Category: Coester Appraisal Group

UAD/UCDP Seminar

Coester Appraisal Group’s educational slideshow regarding the upcoming requirements for the Uniform Collateral Data Portal/Uniform Appraisal Dataset.

DS News

The nation’s Capitol stands out as the “shining star” in nearly every market report that crosses the wire.

Washington, D.C. has consistently defied the recent declines in home prices. The latest S&P Case-Shiller index upheld D.C. as the only city where home prices are increasing on both a monthly and annual basis. That coincided with an official “double dip” in home prices at the national level, brought on by new cycle lows for home prices in such markets as New York, Chicago, and Minneapolis.

Sales activity likewise bucks widespread trends. New numbers from RealEstate Business Intelligence, LLC shows that the number of contracts signed for purchases of D.C. homes in May 2011 was the most for any month of May going back to 2005. RBI says the average number of days a property sits on the market is now 68, the region’s shortest sales cycle in seven months.

So how has D.C. been able to weather the ongoing storm? Industry insiders who live, work, and play in the area say the D.C. market can’t rightfully be used as an apples-to-apples parallel because other markets just don’t stack up.

Foreclosure activity, too, has been almost non-existent of late, thanks to what Jeffrey Fisher of the Fisher Law Group in Maryland explains as “an unofficial moratorium” that’s been in place since last November.

RealtyTrac’s latest foreclosure report pins 28 foreclosure filings on D.C. for the entire month of April.

The lull in foreclosures, though, could soon come to an end. The temporary freeze followed the signing of the Saving DC Homes From Foreclosure Emergency Act signed by Mayor Adrian Fenty late last year. Lenders laid off foreclosure actions until the act’s foreclosure mediation procedures could be put into place.

The procedures became effective May 25th. The new law requires lenders to notify delinquent borrowers of their right to a mediation session prior to foreclosure.

The rules lay out a strict timeline for the pre-foreclosure mediation schedule should the borrower request it, and hefty fines that accumulate daily should a lender fail to meet certain criteria, for example, a $500 a day penalty for any missing documentation or failing to negotiate “in good faith.”

According to a statement from D.C.‘s Department of Insurance, Securities, and Banking, “This emergency rulemaking is necessary…to provide important safeguards to protect residents of the District of Columbia who have a mortgage default and face the danger of losing their homes to foreclosure.”

The department says additionally, “the immediate commencement of the program will enable residential mortgage lenders to reduce expeditiously the backlog of mortgage defaults that have accumulated.”

Rosenberg & Associates is Freddie Mac-designated and Fannie Mae-retained attorney counsel for the District of Columbia. Azer Akhtar, an associate with firm, says he expects the new mediation rules to lengthen the process. He notes that the pre-foreclosure progression alone is now 120 days under the mediation timeline.

The emergency mediation rules are in effect for 120 days from the May implementation date, unless the Department of Insurance, Securities, and Banking decides to make them permanent.

“We think that will happen,” said Mark Meyer, a senior associate with the Rosenberg firm.

While foreclosures have been sitting dormant for six months now, Meyer says he doesn’t expect a surge in foreclosure activity. He says D.C. might experience an artificially high number of filings once lenders fall into place with the new rules two or three months down the road, but beyond this initial wave, Meyer expects the area’s anomaly of stability to be evident.

“The lingering question right now,” Meyer said, “is what the title insurers have to say about it” since failure to comply with the new law could raise title issues in the future if the validity of foreclosure is questioned.

While it might seem rational to tie D.C.‘s defiant market performance to the absence of foreclosure properties because of the temporary moratorium, local experts don’t see that as the defining factor.

Brian Coester with the Coester Appraisal Group based just outside of D.C., says the metro “has not been as negatively affected by the whole foreclosure meltdown” as other hard-hit markets, and he says, properties move fast.

“People snatch up homes so quickly, it’s just incredible,” according to Coester. Some areas – areas that are 700K to 800K – “haven’t even skipped a beat at all,” he says.

Coester points to the fact that in D.C. “you’re dealing with relatively high demand in a limited geographical area.”

He says no other area in the U.S. has similar economic situations because of so many factors that favor high real estate prices, such as limited zoning, strong economic support from the money that goes along with the nation’s political hub, and the inflow-outflow dynamic of people always moving through the area for work or business opportunities.

As Coester puts it, Washington D.C. is just “a different animal.”

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Mortgage News Daily

We have 18 months until the presidential election, and already things are heating up. The financial community is closely following Donald Trump’s campaign, with the slogan is rumored to be: "We Shall Overcomb!" And if he runs and wins, there will be hell toupée.

Wake me up when this is over. Legislators have introduced a proposal to eliminate two companies (Fannie & Freddie) who have a government guarantee, and replace them with five private companies who will also have a government guarantee? What am I missing here? I need to finish my half-completed Jamba Juice application. And how do we mesh that with the stories in the news this morning? "Some Republican lawmakers, as well as other officials and insiders, are concerned that regulators implementing the Dodd-Frank Act are not resolving the problem that some financial institutions are ‘too big to fail.’

Regulators told the Senate banking committee that they are dealing with the issue. ‘A major thrust of the Dodd-Frank Act is addressing the too-big-to-fail problem and mitigating the threat to financial stability posed by systemically important financial firms,’ said Federal Reserve Chairman Ben Bernanke." On top of that, "Several top regulatory positions will be vacant or filled by caretakers when financial regulators next meet to discuss their progress toward changing regulations for the financial industry. The White House has not announced plans to fill several positions, including chairmanship of the Financial Deposit Insurance Corp." And lastly, "Sheila Bair, chairman of the FDIC, said major financial institutions should be subject to higher capital requirements than proposed. Bair wants the big banks to prove that winding them down would not be a problem if they become insolvent. ‘I believe we should impose even higher capital charges on systemic entities until they have developed a resolution plan which has been approved as credible by their regulators,’ Bair said."
When I speak to various groups, I remind them of the role that the rating agencies have had in the credit crisis, as there is certainly plenty of blame to go around. Investors have been trying desperately in recent years to force credit rating agencies to answer for at least some of the severe losses suffered in the wake of the mortgage meltdown, but that became much harder following a ruling yesterday by the Second Circuit. It held that Moody’s, Standard & Poor’s and Fitch Ratings can’t be held liable for their ratings of mortgage-backed securities. In a story in the Wall Street Journal, the court said that ratings firms provided "merely opinions" about the credit-worthiness of mortgage- backed securities, and such opinions are entitled to First Amendment protection. "But perhaps all is not lost for investors…investors have sued rating agencies under different theories, including negligence and negligent interference with prospective economic advantage. And these sorts of claims are not affected by the Second Circuit’s ruling."

Here is a quick licensing update regarding the Mortgage Call Report. "Will NMLS place a deficiency on our company license if we don’t complete the Q1 MCR filing by May 15?" The answer is, "No. Due to the truncated time period between the launch of functionality and the deadline for the Q1 MCR filing, the system will not begin applying license deficiencies related to the Q1 MCR until June 16."

Coester Appraisal Group, a nationwide appraisal management company, has launched a 100% repurchase guarantee program that protects its clients against appraisal based buybacks. "Coester Appraisal Group will guarantee all original appraisals it completes moving forward. The guarantee is applicable for any appraisal-based repurchase request as long as the loan is in good current standing and not in any stage of delinquency." For details (and no this isn’t a paid announcement) go to CoesterAppraisals.

The program appears to be similar to a program that Wells Fargo may be rolling out, titled "Collateral Valuation Warranty Program." "Determining collateral value is an integral and key component of the mortgage loan underwriting process.  The accuracy of the valuation is essential for the lender to properly assess the collateral property pledged as security for the mortgage loan and for determining the Loan-to-Value ratio.  Insuring various methods of valuation by a warranty, and backed by an Errors & Omissions insurance policy, provides added assurance of the correct value to the investment community. The warranty comes in the form a Service Agreement between appraisal vendor and lending institution, in which the carrier indemnifies the appraisal vendor for accuracy of the actual value as of the date of the report. The appraisal vendor has obtained an Errors & Omissions policy that covers losses from claims filed against them as a result of an error in the property value that results in lender loss."
One reader wrote, "Guarantees like this would extend to certain loans, as collateral is only a portion of the credit decision – even if they claim it’s an ‘appraisal based repurchase.’ I do not think I would offer this guarantee on anything over 65% LTV given the volatile conditions that prevail in most housing markets. Any company offering a guarantee like these must have plenty of business rules and good screening in place before a deal is eligible for this kind of guarantee, I would think the requirements are pretty stringent."

For company news, Discover Financial Services has agreed to buy, for about $56 million, the mortgage assets of Home Loan Center, a unit of Inc. Discover is primarily a credit card lender but is looking to boost its revenue – and what better way than in mortgage originations? reported its first-quarter loss widened as selling and marketing expenses jumped, and revenue fell 25% to $33.4 million.

Ellie Mae (owner of LOS Encompass) first-quarter loss narrowed on higher revenue and margin. Ellie makes money through fees not only from originators but also from lenders and servicers who book business through the network, although in the latest period Ellie Mae posted a loss of $799,000, compared with a year-earlier loss of $1.6 million. Revenue increased 19% to $10.6 million, gross margin rose to 68.3% from 65.4%, and active Encompass lenders were up 18%.

Freddie announced that their poll shows 30-yr mortgage rates are at their lowest level of the year. (One leading economist told me that, basically, it is probably more important to pay attention to the trend in Freddie’s weekly numbers rather than the number itself.) And although many resetting ARM loans are actually seeing their rates drop, some pickup in refinancing activity is expected. On the other hand, refi activity remains constrained by tight credit conditions, continued weak or even stable home values, higher LLPAs (loan level pricing adjustments), and reduced competition amongst originators.

The guys were all at a deer camp. No one wanted to room with Bob, because he snored so badly. They decided it wasn’t fair to make one of them stay with him the whole time, so they voted to take turns.

The first guy slept with Bob and comes to breakfast the next morning with his hair a mess and his eyes all bloodshot. They said, "Man, what happened to you?" He said, "Bob snored so loudly, I just sat up and watched him all night."

The next night it was a different guy’s turn. In the morning, same thing, hair all standing up, eyes all bloodshot. They said, "Man, what happened to you? You look awful! He said, ‘Man, that Bob shakes the roof with his snoring. I watched him all night."

The third night was Fred’s turn. Fred was a tanned, older cowboy, a man’s man. The next morning he came to breakfast bright-eyed and bushy-tailed. "Good morning!" he said. They couldn’t believe it. They said, "Man, what happened?"

He said, "Well, we got ready for bed… I went and tucked Bob into bed, patted him on the rump, and kissed him good night. Bob sat up and watched me all night."

If you’re interested, visit my twice-a-month blog at the STRATMOR Group web site located at . The current blog considers the near and longer-term outlook for jumbo lending.  If you have both the time and inclination make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

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MBA Newslink

Appraisal management companies and technology firms continue to traverse new regulations to determine more accurate home valuations.

“It really comes down to what we can do for the appraiser so that they can produce a transparent, irrefutable valuation without having to go through a lot of underwriting, second guessing and everything that goes on today,” said Jeff Bradford, president of Bradford Technologies, San Jose, Calif.

“The issue is that the appraisal today is an opinion of value," Bradford said. "And you could have an opinion and I can have an opinion and the appraiser who is the expert, and a local market expert, has been deemed to have the best opinion. Unfortunately, because of pressure and fraud, that opinion has not really stood the test of time. So that trusted advisor is no longer a trusted advisor. They have lost credibility. That needs to be brought back up, and that is why so much of this geographic competency. Are they really local? Do they really know what they are doing?”

Fannie Mae and Freddie Mac, for example, adopted regulations to relieve pressure on appraisers from outside parties for a true measure of home valuations.

Brian Coester, CEO of Coester Appraisal, Rockville, Md., said lenders adjusted to the GSEs’ Home Valuation Code of Conduct, through hired appraisal management companies, but he said the model does not necessarily correlate to accurate valuations.

“We need to focus on how are we make sure that the appraisal is right and accurate because all the AMCs, all the software companies can theoretically guarantee is compliance,” Coester said. “They cannot guarantee value.”

“History is our best teacher,” said Vladimir Bien-Aime, CEO of Global DMS, Lansdale, Pa. “Looking back, we had this happen before–the savings and loans crisis, for example. It seems like a cycle gets out of hand, things crash, they regulate the heck out of it, and then [regulations] loosen up a little bit after a little bit, a little bit after a little bit until it is engine full steam ahead again, and then we will end up right back where we were. It just needs more checks and balances. We already have this in society, but these things need to be kept in check or they get completely out of control.”

The Uniform Appraisal Dataset, a mandatory initiative from Fannie Mae and Freddie Mac set for September 1, could turn AMCs into data warehouse providers, which could assist in more definitive property descriptions.

Through the UAD, Fannie Mae and Freddie Mac would validate standardized appraisal data prior to loan purchases. Bradford noted that while UAD should increase automation, appraiser property descriptions could narrow.

“In the beginning, it will hinder their productivity but, as they get fast at it, the power users are going to cruise through it,” Bradford said.

“On the lender side, they now need to comply with these regulations on the appraisal review side,” said Arturo Garcia, COO at Platinum Data Solutions, Aliso Viejo, Calif. “When an appraisal comes in, what doyou do with it? Is a lender consistent from one department to the next? Is it consistent from one underwriter to the next? Well, the threat there is that if [lenders] implement a policy, it should include technology because then they can automate many of these processes. They add analytics tied to that, and then it can help them do better quality control in their loan processes and their valuations because now they have data to do it with.”

“And there is going to be quality control,” said Jennifer Creech, president and COO of In-House Inc., Ponte Vedra Beach, Fla. “Even in the UAD, they are going to be seeing if appraisers have over-adjusted properties. And it is going to be important that the lenders know that that appraisal is acceptable before they ever settle on it because it is about a multi-tiered process. Small lenders are selling to larger lenders who are then selling to the GSEs. [Lenders] do not want to have a loan bought back three, four, five months later.”

Bradford said appraisers must look to the future and the past through regression analysis to determine accurate valuations.

“Looking forward, this is where you look at the housing supply, you look at the absorption rates and if that housing supply gets out there and the absorption rate is low, it is a price-elasticity [effect], and so price is going to go down. If you want to move your house right away, price will go down,” Bradford said. “If you can wait nine months or six months, whatever the supply or absorption rate–you might get your price. But it’s all price elasticity, looking at what is out in the future. This is analytics, this is market analysis.”

“That is why UAD is going to be very important,” Creech said. “We are going to become data warehouses of these data sets, and it will be important to assign the appropriate appraiser who has the competency to complete the scope of work.”

For example, in the next year or two, by using acquired data, appraisal management companies could recognize licensed appraisers in different geographic regions with experience in certain transactions.

Creech said a “firewall and separation” between appraiser and lender can complete the scope of work without any undue pressure outside, and analytics and data behind them can help make sense behind the values.

“We want a true value,” Creech said. “Whether it is high, low, down, up, we want it to be accurate.”

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On April 9th, 2011, Coester Appraisal Group’s CEO, Brian Coester teamed up with Branded Productions in Hatfield, PA for our new mobile application commercial that will be debuting soon. Here is a behind the scenes sneak peek at what’s to come.

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