The Nevada State Senate's passage of SB 184 redefines the way broker price opinions are used in real estate valuations in the state.

The law, signed today by governor Jim Gibbons, allows broker price opinions (BPOs) for a number of specified purposes including the listing of real property for sale and by potential lienholders on a property. The stipulations eliminate room for BPOs to be used in lieu of an appraisal in determining whether to approve a mortgage loan.

The law provides clarity in the origination process without preventing the use of BPOs anywhere in the process. According to one industry group, there's a certain time and place for BPOs.

"In some situations a full appraisal might be the appropriate product, while in other situations a BPO gives users the information they are looking for," says Real Estate Valuation Advocacy Association (REVAA) president Michael Ramer in a media statement today.

"It is also very common to get a BPO in addition to a full appraisal which gives the end user even more information," Ramer adds. "The key is to match the valuation or pricing tool to the need, and Nevada's legislation now allows users to choose from a full spectrum of valuation tools in appropriate situations."

In the statement, REVAA officials called the state legislation an ideal model for other states to follow in bringing transparency and clarity to the role of BPOs in the mortgage origination process.

Write to Diana Golobay.

Comptroller of the Currency John Dugan urged late yesterday for regulators to tackle the "significant" compliance risks associated with reverse mortgages, including predatory lending and coercive sales.

Regulators must address these issues before real problems develop, so that these loans are made "in a way that is prudent for both lenders and borrowers," Dugan said.

Reverse mortgages have been in existence for over 20 years. Recently, however, controversy has brewed around the product as older American's find themselves strapped for cash in a troubled economy and turn to reverse mortgages for additional cash flow.

Reverse Mortgages can provide a source of income or line of credit to those elderly homeowners — over the age of 62 — by allowing them to tap the equity in their home without having to sell or move out of the home. The underwriting on these loans is nontraditional since no repayment is required until the homeowner dies, permanently moves out of the home, or fails to maintain the property or pay property taxes.

"While reverse mortgages can provide real benefits, they also have some of the same characteristics as the riskiest types of subprime mortgages — and that should set off alarm bells," Dugan said.

With access to large lump sums upon closing a reverse mortgage, elderly borrowers can be particularly vulnerable to coercive sales of annuity and long term care insurance products that aren't necessarily appropriate to their needs, Dugan explains. Lenders may also simultaneously and aggressively market investment, insurance or annuity products or even attempt to condition loan approval on the purchase of such products.

These products' incentives and fees often put more of a premium on making the loan than on ensuring it is appropriate for the borrower, critics claim.

"In these circumstances, more definitive regulatory standards may need to be adopted, and the OCC is prepared to do that – even if the standards we advocate initially apply only to reverse mortgage lending by national banks," Dugan said in a speech to a regulatory compliance conference sponsored by the American Bankers Association.

Dugan also urged the Department for Housing and Urban Development, which insures 90% of all reverse mortgages, to issue guidelines addressing escrow issues. The nonpayment of taxes or insurance can trigger foreclosure, he says. However, the new Federal Reserve Board escrow requirements for "higher-priced" mortgages do not apply to reverse mortgages, and HUD does not require escrows to be established in connection with HECMs.

"While much attention still needs to be focused on dealing with the economic downturn, regulators can't afford to ignore consumer issues," Dugan concluded. "We need to be on constant alert to emerging risks and vigilant in our regulatory compliance responsibilities."

Despite consumer protection concerns set forth by Dugan, lenders of the product say there are "incredible" safeguards in place for seniors with reverse mortgages. Before a potential borrower is allowed to take on a reverse mortgage, for instance, he or she must by law speak with a counselor from a third party, separate and distinct from the lending institution.

And in the end, the satisfaction rate for Americans who opt into a reverse mortgae sits near 92%, said David Bancroft, president of Omni Reverse Mortgage.

For more in-depth coverage on reverse mortgages, see the June issue of Housing Wire Magazine.

Write to Kelly Curran.

Consumers filed a record 10,552 fair housing discrimination complaints in fiscal year 2008, according to an annual congressional report prepared by the US Department of Housing and Urban Development (HUD).

The Fair Housing Act prohibits discrimination on basis of race, color, nationality, religion, gender, disability and familial status. Fiscal year '08 marked the third consecutive fiscal year of more than 10,000 complaints within these categories.

Discrimination based on disability accounted for 44% of the complaints while 35% of complaints alleged discrimination based on race. Complaints were filed on the basis of alleged discrimination in terms, conditions, privileges, services, or facilities involved in the sale or rental of housing.

"Fighting against housing discrimination and affirmatively furthering fair housing are twin priorities of HUD and the Obama Administration," says John Trasviña, HUD assistant secretary for fair housing and equal opportunity, in a media statement today.

The department's efforts toward those ends are evident in the volume of complaints processed and closed. In the same fiscal year, HUD closed 11,189 discrimination complaints — also a record high.

The congressional report touts HUD's efforts to bring monetary relief to victims of illegal discrimination: forgiveness of a second loan worth $75,000 and modification of the primary loan to a 5% interest rate for a Hispanic couple, a $20,000 settlement for a mother who was denied a house rental because she had a child, and a $40,000 settlement for a family that was denied an accommodation for a child's disability. HUD also touted having donated $5,000 to charity groups for autism and early childhood development.

"HUD has an array of weapons to combat housing discrimination," Trasviña says. "Most important are the partnerships with state, local and other agencies, private fair housing organizations and responsible industry officials who, together with HUD are on the front lines to advance fair housing and fair lending policies."

But according to one consumer group, even these partnerships don't allow HUD to do as much as needed to keep discrimination down. In early May, a report by the National Fair Housing Alliance concluded that 93 private non-profit fair housing organizations processed almost twice as many cases of discrimination in 2008 as HUD, the US Justice Department and 107 state and local government agencies combined.

NFHA’s report failed to acknowledge challenges HUD faces with its staffing and resources. In prepared comments for an early April Senate subcommittee hearing, HUD secretary Shaun Donovan acknowledged the department, and particularly the Federal Housing Administration, needs updated information technology systems and increased staff.

A $490m piece of mortgage fraud legislation signed into law in mid-May, however, calls for millions of dollars split between government and regulator departments to hire fraud persecutors and increase efforts to crack down on mortgage lending companies not regulated or insured by the government. The preventative efforts aim to reduce risky or inappropriate mortgages originated on fraudulent terms.

The increased effort to crack down on fraud might scale back cases of discrimination in reports going forward.

Write to Diana Golobay.

US home prices remain down 13% year-over-year as of April, but the pace of decline in prices seems to have leveled off, according to IAS360 data released Tuesday morning.

“It’s too soon to call this a turn in the housing market, particularly given all the political and regulatory uncertainties,” said Dave McCarthy, president and CEO of Integrated Asset Services. “I think that we’re still in for some difficult spells ahead, but we are seeing a certain kind of pricing equilibrium in several important markets. That’s encouraging for the long term.”

Four of the country's largest metropolitan areas — San Diego, Boston, Chicago, and Denver — now show positive month-over-month gains in home prices. San Diego values are up 0.2%, while Boston and Chicago prices are up 0.8%. Home prices in Denver sit a significant 2.2% above values the previous month.

Three of the four US census regions posted stable or positive price activity in April. Only the South, which includes several hard-hit Florida communities, was down for the month, dropping 0.3%. Still, the the trend line in the South was flattening, showing less volatility, said Integrated Asset Services.

Rick Foos, president of SRA Foos & Associates, Inc. says inventory levels are declining and sales are increasing particularly in the lower priced markets due to a combination of incentives and low interest rates; altogether, creating a positive outlook for the entire market.

However, Foos says if interest rates rise, boosting foreclosures, the market could experience a false bottom. "But if neither materializes to a great degree then it does appear the market may have bottomed."

IAS360 data also shows signs of normalization, or at least a return to seasonality, in California. Arguably the hardest hit state in the US, California is home to six of the ten hardest-hit counties in the country. In April, however, counties up and down the state, including Monterey, San Bernadino, Ventura, Riverside, Sacramento, Sonoma and King, reported upticks in home prices. San Diego, down almost 24% from its high in 2007, has reported three consecutive months of stable prices.

Write to Kelly Curran.