{"id":4044,"date":"2018-11-30T17:33:59","date_gmt":"2018-11-30T22:33:59","guid":{"rendered":"https:\/\/dankrell.com\/blog\/?p=4044"},"modified":"2019-04-25T06:56:24","modified_gmt":"2019-04-25T10:56:24","slug":"next-housing-crisis-appraisals","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2018\/11\/30\/next-housing-crisis-appraisals\/","title":{"rendered":"Next housing crisis and appraisals"},"content":{"rendered":"

\"next<\/a>Are government agencies setting up the next housing crisis?\u00a0 A November 20th<\/sup> proposal<\/a> from the FDIC, the Fed, and the Office of the Comptroller of the Currency, has some consumer advocates suggesting just that.\u00a0 The joint proposal from these agencies would have the threshold for a (1-4 unit) residential mortgage appraisal increased from $250,000 to $400,000.\u00a0 This means that an appraisal would not be necessary for homes valued less than $400,000.\u00a0<\/strong> However, this rule would not apply to mortgages<\/a> insured or guaranteed by federal agencies, such as FHA or VA mortgages.<\/p>\n

Contrary to causing the next housing crisis, the rationale given for the appraisal rule change is to reduce mortgage processing delays.\u00a0 The change is also supposed to reduce costs to both financial institutions and consumers.\u00a0 The proposal<\/a> states:<\/p>\n

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“The agencies believe that the proposed increase to the appraisal threshold for residential real estate transactions would reduce burden in a manner that is consistent with federal public policy interests in real estate-related transactions and the safety and soundness of regulated institutions<\/em>.\u201d<\/p>\n<\/blockquote>\n

However, the Appraisal Institute<\/a> (appraisalinstitute.org) is in strong disagreement.\u00a0 AI president James L. Murrett, MAI, SRA stated in a press release that the rule change could potentially harm consumers by undermining \u201ccrucial risk mitigation services.\u201d\u00a0 Murrett commented<\/a>,<\/p>\n

\n

“The Appraisal Institute anticipates that<\/em> [the increase] will result in a return to the loan production-driven environment seen during the leadup to the financial crisis, where appraisal and risk management were thrust aside to make more \u2013 not better \u2013 loans. Apparently, the FDIC has learned nothing from that experience.<\/em>\u201d<\/p>\n<\/blockquote>\n

The Appraisal Institute is not alone in rejecting the rule change for residential mortgages, as opposition is being voiced from various consumer organizations.\u00a0 But the proposal should not have been a surprise.\u00a0 Changing the appraisal thresholds, which has not been adjusted since 1994, has been in the works for several years.\u00a0 And rumor of an imminent rule change was reported in January by Patrick Rucker for Reuters (U.S. regulators ready to ease check on property values: sources<\/em><\/a>; Reuters.com; January 28, 2018).\u00a0 Mortgage Bankers Association supported a threshold increase because of appraiser shortages, especially in rural areas.\u00a0 However, consumer advocates are concerned of triggering a new housing crisis because improperly inflated home values contributed to the last crisis.<\/p>\n

Interestingly, although this appraisal rule was considered earlier this year, a threshold change was only made for commercial mortgages.\u00a0 The final rule dated April 9th<\/sup> raised the threshold for commercial appraisals from $250,000 to $500,000.<\/p>\n

Some industry associations, such as the National Association of Realtors, have yet to comment on the recent proposal to increase the residential appraisal threshold.\u00a0 However, the NAR did issue a statement<\/a> April 5th<\/sup> supporting the commercial appraisal threshold increase.<\/p>\n

Curiously, NAR\u2019s recent support for increasing the commercial appraisal threshold is counter to their 2016 statement in favor of maintaining<\/em><\/strong><\/a> a $250,000 threshold.\u00a0 The 2016 letter sent to the Federal Financial Institutions Examination Council stated:<\/p>\n

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“NAR believes increasing the appraisal threshold levels would undermine the health of the real estate lending industry as a whole. As NAR states in its Responsible Valuation Policy, a trustworthy valuation of real property ensures the real property value is sufficient to collateralize the mortgage, protect the mortgagor, allow secondary markets to have confidence in the mortgage products and mortgage backed securities, and build public trust in the real estate profession.<\/em>\u201d<\/p>\n<\/blockquote>\n

It remains to be seen if NAR\u2019s position on \u201cbuilding trust in the real estate profession\u201d will completely change to also support an increased residential appraisal threshold.\u00a0 Or if not requiring appraisals for homes under $400,000 will cause the next housing crisis.<\/p>\n

Original published at https:\/\/dankrell.com\/blog\/2018\/11\/30\/<\/span>next-housing-crisis-appraisals<\/span>\/<\/span>(opens in a new tab)<\/span><\/p>\n

By Dan Krell<\/a>. Copyright \u00a9 2018.<\/p>\n

If you like this post, do not copy; instead please:
\nlink to the article<\/a>,
\nlike it on facebook<\/a>
\nor re-tweet<\/a>.<\/p>\n

\"Protected<\/a>
\nDisclaimer<\/a>. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.<\/p>\n","protected":false},"excerpt":{"rendered":"

Are government agencies setting up the next housing crisis?\u00a0 A November 20th proposal from the FDIC, the Fed, and the Office of the Comptroller of the Currency, has some consumer advocates suggesting just that.\u00a0 The joint proposal from these agencies would have the threshold for a (1-4 unit) residential mortgage appraisal increased from $250,000 to … <\/p>\n

Continue reading “Next housing crisis and appraisals”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[428,469,401,140,13,295],"tags":[929,936,871,706,528,797],"class_list":["post-4044","post","type-post","status-publish","format-standard","hentry","category-appraisal","category-home-prices","category-home-value","category-home-values","category-real-estate","category-real-estate-crisis","tag-appraisal","tag-home-prices","tag-home-values","tag-house-values","tag-housing-crisis","tag-real-estate"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-13e","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/4044","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=4044"}],"version-history":[{"count":11,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/4044\/revisions"}],"predecessor-version":[{"id":4337,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/4044\/revisions\/4337"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=4044"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=4044"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=4044"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}