Affordable housing :: The Construction Management Pro

Home Appraisal Process Flawed, Government Report Finds

March 14, 2012

The Government Accounting Office has come to the same conclusion many home builders have: the home loan appraisal process remains flawed.

“Some 20 years after the passage of Title XI [which establishes rules about appraiser qualifications and independence] questions remain about the oversight of the appraisal industry and the quality of appraisals,” says the recently released GAO report.

Appraisal fraud, the deliberate overstatement or understatement of a home’s value, remains a concern. Of the 816 mortgage fraud cases the FBI closed from the fourth quarter of 2010 to the third quarter of 2011, 92 involved appraisal fraud, the report said.

And there are still worries within the industry that the increased use of appraisal management companies, which are often accused of focusing more on the bottom line and quick processing, is sacrificing quality, the report continued.

A much-simplified summation of the GAO’s study is that the appraisal process needs better monitoring. The National Association of Home Builders (NAHB) agrees and said there is evidence that the flawed system is continuing to hamper the home building industry’s recovery by derailing sales.

A recent NAHB poll showed that one out of three builders surveyed lost signed sales contracts because of flawed appraisals. And a National Association of Realtors survey conducted last fall found 18% of Realtors reporting recent contract cancellations or delays as a result of a low appraisal.

“The current system is not working,” said NAHB Chairman Bob Nielsen in Nation’s Building News. “We must resolve a flawed appraisal process that produces inaccurate assessment of home values because this fosters price instability, puts more families in danger of default or foreclosure, and undermines the housing and economic recoveries.”

The GAO specifically looked at the workings of the Appraisal Subcommittee, which is tasked with monitoring states’ compliance with Title XI as well as monitoring appraisal requirements of the federal financial institution’s regulators. The GAO concludes that the subcommittee hasn’t developed clearly defined criteria for assessing whether states are complying with Title XI, and the subcommittee’s monitoring of compliance has been limited.

The subcommittee was also faulted for lacking policies to evaluate whether the activities of the Appraisal Foundation, a non-profit organization that gets government grants and sets the criteria for appraisers and appraisals, are related to complying with Title XI.

In its defense, the GAO report points out that the Appraisal Subcommittee is funded by fees paid by appraisal registration fees, which have dropped off as appraisers left the industry. To make matters worse, the subcommittee got more duties under the Dodd-Frank Act. It is now charged with creating a national appraiser complaint hotline and provides grants to state appraiser regulatory agencies, which have complained they are under-funded. The report expresses concern over whether the subcommittee will be able to meet those requirements with its current resources.

In addition, the GAO expresses concern that the subcommittee might not have the teeth it needs to enforce the regulations anyway.

“These findings underscore the need to establish an effective oversight system to ensure that appraisals accurately reflect true market values and don’t harm aspiring home buyers or builders,” says NAHB’s Nielsen.

Teresa Burney is a senior editor for BUILDER magazine.

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What Does the Real Estate Commission Rebate Law Change Mean to Home Buyers?

March 8, 2012

January 19, 2010 was an exciting day. Then New Jersey Governor Jon Corzine signed into law a bill sponsored by state Assemblyman Patrick J. Diegnan, Jr., Paul D. Moriarty and Joseph Vas  that allows New Jersey home buyers across the state to receive a cash rebate, once they close on their home, from real estate brokerages. With people being asked to come up with higher down payments and meet more stringent lending standards than ever these days, to purchase a house, the ability to get a check after closing – or even cover the closing costs with a rebate from your real estate agent, is sure to be a boon for both cash-strapped buyers and the New Jersey housing market overall.

The real estate industry, historically, has been about what’s best for the agent.  With the new Internet era coming into the real estate market place, the old industry model is broken. It is now permissible for Realtors to rebate a portion of the buyer Agent’s commission to the buyer.

Please contact me at 609-575-8564 if you are interested in purchasing 18 Lenox St., Newark, NJ and getting a check for more than $2,000 at closing.

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Property Management for Scattered Site Rental Property

October 4, 2011

A NeighborWorks® Place-based Training brought to you by the Network

October 17 & 18  9:00 AM – 4:00=PM

145 W Hanover St. Trenton, NJ

This two day course will explore how to manage geographically scattered and small-scale rental properties which pose a unique and difficult challenge in affordable housing ownership. A portfolio of small properties requires the owner to possess or obtain special property management skills. Management will not have the advantages of on-site property management staff, or the economies of scale a multiple-unit building provides. This course is designed to help the participant identify ways of mobilizing and adapting a management operation to effectively monitor the operational performance of a scattered-site real estate portfolio. Through case study analysis and discussion of best practices, participants will learn to identify and examine the different property management options available to best meet their organization’s needs. Approaches to keep such housing stock healthy and energy efficient will be addressed. A special module will cover the specifics of managing REO properties

Presented by Brett William, Neighborworks Training Institute

Fee: $150 Members/ Non Members $200.  (a savings of $295/$245 off this NeighborWorks® course) At this time we currently are NOT accepting electronic payments.  Registration includes Continental Breakfast, Breaks, Lunch and Workshop materials. Please address all checks and money orders to The Housing and Community Development Network of New Jersey and send to the following:

Housing and Community Development Network of NJ
attn: Scattered Site Rental Property Training
145 W Hanover Street
Trenton, NJ 08618
Event Location: HCDNNJ Conference Room
145 West Hanover Street
Trenton, NJ  08618
Parking and Directions
The session starts promptly at 9:00a on Monday, October 17 and Tuesday, October 18. ; We strongly recommend you arrive by 8:30am as parking is limited; Meter parking is available on the streets adjacent to our office, and there are surface parking lots in the vicinity as well.   DO NOT park in the Network’s parking lot, as these are reserved spots and subject to towing if occupied by non-authorized vehicles.  If you need directions, go to and select Click Here to view Agenda

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Trenton’s new director of housing and economic development holds spotty business record

October 3, 2011

Let me know what you think this does to Trenton’s ability to move Housing and Economic development efforts forward?

Carmen Melendez, the city’s newly appointed acting director of housing and economic development, and her husband owe more than $50,000 in unpaid local and federal taxes,

Has failed to pay taxes due, NJ.Com reports.

3 failed business, federal taxes due!!

Read NJ.COM article here

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Research Firm Says U.S. Housing Has Never Been This Undervalued

March 9, 2011

By: Carrie Bay

The continuing depreciation of residential property values at the end of last year has made housing look more undervalued relative to income than ever before, according to analysts at the research firm Capital Economics. Based on the latest Case-Shiller home price index, Capital Economics’ study shows that in the fourth quarter of 2010, housing was 21 percent undervalued when compared with disposable income per capital. Looking at data included in the index published by the Federal Housing Finance Agency (FHFA), the firm found that housing in Q4 was 15 percent undervalued as measured against individuals’ disposable income.

Capital Economics says its results illustrate “housing is exceptionally undervalued,” and the gap is getting bigger. In its third quarter 2010 report, the research firm pegged the Case-Shiller index readings as 19 percent undervalued and the FHFA index as 14 percent below what would constitute a balanced housing value in relation to income. The recent fall back in house prices, coupled with low rates, explains why the initial monthly mortgage payment on a median priced house bought with a 20 percent down payment has fallen to a record low of 13 percent of the median income, Capital Economics pointed out in its report.

Home prices in 29 states hit a new cycle low in the fourth quarter of last year, and the research firm says on both the FHFA and Case-Shiller house price indices, housing now appears close to fair value when set against rents. Such favorable valuations mean there is plenty of scope for housing to perform well in the medium-term, according to Capital Economics, but over the next year, the firm says the combination of weak demand, high supply, and more forced sales of foreclosed properties will push prices lower.

As Capital Economics pointed out, the sharp fall in the mortgage delinquency rate at the end of last year means there are fewer homes in the foreclosure pipeline, but the elevated number of defaulted properties still in process means home values will continue to be negatively impacted by the presence of distress for some time.

On top of low prices, mortgage rates have fallen back a bit in recent weeks, leaving them even further below the 20-year average of 7 percent, the firm’s analysts wrote. Last week marked the third consecutive week that rates have continued to decline. A national survey conducted by Freddie Mac shows that the average 30-year fixed-rate has dropped to 4.87 percent, while the 15-year fixed-rate has slipped to 4.15 percent.

When you wrap declining home prices and historically low mortgage rates together, Capital Economics says, “The incredibly favorable affordability and valuation environment is the housing market’s one big positive.” But despite this fact, mortgage applications have remained subdued. While buyer demand is notably weak by conventional standards, Capital Economics says the decrease in mortgage apps of late reflects, at least in part, the prevalence of cash buyers. The company says the recent “de-valuing” of housing stock appears to be attracting cash buyers and investors back into the market.

They have driven 70 percent of the increase in existing home sales seen since last July, particularly among heavily discounted foreclosed homes, Capital Economics pointed out. Over that same period, first-time buyers have been responsible for just 6 percent of the increase in sales of previously owned homes

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Congressional Resolution Supporting Mortgage Interest Deduction

February 27, 2011

Rep. Gary Miller (R-Calif.), has introduced a resolution in the House of Representatives, expressing a “sense of Congress” that the current federal income tax deduction for interest paid on debt secured by a first or second home “should not be further restricted.” I have kept these blog post non partisan and a political. However, the resolution is suggesting that at a time when efforts are being made by this congress to cut the CDBG program by 62%, and public housing capital funds by 43%, no reduction in the mortgage interest deduction (MID) program should be made. So let’s be clear. the current MID program allows for the deduction of mortgage interest payments for principal and second homes with mortgages up to $1,000,000. The funds allocated to the CDBG program must be used to provide assistance to “low and moderate income households, eleminate slum or blight or address another community development need having a particular urgency.” 

I received an email that says that “this Resolution is an important symbolic gesture that shows its co-sponsors are aware of the critical role that the MID plays in supporting homeownership in this country.” However, supporters of this resolution have also stated that it was federal housing policy that lead us to the housing crisis we have just faced; that congress should no be picking winners and losers through the tax code.

So let’s be clear. Congress is currently debating the merits of reducing funds to eliminate slums and blight in our community by 62%, reduce by 43% the funds used to make capital improvements to public housing, yet maintaining the tax deductibility of mortgage interest on a second home’s $1,000,000 mortgage. Need I say more?

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S&P Study Finds HFA Delinquencies Exceed State Averages for First Time

February 9, 2011

By: Carrie Bay                                                                                                                                02/04/2011

Although the nation is in the midst of an economic recovery, albeit a slow one, unemployment levels remain extremely elevated, and that – along with lower housing prices, diminished demand from homebuyers, and a large inventory of houses in foreclosure – is leading to an increase in defaults on housing finance agency (HFA) loans, according to the analysts at Standard & Poor’s (S&P).

State HFAs issue tax-exempt bonds to finance loans for borrowers and first-time buyers purchasing a home at a reduced interest rate. A recent study by S&P has revealed that delinquent HFA loans have exceeded state averages for the first time since the agency began tracking loans in single-family bond programs in 2006.

Valerie White, a senior director at S&P, describes the results as a “troubling trend for HFA loan performance.” During the third quarter of 2010, delinquencies for loans owned by HFAs increased to their highest level and performed worse than state loan portfolios.

For HFAs, the delinquency rate — the percentage of loans delinquent at least 60 days or in foreclosure — reached 7.12 percent. In 2006, the HFA delinquency rate was 3.14 percent. By comparison, among state portfolios of similar loans, the delinquency rate decreased in the third quarter of 2010 to 6.97 percent, down from 7.24 percent in the second quarter of last year. “In our view, the increase in HFA delinquencies is not surprising given the continued high unemployment rates,” S&P said in its report. “Until the job market improves, we believe that loans will continue to perform worse than their historical record. Based on Standard & Poor’s economic outlook, high delinquency could affect HFAs for a few more years.”

In the third quarter of 2010, the Kentucky Housing Corp. posted the highest delinquency rate at 17.86 percent, compared to the state average of 9.68 percent. Other housing finance agencies with delinquency rate among the five highest were in California, Georgia, Michigan, and New Jersey. However, Georgia and New Jersey’s rates were both lower than their state averages.

While HFA delinquency rates have been “stubbornly high,” S&P said, it could be the cast that HFA loss mitigation efforts, which keep delinquent loans active for a longer period, have contributed to the recent increases.

S&P notes that while the most recent quarter interrupts the historical relationship of lower HFA delinquency compared with states in which the bond programs are located, the year-over-year change in the third quarter of 2010 was not as great as in the second quarter, which in turn was not as high as that in the first quarter

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2-3-11 Why suspend the FHA 90-day Rule

February 3, 2011

The FHA 90-day rule regulation (24 CFR 203.37a(b)(2)) typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days. Last year, FHA  waived the regulation through January 31, 2011. This rule, fashioned to work in raising housing markets is now inappropriate given existing market conditions. It is counter to the goals of stabilizing home values, creating employment and relieving financial institutions of troubled assets.

Most single family distressed properties are purchased by small businesses. The more projects a company can do, the more jobs and economic activity can be created. Waiving this rule frees up an investor’s capital as well as credit by reducing the holding period.  This will now allow for continued economic activity. These jobs are created in the private sector without subsidy, government intervention and created by small businesses. To the extent that there is a desire to support small businesses, put local people to work in there community, the suspension of 24 CFR 203.37a(b)(2) accomplishes these goals.

This waiver also makes it possible for the banks to dispose of their assets in an expeditious manner as investors can turn over their money quicker. Taking these distressed assets off the bank’s books strengthens the bank’s financial position and allows for the expansion of available credit.

Typically these properties are rehabilitated. This improves the housing stock and raises the mean sale price of homes in the community. This in turn stabilizes existing home values and provides both sellers and buyers with comparables for properties in the existing home market.

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Generation Y: The Challenge for the Nation’s Economy

December 10, 2010

I recently read an article stating that Generation Y is the “Next Challenge for Cities.” What is interesting is the statistics included in the article. John K. McIlwain states that Gen Y (those between their late teens to their early 30′s) are forming households at a rate of 400,000 per year; just a quarter of what it was prior to the recession (i.e. 1.6 million). In addition, this cohort is facing an unemployment rate of nearly 30% and carrying an average debt load of $23,000 per person. Click here to read the article

Household formation is what drives housing absorption. If we are not forming new households, there will be no demand for the housing industry to produce new housing, let alone liquidate the shadow industry of foreclosed property. Without a vibrant housing sector, there will not be construction jobs and consumer durable sales will also lag. Isn’t that what we are seeing? That is why I say this is the challenge for the Nation’s economy.

John McIlwain recommend that we “Keep in mind that this is also the next generation of the workforce. Gen-Yers are the entry-level employees needed to keep businesses growing, innovating, and producing. Will they be able to afford to live near jobs now or in the future? Without savings for a down payment and with parents needing to rebuild retirement accounts, when will they be able to afford to buy a home? With wages falling, will they be able to afford market rents? This is an issue facing every community that wants its economy to grow in the years ahead.” I would add, not just every community but our nation as a whole.

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11-3 HUD and DOT Award $68 Million to Create Sustainable Communities

November 3, 2010

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Transportation (DOT) have jointly awarded nearly $68 million to help stimulate a new generation of sustainable and livable communities that connect housing, employment and economic development with transportation and other infrastructure improvements. The joint HUD-DOT funding will reportedly support 62 local and regional partnerships seeking to create a more holistic and integrated approach to connecting affordable housing, job opportunities and transportation corridors. Read more…

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