Appraiser News Online
Vol. 11, No. 1 & 2, January 2010

Government Update—Commercial/General
        Bair: CRE Charge-offs to Continue throughout First Quarter of 2010 [Posted January 27, 2010]
        Senate Votes down GOP Bill to Kill TARP [Posted January 27, 2010]
        Obama Proposes Size Limits on Banks [Posted January 27, 2010]
        Federal Reserve: Commercial BPOs Do Not Satisfy the Definition of "Evaluation" [Posted January 20,
        Bankers Get Grilled During Day One of FCIC Hearings [Posted January 20, 2010]
        Regulators Gets Blamed on Day Two of FCIC Hearings [Posted January 20, 2010]
        Fed‘s Beige Book: Most Districts Note Modest Economic Improvement [Posted January 20, 2010]
        Appraisers May Fall under New IRS Rules [Posted January 13, 2010]
        Audit: Interior's Oversight of Appraisals Faulty [Posted January 6, 2010]
        Financial Reform Bill Closer to Resolution [Posted January 6, 2010]
        Congress Mulls a Return to Glass-Steagall Act [Posted January 6, 2010]
        Government Scrutinizes CDO Deals to Gauge Legality [Posted January 6, 2010]
        Smaller Banks Taking Their Time in Repaying TARP [Posted January 6, 2010]
        TALF Slows as Special Servicing Transfers Grow [Posted January 6, 2010]

Government Update—Residential
        FHA Raises Criteria, Interest for Mortgages [Posted January 27, 2010]
        HUD, Army Corps Speakers Open FAU Symposium [Posted January 27, 2010]
        Panelist: Appraisers Integral to HUD Neighborhood Stabilization Program [Posted January 27, 2010]
        Government Still Debating How to Portray Freddie, Fannie Financing [Posted January 27, 2010]
        HUD Proposal Would Move Broker Supervision to FHA Lenders [Posted January 20, 2010]
        Fed Officials at Odds on Mortgage Purchasing Program [Posted January 13, 2010]
        FHA Probes Lender Defaults [Posted January 13, 2010]
        Fannie/Freddie Secure Government Backing [Posted January 6, 2010]

Inside the States
        Ohio Sherriff's Appraisal Practices Come under Fire [Posted January 27, 2010]
        States Issue BPO Guidance [Posted January 20, 2010]
        Green Leases Gain Traction [Posted January 20, 2010]
        Nebraska Bankers Propose to Gut State Appraiser Licensing Law [Posted January 13, 2010]
        Illinois Governor Signs Mandatory Licensing Law [Posted January 6, 2010]
        Texas Requires Use of All Comparable Properties, Enacts Changes to Tax Appraisal Process
         [Posted January 6, 2010]

Around the Industry
        Private-Label Securities May Resurface in Mortgage Market [Posted January 27, 2010]
        Appraiser/Lender Conference Call Highlights Industry Concerns [Posted January 27, 2010]
        2005-08 Vintages Comprise Three-Fourths of CMBS Delinquencies [Posted January 27, 2010]
        Moody‘s Commercial Index Shows Slight Gain after 13-Month Decline [Posted January 27, 2010]
        S&P: Mixed Messages in Home Price Indices Data [Posted January 27, 2010]

550 W. Van Buren St., Suite 1000, Chicago, IL 60607 | T 312-335-4100 F 312-335-4400 | www.appraisalinstitute.org
        Standard & Poor‘s Looks at 2009 Housing Market, Compares with 2000 Market [Posted January 27,
        Existing Home Sales Drop Nearly 17 Percent [Posted January 27, 2010]
        World Bank Raises Outlook for 2010, Concerns for 2011 [Posted January 27, 2010]
        More than 100 New Hotels to Open Nationwide in 2010 [Posted January 27, 2010]
        Appraisal Institute Comments on Foundation‘s Financial Reporting Discussion Questions [Posted
         January 20, 2010]
        AMC Trade Group Issues ―Standards of Good Practice‖ [Posted January 20, 2010]
        UN Report Highlights Importance of Competent Valuers in Real Estate [Posted January 20, 2010]
        Appraisal Institute to Hold SBA Financing Issues Webinar on Feb. 16 [Posted January 20, 2010]
        Lodging Starts Moving into Smaller Communities [Posted January 20, 2010]
        European CRE Investment Climbs More than 40 Percent in 4Q [Posted January 20, 2010]
        Foreign Investors Being Selective in U.S. Properties [Posted January 20, 2010]
        London Passes Washington as Best City for Foreign CRE Investors; U.S. Still Top Nation [Posted
         January 20, 2010]
        Architecture Billings Index: Negligible Increase in December [Posted January 20, 2010]
        Journal of European Real Estate Research Issues Call for Papers [Posted January 20, 2010]
        MISMO Releases Commercial Property Rent Roll, Operating Standards [Posted January 20, 2010]
        Appraisal Organizations Encourage Interior to Hire Chief Appraiser [Posted January 13, 2010]
        2010 Legislative & Regulatory Update Available [Posted January 13, 2010]
        Inside the Beltway: AI Fights for Professional Appraisers in D.C., State Capitols in 2010 [Posted
         January 13, 2010]
        AI Releases Dictionary; Includes Online Component [Posted January 13, 2010]
        Commercial Delinquencies End 2009 above 6 Percent [Posted January 13, 2010]
        Homebuilding, Lodging Sectors Lead Rebound; CRE Returns Not Expected until 2011 [Posted
         January 13, 2010]
        Pending Home Sales Fall after Nine Consecutive Monthly Increases [Posted January 13, 2010]
        AIA Construction Forecast: Continued Decrease in 2010; Modest Pickup Possible in 2011 [Posted
         January 13, 2010]
        Vacancies across CRE Segments Spike, Rental Rates Cut [Posted January 13, 2010]
        Shopping Mall Vacancies Hit 18-Year High; Retail May Take Until Late 2012 to Recover [Posted
         January 13, 2010]
        Experts Unsure if Hotels Can Sustain Rebound [Posted January 13, 2010]
        Two Large Hotel-Related CRE Deals in the Works Show Market Activity [Posted January 13, 2010]
        WSJ Outlines Top Three Domestic CRE Deals of 2009 [Posted January 13, 2010]
        Study: Green Building Could Comprise 50 Percent of Commercial Market by 2015 [Posted January
         13, 2010]
        Appraisal Organizations Call on Federal Reserve to Suspend Proposed HELOC Rule [Posted
         January 6, 2010]
        Appraisal Review Covered in Upcoming Teleconference; CD Available for Past Briefing [Posted
         January 6, 2010]
        U.S. Commercial Property Values Lowest in Seven Years, Says Moody‘s [Posted January 6, 2010]
        Homebuilder Sentiment Slips in December [Posted January 6, 2010]
         Residential Construction Spending Dips in November [Posted January 6, 2010]
        Green Builders Aim for Net-Zero Energy Housing [Posted January 6, 2010]
        Senior Housing Investment Suffers from Uncertainty [Posted January 6, 2010]

2 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
        Appraisal Institute to Hold Self-Storage Webinar on Jan. 20 [Posted January 6, 2010]
        CMBS Delinquencies Climbing Higher [Posted January 6, 2010]
         AI, IRWA Federal Agency Update: Early Bird Deadline Extended [Posted January 6, 2010]
        Father, Son Charged with Appraisal Fraud [Posted January 6, 2010]
        Dollar General Plans for 600 New Stores in 2010 [Posted January 6, 2010]
        Appraiser among Trio Poised to Buy $1 Billion in Condos [Posted January 6, 2010]
        NY Port Looks to Sell Former Freedom Tower [Posted January 6, 2010]

Inside the Institute
        Appraisal Institute Relief Foundation Can Offer Assistance [Posted January 27, 2010]
        Appraisal Institute, Members Reach Potential Audience of more than 48 Million [Posted January 27,
        LDAC Extends Deadline to Feb. 15 [Posted January 27, 2010]
        In Memoriam [Posted January 27, 2010]
        AI Members Featured in National Media Coverage [Posted January 20, 2010]
        Sample Certification Statements Revised [Posted January 13, 2010]
        AI Members Featured in National Media Coverage [Posted January 13, 2010]
        Appraisal Institute Calls for 2011 Vice President Nominees [Posted January 6, 2010]
        In Memoriam [Posted January 6, 2010]

Economic Indicators – November 2009

3 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Government Update – Commercial/General
Bair: CRE Charge-offs to Continue throughout First Quarter of 2010
Federal Deposit Insurance Corp. Chair Sheila Bair recently said she expects banks to report higher
delinquencies and charge-off rates for commercial real estate in the coming quarters. Bair made her
comments during a Jan. 20 speech to the Commercial Mortgage Securities Association‘s annual
conference in Washington, D.C.

―We [FDIC] expect still higher noncurrent rates and charge-off rates on CRE loans backed by income-
producing properties in the coming quarters,‖ Bair told attendees. ―Of course, the ultimate scale of losses
in CRE loan portfolios depends on the pace of recovery in the U.S. economy and financial markets.‖

Bair emphasized to the crowd the need to revive the market for commercial mortgage-backed securities
as well as the importance of returning to more prudent loan underwriting standards.

―In commercial lending … loan underwriting and administration deserve a much larger role in credit risk
management going forward,‖ Bair said in her prepared comments. ―Lenders need to embrace the lessons
learned from this crisis. They need to establish a prudential framework for extending credit on a sounder
basis,‖ she added.

Bair also reviewed the differences of the commercial real estate industry‘s slow-down, compared with
residential. The commercial slow-down may have come after the residential downturn, but both have led
to similar credit crunches and virtual shut-downs of new securitizations, according to Bair.

In the future, Bair wants to see compensation reforms as well as banking solutions that come from within
the industry.

―We need to reform the compensation systems that skewed economic incentives and helped fuel the
rapid growth in credit markets, especially for mortgages and related derivative products,‖ Bair said. ―At the
same time, I do not want to inhibit innovation and progress, which are the hallmarks of America's capital
markets. It's abundantly clear that we need smarter and more effective regulation; but regulators don't
have all the answers,‖ she continued.

Looking to those in attendance she said, ―You also have a responsibility to help us restart this market, to
use your innovative talents to find solutions that turn a profit, but that prevent another financial crisis
somewhere down the road.‖

Senate Votes down GOP Bill to Kill TARP
The Senate voted down a proposal that would have barred the Treasury Department from releasing any
funds remaining from the $700 billion bailout passed last fall, The Washington Post reported. The
proposal would not have affected repayment rules for banks and other recipients of bailout money.

Sen. John Thune, R-S.D., who sponsored the amendment, told the Post that repealing Treasury's bailout
authority would block Democrats from using the money to finance spending legislation such as a
promised "jobs" bill.

4 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
The proposal garnered 53 votes, more than half of the Senate, but fell short of the 60 votes required to
adopt it under the agreement by which it was afforded a vote. The majority vote probably means it won't
be the last time the senate debates the issue, the Post reported.

Banking Committee Chairman Christopher Dodd, D-Conn., reminded the Senate that the Obama
administration has promised to dedicate TARP money to help ease the foreclosure crisis and help smaller
community banks make small business loans, according to the Post.

Obama Proposes Size Limits on Banks
Among the new rules President Barack Obama has proposed to limit the size and scope of the largest
financial institutions, are restrictions on some banks‘ ability to trade securities – including mortgage-
backed securities – for their own account or set up in-house hedge funds, according to several news

The measures, announced Jan. 21, have been widely seen as a reintroduction of tighter controls over the
risks banks were allowed to take under the Glass-Steagall Act. They would be in addition to the proposed
Consumer Protection Financial Agency that was introduced in legislation in December.

The proposed banking limitations have led to industry-wide concern, GlobeSt.com reported. Ellen
Marshall, co-chair of the Banking and Specialty Finance Practice group at Manatt, Phelps & Phillips, LLP,
told the news site that it will lead to an even greater reluctance on the part of banks to lend. "Bankers who
do not know if they are going to be restricted in how they can finance their portfolio of loans or hedge
them, will certainly become more reluctant to expand that portfolio, at least until the new rules are in
place," she said.

Attorney Edward A. Mermelstein added that, in the short-term, any major changes introduced in the
banking industry will only cause more harm to the economy.

However, despite concern over the short- and medium-term volatility that is likely to be introduced in the
run-up to any new legislation, there is a contingency of investors that wish to see a new regulatory
regime, GlobeSt.com reported.

"With the erosion of the Glass-Steagall Act, money-center banks were able to grow to a point at which
they were too big to fail, through the activities of underwriting securities, trading stocks and bonds, selling
derivatives and more," Wayne Rogers of Wayne Rogers & Co. told GlobeSt.com. Rogers added that
correcting this problem must be done legislatively instead.

Federal Reserve: Commercial BPOs Do Not Satisfy the Definition of
In response to clarification requests from the Appraisal Institute, the Federal Reserve‘s Board of
Governors issued a Jan. 14 letter confirming that a broker price opinion ―does not satisfy the definition of
an appraisal in the Board‘s appraisal regulation.‖

The Fed‘s clarification was addressed to the Appraisal Institute and came in direct response to an Oct.
26, 2009, letter sent to the Fed by the nation‘s four largest appraiser organizations that asked the Fed

5 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
about its policy on the use of BPOs in valuing land and other real property collateralizing commercial

―In response to your question as to the use of BPOs, it is the position of the Federal Reserve staff that a
BPO does not satisfy the definition of an appraisal in the Board‘s appraisal regulation,‖ the agency‘s letter
read. ―Therefore, a regulated institution would not be able to utilize a BPO to originate a loan secured by
commercial real estate when the loan requires an appraisal in accordance with the appraisal regulation.‖

In its letter, the Fed added: ―With regard to the use of BPOs as an evaluation, Federal Reserve staff has
taken the position that a BPO does not provide sufficient detail on a commercial property‘s condition,
occupancy, and use to meet the guidelines‘ requirements for an evaluation.‖

Bill Garber, director of government and external relations of the Appraisal Institute, said: ―We applaud the
diligent position taken by the staff of the Federal Reserve Board, and we believe it is one that should be
taken by all of the federal financial institution regulatory agencies.‖

The Appraisal Institute and fellow appraiser organizations had sought clarification after reports that BPOs
had been ordered by regulated financial institutions to satisfy the ―evaluation‖ requirements for renewals
of commercial loans and refinancing transactions. As the appraiser organizations had pointed out in their
October letter, ―[C]ommercial BPOs typically lack details on a commercial property‘s conditions,
occupancy and use as stipulated by the Interagency Guidelines. As such, any use by regulated or
supervised institutions would constitute a violation of the Interagency Appraisal and Evaluation Guidelines
and, we believe, are inconsistent with written Federal Reserve policies.‖

The Federal Reserve‘s Board of Governors responsible for policy is composed of five members:
Chairman Ben Bernanke, Vice-Chairman Donald Kohn, Kevin Warsh, Elizabeth Duke and Daniel Tarullo.

For the appraiser organizations‘ letter to the Fed, visit

For the Fed‘s response letter, which was signed by Director Patrick M. Parkinson, visit

Bankers Get Grilled During Day One of FCIC Hearings
The long-awaited first hearings of the Financial Crisis Inquiry Commission got off to a charged start Jan.
13 as Wall Street‘s top bankers took heavy criticism from the bi-partisan 10-member commission created
by Congress to investigate the causes of the financial collapse. This according to an Appraisal Institute
representative who attended the hearing.

The commission, which has been mandated to create a special report for Congress by Dec. 15, 2010,
heard from three panels during the first day, including the marquee hearing, ―Financial Institution
Representatives,‖ featuring the heads of each of the major four banks: Lloyd Blankfein of Goldman
Sachs; James Dimon of JPMorgan Chase; John Mack of Morgan Stanley; and Brian Moynihan of Bank of

6 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Led by Chairman Phil Angelides, the Inquiry Commission took aim at exposing the business practices of
these lenders before and during the 2008 financial collapse. Particularly, commission members wanted to
know about executive compensation, risk management practices and perceptions of regulatory oversight.

Blankfein, who took the brunt of the criticism, defended his company and its practices during 45 minutes
of questioning that rarely featured anyone else on the panel. As expected, Blankfein and the other bank
chiefs defended their current compensation practices by relaying that senior executive pay was
significantly reduced for 2008. They also explained in great detail some changes with respect to their
compensation practices since the crisis. An example given was that most of the companies‘ senior
executives must now hold onto their stock grants for longer timeframes and, in some cases, until
retirement from the company.

The bank leaders also defended their risk-management systems, citing that their internal controls were in
place and functional, but that even with controls, the decline in asset values was too steep to predict.
JPMorgan Chase‘s Dimon told the commission how his company stress-tested nearly every scenario in
the book – except for home price declines of 40 percent. According to Dimon, 40 percent declines in
home values are now part of his bank‘s regular stress tests.

Perhaps most telling from this panel was the response in regard to regulatory oversight. Blankfein and
Morgan Stanley‘s Mack discussed several times the difference in their regulatory oversight now that they
are under the Federal Reserve‘s umbrella. Without specifically attacking the oversight they had under the
Securities and Exchange Commission, it was clear they believe the Fed‘s regulators to be much more
involved in their processes on a daily basis. For instance, Mack noted the ―scrutiny of the Federal
Reserve is new to us. They are very diligent in how we manage risk.‖

In addition to the big bank panel, two other panels convened on the first day: ―Financial Market
Participants,‖ which featured members of the investment community; and ―Financial Crisis on the
Economy,‖ which sought perspective on the crisis from regular people and the everyday economy.
Highlights and testimony of all three panels can be found on the FCIC Web site, at www.fcic.gov/.

Regulators Gets Blamed on Day Two of FCIC Hearings
A day after grilling leaders of the nation‘s four major banks, members of the Financial Crisis Inquiry
Commission opened day two of hearings by turning their sights on financial regulators on Jan. 14. Senior
bank and securities regulators were put on the hot seat as the Inquiry Commission pointed out significant
holes in their oversight that helped fuel the financial crisis, according to an Appraisal Institute
representative who attended the hearing.

Top officials from the Securities and Exchange Commission, Federal Deposit Insurance Corp. and
Department of Justice were asked about regulatory decisions made by their agencies as well as why
government staffers missed key warnings. Many questions focused on failures around regulatory
decisions to loosen bank leverage and capital limits, faulty credit rating agencies, a warning about the
epidemic of mortgage fraud and a decision by Congress and the FDIC to stop collecting vital insurance
fees from well capitalized banks between 1996 and 2006.

7 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
According to MarketWatch.com, panel members went so far as to ask Attorney General Eric Holder to
conduct an investigation into what, if anything, the Department of Justice did after the Federal Bureau of
Investigation in 2004 warned that mortgage fraud was so rampant that it was a potential "epidemic."

The first round of FCIC hearings got under way as the White House and Congress consider a bevy of
new regulations for Wall Street. The Inquiry Commission, which will hold hearings year-round, is a bi-
partisan 10-member commission created by Congress to investigate the causes of the financial collapse.
Under Congressional mandate, it will be creating a special report by Dec. 15, 2010, to provide a thorough
overview of the crisis, its causes and its impact. It is expected that members of the FCIC will include
policy recommendations to Congress in their final report.

To view the testimony from day two of the FCIC hearings, visit www.fcic.gov/.

Fed’s Beige Book: Most Districts Note Modest Economic Improvement
Ten of the 12 Federal Reserve districts indicated modest improvement in the economic climate, according
to the central bank‘s latest Beige Book. Philadelphia and Richmond were the only two districts describing
mixed conditions.

―While economic activity remains at a low level, conditions have improved modestly further, and those
improvements are broader geographically than in the last report,‖ the Fed stated in the report, issued Jan.

The Fed reported that home sales increased in most districts, which was largely attributed to the federal
government‘s $8,000 homebuyer tax credit. All districts reported that the housing market‘s low-priced tier
outperformed the high end. Several districts said the original expiration date for the credit boosted sales
in November and caused a downturn in December. Although residential construction activity remained
low in most districts, Chicago and Minneapolis indicated increases. Home prices appeared to have
changed little since the prior Beige Book issued Dec. 2 except in Boston, Philadelphia and Cleveland,
which reported declines.

All districts described soft nonresidential real estate conditions except New York, Philadelphia, Kansas
City and San Francisco, which reported further drops in demand for commercial and industrial space.
Most districts noted rising vacancy rates and falling rent levels, which has led property owners to focus on
tenant retention and allowed tenants to negotiate favorable rent levels and allowances. Most districts
indicated weak non-residential construction activity except for St. Louis and Cleveland, which reported
some gains.

Most districts said loan demand was either weak or declining. St. Louis, Kansas City, Dallas and San
Francisco districts described overall declines or soft demand. A number of districts noted that credit
quality continued to deteriorate, with New York, Philadelphia and Cleveland reporting increases in
delinquencies for various loan types.

To view the Federal Reserve‘s latest Beige Book in its entirety, including a breakdown of the districts, visit

Appraisers May Fall under New IRS Rules

8 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Appraisers may be subject to new Internal Revenue Service requirements, depending on how the agency
interprets certain sections of the new rules. After a six-month review of tax preparers, the IRS announced
Jan. 4 that it is introducing new enforcement and education rules to regulate tax preparers, according to
the Bureau of National Affairs.

The impact on the appraisal profession depends on the IRS‘s interpretation of the rule, according to Bill
Garber, director of government and external relations for the Appraisal Institute. ―The IRS may try to
assess the work and regulatory structures of those in related industries, such as lawyers, accountants
and appraisers, to determine if they should go through competency testing like everyone else,‖ he said.

Among the new IRS regulations, tax preparers will have to register with the federal government and
company employees will have to pass competency tests and stay up-to-date on tax laws by taking
continuing education courses every year, the IRS stated in its Jan. 4 news release.

"As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest
financial transactions of the year," IRS Commissioner Doug Shulman said in the news release. "Our
proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and
strengthen the integrity of the nation's tax system. In addition, we are taking immediate action to step up
oversight of tax preparers this filing season.‖

The rules affect national firms as well as independent tax preparers. Until this point, only a handful of
states required tax preparers who charged fees to be licensed, meaning anyone could do it. The IRS has
already sent letters to approximately 10,000 tax preparers nationwide reminding them to be vigilant in
areas where errors are commonly found. Some of those letter recipients will be visited by IRS agents in
the coming weeks to discuss their obligations and responsibilities to prepare accurate tax returns,
according to the IRS.

The IRS initiatives are expected to take several years to fully implement, and the agency has stated that
the new rules will not be in effect for the current tax season. Because certified public accountants are
already subject to professional standards, they have been exempt from the new rules.

According to the Scripps Howard News Service, the IRS will pay for its new initiatives by imposing a user
fee on people who are registered and tested.

Audit: Interior's Oversight of Appraisals Faulty
A report by the Inspector General‘s Office has found that the Appraisal Services Directorate, or ASD,
which was created to oversee billions of dollars of land appraisals, is weak and unable to function
efficiently due to undermining by other bureaus.

The New York Times has reported that the Inspector General‘s Dec. 23 report recommended that the
Interior Department, which oversees the ASD, give its appraisal arm complete control of appraisal-related

According to the Inspector General‘s report, from its inception in 2003, when the ASD was created to
protect appraisers from undue influence and enhance the reliability of Interior Department appraisals,

9 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
both ―external and internal obstacles have impeded ASD‘s ability to fulfill its mission and provide (the
Interior Department) with timely, independent appraisals and valuation services.‖

Instead, the ASD has been plagued with rival bureaus that have been trying to regain control of appraisal
functions as well as slowed by a lack of leadership. The ASD has not had a permanent chief appraiser for
three years.

In its conclusion, the Inspector General made three recommendations to ensure the ASD can perform
uninterrupted going forward:

    1. Delegate responsibility to, and provide the necessary resources for, ASD‘s complete control over
       the appraisal-contracting function.
    2. Ensure that a strong and competent chief appraiser is selected to lead further change within ASD
       and to provide a single point of contact, offer sound judgment and have final decision authority on
       appraisal matters; and
    3. Revisit the organizational placement of the department‘s appraisal operations and consider
       making ASD an independent office within the Office of Policy, Management and Budget in order
       to reinforce ASD‘s ability to successfully and independently perform appraisal-related activities.

The findings of the Inspector General‘s report hardly come as a surprise. On Dec. 18, representatives
from the Appraisal Institute and three other real estate appraisal groups met with Interior Department
officials to discuss improvements to the operations of the ASD. The meeting was a follow-up to a Nov. 16
letter the groups sent to the House Appropriations Committee regarding the 2010 Interior appropriations
bill, which called into question turn-around time and quality.

Prior to the ASD‘s creation in 2003, Interior Department appraisers reported to bureau managers
responsible for completing land transactions. This setup was often viewed as a burden to efforts to
determine fair market value because appraisals were frequently compromised by pressure to make a deal
go through.

To view the full IG report, visit

Financial Reform Bill Closer to Resolution
Bipartisan support for financial reform legislation, once a far off idea, is edging closer to fruition. Sens.
Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., have issued a joint statement announcing the
resolution of key differences and expressed mutual hope to complete a compromise by the end of the
Senate's winter vacation.

Dodd is chairman of the Senate Banking Committee; Shelby is the ranking member, Dodd announced
Jan. 5 that he will not run for re-election to the Senate this year.

The joint announcement, issued Dec. 23, comes after fierce disagreement between Dodd and Shelby. At
a financial reform hearing in mid-November, the Post reported that Shelby lashed out at Dodd‘s draft
legislation by reading a biting 2,600-word letter. Dodd is reported to have responded by mockingly
thanking Shelby for his support.

10 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
But now that public demand for financial reform rings louder – and it‘s an election year – Dodd and
Shelby are representing the desires from both sides of the aisle to ensure change occurs before
Congressional seats go up for grabs.

―The economic crisis our country faced over the last year exposed serious weaknesses in our financial
regulatory structure,‖ Dodd and Shelby wrote in their joint statement. ―The lesson was clear. Our country
needs financial regulatory reform and we are committed to working together on legislation to create a
sound regulatory structure.‖

According to their statement, both Dodd and Shelby would like the following:

       to end the ―too big to fail‖ mentality;
       to protect American taxpayers from future bailouts by enhancing America‘s resolution regime;
       to modernize and streamline the nation‘s regulatory structure while preserving its dual-banking
       to return the Federal Reserve to its core function, which is conducting monetary policy; and
       to modernize, among other things, regulation and oversight of the derivatives market.

Financial reform has been a hot button issue ever since President Obama declared it one of his
legislative priorities. As the Post noted, his administration had pushed Congress to take action by the end
of last year, and the House passed a bill containing most of the president's proposals early in December.
But the version of the House bill that passed had no Republican support, which would certainly be
required if the bill was to make it through the Senate.

Congress Mulls a Return to Glass-Steagall Act
Since 1999, the Glass-Steagall Act has been a thing of the past on Wall Street. But that may soon be

According to a Dec. 28 Bloomberg News story, lawmakers on both sides of the aisle are expressing
interest in a one-page proposal floating around Congress that could restore the Glass-Steagall Act and
bring back financial regulations that separate commercial and investment banking.

Public anger over the recent Wall Street bailouts has lawmakers looking at other ways to oversee the
financial sector and to prevent another financial market collapse. By reverting back to the Glass-Steagall
Act, the government could break up big banks that also have an investment arm.

The Glass-Steagall Act, which originally was passed in 1933, was overruled with the passage of the
Gramm-Leach-Bliley Act of 1999. As reported by Bloomberg, Sens. John McCain, R-Ariz., and Maria
Cantwell, D-Wash., are now hoping to reconstruct the old rules to prevent deposit-taking banks from
underwriting securities, engaging in proprietary trading, selling insurance or owning retail brokerages. In
addition, the Dec. 16 proposal offered by McCain and Cantwell could undo some of the deals arranged
during the financial crisis, including Bank of America Corp.‘s acquisition of Merrill Lynch & Co.

Industry insiders appear to be divided about the impact the re-introduction of the Glass-Steagall Act
would have upon the financial sector. Wayne Abernathy, an executive vice president at the American

11 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Bankers Association, told Bloomberg in a telephone interview, ―The impact on Wall Street would be

However, others point out that Glass-Steagall Act wouldn‘t have saved investment banks such as Bear
Stearns or Lehman Brothers from collapse. Further, it would have prevented the government from
enlisting banks such as JP Morgan to take on the assets of Bears Stearns.

Bank lobbyists have already begun targeting Senate Banking Committee members as lawmakers
negotiate provisions of a regulatory overhaul bill. Lobbyists are arguing that a return to the pre-1999 era
would reduce the diversity of revenue streams, make financial firms more vulnerable in a crisis, prevent
them from acquiring ailing institutions, increase the cost of raising capital and undermine the global
competitiveness of U.S. institutions, according to Bloomberg.

It is believed that the McCain-Cantwell proposal, which has picked up four additional co-sponsors, could
be considered by the Senate Banking Committee later this month.

Government Scrutinizes CDO Deals to Gauge Legality
The Securities and Exchange Commission, Congress and the Financial Industry Regulatory Authority are
beginning to collect information from key Wall Street firms involved with collateralized debt obligations
(CDOs), securities whose collapse in price was at the heart of the global financial crises, according to a
Dec. 24 report by The New York Times.

While the investigations are in the early stages, authorities are trying to determine if security laws were
violated in the creation and sale of these mortgage-backed investments.

To ensure profits during the real estate boom while protecting against risk, Wall Street executives created
CDOs backed by subprime mortgages and other loans that were sold to investors without government
regulatory oversight, the Times said. CDOs kept lenders with an incoming stream of revenue, which in
turn was used to generate new loans.

Since 2005, $1.3 trillion worth of CDOs have been issued, with a record $521 billion in 2006, according to
the Securities Industry and Financial Markets Association, as reported by National Public Radio.
However, as more borrowers entered into mortgages they couldn‘t afford, the stability of CDOs grew

―The simultaneous selling of securities to customers and shorting them because they believed they were
going to default is the most cynical use of credit information that I have ever seen,‖ Sylvain Raynes, an
expert in structured finance at R & R Consulting, told the Times. ―When you buy protection against an
event that you have a hand in causing, you are buying fire insurance on someone else‘s house and then
committing arson.‖

Wall Street executives maintain the use of CDOs was common practice as a way to hedge investments
and protect against losses, the Times reported. However, industry watchers say the main purpose of
CDOs were not mainly for hedging purposes, but were used to place large negative bets that in turn put
firms at odds with client interests.

12 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Investigations have shed little light on the causes leading to the financial meltdown. However, market
participants and former regulators suggest that underwriting investment banks often had influence over
the investment choices CDO managers made, giving rise to possible conflicts of interest, according to a
Dec. 16 ProPublica story. Moreover, some managers had their own in-house investment funds, which
may have led some to take positions that were in conflict with the interests of investors. ―The possibility
for conflicts and self-dealing is huge,‖ former SEC chief accountant Lynn Turner told the Times.

Smaller Banks Taking Their Time in Repaying TARP
While big banks that borrowed taxpayer money through the government‘s Troubled Asset Relief Program,
or TARP, have been chomping at the bit to repay their loans, smaller banks are in no such rush.

As reported by Forbes.com, when Wells Fargo and Citigroup‘s TARP repayments are approved, the
lending giants will join JPMorgan Chase, Bank of America, Morgan Stanley and Goldman Sachs as major
banks to have returned taxpayer funds, with interest on top. Small banks, however, lack the capital-
raising abilities of their big counterparts and, therefore face a much longer wait time before most will be
able to repay the government.

Banks that borrowed between $1.2 billion to $7.6 billion, such as Discover Financial Services and PNC
Financial Services Group, are finding that it‘s better business to hold onto their TARP funds, which are
being used to buffer against commercial and residential real estate losses as well as delinquent credit
card payments.

One reason big banks have been able to quickly repay their TARP loans while small banks have not is a
matter of stock. As Forbes.com reported, big banks can issue stock and find investors. Local and regional
banks, on the other hand, have a hard time locating those willing to invest in this economy. But that‘s not
necessary bad news – for small banks or taxpayers.

By sitting on their TARP loans, banks maintain a capital cushion, which is vital in a down economy. And
taxpayers, essentially the ones who bailed out the banking industry, earn further interest on the
outstanding TARP loans. Provided the economy continues to rebound, TARP may prove one of the
government‘s more profitable undertakings.

According to Forbes.com, with the return of funds borrowed by Wells Fargo and Citigroup, America's
banks will have paid back $146 billion of the $205 billion taxpayers lent them during the banking crisis,
leaving the $59 billion small banks have in hand. The $205 billion doesn‘t include special assistance the
taxpayers gave to AIG and the auto industry, repayment of which is in question.

TALF Slows as Special Servicing Transfers Grow
The Federal Reserve‘s Term Asset-Backed Securities Loan Facility, or TALF, program received $1.325
billion in investor loan applications for legacy commercial mortgage-backed securities by its December
deadline, according to a Dec. 18 JP Morgan Securities report. The applications brought TALF‘s 2009
subscription requests for CMBS to $9.3 billion.

However, December marked the second month in a row in which TALF requests dropped. According to
the Mortgage Bankers Association, the Fed received $1.489 billion in CMBS requests in November. In
October the Fed had received $2.1 billion in requests.

13 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Industry analysts are chalking up the declines in TALF loan requests to a general slowdown that occurs at
the end of the year as well as the growth of special servicing transfers.

As Alan Todd, head of CMBS research at JP Morgan Securities, told the MBA‘s Newslink, "We believe
the drops do not reflect anything more than year-end, and fewer investors are looking to add new
positions over the final weeks of the year."

As reported by JP Morgan Securities, special servicing increased 1 percent from October to 8.39 percent
of the conduit universe balance. Todd believes that as loans continue to stream into special servicing at a
steady pace and net conduit issuance remains negative, the percentage of loans in special servicing
should surpass 8.75 percent by year-end and could reach double digits by the second-quarter 2010,
according to the MBA.

The TALF program, which has the potential to generate up to $1 trillion in lending for businesses and
households, was initially expanded in June to include newly issued CMBS. The move was part of an effort
to stave off waves of foreclosures as borrowers have been unable to refinance amid cutbacks in lending
and continued drops in property prices.

In August, the Fed and Treasury expanded the TALF investment period for legacy CMBS to March 31,
2010, and the request window for newly issued CMBS through June 30, 2010. Originally, the TALF
program was set to expire at the end of 2009.

The next loan application deadline for the CMBS portion of the TALF program is scheduled for mid-

14 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Government Update – Residential
FHA Raises Criteria, Interest for Mortgages
In a move intended to manage the risks inherent in today‘s residential real estate markets, the Federal
Housing Administration has implemented new policy changes designed to curb the losses the agency has
suffered from bad loans.

As announced in a Jan. 20 FHA news release, the goals of the new measures are intended to help the
FHA better manage its risk while at the same time maintaining support for the nation‘s housing market
and providing access to loans for underserved communities.

Among the policy changes announced, the FHA will increase its mortgage insurance premium from 1.75
percent to 2.25 percent starting at an undetermined time in the spring. The increase means that
borrowers will have to pay more upfront or through monthly payments to get a loan. Also, the FHA plans
to increase enforcement of its lenders, including seeking Congressional authority to make unscrupulous
FHA lenders liable for chronic underperforming loans.

―Striking the right balance between managing the FHA‘s risk, continuing to provide access to underserved
communities, and supporting the nation‘s economic recovery is critically important,‖ FHA Commissioner
David Stevens said in the news release.

In other major changes, by summer the FHA plans to update the combination of FICO credit rating scores
and down payments for new borrowers so that new borrowers would be required to have a minimum
FICO score of 580 to qualify for FHA's 3.5 percent down payment program. New borrowers with less than
a 580 FICO score would be required to put down at least 10 percent. In addition, the FHA would reduce
seller concessions from 6 percent to 3 percent, with the intention of forcing sellers to cut back on the
practice of providing buyers with tangible incentives to purchase a property. The issue here is that the
added incentives go toward the inflation of the property‘s value when in reality the inclusion of a new car
or electronics should not be factored into what a home is worth.

According to the FHA, Housing and Urban Development Secretary Shaun Donovan approved the FHA
policy changes last December.

The FHA is hoping that its policy changes prevent the potential need for a government bailout. FHA
reserves have taken a hit as mounting loan defaults have dropped the agency‘s reserves to below the
government required levels. According to a Jan. 20 article in MSN Money, Stevens believes the FHA‘s
reserve shortage would right itself by 2013 without intervention, but now with the proposed changes
should bring the reserve levels back into line in the next fiscal year.

As a government insurance company, the FHA backs mortgages and refinance loans for approved
lenders. Last year, the FHA insured 1.9 million loans, about 30 percent of the overall market, according to
MSN Money. That‘s up from 1.1 million loans the FHA insured in 2008.

HUD, Army Corps Speakers Open FAU Symposium

15 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
U.S. Department of Housing and Urban Development Deputy Secretary Ron Sims called on appraisers to
join HUD in seeking to meet livability and sustainability goals. He made his comments during the opening
speech at the fourth annual Federal Agency Update public real estate symposium Jan. 26 in Las Vegas.

Sims said HUD is focusing on working with other federal agencies on ―cross fertilization‖ of ideas and in
breaking down departmental silos. He also focused on seeking a unity of purpose during his remarks at
the Flamingo hotel to about 300 attendees.

―I don‘t know how to appraise, how to do eminent domain; I don‘t have the skills you have. But I know you
can do them well,‖ said Sims, adding, ―Great nations can‘t be great if they‘re divided. For too long we‘ve
had too many acrimonious debates. It‘s important to have you as allies for the change that‘s going to

Encouraging federal and state governments and the private sector to work together, Sims noted that
―livability and sustainability is saying (that) we‘re going to grow smarter so that future generations can use
their dollars to compete internationally. Competition is greater than ever.‖

During the lunch address later that day, Christina Baysinger, chief of real estate for the U.S. Army Corps
of Engineers‘ five-state Great Lakes and Ohio River Division, told attendees that the Corps‘ real estate
division is ―striving for consistency and efficiency; we can‘t afford to do our mission ineffectively.‖

Baysinger noted that the Corps‘ real estate division includes 950 employees, including appraisers,
cartographers, attorneys and other professionals, located in 40 locations throughout the world. They
deliver real estate products and services totaling more than $850 million annually and oversee an Army
real property portfolio of 24.5 million acres.

Speaking for the Corps‘ real estate division, she said, ―It‘s easy to say no. What‘s important within our real
estate mission is that we figure out how to say yes. If it‘s legal, fiscally responsible and makes sense,
then we need to find a way to do stuff instead of not doing stuff.‖

Panelist: Appraisers Integral to HUD Neighborhood Stabilization Program
Addressing attendees of Fannie Mae‘s Jan. 26 conference, Don Boucher, SRA, stressed that highly
qualified appraisers are integral to the U.S. Department of Housing and Urban Development‘s
Neighborhood Stabilization Program (NSP).

Boucher, a member of the Appraisal Institute‘s Government Relations Committee, made his comments
during a panel discussion on real estate owned sales to public entities and nonprofits, as part of Fannie
Mae‘s 2010 NSP conference titled, ―Issues, Ideas and Solutions.‖ The NSP is HUD‘s program to stabilize
neighborhoods whose viability has been and continues to be damaged by foreclosed and abandoned

―The intended purpose of the NSP is to help re-vitalize distressed markets, assist low or lower income
people to help obtain good affordable housing and to stimulate housing markets, all of which are noble
and worthy purposes and ideals,‖ Boucher wrote in prepared comments. ―In my opinion, only very
seasoned veterans of the appraisal industry, those who have been around a while and who have pursued

16 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
more than just general licensing, can properly deal with all of the valuation and valuation-related issues
unique to the NSP.‖

In his written presentation, ―Appraisals and the Neighborhood Stabilization Program‖ – truncated during
the conference due to time constraints – Boucher suggested that when it comes to blighted properties,
those involved need to understand the importance of knowing fair market value, or the price that a buyer
is willing to pay in an arm‘s length transaction, as well as understanding market appraised values. He
warned against using broker price opinions, in-house staff opinions or automated valuation models to
determine value, even though those methods are allowed for sales in which the transaction price is
perceived to be $25,000 or less and non-complex.

―The reality of the situation is that the ‗deal‘ will involve transactional amounts much greater than $25,000,
due to renovation funds that will be expended and other costs required to take the foreclosed-on property
to a level acceptable for occupancy,‖ Boucher said. ―Real estate agents or brokers, automated valuation
models and others having some knowledge of market prices may be useful at certain points during the
process,‖ he said, ―but (they) cannot provide the single and consistently reliable source point for all
valuation-related needs and requirements like the professional real property appraiser.‖

Boucher pointed out that another benefit of using appraisers is their objectivity. Whereas a broker or real
estate agent may stand to profit considerably from a transaction, the appraiser is paid a pre-determined
fee and is accountable by law for his or her opinion of value.

―The professional and experienced real property appraiser can provide value estimates for a given
property at various points in time based on actual, assumed or proposed conditions and changes,‖
Boucher stated. ―Appraisers can also assist as disinterested third parties in providing property inspections
to check on renovation progress and quality or to provide useful advice as project managers face various
decision points along the way.‖

Boucher closed his presentation with a reminder that the NSP is a taxpayer-funded initiative that needs to
be carefully managed in order to achieve the greatest results for the American taxpayer.

―We are dealing with taxpayer‘s money here, your money and my money, so the funds need to be wisely
and efficiently spent,‖ Boucher reminded his audience. ―And, I assert and propose that including the best
and most highly qualified appraisers in the process from beginning to end will help achieve the desired
results more efficiently and with substantial cost savings to the taxpayers.‖

Government Still Debating How to Portray Freddie, Fannie Financing
The government‘s plan to absorb Fannie Mae‘s and Freddie Mac‘s losses over the next three years has
created debate on Capitol Hill over whether or not to include their financial obligations in the federal
budget, according to a Jan. 22 report in The Wall Street Journal. The controversy comes amid growing
concerns over controlling government spending.

The Congressional Budget Office is backing the move to reflect them on the books, the Journal reported.
"Recent events clearly indicate a strengthening of the federal government's commitment to the obligations
of Fannie Mae and Freddie Mac," the CBO said.

17 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
The CBO estimates a bailout of the two companies would cost $291 billion, while a takeover would
increase the cost an additional $99 billion over the next decade, according to the Journal. The White
House, however, places total costs at only $112 billion.

The Treasury said the White House does not have plans to alter how Fannie and Freddie are accounted
for in the budget. "I don't anticipate any change," Assistant Treasury Secretary Michael Barr told the
Journal. "They'll have the same appearance that they've had before in the budget books."

Because the government takeover of the two companies in 2008 was intended to be a temporary
arrangement, Treasury officials have said that adding Fannie and Freddie onto the government books is
not necessary until the administration decides how the two entities should be structured. However,
Republicans argue that the arrangement has become more than temporary and therefore should be
reflected on the books. "These are organisms that have now become a direct arm of the U.S. government
and I assume that people who are now buying these securities are looking at them that way," Sen. Bob
Corker, R-Tenn., told the Journal.

While adding Fannie‘s and Freddie‘s obligations to the federal books would increase the federal deficit
sharply, critics agree that the move should be done to accurately reflect risks to taxpayers. ―It should have
been done years ago,‖ David Kotok, chair of Cumberland Advisors, told the Journal.

The White House said it will examine proposals on how Fannie and Freddie, as well as the overall
mortgage market, should be structured in the future when it releases its budget in February. "There's no
question that the future structure of the housing market is going to have to be very different from the
structure that led Fannie and Freddie to the point of conservatorship," Lawrence Summers, President
Obama‘s chief economic adviser, told the Journal. "But this is an issue that's going to play out over time."

HUD Proposal Would Move Broker Supervision to FHA Lenders
―Loan correspondents‖ could be prohibited from originating loans independently if a proposal from the
Department of Housing and Urban Development is implemented that will transfer all supervision of
brokers to Federal Housing Administration-approved lenders.

As reported in the Jan. 8 issue of Banking Daily, in an effort to improve credit risk policies, HUD issued a
proposed rule Nov. 30 in which the agency would no longer approve loan correspondents in FHA
programs. Instead, FHA-approved lenders would be required to ensure that their affiliated brokers meet
FHA qualifications, and assume liability for loans originated by the brokers.

The proposal has not been sitting well with the National Association of Mortgage Brokers or the American
Bankers Association.

According to a Jan. 6 National Mortgage News article, NAMB wants HUD to continue setting standards
for loan correspondents and to start sharing oversight responsibilities with FHA-approved lenders that
chose to sponsor brokers.

In its Dec. 30 comment letter, NAMB said it ―respectfully recommends that HUD revise the proposed rule
and provide for a more balanced, dual oversight of loan correspondents," according to National Mortgage

18 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
According to Banking Daily, the brokers group is especially concerned that the proposed changes would
block broker and correspondent access to important FHA software and technology that is used in the
mortgage origination process, potentially increasing the liability passed along to FHA-approved lenders.

Sharing in the concerns of the NAMB, the ABA has expressed its worry about the liability that the HUD
proposal would impose on FHA-approved lenders. In a Dec. 30 letter, the ABA urged the agency to adopt
safe harbor protections that would shield lenders from FHA penalties and sanctions in certain cases.

―Rational steps to avoid unbounded liability are essential to prevent needless disruptions in lending, and
to ensure that banks can continue to safely contribute to the success of the FHA program,‖ the ABA wrote
to the FHA.

HUD is in the process of reviewing the Dec. 31 deadline comment letters it has received from industry

Fed Officials at Odds on Mortgage Purchasing Program
Recently released minutes from the December meeting of the Federal Reserve have shed light on the
debate between government officials regarding the future of the Fed‘s program to purchase mortgage-

According to a Jan. 7 Wall Street Journal article, minutes from the Dec. 15-16 meeting show some
officials worried the housing recovery could be cut short next year when the Fed stops buying mortgage
debt and when other federal support programs – such as a government housing tax credit – expire.

The minutes detailed that "some participants remained concerned about the economy's ability to generate
a self-sustaining recovery without government support," according to the Journal.

On the other end of the spectrum, however, the minutes show at least one Fed official argued the
program should be scaled back because the economy is improving, the Journal reported.

Fed officials are likely to continue the debate on this issue in the coming months as they try to keep short-
term bank lending rates near zero.

The Fed is on track to purchase $1.25 trillion of mortgage-backed securities through the Term Asset-
Backed Securities Loan Facility, or TALF, program. The purchases have helped to drive down mortgage
interest rates, providing an important boost to housing and financial markets. But when the Fed stops
buying mortgage-backed securities in March, mortgage rates could turn higher, according to the Journal.

FHA Probes Lender Defaults
Federal Housing Administration lenders with high default rates received an unwelcome surprise Jan. 12
when the U.S. Department of Housing and Urban Development subpoenaed 15 mortgage companies as
part of the agency‘s efforts to seek out possible fraud, according to Bloomberg News.

Although HUD officials maintain that they haven‘t found evidence of any wrongdoing on the part of FHA
lenders, they are interesting in taking a closer look at the worst performers in the FHA portfolio.

19 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
―We aren‘t making any accusations at this time, we have no evidence of wrongdoing, but we will
aggressively pursue any indicators of fraud,‖ HUD Inspector General Kenneth Donohue told Bloomberg.
―The fact that there are 15 institutions on this list today does not in any way suggest that there aren‘t other
institutions that we will not look at later.‖

The increased lender scrutiny by HUD is part of an effort by the agency to stem losses on loans insured
by the FHA. The FHA has been under a microscope in recent months as lawmakers have feared that the
FHA may go broke and require a bailout. As reported in the December issue of Appraiser News Online,
HUD assured Congress at a Dec. 2 hearing with the House Financial Services Committee that it was
adopting new measures to reduce risk to the FHA portfolio by improving its lender enforcement and
accountability, increasing capital and re-establishing quality control reviews.

―(HUD) will step up efforts to ensure lenders assume responsibility for any losses associated with loans
not underwritten to FHA standards,‖ Donovan told the committee at the time.

Among the banks subpoenaed by HUD include: First Tennessee Bank N.A. of Memphis; 1st Advantage
Mortgage of Lombard, Ill.; Alacrity Financial Services LLC of Southlake, Texas; Alethes LLC in Lakeway,
Texas; American Sterling Bank of Independence, Mo.; Americare Investment Group of Arlington, Texas;
Assurity Financial Services LLC of Englewood, Colo.; Birmingham Bancorp Mortgage Corp. of West
Bloomfield, Mich.; D and R Mortgage Corp. of Farmington, Mich.; Dell Franklin Financial LLC of
Columbia, Md.; Mac-Clair Mortgage Corporation of Flint, Mich.; Pine State Mortgage Corp. of Atlanta;
Security Atlantic Mortgage Co. of Edison, N.J.; Sterling National Mortgage Co. of Great Neck, N.Y.; and
Webster Bank of Cheshire, Conn.

According to Bloomberg, a HUD spokesman said the agency didn‘t include on its list any mortgage
companies that are already under investigation or subject to an open audit.

Fannie/Freddie Secure Government Backing
Mortgage giants Fannie Mae and Freddie Mac received an early Christmas present when the Treasury
Department announced Dec. 24 that it was raising its limit on federal support for the two government-
sponsored enterprises.

According to Bloomberg News, the government has committed to provide Fannie and Freddie with an
unlimited amount of capital for three years to cover the GSEs‘ potential losses and to alleviate market
concern that the government lifeline for Fannie and Freddie, the largest source of money for U.S. home
loans, could be exhausted.

Prior to the Treasury‘s announcement, the government had a $200 billion limit on the amount of aid it
would provide to each of the GSEs. But with Fannie and Freddie‘s losses expected to climb well above a
combined $400 billion, the Treasury was prompted to remove those limits. As expected, the political
backlash from both Democrats and Republicans has been fierce.

Rep. Dennis Kucinich, D-Ohio, chairman of the Domestic Policy Subcommittee of the House Oversight
and Government Reform Committee, has made it known that his committee will investigate the Treasury‘s
decision to slash the cap on funding for the GSEs. According to CNSNews.com, Kucinich is particularly

20 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
concerned with whether additional funds given to Fannie and Freddie will be used to compensate

Across the aisle, Reps. Scott Garrett, R-N.J., and Spencer Bachus, R-Ala., are also publicly protesting the
administration‘s move to give the government unlimited authority to inject tax money into Fannie and
Freddie. As CNSNews.com has reported, both lawmakers are concerned that the Obama administration
is wasting taxpayer money on another bailout.

The government is using the percentage of residential loans tied to the GSEs to justify its position. Fannie
and Freddie own or guarantee about $5.5 trillion of the $11.8 trillion in U.S. residential mortgage debt,
and in 2009 they financed roughly 75 percent of new U.S. mortgages, according to Bloomberg. The
government believes keeping the GSEs stable will help carry out the Treasury‘s $75 billion plan to let as
many as 9 million homeowners modify or refinance their loans to more affordable terms to prevent

Though unpopular, the approval of the White House to uncap funding means that the Obama
administration and Congress can now move on to the next looming question facing Fannie and Freddie:
what ultimately to do with these companies?

As shareholder-owned companies that also have a federally chartered mission to promote the housing
market, Fannie and Freddie have dual mandates that serve both private and public interests. Lawmakers
have indicated that they want to explore options to perhaps fully privatize the GSEs or go completely in
the other direction and make Fannie and Freddie public. To date, however, no notable hearings on the
matter have been scheduled.

Over the last nine quarters, Fannie and Freddie have lost a combined $188.4 billion, and the federal
government now holds almost 80 percent of the equity in each of the entities, according to Bloomberg.
Those numbers should make for some interesting debate when the future of the GSEs is officially brought
to the table, most likely starting in February.

21 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Inside the States
Ohio Sherriff's Appraisal Practices Come under Fire
Montgomery (Ohio) County Sheriff Philip Plummer‘s foreclosure sale appraisal practices have caught the
attention of a statewide group, which is looking at changing the law to require a license, the Dayton Daily
News reported.

In a Jan. 9 article, the Daily News said that appraisers working for Plummer, most of them without real
estate or appraisal licenses, earned as much as $151,456 last year appraising foreclosed properties to be
sold at sheriff‘s auction.

While Plummer requires they take a course in appraisal, neither he nor state law require that they have a
license. Chief Deputy Mike Nolan said two have real estate licenses but the rest do not. The sheriff does
not bid out the work, nor is he required to, Dayton Daily News reported.

Veteran property appraisal executive Richard Henkaline, MAI, SRA, president of Henkaline Associates in
Dayton, said, ―I believe mandatory licensure/certification should be required for all appraisal work, but
unfortunately not all Ohio appraisers share my position. Some are willing to concede the sheriff sales
and/or probate work in order to move the state closer to mandatory licensure/certification with watered
down legislation.‖

While Henkaline does support mandatory licensure, he also sees the need for valuations of limited scope
that will help governmental organizations control costs associated with that work.

For the full story, visit www.daytondailynews.com/news/dayton-news/sheriff-s-appraisal-practices-

States Issue BPO Guidance
Two states – Virginia and Georgia – have recently issued new documents that clarify when, and under
what limitations, a broker price opinion can be performed legally by a licensed real estate professional.

The Georgia Real Estate Commission, the agency with regulatory authority over agents and brokers,
suggested that ―Before offering Broker Price Opinion, the licensee should first determine the purpose of
the BPO.‖ Georgia law provides that a real estate licensee may give a broker´s price opinion to a
―potential seller, purchaser, landlord, tenant or third party as to the recommended listing, lease, rental or
purchase price‖ in the ordinary course of business.

Despite this statutory limitation on when agents and brokers may give broker‘s price opinions, it is widely
understood that BPOs are performed by agents and brokers for many other purposes, including for
mortgage finance transactions, pre-foreclosure and litigation. The Georgia Real Estate Commission cited
performing BPOs for purposes not expressly permitted in the law as a ―Common Violation‖ of the
mandatory appraiser licensing statute.

The Virginia Real Estate Board recently approved the issuance of a ―Broker Price Opinion Guidance
Document‖ in order to ―assist its licensees in understanding the requirements‖ of the Virginia Code.

22 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Section 54.1-2010A of the Virginia Code permits a licensed broker or salesperson to ―in the ordinary
course of business, provide a valuation or analysis of real estate for a fee.‖

However, in this Guidance Document, the REB has taken the position that ―it is improper to accept a
commission or other valuable consideration (including fees for Broker Price Opinions), as a real estate
salesperson or associate broker, from any person except the licensee‘s principal broker at the time of the

In addition to issuing this guidance, it is possible that the REB will also adopt requirements that agents
and brokers who give BPOs meet minimum education and qualification standards, and that the BPOs be
done in conformance with standards, such as the ―Broker Price Opinion Standards and Guidelines‖ that
was recently issued by the Real Estate Valuation Advocacy Association.

To view a copy of the Georgia guidance, visit
www.grec.state.ga.us/PDFS/About/newsarticles/GREC_Update.pdf, and to view a copy of the Virginia
guidance visit

Green Leases Gain Traction
The New York City Council passed a modified version of Mayor Michael R. Bloomberg‘s proposal for
energy efficient buildings in December that required landlords to audit their buildings‘ energy use once a
decade and publish the results, but made investments to reduce energy waste optional, according to The
New York Times.

In 2009, Bloomberg proposed four laws and two programs that would have required the owners of New
York‘s largest buildings to pay for improvements to make their properties more energy efficient. Building
owners had questioned the feasibility of mandated improvements, arguing that they often bear the burden
of paying for investments without any codified way to share costs with tenants, the Times reported.

David Cheikin, vice president for leasing at Brookfield Properties, a publicly traded company that owns
20.6 million square feet of New York area office space, said the current lease structure gives owners little
incentive to invest in their properties. Cheikin told the Times that language in a New York City class A
office lease says one can‘t throw money into the building and expect tenants to pay for it.

Sean Neill, an economist who started a consulting company to address this question, wants to change
that roadblock, which landlords call the ―split incentive.‖ Working with the Natural Resources Defense
Council and the Environmental Defense Fund, Neill‘s firm, Cycle-7, is preparing to discuss with large
commercial tenants ways to revise the standard leases used in commercial real estate, developing a way
to share the costs and benefits of energy upgrades in a ―green lease,‖ the Times reported.

Although Neill‘s task is complex because landlords hesitate in a weak economy to ask tenants to accept
anything that might be an extra expense, many landlords and environmentalists expect retrofits will
become basic to commercial leasing as the city‘s new law takes effect and as more information becomes
publicly available about the energy waste in buildings, the Times reported.

23 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Nebraska Bankers Propose to Gut State Appraiser Licensing Law
Two members of the Nebraska legislature with strong ties to the banking sector have introduced a bill that
would significantly expand the ability of real estate agents and brokers to perform broker price opinions
outside of the real estate listing and sales process. Sponsored by Sen. Kate Mitchell, a board member of
Cedar Rapids State Bank, and Sen. Dennis Utter, chairman of the board of Adams County Bank,
Legislative Bill 818 was introduced at the request of the Nebraska Bankers Association.

If L.B. 818 were to pass, brokers and agents would be permitted to perform BPOs for any lender or
borrower who is obtaining or extending financing, so long as an appraisal is not required under federal
law and no illusion is given by the agent or broker that the BPO is of equivalent quality to an appraisal.
Circumstances where BPOs would then be permitted in Nebraska include residential finance transactions
by non-bank lenders that fall below the federal de minimis threshold of $250,000, and some business
loan transactions that fall under the $1 million federal threshold.

Currently agents and brokers in Nebraska are limited to performing BPOs for the purpose of ―assisting
buyers or sellers or prospective buyers or sellers in deciding the listing, offering, or sale price of the real
property.‖ Valuation services provided for compensation require an appraisal certification or license and
adherence to the Uniform Standards of Professional Appraisal Practice.

The Nebraska Chapter of the Appraisal Institute intends to vehemently fight this extremely unfavorable
legislation and will highlight the fact that BPOs are not subject to any enforceable standards and that the
training requirements for agents and brokers doing BPOs are very minimal. Since Nebraska has a
unicameral legislature, there will only be one opportunity to defeat or amend the legislation, according to
Scott DiBiasio, Appraisal Institute manager of state and industry affairs. In states with bi-cameral
legislatures, there are usually multiple points in the legislative process where unfavorable legislation can
be defeated or modified.

It is possible that similar legislative and regulatory proposals will be forthcoming in other states from the
real estate and banking trade groups, Dibiasio said. The Appraisal Institute is encouraging chapters in
other states to be extremely vigilant for similar proposals, and to be prepared in advance to respond, he

To view a copy of the introduced version of Legislative Bill 818, visit

Illinois Governor Signs Mandatory Licensing Law
Any person providing appraisal services in Illinois must now be licensed or certified by the Department of
Financial and Professional Regulation in order to perform any appraisal services in the state. Any person
who violates the new requirement is guilty of a Class A criminal misdemeanor for a first offense, and a
Class 4 felony for each subsequent offense.

The new law – effective immediately upon Gov. Pat Quinn‘s Dec. 23 signing of House Bill 1015 into law –
ends a three-year battle to enact mandatory licensing in Illinois. Prior to the enactment of the new law,
appraiser licensing was only mandatory in Illinois if the appraisal was being performed in conjunction with
a federally related transaction.

24 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
In addition to the mandatory licensing requirements, the new law enacts a very strong appraiser
independence standard. Under the new law, ―No person shall influence or attempt to influence through
coercion, extortion, or bribery the independent judgment of an appraiser … in the development, reporting,
result, or review of a real estate appraisal.‖ A person who violates the appraiser independence
requirement is guilty of a Class A misdemeanor for the first offense and a Class 4 felony for any
subsequent offense.

The new law also brings Illinois into compliance with the new licensing and certification criteria adopted
by The Appraisal Foundation‘s Appraiser Qualifications Board. The law also makes it easier for out-of-
state licensed or certified appraisers to obtain a license or certificate to practice in Illinois.

In order to secure passage of the bill, a provision was included that provides for an exemption from the
licensing requirements for real estate professionals who wish to offer appraisal services (not in
conjunction with a federally related transaction) or who wish to perform a broker price opinion or a
comparative market analysis. Similar exemptions are provided for local government assessors.

To view a copy of the new Illinois law, visit www.ilga.gov/legislation/publicacts/96/PDF/096-0844.pdf.

Texas Requires Use of All Comparable Properties, Enacts Changes to Tax
Appraisal Process
Under a new law that went into effect on Jan. 1, chief appraisers of Texas‘s central appraisal
(assessment) districts are prohibited from excluding foreclosure sales and properties as comparables that
have lost value due to the declining market. House Bill 1038 prohibits exclusion of properties in the same
neighborhood as the property being appraised solely because the property was sold at a foreclosure sale
within the last three years, or has a value that has declined because of a declining market.

Several changes were also recently made to the ad valorem tax process in Texas. The passage of
Proposition 2 by voters in November 2009 will require that residential property is appraised only based
upon its use as a homestead regardless of whether the residential use of the property by the owner is
considered to be the highest and best use of the property. Additionally, passage of Proposition 3 will allow
the state Legislature to dictate the standards and procedures for the appraisal of property for ad valorem
tax purposes. Prior to the passage of Proposition 3, this was the responsibility of county governments.

The passage of House Bill 1038, along with the passage of Proposition 2 and 3, is intended to improve
the fairness and accuracy of the appraisal process and will help ensure that appraisal districts are
following uniform appraisal practices and procedures. According to Gov. Rick Perry‘s office, ―The intent of
these measures is to increase transparency and accountability in the appraisal process.‖

To view a copy of H.B. 1038, visit www.capitol.state.tx.us/tlodocs/81R/billtext/pdf/HB01038F.pdf. To view
a copy of the legislation that authorized the consideration of Propositions 2 and 3 visit,

25 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Around the Industry
Private-Label Securities May Resurface in Mortgage Market
The market for private-label mortgage-backed securities that all but disappeared two years ago when
rising defaults caused investors to turn away from the bonds may be making a small comeback,
according to a Jan. 20 story in The Wall Street Journal.

Some Wall Street investors are discussing the possibility of bringing small amounts of private-label
mortgage securities to market within a few months, the Journal reported. The first such sales are likely to
consist of securities backed by high-quality "jumbo" mortgages, those too big to be backed by
government agencies, according to industry analysts the Journal spoke with. The first offering could total
$250 million to $500 million and potentially debut during the first quarter of this year.

At the peak of the housing boom in 2006, private-label mortgage securities accounted for 56 percent of
the $2 trillion in mortgage securities sold to investors, according to industry publication Inside Mortgage
Finance. That was a staggeringly high number considering that most of the nation‘s mortgage securities
have traditionally been issued or backed by Fannie Mae, Freddie Mac and the Federal Housing

Since the collapse of the housing boom, private-label mortgage securities have been stagnating at best.
However, the Journal has noted that credit-rating firms say they have been asked to review several
potential deals in recent weeks, which are made up of fixed-rate loans and mortgages that carry a fixed-
rate for the first few years.

The renewed interest is a far cry from a private-label mortgage securities revival, but it highlights the
interest investors have in expensive nongovernment-backed mortgages. Yet even with investor interest,
it‘s not certain there would even be many ―jumbo‖ mortgages to buy.

Since the housing bust, lenders have tightened underwriting standards and are making fewer such loans.
In addition, the maximum size of "conforming" loans – or those that can be sold to Fannie Mae or Freddie
Mac – has risen to $729,750 in the priciest housing markets, up from $417,000 during the housing boom.
That means that most home buyers can get a conforming loan rather than a ―jumbo‖ mortgage, which
carry higher interest rates, according to the Journal. And lastly, there are fewer consumers looking to buy
higher-end homes in sluggish markets, which means investors have fewer options of mortgages to

Appraiser/Lender Conference Call Highlights Industry Concerns
Recent changes to the Real Estate Settlement Procedures Act, the state of appraiser independence, new
Federal Housing Administration requirements and the proliferation of appraisal management companies
were among the topics addressed during a Jan. 26 conference call.

The call, hosted by Solidifi, was intended to facilitate communication between appraisers and lenders in
light of recent regulatory changes. The one-hour call, which revealed that there is much uncertainty for
appraisers and lenders in today‘s market, featured Alice Alvey of Mortgage U, a mortgage lender training

26 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
and compliance consulting firm, and Griff Straw, president of Solidify USA, a provider of collateral
valuation, risk management and data analytic services to the North American mortgage industry.

―It‘s never been more challenging to keep up on all the different changes,‖ Straw noted in his opening

Alvey called the current state of regulations ―very confusing‖ for both lenders and appraisers to fully
understand. As an example, she noted recent changes to the Real Estate Settlement Procedures Act,
which are intended to provide consumers with more concise information, but as a result have created
shortened, block-format Good Faith Estimate and HUD-1 forms that lenders have found limiting and
difficult to complete.

Appraisers too, it was noted by Alvey, have expressed concerns about the new RESPA changes,
particularly the inflexibility of lenders to change the listed appraisal fee in the Good Faith Estimate even if
the appraisal assignment costs more than was quoted by the lender to the consumer.

Alvey also commented on the recent policy changes the Federal Housing Administration announced it will
be making (see related ANO story, ―FHA Raises Criteria, Interest for Mortgages‖). ―There‘s a hurricane
going on in Washington around the FHA,‖ Alvey remarked. The layers of risk that FHA lenders allowed
since the subprime collapse have forced the FHA to tighten its lending standards and introduce new
rules, she added.

Straw said that the industry hasn‘t seen this type of regulatory reform in many years. ―It‘s only going to get
more confusing in the short-run,‖ she said.

Appraisers participating on the call were eager to know Alvey and Straw‘s thoughts on the future of
appraiser independence regulations, especially with the Home Valuation Code of Conduct scheduled to
sunset this year.

―Appraiser independence is here to stay,‖ Straw proclaimed.

Alvey agreed, noting that she expects to either see the HVCC extended or, depending on the fate of
Fannie Mae and Freddie Mac, see new appraiser independence guidelines introduced.

There was also concern among participating appraisers regarding appraisal management companies and
the perceived emphasis on quick turnaround times over quality valuation analyses. Alvey reminded
appraisers and lenders that using an AMC is not required by the HVCC, but said that lenders, especially
large ones, likely turn to AMCs because these companies provide the easiest way to ensure that a lender
is in compliance with appraiser independence rules.

She stressed, however, that good lenders are typically ones who work with quality appraisers. She noted
that lenders who recognize that quality is paramount are the ones that will be around the longest. But, as
she pointed out, not every shop out there is a good one.

Straw was direct in his commentary: ―You can‘t shortcut quality at all,‖ he said.

27 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
To access the recording of the Solidifi conference call, visit www.solidifi.com/us_en/.

2005-08 Vintages Comprise Three-Fourths of CMBS Delinquencies
Fitch Ratings said Jan. 19 that the four most recent vintages of commercial mortgage-backed securities
represent 75 percent of delinquency balances as of December. More than $16.4 billion of $21.6 billion in
Fitch's delinquency index consists of CMBS issued from 2005 to 2008. Fitch's delinquency index currently
includes 2,143 loans, MBA Newslink reported.

The 2007 vintage accounted for $8.1 billion in delinquencies, the 2006 vintage accounted for $5.6 billion
in delinquencies, the 2005 vintage was $2.4 billion and 2008 accounted for $312.8 million, according to
MBA Newslink.

MBA Newslink also reported that Moody‘s Delinquency Tracker had 3,062 CMBS loans delinquent in
December valued at more than $32.7 billion. Moody‘s DQT showed retail with the highest delinquency
volume at more than $9.2 billion, followed by multi-family at more than $8.8 billion delinquent and office
with nearly $6.5 billion in CMBS delinquencies by the end of 2009. Hotel properties had more than $4.7
billion in CMBS delinquent loans followed by industrial at more than $1.17 billion by the end of December.

CMBS conduit/fusion deals – deals that include a pool of at least 40 loans that is diversified by both
property type and geography, which may or may not contain several relatively larger-sized loans – ended
the year at 4.9 percent.

Moody’s Commercial Index Shows Slight Gain after 13-Month Decline
After 13 consecutive months of falling values, the Moody‘s/REAL Commercial Property Price Index
increased 1 percent in November, according to a report by Moody‘s Investors Service released Jan. 20.

 The index measures the change in sale prices for commercial real estate property based on the repeat
sales of the same assets at different points in time. Commercial real estate prices were down 43 percent
as of November since reaching peak prices, according to the report.

"The positive 1 percent return recorded in November represents a bit of good news for the commercial
real estate market, but the sector is not yet out of the woods," Moody's Managing Director Nick Levidy
said in a news release. "We anticipate further deterioration in property fundamentals and increases in cap

According to the report, monthly declines tapered off in 2009 and future falls in values will be milder than
the declines recorded in early 2009. However, Moody‘s says that prices will resume falling as rental rates
and occupancy levels continue to decline and yields rise. "Those things together will result in lower
property values," Connie Petruzziello, an analyst at Moody‘s, said in the release. Moody's expects prices
to fall between 45 and 55 percent from peak prices reached in 2007 before leveling off.

Sales volume fell to 362 transactions in November totaling $4.1 billion, with lower-end properties making
up the largest percentage of activity, Reuters reported. According to Levidy, properties with short-term
leases, including multifamily properties, may show signs of sustainable recovery later this year, while
other sectors will require more time, Reuters reported.

28 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
S&P: Mixed Messages in Home Price Indices Data
Although there were price declines across several markets, the annual rates of decline of the 10-city and
20-city composites continued to improve for the 10th consecutive month in November 2009, as reported
in the latest Standard & Poor‘s/Case-Shiller Home Price Indices released Jan. 26.

According to the report, the 10-city composite fell 4.5 percent compared to November 2008 while the 20-
city composite dropped 5.3 percent.

―While we continue to see broad improvement in home prices as measured by the annual rate, the latest
data show a far more mixed picture when you look at other details,‖ said David Blitzer, chair of Standard
& Poor‘s Index Committee. ―On balance, while these data do show that home prices are far more stable
than they were a year ago, there is no clear sign of a sustained, broad-based recovery.‖

According to the report, home prices across the country were at late-2003 levels as of November. From
the peak in 2006 through November, the 10-city composite was down 30 percent and the 20-city was
down 29.2 percent, while peak-to-trough prices were down 33.5 percent and 32.6 percent, respectively.

The two composites were both down 0.2 percent in November compared to October. Phoenix led the five
MSAs with positive monthly returns, with a gain of 1.1 percent, followed by Los Angeles (0.8 percent),
San Francisco (0.6 percent), San Diego (0.4 percent) and Portland (0.3 percent).

When examining November‘s year-over-year data, Charlotte, Las Vegas, Seattle and Tampa all reached
new lows. Las Vegas, in particular, led the pack with its peak-to-trough down by 55.6 percent as of
November. On a brighter note, four MSAs registered positive year-over-year gains for the first time in
about two years. Dallas increased 1.4 percent, followed by San Francisco at 1 percent, Denver at 0.5
percent and San Diego at 0.4 percent.

To access the Standard & Poor‘s/Case-Shiller Home Price Indices, visit

Standard & Poor’s Looks at 2009 Housing Market, Compares with 2000
While home sales, housing starts and home price appreciation approached or hit record low levels at the
beginning of 2009, all three indicators started to show modest improvements toward the middle of the
year. But high unemployment rates, mortgage delinquencies and new foreclosures are causing some
uncertainty regarding the nation‘s economic recovery.

As of November 2009, the S&P/Case-Shiller Home Price Indices showed the 10-city and 20-city
composites had annual declines of 4.5 percent and 5.3 percent (see related story), respectively, which is
a notable improvement from the record levels of 19.4 percent and 19.0 percent, respectively, set in
January 2009. However, all 20 metropolitan statistical areas are still reporting declines on an annual

Overall, Arizona, California, Florida and Nevada had experienced the largest increases in prices since
2000 and had been hit the hardest in the downturn. In 2004, Las Vegas and Phoenix had the largest
peaks, with annual gains of 53.2 percent and 49.3 percent, respectively. Los Angeles, Miami, San Diego,

29 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
San Francisco and Tampa followed with annual growth rates above 30 percent. However, as of October
2009, Las Vegas had plunged 55.4 percent from its peak, Phoenix had fallen 51.3 percent, Miami had
dropped 46.9 percent and Tampa had decreased 41.1 percent.

Prices in Washington, D.C., New York and Los Angeles held up fairly well after the housing market
crashed. Washington D.C.‘s November 2009 index level was the highest at 179.20, indicating that home
prices were still about 79 percent above 2000 levels. New York and Los Angeles followed with November
readings at 173.24 and 169.72 percent, respectively. Conversely, at 72.59, Detroit was the only market
below its 2000 level.

Although the housing market has been in a recession for the past three years, there were some signs that
the bottom had been reached. At the beginning of 2009, sales of existing homes hit a 10-year low while
inventory was at a 20-year high. Both indicators began showing signs of improvement later in the year,
however, housing starts are still reporting historically low levels.

Existing Home Sales Drop Nearly 17 Percent
Sale of existing homes fell 16.7 percent in December to a seasonally adjusted annual rate of 5.45 units
from November's rate of 6.54 million units, but remained 15 percent above December 2008‘s rate of 4.74
million units, according to a Jan. 25 National Association of Realtors news release.

In 2009, there were slightly more than 5.1 million existing home sales, which is 4.9 percent higher than
the 4.9 million sales recorded in 2008.

Lawrence Yun, NAR‘s chief economist, said the data contained no surprises. ―It‘s significant that home
sales remain above year-ago levels, but the market is going through a period of swings driven by the tax
credit,‖ Yun said in the release. ―We‘ll likely have another surge in the spring as homebuyers take
advantage of the extended and expanded tax credit.‖

The sales rate for single-family existing homes fell 16.8 percent in December to a seasonally adjusted
annual rate of 4.79 million units from November‘s figure of 5.76 million, NAR reported, but were 12.7
percent above the 4.25 million units recorded a year ago. Overall, single-family sales increased 5 percent
to slightly more than 4.5 million units in 2009.

Sales of existing condominiums and co-ops fell 15.7 percent to a seasonally adjusted annual rate of
660,000 units in December from November‘s seasonally adjusted annual rate of 780,000 units. However,
the rate was 34.7 percent higher than the 490,000 units reported a year earlier. Overall, condominium
sales rose 4.8 percent to 590,000 units in 2009.

By region, existing home sales in the Northeast dropped 19.5 percent to an annual rate of 910,000 units,
up 21.3 percent from a year ago. The Midwest fell 25.8 percent to an annual pace of 1.15 million units, up
8.5 percent from a year ago. The South dropped 16.3 percent to an annual pace of 2.01 million units, up
15.5 percent from a year ago, while the West declined 4.8 percent to an annual rate of 1.38 million units,
up 15.0 percent from a year ago, according to NAR figures.

30 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
As reported by NAR, first-time buyers accounted for 43 percent of the activity in December, down 8
percent from November. Repeat buyers accounted for 42 percent, up from the 37 percent reported in

Existing home inventory fell 6.6 percent in December to 3.29 million, NAR said. Based on the current
sales pace, there is now a 7.25-month supply of existing homes on the market on a seasonally adjusted
basis, up from November‘s supply of 6.5 months.

NAR reported that median existing home prices for all home types logged in at $178,300 in December, up
1.5 percent from a year ago. It was the first year-over-year gain in median price since August 2007. ―The
median price rose because of an increased number of mid- to upper-priced homes in the sales mix,‖ Yun

The median price for an existing single-family home as of December came in at $177,500, 1.4 percent
higher than a year ago. The median price for an existing condominium as of December logged in at
$183,700, 1 percent higher than a year ago. Overall, the median price for an existing single-family home
was $173,200 in 2009, down 11.9 percent from a year ago, and the median price for an existing
condominium was $176,100, down 16.1 percent from a year ago.

By region, the median price in the Northeast was $241,700, up 3.2 percent from a year ago. The Midwest
came in at $143,200, up 1.8 percent from a year ago. The South logged in at $152,000, down 1 percent
from a year ago, while the West came in $236,000, up 2.7 percent from a year ago.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate
mortgage rose from 4.88 percent in November to 4.93 percent in December, up 0.36 percent from a year

World Bank Raises Outlook for 2010, Concerns for 2011
The world economy is recovering surprisingly fast from the first recession since World War II, but the
World Bank sees a risk of a double-dip slowdown if private demand can't replace public stimulus, The
Wall Street Journal reported.

Releasing its first global economic forecasts since June, the World Bank was more upbeat about this
year's outlook, with the rate of recovery expected to reach 2.7 percent instead of 2 percent. The
contraction in 2009 was also estimated to be more modest than expected, a drop of 2.2 percent instead
of 2.9 percent. The 2011 forecast was left unchanged at 3.2 percent, the Journal reported.

Policymakers are faced with the difficult task of keeping stimulus in place long enough for private demand
to catch up, but not too long so as to create unsustainable debt loads or new asset bubbles. Hans
Timmer, director of the World Bank Prospects Group that prepared the report, said in an interview with
the Journal that it is too soon to consider withdrawing the stimulus.

While the World Bank raised its 2010 forecast for high income countries to 1.8 percent growth from 1.3
percent in June, the 2011 estimate was trimmed to 2.3 percent from 2.4 percent. By contrast, developing
countries are projected to accelerate to 5.2 percent growth this year and 5.8 percent in 2011. That
compares with estimates in June of 4.4 percent growth in 2010 and 5.7 percent in 2011 for that group.

31 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Timmer said the strong rebound in developing economies, which are driving global growth, is due in part
to stimulus programs in countries like China and India aimed at boosting capacity and not just demand.
Still, developing countries will face a much more difficult external environment than before the crisis,
Timmer told the Journal, as tougher regulation and lingering risk aversion in advanced economies push
up the cost of capital and limit liquidity. World Bank said the best way to counter the effects of rising
external borrowing costs is for developing nations to continue to develop their local markets and financial
systems, the Journal reported.

Among advanced country forecasts, the U.S. is expected to grow 2.5 percent this year and 2.7 percent in
2011, while the euro area is expected to expand at a 1 percent pace in 2010 and 1.7 percent next year,
and Japan is seen growing 1.3 percent this year and 1.8 percent in 2011. Among developing countries,
China is expected to grow 9 percent this year and next, with India expanding 7.5 percent in 2010 and 8
percent next year, and Brazil gaining 3.6 percent and 3.9 percent over that period, the Journal reported.

More than 100 New Hotels to Open Nationwide in 2010
Though it may seem unlikely at a time when many hotels around the country are having trouble filling
their rooms, nearly 100 hotels are scheduled to open in major American cities this year, The New York
Times reported Jan. 19.

According to Smith Travel Research, New York leads the charge with 46 new hotels, followed by
Houston, with 30. New hotels are also opening in Atlanta, Boston, Chicago, Dallas, Los Angeles, Miami
and Washington this year. That does not include new hotels opening in the suburbs of these cities, the
Times reported.

As to why so many hotels will open even though the economy and travel remain so slow, Mark Lomanno,
president of Smith Travel Research, told the Times that ―hotel building cycles rarely mesh just right with
economic cycles.‖ He went on to explain that planning a new hotel can take two to four years, and
construction an additional one to four years. Most of the hotels getting ready to open were on the drawing
boards several years ago, when the economy was healthy, demand for rooms was strong and room rates
were rising quickly, the Times reported.

Projections for recovery of the American hotel industry as a whole in 2010 vary greatly. Lomanno said the
industry hit rock bottom a few months ago, and the current buyer‘s market will not last because not a lot
of new hotel rooms will be added from 2011 to 2013, the Times reported.

Appraisal Institute Comments on Foundation’s Financial Reporting
Discussion Questions
The Appraisal Institute has submitted comments to The Appraisal Foundation on its ―Discussion
Questions Regarding the Assessment and Measurement of Control Premiums‖ that were released in late
2009. A ―control premium‖ is the amount that an investor will pay to acquire control of a company,
typically an amount higher than the current market value of the company.

In its comments, the Appraisal Institute stated, ―We are concerned about the development of hypothetical
or arbitrary methodologies for control premium adjustments. ‗Rules of Thumb‘ or other measures should
not be developed and cited as reliable methodologies to assess and measure control premiums.‖

32 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
The Appraisal Institute also cited that the ―Internal Revenue Service recently issued a decision which
requires strong support from market transactions for any discounts or premiums for market control or lack
of control. There are serious penalties for ―participants‖ (including appraisers) who use improper or
unsupported control premium adjustments, as determined by IRS valuation experts.‖

The Appraisal Institute encouraged the Foundation‘s Working Group on Control Premiums to require that
―all adjustments for control value be supported by either observed publicly traded market share prices or
other real and reasonable analyses that would show a benefit or loss from control.‖

To view a copy of the TAF Discussion Questions, visit

To view a copy of the AI Comment Letter, visit

AMC Trade Group Issues ―Standards of Good Practice‖
The Title Appraisal Vendor Management Association on Jan. 8 released its ―Standards of Good Practice
in Appraisal Management,‖ which, according to TAVMA, ―Outlines various operating and business
practices that appraisal AMCs can incorporate into their business models to help ensure that quality
valuations are provided to financial institutions in a timely and useful manner.‖

TAVMA is a trade association for the real estate settlement services industry, and several appraisal
management companies are members.

The TAVMA document addresses several important areas, including recognition that ―licensing or
certification is a minimum qualification for eligibility for an appraisal assignment‖ and that ―the AMC should
also consider an appraiser‘s experience, education, designation, proximity to and familiarity with the
area(s) in which the appraiser proposes to complete appraisals.‖

However, comments received by the Appraisal Institute indicate that the TAVMA document does not
adequately address many areas of concern for appraisers doing work for AMCs. The document lacks
emphasis on the quality of an appraisal report, and fails to address the nagging refrain of ―how quick and
for what price‖ sung by many AMCs. There is also little in the TAVMA document that emphasizes that the
AMC is an agent of the client that will utilize the appraisal report, and as such the AMC should be
compensated separately by the client rather than via retention of a portion of the appraiser fee. Also
unaddressed are best practices relating to disclosure of fees paid by the client to the AMC, and those
paid by the AMC to the appraiser. Lastly, there is nothing in the TAVMA document that encourages AMCs
to charge the appraiser a fee that reflects the actual cost of any administrative services being performed
by the AMC.

―Appraisal quality and appraiser competency are two critical components that remain unaddressed by
many in today‘s market,‖ said Bill Garber, director of government and external relations. ―Both of these
elements should be centerpieces of any best practices document on appraisal management.‖

33 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Because of these and other ongoing concerns, the Appraisal Institute is developing a ―Statement of
Principles‖ regarding appraisal management companies. This will assist appraisers in evaluating the
operating practices of AMCs and will help appraisers evaluate with which AMCs they wish to do business.

To view a copy of the TAVMA document, visit

UN Report Highlights Importance of Competent Valuers in Real Estate
Among the recommendations in a recent United Nations Economic Commission for Europe report is an
underlying emphasis on the importance of competent appraisers and accurate appraisals. The UNECE
issued the report to recommend the policies, principles and guidance countries should use when
developing real estate markets.

According to the December report, a ―reliable real-estate appraisal is essential to purchasing and selling
transactions, access to loans and the definition of equitable tax policies.‖ The report goes on to state that
in order to contribute to the creation of more efficient and developed markets, it is necessary to improve
the reliability of valuation processes. To that end, the UNECE report lists the following as key indicators to
healthy property valuation policies:

    1. Property valuation for tax purposes should be based on transparent asset appraisal criteria
       according to international standards that are implemented at the local/national level.
    2. Property valuation for mortgage or loan-granting purposes should be based on transparent
       criteria, according to international valuation standards that are comprehensible and reproducible
       by third-party valuers working for rating agencies for securitization purposes.
    3. There should be sufficient transparency in data recording for information regarding comparable
       sales transactions to be readily available to all valuers; also, statistical data on the development
       of real estate markets should be determined from the data on transactions and should be
       published on at least an annual basis.
    4. The number and amount of taxes on land and/or transactions in land should not be
       disproportionate to the value of transactions in land which trigger the tax charge.
    5. All market operators should have easy access to all the relevant information required to engage
       in a transaction.

The ―Key Components of Real Estate Markets Framework‖ report, which was developed in concert
between the UNECE, the Working Party on Land Administration and the Real Estate Market Advisory
Group, was created in response to the challenges of the current financial crisis. Valuation was one of 10
principles listed in the report to guide countries in overcoming the effects of the financial crisis.

Jim Amorin, MAI, SRA, past president of the Appraisal Institute, addressed the Real Estate Market
Advisory Group last year, discussing the importance of sound appraisal practices and process to a
healthy real estate market. He also provided comments in relation to the Framework report.

To access the ―Key Components of Real Estate Markets Framework‖ report, visit

Appraisal Institute to Hold SBA Financing Issues Webinar on Feb. 16

34 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
The Appraisal Institute‘s upcoming Webinar – ―Contemporary Appraisal Issues with Small Business
Administration Financing‖ – will present critical information about significant changes occurring to SBA
financing programs. Participants will gain an overview of the fundamentals of the SBA‘s 7a and 504
programs and preview changes that may lie ahead.

The Feb. 16 Webinar will contain information about the unique aspects of SBA financing programs that
affect real estate appraisals, appraisal requirements and concerns of SBA lenders, the complexities of the
SBA‘s standard operating procedure, the challenges of specific SBA requirements, the seven tests to
determine if a property is special purpose, going concern valuation appraisals and the allocation of value
to real estate.

The Webinar will be presented by Steven Herron, MAI, president of Herron Companies, one of the largest
purveyors of SBA appraisals nationwide; Mark Quinn, director of the San Francisco District Office of the
U.S. Small Business Administration; and Marshall Meager, MAI, vice president of the Wells Fargo
RETECHS group, who also served as national director of the SBA group for First Union and Wachovia for
eight years.

The 60-minute Webinar will be presented at 1 p.m. CST on Feb. 16. Cost is $30 for members; $75 for
non-members. For more information and to register, visit

Lodging Starts Moving into Smaller Communities
Joe McInerney, president and chief executive officer of the American Hotel and Lodging Association, said
most major markets are at lodging capacity, and companies are moving to second- and third-tier smaller
cities, the Victoria (Texas) Advocate reported Jan. 13.

The Advocate highlighted the trend in several smaller cities in Texas. A new Best Western hotel will soon
open its doors in Cuero; a Sleep Inn and Suites opened in Gonzales in 2008; and Candlewood Suites
moved to Victoria in 2009. McInerney told the Advocate the trend is for chains to move into areas like

Best Western has always been affiliated with smaller markets, but other brands are catching on, said
Mark Williams, vice president of North American development with Best Western International. According
to data from the Office of the Governor, Economic Development and Tourism, the Victoria metropolitan
statistical area boasted 37 hotels during 2008's third quarter, and that increased to 40 by the same time in
2009, the Advocate reported.

Overall, lodging occupancy is down about eight points and room rates have dropped an average $10,
McInerney told the Advocate. But once the economy recovers, some benefits will come. With little
financing available, there are fewer new sites coming on board, McInerney said, and less competition for
existing hotels, giving them time to recapture some of that lost occupancy and rate, the Advocate

European CRE Investment Climbs More than 40 Percent in 4Q

35 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
According to CB Richard Ellis, more than €25.7 billion ($37 billion U.S.) of property deals in Europe were
sealed in the fourth quarter of 2009, an increase of 42 percent on the previous quarter and double the
levels traded in the first two quarters of the year, Financial Times (London) reported.

This is the highest quarterly trade since Lehman Brothers‘ 2008 collapse and the beginning of the
sharpest point of the property slump. The jump in fourth quarter activity brought total 2009 turnover to
$100.8 billion, still lower than the $174.2 billion in 2008, Financial Times reported.

Almost every European market saw an increase in investment activity in the fourth quarter. The United
Kingdom took by far the largest share of the new investment, with more than a third spent on British
property. Investment in the UK increased by 64 percent in the second half compared with the first six
months of the year. The next largest market was Germany, which accounted for about 15 percent of
investment activity, Financial Times reported.

The strongest growth occurred in central and eastern Europe, an area traditionally seen as higher risk
than more established markets in western Europe, according to Financial Times.

Foreign Investors Being Selective in U.S. Properties
Foreign investors are looking for opportunistic U.S. commercial real estate deals, where the price is right
and the property is high quality. Yet, they are finding them hard to come by, according to Real Estate
Investment Trust magazine.

According to Real Capital Analytics Inc., foreign investors had purchased about $2 billion in commercial
properties through Sept. 30, 2009, well below the $12 billion in 2008 and $33 billion in 2007, REIT
magazine reported.

But without a doubt, foreign investors are seizing select opportunities. German investors have led the
way, representing about 40 percent of the value of properties purchased in 2009, according to RCA.
Allianz, a German-based insurer, purchased a 50 percent stake in Boston‘s One Beacon Square from
Beacon Capital, with the property valued at $508 million. DekaBank Group‘s asset management division
purchased 1999 K Street, a relatively new office building in Washington, D.C., that is fully leased, for
$208 million, REIT magazine reported.

While Germany represents a larger piece of the foreign investment, buyers of years past, such as Ireland
and Australia, are now net sellers, according to research by RCA. Similarly, the United Kingdom, which
bought up $3 billion in commercial properties in 2007, had only closed one deal through Sept. 30, 2009, a
$155 million joint-venture transaction between U.K.-based Prime Commercial Properties and Cedar
Shopping Centers Inc., a REIT based in Port Washington, N.Y., REIT magazine reported.

Meanwhile, the share of foreign capital inflows from Asian investors has increased. Asian money
represented 20 percent of all foreign property investments in 2009, up from 8 percent in 2008, according
to RCA. Although Japan had been absent in 2009 as of Sept. 30, investors from South Korea, Hong Kong
and China had stepped in, REIT magazine reported.

London Passes Washington as Best City for Foreign CRE Investors; U.S.
Still Top Nation

36 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
According to a recent survey by the Association of Foreign Investors in Real Estate, London surged
ahead of Washington, D.C., and New York as the favorite destination for commercial real estate
investment, The New York Times reported.

London's score was 31 points higher than second-place Washington and 40 points ahead of third-place
New York. Last year, London was in second place, four points behind Washington and only two ahead of
New York. Investors believe that commercial real estate prices in London already have bottomed out.
Because of differences in accounting practices, prices in the U.S. have not, the Times reported.

Overall, the United States remained the country selected as the "most stable and secure real estate
investment environment," although only 44 percent of the respondents said so. It was the first time the
United State fell below 50 percent in the survey. That's down from 53 percent in 2008 and 57 percent in
2007, the Times reported.

Two-thirds of the respondents said they planned to raise their U.S. investment in 2010, increasing equity
investment by 62 percent and debt investment by 83 percent over 2009 levels. Among U.S. cities, San
Francisco came in a distant third behind Washington and New York. Boston made significant headway
into fourth place, with Los Angeles falling one spot into fifth place, the Times reported.

Survey respondents said they favored investing in multi-family real estate as their preferred property type
followed by office, industrial, retail and hotel properties trailing significantly. Half the survey respondents
said they expect the U.S. commercial real estate market recovery by or before the fourth quarter, six
months later than they projected in AFIRE's mid-year 2009 survey, the Times reported.

Respondents said their top favorite emerging markets are China, Brazil, India, Mexico and Turkey. Brazil
and India, which were the first- and second-ranked emerging markets in the 2009 survey, each received
half the votes of China, the Times reported.

Architecture Billings Index: Negligible Increase in December
The Architecture Billings Index inched up less than one point in December, logging in at 43.4, after it fell
three points in November. Scores lower than 50 represent declining conditions, while those greater than
50 indicate an industry-wide increase in billings.

The index, released by the American Institute of Architects, is an economic indicator of construction
activity that shows a nine- to 12-month lag time between architecture billings and non-residential
construction spending.

―The main impediment to an economic turnaround for the design and construction industry remains frozen
credit markets. We continue to hear that there are numerous viable projects out there awaiting financing,‖
AIA Chief Economist Kermit Baker, Ph.D, said in a Jan. 20 news release. ―And the longer this situation
persists, the more dire the news for the architecture profession which is struggling at unprecedented

The regional averages in December were 43.2 for the South, 48.6 for the Northeast, 46.6 for the Midwest
and 40 for the West. The sector index breakdown in December included mixed practice at 38.1,

37 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
institutional at 44.2, multi-family residential at 51 and commercial/industrial at 42.7. New project inquiries
in December came in at 55.3, down from November‘s rating of 58.5.

The Architecture Billings Index is derived from a monthly ―Work-on-the-Boards‖ survey and produced by
the AIA Economics and Market Research Group. For more information, visit www.aia.org.

Journal of European Real Estate Research Issues Call for Papers
The editorial team of the Journal of European Real Estate Research has issued a general call for papers
for submission. The Journal, the official publication of the European Real Estate Society, aims to provide
a European forum for the interchange of information and ideas relating to commercial and residential

The journal publishes peer-reviewed papers ranging from commercial finance and investment to subjects
as diverse as housing and residential development. Topics include but are not limited to:

        European real estate
        REITs and financial derivatives
        housing and residential markets
        indirect property investment
        cross-border portfolio diversification
        comparative market analysis
        banking and valuation
        analytical techniques and applications in practice
        sustainability and investment value

Articles should be between 3,000 and 5,000 words in length. Papers must apply to, or be based on data
from, Europe. Submissions to the Journal of European Real Estate Research are made using
ScholarOne Manuscripts at http://mc.manuscriptcentral.com/jerer

For more information, and to access author guidelines, please visit www.emeraldinsight.com/jerer.htm or
contact Emily Hemus, Assistant Publisher, at ehemus@emeraldinsight.com or the editor, Stanley
McGreal, ws.mcgreal@ulster.ac.uk.

MISMO Releases Commercial Property Rent Roll, Operating Standards
The Mortgage Industry Standards and Maintenance Organization has released two new standards that, if
adopted, would increase the amount of information available on all types of commercial real estate
collateral, according to a Jan. 13 report by CommercialRealEstateDirect.com.

The standards also would standardize the way property operating statement information is provided.
MISMO is the leading technology standards setter for the mortgage industry,

Rent Roll and Operating Statement v. 2.0.1 would require mortgage servicers to include information on all
property leases associated with commercial mortgage-backed securities, including tenant names, rental
amounts, lease maturity dates and the properties vacancy rates, Commercial Real Estate Direct reported.

38 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
The new standards would increase transparency, standardize data structures and provide easy access to
rent rolls and operating statements, which would allow for more timely and accurate valuations, MISMO
said in a Jan. 13 news release. However, servicers oppose such requirements, citing the costs involved in
implementing the standards, while property owners fear that the information could jeopardize their real
estate, Commercial Real Estate Direct reported.

The standards, released Jan. 6 for a 30-day Intellectual Property Rights disclosure period, would need to
be approved by the Commercial Mortgage Securities Association before being adopted, Commercial Real
Estate Direct reported. To view the standards, visit MISMO‘s Web site at

MBA: Mortgage Apps Inch Upward
Loan refinance applications rose slightly in the week ending Jan. 15, according to a Jan. 20 news release
from the Mortgage Bankers Association.

The group's weekly Mortgage Application Survey showed that the Market Composite Index, which
measures mortgage loan application activity, increased 9.1 percent from the week prior, which had
increased 14.3 percent from the previous week, on a seasonally adjusted basis. The index‘s four-week
moving average fell 1 percent on a seasonally adjusted basis.

The survey found that mortgage refinancing grew in January. The Refinance Index increased 10.7
percent from the week of Jan. 8, which had already increased 21.8 percent from the previous week, on a
seasonally adjusted basis. Refinancing made up 71.7 percent of applications, up from 71.5 percent the
previous week, while adjustable-rate loan activity also inched up to 4.1 percent, compared to 4 percent
the week prior. The four-week moving average for this index fell 2.4 percent on a seasonally adjusted

The news release reported the Purchase Index rose 4.4 percent on a seasonally adjusted basis. On a
non-adjusted basis, the index jumped 9.8 percent from the previous week, but remained 19.1 percent
down from the same period a year ago. The four-week moving average for this index rose 1.1 percent on
a seasonally adjusted basis.

"MBA projects that mortgage originations will decrease from about $2.1 trillion in 2009 to about $1.3
trillion in 2010. MBA forecasts that purchase originations will increase from $742 billion in 2009 to $776
billion in 2010, while refinance originations are projected to fall from $1.372 trillion to $502 billion," the
MBA said in its January 2010 Mortgage Finance Commentary.

Meanwhile, the average rate on a 30-year fixed loan decreased to 5 percent from the prior week‘s 5.13
percent, while points, including origination fees, dropped from 1.17 to 1.05 for 80 percent loan-to-value
ratio loans, the MBA reported. The average rate on a 15-year fixed loan dropped from 4.45 percent to
4.33 percent, while points, including origination fees, increased from 1.04 to 1.19. The average rate on a
one-year adjustable rate mortgage decreased from 6.83 percent to 6.72 percent, still higher than the 6.42
percent it started the year at, while points, including origination fees, remained unchanged at 0.31.

The MBA anticipates that mortgage rates will increase by about a percentage point by the end of 2010 to
6.1 percent because of widening mortgage spreads and an increase in Treasury rates.

39 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Appraisal Organizations Encourage Interior to Hire Chief Appraiser
In response to a report issued by the Inspector General of the U.S. Department of the Interior, a coalition
representing 35,000 real estate appraisers has called on the Interior Department to follow its own
Inspector General‘s direction to hire a chief appraiser for its Appraisal Services Directorate.

Led by the Appraisal Institute, the coalition is asking Interior Secretary Ken Salazar to select a ―strong
and competent chief appraiser … to lead further change within ASD and to provide a single point of
contact, offer sound judgment and have final decision authority on appraisal matters.‖

In its Jan.7 letter to Salazar, the Appraisal Institute – along with the American Society of Appraisers,
American Society of Farm Managers and Rural Appraisers, and the National Association of Independent
Fee Appraisers – wrote: ―Our organizations believe appraisal issues are extremely complex, and the
importance of the appraisal function must be elevated within the department. It is critical for the appraisal
function to be led by a technically competent appraiser.‖

The Inspector General of the Interior‘s report had found that the ASD, which was created to oversee
billions of dollars of land appraisals, is weak and unable to function efficiently due to undermining by other
bureaus and a lack of stable leadership. The ASD has not had a permanent chief appraiser for more than
three years.

―Unfortunately, this lack of consistent, competent and empowered leadership remains to date as the
department decided not to proceed with the selection of a new ASD chief appraiser in June 2009,‖ the
Inspector General‘s report stated. ―Without the presence of a strong chief appraiser as lead, ASD cannot
become a strong appraisal organization and cannot work to enforce policy directives.‖

In their letter, the appraiser organizations acknowledged that there are an ample number of qualified
individuals available for the chief appraiser position, especially among the ranks of the nation‘s
professional appraiser organizations.

To view the appraiser organizations‘ Jan. 7 letter to the Interior Department, visit

To review the Inspector General‘s Dec. 23 report, visit

2010 Legislative & Regulatory Update Available
A new audio-video presentation that outlines many of the public policy issues that the Appraisal Institute
is currently working on in Washington, D.C., and in state capitols is now available for download via the
Appraisal Institute‘s Web site.

Included in this approximately 45-minute presentation, offered in .wmv format, are updates on appraisal
modernization efforts currently being considered by the U.S. Congress, the status of the Home Valuation
Code of Conduct and new requirements applicable to appraisal management companies providing
services to lenders within the Federal Housing Administration mortgage insurance programs.

40 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Other public policy updates outlined in the presentation include proposed changes to the appraisal
threshold for programs administered by the U.S. Small Business Administration, and major forthcoming
changes to the federal bank regulatory agencies‘ Interagency Appraisal & Evaluation Guidelines.

The presentation also updates the activities of the Appraisal Institute in the states, including efforts to
enact regulatory programs for appraisal management companies and to pass strong appraiser
independence requirements. Also discussed are new legislative and regulatory threats that would expand
the ability of a real estate agent or broker to perform broker price opinions outside of the real estate listing
and sales process, including as part of a real estate finance transaction.

Appraisal Institute members can download a copy of the presentation for free by clicking on
www.appraisalinstitute.org/store/p-181-legislative-and-regulatory-update-january-2010.aspx. The price for
non-members is $49.

Inside the Beltway: AI Fights for Professional Appraisers in D.C., State
Capitols in 2010
With the U.S. Congress ready to reconvene Jan. 20 and nearly half of the states having opened their
2010 sessions, this year is sure to bring many policy changes impacting the professional appraiser
community at both the federal and state level, according to the Appraisal Institute‘s sources.

An extremely important piece of legislation, H.R. 4173, The Wall Street Reform and Consumer Protection
Act of 2009, is currently pending in the U.S. Senate, having passed the House in late 2009. While H.R.
4173 is a broad piece of legislation that has the intent of modernizing the overall financial regulatory
system, it contains many favorable appraisal provisions. Included in the bill are provisions that will
modernize Title XI of the Financial Institutions Reform Recovery and Enforcement Act, including:
enhanced oversight authority for the Appraisal Subcommittee, additional enforcement resources for state
appraiser boards and a national appraisal independence standard. The bill also would require the
separation of appraisal fees from appraisal administration fees for appraisal management companies,
would require the registration and regulation of AMCs and would limit the use of broker price opinions in
loan origination, among other things.

Also included in H.R. 4173 is a provision that requires a new federal agency – the Consumer Financial
Protection Agency – to conduct a ―negotiated rulemaking‖ process to establish appraisal independence
standards for residential mortgages across federal agencies. As envisioned, this new rule would be
developed by federal agencies with input and involvement of stakeholder organizations such as the
Appraisal Institute, and could authorize mortgage broker involvement in appraisal ordering where
meaningful rules, oversight and enforcement exist. Further, the CFPA-developed rule would require
lenders and appraisal management companies to compensate appraisers at ―customary and reasonable‖

The Appraisal Institute is leading the effort to include the appraisal provisions of H.R. 4173 in the Senate
deliberations of the regulatory reform legislation, or in any new legislation that comes out of a House-
Senate Conference Committee. Stay tuned for action alerts, as movement is possible early this session.

41 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Other legislation pending before the U.S. Congress of concern to the Appraisal Institute is H.R. 3854, The
Small Business Financing and Investment Act, which would reauthorize the programs of the Small
Business Administration. Included in this legislation is a provision that would raise the appraisal threshold
within the SBA programs from $250,000 to $400,000. The Appraisal Institute continues to fight for the
removal of this provision given the causes of the current financial crisis and the necessity of curtailing
loan defaults that have skyrocketed in the SBA program.

In addition, H.R. 2454, The American Clean Energy and Security Act or ―Cap and Trade‖ bill – which
passed the U.S. House in June 2009 – contains provisions that would require appraisers to complete
qualifying and continuing education requirements regarding the appraisal of energy efficient features for
residential and commercial properties. The Appraisal Institute continues to argue that these new
requirements are redundant and that policymakers should focus their attention on structural and systemic
problems in appraisal procurement and stressing the importance of using qualified and competent
appraisers instead. Further, to the degree that some appraisers may not be reporting energy efficient
features or making proper adjustments in appraisals, those are more importantly matters of enforcement.
Poor performing appraiser should be referred to the appropriate state regulatory authority and/or
professional appraisal organization for enforcement and/or counseling.

In addition to advancing appraisal modernization and other legislation within the U.S. Congress, the
Appraisal Institute continues to work on many issues within the federal regulatory agencies. In 2010, it will
work to build upon the success achieved in 2009 with the Federal Housing Administration to correct its
policies regarding appraisal management companies, requiring payment of customary and reasonable
fees and separation of appraisal and administrative or management fees (Mortgagee Letter 09-28). The
Appraisal Institute also continues to fight efforts to expand the use of broker price opinions for purposes
of real estate finance transactions, at both the state and federal level.

Within the states, Appraisal Institute chapters are busy on several fronts, including advancement of new
regulatory requirements applicable to appraisal management companies. To date, six states have
enacted new state registration requirements based largely on a model bill developed by the Appraisal
Institute and its partner organizations. It is likely that as many as 20 states will consider AMC legislation in

A strong defense is also being mounted against state legislative or regulatory proposals that would
expand the ability of real estate agents and brokers to offer broker price opinions, or similar products, as
valuation tools outside of the real estate listing and sales process. 2010 has already seen legislation
proposed in one state (Nebraska) that would allow agents and brokers to perform BPOs for any mortgage
finance transaction for which an appraisal is not required under federal law. The Appraisal Institute
intends to vehemently fight this proposal in Nebraska (see related story below), and any similar proposals
in other states. Further, several chapters are advancing mandatory licensing initiatives to shore up
regulatory gaps in appraiser licensing requirements.

Finally, the Appraisal Institute continues to monitor and respond to other important state legislative and
regulatory issues, including the enactment of strong appraiser independence requirements and new
proposals to require that appraisers satisfy qualifying and continuing education requirements related to
the valuation of energy efficient features within ―green‖ buildings.

42 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
For more information on each of the proposals being advanced by the Appraisal Institute, visit
www.appraisalinstitute.org/store/p-181-legislative-and-regulatory-update-january-2010.aspx to view a 45-
minute presentation titled, ―January, 2010 Legislative & Regulatory Update‖. The update is available for
free to members, and is available for $49 to non-members.

AI Releases Dictionary; Includes Online Component
The Appraisal Institute‘s highly anticipated and long-awaited ―Dictionary of Real Estate Appraisal,‖ fifth
edition, is now available. This new edition is a unique text created for and by real estate appraisers.

Over the course of a year-long development process, dozens of dedicated real estate professionals
debated and discussed the language of real estate to create this new dictionary with more than 5,000
21st century terms and definitions.

In addition to the appraisal-related entries in the main body of the dictionary, the new edition includes
hundreds of additional entries in seven freestanding glossaries that will help real estate appraisers
communicate with professionals in disciplines such as business valuation, statistics, architecture,
construction, agriculture and the environment.

Dictionary purchasers will also have access to a convenient online version of the dictionary. Using the
online dictionary, they can search all the sections of the dictionary for a specific term, browse the list of
terms alphabetically, browse individual sections of the dictionary addenda, and copy and paste a
definition from the online dictionary directly into their own document.

The price is $70 for members and $85 for non-members, plus shipping and handling. For more
information and to order, visit www.appraisalinstitute.org/REdictionary.

The Appraisal Institute also is offering two discounted dictionary packages: the dictionary and ―The
Appraisal of Real Estate,‖ 13th edition, at $125 for members and $150 for non-members, plus shipping
and handling; and the dictionary with ―An Introduction to Statistics for Appraisers‖ at $105 for members
and $125 for non-members, plus shipping and handling. For more information and to order, visit

Commercial Delinquencies End 2009 above 6 Percent
If the end of 2009 is any indication for the short-term future of commercial real estate loans, then 2010 is
in trouble. The percentage of loans 30 days or more delinquent rose to 6.07 percent in December from
5.65 percent a month earlier, according to commercial-mortgage data provider Trepp LLC and reported
by Dow Jones Newswires on Jan. 7.

December marks the highest delinquency rate ever recorded since the advent of commercial mortgage-
backed securities and casts a long shadow on the nearly $40 billion of commercial-mortgage-backed
bonds set to come due this year. According to Dow Jones, analysts at Jefferies & Co. are predicting that
by year-end the delinquency rates on loans for hotels, shopping malls and other commercial properties
could rise to between 9 percent and 14 percent, as consumer spending remains stifled by high
unemployment and depressed housing markets.

43 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
But there is hope for 2010. The outlook is not as grim as it was during the last big economic implosion for
commercial real estate in the late 1980s and early 1990s. Also, commercial mortgage-backed securities
are easier to renegotiate than residential mortgages because both the borrower and the lender have
leeway to renegotiate terms through a third party. According to Dow Jones, this factor should help
commercial mortgages avoid the collapse suffered by residential mortgage-backed securities over the last
two years.

Homebuilding, Lodging Sectors Lead Rebound; CRE Returns Not Expected
until 2011
Industry analysts expect commercial real estate fundamentals to remain weak and liquidity tight in 2010,
according to a CoStar Group report released Jan. 6. However, the real estate information provider gave
an optimistic outlook for the homebuilding and lodging sectors.

"The commercial real estate industry is a disaster waiting to happen," Andy Bogdanoff, founder and chair
of Remington Financial Group, told industry representatives at a recent meeting. "With U.S. banks in a
deep and continuing liquidity crisis and with $1.2 trillion in commercial debt due to mature by 2013,
thousands of real estate owners and developers across the country will soon find themselves between a
rock and a hard place when their loans mature."

Respondents of Turnaround Management Association's distressed industries forecast, which was
released Dec. 31, agree with CoStar. Nearly half of Turnaround‘s participants expect that sustained
improvement is unlikely until at least third quarter 2010, with 75 percent indicating that commercial real
estate will fare the worst, CoStar said.

While Fitch Ratings‘ outlook for homebuilding in 2010 remains negative, there have been improvements
in the real estate market. The ratings agency said that housing data, including consumer and builder
sentiment, sales, starts, inventory and pricing, have been showing signs of improvement, CoStar
reported. However, Fitch noted that the early stages of this expansion may be muted.

According to PKF Hospitality Research, the lodging sector‘s pace of recovery has accelerated,
suggesting that the industry‘s recovery will arrive a quarter earlier than the firm‘s original projection,
CoStar said. PKF-HR revised its 2010 lodging demand forecast from 1.6 percent to 1.9 percent and said
the industry should post quarterly year-over-year increases during first quarter 2010.

Meanwhile, CB Richard Ellis Group Inc. warns that commercial real estate investors may not see returns
grow until 2011, Reuters reported. "The worst is behind us because [values] won't be dropping as fast,"
Serguei Chervachidze, an economist at CBRE, told Reuters. "That translates into total returns as well."

Based on the National Council of Real Estate Investment Fiduciaries Property Index, CBRE said that
returns should remain negative in 2010 and then increase to 3 percent to 11 percent in 2011, reported
Reuters. Overall, returns have fallen by double digits since peaking in 2007. Although CBRE expects
capitalization rates, which move inversely to prices, to increase up to 1.0 percentage point by mid-2011,
the firm sees rates and values returning to 2005/2006 levels by 2012.

Pending Home Sales Fall after Nine Consecutive Monthly Increases

44 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Pending home sales in November fell for the first time after nine consecutive months of increases,
according to a Jan. 5 National Association of Realtors‘ news release. The Pending Home Sales Index fell
16 percent to 96 from October‘s revised figure of 114.3. However, the index is 15.5 percent higher than
the November 2008 figure of 83.1, according to the release.

NAR chief economist Lawrence Yun said the drop in the index did not come as a surprise. ―It will be at
least early spring before we see notable gains in sales activity as homebuyers respond to the recently
extended and expanded tax credit,‖ Yun said in the news release. ―The fact that pending home sales are
comfortably above year-ago levels shows the market has gained sufficient momentum on its own.‖

By region, November‘s pending sales index fell 25.7 percent in the Northeast to 74.4, up 14.7 percent
from a year ago, NAR reported. The Midwest fell 25.7 percent to 82.0, up 9.2 percent from a year ago;
the South fell 15.0 percent to 97.8, up 14.7 percent from a year ago; and the West dropped 2.7 percent to
124.6, up 21.4 percent from a year ago.

Yun said in the news release that 2 million homebuyers have already benefited from the government‘s tax
credit and projects that an additional 900,000 will qualify for the program. Yun expects 1.5 million repeat
buyers to take advantage of the program as well. However, he warned that mortgage interest rates will
likely increase in 2010.

In related news, new home inventory dropped in November to 234,000 units from October‘s non-
seasonally adjusted figure of 241,000 units, according to a Jan. 8 Hanley Wood Market Intelligence
report. On a seasonally adjust basis, inventory declined in November for the 31 consecutive month to
235,000 units.

Mortgage rates fell from the previous week to 5.09 percent in Freddie Mac‘s Jan. 7 Primary Mortgage
Market Survey after steady increases since early December, Hanley Wood said. In its weekly index
ending Jan. 1, the Mortgage Bankers Association reported the seasonally adjusted purchase index
increased 3.6 percent from the previous week — the first weekly gain in the past month — but remained
down 36.33 percent year-over-year.

AIA Construction Forecast: Continued Decrease in 2010; Modest Pickup
Possible in 2011
Nonresidential construction spending is expected to fall in 2010 by 13.4 percent, while a modest increase
of 1.8 percent, adjusting for inflation, is forecasted in 2011, reported the American Institute of Architects in
a Jan. 6 news release. According to its latest Consensus Construction Forecast, which forecasts
construction spending in the U.S., the trade group expects the first half of 2011 to remain weak before
picking up during the remaining two quarters.

―When economies emerge from this prolonged recession, recovery for nonresidential construction activity
typically takes longer,‖ AIA Chief Economist Kermit Baker, Ph.D, said in the news release. ―Hardest hit
will be the commercial and industrial sectors with projected declines in the 20 percent range for 2010 in
most building categories. Led by the healthcare market, the institutional sector will see far less dramatic
declines and should help lead the construction industry into recovery in 2011.‖

45 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
By sector, spending on industrial projects is expected to fall 24.3 percent in 2010, followed by an
additional 7.8 percent in 2011, while the hotel sector is expected to fall 23.5 percent in 2010, followed by
a 5.4 percent increase in 2011, according to the news release. Office building is expected to fall 18.6
percent in 2010, followed by an 11.8 percent increase in 2011, and retail is expected to fall 17.2 percent
in 2010, followed by a 3.2 percent increase in 2011.

Spending on institutional construction projects is expected to fare slightly better, the news release
indicated. The amusement/recreation sector is expected to fall 12.9 percent in 2010, followed by a 4.4
percent increase in 2011, while religious building is expected to fall 5.8 percent in 2010, followed by a 2.0
percent increase in 2011. Education is expected to fall 5.6 percent in 2010, followed by a 6.0 percent
increase in 2011, while health care is expected to fall 0.3 percent in 2010, followed by a 2.5 percent
increase in 2011.

With an increase of 0.8 percent, public safety is the only sector expected to see growth in construction
spending in 2010, however, the sector may see a 0.1 percent fall in 2011.

Vacancies across CRE Segments Spike, Rental Rates Cut
While vacancies across all commercial real estate sectors mount, asking rents have been falling. From
third quarter 2008 to third quarter 2009, the vacancy rate for apartments rose from 6.5 percent to 8.4
percent; industrial properties climbed from 9.8 percent to 13 percent; office properties increased from 16
percent to 19.4 percent; and retail jumped from 12.9 percent to 18.6 percent, according to the Mortgage
Bankers Association‘s Commercial Real Estate/Multi-family Finance Quarterly Data Book released Dec.

As vacancies rise, the MBA report showed that asking rents have been plummeting – by 6 percent for
apartments, 9 percent for industrial properties, 9 percent for office properties and 8 percent for retail
properties. Reis Inc. said on Jan. 7 that apartment asking rents from 2008 to 2009 experienced the
biggest yearly decline since it began keeping records in 1980, Bloomberg reported.

Property sales and building activity remains depressed. Commercial property sales were 72 percent lower
in 2009 than in 2008. Nationwide, construction was started on only 5,000 units in multi-housing in
October, the lowest level ever recorded (since January 1959), according to the MBA report.

In the apartment sector, many of the developments that came onto the market in 2009 had secured
financing before credit markets seized up. The credit crunch has frozen most new development, which
means that new apartment completions should fall by half in 2011. That's one potential light at the end of
the tunnel for apartment owners: The limited new supply should give them the ability to boost rents
quickly whenever job growth returns, The Wall Street Journal reported.

The MBA report pointed out that the economy, as measured by gross domestic product, began to grow
during the third quarter, which may initiate the countdown on the real estate lag. But given the depth of
the recent downturn, the commercial property market has a significant amount of ground to make up

To download the full MBA report, visit www.mortgagebankers.org/ThirdQuarter2009Download.htm.

46 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Shopping Mall Vacancies Hit 18-Year High; Retail May Take Until Late 2012
to Recover
According to real estate research firm Reis Inc., vacancies at U.S. strip malls hit an 18-year high in the
fourth quarter, and the vacancy rate for large regional malls reached the highest in at least 10 years,
Reuters reported.

In a report released Jan. 6, Reis economist Ryan Severino said that strip malls had a vacancy rate of
10.6 percent in the fourth quarter, surpassing the high set in 1991. For the first time in Reis' 29 years of
tracking the fundamentals of strip malls, effective rent in all of the 77 markets it covers declined, Reuters

Asking rent at U.S. strip malls fell 0.5 percent from the third quarter to $19.12 per square foot in the fourth
quarter, or down 2.05 percent for the year. Factoring in months of free rent and the landlord's portion of
the cost for interiors, effective rent fell 0.8 percent to $16.75 per square foot, wiping out rent gains over
the past nearly four years, Reuters reported.

The vacancy rate at large regional malls rose to 8.8 percent from 8.6 percent the third quarter. It was the
highest vacancy rate for U.S. malls since Reis began tracking mall performance. Asking rent fell 0.4
percent to $39.03 per square foot, the lowest since the second quarter 2006, Reuters reported.

Reis said that continuing high unemployment and inconsistent consumer spending will weigh heavily on
retail properties for at least another 18 to 24 months. It expects the vacancy rate at neighborhood and
community centers to keep rising, and rents to continue falling through 2011, Reuters reported.

Experts Unsure if Hotels Can Sustain Rebound
Stocks of real estate investment trusts that own hotels staged a sharp rebound late last year, outpacing
gains of all other classes of commercial property stocks for 2009 as investors wager that hoteliers are
poised to start a recovery in 2010, according to a Jan. 6 Wall Street Journal article.

The Dow Jones Equity Hotel REIT Index of 13 stocks rose 66 percent on a total return basis in 2009,
following a 59 percent decline in 2008. Hotel REITs' rally last year handily outpaced the next-biggest
gainers, manufactured-home REITs and hybrid REITs, which both gained 44 percent, the Journal

Confident investors note that hotels, which can empty out or fill up overnight, typically bounce back more
quickly than other commercial real estate in an economic recovery. Other factors boosting hotel-REIT
stocks include: REITs with manageable debt loads such as Host Hotels & Resorts Inc. and cash-flush
new arrivals such as Pebblebrook Hotel Trust figure to snap up prime properties on the cheap this year
and next. Confident investors note that hotels' steep declines in occupancy and revenue last year now are
shrinking, and growth in demand for rooms should outpace waning new supply in the U.S. by the middle
of 2010, the Journal reported.

Less enthusiastic observers caution that hotel occupancy and revenue won't bounce back as quickly this
time as they did after previous downturns because the overall recovery is predicted to be long and slow.
In addition, hotels have a long way to climb to get back to their 2007 heights. According to Smith Travel

47 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Research, U.S. hotel occupancies in 2009 were 8.3 percentage points lower than in 2007, and revenue
per available room fell 18 percent in that span, the Journal reported.

PKF Hospitality Research LCC predicts U.S. hotel occupancies will climb slowly from 55 percent at the
end of 2009 to 57.2 percent by the end of 2011. It foresees revenue per available room rising by 5
percent in that span to $56.12, the Journal reported.

Two Large Hotel-Related CRE Deals in the Works Show Market Activity
Big name investors have swooped in on two high-profile commercial real-estate assets in a sign that
activity is returning to the investment property market. And both of the investors are using a strategy that
is expected to become increasingly popular: going after distressed commercial property assets by buying
debt or paying off creditors at a steep discount, The Wall Street Journal reported.

Private equity firm CIM Group has teamed up with New York developer Harry Macklowe to help him
regain control of the Drake Hotel, regarded as one of the most valuable vacant lots in the world,
according to sources. The site of the hotel has been under the cloud of foreclosure for about five months
after the collapse of Macklowe's empire. The partnership has signed a deal to pay off about 10 creditors
that hold the $510 million loan the developer took out primarily to acquire the site. Sources said that the
creditors are getting paid as much as 90 cents on the dollar and as little as zero, the Journal reported.

In the other opportunistic move, private equity giant Blackstone Group LP is making a grab for Highland
Hospitality Corp., a real estate investment trust that owns 27 hotels. Highland has been struggling to
restructure its $1.7 billion debt load amid the worst downturn for the hotel industry in decades. Blackstone
is aiming to buy a chunk of so-called mezzanine debt with a face value of about $320 million from
Wachovia Corp. Sources said that piece of debt, in a key position between the equity and the first
mortgage debt backed by the hotels, gives Blackstone a significant say in how any restructuring unfolds,
the Journal reported.

But risks still linger. Blackstone's effort to control Highland by buying mezzanine debt hinges on its
expectation that the chain is still worth more than its $900 million in senior debt. If that calculation is
wrong, Highland's senior creditors will likely wind up controlling the properties, the Journal reported.

If the Drake deal closes in two weeks as expected, CIM and Macklowe will own what may be the world's
most valuable rubble-strewn lot. Once the site of the Drake Hotel, which was built in 1926, Macklowe
bought and then demolished the hotel in 2007, intending to build a major office tower atop a base of high-
end stores, the Journal reported.

WSJ Outlines Top Three Domestic CRE Deals of 2009
With lenders hesitant to extend credit and property values plummeting, real estate transactions in 2009
were sparse. However, The Wall Street Journal compiled the year‘s top three from its past ―Deal of the
Week‖ columns.

The Sears Tower in Chicago served up an example of just how far the pendulum has swung in the
tenant's favor. In March, Willis Group Holdings Ltd. announced that the name of North America's tallest
building would be changed to Willis Tower. The change was a condition of Willis signing a 15-year
agreement to lease about 140,000 square feet of office space in the 3.8 million square-foot building. Willis

48 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
agreed to pay $14.50 a square foot annually, at the low end of typical rental rates in the building. At the
time of the lease signing, net rents for existing Class A office buildings in the city's West Loop submarket
had fallen to about $21 a square foot from about $25 at the end of 2007. Willis Tower is about 90 percent
leased, the Journal reported.

The $42.1 million sale of the Dominion Tower, New Orleans Centre Mall and a parking structure next to
New Orleans's Superdome almost didn't happen. Hertz Investment Group acquired the three properties in
2003 for $36 million. After the buildings were damaged by Hurricane Katrina, Hertz struggled to sell or fill
them. Last year, the state-appointed agency charged with running the Superdome let an option to buy the
properties for $45 million lapse. It was the property's location near the Superdome that helped trump the
financial crisis. A company wholly owned by the family of Tom Benson, owner of the National Football
League's New Orleans Saints, purchased the complex in September and will lease most of the office
building back to the state of Louisiana. The office building gets a new name: Benson Tower, the Journal

One of the most watched office sale sagas in Los Angeles fizzled out. Macquarie Office Trust, an
Australian real-estate investment trust, took One California Plaza off the market the week of Dec. 20,
according to a person familiar with the property. The decision comes about one year after the 992,000
square-foot glass-clad office building was put on the block. The subdued response of bidders likely led in
part to the decision. In 2006, Macquarie purchased an 80 percent stake in the building in a deal that
valued the property at $325 million. Before the 42-story building was taken off the market, it was in
negotiations with at least one potential buyer for a price in the $220 million range, the Journal reported.

Study: Green Building Could Comprise 50 Percent of Commercial Market
by 2015
Venture capital firm Good Energies Inc.‘s latest study indicates that about half of all non-residential
buildings will be green by 2015, up from today‘s figure of 15 percent, reports The Wall Street Journal.

Leading the move are lower costs associated with implementing green features, according to the study,
the findings of which were relayed in Greening Our Built World, by Greg Kats, a senior director at Good
Energies. The book was released in November.

―We now have a large enough, detailed enough body of data to say that the presumption is ‗why wouldn‘t
you do a green building?‘‖ Kats told the Journal. ―It‘s very cost-effective and it reduces risk in a number of
areas including health, exposure to energy and water prices and obsolescence.‖

The study found that costs associated with non-residential green building projects are roughly 2 percent
higher than projects implementing traditional techniques, which differs from the 17 percent premium
perceived by the public based on the findings of a 2007 World Business Council survey, the Journal said.
It is also lower than the 15 percent premium that construction of a net-zero home compared to a
traditional project, according to a story in the Dec. 24 Journal (and relayed in the Jan. 6 Appraiser News

Kats also noted that green buildings tend to recoup costs in about three to four years. However, over a
20-year period, the recoup rate increases to four- to six-times the investment cost.

49 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
In a separate study, McGraw-Hill reported last October that the number of retrofitted green buildings
could increase to 20 percent to 30 percent in the next five years, generating $10.1 billion to $15.1 billion
in market opportunities for major projects, the Journal reported. Currently, buildings with green retrofits
make up 5 percent to 9 percent of the market, which creates $2.1 billion to $3.7 billion annually in project

Eric Glover, a green building market analyst for Canaccord Adams Inc., agrees with Kats. ―One key area
of growth is the green retrofit market,‖ Glover told the Journal. ―I think it‘s possible that if green
retrofits/renovations represent 20 percent to 25 percent of the market by value by 2015, new green
building construction could represent the other 20 percent to 30 percent.‖

Appraisal Organizations Call on Federal Reserve to Suspend Proposed
The Federal Reserve has proposed a new rule addressing Truth in Lending and Home Equity Lines of
Credit. Among other things, the proposed rule contains several changes in appraisal policy, including an
elimination of an appraisal requirement and an allowance for the use of appraisal alternatives – such as
automated valuation models and broker price opinions – when appraisals are not used.

In response, concerned appraisal organizations called on the Federal Reserve to suspend this proposed
rule, pointing out that the Obama administration and Congress are currently working on stripping the
Federal Reserve of the authority used to advance the proposed rule. In a Dec. 23 letter, the groups
contended that the Fed‘s inability to protect consumers is evident in the proposed rule, where it will allow
less reliable valuation methods to be used for HELOC suspensions during a time when more emphasis
should be placed on due diligence and consumer protection.

―Avoiding appraisals completed by impartial and trained professionals with no financial interest in the
property is the exact opposite of consumer protection,‖ said Bill Garber, director of government and
external relations at the Appraisal Institute. ―By proposing BPOs, the Federal Reserve has dismissed the
economic plight of the consumer, right when they need help the most. The Fed should abandon this rule
and reconsider its appraisal policy.‖

The final rule is expected within six months. To view the appraisal organizations‘ response to the Federal
Reserve, visit www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2009/AI-ASA-ASFMRA-

Appraisal Review Covered in Upcoming Teleconference; CD Available for
Past Briefing
The American Bankers Association and the Appraisal Institute will continue their series of four telephone
briefings collectively titled ―Managing Commercial Real Estate Appraisal Functions‖ with the Jan. 13
offering, ―Appraisal Review: Sales Comparison and Cost Approaches.‖

In this live, joint ABA/Appraisal Institute presentation, bankers and appraisers will examine the important
role of appraisal review, focusing specifically on the sales comparison and cost approaches. Participants
will be presented with the key concepts involved in reviewing appraisal reports that contain either
approach. Appraisers will learn how they can provide value-added services to their bank clients.

50 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
The scheduled speakers include moderator Robert Seiwert, senior vice president, Center for Commercial
Lending and Business Banking, American Bankers Association; Nikki Griffith, MAI, Sandollar Realty
Advisors, Kennewick, Wash.; and George Mann, MAI, SRA, Collateral Evaluation Services, Inc.,
Cincinnati, Ohio.

The series continues through March with ―Appraisal Review: Income Capitalization Approach,‖ slated for
Feb. 10, and ―Land, Condos and Subdivisions – Solutions to Hard to Value Assets,‖ slated for March 17.
All telebriefings will be held from 2 p.m. to 4 p.m. EST.

The cost for each telebriefing is $255 per site license for ABA and AI members and $385 per site license
for non-members. Each site license entitles participants to one phone and one Internet connection at one
location, where an unlimited number of listeners may participate. For more information, or to register, visit

The series kicked off Dec. 16 with ―Managing and Procuring Commercial Appraisal Reports,‖ which
attracted 225 listening sites across the country with an estimated audience of at least 720 participants.
Audio recordings of the ―2010 Managing the Commercial Real Estate Appraisal Function‖ telephone
briefings are available for six months after each program date. The cost is $255 for AI and ABA members,
$385 for nonmembers. Telebriefing attendees get 50 percent off those prices. For more information on
the Dec. 16 briefing and to order the CD, visit www.aba.com/teleweb/tb121609.htm.

U.S. Commercial Property Values Lowest in Seven Years, Says Moody’s
Commercial real estate values in October fell 1.5 percent from September to their lowest levels since
August 2002 as high unemployment negatively affected demand for office, apartment and retail space
Bloomberg News reported.

October prices were 36 percent lower from the same time a year ago and 44 percent lower since peaking
in October 2007, according to Moody‘s/REAL Commercial Property Price Indices released Dec. 21.
Industry watchers warn that office vacancy rates may approach 20 percent in 2010 as employers defer

As reported by Bloomberg, Matthew Anderson, a partner at Foresight Analytics, said commercial property
values may decline by as much as 50 percent from the peak. ―This is the worst that we‘ve seen since
World War II,‖ Anderson said. ―The number one issue facing commercial real estate right now is the value
declines that we‘ve seen since prices peaked.‖

Adding to the mix, Foresight said about $1.4 trillion in commercial real estate debt is scheduled to mature
over the next five years, of which 53 percent is estimated to be underwater where a property‘s mortgage
is greater than its value.

Foresight indicated the delinquency rate for commercial real estate mortgages held by banks may jump
an additional 5.6 percent in fourth quarter 2009 and climb to 8 percent in 2010, Bloomberg reported.
According to Moody‘s Investors Service, the delinquency rate for U.S. commercial mortgage-backed
securities as of the end of November increased to 4.47 percent, six times last year‘s rate of 0.75 percent.

51 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Bloomberg said that CMBS loan delinquencies may increase by 6 percent in the first quarter of 2010 and
climb to 12 percent by the end of 2012, according to the Fitch Rating‘s U.S. Structured Finance 2010
Outlook released Dec. 9. With operating cash flows expected to fall across all property sectors over the
next two years, Fitch said that commercial real estate will take longer to recover compared to other
sectors of the economy.

Homebuilder Sentiment Slips in December
Homebuilder confidence unexpectedly dropped in December on concerns over the weak economy and
labor market, according to the latest National Association of Home Builders/Wells Fargo Housing Market
Index released Dec. 15.

The index dropped to 16, its lowest level since June 2009, from November‘s figure of 17. The housing
market index measures builders' confidence in the market for newly built single-family homes. Scores
lower than 50 indicate that more builders view sales conditions as poor than good.

"From an affordability standpoint, rarely has there been a better time in history to purchase a home,
thanks to record low interest rates, attractive prices and of course the recent extension and expansion of
the home buyer tax credit," NAHB Chairman Joe Robson said in a news release. "However, builders are
not seeing the full impact of these conditions on buyer demand, partly because awareness of the latest
incentives is still building, and partly because of concerns about job security and other economic woes."

Broken down by region, the index results were mixed with the Northeast rising three points to 23, the
West increasing one point to 19, the South remaining steady at 17 and the Midwest dropping 2 points to
12. Meanwhile, the sales expectations measure for the next six months dropped two points to 26 while
the index that measures prospective buyer traffic remained unchanged at 13.

Residential Construction Spending Dips in November
November construction spending declined for the seventh consecutive month to about $900 billion — its
lowest level in more than six years — as the number of residential and commercial projects declined,
according to Bloomberg News. The Commerce Department reported on Jan. 4 that construction spending
fell 0.6 percent in November and was down 13 percent from the same period a year ago.

Increasing commercial vacancy rates as well as the threat of a second wave of home foreclosures is
discouraging the development of new projects. ―Further weakness is expected in the months ahead,‖
Steven Wood, president of Insight Economics LLC, told Bloomberg. ―Homebuilding has begun an
irregular recovery, while non-residential construction is contracting because of rising vacancy rates, falling
rents and tight credit.‖

After surging 4.8 percent in October, residential construction dropped 1.6 percent in November to an
annual rate of $250.7 billion and was down 19 percent from the same period a year ago, Bloomberg said.
Non-residential construction, which includes public projects, dropped 0.2 percent in November and was
down 11 percent from the same period a year ago. Privately funded non-residential construction dropped
slightly to its lowest level since January 2007 from October‘s figure of $330.6 billion to $330.5 billion in
November, while public construction fell 0.4 percent.

52 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
As reported by RealtyTrac on Dec. 10, foreclosure filings in 2009 may have reached a record level for the
second consecutive year with 3.9 million home mortgage holders receiving a notice, Bloomberg noted.
However, a report from the Commerce Department on Dec. 16 showed housing starts in November
increased 8.9 percent, which may signal the housing market is beginning to stabilize.

―We don‘t know how fast we‘re coming back, but we do know we‘re coming back,‖ Robert Toll, chief
executive of Toll Brothers Inc. said Dec. 11 in a Bloomberg Television interview. ―There‘s a pretty good
reservoir of pent-up demand.‖

Meanwhile, non-residential construction may continue to struggle, Bloomberg said. Real Estate
Econometrics, LLC, said on Dec. 1 the default rate for the first nine months of 2009 on U.S. commercial
mortgages was the highest since 1993. The firm also reported that the rate doubled in third quarter 2009
to 3.4 percent.

Green Builders Aim for Net-Zero Energy Housing
With net-zero energy buildings gaining considerable interest over the past decade as a way to cut
greenhouse gas emissions and reduce dependency on fossil fuel, industry proponents have set a new
goal to move this niche market to mainstream America, The Wall Street Journal reported Dec. 24.

But while some industry experts say the costs associated with constructing net-zero homes has declined
as more green materials become available, the Journal reported that construction of a net-zero home can
cost an additional 15 percent compared to a traditional project. For example, rooftop solar panels for a
three-bedroom home can cost about $10,000.

Behind the push is the fact that buildings account for approximately 40 percent of energy usage in the
country. Net-zero energy homes, which are designed to produce as much energy as they consume,
integrate high-performance, energy-efficient solar design and on-site renewable energy.

With energy costs escalating across the country, energy-saving features are becoming popular with both
builders and homebuyers, according to the Journal. Some consumers have found ways to add green
features to their homes without piling on extra costs. By using special insulation panels in the expansion
of their 50-year-old Hermosa Beach, Calif., home, Robert and Monica Fortunato will be able to offset the
additional costs by not having to purchase a big furnace, the Journal reported.

Senior Housing Investment Suffers from Uncertainty
In its Seniors Housing 2010 Outlook released Jan. 1, Marcus & Millichap Real Estate Investment Services
projected a 90 basis-point decline in assisted living facility occupancy rates for 2010, down to 88.2
percent, with average rents up 0.8 percent from last year to $3,488 per month. It forecast a 1 percent
drop for independent living facility occupancy rates to 88.4 percent for the year with a 1.4 percent
increase in average rents to $2,638 per month, according to MBA Newslink.

Marcus & Millichap said that construction fell 6 percent from 2008 for independent living facilities while
national sales dropped 40 percent in the past year. Sales dropped 34 percent for skilled nursing facility
sales and average sales price in continuing care retirement communities fell 10 percent in the past year
to $41,300 per unit, based on limited transactions, according to MBA Newslink.

53 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
For 2010, Marcus & Millichap forecast that assisted living facility cap rates will increase nearly 180 basis
points, near 10 percent, while independent living facilities are expected to rise more than 8 percent by the
end of the year. Cap rates continue to move upward among all senior housing property types, including
skilled nursing facilities, up 180 basis points to near 11 percent, MBA Newslink reported.

Jeffrey Davis, chairman of Cambridge Realty Capital Cos., told MBA Newslink, "For senior housing/health
care borrowers, the driving force in the market will continue to be FHA-insured HUD Lean loans for
nursing homes and assisted living facilities, and Fannie Mae and Freddie Mac agency programs for
independent living and assisted living properties."

Appraisal Institute to Hold Self-Storage Webinar on Jan. 20
The Appraisal Institute‘s upcoming Webinar – ―Self-Storage: Looking at the Past – Are These Indicators
for the Future?‖ – will present valuable information about the dynamics and complexities in today‘s self-
storage market to both the novice and the veteran.

The Jan. 20 Webinar will provide insight on current benchmarks, trends and indicators leading to the
question, ―Is self-storage recession proof?‖ The Webinar will also explore how self-storage stacks up to
the other real estate segments in today‘s market, sources of data and other resources on self-storage,
and a case study on appraisal techniques for self-storage, focusing on forecasting market demand.

The Webinar will be led by R. Christian Sonne, MAI, managing director of Cushman & Wakefield‘s Self-
Storage Industry Group, a national full-service real estate consulting and appraisal team specializing in
the self-storage asset class.

The 60-minute Webinar will be presented at 1 p.m. CST on Jan. 20. This Webinar is approved for one
hour of Appraisal Institute continuing education credit. Cost is $30 for members; $75 for non-members.

For more information and to register, visit

CMBS Delinquencies Climbing Higher
Delinquent commercial mortgage-backed security balances rose to $37.93 billion in November from
$32.55 billion in October, according to the December Monthly Delinquency Report from Realpoint LLC.
The Horsham-based credit-rating agency said that the increase marks the highest total of the year to

According to the Financial Times, not since a spike in delinquencies in June 2009 – when the temporary
late payment status of some General Growth Property loans helped push total delinquent CMBS to
$28.85 billion – has there been such a large increase in unpaid balances.

Realpoint‘s November numbers show a delinquency rate of 4.706 percent, up from the 4.013 percent
posted in October, according to the Financial Times. That number is largely due to an Extended Stay
Hotel LLC loan, which was responsible for $3.5 billion of the November CMBS increase.

Looking ahead, in the near-term Realpoint is predicting that overall delinquency rates will continue to
climb before potentially peaking in the second or third quarter of 2010.

54 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
AI, IRWA Federal Agency Update: Early Bird Deadline Extended
The early bird registration deadline for the Federal Agency Update, to be held Jan. 26-28 in Las Vegas,
has been extended until the event. Early bird fees are $425 for IRWA and AI members and $525 for non-
members. On site, the registration charge will be $50 higher. For more information and to register, visit

Presented by the International Right of Way Association and the Appraisal Institute, this public real estate
symposium will give attendees access to U.S. federal agency representatives, consultants and other
right-of-way entities. Sustainable communities, green infrastructure and transit-oriented development are
among the main topics that will be discussed.

The conference hotel is the Flamingo Hotel in Las Vegas. To reserve a room, call 800-732-2111 or visit

Father, Son Charged with Appraisal Fraud
James Eaton and his son, Brian Eaton, both of Laguna Beach, Calif., were charged by the Orange
County District Attorney with conspiring to commit fraud by inflating property values.

According to the complaint, they obtained the personal passwords and electronic signatures of appraisers
employed at their residential real estate appraisal firm for the purpose of changing property values or
eliminating negative comments that could decrease values. They altered the appraisal file and created a
new version using the signatures of their employees or themselves to make the property value more
advantageous for a greater loan amount.

The complaint alleges that on Aug. 9, 2006, James Eaton fired Landmark Equities Group‘s Dublin, Calif.,
office manager when she refused to provide her password and those of the employees she supervised.
The terminated office manager and another fired employee both discovered later that the suspects had
used their personal information as appraisers to forge their names and prepare inflated appraisals,
according to the complaint.

A warrant has also been issued for a third suspect, Michael Bell of Corona Del Mar, Calif. James and
Brian Eaton and Bell are all charged with one felony count of conspiracy to defraud another of property,
17 felony counts of grand theft by false pretense, two felony counts of identity theft, two felony counts of
false personation and sentencing enhancement allegations for aggravated white collar crime over
$100,000 and property damage over $50,000. If convicted, each defendant faces a maximum sentence of
18 years in state prison.

Dollar General Plans for 600 New Stores in 2010
Dollar General Corporation is staying aggressive in 2010, planning to open 600 new stores, as well as
remodel or relocate 500 stores. This follows 500 new store openings and 450 remodels or relocations
carried out during 2009, CoStar Group reported in a Dec. 24 story.

Dollar General Corporation reported a 296 percent increase in net income from 2008 to $63.7 million for
the first nine months of 2009. Dollar General said a significant increase in customer traffic and average

55 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
transaction amount drove a 10.3 percent increase in same store sales for the period, according to CoStar

Appraiser among Trio Poised to Buy $1 Billion in Condos
Boutique investment bank Westwood Capital has enlisted the help of Appraisal Institute member
Jonathan Miller and veteran apartment building owner and manager Gerald Guterman in its plan to buy
$1 billion worth of new condominium buildings from struggling banks and convert them into rental
apartments, Reuters reported.

The venture, Condominium Recovery LLC, is doing something that few other investors have done before
because there has rarely been such a glut of property hitting the market during such depressed
conditions. The team will buy whole buildings or large swaths of 50, 100 or 200 units at a time from banks
that soon may be forced to foreclose on billions of dollars in loans they made to developers. They plan to
start buying in New York City and south Florida, according to Reuters.

In the third quarter, new condos comprised 22 percent of sales. However, Miller estimated that after
stripping out contracts signed before the Lehman Brothers collapse froze credit markets, it is more like 15
percent. At that rate, it would take more than seven years sell the inventory of available units, Reuters

Condominium Recovery LLC is eyeing an average 10 percent return, and expects to hold the properties
for about four years. Based on market conditions then, it could sell rentals as co-ops or condominiums, or
it could create an apartment real estate investment trust, Reuters reported.

NY Port Looks to Sell Former Freedom Tower
The Port Authority of New York and New Jersey is looking to sell 1 World Trade Center, the skyscraper
formerly known as Freedom Tower. According to the New York Times, the Port Authority has asked a
select group of commercial real estate developers and owners to bid for a partnership interest in the $3.2
billion tower.

The offering would allow the Port Authority to raise what it hopes would be at least $100 million for the
project. When the project is complete in 2013, the 2.6 million square foot tower will stand 1,776 feet tall
and will also be among the most expensive office buildings in North America. The Port Authority also
wants its new partner to take on the difficult task of marketing the skyscraper‘s space and negotiating
leases with corporate tenants, the Times reported.

But the Port Authority is at odds with the developer Larry A. Silverstein, who leased the World Trade
Center only weeks before it was destroyed in 2001. Silverstein wants to build three office towers at
ground zero with Port Authority financing, but given the lack of demand, the authority favors a slow,
phased approach to construction, the Times reported.

The sales effort has just gotten under way. According to executives briefed on the authority‘s strategy, it
has hired two real estate advisers, Cushman & Wakefield and Jones Lang LaSalle, to handle the
negotiations with the prospective partners. Executives say that the Port Authority believes it has a
saleable asset, the Times reported.

56 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Inside the Institute
Appraisal Institute Relief Foundation Can Offer Assistance
In response to the recent earthquake in Port-au-Prince, Haiti, and massive flooding in California, the
Appraisal Institute Relief Foundation has issued a reminder of its ability to assist victims of such disasters.

The Appraisal Institute Relief Foundation initially was established when Hurricane Katrina hit the Gulf
Coast and many members wanted to help appraisers who were affected. Jim Amorin, MAI, SRA,
president of the Appraisal Relief Foundation, said the Foundation ―seeks to provide emergency financial
assistance to Appraisal Institute members and employees, as well as to individuals who have made
meaningful contributions to the real estate profession, who have experienced a disaster or emergency
that has left them in a state of financial, physical or emotional distress." In addition to assisting victims of
Katrina, the Appraisal Institute Relief Foundation also has assisted appraisers and others who have been
impacted by wildfires on the West Coast, and other personal tragedies.

Eligible candidates who have been affected by these disasters and who may need financial assistance,
are encouraged to contact the Appraisal Institute Relief Foundation. Applications for assistance are
available at

To support AIRF, download the tax-deductible contribution form from
https://www.appraisalinstitute.org/contribution/ReliefFoundation.aspx or contact

Appraisal Institute, Members Reach Potential Audience of more than 48
The Appraisal Institute and its members appeared in media coverage reaching a potential audience of
more than 48 million readers, listeners and viewers during the second half of 2009, according to recently
completed research by the organization. Members can view highlights on the members-only side of the
Appraisal Institute‘s Web site.

The Appraisal Institute and its members were included in 212 news stories that appeared in 158 media
outlets during the last six months of 2009, reaching an average of more than 8 million potential readers,
listeners and viewers each month.

During the fourth quarter, the Appraisal Institute and its members appeared in three of the nation‘s five
largest newspapers (The Wall Street Journal, The New York Times and The Washington Post) and
appeared in local media coverage in at least 77 cities and at least 30 states. A story on PBS‘ ―Nightly
Business Report‖ reached 2.6 million viewers.

During the third quarter, the Appraisal Institute and its members appeared in the nation‘s three largest
newspapers (The Wall Street Journal, USA Today and The New York Times), four of the eight largest
newspapers (including the Chicago Tribune) and appeared in local media coverage in at least 39 cities
and at least 24 states. A story on NPR‘s ―Morning Edition‖ reached 14 million listeners.

57 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
A five-minute DVD highlighting the Appraisal Institute‘s national and local television, radio, magazine and
newspaper coverage from July to December 2009 is available to members at

LDAC Extends Deadline to Feb. 15
The application deadline has been extended to Feb. 15 for the Appraisal Institute‘s 2010 Leadership
Development & Advisory Council, LDAC will convene May 5-7 at the Hyatt Regency Washington on
Capitol Hill.

The Leadership Development & Advisory Council strives to foster creative thought from talented
individuals involved in the real estate appraisal profession while developing the future leaders of the
Appraisal Institute. LDAC also establishes an appraiser presence in Congress and demonstrates that the
Appraisal Institute is made up of professionals who recognize the importance of being actively involved in
the political process.

For more information on the LDAC application and conference, visit

In addition to attendees, LDAC is also looking for sponsors for the event, including chapters or regions.
For more information on why and how to donate, visit
http://appraisalinstitute.org/profession/events/LDAC.aspx, or download the form at

For more information on the event or donating, contact Amy Komorowski at

In Memoriam
The Appraisal Institute regrets the passing of the following designated members who were reported to us
in January: Bart T. Bryson, MAI, SRA, Hendersonville, N.C.; Jay K. Coleman, SRA, Isle of Palms, S.C.;
Davis Cooper, SRA, Orange, Texas; Tom S. Corey, MAI, Big Bear Lake, Calif.; Hiram L. Cox, SRA,
Fairfield, Ohio; Robert H. Garmoe, MAI, Redmond, Wash.; Ronald D. Grant, MAI, Arroyo Grande, Calif.;
William H. Hetfield, MAI, SRA, Plainfield, N.J.; Jack C. Keeler, MAI, Fairfield, Calif.; R. A. Powell, SRA,
Katy, Texas; William D. Price, Jr., SRPA, SRA, Conyers, Ga.; Gale J. Raymond, SRA, Sugar Land,
Texas; Maurice J. Simon, MAI, SRA, Jacksonville, Fla.; Gordon J. Smith, MAI, Charlotte, N.C.

This information is listed in Appraiser News Online on a monthly basis. For a list covering the past several
years, go to the ―In Memoriam‖ page of the Appraisal Institute Web site,
www.appraisalinstitute.org/findappraiser/memoriam.aspx , which is continually updated.

AI Members Featured in National Media Coverage
Appraisal Institute President Leslie P. Sellers, MAI, SRA, was recently featured in the nation‘s second
largest newspaper, USA Today. In the Jan. 11 story, Sellers discussed how new appraisal regulations are
hurting consumers and appraisers. USA Today has a circulation of more than 1.9 million.

Jonathan Miller, an Associate member from the New York Metro Chapter, also appeared last week in
national news outlets, including Forbes and BusinessWeek magazines and The New York Times.

58 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Those stories are among the recent media coverage included in the ―AI in the News‖ feature on the
members-only section of the Appraisal Institute Web site.

Local media coverage around the country last week included the Appraisal Institute‘s Mike Hartnett, MAI,
in the Tampa (Fla.) Tribune; Gerald Teel, MAI, SRA, in the Lubbock (Texas) Avalanche-Journal; Gary
Crabtree, SRA, in The Bakersfield Californian; Michelle Koeller, MAI, in Finance and Commerce
(Minneapolis); Glenn Day, SRA, in the Fort Worth (Texas) Star-Telegram; and Richard Henkaline, SRA,
in the Dayton (Ohio) Daily News. Appearing in local television coverage last week was James Henderson,
SRA, who was featured on KGET-17 (NBC) and KBFX-58 (Fox), both in Bakersfield, Calif.

To see the latest media coverage about the real estate valuation profession, the Appraisal Institute and its
members, go to the members-only area of the Appraisal Institute Web site at
www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the headlines under ―AI in
the News.‖ Media coverage is updated daily and also includes the latest news releases from the
Appraisal Institute.

Sample Certification Statements Revised
The Sample Certification Statements for Written Appraisal, Appraisal Review and Appraisal Consulting
Service Reports that Appraisal Institute members may use as a resource in developing their own
Certification Statements have been updated to reflect recent changes in the Uniform Standards of
Professional Appraisal Practice.

The main change affects the requirement to disclose in a report certification ―any services regarding the
subject property performed by the appraiser within the three-year period immediately preceding
acceptance of the assignment, as an appraiser or in any other capacity.‖

The Sample Certification Statements can be accessed via the members-only section of the Web site, at

AI Members Featured in National Media Coverage
Don Boucher, SRA, of the Washington, D.C., Metro Chapter was recently featured in a PBS ―Nightly
Business Report‖ story previewing the 2010 U.S. residential real estate market. Also appearing in the
Dec. 31 story seen by up to 2.6 million viewers was Bill Garber, the Appraisal Institute‘s director of
government and external relations.

Those two stories are among the recent media coverage included as part of the latest ‖AI in the News‖
feature on the members-only section of the Appraisal Institute Web site.

Other members recently in the news nationally include Appraisal Institute President Leslie Sellers, MAI,
SRA, who began appearing Jan. 8 on HGTV‘s FrontDoor Web site, where he provides consumers with
tips on home improvements. Jonathan Miller, an Associate member from the New York Metro Chapter,
appeared last week in BusinessWeek and The New York Times, among other media outlets.

Local media coverage around the country last week featured the Appraisal Institute‘s Ron DeVries, MAI,
SRA, in the Chicago Sun-Times; Gary Crabtree, SRA, on KGET-17 (NBC) in Bakersfield, Calif.; Sharon

59 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Harbin, MAI, SRA, in Crain‘s Detroit Business; Richard Hagar, SRA, on independent television station
KONG-6/16 in Seattle; and Woodman ―Woody‖ Herr, MAI, in the Tampa Bay (Fla.) Business Journal.
Appraisal Institute members appeared in media outlets from New England to Alaska to Guam the past

To see the latest media coverage about the real estate valuation profession, the Appraisal Institute and its
members, go to the members-only area of the Appraisal Institute Web site at
www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the headlines under ―AI in
the News.‖ Media coverage is updated daily and also includes the latest news releases from the
Appraisal Institute.

Appraisal Institute Calls for 2011 Vice President Nominees
The Appraisal Institute is seeking the names of those members interested in serving as the 2011 Vice
President of the Appraisal Institute. The 2011 Vice President succeeds to the offices of 2012 President
Elect, 2013 President and 2014 Immediate Past President. The due date for submissions is Feb. 4, 2010.

Qualifications for 2011 Vice President can be found on ―My Appraisal Institute‖ under the ―About Us‖ tab.
Under ―National Officers and Committees,‖ members should select ―Appraisal Institute Officers‘ Job

Those interested in serving, or wishing to recommend someone for the position, should submit their
recommendation in writing by Feb. 4 to: Jim Amorin, MAI, SRA; Chair, 2010 National Nominating
Committee; c/o Darlene Grass; Appraisal Institute; 550 West Van Buren Street; Suite 1000; Chicago, Ill.,

On April 17, the National Nominating Committee will conduct personal interviews with potential nominees
at The Naples Grande Beach Resort in Naples, Fla., before the second quarter Board of Directors

In Memoriam
The Appraisal Institute regrets the passing of the following designated members who were reported to us
in December: Charles E. Anderson, MAI, Olympia, Wash.; Leland M. Coe, MAI, SRA, Dayton, Ohio;
Maurice J. Simon, MAI, SRA, Jacksonville, Fla.; Robert P. Turner, MAI, Chesapeake, Va.; Robert E.
Walsh, SRA, Lancaster, Pa.; and Ray C. Wilson, MAI, San Antonio, Texas.

This information is listed in Appraiser News Online on a monthly basis. For a list covering the past several
years, go to the ―In Memoriam‖ page of the Appraisal Institute Web site,
www.appraisalinstitute.org/findappraiser/memoriam.aspx, which is continually updated.

60 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Market Rates and Bond Yields
                           Nov09                                          May09          Nov08          May08         Nov07          Nov06
Reserve Bank Discount      0.50                                           0.50           1.25           2.25          5.00           6.25
Prime Rate                 3.25                                           3.25           4.00           5.00          7.50           8.25
Federal Funds Rate         0.12                                           0.18           0.39           1.98          4.49           5.25
3-Month T Bills            0.05                                           0.18           0.19           1.73          3.27           4.94
6-Month T Bills            0.15                                           0.30           0.73           1.82          3.46           4.95
3-Month CD                 0.21                                           0.57           2.36           2.66          4.97           5.32
LIBOR-3 month rate         0.45                                           1.30           3.11           2.84          5.02           5.36
5-Year Bond                2.23                                           2.13           2.29           3.15          3.67           4.58
10-Year Bond               3.40                                           3.29           3.53           3.88          4.15           4.60
30-Year Bond*              4.31                                           4.23           4.00           4.60          4.52           4.69
Municipal Tax Exempts Aaa† 3.99                                           4.26           4.83           4.36          4.26           4.46
Municipal Tax Exempts A†   4.84                                           5.25           5.68           4.78          4.56           4.70
Corporate Bonds Aaa†       5.19                                           5.54           6.12           5.57          5.44           5.33
Corporate Bonds A†         5.64                                           6.67           7.68           6.30          5.97           5.76
Corporate Bonds Baa†       6.32                                           8.06           9.21           6.93          6.39           6.20

Stock Dividend Yields
Common Stocks—500                                          1.99           2.41           3.11             2.07        1.95           1.80

Other Benchmarks
Industrial Production Index ¶ **                           99.4           96.2**         104.8**         110.7** 112.1**             109.6**
Unemployment (%) ¶                                         10.0           9.4            6.8             5.5     4.7                 4.5
Monetary Aggregates, daily avg. ¶
 M1, $ Billions                                            1,688.5        1,595.5††       1,523.2†† 1,383.8†† 1,363.8 1.368.1
 M2, $ Billions                                            8,391.9        8,342.6††       7,982.1†† 7,669.8†† 7,425.0 6,976.9
Member Bank Borrowed Reserves
 $ Billions^                                                  n/a^           n/a^           n/a^          n/a^          0.366        0.160
Consumer Price Index
 All Urban Consumers                                         216.3          213.9          212.4         216.6        210.2          201.5

Per Capita Income
                                                           3Q09          2Q09          3Q08            2Q08         3Q07        2Q07        3Q06
Per Capita Personal
 Disposable Income                                         35,758        35,735        35,586          36,059       34,574 34,320 33,367
Annual Rate in Current $s
Savings as % of DPI(††)                                      4.5             5.4          2.2              3.4          1.6       1.8 2.3
* As of April 2006, the Fed went back to reporting 30-yr rates; the historical data is 20+ year rates. A factor for adjusting the daily nominal 20-year
  constant maturity in order to estimate a 30-year nominal rate can be found at www.treas.gov/offices/domestic-finance/debt-management/interest-

** On November 7, 2005, the Federal Reserve Board advanced to 2002 the base year for the indexes of industrial production, capacity, and electric
   power use. This follows the December 5, 2002, change to a 1997 baseline, from the previous 1992 baseline. Historical data has also been updated.

^ The Fed stopped releasing this figure in March 2008.

61 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010
Conventional Home Mortgage Terms

                                                            Nov09         May09         Nov08         May08          Nov07         Nov06
New Houses Loans—U.S. Averages
Interest rate                                               5.08          4.92          6.16          6.01           6.42          6.55
Term                                                        28.5          29.0          28.7          29.2           29.2          29.7
Loan Ratio                                                  73.0          74.1          74.0          77.3           77.1          75.7
Price                                                       312.9         342.7         346.4         339.4          366.8         354.8

Used House Loans—U.S. Averages
Interest rate                                               5.09          4.95          6.26          6.10           6.41          6.51
Term                                                        27.9          28.2          28.7          28.3           28.9          29.3
Loan Ratio                                                  74.1          74.2          77.4          77.6           79.4          77.7
Price                                                       296.0         312.2         271.6         298.3          291.0         295.4

Conventional Home Mortgage Rates by Metropolitan Area

                                                     rd         rd          rd         rd
                                3 Q                           3 Q         3 Q        3 Q
                                2009                          2008        2007       2006
Atlanta                         5.30                          6.44        6.73       6.77
Boston-Lawrence-NH-ME-CT#       4.98                          6.12        6.65       6.55
Chicago-Gary-IN-WI#             5.54                          6.45        6.78       6.60
Cleveland-Akron#                5.21                          6.16        6.74       6.80
Dallas-Fort Worth#              5.24                          6.47        6.78       6.78
Denver-Boulder-Greely#          5.36                          6.46        6.74       6.83
Detroit-Ann Arbor-Flint#        5.28                          6.36        6.79       6.79
Houston-Galveston-Brazoria#     5.33                          6.48        6.84       6.92
Indianapolis                    5.40                          6.57        6.82       7.00
Kansas City, MO-KS              5.20                          6.18        6.50       6.46
Los Angeles-Riverside#          5.32                          6.48        6.72       6.79
Miami-Fort Lauderdale#          5.44                          6.53        6.86       7.06
Milwaukee-Racine#               5.30                          6.47        6.76       6.61
Minneapolis-St. Paul-WI         5.30                          6.37        6.65       6.66
New York-Long Island-N. NJ-CT# 5.26                           6.30        6.66       6.71
Philadelphia-Wilmington-NJ#     5.33                          6.27        6.73       6.86
Phoenix-Mesa                    5.49                          6.56        6.79       6.81
Pittsburgh                      5.28                          6.15        6.57       6.56
Portland-Salem#                 5.17                          6.39        6.71       6.63
St. Louis-IL                    5.23                          6.58        6.88       6.78
San Diego                       5.39                          6.40        6.68       6.65
San Francisco-Oakland-San Jose# 5.24                          6.48        6.77       6.72
Seattle-Tacoma-Bremerton        5.15                          6.28        6.72       6.72
Tampa-St. Petersburg-Clearwater 5.33                          6.50        6.87       6.95
Washington, DC-Baltimore-VA#    5.32                          6.37        6.83       6.85

* As of the first quarter 2003, the Federal Housing Finance Board no longer reported on the markets of Greensboro, Honolulu and Louisville.
¶ Seasonally adjusted
† Source: Moody's Bond Record
†† Revised figures used
# Consolidated Metropolitan Statistical area

62 | Appraiser News Online Vol. 11, No. 1 & 2, January 2010

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