Archive for June, 2011
At first glance, you're not likely to see a lot of similarities between stately Cambridge, Mass., and sprawling Denton, Texas.
Cambridge (population about 105,000) was already more than 200 years old when Denton (120,000) was founded in 1857. From the center of Cambridge, it's an easy stroll across the Charles River into Boston. Denton, in contrast, sits where Interstate Highway 35 divides—to the west, it's 41 miles to Fort Worth; to the east, 39 miles to Dallas.
But both are college towns. Cambridge is well known as the home of Harvard University and the Massachusetts Institute of Technology. Denton has North Texas State University and Texas Woman's University.
They have something else in common, too. Both have pretty much recovered from the five-year-and-counting housing recession. And both provide invaluable clues for those looking to decipher whether their own markets have seen the worst of the crisis.
Mid-sized cities, much like their larger counterparts, are experiencing a similar phenomenon where home prices are constantly fluctuating up and down.
It's called a catfish recovery, Altos Research said Monday. And in a catfish recovery, home prices bob up and down, making it hard to predict when a real recovery or downturn will officially take hold.
In Altos' 20-city composite report on mid-sized cities, the research agency found home prices increased in 19 of 21 mid-cities surveyed last month. The mid-cities median price rose 1.11% in May, hitting $254,046, compared to $251,247 in April.
The mid-sized cities experiencing the largest increases were Orlando, Fla., Boise, Idaho, and Boulder, Colo., all of which saw price gains above 5.5%.
Altos concluded in its latest report that "headlines are still talking about a double-dip in housing and the mid-cities numbers provide further evidence of strength in prices across the board. The S&P/Case-Shiller numbers will report the same price strength in the late summer and early fall."
The only mid-sized markets to report declines in the past three months were Honolulu, with price declines in the 2.64% range; Reno, Nev., which experienced a 0.33% decline; and Charleston, S.C. with a 0.24% drop.
Write to: Kerri Panchuk.
Many in the housing industry fear the qualified residential mortgage will hinder origination levels. However one credit ratings agency found those seemingly arduous standards are common in today's tighter credit environment.
According to DBRS, the standards for originating a prime loan in 2011 are very conservative. Indeed, the criteria is extremely similar to some aspects that would be mandated under the QRM. The DBRS finding shows how difficult it is for borrowers to currently qualify for a prime mortgage.
Borrowers must have an 80% loan-to-value ratio along with a credit score between 680 and 720 to even be considered for a prime mortgage in 2011, for example. This is already a common down payment on prime mortgages this year, DBRS finds in a report. This year, underwriters also typically required two years worth of W-2 forms and verification of employment within 10 days of closing the loan.
A qualified residential mortgage is one with a maximum 80% loan to value, on a property that is owner-occupied and has a 30-year amortization period with full documentation. A borrower must have a track record clear of 60-day delinquencies, according to regulators who defined the terms. If a loan is originated outside of this criteria, banks must keep a 5% risk retention, or "skin in the game."
One controversial aspect of the QRM is the requirement for borrowers to put down 20% of the loan at closing. According to the National Foundation for Credit Counseling, roughly half of all borrowers would never be able to afford this. Lawmakers in the House of Representatives recently sent a letter to federal regulators asking to lower that down payment.
However, if a borrower puts down 20% of the loan, it implies his or her LTV is 80%, which is what DBRS found is already being originated. Still, analyst Kathleen Tillwitz said current origination standards give the market little leverage for recovery.
"Based on the minimum FICO score, maximum loan-to-value (LTV) and the requirement that a foreclosure, short sale or deed-in-lieu be at least seven years old, it is likely that most of the U.S. population will not be able to qualify for a mortgage any time soon," commented Tillwitz. "Consequently, DBRS expects the housing recovery to continue to lag for many years to come unless there is a loosening of underwriting criteria by the major lenders."
See DBRS' findings below (click to expand).
Write to Christine Ricciardi.
The government-sponsored enterprises' Uniform Mortgage Data Program is coming into force by Sept. 1.
After that time, the GSEs will require seller-servicers to submit full appraisal reports in electronic data format prior to loan delivery to the secondary markets.
It creates a single means for submitting the 17 pages or so that make up a typical appraisal.
In this case, the GSEs would prefer appraisals submitted in the Mortgage Industry Standards Maintenance Organization XML format.
MISMO, of course, is a subsidiary of the Mortgage Bankers Association, so it makes sense for appraisers to use the soon-to-be industry standard.
The deal by CoreLogic (CLGX: 14.54 +0.48%) to use Mercury Network is proof the new system is already being widely adopted.
Of course, lenders can still submit the appraisals via an Adobe .pdf form. But, there is only one firm that will externally translate that doc in XML format: Veros Real Estate Solutions.
"The industry is moving towards fully electronic submissions of appraisals in MISMO open-source XML formats. GSE programs such as the UCDP are accelerating this long overdue adoption," said Darius Bozorgi president and CEO of Veros Real Estate Solutions.
Lenders remain free to do their own .pdf extractions to submit to the portal and are under no requirement to go to Veros.
"Nevertheless, .pdfs are still one of the major formats for the transmission of appraisals, and arguably the predominant format. As a result, the .pdf extraction service will play a significant role over the next several years," Bozorgi adds. "We anticipate a high volume of .pdf submissions that will gradually decline as the industry more fully adopts MISMO property valuation data standards."
The lender or the appraisal management company is responsible for the fees — though no one is suggesting it isn't worth the costs Veros incurs to do this work. But appraisers may ultimately be hit up for the added cost as lenders and AMCs look for ways to recoup those fees.
Veros' servicing fees for extracting the First Generation PDF into a supported version of XML for submission to UCDP were being circulated at the recent REO Expo conference in Fort Worth, Texas.
Before showing it to me, one source described the fees as "jaw dropping."
For me, I interpret the new fees as a sign that it is time to stop using .pdfs for appraisals altogether (not that I want to take business away from Veros).
There are three levels of .pdf extraction, with escalating fees. Keep in mind that electronic data extraction from .pdfs often lead to textual errors — perhaps the reason it no longer suits the appraisal industry.
So there is the first level of charges, a $3.50 fee per successful appraisal data extraction. Veros anticipates the vast majority of .pdf extractions will fall into this first bucket.
If it doesn't pull clean, the appraiser can always resubmit. If the appraiser wants additional extraction attempts, it could begin to get costly.
The second level of extraction is $18 per appraisal. Therefore, 100 appraisals would cost $1,800. In this case, Veros staffers will offer a more detailed extraction, and clear data inconsistency.
For appraisers using nonsupported appraisal forms, however, Veros will need to manually rekey the entire document to ensure accuracy. This is $12 per page, so 100 appraisals would cost roughly $20,400.
That's more than $20k to switch a hefty batch of appraisals into a XML format — a clear killer to whomever is not on board with the slow death to the appraisal .pdf.
Write to Jacob Gaffney.
Follow him on Twitter @JacobGaffney.
Tags: .pdf, Adobe, appraisal, CoreLogic, GSE, MISMO, Veros, XML
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