WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today that it is charging the owner of a 24-unit apartment building in Holyoke, Massachusetts, with housing discrimination for denying units to families that have children. HUD’s charge alleges that Nilma Fichera, who owns and manages New York-based N.A.G. Realty, LLC, violated the Fair Housing Act when she refused to show or rent apartments to families with children because she could not certify that the building was free of lead-based paint.

Appraisers say "Don’t Blame the Messenger" for Low Home Prices

Appraisal Institute has apparently had enough and has decided to fight back
against what it perceives as unwarranted blame for depressed home prices.  In a press release the Institute says, ” Don’t blame the real estate appraiser if it turns out that
house you’re trying to sell or buy isn’t worth what you thought it was.”

Speaking for the Institute, its
president Sara W. Stephens, MAI said that real estate agents, homebuilders and
others have placed blame for the market’s distressed condition on appraisers
who produce opinions of value that don’t match a home’s listing, contract or
sales price, delaying a recovery in the housing market and called that
accusation “nonsense.”

“The fact is that appraisers are
undertaking the same thorough research and thoughtful analysis that they always
have in order to continue producing reliable, credible opinions of value,”
Stephens said. “Don’t shoot the messenger.”

It is unclear why the Institute
decided to refute the claims about appraisers at this time.  We did a search and found a number of
articles with the blame appraisers theme, but none that were more recent than
last summer except for charges from the National Association of Realtors that low
appraisals are among the reasons for recent high levels of sales contract
cancellations.  NAR, however, has been complaining
about low appraisals since at least the spring of 2009. 

Noting that buyers and sellers often
have emotional value attached to a home or are unaware of the market, Stephens
pointed out that appraisals completed for mortgage transactions are used to
assist lenders, who are the clients, not buyers or sellers, in making lending
decisions – and are not intended to confirm a listing, contract or sales price.
There’s no reason to assume the contract price is the “correct” price simply
because it’s higher than the appraisal, she said.

As to the claim that appraisers are
using distressed sales as comps for market rate properties, Stevens said that
qualified appraisers know how to handle adjustments for distressed properties
and added that in some markets, distressed sales are so prevalent that it would
be improper not to use them as comparables.

The Institute also released two
handouts.  The first explains the process
of conducting an appraisal
in a declining market and includes a discussion of
how an appraiser discounts a distressed comp. The second handout attempts to
explain what an appraisers job really is, making the points that:

  • Appraisals aren’t intended to confirm a home’s sales
  • Appraisers don’t set the real estate market; they
    reflect what’s happening in the market.
  • Appraisers work not for buyers or sellers, but for
  • Appraisers are independent, third-party experts with
    no motive to be biased.
  • Appraisals sometimes are assigned to the least
    qualified, least competent appraisers, but especially in a distressed market,
    competent and qualified appraisers – such as designated members of the
    Appraisal Institute – should be hired for difficult assignments.
  • Appraisers know how to use distressed sales as

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David Stevens Leaves MBA to Take Position as President of SunTrust Mortgage

Only slightly more than a year after joining the Mortgage Bankers Association as its President and CEO, David Stevens will leave to become President of SunTrust Mortgage, Inc.  Stevens will join SunTrust effective July 16 and will be responsible for day-to-day business operations of the company.  His new position will report to the bank’s CEO Jerome Lienhard.

In announcing the departure of Stevens, MBA said it has already begun a search for his replacement.  In the interim, Marcia M. Davies, MBA’s Chief of Staff and Senior Vice President will assume Stevens’ responsibilities.

Stevens joined MBA in May 2011 after serving as Assistant Secretary of Housing and Urban Development and Commissioner of the Federal Housing Administration (FHA).  At that time, confronting potential charges of conflicts of interest, Stevens announced he would recuse himself from working on any MBA issues involving that agency.

SunTrust Mortgage, Inc. is a wholly-owned subsidiary of SunTrust Banks which has total assets of $178.2 billion and total deposits of $130.0 billion.  The bank is based in Atlanta but Stevens will be headquartered in Washington, DC. 

“Dave has been an exceptional leader for MBA,” said MBA Chairman Michael Young.  “Although we are sorry to see him leave so soon, he leaves us well-positioned for the future.  Dave delivered on his pledge to enhance MBA’s position as the industry’s leading voice in advocacy, policy, education and research and has developed a dynamic infrastructure for addressing member needs.  

“His insights and leadership have demonstrated the importance of having one large platform where the entire industry can come together in an effort to provide a common voice on the critical issues of the day.” Young continued.  “The MBA, its leadership and members remain steadfast in our focus to bring solutions that will benefit the entire housing market, borrowers and lenders alike.”     

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DeMarco Discusses the Future of FHLBanks

Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA) told Federal Home Loan Bank (FHLBank) directors yesterday that their Banks’ proven ability to access global markets could play a large role in their future.  DeMarco spoke to the directors as they met in conference in Washington, DC.

DeMarco said that most FHLBanks had emerged from the recent crisis in relatively good condition and all 12 were profitable last year.  Retained earnings have increased dramatically in the past five years and now top $9 billion and should continue to increase as a result of the capital plan provisions adopted last year to set aside 20 percent of income in restricted retained earnings.  The quality of assets held by the Banks has also improved as holding of private label mortgage-backed securities (MBS) have declined.  Credit-related other than temporary impairment charges on those securities also dropped in each of the last three quarters.  “In a reversal from just a few years ago, the market value of equity exceeds the par value of capital stock at most FHLBanks,” Demarco said.

The banks still face headwinds, the largest being the decline in the volume of advances, “and the outlook for advances growth is not promising in the short-term as members remain flush with cash and loan demand remains slack.”  Expenses have not contracted as fast as assets and advances and persistent low interest rates have reduced the return on invested capital, both contributing to weakened earnings.

Growth of membership over the past year has been concentrated among insurance companies.  Their collateral arrangements with the FHLBanks differ in some critical ways from those with insured depository institutions and, DeMarco said, these arrangements bear watching as does market risk, especially at Banks with large holdings of mortgages and MBS relative to assets.

In the current climate housing finance reform is a critical concern and, while the futures of Fannie Mae and Freddie Mac are central to that discussion, the FHLBanks should be part of it as well.  The Banks, DeMarco said, have long been a conduit to global capital markets and have enhanced the liquidity and funding of mortgages for decades.  “Expanding, maintaining, or refining that role will be the focus of the conversation as it pertains to the FHLBanks.”

There are more than $10 trillion in single-family mortgage loans in the nation, there are not enough deposits in the country to fund them all, and the risk management challenges for domestic financial institutions to manage all the associated risks in the portfolio are substantial.  The U.S. Housing market of the future, like the market today, needs access to global capital markets.

“A critical question for policy makers is how to build or rebuild the plumbing necessary to connect global market investors with individual families seeking a mortgage to buy a home,” he said.   FHLBanks have already demonstrated their scalability and their ability to access the markets, even during the height of the liquidity crisis.  By issuing debt into global markets the FHLBanks raise funds that support housing through funding advances for mortgages going into members’ portfolios.  The ready availability of advances also makes those mortgages more liquid than they would otherwise be, thereby reducing the liquidity risk in members’ mortgage portfolios.  This also allows the FHLBanks to issue market-worth letters of credit which, in turn, allows members to attract their own funds for use in housing finance.  “Furthermore, as market intermediaries, the FHLBanks now serve as facilitators in the securitization process, collecting mortgage loans from members for sale in the secondary market.”

The FHLBanks already have strong relationships, including a cooperative ownership structure, to their nearly 8,000 front-line local lenders and these relationships give the Banks an important role as market intermediaries.  This makes them well suited to be part of an evolving housing market.

DeMarco laid out three ways in the Banks might be affected by moves to rebuild the housing finance infrastructure.  Congress could choose to expand the FHLBanks’ permissible business activities and such expansion might also require a review of the System’s capital structure and requirements and its approach to risk management.  Congress could choose to add some limits or restrictions on the Banks, essentially requiring some degree of contraction such as suggested in the Administration’s finance reform white paper by way of adding restrictions on the access of larger members to advances.  Or Congress could decide that the System is working well and leave it largely unchanged from where it is today.

If the decision is to stay the course, FHLBanks would remain focused on providing advances to members and providing a competitive and balanced finance and servicing system.  For members interested in retaining mortgages in portfolio the FHLBanks can continue to provide liquidity; for members interested in selling those mortgages, the banks have already demonstrated an ability to serve as a conduit to the secondary market.  And by serving as an aggregator in this process, the Banks are doing two important things; enabling community financial institutions to obtain better pricing and providing quality control by ensuring mortgages are securitized to meet the standards of the AMA programs.

DeMarco told the directors their most important role is to oversee and advise on the strategic planning process at their banks which means planning for the future.  For an organization to compete effectively it must build its strategic plan around its competitive advantage and for FHLBanks that advantage is their government-sponsored enterprise borrowing privilege.  It is the directors’ responsibility to product that privilege by using it to fund core mission activities safely and soundly.

DeMarco told the directors that the key to planning is to envision the future before it arrives.  Unfortunately, he said, because almost everything about the future is uncertain and unpredictable, “The question that faces the strategic decision-maker is not what his organization should do tomorrow.  It is ‘What do we have to do today to be ready for an uncertain tomorrow?’   “This,” he told the directors, “is your role.”

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