% in November from 3.6% the prior month
• The Labor Force Participation Rate Fell to 63.2% in November from 63.3% the prior month
• The Average Hourly Wage rose 0.2% in November, up 3.1% YoY

Inflation Economic Data Released in December 2019
Inflation was running slightly higher than expected at the Consumer level in November with the CPI at 2.1% YoY. That is still a tame number. If you remove the volatile food and energy components, Core CPI is 2.3% YoY. Inflation at the Wholesale level is very low, with the November PPI at 1.1% and Core PPI at a negative 0.2%. Most of the increase in CPI can be attributed to the cost of services with the usual culprits of Shelter and Medical costs leading the way. Medical care prices are now up 4.2% YoY – almost double the CPI. The latest Inflation data confirms the Fed’s views that Inflation pressure will be running low for the near future.
• CPI rose 0.3%, up 2.1% in the last 12 months
• Core CPI (ex-food & energy) rose 0.2%, up 2.3% in the last 12 months
• PPI unchanged, up 1.1% in the last 12 months
• Core PPI (ex-food & energy) fell 0.2%, up 1.3% in the last 12 months

GDP Economic Data Released in December 2019
The 3rd Estimate of 3rd Quarter 2019 GDP showed the Economy expanded at a 2.1% annualized rate (2.1% expected). This last estimate was in line with expectations and unchanged from the last estimate. The Consumer continues to support the Economy as Consumer Spending grew 3.2% from the last quarter. A decrease in Inventories offset the increase in Consumer Spending. Businesses continue to hold back spending as investment in commercial buildings, equipment, and intellectual property fell 2.3%. The next GDP estimate will be for the 4th quarter. There is a lot of uncertainty about the ability of the Economy to continue its momentum. At this point, the different models that forecast GDP are showing a wide range of predictions – from a low of 0.8% to a high of 3.0%. So far, the Economy has proved the doom-and-gloomers to be wrong.

Consumer Economic Data Released in December 2019
Retailers had a very Merry Christmas due to a robust Holiday Buying Season. The Consumer continues to keep their wallets open. Black Friday Online Sales hit a new record of $7.4 Billion in one day. Consumer Confidence remained high despite the political infighting and Impeachment. All in all, the Consumer continues to maintain a very positive outlook for the Economy and Labor Market. This positive outlook is especially important to the Housing Market. People don’t buy homes unless they are confident in their jobs and future income prospects.
• Retail Sales rose 0.2% during November, up 3.3% in the last 12 months
• Consumer Confidence Index fell slightly to 126.5 from 126.8 the prior month
• Consumer Sentiment Index (U of M ) rose to 99.3 from 96.8 the prior month

Energy, International, and Things You May Have Missed
• Oil prices jumped due to escalating tensions with Iran (Prices as of January 3: North Sea Brent Crude about $69 per barrel, West Texas Intermediate Crude about $64 per barrel).
• Tensions with Iran are escalating after the attack on the US embassy in Bagdad.
• UK Elections: Prime Minister Boris Johnson and his Conservative Party won a landslide victory.
• Continuing Hong Kong protests are affecting their Economy. Hong Kong expects to run a budget deficit this year as Retail Sales fell a staggering 24.3% YoY.

This Economic Commentary is written to be a concise summary of the Key Economic Data that influence the Mortgage and Real Estate Industries. 

October 3, 2019

The October 2019 Mortgage Economic Review summarizes Key Economic Data and Events that are important to Mortgage and Real Estate Professionals.

We are just starting the last quarter of 2019 and getting closer to another year going into the record books. Bad news seems to have dominated the media during the last few months – geopolitical risks, global manufacturing slowdown, negative interest rates, hard Brexit, impeachment hearings, Trade War, impending Recession, etc, etc, etc…… Why is doom and gloom dominating the news when in reality the US Economy is doing fine? Wages are up, Jobs are plentiful, Inflation is low, the Dollar is strong, and the US Consumer is still buying. If you read enough Economic articles, it’s easy to get caught up in the endless stream of chatter about the next Recession that’s just around the corner. However, some commentators have gotten the impression that the media is trying to scare the Economy and Consumer into a Recession. Similar to a self-fulfilling prophecy – if you talk about it enough – it will happen. If a Recession does happen soon, it will be the most talked about and anticipated Recession in history. In the meantime, let’s look at some of the recent Economic Data that is important to Mortgage and Real Estate Professionals.

Key Economic Data and Events in September 2019
• The Federal Reserve cut the Fed Funds Interest Rate by 0.25%.
• Attack on Saudi Oil Production Facilities spiked oil prices and geopolitical tensions.
• The US House of Representatives began an Impeachment Inquiry on President Trump.
• Inflation remained low with the CPI at 1.7% YoY.
• The Economy added 130,000 New Jobs during August.
• US GDP expanded at a 2.0% annualized rate in the 2nd quarter of 2019.
• Trade negotiations with China continued.

Interest Rates and Fed Watch
The latest FOMC meeting concluded on September 18th, and as widely expected, the Federal Reserve cut the Fed Funds Interest Rate by 0.25% to a target range of 1.75% – 2.00%. However, the decision to cut rates was not unanimous among all the FOMC Committee members. One member wanted a 0.50% cut while 2 others wanted to keep rates unchanged. The FOMC Statement that was released after the meeting had an overall positive tone stating there is no sign of a Recession, the Economy is in good shape with a strong Labor Market, healthy Consumer spending, and increased Economic activity. The statement also mentioned that lower exports were more about a strong dollar than the Trade War with China. The next FOMC Meeting is October 29th and 30th. At this point, the odds of another 0.25% Interest Rate cut are running at 51%.

222 Fed Target
• Inflation 1.7% CPI for the last 12 months
• Wage Growth 3.2% for the last 12 months
• GDP Growth 2.3% annualized rate for the last 12 months

Housing Market Data Released in September 2019
Housing Data was all green this month. Existing, Pending, and New Homes Sales data were all in positive territory. The Consumer seems to be in a spending mood this year for everything – including homes. Much of the positive numbers can be attributed to lower Interest and Mortgage Rates. Mortgage Rates are so low that they were approaching the historic lows of 2012 around 3.5% on a 30 Year Fixed. Home prices are still going up, but not as fast as in the past. Home prices in Charlotte, Las Vegas, and Phoenix increased at some of the fastest rates.
• Existing Home Sales (closed deals in August) rose 1.3% to an annual rate of 5,490,000 homes, now up 2.6% in the last 12 months. The median price for all types of homes is now $278,200 – up 4.7% from a year ago. The median Single Family Home price is $280,700 and $257,600 for a condo. First Time Buyers were 31%, Investors 14%, Cash Buyers 19%. Homes were on the market an average of 31 days, and 49% were on the market for less than a month. Currently, 1,860,000 homes are for sale, down from 1,900,000 a year ago.
• New Home Sales (signed contracts in August) rose 7.1% to a seasonally adjusted annual rate of 713,000 homes – up 18.9% YoY. The median New Home price was $328,400, and the average New Home price was $404,200. The number of New Homes for sale fell 1.2% to 326,000 units from 337,000 units the previous month, which represents a 5.5 month supply.
• Pending Home Sales Index (signed contracts in August) rose 1.6% to 107.3 from 105.0 the prior month.
• Housing Starts (excavation began in August ) rose 12.3% to a seasonally adjusted annual rate of 1,364,000 units – up 6.6% YoY. Single Family Starts rose 4.4% to an annual pace of 919,000 units – up 3.4% YoY.
• Building Permits (issued in August) rose 7.7% to an annual adjusted rate of 1,419,000 – up 12.0% YoY. Single Family permits rose 4.5% to 866,000 units – up 4.5% YoY.
• Housing Completions (completed in August) rose 2.4% to an annual rate of 1,294,000 units – up 5.0% in the last 12 months. Single Family Completions were up 3.7% to 945,000 units – up 0.6% YoY.
• S&P/Case-Shiller 20 City Composite Home Price Index rose 0.02% in July – up 2.0% YoY.
• FHFA Home Price Index rose 0.36 % in July, now up 4.97% YoY.

Labor Market Economic Data Released in September 2019
The Bureau of Labor Statistics reported the Economy added 130,000 new jobs during August (160,000 expected). With this latest Labor Market Data, the Economy has created an average of 150,000 New Jobs per month for the last 6 months. This recent data may indicate a slowing of job creation in the Economy. Remember that this is only one data point and not a sign of an impending Recession. Looking at the trend, the Labor Market remains robust with record low Unemployment and strong Wage Growth for the foreseeable future.
• The Economy added 130,000 new jobs in August.
• The Unemployment Rate was unchanged at 3.7% for the prior 3 months.
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• The Labor Force Participation Rate rose to 63.2% from 63.0% the prior month.
• The Average Hourly Wage rose 0.4%, up from 0.3% the prior month, now 3.2% YoY.

Inflation Economic Data Released in September 2019
Inflation ticked up only 0.1% during August thanks to lower energy costs. The September CPI data was in line with expectations, and Inflation appears to remain in check. However, there was a bit of a surprise in the Core CPI and Core PPI data, which strips out the volatile food and energy prices. Over the past year, Core Inflation is running at 2.4% – higher than the Fed’s target of 2.0%. Let’s take a look at the trend in prices over the past 12 months in the major categories: shelter costs were up 3.4%, medical care costs up 4.3%, used vehicle prices up 2.1%, food prices up 1.7%, gasoline prices down 7.1%. The perpetual rising cost of shelter and medical care was offset by decreased energy costs over the past 12 months.
• CPI rose 0.1%, now up 1.7% in the last 12 months.
• Core CPI (ex-food & energy) rose 0.3%, now up 2.4% in the last 12 months.
• PPI rose 0.1%, now up 1.8% in the last 12 months.
• Core PPI (ex-food & energy) rose 0.3%, up 2.3% in the last 12 months.

GDP Economic Data Released in September 2019
The 3rd Estimate of 2nd Quarter 2019 GDP showed the Economy expanded at a 2.0% annualized rate (2.0% expected). This latest GDP data pegs US Economic growth at 2.3% in the last 12 months. The Economy keeps chugging along despite all the negative news in the media. Although this is a lower growth rate than the 3.1% from the first quarter, it’s still a substantial number thanks to a strong Labor Market and confident Consumer. As can be expected, lower data for trade and business investment was a drag on growth, but government spending provided a larger than expected boost to the Economy.

Consumer Economic Data Released in September 2019
US Consumers continued to keep their wallets open as Retail Sales had another good month. However, there was mixed data on how the Consumer was feeling. Consumer Sentiment jumped up while Consumer Confidence fell. What was on Consumers’ shopping list? Vehicle Sales were up 1.8%, Building Materials up 1.4%, Online Retailers up 1.6%, Health Stores up 0.7%, Sporting Goods up 0.9%, Electronics were flat, Furniture down 0.5%, Bars and Restaurants down 0.2%, Clothing down 0.9%, Gas Stations down 0.9% (due to lower gas prices).
• Retail Sales rose 0.4%, up 4.1% in the last 12 months.
• Consumer Confidence Index fell to 125.1 from 135.1 the prior month.
• Consumer Sentiment Index (U of M ) rose to 93.2 from 89.8 the prior month.

Energy, International, and Things You May Have Missed
• Oil prices spiked then backed down after an attack on a Saudi Oil facility September 14th. Prices are now lower than 30 days ago – before the attack. (Prices as of October 1: North Sea Brent Crude about $59 per barrel, West Texas Intermediate Crude about $54 per barrel).
• Brexit deadline of October 31 is approaching with much uncertainty. UK Prime Minister Boris Johnson threatened to call for a general election on October 14 if Parliament attempts to block a no-deal Brexit.
• European Yields go more negative. German 10-Year Bond yields are hovering around -0.60% and French 10-year Bond yields around -0.30%.
•
• Protests in Hong Kong continued. These protests started in March and gained strength in numbers and violence.

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Triad Expecting Growth In New Home Market
The triad is expecting to see a steady growth in the New Home Market in the coming year as lenders have shifted their focus from refinancing or distressed homes to buildings of new ones. And the Triad certainly has a surplus of lots to accommodate this shift.

This uptake of new home growth in the triad isn’t old news – but its still growing and taking shape. The main driving points behind the Triad’s new home market expanding are:

Job creation – more people are employed – able to purchase homes, increases confidence (which is up 10% from last year)
The number of unemployment claims are continuously going down. (This means that less people are leaving work against their will, and also determines how long they are out of work).

In fact, there are currently more job openings than employment separations. Meaning confidence in the economy is stabilizing – and this is easily reflected in the housing market.

Currently, new homes only make up for 9% of the total market in the Triad, but we expect that to change. Especially in counties such as Alamance, Forsyth, and Guilford.

While distressed homes do hinder the flow of building new homes, there are fewer and fewer foreclosures, which only drives the importance of building new homes up.

Alamance County can be seen for the fastest growing new home developments in the Triad with starts up 14% and closings up 16%. We like to see the starts rise and closing rise after in tandem, this indicates this growth in new home development is real and valid. Communities around Duke and UNC are being pushed into Alamance as it is difficult to find housing below $200,000 in that area. The short commute from Alamance makes this county perfect for new home development. And with 10,792 lots available – its an opportunity that should quickly be taken.

Guilford County and Forsyth County are also memorable mentions in the Triad for new home development, and ValPros looks forward to seeing how this market continues to expand over the next year. As appraisals have gone up, people are confident in the market, and there is some price stability, we expect steady growth in new home development in 2015.

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December 4, 2014

New Lending Guidelines Could Loosen Credit Standards
Fannie Mae & Freddie Mac’s easier lending guidelines went into effect yesterday and mortgage lenders are eager to take advantage of them in an ongoing effort to offset the long-term slowdown in mortgage activity. The new guidelines resulted from an agreement in October to clarify when lenders would be penalized.
Lenders benefit greatly due to the clarification on penalizations issued for mistakes in mortgages sold to the GSE’s. The lack of clarity in the past caused lenders to tighter their own lending rules, limiting potential buyers from qualifying for home mortgages.

The director of the Housing Finance Policy Center at the Urban Institute, Laurie Goodman, seems to be hopeful about the changes, stating they are “going to be big,” but it will take time to assess the full impact of the changes. The Urban Institute, a Washington think tank, earlier this year estimated that as many as 1.2 million additional home loans would be made annually if mortgage availability were at “normal” levels, substantially loosing the credit crunch that has been choking today’s economy. Economists have long maintained that tight credit could be holding back the housing recovery and damping economic growth. Such an influx in additional home loans would require lenders to streamline their businesses and manage their company with the latest technology and quality data.

After the financial crisis, Fannie and Freddie required banks to repurchase tens of billions of dollars in loans that the GSE’s said didn’t meet their standards. Since that time, many lenders tightened their credit standards; only allowing Lenders do seem split on their decisions to ease their credit standards for loans. Some lenders, such as Wells Fargo, and Bill Godfrey (Mason-McDuffie Mortgage’s CEO) are excited about the changes. Godfrey states the new guidelines will allow them to lend to borrowers with credit scores as low as 620 and expect to see changes in just a few weeks (such as faster turnaround times for mortgage applications to be processed). However, others such as Richard Davis from US Bancorp doesn’t expect to loosen credit standards as he isn’t convinced the new rules to remain permanent.

September 19, 2014

                                                                     Understanding TILA-RESPA

Sections 1098 and 1100A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) direct the CFPB to publish rules and forms that combine certain disclosures that consumers receive when applying for and closing on a mortgage loan under the Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (Regulation X).

The TILA-RESPA Integrated Disclosures Rule’s purpose is to improve the way consumers get loan information when they apply for and close on a mortgage. On August 26, 2014, the CFPB and Federal Reserve Board co-hosted a webinar to address questions about the final TILA-RESPA Integrated Disclosures Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015.

This rule effects two major federal regulations, consumers’ experience in shopping for and closing on mortgages, and almost the entire residential real estate industry. The requirements are about two disclosure documents, the Loan Estimate and the Closing Disclosure. After proposing the initial rule, the CFPB received over 3,000 comments, which they analyzed before responding. After finalizing the rule, it is important to understand the differences between the proposal and the rule itself, as well as what the rule does.

It’s important to understand the difference between the proposal and the rule as there were many significant changes.

Now that we understand the key differences, it’s important to understand the rule itself. The final rule applies to most closed-end consumer mortgages. It would not apply to home-equity lines of credit and reverse mortgages. The new rule contains new rules and forms for two disclosure forms consumers receive in the process of getting a mortgage loan: the Loan Estimate, and the Closing Disclosure.

mortgagecompliancemagazine.com

The Loan Estimate must be provided to the consumer within three business days (days the lender is open) after application, this replaces the “Good Faith Estimate” required under RESPA and the “early Truth-in-Lending” required under TILA. If a lender decides to use a mortgage broker, the lender still retains responsibility for ensuring the consumer is provided the Loan Estimate. The consumer may not be charged any fees until after the Loan Estimate is provided and the consumer has decided to proceed with the transaction (exception for the costs of credit checks only).

The lender is required to give the Loan Estimate if the consumer provides the following: Consumer name, income, social security number (for credit report), property address, estimate of the value of property, mortgage loan amount sought). The “other relevant information” currently permitted under RESPA has been removed from the current rule, however creditors are able to collect whatever information deemed necessary for the extension of credit as long as they can provide the Loan Estimate once the above six pieces of information are given.

The Closing Disclosure merges and replaces the final “TIL” statement and the RESPA-required HUD-1 settlement statement. It is five pages long and combines five pages of old forms, plus new disclosures required by the Dodd-Frank Act. The Closing Disclosure is required by the new rule and reflects the actual terms of the transaction. The creditor is required to make certain the consumer receives the Closing Disclosure no more than three business days before consummation of the loan.

The Closing Disclosure must contain the actual terms and costs of the transaction. Creditors may estimate disclosures, however, they must act in good faith and use due diligence in obtaining the information. The Closing Disclosure must be in writing, and if the actual terms or costs of the transaction change prior to consummation, the creditor must provide a corrected disclosure that contains the actual terms of the transaction.

This was the first of many webinars, and according the to CFPB, will be hosted in a Q&A format to facilitate clear guidance. Industry members have historically preferred written guidance.

The CFPB has announced they will soon release additional guidance on their website, including (but not limited to) a timing calendar for various requirements under the new rule.

Next webinar date: October 1, 2014 – to cover Loan Estimate and Closing Disclosure content.

CFPB Disclosure Forms & Compliance Guide

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September 17, 2014

The Credit Box Opens
Since the great depression, housing starts have nearly doubled. More recently, strong investors have been buying properties in distress at a insatiable rate, driven by low house prices and strong rental demand, but as that trend began it’s decline, first time homebuyers have stepped up to fill the void. These shifts have helped stimulate much of the United State’s economic growth. Although mortgage rates are still low (historically speaking) they have risen overall in the past few decades.

The constriction of credit is driven by multiple factors. First, lenders have reassessed how much risk they are willing to take on, often due to the increased cost of servicing distressed borrowers and the legal risks with servicing defaulting loans. Also, rising interest rates coupled with a smaller refinance market has changed the industry’s resources for refinancing. These factors joined with ever changing rules and reforms are keeping lending tight. Therefore, easing mortgage lending standards to help new homebuyers obtain loans is crucial to our economic recovery. Currently, new homebuyers are close to dominating the market; with Texas and Colorado leading the way.

The reasons for the tight credit box are as complex and vast as the solutions, but it seems large lenders will step up to the plate, and be the first to open up the credit box.
According to Fannie Mae’s third-quarter Mortgage Lender Sentiment Survey (which polls senior executives of its lending institution customers), large lenders are more likely to ease their credit standards in the next three months, with an emphasis in non-GSE-eligible and government loans. Fannie Mae suggests this could indicate an effort to boost purchase mortgage before the end of the year.
Doug Duncan, senior vice president and chief economist at Fannie Mae believes they are tapping into this market to “maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end”.

This trend is already evident, as Citigroup and Bank of America announced they will begin offering mortgages at discounted interest rates to help borrowers with low incomes or subprime-credit histories. Wells Fargo reduced some of its standards in August for high-priced loans.

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April 30, 2014

When Not to Use an AVM

Selling your home is one of the most important financial transactions for any family. Some Realtors and sellers rely on Automated Valuation Models (AVMs) or “free value estimates” to determine a home’s sale price. These valuations are created in cities far away by a person on a computer who may never see your property. They rely on data gathered from a hodge podge of sources, some of which are shockingly unreliable. They mix the data up and then spit out a “value” that may or may not be accurate. Perhaps you’ve spent thousands on kitchen renovations, bathroom updates or invested in a new addition that adds value to your home. No far away person on a computer takes these improvements into account. Simply put, relying on that data instead of a professional appraiser can result in disaster.

Realtors, sellers and even home buyers are sometimes in a rush to close on the sale. A professional appraiser is unbiased, carefully considering all the aspects of your property to create an accurate valuation of your home’s worth. Backed by a professional appraisal of your specific property, your asking price will have significantly more credibility. Potential buyers will take note and so will their prospective lenders.

If you’re selling a home, order a real appraisal from ValPros for a valuation you can trust. We are professional appraisers with years of experience, based in Kernersville, NC. We know your neighborhood and your housing market. Plus, we actually come to your home and evaluate the features, upgrades and specific amenities of your property. No computer can compare.

March 12, 2014

The Difference Between On and Off Frame Modular Homes

Have you ever wondered what the difference is between an on-frame modular and an off-frame modular? Here’s a quick video that illustrates the difference.

Watch the video on YouTube

On-Frame modular homes are constructed in a factory to UBC or BOAC or CABO or other local building codes on a steel undercarriage and towed to the site. They are eligible for Freddie Mac, VA and FHA financing, but they do not qualify for loans that will be sold to Fannie Mae.

Off-Frame modular homes are also constructed in a factory to UBC or BOAC or CABO or other local building codes, but they are on wood floor joists and are hauled to the site. They are eligible for all types of financing.

January 7th, 2014

2014-15 USPAP Modifications Released

In order to assist our clients to become familiar with the new 2014-15 modifications to USPAP effective January 1, 2014 ValPros has prepared a brief summary outlining the modifications.

The Appraisal Standards Board (ASB) 2014-15 modifications to USPAP become effective January 1, 2014. These modifications include:

1) Revisions to the DEFINITIONS of “Assignment Results” and “Scope of Work” — Based on comments received, there was a need to clarify the definition of ‘Assignment Results.’ In an appraisal assignment, assignment results currently include more than just the appraiser’s opinion of value, as the appraiser is responsible not only for the opinion of value, but for the other opinions formed as part of an appraisal or appraisal review assignment. The change to the definition was made to clarify this point. The change to the definition of Scope of Work makes it consistent with the application of the SCOPE OF WORK RULE.

2) Revisions to the PREAMBLE—When Do USPAP Rules and Standards Apply — A section was added to clearly state when the Rules and Standards apply.

3) Certification Requirement Related to Current or Prospective Interest and Prior Services — The ETHICS RULE was edited to clarify that in assignments in which there is no appraisal or appraisal review report, only the initial disclosure to the client is required—a certification is required only for appraisal and appraisal review assignments.

4) Revisions to the COMPETENCY RULE — The COMPETENCY RULE has always required that an appraiser be competent to perform the assignment, or acquire the necessary competency to perform the assignment, or withdraw from the assignment. However, the COMPETENCY RULE previously did not expressly require the appraiser to act competently in the given assignment. The change to the COMPETENCY RULE now clearly states that the appraiser must perform competently when completing the assignment.

5) Report Options in STANDARDS 2, 8, and 10 — USPAP previously had three written report options for real property and personal property appraisal assignments: Self-Contained Appraisal Report, Summary Appraisal Report, and Restricted Use Appraisal Report. USPAP now has two written report options, Appraisal Report and Restricted Appraisal Report, for real property and personal property appraisal assignments; this is similar to STANDARD 10 Business Appraisal Reporting. In STANDARDS 2, 8, and 10, the “restricted use” report option name was changed to Restricted Appraisal Report.

An Appraisal Report must summarize the appraiser’s analysis and the rationale for the conclusions. A Restricted Appraisal Report might not include sufficient information for the client (no other intended users are allowed) to understand either the appraiser’s analyses or rationale for the appraiser’s conclusions.

Additional edits were made to the minimum report requirements. In Standards Rule 2-2(a)(i), clarifying changes were made regarding intended users. The order of the requirements in subsections (iii) and (iv) within Standards Rule 2-2(a) were rearranged. In Standards Rule 2-2(a)(vi), the date of report was defined. In Standards Rule 2-2(a)(vii) and 2-2(b)(vii) the statement, “The signing appraiser must also state the name(s) of those providing the significant real estate assistance” was edited. The new statement eliminates the signing appraiser, and states “The name(s) of those providing the significant real property appraisal assistance must be stated in the certification.” In Standards Rule 2-2(a)(viii), “agreements of sale” was added. In Standards Rule 2-2(a)(ix) and 2-2(b)(ix), the statement was divided with the last part of the statement becoming Standards Rule 2-2(a)(x) and 2-2(b)(x). The remaining items under these Standards Rules were renumbered. Similar changes were made to Standards Rules 8-2 and 10-2.

Lastly, to be consistent with items identified in the development requirements of Standards Rule l-2(e)(i), an edit was made to Standards Rule 2-2(a)(iii) to include the summarization of legal characteristics relevant to the assignment. This edit is not viewed by the ASB as a new requirement; rather, it clarifies legal characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal must be communicated.

6) Revisions to Standards Rule 3-5 — STANDARD 3 now requires a date of the appraisal review report which makes STANDARD 3 consistent with the other Standards which require the date of the report.

7) Retirement of STANDARDS 4 and 5 — STANDARDS 4 and 5 addressed real property appraisal consulting development and reporting. STANDARDS 4 and 5 have been retired due to the confusion and misuse of these Standards. Revisions and additional illustrations were made to Advisory Opinion 21 to demonstrate how an appraiser can complete assignments that include services other than appraisal or appraisal review. The use of the term “appraisal consulting” has been eliminated in USPAP.

8) Revisions to Advisory Opinion 11, Content of the Appraisal Report Options of Standards Rules 2-2 and 8-2 and Advisory Opinion 12, Use of the Appraisal Report Options of Standards Rules 2-2 and 8-2 — Due to the changes in the reporting format options, Advisory Opinions 11 and 12 were edited to demonstrate the impact of these changes. In addition, the scope of these two Advisory Opinions was expanded to include Standards Rule 10-2.

9) Revisions to Advisory Opinion 13, Performing Evaluations of Real Property Collateral to Conform with USPAP — Due to changes in the Interagency Appraisal and Evaluation Guidelines effective December 2010, Advisory Opinion 13 has been revised.

Administrative edits were also made to USPAP and all guidance material, including the USPAP AdvisoryOpinions and USPAP Frequently Asked Questions, for conformity and consistency. The details of the changes to the 2014-15 edition of USPAP can be read on The Appraisal Foundation’s website, www.appraisalfoundation.org in a document entitled 2013 Summary of Actions Related to Proposed USPAP Changes.