Appraisal requirements are changing and have changed

By
Mortgage and Lending with Guild Mortgage Co - Oak Harbor WA

Inflated appraisals were cited as one of the things to blame for the mortgage melt down and have continued to be a concern for several months. More and more companies are tightening up on their appraisal requirements and requiring that the appraisal comparables be within a certain area and within a certain time frame. Here are the latest appraisal changes from Countrywide:

 

New Appraisal Requirements:

The appraiser must be provided with a copy of the Purchase Contract and all Addenda to ensure that any financing and/or sales concessions are considered when determining any impact on the value of the property.

If a Supervisory Appraiser signs the appraisal, the Supervisory Appraiser must perform the property inspection.

If an appraiser uses comparable sales outside the subject neighborhood when comparable sales are available, an explanation must be provided.

I don’t think these will be the last changes we see in appraisal requirements. Alpine Mortgage will be conducting a Town Hall Meeting Feb. 19 at First American Title Co., Eugene to go over the latest changes in appraisal requirements.

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Tags:
equity
purchase
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Rainer
295,550
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

I'm sure you are aware about the FHA guideline ... but I closed on my first FHA that required two appraisals the other day. Two appraisal were needed for over 85% LTV cash-out. And the appraisals came in a little different, of course the lower being used. Thankfully this borrower had a little wiggle room 8-D. I udnerstand the concern, but realistically this could hurt as much as it helps.

Jan 28, 2009 08:10 AM #1
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Steve - I would feel sorry for what you went through, but I closed an FHA cash out today that had an appraisal with a 80% loan to value, the review appraisal came in at an 88% loan to value so I had to get a 2nd (make the third counting the review) appraisal to close it. Yes, these can be tricky.

Jan 28, 2009 08:20 AM #2
Rainmaker
238,410
Angelia Garcia
Pure Realtors - Dallas, TX

So does this only apply to refi's or purchases as well?

Jan 28, 2009 11:29 AM #3
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Angelia - No difference between refis or purchases. More changes will be coming later, I can almost guarantee it.

Jan 28, 2009 11:38 AM #4
Rainer
55,339
Cecily Parks
iMove Group, Knipe Realty NW, Inc. - Salem, OR

Crickey! Things they are a changin', huh! Thanks for keeping us up to date!

Jan 28, 2009 01:12 PM #5
Rainer
23,676
James Graner
Residential Services: http://appraisalmo.com - Saint Charles, MO

This language actually looks older, we have been living with this for years. Some of the things that bother me are comps within three months, not available in some area in winter time. Underwriters defining a neighborhood for an appraier, Second appraisal requirements on FSBO homes.

Jan 28, 2009 03:06 PM #6
Rainmaker
116,561
Leslie Stewart
Oregon Licensed Broker with Berkshire Hathaway HomeServices Real Estate Professionals - Stayton, OR
Realtor, ABR, CRS, Oregon Licensed Broker

Wow, this is going to be hard to do, in some areas, like the town I live in there hasn't been a sale in 3 months for comparison. 

Jan 28, 2009 04:23 PM #7
Rainmaker
400,528
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

This has been pretty standard lately with most lenders.  We have just made it 'the norm' for our appraisers to reduce the roadblocks in the future.  Even when explained, it still does not guarantee the value will hold.  Depends on the area, as you know.

Jan 29, 2009 04:45 AM #8
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Cecily - they definitel are and there are more changes coming.

James - Some lenders have implemented some of these changes earlier and some will do it later, but eventually there will be standards everywhere.

Leslie - There is the ability to explain why they are not available. But it is getting harder.

John - Right you are. An appraisal continues to be an opinion determined by past events.

Jan 29, 2009 05:41 AM #9
Rainer
5,356
Matt Hinkle
McGuire Real Estate - San Francisco, CA

I've been contacted by several lenders looking to update appraisals 60-90 days down the road. With values declining so rapidly in SoCal this is a significant issue and a reason that while apps are up, pull-through rates are way down.

Jan 29, 2009 06:10 AM #10
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Appraised values is a problem in refinances, not quite so much on purchase if the listing Realtor did their work. You are right about pull-through ratio.

Jan 29, 2009 07:25 AM #11
Rainmaker
1,086,704
Greg Nino
RE/MAX Compass, formerly RE/MAX WHP - Houston, TX
Houston, Texas

But Fred! How many months do they go back? Is it 3 or 6?

Jan 29, 2009 10:59 AM #12
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Greg - It kind of depends on the market. Our underwriters want comps within 60 days or an explanation of why not. They also want a pending or a listing comp. It has to be getting harder on the appraisers too.

Jan 29, 2009 11:35 AM #13
Ambassador
2,870,233
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

Fred I have issues with a listing comp.  We are now having to do that for BPO's on foreclosures.  It makes no sense to me to use a listing price to help set a price.  Just because a house if on the market for X dollars doesn't mean it's worth X, it could only be worth Y.  Pending I certainly can see the value in that.  Even if it doesn't make it to close you can have a valuable idea of what someone was willing to pay for it, but what if the identical house 3 doors down is on the market but over priced by $50k.  What sense is there in using that as a comp?  Who makes these rules anyway?

Jan 29, 2009 03:32 PM #14
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Tammy - I don't know who makes the rules, but they are getting harder and harder all of the time. May 1, the newest changes will be going into effect. I will post on it later.

Jan 29, 2009 03:42 PM #15
Rainmaker
120,244
Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser

Hi Fred -

I'm not sure if that's new to Countrywide or they are just now enforcing it. I don't find those requirements too harsh -

However, I don't think any rules are more clenched than Provident's:

Comparables must be within a reasonable distance (determined by the location of the property).

The following distances must be adhered to:

  • 0.5 miles for Urban
  • 1 mile for Suburban
  • 5 miles for Rural locations

All comparables must have a date of sale within 3 months of the date the appraisal was completed.

Verification of comparable sales with a reliable party that is not associated with the subject property or the subject property's development and at least two comparables must be verifiable through MLS as Arms-Length Transactions. .......

In addition to the three comparables provided at least one current listing or pending sale must be provided DOM for subject if applicable and comparable sales must be provided. The average DOM for the comparable sales must not exceed the Marketing Time box marked by the appraiser.

Provident Funding does not allow an appraisal update of value in Declining Markets

Sometimes these guidelines simply will not produce an accurate appraisal.

And to Tammy's statement... I now add three active listings in each report when they are relevant to the appraisal.  They are added outside of the weighted area of the sales comparison approach and it is stated that they are only there to show the behavior of sellers in the current market.

Feb 11, 2009 03:03 AM #16
Rainer
2,101
Jeffrey Worden
Tradition Roofing and Exteriors - Saint Paul, MN

Hey

I have been trained to use these guidelines  for the past few years. the trick is how to explain why it is neccisary to use comparable sales that are outside thos nifty "Requirements"

No Problema Dito Sara on the active listings

Jeff

 

Feb 13, 2009 12:01 PM #17
Rainer
171,765
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Sara - More changes will be coming May 1. That should be an interesting time. Some of it will be phased in but that is the deadline from my information.

Jeffrey - That is right, the trick is explaining and then making sense with it.

Feb 13, 2009 04:22 PM #18
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Rainer
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Fred Chamberlin

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