The next speaker for I Survived Real Estate 2009 was Joseph Magdziarz. He is the 2009 Vice President of the Appraisal Institute, and will become president of the Appraisal Institute in 2011. He has been an active member of the Appraisal Institute for 38 years.
The Appraisal Institute is the largest professional appraisal group in the world with 26,000 members. Last year, the Appraisal Institute had 3,900 new members.
The market conditions today are difficult to figure out. When there are complex issues going on, we need to have experts dealing with them, but we are not getting experts to deal with these issues. The reason why this is happening is because the appraisal management companies want reports within a few hours and they pay very little. The best appraisers are starting to leave the industry because of this.
The HVCC expires in July of next year, and people are not happy with it. Moratoriums are not going to help anything. We need long term solutions.
There are 10 large appraisal management companies in the country. Those companies are advertising jobs to people who can do appraisal jobs quickly and cheaply, so people are taking these jobs in areas that they are not familiar with. This is harming consumers, and it harms everyone in the industry. The government is trying to pass a bill which will regulate management companies, so that they work on a state by state basis, and the appraisal management companies do not like that. If this bill passes, perhaps appraisal management companies will start looking for people of quality to do these jobs. Right now, consumers are paying more from lower quality work, and that is wrong. Perhaps if we present this problem as something that is hurting consumers then we can get this problem fixed, because nobody cares about appraisers, Realtors, and mortgage bankers.
One of the problems with current appraisal standards is that appraisers are using distressed sales as comparable sales. Distressed sales do not meet the definition of market value. If you were to use them, you would have to make significant upward adjustments.
People who are not a member of the Appraisal Institute are 7 to 20 times more likely to have complaints filed against them. Joseph hopes to make appraisals more competent by increasing education. Joseph asks that if anyone has an appraiser who is doing work outside of their comfort zone then they need to file a report with the Appraisal Institute. Anyone who does work outside of there are of competency needs to be reported.
Joseph supports the original HVCC because appraisers need to have pressure taken off of them, so that they can make accurate appraisals. Before, some appraisers were pressured to inflate appraisals.
A lot of the Appraisal Institute’s members had relationships with lenders, and they could talk to the lenders when they had problems. They were not being influenced to do unethical things. Right now appraisers have to register with the state, but they do not need a license. Appraisal fraud is beginning to increase again.
People are being discouraged from filing complaints against appraisers. Mortgage lenders do not want to get involved, but they need to. They need to file complaints with the state, because appraisers must have licenses, and file with the Appraisal Institute if the appraiser is a member.
Appraisers were not reporting listing histories or concessions in the past and that can cause over valuing. Also, not knowing those things can cause under valuing issues. If you do not talk with sellers about what caused them to sell, you can come up with a bad appraisal.
Under HVCC, lenders are responsible for paying the appraiser. Brokers are getting bad appraisers because they are not allowed to pick their appraiser. You should have the right to ask for a competent appraiser. If you are not given a competent appraiser, report the appraiser, report the bank, and report the appraisal management company. Ask your appraiser how long they have been in business and if they belong to a professional group. Fannie and Freddie agree that you should look for appraisers that belong to professional associations, because those appraisers have people observing their activity. Professional associations have more strict ethics than the state requirements.
If you have trouble understanding what a comparable sale is, think like this: “If I can’t buy this property that I’m looking at, what other property would I buy first?” That mentality will give you a good idea as to what a comparable sale is. This requires a competent person who can account for repairs that have been done on a house in a neighborhood full of foreclosures. If a repaired house is being compared to a neighborhood full of foreclosures then an upward adjustment must be made on the appraisal. Joseph thinks that many of the problems that we currently have can be blamed on congress, and their lack of enforcement.
The next speaker on I Survived Real Estate 2009 was David Kittle. David began his mortgage banking career in 1978, and is currently vice president of Vision Mortgage Capital. He has served as a past chairman of MBA’s political action committee, board of governors, and he has served on the board of directors since 2004. David Kittle’s mother-in-law is a 21 year breast cancer survivor.
David Kittle has been privileged to represent 3,000 member companies, and over 400,000 individuals that are members of MBA. During the last year and a half, David has spoken in front of congress 14 years. David’s favorite testimony was on November 19, 2008. Senator Whitehouse came out first and screamed at people saying, “Why can’t you modify these loans?” One of the other people there claimed that David was responsible for the entire collapse of the world economy. Last time the bankruptcy laws were changed was 1978. When David got in the business, he could get you an investment loan or a second home loan under the same terms as an owner occupant loan. People at this testimony called David a scrooge, because people were getting kicked out of their homes. David was taught not to talk back to a senator, but he fired back. He said, “Excuse me, Senator. I haven’t drawn a paycheck in 14 months. I’ve layed off 90 percent of my staff, because I can’t afford them. Don’t tell me I don’t know what these people are feeling. I was smart enough to put money away, I protected my credit scores, and I’m making my payments on time.” The senator that was accusing him sat back in his chair and apologized. 95 percent of David’s members are individual business owners who take risk every day. Senators could care less about David’s industry. They care about getting reelected.
MBA has a mortgage action alliance that is free for anyone who wants to make a difference in the mortgage industry. It is free and you do not have to be a member of the MBA. Got to MBA.org, give them your name, email address, and the names of your family. MBA will write your letter to congress, and they will send it to you, so that you may personally send it to congress. If you do not like the letter then you can edit it. A senator may not pay attention to 100 phone calls, but they will pay attention to 15,000 emails. Your opinion does matter.
People sometimes ask mortgage bankers, “Why can’t you modify more loans?” Mortgage bankers cannot modify loans, because borrowers will not call back. When people do ask for modification, they are already 90 days down the road. When bankers modify the loan, they have to retake the loan application, they have to verify assets, and they have to make sure that their borrowers have jobs. Then they have to run a title. The longer those go out, the more taxes are placed against their property.
David predicts that next year there will be a larger wave of foreclosures. All the brokers got FHA approved, and all the loans that were subprime are being placed under FHA. The government is going to have to bail out FHA next. David thinks that the net worth requirements should be higher, and education and licensing requirements need to be higher.For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.