Richard's Real Estate Thoughts

My problem with HVCC - the new mandated home appraisal procedures

Tue, 23 Jun 2009 17:03:39 -0500

HVCC is the new standards and procedures for residential appraisal orders. It was negotiated by FNMA and FreddieMac with the New York Attorney General Andrew Cuomo in a settlement of a law suit brought by the NY Attorney General's office against Washington Mutual, a lender, and First American, an appraisal management company. The law suit was brought in November 2007 alleging the "appraiser colluded with Washington Mutual, one of the largest savings and loan companies, to inflate home values."

The HVCC procedures require mortgage brokers, who were not involved in the original lawsuit, to use lenders and appraisal management companies, who were involved in the original lawsuit, to order residential property appraisals.

Did you catch that? The appraisal process is being entrusted with the appraisal management companies, the same industry that was cited in the original law suit.

Several problems were identified at the time by industry professionals and the implementation of the HVCC was delayed. Now, 2 months into the actual implementation of HVCC, the chief economist for the National Association of Realtors®, Lawrence Yun, pointed to HVCC as a contributing factor to less than expected improvement in existing home sales.

From today's NAR press release, "Yun said the appraisal problem is serious. "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales," he said. "In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected." "

The mortgage broker's association, NAMB, is encouraging members to communicate with their local congressional representatives and local media about problems with the HVCC. They also are soliciting information from other industry professionals as well as from home owners and from buyers. Problems might include delays, low valuations, extra costs.

For me personally, I have not experienced problems with delays or low valuations. I have heard of problems with other mortgage brokers. For the most part the appraisal management companies have used the same appraisers that I would have used. And they have received the same valuation that I would have received.

I have seen no change at all in valuations.

What is different is the consumer is paying about more for that valuation.

What is different is the consumer has lost some flexibility with lender options because of difficulties with transferring the appraisal to a different lender.

What is different is that the local appraiser is burdened with additional paperwork in order to deal with the administration and procedures of numerous different appraisal management companies.

What is different is the local appraiser, a small business person with local ties to the community, is getting paid less for the valuation, even as the consumer is paying more. This means that more money is leaving the local economy and going to a large out of state corporation.

These changes do not make sense to me.

When trying to understand why an action was taken, I tend to look at the results and who benefitted from the action.

The mortgage process is not helped. The housing recovery is not helped. Consumers are not helped. Valuations are not better.

Appraisal management companies certainly benefit. Why would AG Cuomo seek to boost the revenues of appraisal management companies? Especially when one of the appraisal management companies was involved in the original law suit.

Judging based on the results of the implementation of HVCC it appears to me that the intentions of the New York Attorney General were to:

•·         Increase consumer cost
•·         Reduce consumer choice
•·         Increase appraiser work load
•·         Decrease appraiser income
•·         Slow the housing recovery
•·         Increase the income for appraisal management companies

Oh, and as I was writing this, I just received notice that one of the appraisal management companies ordered an appraisal from an appraiser who is on the lender's "Do Not Use" list. This means we need a new appraisal, we will miss the closing date, the borrowers will need to pay for a lock extension, and the sale is in jeopardy because we will need a contract extension.

Kind of makes me wonder about the quality of appraisers that the appraisal management company is using. My guess is that the QC standard for selecting the appraiser is the one who will work the cheapest. In this particular case, the QC procedures for approving a quality appraiser appear to be deficient.

At least the appraisal management company apologized. I wonder what the New York Attorney General thinks.

BTW, the appraiser on the lender reject list who was used by the appraisal management company is not someone that we typically would have chosen.

Drops of Jupiter fall on Chattanooga - Train comes to Riverbend 2009

Wed, 10 Jun 2009 06:55:18 -0500

Day Two of Riverbend 2009 brought Train, with Calling All Angels and a favorite song of mine, Drops of Jupiter in her hair. I really want to meet the lady who inspired that song, as well as Virginia.

Train of course is a well known group, but I was not expecting how good they are in concert. A great concert band. They played to the audience, even twice bringing people on stage and letting them sing and dance along. Their show got better as it went, and it started very good.

Drops of Jupiter

Meet Virginia

Calling on angel opens concert

Train Sand Sculpture

The Train sand sculpture by Team Sandtastic. And I caught one of the artists at work - almost one grain at a time.

Playlist for Train

Here is a link to the Day One post

Chattanooga welcomes Willie Nelson to the Tennessee River - Riverbend 2009

Mon, 08 Jun 2009 21:44:34 -0500

Willie Nelson was on the road again, this time to the Chattanooga Riverbend Music Festival.

Since the announcement that Willie Nelson was coming to Riverbend, I have just not been able to wait. Friday's opening act for the main stage did not disappoint. The crowd was ready and so was Willie.

Crowd gathers for Willie Nelson and Riverbend 2009 Opening Night.

Willie Nelson opens with Whiskey River

On the road again and a Hank Williams medley

Willie Nelson Playlist

The Riverbend Music Festival is a 9 day event with a wide variety of music acts. Chattanooga has held the festival since 1981, and it seems to get better each year. A first this year the Riverbend Beach, featuring expert sand sculpturing. The crowds are able to watch the artists and to see the progress each day.

Willie Nelson Sand Sculpture

Tennessee Valley FCU, Riverbend Festival and Riverbend Beach sponsor

Sand sculptures by Team Sandtastic of Sarasota, Fl

Riverbend Festival is 9 days of live music with continuous acts performing on from 5pm on, on 4 stages. These are in addition to the main stage act, on the Coke Stage, from 9:30 to 11. Every night you are treated to some of the best new acts and some more established acts, all in very intimate settings.

Friday my treat was Infinite Orange. This is a local phenomenon with 3 young men from Soddy Daisy, a neighboring community to Chattanooga. Folks, I had not heard of them before. But I was by myself in not knowing this group.

It is special to see talent at the beginning. Infinite Orange is that.They have a huge following, and they added one old man Friday night.

Infinite Orange has a new CD coming out this fall, titled Dig it. Their next performance is Nightfall on June 26. I will be there. Here is a link to a playlist. Take time to visit.

Art 'til Dark sponsored by Winder Binder Gallery

Sat, 30 May 2009 16:49:29 -0500

Visited Art ‘til Dark this afternoon. It is a regular outdoor art showing sponsored by Winder Binder Gallery. Some talented folks. Sculpture, painting, glass blowing, handicrafts. The originality of these artists always amazes me.

Today I met Charles McFarland, a local sculptor. He has worked in steel for over 2 decades, but had only recently turned his skills into creating art. His pieces are both large and small. He works both freelance and by commission. His customers include many corporations in Chattanooga, but also individuals.

Here are two of the larger pieces by Charles McFarland being displayed at the Art ‘til Dark show.

Today I also met Gypsy Hundley, a painter from North Carolina. As we talked, I mentioned that last week at the Who-Fest I met another artist whose work used the bright colors and imaginative drawing. Gypsy said, "Yes, my sister, Kim."

Two very talented ladies. With striking use of beautiful colors.

Visit Gypsy's Folkart on myspace.

Gypsy's sister, Kim, was here today also, but I missed her. From her booth at Art ‘til Dark.

David Smotherman runs Winder Binder Gallery on Frazier Avenue, where the regular Art ‘til Dark shows are held. He also sponsored the Who-Fest last weekend.

Give him a visit and see these great and inspired pieces. The next show is June 6, at the start of Riverbend.

Winder Binder Gallery
40 Frazier Avenue
Chattanooga, TN 37405
Phone: 423.413.8999

Chattanooga Market - Beast Feast BBQ Cookoff

Fri, 29 May 2009 14:36:53 -0500

The Chattanooga Market had a first last Sunday with its Beast Feast BBQ Cookoff. Some of the best BBQ chefs in the area set up shop. Despite the weather, the crowds came and stood in line to taste the best. We could buy a plate or a ticket to sample all.

The crowd gathers to taste the best of the best BBQ in Chattanooga.

The categories and results were:

People’s Choice

v Southern Smokehouse

v Hillbilly Willy’s BBQ & Catering

v Big Ben’s BBQ

Best Chicken

v Hillbilly Willy’s BBQ & Catering

v Moss Place BBQ &Catering

v Lockhart’s Fire & Smoke BBQ

Best Beef

v Hillbilly Willy’s BBQ & Catering

v Southern Smokehouse

v Kenny’s smokehouse BBQ

Cooking at the Beast Feast

Best Pork

v Kenny’s Smokehouse BBQ

v Hillybilly Willy’s BBQ & Catering

v Dixie BBQ

Best Beast

v Hoss’s (Almost Famous) BBQ by Terry

v Kenny’s Smokehouse BBQ

v Southern Smokehouse


And strawberries are in season at the Market	Always great music

This Sunday is Big Band Day. As part of the EPB CFL Day Electric Power Board (EPB) will give away 3,000 free CFL (compact fluorescent light bulbs) bulbs. You can also return used CFL bulbs. Also come and learn from the Master Gardeners of Hamilton County "to give you the "dirt" on gardening and answer any questions you may have about your plants and gardens at home."

It is great to live in Chattanooga.

Tax credit downpayment. Is it back in play with new HUD announcement?

Fri, 29 May 2009 10:51:46 -0500

The tax credit down payment is back. Well maybe not so much.

HUD announced today the details of the "new" program that have been much anticipated and in the news recently with a lot of false information. I expect that today's announcement will add to the dissemination of false information.

The policy allows certain entities to offer tax credit advances with second liens. This is the approach already taken by THDA for Tennessee purchases. Other states have similar programs.

The purchaser may not receive cash back as a result of the tax credit advance.

The second lien may not exceed the total amount needed by the borrower for down payment, closing costs, or prepaid escrows.

As an alternative to a tax credit second mortgage, approved entities may PURCHASE the anticipated tax credit refund.

More information is available in the reissued Mortgagee Letter 09-15.

News articles are already out on this HUD announcement, but in actuality I cannot find very much in the mortgagee letter that is new. There seems to be more in the headlines than in the details.

Maybe someone else can find more. It looks to me like the last paragraph in the announcement is almost a threat. "FHA will monitor the purchase of tax credit transactions closely." The primary concerns are overcharges for the tax credit advances and use of this program by entities involved in the transaction. This last is a nod to the former seller funded down payment programs that were discontinued this past fall.

Who-Fest 2009 - Wonderful art. Wonderful time.

Thu, 28 May 2009 21:14:17 -0500

Over the Memorial Day weekend Chattanooga was treated to a folk art festival. The third annual Who-Fest was held in Chattanooga. Despite some weather, dozens of folk artists set up shop and a good crowd came out to see their work.

Crowds along one of the walks of artists tents

The festival brought talented artists from all over. There was a great variety of art forms, from painting and sculpture to hand crafts and glass blowing. All amazing.

Kimberly Dawn was one of the many fabulous artists who displayed their work. Kimberly is also an established illustrator of children's books. Percy Porcupine and No More Handprints are two of her books.

Music variety was also provided for the crowd who wanted to set on the open grassy Hill Overlook at Renaissance Park.

Crowd sitting on hill overlook, listening to live music

Art appreciation includes free bongo lessons

Wildflowers along walk to the art festival

An added feature was the location. Renaissance Park is an example of Chattanooga's commitment to renewal and a tribute to its past. The park is open and grassy. The site of Who-Fest very appropriately overlooks the Renaissance Wetland, a 1.5 acre man-made, natural water filtration site.

Renaissance Wetlands

Is the US credit rating in trouble?

Wed, 27 May 2009 15:15:57 -0500

A new concern in the current US economic crisis is the credit rating of the United States.The fact that questions about the US credit rating is enough cause for concern. The strength of the dollar backed by the “faith and credit” of the US government has guaranteed low interest rates for government borrowing and provided a perception of safe investment for everyone.

UPDATE: As I was writing this post the bond markets underwent the worst adjustment I have seen with bond prices dropping, pushing mortgage rates up drastically. Best I can see, at issue are concerns over the US credit rating and heavy borrowing.

This confidence is now in question. To the point that the Treasury Secretary felt required to address the question, the reality of the issue is apparent. Pressing concerns even further is that the United Kingdom credit rating seems to be close to a downgrade with S&P’s decision last week to drop their outlook on Great Britain from stable to negative.

The dollar is facing renewed challenges as the global currency. While this is not new, the matter is getting new play, especially from China.

The rapid expansion of the US debt is the primary concern of debt markets. The growing foreclosure problem compounded with what appears to be permanent job losses especially in the automotive industry add to concerns over the US credit rating.

The immediate impact though is upward pressure on bond market rates, including mortgage back bonds. This is leading directly to increases in mortgage rates, despite the best efforts of the Federal Reserve to target rates below 5%.

At present the credit rating is AAA. Is there cause for concern?

Nightfall Concert series opens with a large crowd

Tue, 26 May 2009 17:06:31 -0500

Nightfall is one the treats of living in Chattanooga.

It is a free, summer, outdoor concert series

The opening night performance this year was last Friday. There was a large crowd, and everyone had fun.

Dexter Thomas Band at Nightfall 09

The lead off band was Dexter Thomas Band. They played some rock and roll standards. The singers were outstanding. Kept waiting for India Galyean, the female vocalist, to break out something from Janis Joplin. She has that kind of voice. They did not, but maybe they will read this and next time....

Lil' Malcolm & The House Rockers at Nightfall 09

Friday's headliner was Lil' Malcolm & The House Rockers. They brought a zydeco funk rock sound all the way from St Charles, LA. They really played to the crowd and had the whole place dancing real quick.

The Chattanooga Downtown Partnership sponsors the series. The Downtown Partnership was formed to develop and encourage programs that make the Chattanooga down town area attractive and fun for business and for the public.

This Friday Nightfall brings the NimNims and the headliner band, Nation Beat.

Home price declines continue - pushed by unemployment, foreclosures, tightening guidelines

Tue, 26 May 2009 10:46:49 -0500

Recent reports are being viewed as pointing to a general housing recovery, or at least to reaching the bottom. The most recent is the RPX monthly survey.

This seems to be some economic spin, most recently reflected in this morning's JUMP in Consumer Confidence. Last month we had a surprising increase. This morning we had a shocking increase.

This rise in Consumer Confidence must be balanced with the home price decline, increasing unemployment, and the growing list of bank closures.

From last week's RPX report, several news accounts reported that the housing market is showing signs of stabilizing from its freefall in 2008. The report gives a composite index of home prices from 25 larger MSA's. The report gave this summary, "The Composite declined only 0.3 percent on a month-over-month basis in both February and March 2009, which compares favorably to the 1.2 percent and 0.9 percent declines in February and March 2008."

(RPX stands for Radar Logic monthly report the Residential Property Index^TM (RPX^TM).)

(MSA stands for Metropolitan Statistical Area. It is based on census data and is used, among other purposes, as the basis for establishing lending parameters such as maximum loan amounts and median income for some mortgage programs.)

This report shows that 13 of the 25 larger MSA's all had price increases from February to March 2009. Most looked at this as partially a result of seasonal changes, but it was considered to be a positive sign.

The report data though still shows consistent declines in Year over Year results. Each of the 25 MSA's showed price declines from March 2008 to March 2009. Additional concerns seem real that the growing unemployment figures will point to even more foreclosures causing increased inventories and price pressure.

Today additional information came out from the Case Schiller index. The index reports a "staggering 32.2%" decline since the housing market began its fall. The most recent quarter showed "a 19.1% decline compared to the first quarter of 2008, marking the steepest fall ever in the 21-year history of the index."

This chart is from the Case-Shiller HPI showing percentage declines. Projections seem to indicate continued national declines with pressures from foreclosures and continuing loss of qualified buyers from unemployment and tightened requirements for all lending programs.

Chattanooga has not been immune to price declines. With the median price dropping over 8%.

Will another agency help? Secretary Geithner considers creating another agency.

Thu, 21 May 2009 15:52:03 -0500

It is hard for me to believe this. Treasury Secretary Geithner testified today before a congressional panel that the administration is considering creating another federal agency in order to protect consumers from certain financial and mortgage products.

I don't even hardly know what to say about this.

Where were the existing federal agencies when the mortgage meltdown was developing? How will another agency do better?

Why does anyone think that the problem was a lack of federal agencies?

Surely someone from FHFA, HUD, FHA, Treasury, Federal Reserve, VA, Rural Development, FDIC, or the FTC can be found.

Maybe he was just brainstorming with Congress.

Maybe someone will give a comment that shows how this makes sense. How the problem was a lack of federal agencies.

Poetic Voices II at Rock Point Books, Chattanooga

Thu, 21 May 2009 07:08:56 -0500

Come tonight to enjoy readings from some of Chattanooga's local writers. Rock Point Books is holding the second Poetic Voices tonight from 6 to 8.

Sheduled writers are:

Bruce Majors a finalist for an Indie Excellence Award in the 2007 book awards competition

E. Smith Gilbert has published extensively in the United States and Great Britain.

Ray Zimmerman his poem Glen Falls Trail took second place in the Tennessee Writers Alliance poetry contest, and the reading was part of an awards ceremony. He edits the literary newsletter, Feed Your Brain. He is a former president of the Chattanooga Writers Guild.

After these scheduled readers, the microphone will be open to anyone willing to share their writing.

Rock Point Books is located at 401 Broad Street. It is a great sponsor of reading in Chattanooga, offering public readings, children reading, book clubs, book signings.

On May 30 Tim Hollis will be present for a book signing of his See Rock City . He covers the history of some of the great spots in this local site, as well as the story behind the "See Rock City" marketing campaign.

Who-Fest This Weekend, Memorial Day in Chattanooga at Renaissance Park

Wed, 20 May 2009 18:40:55 -0500

The Who-Fest is this weekend. Saturday and Sunday, Memorial Day Weekend, at Renaissance Park. 10am to 6pm. It is an art and music festival sponsored by the Winder Binder Gallery of Folk Art. The festival is "a two day celebration of Folk, Outsider and Self Taught Art."

Over 70 artists have registered booths. Various music acts will perform beginning at 11am on both Saturday and Sunday.

Winder Binder Gallery sponsors many art event in Chattanooga. These events are just part of the reason Chattanooga has become recognized as one of the top cities for the arts.

Credit Card Reform and Guns in National Parks

Wed, 20 May 2009 17:36:55 -0500

Congress has now passed two unrelated pieces of legislation. Credit card reform and guns in the park. I am not expressing an opinion on either piece of legislation, though I have my opinion on both.

My concern is the way this legislative business is conducted, under the guise of compromise. And getting things done.

If you vote for mine, I'll vote for yours.

Does this approach not give the country two bad laws for the price of one?

If we need guns in the national parks, it should stand on its own.

If we need credit card reform, it should stand on its own.

I really think it is time to change business as usual in Congress. Does it make sense that the credit card bill also addresses gun legislation?

This is business as usual, and it produces bad laws. It happens with most every piece of legislation, certainly every major piece of legislation.

Economic recovery based on consumer sentiment and stronger banks

Wed, 20 May 2009 05:49:05 -0500

An apparent gap exists among different economic indicators as to the state of the recovery. Surveys of consumer sentiment and home builders both indicated significant improvement in recent weeks. Economists and markets quickly pointed to these surveys as evidence that the economy is nearing the bottom.

Consumer confidence and GDP

These reports though were followed by hard data that were contrary to the surveys. For Consumer Confidence the better-than-expected improvement was countered by a worse than expected drop in Gross Domestic Product and lower Retail Sales figures. These in addition to continuing high unemployment figures.

Builder sentiment and housing starts

This Monday we were encouraged by reports of increased enthusiasm from home builders. The Federal Reserve responded to this and other positive reports to offer cautious optimism that the economy is mending - really an affirmation of the administrations stimulus program.

Today though, we are met with hard data again running counter, with the report that housing starts were down. Part of that data does include improvement in single family housing starts, which could very well be indicative of a turn around.

Sentiment and actual data

It seems as sentiment and confidence surveys are reflecting hopes that the economy is turning, but do those hopes match economic reality? With unemployment still growing and with many of the lost jobs seemingly permanent losses, can the economic recovery be sustained on improving sentiment? Can sentiment continue to improve if the hard economic numbers do not show some consistent improvement?

Recovery plan focused on financial markets

The focus of the stimulus package seems to be to ensure stability in the financial markets, providing massive bailouts with few requirements to large banks. Unemployment is rising. Thirty three smaller banks have closed, with more coming. The major automotive manufacturers are closing plants and dealerships. Even the financial industry is suffering job losses, with American Express announcing cutbacks today.

Today the Federal Reserve announced that money will be available in July to encourage commercial lending. Additional emphasis on finance.

Hope for a recovery is based on encouraging lending, by strengthening banks. We are moving towards big government and big banks. So far efforts to stem foreclosure, to save jobs, to hold on to automotive manufacturing have either not been successful or have been primary. We seem to be conceding that employment loss will continue.

Will the big banks and big government be able to rescue the economy? Is this the right course?