Appraisers: Between a mortgage lender & a hard place

Back in the day, John Dreano belonged to a group of 375,000 licensed certified appraisers in the United States, professionals who analyzed neighborhood housing markets, sales and trends so lenders could decide the right price for a home loan, and buyers and sellers could live the American dream.

Now, Dreano's national real-estate appraisal network has dwindled to 86,000, according to information gathered by the Appraisal Institute, an international membership association of professional real estate appraisers.

Like 37 percent of others in this smaller group, according to the Institute, Dreano has been in the field for 21 years or more (nearly 30 to be exact), and he's seen his fair share of change.

But, he said, a lot of this change has occurred in the past four years - after the nationwide housing market crash, when Congress stepped in with the Dodd-Frank Act to make sure American consumers receive clear, accurate information about shopping for mortgages, credit cards and other financial products.

What's different?
When an appraiser receives a request for an appraisal, it's no longer from a loan officer, said Dreano, who owns Real Appraisals Inc. in Chesapeake with his wife, Kay Dreano.

"It used to be where mortgage companies would order their own appraisals," said Jay Payne, a

certified real-estate appraiser with Sinnen-Green & Associates in Virginia Beach and board of directors' member with Hampton Roads Realtors Association. "We could talk to the loan officers - just to touch base and try to see what's going on with the property.

"Now most of the appraisals are ordered through AMCs, (or) appraisal-management companies," said Payne, chair of HRRA's Appraisers Council.

Most of the big banks, like Bank of America and Wells Fargo, use these companies, he said.
"They're trying to keep it hands off," Payne said. "Conversely, it's hurting us appraisers."
"The industry obviously has changed," said Trey Cooper, managing director of Monarch Home Funding LLC, the mortgage arm of Monarch Bank.

"We have to sign affidavits that say we can't contact the appraiser," Cooper said. "That's a positive change."

But there are long-term ramifications.
The Appraisal Institute, after analyzing the Appraisal Subcommittee National Registry data since 2006, found that the number of appraisers continues to decrease at a rate of about 3 percent per year.

It also found that appraisal firms decreased the number of trainees dramatically over the past two to three years, and that the appraiser population could decrease 25 to 35 percent over the next decade due to age attrition and fewer new entrants.

The Institute also found that appraisers are leaving the profession, among other reasons, "due to challenging business conditions (and) increasing government regulation," a summary of its findings stated.

For Dreano, he worries about the future of his profession. He even goes as far to say that computers, or advanced valuation models, might take over the bottom line of making appraisals.

Regardless of the changes, Dreano said he still does his job the way he always has - ethically, carefully weighing the market neighborhood by neighborhood.
He's also bound to follow regulations set forth by the Uniform Standards of Professional Appraisal Practice, or USPAP, quality control for appraisal analysis and reports in the United States.

Dreano said USPAP is a good minimum starting point for his profession. States require other standards, as well as lending agencies that dictate their own requirements for an appraisal. All appraisers have had to be licensed, for example, for nearly the past 20 years, he said.
On a recent visit to his home in Miars Plantation in Chesapeake, Dreano pulled out a folder containing a home appraisal.

While there is no set format in which appraisals are presented, Dreano pointed out what he does for each of his appraisals.
Dreano said he will put the information from the Multiple Listing Service he used to come up with a home's valuation, so the lender can see "my reasoning for the value and why.
"I try to give them as much as I can," he said.

Dreano looks for comparable properties to the one being sold after his inside and outside inspection of a property.

These properties must be similar in style, condition, quality of construction, upgrades, size and room count, as well as location, according to industry standards
For example, Dreano said, he wouldn't compare a single-story house to a two-story house.
Using his "concentric-circle theory," Dreano then tries to find houses near the one being appraised - searching around and around the home until three are found.
Appraisers also look for homes that have most recently sold in a neighborhood over a certain period of time.

Dreano also takes into consideration the foreclosures, short sales and estate sales in a neighborhood if they're above 25 percent of an area's sales.

"You need to use those in the valuation," he said.
As for upgrades to a house, Dreano said, it all depends on what the market dictates.
You have to look at value and use, Dreano said. For example, granite counters, kitchen upgrades and higher-end flooring may not reflect market value, he said.

"The way that an appraiser determines any adjustment in the appraisals is by value and exchange," Dreano said. "This will determine what the buyers are willing to pay for any differences in the properties."

He advised before doing any home-improvement project getting an appraiser to look at the market your house is in - and whether that particular market has other houses with comparable improvements.

There will be no adjustment to a price if there are no comparable sales with similar features, he said.
"People perceive their house is a castle," Dreano said. "What the appraiser sees are sticks and bricks."
Toni Guagenti,tguagenti@cox.net

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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Vital Chart: Another Record Low for Mortgage Rates.

Home-mortgage rates continue to fall to record low levels, helping lift the slowly mending housing market.

Rates for a 30-year fixed mortgage fell to 3.36% this week, from 3.4% a week earlier and over 4% during the early part of the year.

While lending standards remain tight — making new mortgages hard to secure — low rates have helped move home sales forward.   By Conor Dougherty

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Applications for home mortgages surged last week

(Reuters) - Applications for home mortgages surged last week as demand for refinancing rose to the highest level in more than three years, driven by a drop in interest rates to yet another record low, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, jumped 16.6 percent in the week ended Sept 28.

The index of refinancing applications surged 19.6 percent, hitting the highest level since April 2009.
The gauge of loan requests for home purchases - a leading indicator of home sales - also rose, though not as strongly, gaining 3.9 percent.

The stronger demand came as mortgage rates hit fresh lows in the wake of the Federal Reserve's latest aggressive program to boost the economy.

In a program known as quantitative easing, or QE3, the Fed said in September that it will buy $40 billion in mortgage-backed securities a month until the job market improves.

"Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates," Mike Fratantoni, MBA's vice president of research and economics, said in a statement.

Fixed 30-year mortgage rates dropped 10 basis points to average 3.53 percent, down from 3.63 percent the week before.

The refinance share of total mortgage activity gained to 83 percent of applications from 81 percent the week before.
The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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California house sales, prices to keep rising

Home sales in California are projected to rise for the third year in a row thru 2013, climbing to the highest level in four years, the California Association of Realtors said in a housing market forecast released today.
 
Meanwhile, prices are expected to hit the highest level in five years after rising for a second year in a row.

“The housing market momentum which began earlier this year will continue into 2013,” said Leslie Appleton-Young, the association’s chief economist.

“Pent-up demand from first-time buyers will compete with investors and all-cash offers on lower-priced properties, while multiple offers and aggressive bidding will continue to be the norm in mid- to upper-price-range homes.”

Specifically, the CAR 2013 outlook predicts that:

• The number of existing single-family homes resold in the state will total 530,000, a 1.3 percent increase from this year’s projected tally of 523,300 house sales. That would be the highest number of sales since 2009, when 546,900 houses were sold statewide.
• The median price of an existing California house – or price at the midpoint of all sales – will rise to $335,000, up 5.7 percent from this year’s projected median price of $317,000. That would be the highest median since prices peaked at $560,300 in 2007.

If next year’s forecast is accurate, house sales will be up 53 percent from California’s sales bottom in 2007, but still will be 15 percent below the market peak of 625,000 transactions in 2005.

The median price would be up 22 percent from the price bottom of $275,000 in 2009. But the median price would remain 40 percent below 2007’s price peak.

The CAR forecast has had a spotty track record, with the median price forecast coming within five percentage points of actual prices just once in the past seven years.

The sales outlook came within five percentage points just twice in the past seven years, but that was in the last two forecasts.

Still, state Realtors are confident that the market rebound will go on.
“The market has improved moderately over the past year, and we expect that to continue into 2013,” a CAR statement quoted association President LeFrancis Arnold as saying.
“Sales would be even higher if inventory were less constrained in REO-dominated markets, particularly in the Central Valley and Inland Empire, where there is an extreme shortage of available homes.”

CAR’s outlook also calls for mortgage interest rates to end six years of declines, climbing slightly to 4 percent for a 30-year, fixed rate mortgage. Although that’s up from this year’s projected rates of 3.8 percent, it’s still well below rates for the previous seven years.
The one-year adjustable-mortgage rate is expected to hold steady at a record low of 2.8 percent.
The forecast predicts further that:

• California employment will increase 1.6 percent next year, lowering the state’s jobless rate to 9.9 percent (down from 10.7 percent this year).
• The U.S. Gross Domestic Product will rise to 2.3 percent next year, vs. a gain of 2 percent in 2012.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713 NMLS#4256

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People are refinancing - again and again

Many homeowners are feeling a tad richer after refinancing -- some again and again -- thanks to the Fed's never-ending efforts to drive down interest rates.
Call it the refi redo.

Some homeowners nationwide are in the unusual spot of refinancing a couple of times in the past few years. The saga could continue in the months ahead, after the Federal Reserve's extra efforts to keep mortgage rates low.
"It makes all the sense in the world," said Greg McBride, senior financial analyst for Bankrate.com.

Some borrowers can save money when they spot a rate that's at least half a percentage point lower than their existing rate, experts say. More typically, people tend to move when they see more than a full percentage-point drop.

Robert Traviss, 48, refinanced earlier this month -- the second time in four years -- and saved roughly $150 a month.

Traviss, who lives in Monroe, Mich., and works at a utility company, said the he and his wife started with a rate around 8% in 1999, refinanced to about 6% in 2008, refinanced again in September, and now have a rate at 3.75%. 

The couple, who owe $112,000 on their mortgage, pay extra each month so they're not just refinancing and dragging out the mortgage another 30 years. 

"It's kind of a no-brainer to save $200 when everybody's hurting these days," he said.
Take another example: Say a homeowner refinanced a $200,000 mortgage in January at a rate of 4.25%. If that homeowner now refinances to 3.7%, McBride said, he or she would save $63 a month. The monthly mortgage payment would drop to $920 from $983 a month.

To be sure, we're not talking about the highflying days of refinancing when people grabbed thousands of extra dollars out of the house to pay for cars, trips or other goodies.
Data from mortgage giant Freddie Mac showed that in the second quarter of this year, 23% of homeowners who refinanced reduced their principal balance during the process, and 59% maintained the same loan amount.

The percentage of borrowers keeping about the same loan amount was the highest in the 27 years of tracking. 

Naomi Pennington, 69, who lives outside of Houston, didn't want to tap into equity when she refinanced in September.

"Who would want to owe more money?" she said. Instead, she refinanced to drop her rate by about three percentage points to 4.25%. She's saving $300 a month on the payment. It's her second refinance in five years. Refinancing only makes sense to her if you don't end up owing more money.
These days, some homeowners who refinance might bring extra money to the table to be able to pay a little more toward what they owe, said Joel Gurman, vice president of mortgage banking for Quicken Loans. 

As people refinance for the second go-around in a few years, Gurman said, some might opt to go with a shorter-term mortgage, maybe 20 years or 15 years, to save money in the long term. Quicken has a product called "Yourgage" that has a customized term ranging from eight years to 29 years.

Refinancing, of course, is a math problem -- how much will it cost you to refinance to save X amount of dollars? How long will it take you to recoup the costs?

"Refinancing does have costs," said Kathy Conley, housing specialist for GreenPath Debt Solutions, a non-profit HUD-approved housing counseling agency.

It might not make sense for someone in their 80s to spend $4,000 upfront to save $50 a month, she said. Others can look at their costs, how long they plan to remain in the home and explore various types of loan products. Talking to a housing counselor in advance can help work out the numbers. 

Mark Stevens, a regional sales executive for Bank of America overseeing Michigan, Ohio and upstate New York, said he's seeing more daily refinance applications now than in the previous month -- thanks to the Fed's latest move.
"People are more focused on how do they improve their situation and not increase debt," Stevens said. 

His advice to consumers is to not rule anything out. Some federal programs covering Fannie Mae and Freddie Mac mortgages allow for refinancing even if the homeowner owes more than the house is worth.

"Don't think that you can't do it," Stevens said.
What works -- and what doesn't -- for a refi redo:
Some people who refinanced a year or two ago might not qualify for refinancing again.
For example, what if both the husband and wife worked in 2010 but one retired or lost a job this year. If only one person instead of two is working, their income would be much smaller than when they took out the loan, and they might not qualify again. If the debt-to-income ratio is now above 40%, that becomes a red flag for the lender, said McBride.

Some who recently became self-employed could face roadblocks, too.
A homeowner needs a job or income. The refinance application could be turned down if you're now out of work.

A homeowner who owes far more than the house is worth is still not going to be able to refinance with a traditional mortgage. Their best bet would be the Home Affordable Refinance Program. But if you've already refinanced once under that program, you cannot refinance with it a second time.

Most experts say homeowners should start with their original lender to see about any streamlining options for that refinance. But it's key to compare options at various lenders, too.
The good news is that many homeowners have time to shop. 

"There's no deadline pressure. The Fed's not going to increase rates tomorrow afternoon," said Keith Gumbinger, vice president for HSH.com, a mortgage-information website.
"Not for a bunch of afternoons."  Susan Tompor, USA TODAY

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713 NMLS#4256

Visit FirstCapital Online or call: 310-458-0010