Freddie Mac posts long awaited HOME VALUATION CODE OF CONDUCT (HVCC) on their website today

The Code of Conduct has a number of main concerns including sections addressing the issues of Appraiser Independence Safeguards, Appraiser Engagement, Prevention of Improper Influences on Appraisers, establishment of The Independent Valuation Protection Institute and Scope of the Code.

No doubt, this detailed document will be much discussed, interpreted and clarified in the days ahead, but at first glance it appears as though:

--An Independent Valuation Protection Institute is to be established

--This Institute will receive complaints for review and referral regarding non-compliance with the Code of Conduct

--The Code of Conduct applies to Freddie Mac and Fannie Mae, not FHA

--Some sensible provisions designed to prevent coercion of appraisers are being enacted.

--Various "firewalls" are to be constructed with the goal of separating mortgage loan production functions and appraiser selection.

--The final nail in the "Comp Check" coffin may have been driven.

--Nothing in the Code of Conduct mandates the usage of appraisal management companies.

The full text can be found by following this link: http://www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf

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.fhaappraisernewsletter.com
Regards,
Bill Collins
bill@fhaappraisers.com
www.fhaappraisers.com
www.fharoster.com
(877) 4FHA-VALU

An Open Letter to President-Elect Obama

Like many Americans, I am excited about your upcoming administration, but concerned about the steep challenges that await.

So much about your election represents what is best about this country. We are still a land of opportunity, a place where qualifications matter and the "cream can rise to the top." While the playing field is not always level, at least we are all on the field and can get in the game.

We are a forward looking people for the most part and feel that better days may be ahead. It may take some hard work and involve tough decisions but Americans are ready to pitch in.

Your usage of the internet during the election campaign was exciting and a lesson to all of us that we need to continually strive to utilize the latest technology and remain competitive in the marketplace, whatever our industry or profession may be.

No one has elected me to any positions recently, but I have the honor to be both a real estate appraiser and part owner of an internet advertising directory for appraisers. As such, I also feel a responsibility to share some thoughts with you as to the precarious state of the profession and the possible impact of various regulatory decisions.

The past year has been disastrous for many appraisers due to the frozen credit market, reduced lending and reduced demand for appraisals. Many appraisers have left the profession and I say to a large percentage of them good riddance! During the crazy period earlier this decade, the appraisal profession was invaded by thousands of individuals who were both inadequately trained and ethically bankrupt. These form-filling, number-hitters joined forces with similarly morally challenged and opportunistic loan originators in a grand scheme which helped make many wealthy and contributed to the mortgage meltdown.

Many qualified, honest appraisers left the profession as this unfolded, but many still remain, of which a substantial number are struggling financially. The economic crisis which developed during the past year drove a dagger into an already wounded profession which was reeling from a loss of business to the corrupt bunch that teamed with corrupt loan officers and garnered the bulk of appraisal business.

There is no doubt that the appraisers who are now suffering are not completely blameless. Many could have diversified their appraisal practice away from a reliance on residential appraisals for mortgage purposes, and many could have been more courageous and taken stronger action against the corrupt group that was destroying the profession.

There is no turning the clock back to a golden age for appraisers, however, and appraisers are not looking for any handouts or bailout. Good appraisers, though, can play an extremely important role in the overall complex solution to the lending system, which we all agree is broken. Automated valuation models and complex statistical constructs, inadequate by themselves and capable of producing grossly misleading results, can be used by well trained appraisers to support valuations that can truly be relied upon by mortgage professionals.

We are all too aware now of the fallacy of relying on complex financial derivatives with uncertain assets at their core. Alan S. Blinder, the respected professor of economics at Princeton and former vice chairman of the Federal Reserve wrote in the New York Times on 12/21/08, "There were several rationales for buying troubled mortgage-backed securities. First, panic had virtually shut down the markets for these securities-markets that must be restarted to restore our system of mortgage finance. Second, one source of that panic was that nobody knew what the securities were worth. A functioning market would establish objective valuations."

Don't let the fox back into the hen house! While many of the corrupt mortgage brokers and lenders who pressured appraisers to "hit their numbers" have moved on, some reportedly to "foreclosure help" schemes, others becoming involved in so-called appraisal management companies ("AMC's) where they can still pressure the appraiser. Theoretically, AMC's should operate as a firewall between the loan originator and the appraiser. In reality there is pressure on the appraiser; while more sophisticated and less direct, it can be equally effective in achieving fraudulent results through the selection of appraisers who "play the game."

At the same time, many AMC's contribute little of value while "picking the appraiser's pocket" for maybe 30% to 50% of the appraisal fee. The result is that appraisers who actually fully research their appraisal assignments are quitting this now unprofitable business, leaving a diminished pool of appraisers, many of whom are less qualified and quick to take foolish shortcuts in their appraisal analysis to remain profitable.

While new regulations are needed, lets make sure they are smartly conceived. Some reforms can be found in the marketplace itself, such as competition between AMC's which drive down their share of the appraisal fee leaving more for qualified appraisers. Striving for transparency in all parts of the loan process is important and will reduce opportunities for fraudulent acts. Let's take the deal making out of the back rooms and shine the spotlight on the process, utilizing our most advanced technology to ensure trustworthy valuations and mortgage securities that have value that can be quantified and truly relied upon.

Sincerely,

Bill Collins

FHA Certification Requirement Delayed until 10/09

The U.S. Department of Housing and Urban Development, in Mortgagee Letter 2008-39, has just announced that the implementation date for the requirement that all appraisers be state certified (certified residential or certified general) has been extended until October 1, 2009.

The mortgagee letter states that: "Although Section 202(f) of the National Housing Act was made effective upon enactment, FHA has determined that the loss of available FHA Roster appraisers in certain locations will impede its ability to support affordable mortgage financing in those areas, which would contravene the goals of the HOPE for Homeowners Program and hinder use of other FHA single family programs at a time when use of those programs has increased significantly."

Appraisers interested in reading the complete mortgagee letter can find it at www.fha.gov, then click on "Access Mortgagee Letters and Handbooks," click on "2008 Letters" and then click on "08-39FinalML-Revised FHA Roster Requirements."

As we have advocated for many months, it is highly recommended that licensed appraisers interested in FHA Appraisal business take the necessary steps to become certified as soon as possible, as many lenders are already looking for certified appraisers to perform their FHA appraisals.

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.fhaappraisernewsletter.com

Regards,
Bill Collins
bill@fhaappraisers.com
www.fhaappraisers.com
www.fharoster.com
(877) 4FHA-VALU

FHA Appraiser Newsletter, Issue 4

Opening Remarks

Election day has come and gone, and regardless of one's political beliefs, it is clear that the coming months will bring some big changes within our society in general and to the appraisal profession specifically.

After the $250 billion infusion of capital into major financial institutions by the Treasury Department, the debate is on as to the proper allocation of the remaining $450+/- billion. While Wall Street lobbies the Treasury Department, other government officials support expanded efforts to assist struggling homeowners. F.D.I.C. chairwoman Sheila Blair has been a leading advocate for increased loan modifications in which the government might offer a partial guarantee for mortgages modified under specific guidelines. In August the F.D.I.C. launched a program of mortgage modification after the government takeover of Indy-Mac. Details on a new and expanded plan are expected to be offered in the very near future. Numerous published reports indicate that some principals of Wall Street hedge funds are lining up in opposition to these loan modification proposals. Other hedge fund firms were not against all such efforts but wanted to insure that modifications conformed to contracts governing mortgage securities. In a New York Times article on October 30th, John D. Geanakoplos, a professor of economics at Yale and a partner in a hedge fund that trades in mortgage securities, advocated that it makes more sense to rework mortgages to allow homeowners to meet their responsibilities and stay in their homes. He advocated that "Under our plan, servicers would provide the homeowner's name and other relevant information on each loan to a central government clearing house, which would in turn give trustees the data on homes in their local area. Once the trustees have examined the loans-leaving some unchanged, reworking others and recommending foreclosures on the rest-they would pass those decisions to the government clearing house for transmittal back to the appropriate servicers." Published reports this week also indicated that J.P. Morgan Chase & Co. was launching a large scale plan to modify approximately $70 billion in mortgages for borrowers who are behind in their payments. The Wall Street Journal reported on November 1st that the plan would cover as many as 400,000 borrowers, many of whom were inherited with the company's takeover of Washington Mutual last month.

What about Hope for Homeowners?

Newsday reported on November 5th that the early results for the Hope for Homeowners program, which commenced on October 1st, were discouraging. No loans have yet to be approved under this program, under which applications take about 60 days to process, and applications to date were disappointing. Steve O'Halloran, a spokesman for the Department of Housing and Urban Development, was quoted in the article that early projections were "...an extremely preliminary estimate of early applications for a program that is barely a month old. Borrowers and lenders are continuing to sign up." Howard Glaser, a former housing official in the Clinton administration, was also quoted in the article; "It just reinforces that none of the federal efforts to date seem to be getting the job done. There's no question that when a new president and Congress come back to town, they're going to take much more aggressive intervention."

The Silence is Deafening

The Federal Reserve, in their most recent survey conducted during the first half of October, reported that large numbers of banks reported tighter credit standards. This credit tightening involved both commercial and industrial loans, business credit lines, mortgage loans and credit card debt.

This has all contributed to a dearth of mortgage appraisal assignments for most appraisers, as most appraisers sadly admit.

Potentially Bad News for Licensed Appraisers.

In a "flip-flop" worthy of an election season, it is now reported that the discussed implementation date of September 2009 of the FHA requirement for the utilization of certified appraisers is under review and the possibility exists that licensed appraisers may be removed from the FHA roster in the near future.

It appears as though almost anything is possible at this time, with licensed appraisers facing possible removal at any time from next month to next year! As we have repeatedly advocated, it is advised that licensed appraisers work to complete the requirements to become certified as soon as possible as the situation is quite uncertain.

Closing Remarks

While there are many factors currently working against appraisers, this could change along with some of the many changes that will be taking place in the political arena. Let's wish the Obama Administration the best of luck, as the challenges they will be facing are many. As we have stated in the past, it would seem prudent and necessary for regulators to "drill down" to the core real estate assets underlying many of these so-called "toxic" securities and recognition of this fact could also create a need for a large number of appraisals. So, let's revive the chant "Drill Baby Drill" in this new context. Hopefully, the new administration will work to modernize the FHA and facilitate the professionalism of the appraisal industry with measures to make lender pressure a thing of the past along with recognition of the important role provided by professional, qualified appraisers.

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.fhaappraisernewsletter.com

Regards,

Bill Collins

bill@fhaappraisers.com

www.fhaappraisers.com

www.fharoster.com

(877) 4FHA-VALU

FHA Appraisers.com Newsletter Issue #3

Opening Remarks

With Election Day less than two weeks away, it is difficult to ascertain not only the upcoming regulatory changes that will guide the appraisal and mortgage industries, but who will be making these decisions. While it is clear that the Bush administration, in its final days, will be putting forth many environmental edicts that will upset organizations such as the Sierra Club, what directives might also be issued that will impact our business in the future?

Today's Wall Street Journal reports that the Bush administration is weighing a $40 billion proposal to help forestall foreclosures. They reported that the government may offer financial incentives to turn troubled loans into more affordable mortgages with the government and lenders sharing in any future losses from these loans. Plans for the Treasury Department to use part of its $700 billion financial rescue fund to directly buy and renegotiate mortgages are also being considered.

Also under consideration are measures which would utilize Fannie Mae and Freddie Mac to bring down mortgage rates as well as insuring inexpensive, reworked loans through the FHA. It is noted that language in the "bailout bill" obligates the Treasury Department to use its authority to help homeowners in danger of foreclosure.

Main Street vs. Wall Street?

While larger financial institutions may have the inside track with Washington decision-makers, there appears to be an emerging consensus that establishing some stability in the housing market is mandatory if any other measures are to succeed in strengthening the economy. Moody's Economy.com reports that 7.3 million homeowners are expected to default on their mortgages between 2008 and 2010, further depressing home values.

Initial attempts to have the mortgage industry voluntarily rework these loans have not resulted in substantial progress according to many analysts. An example is the new $300 billion FHA Hope for Homeowners program, through which loans can be reworked to allow borrowers who are "underwater" (loans greater than the current value of their homes) to obtain new loans if the lender agrees to reduce the principal. While little data is available on this program, which is only several weeks old, report from the field suggest that some "wrinkles" need to be ironed out for this program to be fully implemented.

Poor Numbers and The Political Factor

The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan dropped 17% last week to 408.1, the lowest level since December 2000, from 489.3 the prior week according to published reports in Newsday yesterday. This appears to be a function of both declining property values, making prospective purchasers wary, as well as a continuation of the overall credit crunch.

In trying to address issues like this, the political parties have both concocted various plans to steer us from disaster. It would seem, however, that whatever happens on Election Day, a multi-faceted approach with unprecedented governmental intervention will be the order of the day.

It would seem prudent and necessary for either party to insist regulators "drill down" to the core real estate assets underlying many of these so-called "toxic" securities and recognition of this fact could also create a need for a large number of appraisals.

What can Appraisers do to Prepare?

--As I've repeated to exhaustion, if you are a licensed appraiser only and not yet certified, it is essential that you take the steps needed to achieve certified status. It is understood that HUD officials will be meeting with Capitol Hill legislators either tomorrow or Monday to discuss this requirement for certified appraisers, along with the timetable for its implementation. It is likely that notice of their decision will be forthcoming shortly thereafter.
--Support the appraisal organizations in which you are involved in their efforts to promote greater professionalism.
--Support a mandatory licensing law in your state if it does not yet have one. Amongst other things, a mandatory licensing law provides that only licensed real estate appraisers can perform real estate appraisals, i.e., this would restrict real estate salespersons from performing appraisals except in the limited instance where they are perfoming a comparative market analysis in the context of a listing presentation . Bill Garber, Director of Government and External Relations of the Appraisal Institute, reports that New York, for example, is likely to seriously entertain such a law early next year, and with the governor's anticipated support, this should finally become law.

Giving Back

While it is my aim for this newsletter to be purely informative and not hit you with a sales pitch for our directory, FHAAppraisers.com, I wanted to mention an offer we are running this week. In this climate, many appraisers are hurting financially, but most of us are lucky enough to say we still have our health. For those who are less fortunate, and in support of Breast Cancer Awareness Month, we will be donating up to $25 dollars per listing ($25 for each highlighted listing, and $15 for each regular listing) to Susan G. Komen for the Cure. If you are interested in joining us and helping a good cause, please give us a call to find out how.

Regards,
Bill Collins
bill@fhaappraisers.com
www.fhaappraisers.com
www.fharoster.com
(877) 4FHA-VALU

Special News Bulletin - Possible delay in implementation of FHA certification requirements

It has come to our attention that the FHA is strongly considering delaying the requirement that appraisers be certified for an additional six months. While they previously anticipated extending the certification requirement in a number of states, they are now looking at the possibility of extending implementation in all fifty states partly due to their concern that a shorter time frame presents an undue financial hardship for many appraisers. While this is counter to the congressional legislation mandating the use of certified appraisers only, it appears as though there is a good possibility that this extension may take place.

While this is the case, usage of certified appraisers only by the FHA does seem a certainty and appraisers interested in remaining on the FHA roster should make the necessary arrangements to satisfy their educational requirements as soon as possible. This possible delay is good news for many appraisers if it comes to pass but the situation appears to be fluid and licensed appraisers are well advised to complete the requirements to be certified as soon as possible in the eventuality that congressional mandates override FHA concerns and implementation does take place within a shorter time frame.

Issue 2

Opening Remarks

I can't recall a period where appraisers faced such uncertainty. With the domestic and worldwide economies in turmoil, our own industry awaits news on whether the old model is gone forever, and if so, what will the new model look like. Reasonable projections made by respected appraisal industry analysts are now relegated to the trash each week as they are superseded by changing events. As I write this Monday, U.S. financial markets are rebounding strongly from the worst week ever for domestic equity markets, as are worldwide markets. The U.K. government is taking control of two large banks with indications that U.S. policymakers may be changing some of their focus from acquisition of troubled assets to direct investment in U.S. banks. Announcements are anticipated this week from the Treasury Department as to the terms under which banks could qualify for capital infusions.

Ongoing Change in the Appraisal Industry

Many appraisers are excited about their own business prospects with all of the bailout talk, hoping for it to be a second coming of the Resolution Trust Corporation, sometimes referred to as "The Appraiser's Full Employment Bill." TARP (the Troubled Asset Relief Program), EESA (the Emergency Economic Stabilization Act), and H4H or HOPE (the Hope for Homeowners Program) have led to H4A (Hope for Appraisers). The Appraisal Institute Newsletter on October 8th, amongst many excellent descriptions of the impact of these bills, stated that "Participants in the new HOPE for Homeowners Program...will be required to obtain a new FHA appraisal on their property." The HOPE for Homeowners Program began quietly on October 1st and is scheduled to run until September 30th, 2011, with most analysts figuring that it will be several months before it is fully operational. So, FHA Appraisers do have some reason for excitement as we head towards the end of the year

Update on New FHA Certification Requirements

As of October 1st, the FHA stopped accepting applications from licensed appraisers for placement on the FHA roster. Licensed appraisers who were on the FHA roster prior to that date may continue performing FHA appraisals until further notice. While FHA officials indicate that such notice might come for many by November 1st, this date is very likely to be moved up as they attempt to implement this congressionally mandated action fairly, without ending up with a shortage of appraisers in some states. It appears likely that approximately 1/2 of the 50 states will be given an additional six months to a year to make this change. These are likely to be the states with the lowest percentage of certified appraisers relative to licensed, although other factors (such as anticipated loan volume, or concentration of certified appraisers within one part of the state) may come into play. When the change occurs in your state, licensed appraisers will be purged from the FHA roster with reinstatement to (supposedly) occur immediately upon achieving certification status.

Update on Other Regulatory Changes

Nothing substantive has come to pass regarding the HVCC since our last newsletter, but it is known that implementation will not take place before February or March of 2009. It also appears that it may be substantially revised from what was previously rumored.

Appraiser "To Do" List

-If you are not certified, Why are you reading this and not in class?? Many appraisal education schools are offering expanded class selections. As always, contact the Appraisal Institute or McKissock to see their classes in your area.

-When business is slow, work on improving your marketing, including analyzing ways to improve your exposure and gather more of the upcoming FHA appraisal work.

-Work on expanding your private practice (tax grievances, bankruptcy appraisals, estate work, matrimonial appraisals)

Closing Remarks

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 http://community.icontact.com/p/fhaappraisers

Regards,

Bill Collins

bill@fhaappraisers.com

www.fhaappraisers.com

(877) 4FHA-VALU