Monthly Archives: June 2012

[MBS Commentary] – MBS RECAP: Holding Ground Impressively Despite Down Day

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MBS RECAP: Holding Ground Impressively Despite Down Day

Posted to: MBS Commentary
Friday, June 29, 2012 4:11 PM

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MBS Live: MBS Afternoon Market Summary
After the June 20th FOMC Announcement failed to coax bond markets out of their horizontal range, much began to be made of this week’s EU Summit.  Then markets grew dismissive of it’s potential early this week after two of the key Greek participants sent rain-checks.  Reality turned out to be somewhere between the hype and cynicism as the Summit at least produced something market-moving, but the movement was ultimately contained by the same old sideways range that has contained almost every last bit of MBS-relevant bond market trading since 6/5.  In terms of of Fannie 3.5’s that range has been 104-20 to 105-08 with only a few brief departures outside.  Fannie 3.0’s experienced it at 102-00 to 102-24 and 10yr yields from 1.55 to 1.69, give or take a bp.  The super clearly-defined triangle that, at one time, seemed intent on generating a marked break higher or lower, COMICALLY broke both higher AND lower on the last two days of the week only to hit the horizontal range boundaries on both sides and decide to stay inside those boundaries.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

FNMA 3.5
105-04 : -0-07
FNMA 4.0
106-14 : -0-04
FNMA 4.5
107-09 : -0-03
FNMA 5.0
108-08 : -0-02
GNMA 3.5
106-32 : -0-05
GNMA 4.0
109-08 : -0-04
GNMA 4.5
109-12 : -0-04
GNMA 5.0
110-02 : -0-01
FHLMC 3.5
104-29 : -0-06
FHLMC 4.0
106-04 : -0-05
FHLMC 4.5
106-26 : -0-03
FHLMC 5.0
107-16 : -0-01
Pricing as of 4:07 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.
1:48PM  :  ALERT ISSUED: Drifting Into Riskier Territory Now. Potential Negative Reprices

Liquidity (and earlier gains) have been leaking out of bond markets since the noon hour. Fannie 3.0s are back down to 102-16 after hitting 102-22 earlier. Fannie 3.5’s are down to 105-01.

We’re not seeing any cause for alarm with respect to a major sell-off given the current information at the market’s disposal, but simply being backed up to these levels does introduce a modicum of negative reprice risk. Reprices wouldn’t be widespread by any means at current levels, but if bond markets make some sort of unified movement past support levels (1.675 in 10yr yields, 105-00 in Fannie 3.5s and 102-14 in Fannie 3.0s).

Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard’s Live Chat feature, utilized by hundreds of industry professionals each day.
Matthew Graham  :  “smart enough to be paralyzed by indecision”
Victor Burek  :  “bond traders are smarter”
Andrew Horowitz  :  “nope, that is why bonds haven’t moved all that much…”
Rob Clark  :  “Sheep mentality. If enough people believe things are better they will get better.”
Brent Borcherding  :  “Just because they are buying stocks today, does NOT mean they buy that the issue is fixed….they’ll just sell next week.”
Andrew Horowitz  :  “Saw a headline on CNBC earlier “now that Europe is fixed, is China next”….Fixed????”
Matthew Graham  :  “RTRS – GERMAN FINANCE MINISTER SCHAEUBLE SAYSNO EURO BONDS IN HIS LIFETIME EITHER WITHOUT COMMON FINANCIAL POLICY “
Steven Stone  :  “use the orig val”
Jason York  :  “on an FHA SL w/0 appraisal, so you always have to use the 95+ MI factor, or can use use the < 95% factor by using the original value “
Steven Stone  :  “you can include the interest”
Jason York  :  “for an FHA Streamline without an appraisal, is the new loan amount limited to the principle balance plus new MI, or can you include daily interest also?”
LSP  :  “REPRICE: 11:37 AM – Franklin American Better“
John McClellan  :  “the Horror! 105-5!”
John Paul Mulchay  :  “Man, I can’t believe we’re all the way down to 105-5”
Matthew Graham  :  “http://www.newyorkfed.org/markets/maturity_extension_faq.html end of 2012″
Andy Pada  :  “twist continues until when?”
Matthew Graham  :  “In other news, Fed just finished today’s “twist” buying in 6-8 year range, $4.67 bln vs an expected range of 4.25-5.25 bln. “
Matthew Graham  :  “ECB to Risk-On Rally: “Gear down, turbo!””
Matthew Graham  :  “just a reminder from the ECB that the overnight developments aren’t instantly applicable.”
Matthew Graham  :  “RTRS- ASMUSSEN – ESM CAN ONLY FUND BANKS DIRECTLY ONCE BANKING SUPERVISION IS ESTABLISHED, DECISION BY YEAR-END “
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[Mortgage Rate Watch] – Mortgage Rates Rise But Hang On To Some Of Yesterday’s Improvement

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Mortgage Rates Rise But Hang On To Some Of Yesterday’s Improvement

Posted to: Mortgage Rate Watch
Friday, June 29, 2012 2:51 PM

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Mortgage Rates moved slightly higher today but only erased a portion of yesterday’s improvement.  That leaves the Conventional 30yr Fixed Best-Execution rate unchanged and borrowing costs slightly higher than yesterday, but still lower than the previous day.  

(Read More:What is A Best-Execution Mortgage Rate?)

Much like yesterday, the domestic economic data regarding Consumer Sentiment, Consumer Spending, or the Chicago manufacturing data were all non-events next to bigger considerations.  Today, or overnight rather, the market’s focus turned to news that European leaders agreed to allow recapitalization of troubled European banks out of the Euro-zones permanent bailout fund, the European Stability Mechanism, or ESM.  

The recapitalization isn’t something that will happen overnight, and indeed several countries said “we don’t need that now, but might some day!  Thanks!”  in not so many words.  Additionally, the European Central Bank (ECB) noted that none of this can begin until supervision of the program is established–something that should happen by year end.  Even so, it’s perceived as a small step in the right direction for a European Union that’s had a hard time getting on the same page fiscally.  Such things tend to encourage better risk-tolerance in markets, generally leading to higher stock prices and bond yields.

Although bond yields did, in fact, rise noticeably in terms of Treasuries, the Mortgage-Backed-Securities (MBS) that most directly influence mortgage rates, experienced a tamer version of the weakness.  This is what ultimately allowed mortgage rates to hold on to some of their gains from the previous session whereas Treasuries have given all of theirs back.  This “ground holding” is consistent with a bit of a shift in our analysis seen yesterday.

“we’re feeling less and less like rates are cutting this narrow, converging path because they’re ready to break quickly to one direction or another and more like rates are just really low, really sideways, and will take a lot of convincing before doing something else.”

In other words, we’re planning on “low and sideways” around current levels until something big happens to change that.  All we can do is watch and wait for such things and keep an eye out for upcoming candidates to motivate the potential movement.  

Long Term Guidance: We’d continue to advocate against trying to “get ahead” of current market movements due to the high degree of uncertainty.  While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren’t “scheduled” or able to be forecast.  Risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.

Loan Originator Perspectives

Mike Owens, Partner with HorizonFinancial, Inc.

I am and will always be a lock and load fan. Floating always leaves the chance of a Titanic type event that I want no part of. Therefore lock in your 20 or 15 year loan and only consider 30 if you really need payment relief.

Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage

Stock market rallies such as today’s ordinarily lead to higher mortgage rates as money flows out of bonds and into stocks. The fact that rates are essentially unchanged today is a bullish signal for bond markets, showing strength and probability of continued low rates. Said it before, will say it again, US economy is best of a bad lot, and until our fiscal time bond blows up will continue to be!

Jeff Stats, Network Funding L.P.

I am guiding my customers to lock if closing in the next 30 days. The stored energy poised to affect MBS negatively is simply too great a risk to justify the reward.

Victor Burek at Benchmark Mortgage

The EU summit has come and gone with no real solution, just more can kicking. With the surge in equities, lenders rate sheets were slightly worse this morning. That said, i favor floating all loans over the weekend, then i will continue with my strategy of advising clients to float til within 15 days of closing.

Kent Mikkola #353976, Mortgage Consultant ,  M & M Mortgage, LLC #213677

Still more to lose than gain by floating, in my opinion.

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.625%
  • FHA/VA -3.5% – 3.75%
  • 15 YEAR FIXED –  3.00%
  • 5 YEAR ARMS –  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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[MND NewsWire] – Proposal to Seize Underwater Mortgages via Eminent Domain not Well Received

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Proposal to Seize Underwater Mortgages via Eminent Domain not Well Received

Posted to: MND NewsWire
Friday, June 29, 2012 11:57 AM

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The Board of Supervisors in the California county of San Bernardino has, perhaps unintentionally, picked a fight with some of the giants of the real estate industry.  The Board unanimously approved a plan two weeks ago that would use eminent domain to seize underwater mortgages and restructure them for homeowners unable to sell or refinance the properties.

The Homeowner Protection Program, in which San Bernardino would partner with the cities of Ontario and Fontana within its borders, is only broadly sketched out at present but it has already provoked a strong reaction from the Securities Industry and Financial Markets Association (SIFMA).  SIFMA claims to represent the interests of hundreds of securities firms, banks and asset managers.  The trade association fired off a letter to the Board on Friday, cosigned by more than a dozen of its member organizations, protesting the proposed actions.  “Based on publicly available information on the Agreement,” the letter said, “we are very concerned that the good intentions of the Board of Supervisors will instead result in significant harm to the residents the Agreement intends to help.”

The thrust of the letter is that such an action as proposed in San Bernardino would significantly reduce access to credit for mortgage borrowers.  “If eminent domain were used to seize loans, investors in these loans through mortgage-backed securities or their investment portfolios would suffer immediate losses and likely be reluctant to provide future funding to borrowers in these areas.  It is essential to remember that investors in mortgage-backed securities channel the retirement and other savings of everyday citizens through their investment funds.  This program may cause loans to be excluded from securitizations, and some portfolio lenders could withdraw from these markets.  In other words, this program could actually serve to further depress housing values in the county by restricting the flow of credit to home buyers”

The Los Angeles Times quotes David Wert, a spokesman for the county as saying the country would use eminent domain to condemn mortgages on properties that are underwater, that is the owner owns more on the mortgage than the value of the home, and would then renegotiate the mortgages at a lower amount.  Only homeowners who are current on their mortgage payments would be eligible for the program.

The move is intended to help stimulate the region’s hard-hit economy by freeing up people who have been stuck in their homes, Wert said. “Real estate is the foundation of the inland economy,   [It] is based on the building and selling of homes, and this is one way to stimulate that again.”

The program is still in its initial stages and additional details will be hashed out in public the spokesman on said. 

Among those signing the SIFMA letter one were the Mortgage Bankers Association, American Bankers Association, National Association of Realtors®, The Financial Services Roundtable, American Securitization Forum, and the Residential Servicing Coalition.

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[MBS Commentary] – MBS MID-DAY: Bouncing Back From EU Summit Weakness

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MBS MID-DAY: Bouncing Back From EU Summit Weakness

Posted to: MBS Commentary
Friday, June 29, 2012 11:07 AM

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MBS Live: MBS Morning Market Summary
Bond markets opened up moderately weaker and moved to what could be considered significantly weaker territory in the first hour of the domestic session.  It was about a 10bp move from yesterday’s close in 10yr yields (1.57 to 1.67).  But everything has been moderating since then, buoyed by a healthy recovery in European benchmark debt (10bps lower since 3am), technical support levels, an absence of any disconcerting domestic economic data, and some measure of general bid-side support due to month-end/quarter-end.  Beyond all of the above, MBS have outperformed anyway, losing less ground into the weaker territory earlier this morning.  Everything here is pretty consistent with 2 big components of our default outlook: first, that the recently consolidating trends in bond markets seem to be resolving into a new sideways pattern instead of releasing stored energy and secondly, that MBS are as able as ever to hold their ground in the face of Treasury weakness, especially if that weakness remains range-bound.
MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

FNMA 3.5
105-06 : -0-04
FNMA 4.0
106-15 : -0-03
FNMA 4.5
107-10 : -0-02
FNMA 5.0
108-08 : -0-01
GNMA 3.5
107-01 : -0-03
GNMA 4.0
109-09 : -0-03
GNMA 4.5
109-12 : -0-04
GNMA 5.0
110-01 : -0-02
FHLMC 3.5
104-31 : -0-04
FHLMC 4.0
106-05 : -0-04
FHLMC 4.5
106-27 : -0-02
FHLMC 5.0
107-16 : -0-01
Pricing as of 11:06 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this morning.
10:51AM  :  ALERT ISSUED: Bond Markets Get A Boost From European Benchmarks

One of the most interesting developments following the EU news overnight was that 10yr European benchmark yields rose above US 10yr Treasury yields for the first time since February. More so than the Euro or the Stock lever or even just the general “risk-on” trade, US Treasuries mirror and match German Bunds (European Benchmark). So there was quite a bit of pressure for 10’s to re-test the ceiling of supportive levels in the high 1.6’s. as Bunds themselves hit the high 1.6’s.

But thus far, domestic bond markets have done an admirable job of holding their ground vs the general currents of the “risk-on” trade. And now that Bunds are easing lower from their late European session highs, US Treasuries have backed down from their highs of the morning as well–all this despite advancing stocks and Euros.

MBS generally approve of the ground-holding and are very close to regaining the lower levels of yesterday’s range. Bottom line for now is that 102-13 to 102-14 has been supportive all week in Fannie 3.0s, getting attention on Tuesday, Wednesday, and again this morning. Just like 10yr Treasuries are contending with an intermediate pivot point around 1.645 before going lower, so too are Fannie 3.0’s contending with their overhead pivot at 102-22.

Both of these are somewhat blurry lines in the sand that will help us assess any ongoing positivity. “Blurry” because there’s no good specific level to assign to either pivot point. For 3.0’s, it’s more like 102-22 to 102-24 and for 10’s 1.64 to 1.65. Anything INSIDE those ranges is positive, but equivocally so.

A break through to stronger territory would be significantly more positive whereas a firm show of resistance would be the first warning sign of further weakness, but that weakness would need to be confirmed by follow-through selling that takes Fannie 3.0’s through 102-13 and 10yr Treasury yields above 1.69 before we’d be too concerned that the “new sideways” range is at risk. Otherwise, every passing minute is confirming the “new sideways.”

10yr yields are currently down to an impressive 1.6483 and Fannie 3.0’s back up to 102-21. Very good, even if not great, all things considered.

10:06AM  :  ECON: Consumer Sentiment Slightly Lower Than Expected

– Headline Sentiment 73.2 vs 74.1 consensus
– ‘current conditions’ 81.5 vs 82.1 consensus
– ‘consumer expectations’ 67.8 vs 69.0 consensus
– 12 month outlook 79 vs 82 consensus
– 1-yr inflation expectations 3.1% vs 3.0 consensus
– 5-yr inflation expectations 2.8% vs 2.9 consensus
– sentiment, conditions, expectations lowest since December

(Reuters) – Consumer sentiment dropped to a six-month low in June as Americans’ view of the economy soured, a survey released on Friday showed. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment fell to 73.2 in June from 79.3 in May.

It was the lowest level since December and fell short of economists’ expectations for the index to hold at the same level as June’s preliminary reading of 74.1.

The deterioration in consumers’ attitudes came mostly from households with incomes over $75,000; sentiment among lower-income households was little changed, the survey said. “While the overall level of consumer sentiment is substantially above last summer’s low – which would normally indicate a growth slowdown, not a downturn – the buying plans of upper-income households have also sharply declined,” survey director Richard Curtin said in a statement.

“Since these households account for a large share of total spending, if the declines continue in the months ahead, it could have a substantial impact on total spending.”

9:57AM  :  ECON: Chicago Purchasing Managers Index Roughly As-Expected

* 52.9 Headline vs 52.5 consensus and 52.7 last month… not the sort of deviations that will inspire bond markets much this AM…

From ISM-Chicago:

The Chicago Purchasing Managers reported the June Chicago Business Barometer stabilized just above May’s 33 month low. The short-term trend of the Chicago Business Barometer fell for the third month. The three-month moving average of each Business Activity index, except Employment, fell in June. Prices Paid were at a 30 month low. New Orders and Order Backlogs were at their lowest since September 2009.

9:06AM  :  ALERT ISSUED: Bond Markets Weaker On EU Debt Deal, Trying To Establish Support

Bond markets continue to trade in weaker territory after this morning’s first round of domestic economic data proved to be of little interest compared to overnight events. The key market mover so far today is the agreement reached at the EU Summit (after much wailing and gnashing of teeth from Spain and Italy) that will allow Europe’s permanent bailout fund, the ESM, to recapitalize banks without increasing a country’s budget deficit and without taking preferential status over the country’s other bondholders.

The Euro shot sharply higher following the announcement in the wee hours of the morning and everything else has followed in a “risk-on” direction. 10yr yields have seen their sharpest upward movement since the Greek elections and S&P futures are close to 25 pts higher.

MBS are outpeforming noticeably with Fannie 3.5s down only 10 ticks on the day at 105-00, a familiar support level of late and Fannie 3.0’s are down 13 ticks at 102-15, roughly in line with Wednesday’s lows. 10yr yields currently trade in the mid 1.67’s which marks the beginning of some critical “line in the sand” territory that stretches up to 1.69.

Current trading movements are less about “stuff” that’s happening right now and more about sorting out the reaction to the overnight news, as well as simply letting the technical and flow-based trading considerations run their course. If bond markets are able to dig in and hold ground at current levels, it would be a profound statement reinforcing the “new sideways” range from 1.68 to 1.56 (plus or minus a bp on either side).

8:36AM  :  ECON: Incomes And Outlays Both In Line With Expectations

* Both Incomes and Outlays as expected. No real surprises in the report. Markets continue to be more interested in Europe.

From the BEA:

Personal income increased $25.4 billion, or 0.2 percent, and disposable personal income (DPI) increased $18.5 billion, or 0.2 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $4.7 billion, or less than 0.1 percent. In April, personal income increased $29.4 billion, or 0.2 percent, DPI increased $19.5 billion, or 0.2 percent, and PCE increased $16.2 billion, or 0.1 percent, based on revised estimates.

Real disposable income increased 0.3 percent in May, compared with an increase of 0.1 percent in April. Real PCE increased 0.1 percent in May, the same increase as in April.

Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard’s Live Chat feature, utilized by hundreds of industry professionals each day.
BVG  :  “try Advancial CU Blair”
Matthew Graham  :  “RTRS- THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT FINAL JUNE 73.2 (CONSENSUS 74.1) VS PRELIMINARY JUNE 74.1 “
Blair  :  “Anyone have any non warrantable lenders at 90 ltv”
Andrew Horowitz  :  “It seems like it is a step in the right direction, the problem is that they still have months of work to do to put these steps into place. With their economies all falling into recessionary levels it will put more pressure on the governments to pay their way out of their mess right now”
Matthew Graham  :  “RTRS – CHICAGO PURCHASING MANAGEMENT INDEX 52.9 IN JUNE (CONSENSUS 52.5) VS 52.7 IN MAY “
Adam Quinones  :  “impressive performance MBS!”
Adam Quinones  :  “wow…basis about 7 tighter vs. rates even with about 1bn in TBA supply this AM.”
Matthew Graham  :  “There’s some “turning point” / “game changer” type buzz over this one, but markets seem to disagree, otherwise they’d be much less interested in respecting recent support levels. For my party, I couldn’t really say for sure Jeff, but still leaning toward can-kicking at this point. I guess the biggest question is whether or not the overall “situation” can even be adequately treated by the existing system. Some say EU has the resources to fix itself, some don’t. If you’re in the former camp, t”
Matthew Graham  :  “RTRS – MERKEL COALITION PARL’T LEADER SAYS VOTE ON ESM,. FISCAL PACT TO TAKE PLACE ON FRIDAY AS SCHEDULED “
Jeff Anderson  :  “Gm, all from finally sunny Fl. So basically the can got kicked again and Spain became Grease 2. And they’ll let us know when they need some more money? Oh, and they don’t have to tighten up anything for now. So they’ll be fine. “
Matthew Graham  :  “RTRS – BULLARD – FED COULD REOPEN CRISIS-ERA LIQUIDITY FACILITIES IN EVENT OF A SHOCK “
Matthew Graham  :  “RTRS- FED’S BULLARD – MONETARY POLICY IS APPROPRIATELY CALIBRATED TO CURRENT SITUATION “
Andy Pada  :  “personal saving rate is sort of a double edge sword”
Matthew Graham  :  “RTRS – US MAY PERSONAL SAVING RATE 3.9 PCT VS APRIL 3.7 PCT “
Matthew Graham  :  “RTRS- US MAY OVERALL PCE PRICE INDEX -0.2 PCT (-0.1858), LARGEST DECLINE SINCE JUNE 2010, VS APRIL 0.0 PCT (PREV 0.0 PCT) “
Matthew Graham  :  “RTRS – US MAY PERSONAL INCOME +0.2 PCT (CONS +0.2 PCT) VS APRIL +0.2 PCT (PREV +0.2 PCT) “
Matthew Graham  :  “RTRS – US MAY PERSONAL SPENDING 0.0 PCT (CONSENSUS 0.0 PCT) VS APRIL +0.1 PCT (PREV +0.3 PCT) “
Victor Burek  :  “sure..risk on”
Andy Pada  :  “agreed, but is this morning’s Treasury weakness a result of EU action?”
Victor Burek  :  “nothing solved over there”
Andy Pada  :  “VB, is that in response to EU?”
Victor Burek  :  “dont worry about the ugly start Oliver..it is only temporary”
Oliver S. Orlicki  :  “Ugly start this morning”
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[MND NewsWire] – CoreLogic: 2,400+ Foreclosures per Day over Last 12 Months

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CoreLogic: 2,400+ Foreclosures per Day over Last 12 Months

Posted to: MND NewsWire
Friday, June 29, 2012 10:46 AM

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There were 63,000 completed foreclosures in May, about 1,000 more than were completed in April according to the National Foreclosure Report issued today by CoreLogic.  In May, 2011 77,000 foreclosures were completed nationwide.

Mark Fleming, chief economist for CoreLogic said that the foreclosures in May brought the 12 month total to 819,000 foreclosures which is an average of 2,440 each day.  “Although the level of completed foreclosures remains high, it is down 27 percent from a peak of 1.1 million in all of 2010,” Fleming said.

Since the financial crisis began in September 2008 there have been approximately 3.5 million completed foreclosures across the nation and, as of the end of May, another 1.4 million homes were in the national foreclosure inventory.  The inventory, the number of homes in some stage of foreclosure, is down from 1.5 million in May 2011.   The current inventory represents 3.4 percent of all homes with a mortgage.

The states with the highest numbers of completed foreclosures over the 12 months ended in May were California (133,000), Florida (92,000), Michigan (60,000), Texas (58,000), and Georgia (57,000).  These five states account for nearly half (400,000) of the completed foreclosures in the entire country during that period.

On a percentage basis the states with the most foreclosures were Florida (11.9 percent), New Jersey (6.6 percent), Illinois (5.3 percent), New York (5.0 percent), and Nevada (4.9 percent).

Though the national foreclosure inventory levels remain steady, around 1.4 million homes, there have been dramatic shifts at the state level,” said Anand Nallathambi, president and CEO of CoreLogic. “Nevada, Arizona and Michigan, for example, each experienced at least a 20-percent decline in the foreclosure inventory from a year ago. While foreclosure inventories in most states are declining, the foreclosure inventory is still rising in many judicial states, such as Hawaii, New York and Connecticut.”

The five states with the most completed foreclosures are also the top states in terms of their foreclosure inventory.  Four of the five states, Nevada being the exception, use primarily a judicial foreclosure process which has been blamed for much of the backlog of loans that are severely delinquent but not yet foreclosed.

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Mortgage Rates Edge Down To NEW All-Time Lows; Appraisal Regulation

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Jun 28, 2012 2:43PM

Mortgage Rates Edge Down To NEW All-Time Lows

Mortgage Rates moved slightly lower today but it was enough to officially hit new all-time lows. Some perspective is in order though. Certain lenders’ rates are unchanged on the day, and some are even slightly higher, but the average moved lower. Even then, the actual INTEREST RATE would be the same as it was yesterday. The improvements from yesterday were seen in the form of lower borrowing costs for those same rates. Bottom line: Best-Execution remained at 3.625%, but just got a bit more affordable…

Jun 28, 2012 12:27PM

Congress Hears Different Views on Appraisal Regulation

Among those testifying at a hearing of the House Committee on Financial Oversight’s subcommittee on Insurance, Housing, and Community Opportunity were William B. Shear , director, Financial Markets and Community Investment, Government Accountability Office (GAO) and Sara W. Stephens, president of the Appraisal Institute. Shear restated GAO’s earlier recommendations that federal regulators set minimum standards for registering Appraisal Management Companies (AMC) before a hearing on Thursday while…

Micro News

1:16 PM:

Another Dismal Treasury Auction Shrugged Off By Bond Markets

10:31 AM:

Bond Markets At Best Levels Following Healthcare Ruling

10:03 AM:

Freddie Mac: Fixed Mortgage Rates Match All-Time Record Lows

8:55 AM:

Bond Markets Continue In Moderately Stronger Territory After Data

8:41 AM:

ECON: Jobless Claims Fell To 386k, In Line With Consensus

8:36 AM:

ECON: Final Q1 GDP +1.9%, As Expected

2:04 PM:

Positive Shifts In Reprice Risk As MBS Hit Highs

1:13 PM:

Ugly Five Year Auction Putting ALMOST Noticeable Pressure On MBS

Around the Web

Video News

Santelli to Conservatives: ‘Take this Decision with Respect’

Santelli’s Morning Bond Update

Merkel, Roubini, Maughan Own Words on Euro Bonds

Today’s Comments

Ted Rood

“Now all we need is for this to happen about 100 more times, and have agents, developers, title companies, and builders involved be prosecuted as well….”
Jason Harris

“I hear more about money at home in the safe that one ever should….must be something in the water around here but seems like everybody has a few thousand…”
daniel.rodrigues

“Hi Rob You state “Despite rates remaining near all-time lows, conventional refinance application volume declined, and the HARP share of refinance…”

Today’s Q&A

“Buying a new home 30 days after refiancing current primary residence”

“Purchasing another home as primary residence after refinancing on current primary residence”

“What if you have signed a contract and the house goes into short sale? What happens?”

<!–

Today’s Forum Discussions

Mike B

“Hello, Thanks in advance for reading.. I wanted to get an opinion if I should go ahead and refinance or not. I have an outstanding loan balance of $201…”
Richard Bacon

“Hello everyone, In home improvement store, a customer put a piece of long and big mental in the cart. It was protruding. An employee ran into it and caused…”
Michael LiVigni

“I am hoping to get some advice. We have two mortgage loans on our house (which is now underwater.) We are making the payments fine and hope to wait out…”

–>
Erick Strobel

Market Data

Mortgage Rates

30YR 3.72 -0.03
15YR 2.99 -0.02
FHA30YR 3.64 -0.02
Jumbo30YR 4.10 -0.02
5/1ARM 2.97 -0.01

MBS Quotes

30YR FNMA 3 105-11 0-07
30YR FNMA 4 106-18 0-05
30YR FNMA 4 107-12 0-03
30YR FNMA 5 108-10 0-02

Treasuries

2 YR 0.3050 -0.0040
3 YR 0.3989 -0.0081
5 YR 0.6926 -0.0244
7 YR 1.0452 -0.0398
10 YR 1.5819 -0.0391
30 YR 2.6801 -0.0129

Recent Housing Data

Visit our Market Data Center for all of the latest housing numbers, graphs, etc.

S&P/Case Shiller 1.28%
Mortgage Application -0.83%
Mortgage Refinance 0.97%
Mortgage Purchase -8.51%
Existing Home -1.52%
New Home Sales 7.58%

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[MBS Commentary] – MBS RECAP: Bond Markets To Any Lurking Guidance Givers: "Your Move!"

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MBS RECAP: Bond Markets To Any Lurking Guidance Givers: "Your Move!"

Posted to: MBS Commentary
Thursday, June 28, 2012 4:06 PM

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MBS Live: MBS Afternoon Market Summary

Bond markets made their move today… The trend of convergence and consolidation on bond markets that we’ve been tracking and discussing in recent days was finally tested, and in just about the LEAST interesting way possible.  Essentially, the “triangle” of lower highs and higher lows was already broken by the time New York got in and we’d guessed last night, or perhaps “suggested” that while the triangle would clearly be broken by today’s trading, the only really interesting eventuality would be the subsequent break of one of the significant recent horizontal yield levels, like 1.68 on the high side of the previous June lows.  So given that the lower red line in the chart below is the less intense of the two horiztonal levels on the downside, bond markets have essentially done “only what they had to do” and nothing more.  Your move world.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

FNMA 3.5
105-08 : +0-05
FNMA 4.0
106-17 : +0-04
FNMA 4.5
107-12 : +0-03
FNMA 5.0
108-09 : +0-01
GNMA 3.5
107-03 : +0-06
GNMA 4.0
109-10 : +0-03
GNMA 4.5
109-14 : +0-04
GNMA 5.0
110-03 : +0-01
FHLMC 3.5
105-01 : +0-05
FHLMC 4.0
106-07 : +0-04
FHLMC 4.5
106-29 : +0-03
FHLMC 5.0
107-18 : +0-01
Pricing as of 4:06 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.
1:16PM  :  ALERT ISSUED: Another Dismal Treasury Auction Shrugged Off By Bond Markets

The 7yr Treasury Auction came in 1.705 vs a 1.505 “when-issued” yield at 1pm’s auction bid cut-off, making this a moderately large 2bp tail (Treasury Auction Jargon Refresher HERE if you need it). The bid-to-cover was a low 2.64 compared to a recent of 2.85 and 2012 low of 2.72.

While this does look to be reinforcing the 1.568-ish floor of resistance in Treasuries at the moment, bond markets certainly haven’t done what you might expect them to do on the heels of such an auction. Then again, if you were tuned in to yesterday’s 5-yr auction, the same thing happened. So maybe it would be fair to have expected a repeat performance, or at least hoped for it.

Whether or not that continues to be the case remains to be seen. So far so good for now as 10’s never went higher than 1.59 on the initial knee-jerk response and are currently back down to 1.575. Apart from the shorter term 1.568 floor, there’s a more pronounced range of technical resistance around the mid 1.55’s. Anything above there is sort of a non-event heading into tomorrow and preserves the sideways range from early June.

On the MBS front, Fannie 3.0’s are up 8 ticks on the day, at 102-28 and 3.5’s up 7 at 105-10. Both are little changed since 10am and holding narrow ranges right through the post-auction trade. We’ve already seen a few scattered positive reprices, but more could follow if the general “holding our ground” theme continues unabated.

Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard’s Live Chat feature, utilized by hundreds of industry professionals each day.
Bryce Schetselaar  :  “REPRICE: 2:39 PM – Sierra Pacific Worse“
Tom Schwab  :  “REPRICE: 1:53 PM – AMC Better“
Justin Bayle  :  “I really think so”
Brent Borcherding  :  “We’re turning Japanese.”
Alan Craft  :  “It’s a different world we live in these days”
Matthew Graham  :  “buyers showing their hands readily on that one. “
Matthew Graham  :  “but darned if the initial pull-back wasn’t met with buying in TSYs. So far, turning out like y’day again”
Matthew Graham  :  “go figure”
Victor Burek  :  “Santelli gave it a D”
Matthew Graham  :  “yep, let’s see how it’s traded. not too ugly so far”
Victor Burek  :  “hope nobody cares like yesterday”
Matthew Graham  :  “that’s another D, maybe worse”
Victor Burek  :  “yuck”
Matthew Graham  :  “RTRS- US TREASURY – PRIMARY DEALERS TAKE $14.91 BLN OF 7-YEAR NOTES SALE, INDIRECT $12.17 BLN “
Matthew Graham  :  “RTRS- U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.64, NON-COMP BIDS $7.65 MLN “
Matthew Graham  :  “RTRS- U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 1.075 PCT, AWARDS 54.05 PCT OF BIDS AT HIGH “
Bryce Schetselaar  :  “MG, is there a way to show the S&P, 10 year and FNMA 3 on advanced charts at the same time?”
Matthew Graham  :  “1pm when-issued = 1.055”
Matthew Graham  :  “range 2.72-3.11”
Matthew Graham  :  “recent average BTC for 7yr auction = 2.85”
LSP  :  “REPRICE: 12:35 PM – Chase Better“
David Zilkha  :  “I just don’t buy that. If you have demand, you hire. The expenses are of course a consideration, but a small one compared to the demand “
Jeff Anderson  :  “I hear you, Andy but I’ve heard a lot of CEO’s saying they won’t hire until the healthcare was figured out. But I agree that they probably stand pat until the tax issue is resolved also.”
Andy Pada  :  “@Jeff, no one hires unless they have to. Squeeze every dollar out of current resources. Only demand wil spur new hiring.”
Matthew Graham  :  “RTRS – EU LEADERS TO SAY BANKING UNION SHOULD COVER ALL EU COUNTRIES, BUT ALLOW FOR DIFFERENCES BETWEEN EURO AND NON-EURO COUNTRIES – DRAFT SUMMIT CONCLUSIONS “
Matthew Graham  :  “RTRS- EU LEADERS TO ASK TOP FOUR EU OFFICIALS TO DEVELOP SPECIFIC, TIME-BOUND ROAD MAP FOR GENUINE ECONOMIC AND MONETARY UNION BY YEAR-END, INTERIM REPORT BY OCT – DRAFT SUMMIT CONCLUSIONS “
Jeff Anderson  :  “So with this uncertainty ‘over’ do businesses hire? “
Lynn ONeal  :  “REPRICE: 11:18 AM – USBank Better“
Timothy Baron  :  “I’m disappointed too Brett (cougar), but I think the decision is actually correct constitutionally. “
Andy Pada  :  “Wow…Santelli waxing knowledge”
Brett Boyke  :  “plus $500K cash on cash outs”
Brett Boyke  :  “USB Broker made some product changes that may be useful – 90% LTV purchases up to $750,000 with no MI (80% LTV purchases up to $1 million in AZ, CA, FL, MI, & NV) “
Brett Bly  :  “I’m very disappointed in John Roberts today. Haven’t read the decision but the only silver lining might be a true limitation of the commerce clause for the future.”
Read what our user’s have to say about MBS Live on LinkedIn.
» Start a two week free trial of MBS Live.

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[Mortgage Rate Watch] – Mortgage Rates Edge Down To NEW All-Time Lows

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Mortgage Rates Edge Down To NEW All-Time Lows

Posted to: Mortgage Rate Watch
Thursday, June 28, 2012 2:43 PM

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Mortgage Rates moved slightly lower today but it was enough to officially hit new all-time lows.  Some perspective is in order though.  Certain lenders’ rates are unchanged on the day, and some are even slightly higher, but the average moved lower.  Even then, the actual INTEREST RATE would be the same as it was yesterday.  The improvements from yesterday were seen in the form of lower borrowing costs for those same rates.  Bottom line: Best-Execution remained at 3.625%, but just got a bit more affordable. 

(Read More:What is A Best-Execution Mortgage Rate?)

Today’s economic data at home was a non-event, and the European considerations that helped push rates lower this morning were largely known and accounted for by the time domestic markets started trading today.  Bond markets improved in the first few hours of the morning and have since been trading in ranges that are so narrow and so sideways that it borders on ridiculous.  

With nothing spectacular coming out of today’s EU Summit, there’s one more day left for European headlines to motivate rates away from their recent trend of narrow historic lows.  We’re always cautious about being optimistic about the FUTURE direction of rates, not only because that can’t be predicted with certainty, but also because we’re not eager to sway anyone’s locking/floating preferences.  We’d rather lay out the relevant considerations and help guide our audience toward their own conclusions based on their unique scenario.

Obviously, no two scenarios are exactly the same.  That said, we’re feeling less and less like rates are cutting this narrow, converging path because they’re ready to break quickly to one direction or another and more like rates are just really low, really sideways, and will take a lot of convincing before doing something else.  Granted, we COULD see a big move in one direction, but probably not the other.

 Simply put, rates just cannot drop quickly from current levels!  There are structural roadblocks in the Secondary Mortgage Market to such things.  Because of that, and because there continue to be risks ahead, we continue to think that risk outweighs reward with regard to floating, but readily acknowledge that we’re not on the edge of our seats waiting for rates to break wildly higher (though we’d probably stand up and take note if it looked like such a thing was actually happening).  

Long Term Guidance: We’d continue to advocate against trying to “get ahead” of current market movements due to the high degree of uncertainty.  While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren’t “scheduled” or able to be forecast.  Risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.

Loan Originator Perspectives

Mike Owens, Partner with HorizonFinancial, Inc.

Lock your rate and be happy that you are getting the lowest rate mortgage on record. Floating just isn’t worth the worry over an 1/8 of a point here or there. It’s better to have locked if rates are down than to have floated if rates are up. More to lose than gain. Consider a 20 or 15 year loan as well.

Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage

 

Like the least wormy apple in an orchard, US bonds and mortgage securities continue to improve by default.  Eurozone is a looming disaster, and US equity outlook is far from certain.  Bonds and mortgages win by default.  Can lock or float at these levels depending on risk tolerance and time until closing, but be aware that the longer we are range bound (as we’ve been for better part of a month), the greater the intensity when pricing breaks one way or the other.

 

Bob Van Gilder, Finance One Mortgage

How low can they go? Beats me. Just take advantage of what’s available and should it get better— (4-6months down the road) your Originator (if he/she is any good) will take care of you. If not, I’ll be calling!

Victor Burek at Benchmark Mortgage

I continue to advise my clients to float til within 15 days of closing. That strategy has been quite successful for the last couple months; however, we do have a high risk event tomorrow with the EU summit. If they pull some kind of rabbit out of their hat, the market could get very happy and drive rates higher.

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.625%
  • FHA/VA -3.5% – 3.75%
  • 15 YEAR FIXED –  3.00%
  • 5 YEAR ARMS –  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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[MND NewsWire] – OCC Notes Fewer Banks Tightening Underwriting Standards

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OCC Notes Fewer Banks Tightening Underwriting Standards

Posted to: MND NewsWire
Thursday, June 28, 2012 1:44 PM

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The Office of Comptroller of the Currency (OCC) recently completed its 18th annual “Survey of Credit Underwriting Practices.” The survey seeks to identify trends in lending standards and credit risks for the most common types of commercial and retail credit offered by National Banks and Federal Savings Associations (FSA).  The latter was included for the first time in this year’s survey.

The survey covers OCC’s examiner assessments of underwriting standards at 87 banks with assets of three billion dollars or more.  Examiners looked at loan products for each company where loan volume was 2% or more of its committed loan portfolio.  The survey covers loans totaling $4.6 trillion as of December 31, 2011, representing 91% of total loans in the national banking and FSA systems at that time.  The large banks discussed in the report are the 18 largest by asset size supervised by the OCC’s large bank supervision department; the other 69 banks are supervised by OCC’s medium size and community bank supervision department.  Underwriting standards refer to the terms and conditions under which banks extend or renew credit such as financial and collateral requirements, repayment programs, maturities, pricings, and covenants.

The results showed that underwriting standards remain largely unchanged from last year.  OCC examiners reported that those banks that changed standards generally did so in response to shifts in economic outlook, the competitive environment, or the banks risk appetite including a desire for growth.  Loan portfolios that experienced the most easing included indirect consumer, credit cards, large corporate, asset base lending, and leverage loans.  Portfolios that experienced the most tightening included high loan-to-value (HLTV) home equity, international, commercial and residential construction, affordable housing, and residential real estate loans.

Expectations regarding future health of the economy differed by bank and loan products but examiners reported that economic outlook was one of the main reasons given for easing or tightening standards.  Others were changes in risk appetite and product performance. Factors contributing to eased standards were changes in the competitive environment, increased competition and desire for growth and increased market liquidity. 

The survey indicates that 77% of examiner responses reflected that the overall level of credit risk will remain either unchanged or improve over the next 12 months.  In last year’s survey 64% of the responses showed an expectation for improvement in the level of credit risk over the coming year. Because of the significant volume of real estate related loans, the greatest credit risk in banks was general economic weakness and its results and impact on real estate values.   

Eighty-four of the surveyed banks (97 percent) originate residential real estate loans.  There is a slow continued trend from tightening to unchanged standards with 65 percent of the banks reporting unchanged residential real estate underwriting standards.  Despite the many challenges and uncertainties presented by the housing market, none of the banks exited the residential real estate business during the past year however examiners reported that two banks plan to do so in the coming year.  Additionally, examiners indicated that quantity of risk inherent in these portfolios remained unchanged or decreased at 81% of the banks.

Similar results were noted for conventional home equity loans with 68% of banks keeping underwriting standards unchanged and 18% easing standards since the 2001 survey.  Of the six banks that originated high loan-to-value home equity loans, three banks have exited the business and one plans to do so in the coming year

Commercial real estate (CRE) products include residential construction, commercial construction, and all other CRE loans.  Almost all surveyed banks offered at least one type of CRE product and these remain a primary concern of examiners given the current economic environment and some banks’ significant concentrations in this product relative to their capital.  A majority of banks underwriting standards remain unchanged for CRE; tightening continued in residential construction and commercial (21 percent and 20 percent respectively).  Examiners site cited the distressed real estate market, poor product performance, reduced risk appetite and changing market strategy as the main reasons for the banks net tightening.

Nineteen banks (22 percent) offered residential construction loan products but recent performance of these loans has been poor and many banks have either exited the product or significantly curtailed new originations.

Of the loan products surveyed 17% were originated to sell, mostly large corporate loans, leveraged loans, international credits, and asset based loans.  Examiners noted different standards for loans originated to hold vs. loans originated to sell in only one or two of the banks offering each product.  There has been continued improvement since 2008 in reducing the differences in hold vs. sell underwriting standards and OCC continues to monitor and assess any differences.

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[MND NewsWire] – Congress Hears Different Views on Appraisal Regulation

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Congress Hears Different Views on Appraisal Regulation

Posted to: MND NewsWire
Thursday, June 28, 2012 12:04 PM

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Among those testifying at a hearing of the House Committee on Financial Oversight’s subcommittee on Insurance, Housing, and Community Opportunity were William B. Shear, director, Financial Markets and Community Investment, Government Accountability Office (GAO) and Sara W. Stephens, president of the Appraisal Institute.  Shear restated GAO’s earlier recommendations that federal regulators set minimum standards for registering Appraisal Management Companies (AMC) before a hearing on Thursday while Stephens countered that non-congressionally mandated regulations are threatening to hamstring and jeopardize the real estate appraisal profession altogether.

Shear presented results of a GAO study on appraisal oversight which confirmed that appraisals remain the most popular form of property valuation used by Freddie Mac, Fannie Mae (the GSEs) and major lenders.  While other valuation methods such as broker opinions and automatic valuation models (AVM) are quicker and less expensive, they are also considered less reliable and are not generally used for loan originations.   While GAO did not capture data on the prevalence of approaches used to perform appraisals, the sales comparison approach is required by the GSEs and FHA and is reportedly used in nearly all appraisals.

Charges of conflict of interest have changed the ways in which appraisers are selected and raised concerns about the oversight of AMCs which often manage appraisals for lenders, GAO said.  The Dodd-Frank Act reinforced earlier requirements and guidance about selecting appraisers and prohibiting coercion and this has encouraged more lenders to turn to AMCs.  This in turn has raised questions about the oversight of these firms and their impact on appraisal quality.

Federal regulators and the enterprises said they hold lenders responsible for ensuring that AMCs’ policies and practices meet their requirements but that they generally do not directly examine AMCs’ operations.  Some industry participants voiced concerns that some AMCs may prioritize low costs and speed over quality and competence. The Dodd-Frank Act requires state appraiser licensing boards to supervise AMCs and requires other federal regulators to establish minimum standards for states to apply in registering them. Setting minimum standards that address key functions AMCs perform on behalf of lenders could provide greater assurance of the quality of the appraisals those AMCs provide GAO said, but as of June 2012, federal regulators had not completed rulemaking for such standards.

The Appraisal Subcommittee (ASC) established in 1989 by the Title XI of the Financial Institutions Reform, Recover, and Enforcement Act (FIRREA) has been monitoring the appraisal function but its effectiveness has been limited by several weaknesses which include failing to both define the criteria it uses to assess state compliance with Title XI and the scope of its role in monitoring the appraisal requirements of federal banking regulators.

ASC also lacks specific policies for determining whether activities of the Appraisal Foundation (a private nonprofit organization that sets criteria for appraisals and appraisers) that are funded by ASC grants are Title XI-related. Not having appropriate policies and procedures is inconsistent with federal internal control standards that are designed to promote the effectiveness and efficiency of federal activities.

Appraisals and other types of real estate valuations have come under increased scrutiny following the mortgage crisis and Dodd-Frank codified several requirements for the independence of appraisers and expanded the role of ASC.  It also directed GAO to conduct two studies which were the source of Shear’s testimony before the committee.

GAO recommends that federal regulators consider key AMC functions in rulemaking to set minimum standards for registering AMCs, that ASC clarify the criteria it uses to assess states’ compliance with Title XI of FIRREA and develop specific policies and procedures for monitoring the federal banking regulators and the Appraisal Foundation.  ASC and regulators are either taking steps to implement these recommendations or considering doing so.

Although she was not speaking directly to the GAO report, Stephens in a written statement told committee members that, although appraising is the most heavily regulated activity within the mortgage and real estate sectors, regulatory agencies are planning to enact further changes that would threaten to tie the hands of appraisers, curtail innovation and increase regulatory burdens on appraisers and financial institutions.

Stephens was testifying directly against The Appraisal Foundation’s creation of a new Appraisal Practices Board delving into appraisal practice matters without Congressional authorization. The Foundation does not have authority to codify appraisal methods and techniques, she said, and called it a dangerous and unjustified move.  “The regulatory burden for appraisers is on the cusp of being expanded exponentially.”

“Appraisal methods and techniques require judgment by the appraiser. It is assumed that the appraiser has been thoroughly trained to judge appropriate situations. The choice of methods and techniques are the responsibility of the appraiser in the development of his/her scope of work” she said. For instance, whether to use reproduction cost or replacement cost or when and how to adjust for sales concessions are dependent on the actions of the marketplace and should not be mandated by a body such as the Appraisal Practices Board. Hard “rules of thumb” do not work within valuation because there always is an exception to the rule, she said.

The Appraisal Institute offered a long list of recommendations to Congress including that they:

  • realign the appraisal regulatory structure with those of other industries in the real estate and mortgage sectors
  • Protect the independence of the appraisal standards-setting process and require that standards for federally related transactions be issued by an entity that does not develop or offer education for appraisers.
  • Establish limitations around the Appraisal Practices Board specifying that no tax dollars be used to fund the venture, voluntary guidance be truly voluntary, and meaningful oversight over the de facto regulatory action of the Foundation be established.
  • Reiterate that the Foundation does not have legislative authorization in the area of “methods and techniques” and “appraiser education.”
  • Authorize the GSEs and other agencies to halt purchase or guarantees of loans in states that maintain deficient appraiser regulatory regimes and ensure that ongoing federal support for the GSEs or any replacement maintains consistent appraisal rules.

The Institute said states should be restricted from codifying voluntary guidance into state law or regulation and the Appraisal Standards Board prohibited from specifically referencing its works within the Uniform Standards of Professional Appraisal Practice and laws should be established to empower state boards to investigate and prosecute complaints involving appraisers.

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