Fear And Zooming In The Housing Market

April 17, 2020

I only shared the following because we’ve obviously all been there before.

To all my loyal Housing Note readers, there is a ton of content to cover today but I have prepared for and spoken on 10 Zoom/Facetime calls in the last 48 hours and published 16 market reports, so I’ve had limited opportunities to write about the state of housing.

Before you heave a sigh of relief, I will be writing on my Matrix Blog this weekend where I will be publishing all the stuff that was supposed to make it and consider dropping it in your RSS feed.

But I digress…

Banks Can Defer Appraisals for 120-Days

Here’s a great summary of the new rule on the The Real Deal (but not because of the great graphic they created):

But what could go wrong? I’ll have more to say on this over on Matrix this weekend, providing a specific link here.

Here is my take on the new ruling since I just happen to be an appraiser with 34 years of experience:
_________________
Lenders have seen their mortgage volume drop because of liquidity issues (namely job loss and uncertainty about future income). Lenders are also reluctant to issue low rate loans in this situation given concerns about liquidity and lack of processing capacity, so mortgage rates are not falling in aggregate. In essence, they are slightly higher than a month ago. There is also the likelihood of declining property values going forward, so an 80% LTV could be a 100% LTV tomorrow.

So to fix this, the Treasury, the Fed, and FDIC have opted to allow banks to skip the appraisal for 120 days despite efforts by FHFA to allow for driveby and desktop alternatives. They are not waiving the appraisal. Yet 120 days after the loan, appraisers will provide an opinion which I would assume would show a lower value. What do banks do with that?

This rule only applies to FRT (federally related transactions), which is a small number of mortgages. Still, you can bet other regulatory bodies will adopt this rule quickly to try to bolster the mortgage volume so people can take advantage of the low rates. Yet this is not the problem. These three parties have already been critical of the appraisal process, as evidenced by their recommendations to save on cost and timing without consideration of quality and reliability last year.

The thing is, the appraiser isn’t the problem. Property access has been solved temporarily by drivebys and desktops via FHFA for sales. But refinance activity has been limited because the banks don’t want to take on the risk. After all, they don’t trust the daily changes in regulations by the federal government, have real concerns about a future with falling values and significant liquidity risk. The primary problem is liquidity, and all this rule does is unleash a potential tsunami of mortgage fraud and predatory lending on the housing market when people are most vulnerable.

Perhaps this rule was made with the best intentions, but it reflects a fundamental misunderstanding of what the purpose of an appraisal is.

Let’s hope most banks avoid this recklessness that will be paid again by the taxpayer.

Florida, Connecticut & Boston Market Reports Were Published

More on this over on my Matrix Blog this weekend, but for now, here are the links:

Elliman Reports: Q1-2020 Florida

Elliman Reports: Q1-2020 Connecticut

Elliman Reports: Q1-2020 Massachusetts

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

More Appraisalville content will be shared over the weekend on my Matrix Blog.

Phil Crawford’s Data-Point Zero Concept

From the man that coined the phrase “Curbside Appraisals” has a new mantra:

OFT (One Final Thought)

Building a house of cards somehow seemed relevant today and this guy is a professional.

Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

– They’ll Zoom;
– You’ll Facetime;
– And I’ll blog.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

Reads, Listens and Visuals I Enjoyed

My New Content, Research and Mentions

Recently Published Elliman Market Reports

Appraisal Related Reads

Extra Curricular Reads