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.
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
(877) 4FHA-VALU
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