On her first day at the senior complex, the
new manager addressed all the seniors pointing out some of her rules.
"The female sleeping quarters will be
out-of-bounds for all males, and the male dormitory to the females. Anybody
caught breaking this rule will be fined $20 the first time."
She continued, "Anybody caught
breaking this rule the second time will be fined $60. Being caught a
third time will cost you a fine of $180. Are there any questions?"
At this point, a crusty old retired loan
officer stood up and asked: "How much for a season pass?"
The stock market is not the economy. That's a simple financial
truth, but it is hard to keep in mind during rallies or sell-offs. Especially
when mainstream press seems to forget it. More on stock & bond prices
several paragraphs down.
And here's some good news! Banc of California, Inc.
announced that the Special Committee of its Board of Directors has received the
final report of the independent investigation into previously disclosed blogger
allegations. The report concludes that there was no violation of law and that
Jason Galanis had no indirect or direct control or undue influence over the
Company. As you recall, in October an anonymous blog post raised questions
about related party transactions and other issues with respect to the Company.
In response to these allegations, the Board formed a Special Committee which
commenced a process to identify and engage an independent law firm to review
the allegations.
The Special Committee retained WilmerHale, a law firm with
no prior relationship with the Banc of California, to conduct an independent
investigation to address certain issues raised by the blog post, and items
identified by the Special Committee, as well as other questions raised by an
auditor. WilmerHale has made a final report to the Special Committee and KPMG
and has confirmed its earlier conclusion that the inquiry has not found any
violation of law.
All of these companies know a thing or two about
evaluating collateral and appraisals. Change is afoot in the appraisal business
as the industry strives to alter the process for becoming an appraiser, as
there are 50 states with a myriad number of rules and restrictions. Stay tuned
on that, but in the meantime, let's see what various lenders and investors
have been doing regarding appraisal & collateral changes and assessing
storm damage.
The NAR's quarterly survey of mortgage lenders came out and problems
with appraisers (or lack thereof) dominate the headaches. Over half of all
respondents reported issues in this area, with 11% characterizing them as
significant. One problem is the lack of new entrants, however 28% of lenders
won't accept an appraisal done by a trainee, and 44% require direct supervision
of all aspects performed by a trainee. Non-QM lending fell slightly during the
quarter, however investor demand for the product is rising. Rising rates are
expected to have some effect on purchase demand, however there is such tight
supply that it shouldn't affect volumes overall.
Some believe that the appraiser shortage is clogging up the system, at least
until volumes sank. There were 2000 fewer appraisers in 2016 versus 2015, and
the average age is 53. Many are looking to retire, and the pipeline of new
appraisers is shrinking. Regulatory challenges have largely caused the problem,
and the industry is looking for ways to attract new blood into the industry,
via waiving the degree requirement and shortening the number of apprentice
hours required. The ones that remain however have so much work that they don't
have the time to train anyone.
The newest update to the Fannie Mae Selling Guide includes appraisal policies
related to property inspection by an appraiser trainee, appraisal adjustments
for sales concessions, and comps in new projects or subdivisions. It also
provides updated guidelines for confidentiality of information and data breach,
changes to seller/servicer financial eligibility requirements and removes
duplicative content in the Selling Guide and Servicing Guide.
Fannie Mae Limited Reviews are now permitted for condominiums
under the Wells Fargo High Balance Conforming Loan Program for Prior
Approval Loans. In addition, Wells Fargo Funding Solar Panel System Approval
Request (Exhibit 9) has been updated to no longer require the two most recent
solar billing statements if the agreement is a Power Purchase Agreement.
The SunWest Mortgage disaster area policy is as
follows: For loans submitted with an appraisal dated on or before the incident
period end date or for those submitted without an appraisal, Sun West will
require an interior and exterior inspection prior-to-funding or purchase of any
loans with subject properties that are determined to be at risk. The inspection
must verify that the property is sound, habitable and in the same condition as
when it was appraised.
NewLeaf issued the following information regarding
active loans in the pipeline: Because of Severe Storms, Tornadoes, and
Straight-Line Winds occurring in Georgia from January 21, 2017 (incident
start date) through January 22, 2017(incident end date), the President issued
a federal disaster declaration on January 26, 2017 for the following counties: Berrien,
Cook, Crisp, Dougherty, Turner and Wilcox. All
subject properties in the areas impacted by the disaster require evidence that
the subject sustained no damage from the identified disaster. If the
subject property is located in an impacted area, with a completed appraisal
dated prior to the incident start date, a 1004D re-inspection completed
by the Appraiser must certify that the property is free from the applicable
natural disaster damage.
Per FAMC's Correspondent Lending Bulletin,
effective immediately, a buyer will be allowed to assume the seller's flood
insurance policy and retain the same rates provided the loan is not a
construction loan and the policy states it is transferrable. Please review the
updates to the Flood Disaster Protection Act chapter of the manual for specific
requirements. Also, FAMC has updated its guidelines to align with FHA's
current 4000.1 policy, as announced in FHA INFO#16-64. The total amount of
required repairs must not exceed $10,000 for HUD REO properties insurable with
a repair escrow.
In response to the severe storms, tornadoes and
Straight-line winds and in response to a Federal Disaster Declaration, M&T
Bank will enforce the Disaster Re-Inspection Policy for all Georgia
properties located in the counties of Berrien, Cook, Crisp, Dougherty, Turner,
Wilcox. The same is true for Mississippi Counties of Forrest, Lamar, Lauderdale,
Perry.
Because of severe storms, tornadoes and
straight-line winds in Georgia (Georgia Severe Storms, Tornadoes, and
Straight-line Winds (DR-4294 and DR-4297), FEMA declared a major disaster
area. Loans scheduled to close in these areas may need to be delayed until
confirmation of the property's condition can be obtained. Plaza will
reassess the collateral for these loans and prepare them for closing as soon as
possible.
Quicken Loans released its monthly Home Price Perception Index
(HPPI) and Home Value Index (HVI). The gap between homeowner estimates and
appraiser opinions widened for the first time in six months. On average,
appraised values were 1.33 percent less than what homeowners estimated in
December, per the National HPPI. The gap between the appraisal and homeowner
estimates widened slightly since the previous month when appraiser opinions
were 1.00 percent lower than homeowner expectations. This widening of opinions
between homeowner and appraiser is a reversal of the narrowing trend that
dominated the second half of 2016 as homeowner and appraiser opinions had been
moving steadily closer.
The average appraisal values fell 1.19 percent from
November to December, per the National HVI, but increased 3.85 percent compared
to the previous December. This growth, however, is a slower pace than the 5.28
percent annual increase in November. Appraised values showed strongest annual
growth in the West, while the Midwest had the slowest gains.
The divergence between the opinions of buyers / sellers and
appraisers isn't new. According to Quicken loans, appraised values came in
about 1.3% lower than owner expectations in November. Interestingly, appraised
values fell in November, while house prices (at least per the home price
indices) have been rising. That said, appraisal values did increase almost 4%
YOY, however that is much lower than the 6% or so home price appreciation we
have been seeing in the other indices. That said, since appraisals use
historical comparisons, some lag is to be expected.
The markets
The stock and bond markets do not have to move in
opposite directions. Heck, just look at how both bond and stock prices both
improved throughout the 80's, 90's, and into this century. Both incorporate
future expectations. Typically, stock market moves indicate investor's genuine
hopes or anxieties about the future - or day trader's hopes or anxieties about
the future. But those hopes or anxieties have surprisingly little to do with
the current state of the American economy.
Often problems in China are blamed when our stock market
heads south. But exports to China are less than 1% of our gross domestic
product. So Chinese problems may squeeze a few companies like Apple, Yum!
Brands (Pizza Hut), and Iowa farmers, most American companies would barely
notice it. And the flow of goods we import from China is unlikely to be
affected by any Chinese downturn at all.
To say that the stock market isn't the economy doesn't
mean that stock market crisis can't become contagious; they can dampen the
"animal spirits" of managers and consumers, leading them to cut back
on investment and spending. Stock prices do have some impact on consumer
spending (the richer consumers feel, the more willing they are to spend).
Still, market moves need to severe and long-lasting to make a real difference.
The 1987 crash, for example, saw stocks drop more than twenty-two percent in a
single day. Yet it had no measurable impact on corporate investment, and only a
short-lived effect on consumer spending.
Turning to the bond market and interest rates, plenty of
NY bond traders stayed home Thursday due to the storm and we began with
treasury yields modestly higher vs. Wednesday's close as risk assets (e.g.,
stocks) were poised for a positive open. Not much changed throughout the day
and the new 10-year note closed 1/2 point in price lower to yield 2.40% while
5-year T-notes and agency MBS price declined about .250 in price.
This morning we've had January's import prices: +.4%, a
bit less than the prior month, and up 3.7% over the year. Coming up is the
University of Michigan Sentiment figures. Hopefully it will be a quiet trading
day, and we start it with the 10-year yielding 2.42% and agency MBS prices
worse about .125.
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