On Appraisals: The Impact of HVCC

July 6, 2009

By Jed Smith, Managing Director, Quantitative Research

A preliminary analysis indicates that the implementation of the Home Valuation Code of Conduct (HVCC) appears to be having adverse impacts on the housing markets. Appraisal issues associated with the implementation of HVCC have recently been in the news. NAR Research has developed information on the subject through a statistically representative survey of the membership. A preliminary analysis of Realtor® responses includes the following:

Approximately 76 percent of Realtors® representing buyers or sellers indicated that the time to obtain a completed appraisal increased after May 1; 69 percent of those reporting increased appraisal times reported an increase of over 8 days.
Lost sales were reported by 37 percent of Realtors® attempting to complete home sales, with 17 percent reporting one lost sale and 20 percent reporting more than one lost sale.
Reports of lost sales will impact the fallout rate in Pending Home Sales, although some of the sales may ultimately be completed on a delayed basis.
An increased use of out-of-area Appraisers was reported by 70 percent of Realtors® seeking to complete a sale.
The number of NAR Appraiser members reporting that they obtain over 50% of assignments from AMCs increased from 14 percent to 39 percent after May 1.
Approximately half of NAR Appraiser members reported a reduction in fees received by them, and 70 percent of NAR Appraiser members reported that consumers were paying higher fees.
Time for an appraiser to submit an appraisal to the AMC decreased, as reported by 71 percent of NAR Appraiser members.
Approximately 85 percent of NAR Appraiser members reported a perceived reduction in appraisal quality.
Among Realtor® respondents obtaining an appraisal for a client, 55 percent reported a perceived decrease in appraisal quality.
NAR Appraiser members reported a significant number of assignments in unfamiliar geographic areas: for example, 16 percent reported that more than 11 percent of their assignments were in unfamiliar areas.

The above are preliminary results of the survey. An analysis of survey responses at the state level is projected in the near future.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

Comments? Questions? E-mail NAR Research.

Posted by Tom Pfeiffer on July 8th, 2009 3:11 PMPost a Comment (0)

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Risk Of No Down Payment Mortgages

July 11th, 2009 11:10 AM

Risk Of No Down Payment Mortgages

There is longstanding and overwhelming statistical proof
<http://mortgagedfuture.com/fha-ready-to-join-fannie-and-freddie/> that
zero down payment home buyers default on mortgages at a far higher rate
compared to home buyers who make a down payment. This matter has lately
received more attention than in the past due to the large number of
foreclosures related to zero down payment purchases during the housing
bubble years. In 2005, for example, nearly half of all home purchases
were made with zero down payment mortgages.

Zero Down Payments = Foreclosures

FHA Delinquency Crisis <http://whistleblower.ml-implode.com/?p=22>

Could FHA's rising delinquency rate be due to FHA incorporating
risky practices that have become standard in the mortgage industry?
Since industry experts often cite 100% financing as being a major factor
in the mortgage meltdown, let's take a look at borrower down payment
sources:

The delinquency rate clearly rises in tandem with the increase in
non-profit funded down payments.

In 2005, HUD commissioned a study entitled "An Examination of
Downpayment Gift Programs Administered By Non-Profit Organizations".
Later that year, another report titled "Mortgage Financing:
Additional Action Needed to Manage Risks of FHA-Insured Loans with Down
Payment Assistance" was completed by the U.S. Government
Accountability Office. Both studies concluded that seller funded down
payment assistance increased the cost of homeownership and real estate
prices in addition to maintaining a substantially higher delinquency and
default rate.

No Skin In The Game
<http://online.wsj.com/article/SB124657539489189043.html>
The analysis indicates that, by far, the most important factor related
to foreclosures is the extent to which the homeowner now has or ever had
positive equity in a home.

Instead, the important factor is whether or not the homeowner currently
has or ever had an important financial stake in the house. Yet merely
because an individual has a home with negative equity does not imply
that he or she cannot make mortgage payments so much as it implies that
the borrower is more willing to walk away from the loan..

[No Down Payment]

No Down Payment

Courtesy: WSJ <http://online.wsj.com/article/SB124657539489189043.html>
Wells Fargo (WFC <http://seekingalpha.com/symbol/wfc> ) Initiates Down
Payment Assistance Program
Ignoring the overwhelming evidence of high default rates on zero down
payment purchases, Wells Fargo this week announced a major nationwide
down payment assistance program (DAP) to be used for down payment and/or
closing costs on FHA, VA and conforming loans. Incredibly, the program
is being advertised as a means of helping low to moderate income
applicants achieve the "American dream" of home ownership. Based
on the historical evidence, Wells Fargo is sowing the seeds for the next
major crop of foreclosures. Incredibly, this is being done even as the
current foreclosure crisis grows in intensity.

Approving mortgages that immediately put new homeowners at a high risk
of default is financial lunacy and a disservice not only to the
homeowner but to a nation already in financial chaos due to defaulting
homeowners.

Down Payment Assistance Programs (DAPs) Help More Low- and
Moderate-Income Borrowers Achieve Home Ownership. Refer your low- to
moderate-income applicants to local housing agency contacts and help
them achieve home ownership by using one of these Downpayment Assistance
Programs (DAPs) approved for use with a Wells Fargo Wholesale Lending
first mortgage. DAPs provide financial assistance for qualified
borrowers and, depending on the program, may be used for debt reduction,
down payment and/or closing costs on FHA, VA and Conforming Conventional
loans.

Posted by Tom Pfeiffer on July 11th, 2009 11:10 AMPost a Comment (0)

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