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
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