I only shared the following because we’ve obviously all been there before.
WHO FLEW WITH CRABS?! pic.twitter.com/c0cux6Jyyi
— Reese Waters (@reesewaters) April 16, 2020
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.
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
(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.
Bryan Berg holds so many Guinness World Records for card stacking that he's lost count. And he keeps making more elaborate and incredible structures.
— WIRED (@WIRED) April 17, 2020
Brilliant Idea #1
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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.
Reads, Listens and Visuals I Enjoyed
- Coronavirus cuts Orange County consumer confidence
- Number of mortgage loans in forbearance jumps, industry survey shows [Yahoo Finance]
- New Yorkers snap up high-end rentals in Miami Beach [The Real Deal]
- The coronavirus is changing real estate sales contracts. The shift looks permanent [Miami Herald]
- iBuying startup Opendoor lays off 35% of staff [The Real Deal]
- Banks will be able to delay some appraisals 120 days after loan closes [Housingwire]
- The impact of the coronavirus on mortgage refinancings [Brookings]
- Only 20% of Related Group’s commercial tenants paid rent in April [The Real Deal]
- The Return of Fear in New York [NY Magazine]
- As Wealthy New Yorkers Flee the City for Suburbs, Will the Exodus Be Permanent? [Mansion Global]
- MiB Bonus WFH Edition – The Big Picture [Ritholtz]
- This is who Compass terminated in California [The Real Deal]
- Bridgehampton's "Sandcastle" rents for $2M, breaking East End record [The Real Deal]
My New Content, Research and Mentions
- Fewer homes hit the market in Q1: Elliman [The Real Deal]
- Boca, Delray Home Prices Plummet, But Condos Look Good [Boca News Now]
- What $650,000 buys in NYC right now [Curbed NY]
- Tiny Beacon Hill one-bedroom packs a lot in [Curbed Boston]
- Million-dollar listings: Q1 Palm Beach sales reports show boom before storm [Palm Beach Post]
- Banks Allowed to Defer Appraisals to Boost Lending [The Real Deal]
- Coronavirus hammers the already battered NYC luxury housing market [Yahoo]
- How NYC sellers can adapt to the new normal: Brick Underground's best advice [Brick Underground]
- WSJ News Exclusive | Oceanfront Hamptons Compound Sells for $45 Million, Marking Biggest Sale of the Year [Wall Street Journal]
- Homebound Buyers Ask: Is a Picture Worth $1 Million? [NY Times]
Recently Published Elliman Market Reports
- Elliman Report: Greenwich Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Fairfield County Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Downtown Boston Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Putnam & Dutchess Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Westchester Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 3-2020 [Miller Samuel]
- Elliman Report: Brooklyn Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Queens Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Northwest Queens Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Riverdale Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Northern Manhattan Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Manhattan Sales 1Q 2020 [Miller Samuel]
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 2-2020 [Miller Samuel]
- Elliman Report: Manhattan, Brooklyn & Queens Rentals 1-2020 [Miller Samuel]
- Elliman Report: Manhattan Decade 2010-2019 [Miller Samuel]
- Elliman Report: Manhattan Townhouse 2010-2019 [Miller Samuel]
- Elliman Report: Venice + Mar Vista Sales 4Q 2019 [Miller Samuel]
Appraisal Related Reads
- Seven things to watch in real estate during a pandemic [Ryan Lundquist/Sacramento Appraisal Blog]
- COVID-19 Issues Addressed & Interior Inspections Liabilities [Appraisers Blogs]
- Appraisal Options During The Coronavirus Pandemic [Tom Horn/Birmingham Appraisal Blog]
- Veros Suspect Forecast Displays their Lack of Understanding of the Crisis [Appraisers Blogs]
- Covid 19 Issues Addressed [Vacap Online]
- In the face of uncertainty – by Bill Pastuszek [nerej.com]
- Risky Business: Why Lenders Continue to Demand Interior Inspections [Working RE]
- Does My Basement Count as Square Footage or in an Appraisal? [Advanced Appraisal]
- How Will The Coronavirus Effect Birmingham Home Values? [Birmingham Appraisal Blog]
- COVID-19 Legal & Risk Issues for Appraisers [Appraisers Blogs]
- Watching listings, the word on the street, & being negative [Sacramento Appraisal Blog]
Extra Curricular Reads
- Admit it, you miss your noisy office. This tool re-creates all your coworkers’ annoying sounds [Fast Company]
- How the ‘Greatest Rock and Roll Band in the World’ Got Its Logo [NY Times]
- Miami Judge Reminds Attorneys To Wear Pants For Zoom Hearings [Above The Law]
- Elvis Costello Writes Tribute to John Prine [Pitchfork]
- Opinion | Jason Isbell: John Prine Taught Me to Stay Vulnerable [NY Times]
- Elvis Costello [Facebook]
- Apollo 13: As They Shot It [NY Times]
- Ford files a patent application to help sniff out stinky ride-hailing cars – Roadshow [CNET]
- John Prine: 1946—2020 [The Bitter Southerner]