Increasing Concerns over Commercial Real Estate, Commercial Loans & Community Banks
Published reports concerning the weakening commercial real estate market and lack of commercial lending have increased in recent days. This, of course, is of little surprise to many commercial real estate appraisers who are finding a substantially reduced demand for mortgage appraisal purposes. An article on October 12th by John Mason that discusses the lack of commercial lending and the problems faced by smaller banks can be viewed by clicking on the following link: Commercial Real Estate Lending Problems Hitting the Smaller Banks.
On October 14th, the Wall Street Journal reported the following about FDIC Chairman Sheila Bair’s prepared remarks prior to her testimony before a Senate subcommittee about the state of the banking industry:
“…federal regulators will soon issue guidance on [commercial real estate] loan workouts. Commercial real estate is seen widely as one of the biggest dangers facing the banking industry, as heavy losses in this area are crushing many community banks and eating into bank capital. These loans often prove more difficult for banks to work out than residential mortgages.
The agencies recognize that lenders are borrowers face challenging credit conditions due to the economic downturn, and are frequently dealing with diminished cash flows and depreciating collateral values…Prudent loan workouts are often in the best interest of financial institutions and borrowers, particularly during difficult economic circumstances and constrained credit availability. This guidance reflects that reality, and supports prudent and pragmatic credit and business decision-making within the framework of financial accuracy, transparency, and timely loss recognition.”
On October 21st, the Journal reported on the Obama administration’s proposal to boost small business lending and the importance of community banks. This article can also be read in its entirety by clicking on the following link:
For Community Banks, Obama Plan Poses Fresh Concerns
Does this bode well for increased business for commercial real estate appraisers in the future? It might, but the upside to a down market can be a significant increase in appraisals for tax grievance and appeal. The Wall Street Journal on October 13th discussed the increase in commercial property owners grieving their real estate tax assessments in an article titled Entrepreneurs Take On Tax Man
Continued Concern Over the Residential Housing Market
For those of you who haven’t been involved in the residential sector, here is the October 22nd Wall Street Journal Article that summarizes numerous concerns: Waiting for the Next McMansion to Drop
In our last newsletter, we provided a link to an interesting map which graphically depicts U.S. credit conditions. In consideration of all that we have described in this newsletter, we still find this map interesting and here is that link again: U.S. Credit Conditions - Federal Reserve Bank of New York
So, How Many Appraisers Are Really Left on the FHA Roster?
A representative of the FHA reported to us that their most recent count received last Friday October 23rd indicated that on October 5th there were 50,697 certified appraisers on the FHA roster with 11,258 licensed appraisers in an “inactive” type status. The FHA is maintaining their information in its database (but suppressing it from the public domain) in order to quickly add them to the roster when they fulfill the requirements and become certified. At this time, upon receiving information that an appraiser has completed those requirements and is certified they are placing the appraiser back on the FHA roster within 7 to 10 days.
While no study has been made as to geographical areas where there are shortages, the representative indicated that there were clearly states (i.e. Michigan) where the removal of licensed appraisers was being felt.
Correction From Last Newsletter
The sentence “Here are a few of the e-mails we received in response to our last newsletter which supported the removal of licensed appraisers” should have read reported the removal. While we are very much in support of increased education and training for appraisers and measures that enhance the overall professionalism of appraisers, we admit to being moved by many of the calls and e-mails from long-time FHA appraisers who were being removed from the FHA roster. While the FHA had no alternative to this removal, being under a Congressional mandate to do so, the blanket removal of licensed appraisers without the possibility of exceptions for unusual or hardship cases has resulted in the loss of a good number of experienced, qualified appraisers whose absence from the FHA roster will be felt.
Weekly Reminder to Continue Promoting Your Appraisal Practice
After everything that has occurred during the past year, it is still surprising to us when we speak with appraisers who expect business to magically appear without any expenditure of time, effort or money on their part. You must invest in your appraisal practice (i.e. Bar Association journals, professionally prepared direct mail marketing, increasing your on-line presence, etc.) or you are putting your business at risk.
Develop your professional skills: when business is slow, not only take steps to change that situation but take new classes to expand your appraisal skills.
As always: Continue to work on building your private appraisal practices for periods when mortgage appraisal work is slow. There is a lot of non-lender work (i.e. divorce, estate, bankruptcy, tax grievance and appeal, etc.) available for those who take the time to learn how to do it and market themselves properly!
The Mortgage Bankers Association reported that 30-year fixed rate mortgages increased from 5.02% to 5.07% in the most recent weekly period studied (ending 10/16/09). Along with this increase, the Association reported a sharp decline in mortgage loan applications with volume down 13.7% from the previous week. Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts - Mortgage Bankers Association
Name the public figure responsible for the following quote:
"I come from Main Street. That's my background. And I've never been on Wall Street. And I care about Wall Street for one reason and one reason only: Because what happens on Wall Street matters to Main Street."
The Choices are:
1: Timothy Geithner, Secretary of the Treasury
2. Ben Bernanke, Chairman of the Federal Reserve
3. Bernard Madoff, Federal Penitentiary
4. John Barrymore, Main Street Cleaners
We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!
We really hope you find our newsletter to be informative! If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue. If you want to look back at past issues you can see our archive at www.appraisernews.com
Regards,
Bill Collins, Appraiser Help Inc.
Real Estate Appraiser Directory - Appraiser Help
Posts
