Apr Updates by 9y9AHs

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									Appraiser News Online
Vol. 10, No. 7 & 8, April 2009

Government Update—Commercial/General
        Critical H.R. 1728 Amendment Mirrors Many AI Recommendations [Posted April 29, 2009]
        Rep. Frank Decides against Fast-Tracking Regulatory Bill [Posted April 29, 2009]
        Fed Releases Stress Tests Results, but not Publicly [Posted April 29, 2009]
        Senate Approves Creation of Financial Markets Commission [Posted April 29, 2009]
        Appraisal Institute‘s Amorin to Testify on Mortgage Reform [Posted April 22, 2009]
        Sen. Schumer Proposes Federal Help to Fight Mortgage Fraud Nationwide [Posted April 22, 2009]
        Fed: Commercial Property Could Get Special Lending Program [Posted April 22, 2009]
        Pelosi Plans Commission to Investigate Financial Collapse [Posted April 22, 2009]
        SEC Roundtable Scrutinizes Credit Rating Agency Regulation [Posted April 22, 2009]
        Obama Expected to Tap Fannie Head to Run TARP [Posted April 15, 2009]
        Rep. Frank Criticizes Moody‘s Negative Outlook on U.S. Municipalities [Posted April 15, 2009]
        Treasury Clarifies TALF Program Details [Posted April 15, 2009]
        OCC Chief Calls for Regulatory Consolidation [Posted April 15, 2009]
        FDIC Appoints Deposit Insurance National Bank after State Regulators Closure [Posted April 15,
         2009]
        Frank to Introduce Anti-Subprime Lending Bill [Posted April 8, 2009]
        Mortgage Fraud Bill Introduced in House; Contains Major Appraisal Provisions [Posted April 1, 2009]
        Dodd, Frank Pledge Collaborative Effort on Regulatory Modernization [Posted April 1, 2009]
        Government Looks for More Authority over Non-Banking Institutions [Posted April 1, 2009]
        Legacy Assets Program Calls for "Third Party Valuations" [Posted April 1, 2009]
        Mineral Valuations, Appraisals Debated in Land Exchange Policy [Posted April 1, 2009]

Government Update—Residential
        HVCC Effective Friday; FAQs, Telebriefing, Myths Document among Resources Available [Posted
         April 29, 2009]
        Cram-down Bill Continues to Face an Uphill Battle [Posted April 29, 2009]
        Inside the Beltway: Read the Fannie, Freddie HVCC Guidance, Effective May 1 [Posted April 22,
         2009]
        Fannie, Freddie Refinance Volume Up [Posted April 15, 2009]
        FHA Preparing Electronic Loan Specifications [Posted April 15, 2009]
        Freddie Says ―No‖ to BPOs [Posted April 8, 2009]
        FHA Adopts MC Form, Releases Declining Market Reporting Requirements [Posted April 8, 2009]
        New Requirements for VA Appraisals Announced [Posted April 8, 2009]
        Fannie, Freddie Release Updated FAQs on HVCC [Posted April 1, 2009]
        Market Conditions Form (1004 MC) Effective Today; AI Offers Free Webinar, New Seminar
         [Posted April 1, 2009]
        Obama Nominates Former Freddie Mac Exec as HUD Assistant [Posted April 1, 2009]

Inside the States
        Governors of Iowa and Mississippi Sign Appraiser Independence Laws [Posted April 22, 2009]
        New Mexico Governor Signs AMC Bill into Law [Posted April 15, 2009]



550 W. Van Buren St., Suite 1000, Chicago, IL 60607 | T 312-335-4100 F 312-335-4400 | www.appraisalinstitute.org
         Idaho Enacts New Appraiser Independence Law [Posted April 8, 2009]
         Florida Attorney General Forms Mortgage Fraud Group [Posted April 8, 2009]
         Utah, Arkansas Governors Sign Nation‘s First AMC Laws [Posted April 1, 2009]
         Colorado House Passes Increased Penalties for Appraisal Law Violations [Posted April 1, 2009]
         Kansas Governor Signs Legislation to Comply with National SAFE Act [Posted April 1, 2009]

Around the Industry
         AI Testifies Before Congress; Urges Action on BPOs, AMCs, Removing Fee Caps on Appraisers
          [Posted April 29, 2009]
         ARES Meeting Documents Available on Web [Posted April 29, 2009]
         Hanley Wood: Building Activity Stalls in March; Builder Sentiment Perks in April [Posted April 29,
          2009]
         Architecture Billings Index Shows Early Signs of Improving Business Conditions [Posted April 29,
          2009]
         CRE Delinquencies, Losses Rose in 2008; Could Inch Higher [Posted April 29, 2009]
         Moody's: U.S. Commercial Real Estate Markets Weaken 'Broadly' [Posted April 29, 2009]
         BofA, Wells Fargo Top 2008 Commercial/Multifamily Originations [Posted April 29, 2009]
         April 23 Audio Conference: GSEs Explain New Refinance and Loan Mod Programs [Posted April 22,
          2009]
         Appraisers File Law Suit against Wells Fargo Alleging Appraisal Pressure [Posted April 22, 2009]
         Short Sales May Require More Appraisals [Posted April 22, 2009]
         AARO, State Regulatory Committee Hold Joint Meeting [Posted April 22, 2009]
         Report Explores Appraisers' Role in Housing Bubble [Posted April 22, 2009]
          Discount Retailers Score in Down Economy [Posted April 22, 2009]
         Second Largest Mall Owner Files Chapter 11 [Posted April 22, 2009]
         Construction Activity Remains Tight as Economy Continues to Struggle [Posted April 22, 2009]
         International RE Group Launches U.S. Annual Index; Unveils May 27 in NY [Posted April 22, 2009]
         ABA: HUD Should Withdraw or Suspend RESPA Changes [Posted April 15, 2009]
         TARP Eligibility Extended to Life Insurers; Good News for CRE Sector [Posted April 15, 2009]
         Life Insurance Companies Face High Exposure to CMBS [Posted April 15, 2009]
         CBRE: Increased Cap Rates in Most Markets [Posted April 15, 2009]
         U.S. Apartment, Office, and Retail Center Vacancies Hit Highs [Posted April 15, 2009]
         Germany Makes $384M Takeover Bid for Hypo Real Estate [Posted April 15, 2009]
         Counselors of Real Estate Optimistic about Capital Markets [Posted April 15, 2009]
         FASB Updates Troubled Assets Report Rules [Posted April 15, 2009]
         CRE Construction Loans Burdening Smaller Banks [Posted April 15, 2009]
         Hanley Wood: Modest Gains Seen in the Housing Sector [Posted April 15, 2009]
         IAS Index: House Prices Remain in Critical Condition [Posted April 15, 2009]
         Appraisal Institute Challenges State Boards to Tackle Enforcement, AMCs and BPOs [Posted April
          8, 2009]
         Appraisals Listed in WSJ's "Call to Action" [Posted April 8, 2009]
         Fed Takes Lead in Defining Stress Tests for Banks [Posted April 8, 2009]
         FASB Proposes Fair-Value Overhaul that Might Improve Bank Profits [Posted April 8, 2009]
         John Hancock Tower Sale May Signal Trouble for Commercial Real Estate [Posted April 8, 2009]
         Prime Loan Foreclosures Jump in February; Insured Mortgage Defaults Drop [Posted April 8, 2009]
         S&P: Downward Trend in Housing Values Continues in 2009 [Posted April 8, 2009]



2 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
         REO Sales Having Impact on Home Prices [Posted April 8, 2009]
         Grubb and Ellis: Industrial Space Rates Hold Despite Vacancy [Posted April 8, 2009]
         MBA Expresses Objections to Proposed Project Restart Standards [Posted April 8, 2009]
         New Edition of Shopping Center Appraisal Book Now Available [Posted April 8, 2009]
         CCIM/STDB Host Technology Expo, April 24-25 in Fort Worth [Posted April 8, 2009]
         Appraisal Institute Releases HVCC ―Myths and Realities‖ Document [Posted April 1, 2009]
         AI Offers VFR Webinar, Podcast to Help Expand Business Opportunities [Posted April 1, 2009]
         Tenant Credit Analysis Webinar Recording Now Available [Posted April 1, 2009]
         MBA Calls for Uniform National Regulation of Mortgage Lending [Posted April 1, 2009]
         Appraisal Subcommittee Hires Jim Park as Executive Director [Posted April 1, 2009]
         2009 European Hotel Valuation Index Shows 10 Percent Decline in Value [Posted April 1, 2009]
         Major CMBS Assets Face Tougher Times Ahead [Posted April 1, 2009]
         Minnesota Financier's Fall Indicative of Unregulated System [Posted April 1, 2009]
         Survey: Wealthy Plan to Buy Commercial Real Estate [Posted April 1, 2009]
         EDR and ExactBid Increase Access to Environmental Risk Data via Partnership [Posted April 1, 2009]

Inside the Institute
         AI Closely Monitoring Swine Flu Outbreak [Posted April 29, 2009]
         Past President Charlie Akerson, MAI, 86, Passes Away [Posted April 29, 2009]
         Phil Steffen, MAI, to Lead New PGP Phoenix Office [Posted April 29, 2009]
         Appraisal Institute, Fecisval Host International Valuation Congress in Cancún in November [Posted
          April 22, 2009]
         Three Candidates Announced for 2010 Appraisal Institute Vice President [Posted April 15, 2009]
         Deadline for Contributions to Dictionary Development Database Looms [Posted April 15, 2009]
         AI Members Reappointed to Pennsylvania, Rhode Island Appraisal Boards [Posted April 15, 2009]
         AI Vice President to Undergo Surgery [Posted April 8, 2009]
         Appraisal Institute Issues 45-Day Notice of Proposed Amendments to Bylaws and Regulations
          [Posted April 1, 2009]
         Appraisal Institute Signs MOU with Italian Appraisal Groups [Posted April 1, 2009]
         Appraisal Institute Chapter Conducts Timely Fraud Seminar [Posted April 1, 2009]
         In Memoriam [Posted April 1 and April 29, 2009]

Economic Indicators – February 2009




3 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Government Update – Commercial/General
Critical H.R. 1728 Amendment Mirrors Many AI Recommendations
The Mortgage Reform and Anti-Predatory Lending Act of 2009, a bill that would eliminate a number of
regulatory loopholes in the mortgage lending system and strengthen the appraisal regulatory structure, is
currently being considered by the House Financial Services Committee, where markup is expected to last
until Thursday. An amendment by Rep. Paul Kanjorski, D-Pa., adopted April 28, includes many reform
proposals recommended by the Appraisal Institute. The Appraisal Institute is urging Congressional
representatives to pass the bill, also known as H.R. 1728.

―Our organization supports the Mortgage Reform Act because it not only returns to the fundamentals of
mortgage lending and protects the independence of the appraiser from undue third-party pressure, but it
also ultimately seeks to safeguard the best interests of consumers‖ said Jim Amorin, MAI, SRA, president
of the Appraisal Institute. ―The American public needs and deserves a healthy mortgage lending system.‖

In April 23 testimony before the House Financial Services Committee, Amorin presented lawmakers with
a short list of areas the Appraisal Institute believes are in need of reform in order to protect the safety and
soundness of mortgage finance system transactions. The Kanjorski amendment includes the following list
of reform proposals recommended by the Appraisal Institute:

         Requirements for complete interior inspection appraisal requirements for all subprime loans
         Establishment of a federal appraisal independence standard with up to $20,000 civil penalties for
          violations
         Modernizing provisions of Title XI of FIRREA to provide additional resources for state
          enforcement and greater accountability of federal and state appraisal regulators
         Validation for consideration of professional appraisal designations in appraiser hiring decisions
         Required separation and clear disclosure of fees paid to appraisers and fees paid for appraisal
          administration (fees paid to appraisal management companies)
         Limitations on the use of broker price opinions in mortgage origination
         Registration requirements, and a regulatory regime, for Appraisal Management Companies, with
          mechanisms to prohibit infiltration by appraisers sanctioned by state regulatory agencies.

―We are pleased to see Congress moving swiftly and in the right direction to curb abusive lending
practices,‖ noted Amorin. ―Our organization urges all appraisers and members of the public to contact
their Representatives in support of H.R. 1728, and encourage they become a cosponsor of the bill.‖ He
noted that they could do so by visiting
http://capwiz.com/appraisal/callalert/index.tt?alertid=13235871&type=CO%20.

The Mortgage Reform and Anti-Predatory Lending Act of 2009 was introduced in March by Reps. Brad
Miller, D-N.C., and Mel Watt, D-N.C. To view an overview of Kanjorski‘s amendments to H.R. 1728, visit
www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2009/KanjorskiAppraisalandServicingA
mendmentSummary.pdf.

For more information on H.R. 1728 and other legislative issues impacting appraisers, visit the Appraisal




4 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Institute‘s Web site at www.appraisalinstitute.org/newsadvocacy or contact Bill Garber, director of
Government and External Relations, at 202-298-5576 or bgarber@appraisalinstitute.org.

Rep. Frank Decides against Fast-Tracking Regulatory Bill
Despite communication from the Obama Administration that they would like to quickly revamp America‘s
financial markets, House Financial Services Committee Chairman Barney Frank, D-Mass., has opted to
slow down the passage of a measure that would allow the government to place large financial companies
into receivership. Citing the complexity of the bill and the fact that his Senate counterparts were poised to
move more cautiously, Frank indicated his committee would instead package the measure with broader
legislation to create a new regulator to oversee systemic risks to the economy later in the year.

Obama Administration officials had lobbied lawmakers last month to move along quickly the measure to
address deficiencies in the regulatory structure, arguing that they needed powers to respond to a fast-
moving financial market crisis aggressively. The government was looking for Congress to establish a
receivership process that would be similar to the way the Federal Deposit Insurance Corp. places banks
into receivership, but that would also apply to insurance companies, bank-holding companies, broker
dealers and other financial firms.

Frank‘s announcement that Congress needs to first create a regulatory body to evaluate systemic risk for
financial institutions before allowing the government to place institutions in receivership means the
Obama Administration will have to wait.

Fed Releases Stress Tests Results, but not Publicly
The results of the Federal Reserve‘s ―stress tests‖ on the nation‘s largest banks are in…kind of.
Preliminary results of the government's stress tests of the nation's 19 largest banks indicate that at least
six of the financial institutions are in need of additional capital, according to Bloomberg News. The banks
are expected to convert preferred shares into common stock, although some of the capital may come
from government injections. While the Fed gave little information or insight into each lender‘s individual
assessment, they did make it clear that the government is prepared to rescue any of the 19 banks that
underwent the stress tests should the recession worsen sharply.

Although the public has not been made aware of the results, executives at the banks that were tested
were briefed April 24 (by law, the banks cannot publicize the results without the government‘s
permission). What is known publicly is that banks will be required to keep an extra capital buffer beyond
current requirements in case losses continue to mount.

Under the stress tests, each bank was put through two ―what if‖ scenarios by regulators. Under the first
scenario, it was assumed that the unemployment level will reach 8.8 percent in 2010 and house prices
will decline by 14 percent.

In the second scenario, banks were analyzed for what would happen during a worse-than-expected
downturn; one where unemployment levels would hit 10.3 percent in 2010 and house prices would drop
22 percent this year.

The 19 banks analyzed by the Fed hold one-half of the loans in the U.S. banking system. These
institutions have been using this week to review the government‘s stress tests results and to appeal any



5 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
findings they disagree with. Regulators are expected to give them the final results of the stress tests May
1.

Senate Approves Creation of Financial Markets Commission
The Senate last week approved an amendment that will establish the Financial Markets Commission, a
10-member, bipartisan body now charged with investigating the causes of the current financial and
economic crisis in the United States. Introduced by Sens. Johnny Isakson, R-Ga., and Kent Conrad, D-
N.D., the Financial Markets Commission will be modeled after the 9-11 Commission, which independently
investigated the failures leading up to the September 11, 2001, terrorist attacks and made sound
recommendations regarding how the country could improve to prevent future attacks.

The Financial Markets Commission will have 18 months to investigate all of the circumstances that led to
the current financial crisis and will have the authority to refer to the U.S. Attorney General and state
attorneys general any evidence that institutions or individuals may have violated existing laws. At the end
of its investigation, the Commission will report to Congress its recommendations for statutory or
regulatory changes necessary to protect the U.S. from the repeat of a financial collapse.

―The American people – many of whom saw their retirement accounts take significant losses in recent
months - demand and deserve to know what caused our financial system to spiral downward so far so
fast,‖ said Sen. Conrad. ―We must hold those responsible for this calamity to account.‖

The Financial Markets Commission will include two appointees each by the Speaker of the House and the
Senate Democratic Leader as well as one appointee each from the House Republican Leader; the
Senate Republican Leader; the Chairman of the Senate Banking, Housing and Urban Affairs Committee;
the Ranking Member of the Senate Banking, Housing and Urban Affairs Committee; the Chairman of the
House Financial Services Committee; and the Ranking Member of the House Financial Services
Committee.

The Speaker and Senate Democratic Leader will choose the commission‘s chair. The Senate and House
Republican Leaders will select the vice-chair. Members of Congress as well as federal and state
employees will be prohibited from serving on the Commission.

―The only way to get an objective evaluation of where mistakes were made is to create an independent
commission of experts to ask what went right, what went wrong and what could we have done to prevent
this,‖ Isakson noted. ―We need a forensic audit of the laws of the United States as it relates to the
financial markets and our economy.‖

Isakson and Conrad originally introduced legislation to examine the causes of the current economic crisis
in January 2009. The amendment to create the Financial Markets Commission passed the Senate by a
vote of 92 to 4.

Appraisal Institute’s Amorin to Testify on Mortgage Reform
Appraisal Institute President Jim Amorin, MAI, SRA, will testify in front of the House Financial Services
Committee on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. The bill,
introduced in March by Reps. Brad Miller, D-N.C., and Mel Watt, D-N.C., is aimed at curbing predatory
lending, which has been a major factor in the highest home foreclosure rate in the nation in 25 years. The



6 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
hearing is scheduled for Thursday, April 23, at 10 a.m. A link to the C-SPAN coverage will be provided on
the Appraisal Institute‘s homepage, www.appraisalinstitute.org, Thursday morning.

Amorin will voice the need to address weaknesses in the appraisal regulatory structure, including
increased resources for enforcement, gaps in regulation, and the need to return to fundamental mortgage
lending practices.

He will also address the issues relating to the regulation of appraisal management companies and seek
specific reform for regulatory inconsistencies in Department of Housing and Urban Development policies
that severely impact the payment structure for appraisers engaged by AMCs. Current HUD policies
effectively require that management companies restrict appraisal fees to levels significantly below the
customary appraisal fee for any given market area. President Amorin is expected to discuss these
artificial caps placed on appraiser fees and urge Congress to make necessary reforms.

The testimony is in follow-up to testimony Amorin provided at a March 11 hearing on the same topic, a
copy of which is available at
www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2009/AITestimony_MortageReform_031
109.pdf.

H.R. 1728 is a tougher version of a similar measure sponsored in the previous Congress by Miller and
Watt that would have overhauled mortgage regulations to prevent another subprime mortgage meltdown.
The House approved the bill in 2007 with bipartisan support, but it was never passed by the Senate.

Among the provisions included in H.R. 1728 are measures that would license mortgage originators,
establish two new Federal standards for residential mortgage loans and strengthen appraisal
independence regulations, among other actions.

Specifically in regards to the appraisal process, H.R. 1728 seeks to:
    Establish stronger, enforceable Federal appraisal independence standards with tough penalties,
        which will allow appraisers to act as independent referees to verify the value of the property for
        the buyer, the seller, the lender, and the investor, among others.
    Provide the Appraisal Subcommittee of the interagency Federal Financial Institutions Examination
        Council with a consumer protection mandate and enhances its ability to monitor the performance
        of State appraisal oversight agencies.
    Strengthen appraiser licensing and education standards, and establishes a Federal grant
        program to assist States in their appraisal regulatory activities.

To view H.R. 1728, visit www.house.gov/apps/list/press/financialsvcs_dem/1728.pdf; a summary is
available at www.house.gov/apps/list/press/financialsvcs_dem/summary_of_hr_1728_--_03_26_09.pdf.

Amorin‘s April 23 testimony will be available at
www.appraisalinstitute.org/newsadvocacy/letrs_tstimny.aspx after the conclusion of the hearing.

Sen. Schumer Proposes Federal Help to Fight Mortgage Fraud Nationwide
With mortgage fraud becoming more prevalent, Sen. Charles Schumer, D-N.Y., along with five New York
City district attorneys, have called on the federal government to provide local prosecutors across the



7 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
country with hundreds of millions of dollars to combat the surge. ―Housing scams are a nationwide
problem, and they require a nationwide solution,‖ Schumer said.

Schumer introduced a proposal that would make available $100 million in grants each year to local
prosecutors across the country to fight mortgage fraud beginning in 2010 through 2013. Local
prosecutors would complete for the grants, which the attorney general would issue.

Citing FBI statistics, Schumer said that mortgage fraud and deed theft cost homeowners approximately
$6 billion annually. However, local officials have had trouble investigating and prosecuting such crimes
because of insufficient staff and resources.

―The district attorneys are really strapped,‖ Schumer said. ―Mortgage fraud cases are very labor intensive
because they involve paper trails that require a lot of prosecutors and analysts and they have to pull
people off other cases.‖

Schumer‘s proposal stems from an earmark he successfully attached to an appropriations bill that
provided the Brooklyn district attorney‘s office an $875,000 grant to expand its mortgage fraud initiatives.
Senate Democratic leaders have not yet endorsed the proposal.

Fed: Commercial Property Could Get Special Lending Program
The commercial property market – the latest big threat to economic recovery in the U.S. – could be the
next target of an expanded special lending program from the central bank. According to Dennis Lockhart,
president of the Atlanta Federal Reserve Bank, fed policymakers are still considering whether to include
sponsorship for commercial property loans under its Term Asset-Backed Securities Loan Facility.

At their last meeting, the Fed committee that deliberates the bank‘s policy actions announced a new plan
to buy $300 billion in longer-term Treasury bonds and expand the lending programs aimed at reducing
mortgage rates by $750 billion. The TALF program, which can accommodate around $1 trillion of support
for the asset-backed markets that support consumer and business lending, has only just gotten
underway, to a tepid reception from investors.

The commercial real estate market has suffered on a variety of fronts, from rising unemployment in the
corporate sector to a drop in business travel that‘s depriving hotels of guests. As a result, Lockhart said
there‘s a real risk of a spike in delinquencies and failure to refinance the roughly $400 billion of
commercial real estate loans coming due this year.

Pelosi Plans Commission to Investigate Financial Collapse
During a speech before the Commonwealth Club of California, Democratic House Speaker Nancy Pelosi,
D-Calif., announced that she is calling for a legislative commission to investigate the causes leading to
the financial collapse and determine the costs to taxpayers of the federal bailouts. She said her actions
are the result of concerns she hears from Americans across the country about financial irregularities.

―Seventy five percent of the American people, at least, want an investigation of what happened on Wall
Street,‖ Pelosi said. ―We need to know how we got here … to make sure it does not happen again.‖ The
speaker plans to talk to fellow lawmakers about the proposal when Congress returns from recess.




8 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Pelosi said she had spoken to Treasury Secretary Timothy Geithner about creating a panel modeled after
the Pecora Commission, which studied the 1929 stock market crash. The bipartisan commission helped
lead the way for major banking system reforms and new securities laws including the Securities Act of
1933, the Securities Exchange Act of 1934 and the creation of the Securities and Exchange Commission
in 1935.

With the state of the economy continuing to be a major concern with Americans, political consultant Don
Solem said Pelosi‘s announcement was a perceptive move. ―They [Americans] want the facts, why certain
things didn‘t happen at certain points, and what can be done to prevent it,‖ Solem said.

SEC Roundtable Scrutinizes Credit Rating Agency Regulation
The Securities and Exchange Commission invited an array of credit rating agency executives, consumer
and investor representatives, academics and other financial industry stakeholders to examine the
commission's oversight of credit rating agencies, which have been widely blamed for misleading investors
by giving high ratings to securities containing subprime mortgages.

The April 15 roundtable discussion featured four panels of witnesses, who addressed a variety of topics,
including what the rating agencies themselves are doing to address the problems, competition issues
(from a domestic and global perspective), and recent SEC rulemaking initiatives governing conflicts of
interest, competition and transparency.

At the meeting, SEC Chair Mary Shapiro said, "Clearly, the role of credit rating agencies must be an area
for our intense review as we think about how to promote investor protection and market integrity, and
restore confidence in our financial system." She added, "The status quo isn't good enough. Rating agency
performance in the area of mortgage-backed securities backed by residential subprime loans, and the
collateralized debt obligations linked to such securities has shaken investor confidence to its core."

Lawmakers on both sides of the aisle – as well as regulatory officials including FDIC Chair Sheila Bair –
have criticized the ratings agencies for their role in the financial crisis. Fed Governor Randall Kroszner
has stated that investors should "trust, but verify" the credit ratings these agencies issue.

At a House Oversight Committee hearing in October, lawmakers focused on whether the business model
of companies such as Moody's, Standard & Poors and Fitch – which are paid by the issuers of the
securities they evaluate – might inherently represent a conflict of interest that contributed to the
overvaluation of (subprime) residential mortgage-backed securities in recent years, and subsequent
financial market turmoil. Some industry critics recommend a new model in which companies are paid by
investors.

The SEC will reportedly use remarks from Wednesday's forum – and public comments – as it considers
additional regulations in this area. Public comments are due to the agency by May 15.

Obama Expected to Tap Fannie Head to Run TARP
According to the Wall Street Journal, President Barack Obama is expected to tap Fannie Mae Chief
Executive Herb Allison to head the government's $700 billion Troubled Asset Relief Program. Allison, the
former chairman of investment company TIAA-CREF and a former Merrill Lynch & Co. executive, has run
Fannie Mae since September, after the U.S. took over the mortgage giant and its sister firm, Freddie Mac.



9 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The selection would leave the administration searching for permanent leaders of both Fannie and
Freddie. David Moffett, Freddie's CEO, announced his resignation last month.

Allison, who would become Assistant Secretary for the Office of Financial Stability, would replace Neel
Kashkari, a holdover from the Bush administration, who was asked by Treasury Secretary Timothy
Geithner to stay on until a replacement was found. If confirmed, Allison will become point person for the
program, according to the Wall Street Journal, including defending plans for spending the program's
remaining cash, and representing the administration if it requests more bailout funds from Congress,
which many observers expect.

Geithner has been searching for months for someone to run TARP, the Wall Street Journal said. Various
candidates either have not made it through the vetting process or have pulled out of consideration. Last
month, the leading candidate, hedge-fund manager Frank Brosens, withdrew for personal reasons.
Allison has been on the short list from the beginning, but the need to replace him at Fannie complicated
matters.

Rep. Frank Criticizes Moody’s Negative Outlook on U.S. Municipalities
Rep. Barney Frank, D-Mass., Chair of the House Financial Services Committee, recently criticized
Moody‘s Investors Service after the rating agency assigned a negative outlook on all debt issued by local
governments in the United States. Frank said he will conduct a hearing in May about Moody‘s recent
action, which he categorized as unfairly impacting local governments.

―I am troubled by the action of Moody‘s Investors Service to issue a negative outlook across the board on
America‘s municipalities, which could raise the interest rates on cities and towns making it more
expensive to borrow funds for infrastructure improvements. Today‘s action could result in an unjustifiable
burden on local governments, and this may have the unintended consequence of undercutting the
stimulative effect of the economic recovery package. Interest rates on full faith and credit general
obligation bonds are already too high and there is not demonstrated record of default.‖

Moody‘s attributed the negative sector-wide outlook to the weak economy. ―The negative outlook reflects
the fiscal challenges local governments face as a result of the housing market collapse, dislocations in
the financial markets and a recession that is broader and deeper than any recent downturn,‖ said
Moody‘s Senior Vice President Eric Hoffmann. ―The current economic environment will clearly pose
significant challenges for many if not most local governments.‖

Treasury Clarifies TALF Program Details
Following up on its plan to purge toxic assets from the financial system, the Treasury Department has
announced an expanded initiative to complement the Federal Reserve Board's newly established Term
Asset-Backed Securities Loan Facility program. The goal of Treasury‘s plan is to both encourage
purchases of risky real estate loans and restore the market for higher-quality existing commercial real
estate loans.

The Fed started the TALF program in March, lending to investors buying securities backed by auto,
credit-card, education and small-business loans. In coming months, the program will expand to include
securities backed by commercial real-estate loans as well as to encompass ―legacy‖ assets that were
originated before 2009.



10 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The expansion of the TALF program (from a $200 million emergency-lending to a $1 trillion emergency-
lending program) comes after repeated requests from the commercial mortgage-backed securities
industry to rewrite the program to provide for loans of at least five years, rather than the current three-
year limit, to avert a meltdown in the market.

The Fed has yet to grant the CMBS industry‘s request outright, as the government appears to be wary of
loosening limits on the TALF program because longer loans would make it more difficult to tighten credit
when inflation picks up. Conversely, however, the Fed appears to recognize that rejecting the industry‘s
request may further stymie the TALF program and slow efforts to revive the economy.

In its first two months, the TALF program has received applications to borrow more than $6 billion. If the
Fed increases the TALF-supported loan limit to five years, the number of requests for applications is
expected to go up dramatically.

OCC Chief Calls for Regulatory Consolidation
Comptroller of the Currency John Dugan said there is a strong case for consolidating banking agencies
under a restructured financial regulatory system with a so-called dedicated prudential supervisor charged
with monitoring day-to-day operations.

He said there should be at least some consolidation of banking oversight duties currently shared by his
office, the FDIC, the Office of Thrift Supervision, and the Federal Reserve Board, but questioned whether
the Federal Deposit Insurance Corporation is the right agency to handle all types of large financial
institutions subject to the new regime.

Dugan also called for the creation of a systemic risk regulator, which would be responsible for taking a
broader look at the financial landscape and reining in those large institutions—such as banks, insurance
firms, and hedge funds—that have potential to cause harm to the entire system. Dugan drew applause
from the American Bankers Association in calling for more flexibility in how banks apply fair value
accounting rules.

Dugan's comments were similar to those House Financial Services Committee Chairman Barney Frank,
D-Mass., made to the ABA conference. Frank said regulators need to be more realistic about assets that
banks intend to hold until maturity. Franks also pledged to inquire with the Securities and Exchange
Commission about allowing any changes to mark-to-market to apply to long-term assets that banks have
already written down.

Frank also said it is a good sign that some financial institutions have expressed eagerness to return
capital infusions received under the Troubled Assets Relief Program. Whether they can return funds may
depend on the results of ―stress tests‖ ordered by the Obama administration.

Frank to Introduce Anti-Subprime Lending Bill
Rep. Barney Frank, D-Mass., Chair of the House Financial Services Committee, said he is working on
legislation that would limit future subprime lending, as well as address executive compensation and limit
systemic risk. "We will bring a bill out in April that will stop people from getting loans in the future that they
cannot repay," said Frank. "It is important that we say you can't securitize 100 percent of anything." Frank



11 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
said he expects to hold hearings on a bill by the end of the month and he aims for the package to become
law by the end of the year.

Frank said he did not propose to eliminate mortgage securitization but said that allowing lenders to
securitize the full value of a loan encouraged overly risky lending practices. His bill would limit the
securitization of subprime mortgages, but Frank said his eventual goal would be to apply the no-100-
percent securitization rule across the financial industry. His comments came at an April 6 speech at
Harvard University.

Frank said his bill also will take on the issue of executive bonuses in an effort to ensure that financial
industry officials do not take excessive risks. The aim is to do away with a culture in which, he said, "If
you take a big risk and it pays off, you make money and if you take a big risk and it costs the company
money, you break even."

While activity in the subprime mortgage market has largely ground to a halt, taking the economy with it,
Frank said he is pushing legislation to restrict it in the future out of a presumption the market will return
someday. "It won't be dead forever," Frank said of subprime lending. "It would be a grave mistake to think
it's never going to come back again."

Mortgage Fraud Bill Introduced in House; Contains Major Appraisal
Provisions
On March 26, Rep. Brad Miller, D-N.C. introduced House Resolution 1728, The Mortgage Reform and
Predatory Lending Act of 2009, which aims to protect consumers and financial institutions by stopping
abusive lending practices. H.R. 1728 consists of many provisions from H.R. 3915, which passed the
House in 2007, but was not enacted into law, including provisions that ensure an independent appraisal
process, strengthen federal and state appraisal regulations, and grant additional resources for
enforcement. The bill would require mortgage originators to retain a 10 percent economic interest in all
non-qualified mortgages, which is an attempt to address concerns about the securitization market.

To view a complete summary of H.R. 1728, which the House Financial Services Committee is expected to
―markup‖ the bill after the Easter recess, visit
www.house.gov/apps/list/press/financialsvcs_dem/summary_of_hr_1728_--_03_26_09.pdf.

Dodd, Frank Pledge Collaborative Effort on Regulatory Modernization
In a March 30 letter to President Obama, Sen. Chris Dodd, D-Conn., Chairman of the Senate Committee
on Banking, Housing and Urban Affairs, and Rep. Barney Frank, D-Mass., Chairman of the House
Financial Services Committee, pledged to work ―expeditiously, carefully and deliberately‖ to create a
framework for 21st Century regulation that will enhance financial stability and protect consumers and
investors.

―Given the importance to our economic future of this set of issues, I will do everything I can to achieve the
broadest possible support for legislation that is effective and comprehensive,‖ said Frank.

Dodd added, ―As we prepare to write legislation that will modernize our financial regulatory system for the
21st century, the Banking Committee has strong partners both across the Capitol and in the White
House. I will also continue to work closely with Ranking Member Shelby and my other Republican



12 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
colleagues to build upon our bipartisan record. We have already begun an intensive series of hearings,
briefings and meetings on this subject which, combined with the important work of the House Financial
Services Committee, will help us pave the way for this significant undertaking. I am confident that
through this process we will be able to design a system to better protect consumers and restore
confidence in our banking system.‖

For the full letter, visit www.house.gov/apps/list/press/financialsvcs_dem/033009_doddfranktoobama.pdf.

Legacy Assets Program Calls for "Third Party Valuations"
As part of its efforts to repair balance sheets throughout the nation‘s financial system, a new Treasury
Department program will require the Federal Deposit Insurance Corporation to select a third-party
valuation firm to provide independent valuation advice and risk analysis. The Public-Private Investment
Program, expressly focusing on ―legacy assets,‖ which are both real estate loans held directly on the
books of banks (―legacy loans‖) and securities backed by loan portfolios (―legacy securities‖) is intended
to spur economic recovery and get financial institutions lending again, according to the Treasury
Department.

Using $75 billion to $100 billion in TARP funds and capital from private investors, the Treasury projects
that PPIP will generate $500 billion in purchasing power to buy legacy assets – with the potential to
expand to $1 trillion over time. This newfound purchasing power will enable financial institutions to raise
more private sector money while also lessening the need for the government to recapitalize the banks
with public capital.

The government believes that the potential relationships with private investors could be mutually
beneficial to both parties down the road as well as to borrowers. In the short-term, however, the majority
of the financing to price and purchase toxic assets will come from the government, which is willing to foot
most of the bill as a means to encourage private investment.

To learn more about the Treasury Department‘s Public-Private Investment Program, including FAQS,
legacy securities summary of terms, and legacy loans summary of terms, visit
www.ustreas.gov/press/releases/tg65.htm.

Government Looks for More Authority over Non-Banking Institutions
With the AIG bailout fresh on everyone‘s minds, last week the Obama administration began asking
lawmakers for more authority to seize non-banking financial institutions that fail. Noting that the
government could have handled the AIG bailout more efficiently had they had better powers of control,
President Obama let lawmakers know that he would like the federal government to have the same
regulatory controls over insurance companies, investment banks and private equity firms as it has over
FDIC-insured banks.

In coordination with the President‘s message, Treasury Secretary Timothy Geithner told a meeting of the
House Financial Services Committee that legislation is needed to give the federal government the same
basic tools to deal with non-bank failures that the FDIC has for banks. In addition, Geithner stressed to
the committee that the Treasury secretary, in consultation with the Federal Reserve Board, should have
the power to determine how to resolve a failing non-bank, based on the FDIC model.




13 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
To read Geithner‘s full statement from the March 24 testimony, visit
www.house.gov/apps/list/hearing/financialsvcs_dem/statement_-_geithner032409.pdf.

Mineral Valuations, Appraisals Debated in Land Exchange Policy
Last week, Acting Deputy Director of the Bureau of Land Management Michael Nedd voiced his agency‘s
support for H.R. 1275, a bill that would allow BLM to acquire thousands of acres of land and mineral
estate in Utah. However, he raised concerns about valuation and appraisal processes laid out in H.R.
1275. Specially, Nedd noted how the bill only requires an appraisal to comply with section 206 of the
Federal Land Policy and Management Act as opposed to Uniform Standards of Professional Appraisal
Practice.

―[T]he legislation omits the language typically included in legislated land sales and exchanges stating that
the appraisals shall be conducted ‗in accordance with the Uniform Appraisal Standards for Federal Land
Acquisitions and the Uniform Standards of Professional Appraisal Practice.‘ The omission of this
language could raise questions about the intent of Congress and the Department recommends its
inclusion,‖ testified Nedd.

In addition to appraisal concerns, Nedd also wanted to ensure that H.R. 1275 expressly denoted that
accrued administrative costs be split equally among participating government agencies. As Nedd stated
in his testimony, ―It is typical in administrative exchanges between governmental entities that costs of the
exchange, including but not limited to appraisals, surveys, and clearances, are split equally between the
two parties. We trust that is the intention of H.R. 1275, but it is not specified and we recommend that this
be made clear.‖

Nedd‘s comments came before the House Natural Resources Committee — Subcommittee on National
Parks, Forests, and Public Lands. To read the entire testimony, visit
http://resourcescommittee.house.gov/images/Documents/20090324npfpl/testimony_nedd.pdf.




14 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Government Update – Residential
HVCC Effective Friday; FAQs, Telebriefing, Myths Document among
Resources Available
Despite legal maneuvers and rumors of intervention and delay, the Home Valuation Code of Conduct is
scheduled for implementation this Friday, May 1, 2009. According to the Code and Fannie Mae and
Freddie Mac, mortgage loans originated by lenders from there on out and after must comply with the
Code in order to be eligible for sale to the GSEs. Leading up to the implementation date, the Appraisal
Institute has drawn appraisers‘ attention to a variety of resources, including recent FAQs from Fannie and
Freddie; a ―Myths and Realities‖ document the organization drafted; and promotion of its May 6
telebriefing on the HVCC with the American Bankers Association.

Earlier this month, Fannie Mae and Freddie Mac released updated guidance on the HVCC in the form of
Frequently Asked Questions, including new sections relating to mortgage broker payment and activity
with authorized agents of lenders. The revised FAQs make it clear that mortgage brokers still cannot
order appraisals directly, but they can ―initiate‖ appraisals with lenders or the lender‘s agents and even
pay them if certain requirements are met. This appears to extend to or include ―appraisal companies,‖ in
addition to appraisal management companies. The Fannie Mae FAQ can be located at
www.magnetmail.net/images/clients/Appraise/attach/FannieMae_HVCC_FAQs.pdf, and the Freddie Mac
FAQ can be located at www.freddiemac.com/singlefamily/hvcc_faq.html.

A telebriefing on the HVCC originally slated for Wednesday, May 6, has been postponed to later in the
Spring in light of a number of still-evolving developments surrounding Home Value Code of Conduct
implementation, according to co-presenter the American Bankers Association. The ABA is in the process
of updating the program content in order to present attendees with the most comprehensive telephone
briefing possible. For important information concerning the updated Home Valuation Code of Conduct
telephone briefing and the new date, visit www.aba.com/teleweb/tb_calendar.

When presented, the briefing will feature banking and appraisal industry leaders discussing the
requirements of the HVCC, including those nuances found in recently released guidelines from Fannie
Mae and Freddie Mac. Presented by the ABA and the Appraisal Institute, the Home Valuation Code of
Conduct: Fundamental Requirements Bankers and Appraisers Need to Know to be Compliant telebriefing
will cover HVCC specifics, including organizational structures and practices that are allowed and
prohibited; myths and realities of the HVCC; how the HVCC will be supervised and enforced; best
practices, policies and procedures to achieve compliance and promote appraisal quality; how various
sectors of the real estate industry, including appraisal companies, appraisal management companies,
mortgage lenders and mortgage brokers, are responding to the code of conduct; and potential impacts
the HVCC has on bank operations such as commercial real estate appraisal functions.

To dispel some of the misinformation in the marketplace today regarding the HVCC, the Appraisal
Institute released a Myths and Realities document, which the organization is asking its members to share
with clients. The Myths and Realities document addresses and answers common questions related to the
HVCC and separates myth from reality when it comes to how the new code will impact the ordering of
appraisal services.




15 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
―In general, there is confusion and misinformation in the marketplace regarding HVCC compliance and
appraisal policies, particularly in regard to use of third-party vendor management firms,‖ noted Bill Garber,
Director of Government and External Relations for the Appraisal Institute. ―We felt a Myths and Realities
document was needed to inform appraisers and clients of appraisal services as to how their relationships
will (and will not) be affected.‖

Perhaps the most common myth currently circulating around the industry is that the HVCC will require all
lenders to use AMCs when ordering appraisals. However, as Garber points out, this is not the reality of
the situation. ―The HVCC makes no stipulation that lenders must use AMCs and, in fact, the Code allows
lenders to engage appraisers directly without using third parties,‖ said Garber.

Another popular misconception is that loan production staff will be prohibited from communicating with
appraisers. As the Myths and Realities document shows, however, loan production staff will have the
ability to communicate with the appraiser, but may not select, recommend or influence the selection of an
appraiser for a given assignment.

―Loan production staff will be prohibited from having substantial talks with appraisers or AMCs relating to,
or having an impact on, a valuation assignment,‖ informed Garber. ―But these individuals will still be
allowed to ask necessary questions and ensure appraisal quality.‖

To view the Appraisal Institute‘s HVCC Myths and Realities document, visit
www.appraisalinstitute.org/newsadvocacy/downloads/HVCC_myths.pdf.

Cram-down Bill Continues to Face an Uphill Battle
The Helping Families Save Their Homes Act of 2009 – a bill designed to assist struggling homeowners –
originally hit a snag in March after passing the House and entering the Senate where moderates from
both side of the aisle expressed reservations. At the center of the debate over the bill has been a
controversial ―cramdown‖ provision that would allow bankruptcy judges to modify the terms of troubled
homeowners‘ mortgages, something the lending industry has been strongly opposed to.

And now the cram-down bill faces a further uphill battle as federal credit unions, representing more than
800 lenders, have refused to endorse the legislation as it stands. This is troubling news for proponents of
the measure, especially as the vote on mortgage legislation looms just four weeks away under a schedule
set by Senate Majority Leader Harry Reid, D-Nevada.

Senate Democrats are said to be working with representatives of the banking industry to iron out
differences the lending community has in regard to the cram-down language, but it‘s unclear whether
those conversations will yield fruitful results.

Last year, Republicans opposed a similar bill and the bankruptcy provision died amid veto threats from
President George W. Bush. In addition, investors have said giving judges the authority to reduce principal
payments or adjust payment plans may cripple the secondary mortgage market and artificially raise
interest rates.

The Helping Families Save Their Homes Act of 2009, which passed the House by a 234-191 vote, would
require 60 votes to clear the Senate.



16 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Inside the Beltway: Read the Fannie, Freddie HVCC Guidance, Effective
May 1
Despite legal maneuvers and rumors of intervention and delay, the Home Valuation Code of Conduct is
scheduled for implementation on May 1, 2009. According to the Code and Fannie Mae and Freddie Mac,
mortgage loans originated by lenders from there on out and after must comply with the Code in order to
be eligible for sale to the GSEs.

Fannie Mae and Freddie Mac have released updated guidance on the HVCC in the form of Frequently
Asked Questions. Appraisal Institute members are strongly encouraged to study the updated FAQs,
particularly new sections relating to mortgage broker payment and activity with authorized agents of
lenders, according to Director of Government and External Relations Bill Garber. The revised FAQs make
it clear that mortgage brokers still cannot order appraisals directly, but they can ―initiate‖ appraisals with
lenders or the lender‘s agents and even pay them if certain requirements are met. This appears to extend
to or include ―appraisal companies,‖ in addition to appraisal management companies.

―We urge you to contact your lender clients now and discuss how you can offer Code compliant services
going forward,‖ Garber said.

The Fannie Mae FAQ can be located at
www.magnetmail.net/images/clients/Appraise/attach/FannieMae_HVCC_FAQs.pdf, and the Freddie Mac
FAQ can be located at www.freddiemac.com/singlefamily/hvcc_faq.html.

Fannie, Freddie Refinance Volume Up
Fannie Mae said its refinancing volume totaled $77 billion in March, up from $41 billion in February, as
borrowers took advantage of lower mortgage rates and a new flexible refinancing program. The
government-sponsored enterprise has not had this level of activity since the refinancing boom of 2003.

Fannie Executive Vice President Tom Lund said they expect even higher volume as millions of additional
homeowners become eligible to refinance under the Home Affordable Refinance initiative. Under that
initiative, Fannie and Freddie Mac are expected to use flexible underwriting to refinance mortgages they
already own or guarantee. Borrowers with loan-to-value ratios between 80 percent and 105 percent can
refinance at current market rates through the program. Mortgage insurance requirements have been
waived on those refinancing transactions. Existing insurance policies will be transferred to the new loan,
however.

As of April 4, lenders and brokers can use Fannie's Desktop Underwriter to process those refinancing
applications.

FHA Preparing Electronic Loan Specifications
With industry-wide originations expected to rise to about 30 percent this year, the Federal Housing
Administration has announced its intentions to publish electronic mortgage specifications.

By moving to a paperless process, the FHA hopes to eliminate the currently required manual input of
mortgage information by lenders. The agency has already circulated a seven-page draft of its electronic




17 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
signature specifications and is on schedule to beta test fully electronic mortgages with approved lenders
later this year.

News of the FHA plan to standardize all mortgage documents has brought mixed reviews from industry
participants. While many feel it is only a matter of time before all mortgage information goes electronic,
others worry that the specifications for mortgage documents will be too complicated and that the FHA will
burden the process by requiring too many standards for lenders to easily adopt.

The FHA's draft electronic signature guidelines embrace the standards set forth by the Mortgage Industry
Standards Maintenance Organization, requiring that the note be a Category 1 Smart Doc, just as Fannie
Mae and Freddie Mac require, and they substantiate the validity of the MERS loan-registration system's
Mortgage Identification Number. The direction being taken by the FHA has been to adopt standards that
have been proven while also creating a blueprint for the entire mortgage industry to automate the process
from start to finish.

Freddie Says ―No‖ to BPOs
On March 31, Freddie Mac revised its Seller/Servicer Guide to strictly prohibit its lenders from using
broker price opinions to value properties for mortgage purchases. Though Freddie had refrained from
using BPOs as a matter of policy, the changes made to section 44.7 of its Selling Guide leave no room for
loopholes.

The revised Selling Guide states that to be acceptable for a transaction, each mortgage file must contain
one of the following reports:
     A written appraisal report
     A written inspection report
     A print-out of the Last Feedback Certificate with the Minimum Assessment Feedback of Form
        2070 or PIA

Also clearly stated in the revised language of Freddie‘s Selling Guide is the requirement that the Seller
may not use tax-assessed valuations or BPOs to determine value.

―Freddie Mac is to be applauded for clarifying their policy on BPOs,‖ said Bill Garber, Director of
Government and External Relations of the Appraisal Institute. ―This action should serve as a model for
government agencies and bank regulators to follow, as it promotes independent and sound collateral
valuation practices. While the action is mostly symbolic, we believe the provision has a broader impact
and should be viewed as an important cog in helping rebuild confidence investor confidence in the real
estate market.‖

The Seller/Servicer guide (Section 44.7) can be accessed at www.freddiemac.com/singlefamily/# under
―Forms and The Guide  Allregs.‖

FHA Adopts MC Form, Releases Declining Market Reporting Requirements
In addition to requiring the Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form
71) for all Federal Housing Administration appraisals performed on or after April 1, 2009, the FHA now
also requires two comparables that closed within 90 days prior to the effective date of the appraisal for




18 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
appraisals of properties located in declining markets. For those properties for which there is a lack of
market data, a detailed explanation is required.

The FHA defines a ―declining market‖ as any neighborhood, market area, or region that demonstrates a
decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing
inventory or extended marketing times. A declining trend in the market will be identified by the
conclusions of the 1004MC form. The appraiser must provide a summary comment and provide support
for all conclusions relating to the trend of the current market. The FHA‘s additional guidance for collateral
assessment practices for properties located in a declining market is effective April 1, 2009.

Specifically, the FHA calls for:
    a minimum of two active listings or pending sales on the appraisal grid of the applicable appraisal
        reporting form in comparable 4-6 position or higher (in addition to the three settled sales).
    that active listings and pending sales are market tested and have reasonable market exposure to
        avoid the use of overpriced properties as comparables.
    active listings reflect list to sale price ratios for the market.
    pending sales reflect the contract purchase price whenever possible or the appraiser will adjust
        pending sales to reflect list to sale price ratios.
    the original list price, any revised list prices, and total days on the market. Appraisers must
        provide an explanation for DOM that do not approximate time frames reported in the
        Neighborhood section of the appraisal reporting form or that do not coincide with the DOM noted
        in the Market Conditions Addendum.
    a reconciliation of the adjusted values of active listings or pending sales with the adjusted values
        of the settled sales provided.
    an absorption rate analysis.

In terms of data reliability, the FHA said that ―appraisal results should be able to be replicated,‖ and that a
Multiple Listing Service by itself is not considered a verification source. Furthermore, the FHA said that
that any sales concessions must be documented.

In the latest guidance, the FHA said that lenders are responsible for properly reviewing the appraisal and
determining if the appraised value used to determine the mortgage amount is accurate and adequately
supports the value conclusion. And that Direct Endorsement lenders are held responsible, equally with
the appraiser, for the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage
insurance purposes.

Fannie Mae Announcement 08-30, which contains further information and instructions on completing the
Addendum, is available online at www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf. For
more information on the latest guidance, call 800-225-5342.

New Requirements for VA Appraisals Announced
The U.S. Department of Veterans Affairs recently issued three new requirements for real estate
appraisals associated with VA-related loans. In suit with Fannie Mae‘s new requirement to supplement
the minimum standards set forth in the Uniform Standards of Professional Appraisal requiring appraisers
to document neighborhood market conditions and trends for all one- to four-unit properties, the VA now




19 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
requires appraisers to include Form 1004MC in all VA-related appraisals. Instructions for completing this
form can be found at www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf.

To ensure that a VA appraiser has the most up-to-date information when performing a valuation, the VA
also now requires that a requestor of an appraisal provide the appraiser with a copy of the property‘s
agreement of sale immediately upon assignment. If an amendment is made to the agreement of sale, the
VA requires that the requester provide the appraiser with the updated contract immediately. If the
requester does not provide the appropriate documents as outlined above, the appraisal will be postponed
and the VA will be notified about the delay.

With an increased interest in the purchase of foreclosed properties, the VA is strictly enforcing its policy
regarding minimum property requirements (MPRs) prior to guaranteeing a loan. As outlined in the VA
Lender‘s Handbook, all properties, including foreclosed properties, must meet the agency‘s MPRs or
demonstrate that it can be repaired to meet the agency‘s standards prior to loan closing. In cases where
repairs are required, the VA requires that the appraisal report contain information regarding the necessary
repairs and include an estimate of the property‘s fair market value as if the repairs had been completed.
Because the estimate of value does not take into consideration the costs associated with the repairs, the
seller is expected to pay for these expenses.

Fannie, Freddie Release Updated FAQs on HVCC
On March 31, Fannie Mae and Freddie Mac released an updated Frequently Asked Questions regarding
the Home Valuation Code of Conduct that is set to take effect May 1, 2009. Highlights of the FAQ include
sections regarding mortgage broker initiation of the appraisal process, quality control, and loan production
staff training.

In its FAQs, Fannie and Freddie reiterated that all appraisers must be licensed or certified by the state in
which the property is located; that lenders are permitted to use in-house appraisers, provided the lender
is in full compliance with other sections of the code; and that lenders are not permitted to use appraisal
reports completed by an appraiser ―selected, retained or compensated in any manner by mortgage
brokers and real estate agents.‖

Fannie and Freddie clarified a mortgage broker can initiate an appraisal request through a lender‘s
designated appraisal management company, and presumably, a designated appraisal company. Further,
Fannie and Freddie also clarified that a lender may direct a broker to use a Web portal set up either by
the lender, or by the lender‘s authorized agent, through which the broker inputs a request for an appraisal
and then triggers the lender‘s system to order an appraisal.

The two lenders also said that they are working with the New York State Attorney General, as well as the
Federal Housing Finance Agency, to finalize the details of the Independent Valuation Protection Institute.
They reiterated that since the Institute has yet to be established, the provisions regarding it in the Code
are not yet effective.

Appraisal Institute members are encouraged to read the FAQs in their entirety and to submit any
questions to insidethebeltway@appraisalinstitute.org. To access the full FAQs as well as a variety of
other HVCC-related information, visit www.freddiemac.com/singlefamily/hvcc_faq.html and
www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/.



20 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Market Conditions Form (1004 MC) Effective Today; AI Offers Free Webinar,
New Seminar
Fannie Mae‘s revised ―Market Conditions Addendum to the Appraisal Report‖ (Form 1004MC), required
for all one- to four-unit properties financed through the agency, goes into effect today, April 1. In response
to the changes, the Appraisal Institute is offering a free Webinar prepared in conjunction with Fannie Mae
and Freddie Mac for download from its Web site, as well as a new seminar.

The New Residential Market Conditions Form, a seminar intended for residential appraisers, review
appraisers, investors, underwriters and lender quality control staff, focuses on researching, analyzing and
reporting market conditions in the subject‘s specific market. Also included in this material will be
discussion of policy differences called for by Fannie Mae Announcement 08-30, which is available at
www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0830.pdf. For more information, including
registering for the offering closest to you, visit
www.appraisalinstitute.org/education/seminar_descrb/Default.aspx?sem_nbr=812am&key_type=S.

In the free 26-minute Webinar, available at www.appraisalinstitute.org/education/webinars.aspx, Mark
Ratterman, MAI, SRA, covers the "Market Conditions Addendum to the Appraisal Report" (Form 1004MC)
including a case study, which will illustrate how to complete the form, which is available at
www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/1004mc.pdf.

Obama Nominates Former Freddie Mac Exec as HUD Assistant
On March 23, the White House nominated David Stevens as assistant secretary at the Department of
Housing and Urban Development. The position requires Senate confirmation and would put Stevens in
charge of the Federal Housing Administration. Stevens is currently president and chief operating officer of
Long and Foster Cos., a Chantilly, Va., based real estate brokerage, and a former senior vice president at
Freddie Mac.

In a December 5 Washington Business Journal article, Stevens promoted the use of appraisals in relation
to gauging the selling price of a home. When asked how best to manage a seller‘s expectations of their
sales price, Stevens said, ―Agents are encouraging the seller to get a real appraisal on the home before
they put it on the market to give them a reality check.‖ While only 10 percent are doing so, Stevens said,
―I highly encourage it. In fact, I‘m looking to buy a home right now, and I‘m getting an appraisal on a
home myself because it‘s really hard to tell what the real home value should be.‖

For the full article, visit http://washington.bizjournals.com/washington/stories/2008/12/08/story13.html.

At Freddie Mac, Stevens was a senior vice president in charge of affordable lending, sales and
marketing. During his tenure, Freddie Mac launched The Home Possible program, which combines
borrower education and early delinquency counseling, zero and three percent downpayment mortgage
products and flexible credit requirements.

One big challenge for Stevens will be the U.S. mortgage market's increasing dependence on FHA loans,
which are made by banks, insured by the government and sold as mortgage backed securities by Ginnie
Mae, the government's mortgage finance agency. The agency said in a February report (available at
www.huduser.org/periodicals/ushmc/winter08/nat_data.pdf) that applications tripled to 2.3 million in 2008,



21 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
from 2007. In the fourth quarter of 2008, the FHA backed about a third of new home loans, up from about
4 percent in 2005, according to Inside Mortgage Finance, a trade publication. The FHA allows borrowers
to take out home loans with a down payment of as low as 3.5 percent, compared with 20 percent for a
typical loan that doesn't require mortgage insurance.

But with the agency's role growing, some lawmakers are worried that the government will wind up on the
hook should defaults and foreclosures surge further. The program "poses significant risks to taxpayers,
and therefore requires diligent oversight," Sen. Richard Shelby, R-Ala., said at a hearing earlier this year.

Stevens would replace Federal Housing Commissioner Brian D. Montgomery, who was appointed by
President George W. Bush.

For David Stevens‘ reaction to his nomination, visit his blog at http://lnfdave.wordpress.com/.




22 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Inside the States
Governors of Iowa and Mississippi Sign Appraiser Independence Laws
Govs. Chet Culver of Iowa and Haley Barbour of Mississippi have each signed new appraiser
independence laws. The language included in the two new laws is identical, and prohibits mortgage loan
originators from making any payment, threat, or promise to any person for the purposes of influencing the
value that is reported in conjunction with an appraisal for a mortgage loan.

Most states, including Iowa and Mississippi, are under a federal mandate to enact new state mortgage
loan originator licensing requirements by July 31, 2009. This mandate was enacted as part of the federal
Secure and Fair Enforcement of Mortgage Licensing Act of 2008, which was a key component of the
Housing and Economic Recovery Act of 2008. The SAFE Act is designed to enhance consumer
protection and reduce mortgage fraud by encouraging states to establish minimum standards for the
licensing and registration of state-licensed mortgage loan originators.

The appraiser independent language that was adopted in Iowa and Mississippi is directly from model
legislation that was prepared by the Conference of State Bank Supervisors. Iowa and Mississippi have
                 th      th
become the 24 and 25 states, respectively, to adopt appraiser independence laws. Additional appraiser
independence language, most based upon the CSBS model, is currently pending in 24 states.

New Mexico Governor Signs AMC Bill into Law
As of June 19, 2009, appraisal management companies operating in New Mexico will have to register
with the New Mexico Regulation and Licensing Department. New Mexico has become the third state to
enact requirements that appraisal management companies operating in the state are registered with, and
regulated by, a state agency.

The Appraisal Management Company Registration Act, which Gov. Bill Richardson signed into law last
week, is based heavily upon model legislation that was drafted by the Appraisal Institute and its
government affairs partners – the American Society of Appraisers, American Society of Farm Managers
and Rural Appraisers, and National Association of Independent Fee Appraisers, which have pledged their
assistance to RLD in drafting the regulations and guidance that will be necessary to implement the
registration and regulation program.

In a letter that was sent to Richardson urging him to sign the bill, the appraisal groups pointed out that
AMCs operating in New Mexico are not required to register with any government agency, and are not
subject to any state or federal regulation. ―While the enactment of S.B. 456 into law will not solve all of the
problems with AMCs, it is an excellent first step,‖ they wrote. ―The enactment of S.B. 456 will provide a
level of transparency into the operation of AMCs, and will give parties that feel that they have been
harmed by an AMC a process with the Regulation and Licensing Department through which they can
adjudicate their disputes,‖ they added.

Bill Garber, Appraisal Institute Director of Government and External Relations stated, ―The Rio Grande
Chapter of the Appraisal Institute is to be congratulated and applauded. Their tireless work on this bill
from the day that it was introduced was instrumental in ensuring that Governor Richardson signed the bill
into law.‖



23 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
New Mexico joins Arkansas and Utah in passing AMC laws. Similar legislation is currently pending in
California, Florida, Hawaii, Louisiana, Missouri and North Carolina.

Idaho Enacts New Appraiser Independence Law
Earlier this week, Idaho Gov. Butch Otter signed into law legislation that will prohibit the inappropriate
influencing of an appraiser. The Idaho Residential Mortgage Practices Act (H.B. 169) is intended to bring
Idaho into compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

The bill prohibits mortgage brokers and lenders from making any payment to an in-house or independent
fee appraiser for the purpose of influencing the independent judgment of the appraiser. Furthermore, the
bill prohibits any person from making any payment, threat or promise to an appraiser to influence the
outcome of an appraisal report.

Violators of either provision are subject to a civil penalty from the Department of Finance of up to
$25,000. Individuals that hold mortgage loan originator licenses may also have their suspended, revoked,
conditioned or non-renewed. These new provisions take effect on July 1, 2009.

Florida Attorney General Forms Mortgage Fraud Group
Florida Attorney General Bill McCollum, who recently formed a working group on how to effectively deal
with mortgage fraud, has urged the group to develop a plan of action for triaging and referring mortgage
fraud cases to help ensure complaints are reviewed by the appropriate agencies. The group of comprised
of law enforcement agents, attorneys and state officials.

―This mortgage fraud crisis is similar to a state of emergency—it will take an all-hands-on-deck approach
between our state‘s agencies to effectively address our citizens‘ concerns,‖ said McCollum. ―We must
work together if we are going to make a difference.‖

McCollum says the group‘s first objective is to coordinate intake of possible mortgage fraud cases. The
second objective is to develop effective tools to educate state residents about how to protect themselves
against mortgage fraud and where to call for help. The group will next meet in mid-April.

With a surge of mortgage fraud complaints in 2008 to the Attorney General‘s Office, McCollum was
instrumental in the creation of a new law providing consumer protection against foreclosure rescue fraud.
Since the law took effect on October 1, 2008, the Attorney General‘s Economic Crimes Division has filed
five civil lawsuits against companies in violation of the law, has reached settlements with another five
companies and is actively investigating 39 other companies.



Utah, Arkansas Governors Sign Nation’s First AMC Laws
Earlier this week, the governors of Utah and Arkansas signed the nation‘s first laws that will bring
appraisal management companies under the regulatory oversight of their state‘s real estate appraiser
boards. In addition to the registration requirements, the new Utah and Arkansas laws, which are effective
on May 12, 2009 and January 1, 2010 respectively, require that AMCs have systems in place to verify
that only licensed or certified appraisers are used. AMCs must also ensure that all appraisals comply with




24 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
the industry‘s Uniform Standards of Professional Appraisal Practice. Additional language is included in
each law to ensure that appraisers are free from inappropriate influence and coercion from AMCs.

One element that is unique to the Arkansas law is a requirement that AMCs operating in Arkansas post a
$20,000 surety bond with the board. Any party, including an appraiser that has a claim against an AMC,
can bring suit to recover funds from the bond. The only exception is that a consumer‘s claims takes
precedence over all other claims. In lieu of a surety bond, an AMC can make a deposit of cash or
securities.

In a letter to Gov. Jon Huntsman, the Appraisal Institute and other appraisal community organizations
stated, ―We congratulate the State of Utah for its leadership role in becoming the first state in the nation to
enact requirements that appraisal management companies register with, and be regulated by, a state
agency.‖ The appraisal organizations will also be writing to Gov. Beebe to thank him for his action on his
state‘s version of this important legislation.

According to the chief sponsor of the Utah law, Rep. Michael Morley, appraisal management companies
may be inclined to hire the lowest-cost appraisers rather than the most appropriately qualified in order to
boost profits. Rep. Morley added that appraisal management companies often hire inexperienced
appraisers who are susceptible to pressure from lenders or mortgage brokers to come up with a
predetermined valuation.

Utah State Rep. Jack Draxler, a member of the Appraisal Institute from North Logan, Utah added, ―If we
want the integrity of the process to go forward, if we want to prevent mortgage fraud, appraisal
management companies should come under the same set of standards as the rest of the people
operating in this very, very critical industry.‖

To view the new Utah law in its entirety, visit http://le.utah.gov/~2009/htmdoc/hbillhtm/HB0152.htm, or to
view the Arkansas law, visit www.arkleg.state.ar.us/assembly/2009/R/Acts/Act628.pdf.

Colorado House Passes Increased Penalties for Appraisal Law Violations
The Colorado House of Representatives has passed a bill that, if enacted into law, will increase the
penalty for violations of law related to real estate appraisals. The bill, H.B. 1183, clarifies that, among
other things, it is illegal for a real estate appraiser to: 1) accept anything of value in order to influence the
outcome of an appraisal; 2) use fraud or misrepresentation to obtain a license; or 3) conduct an appraisal
in a fraudulent manner.

As it is currently drafted, the bill makes these crimes Class 1 misdemeanors punishable by up to 18
months in a county jail and a fine of up to $5,000 for a first offender. A second conviction would be a
Class 5 felony, punishable by up to three years in state prison and a $100,000 fine. These crimes were
previously Class 3 and Class 1 misdemeanors, respectively.

Several other actions which were previously criminal misdemeanors, such as committing violations of the
Uniform Standards of Professional Appraisal Practice or false advertising, are likely to be considered as
civil violations subject to action by the Board of Real Estate Appraisers.




25 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
After passing through the House, the bill is now pending before the Colorado Senate Appropriations
Committee, where a hearing will be held in the near future.

Kansas Governor Signs Legislation to Comply with National SAFE Act
In what may be one of her last acts as governor before moving to the federal government, Kansas Gov.
Kathleen Sebelius recently signed into law a bill designed to bring the state into compliance with
provisions outlined in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. The
Kansas bill, S.B. 240, would make it illegal to influence a person in connection with a residential mortgage
loan by making a payment, threat or promise. Moreover, it would be illegal to make a payment, threat or
promise to an appraiser for the purposes of influencing the value of a property.

The new law, which would amend the Kansas Mortgage Business Act and the Kansas Uniform Consumer
Credit Code, would also establish regulation standards for mortgages and mortgage loan originators. As
described in the law, loan processers and underwriters would be prohibited from advertising that they
perform duties similar to a mortgage loan administrator. In addition, the new law would make it illegal to
engage in fraudulent lending or underwriting practices as well as delay the closing of a loan to increasing
interest, costs, fees or charges payable by the borrower.

S.B. 240 grants oversight authority to Kansas‘ Office of the State Bank Commissioner and would require
participation in the Nationwide Mortgage Licensing System and Registry. Under the legislation, a first-time
conviction for inappropriately influencing an appraiser is considered a Class A misdemeanor with a
penalty of up to one year in prison and a fine of up to $2,500. Second convictions are considered a Level
7 felony. The new law will become effective on July 1, 2009.

To view S.B. 240 in its entirety, visit www.kslegislature.org/bills/2010/240.pdf.




26 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Around the Industry
AI Testifies Before Congress; Urges Action on BPOs, AMCs, Removing Fee
Caps on Appraisers
In April 23 testimony before Congress, Appraisal Institute President Jim Amorin, MAI, SRA, told the
House Financial Services Committee that mortgage reform legislation is needed and called for a ―back to
basics‖ approach to mortgage lending. Amorin voiced his organization‘s support for the recently
introduced H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. (See top story.)

―It is imperative that we return to the fundamentals of mortgage lending with the focus being on the three
C‘s: the capacity to repay the loan; the credit-worthiness of the borrower; and the underlying collateral
value,‖ Amorin noted in his testimony. ―These are the basic tenants of sound lending practices, which are
being ignored by ineffective regulatory oversight and lax underwriting standards.‖

Focusing on the regulatory loopholes plaguing the mortgage lending industry, Amorin presented
lawmakers with a short list of areas the Appraisal Institute believes are in need of reform in order to
protect the safety and soundness of mortgage finance system transactions. His recommendations
included the following:

         Federal requirements for regulation of appraisal management companies (AMCs).
         Removal of compensation caps placed on appraiser fees by HUD and customary practice.
         Requiring the separation and disclosure of fees paid directly to appraisers as well as any
          administrative fees charged by appraisal management companies.

In addition, Amorin stressed the need to close regulatory gaps, like those that allow unregulated valuation
products for mortgage origination. Recently, Freddie Mac clarified that broker price opinions were
prohibited for mortgage origination purposes, and Amorin suggested this provision should apply to all
mortgage loans, in line with his call for refocusing on fundamentals.

Amorin – representing more than 30,000 real estate appraisers from the Appraisal Institute, the American
Society of Appraisers, the American Society of Farm Managers and Rural Appraisers and the National
Association of Independent Fee Appraisers – was testifying for the second time this year in front of
Congressional leaders. On March 11, he spoke to the U.S. House of Representatives Subcommittee on
Financial Institutions and Consumer Credit about the need for mortgage reform legislation.

―We believe that H.R. 1728 will go a long way in restoring confidence in mortgage lending,‖ said Amorin.

To view Amorin‘s testimony to the House Financial Services Committee, visit
www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2009/AI-ASA-ASFMRA-
NAIFATestimonyonMortgageReform042309final.pdf.

ARES Meeting Documents Available on Web
Presentations on public interest value and distressed asset valuation are now available for download from
the Appraisal Institute‘s Web site. The presentations, titled ―Public Interest Value‖ and ―Distressed Asset
Valuation,‖ were presented at the annual American Real Estate Society meeting, held April 1-4 in



27 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Monterey, Calif. A number of other valuation issues were discussed at the meeting, including: market
environment, mark-to-market, and market analysis and market forecasting.

To download the presentations, visit www.appraisalinstitute.org/membership/ares.aspx.

Hanley Wood: Building Activity Stalls in March; Builder Sentiment Perks in
April
The fact that building activity stalled in March – with both total building permits and housing starts
recording declines – is not a concern, according to the latest release from Hanley Wood Market
Intelligence, since existing inventory remains high, despite February‘s increases in new and existing
home sales.

Both new and existing home sales rebounded in February due to falling home prices, record-high
affordability levels and homebuyer tax incentives, according to HWMI. This was the first time since July
2008 that both new and existing home sales increased in the same month. Furthermore, new home
prices have not posted back-to-back monthly gains since March-April 2007, so, it will be interesting to
note what new home prices did in March. That data was not available at press time.

Furthermore, builder sentiment perked up significantly in April, according to HWMI, despite leading
economic indicators declining in March, which suggests further slowing in the economy going into the
summer months. Additional foreclosure activity could also weigh heavily on home prices going forward.

Architecture Billings Index Shows Early Signs of Improving Business
Conditions
After a series of historic lows, the Architecture Billings Index was up more than eight points in March. The
American Institute of Architects reported the March ABI rating was 43.7, up from the 35.3 mark in
February. This was the first time since September 2008 that the index was above 40, but the score still
indicates an overall decline in demand for design services (any score above 50 indicates an increase in
billings). The new projects inquiry score was 56.6. As a leading economic indicator of construction
activity, the ABI reflects the approximate nine- to 12-month lag time between architecture billings and
construction spending for nonresidential projects.

―This news should be viewed with cautious optimism,‖ said AIA Chief Economist Kermit Baker, PhD, Hon.
AIA. ―The fact that inquiries for new projects increased is encouraging, but it will likely be a few months
before we see an improvement in overall billings. Architects continue to report a diversity of business
conditions, but the majority is still seeing weak activity levels.‖

The regional averages for September were: South (43.4), Northeast (41.8), Midwest (37.5) and West
(36.1), while the sector index breakdown was mixed practice (44.0) institutional (42.9), multi-family
residential (39.4) and commercial / industrial (35.0).

The Architecture Billings Index is derived from a monthly ―Work-on-the-Boards‖ survey and produced by
the AIA Economics & Market Research Group. Based on a comparison of data compiled since the
survey‘s inception in 1995 with figures from the Department of Commerce on Construction Put in Place,
the findings provide an approximately nine- to 12-month glimpse into the future of nonresidential
construction activity. For more information, visit www.aia.org.



28 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
CRE Delinquencies, Losses Rose in 2008; Could Inch Higher
There was an increase in construction and land development loans at more than 90 days past due
reported by small bank holding companies and large and regional banks with high concentrations of
commercial real estate, multi-family and non-residential construction loans. Non-accruing loans also
increased from the third to fourth quarters of 2008. In a related survey, nearly 80 percent of small bank
executives said delinquencies would increase this year.

The non-current loans increased to nearly $27 billion by the end of 2008, up from $21.74 billion at the end
of September, said SNL Financial in its Data Dispatch report. Non-current commercial real estate loans at
commercial banks hit 1.64 percent by the end of last year, compared to 4 percent for one- to four-family
loans, SNL Financial said.

Nearly 80 percent of small bank executives said delinquencies would increase this year, said a Bank
Executive Survey conducted by Grant Thornton LLP in conjunction with Bank Director magazine. Two-
thirds of survey respondents, 66 percent, said commercial loan losses would increase, 54 percent
forecast higher consumer loan losses and 44 percent of respondents predicted higher residential
mortgage losses.

Nearly half – 45 percent – of respondents said commercial loan demand would decline, 50 percent
forecast drops in consumer loan demand and 46 percent predicted declines in residential loan demand.
While bankers forecast demand dropping and potential delinquencies and losses increasing this year,
SNL Financial's findings showed more pronounced risk ratios in small banks compared to large, regional
banks at the end of 2008.

Small bank holding companies with less than $5 billion in assets and high concentrations of non-
residential real estate, held ratios of commercial/multi-family and non-residential construction loans to
total risk-based capital from nearly 675 percent to more than 1,616 percent. SNL Financial reported that
by the end of last year, large and regional banks doubled and nearly tripled their non-residential loan
delinquency ratios.

Moody's: U.S. Commercial Real Estate Markets Weaken 'Broadly'
Commercial real estate markets across the United States weakened broadly in the last quarter of 2008,
Moody's Investors Service reported in its latest Red-Yellow-Green study. All seven property types tracked
by Moody's showed declines in market strength during the quarter.

These drops appeared most dramatic in the two hotel sectors, full- and limited-service, which scored zero
for the quarter, reflecting extreme market weakness. For full-service hotels, the steep fall involved a 10.6
percent decline in year-over-year revenue per available room (RevPAR) and an additional projected 6.5
percent drop over the next year. The downward spiral of the limited-service hotel sector reflected a year-
over-year RevPAR growth of -9.5 percent and a projected growth of -6.2 percent.

The study said only the multi-family housing sector continues to have a "green" (strong) score; during the
past quarter, however, even this dropped, by seven points to 72, as vacancy rates rose. The vacancy
level continued to move upward, from 5.8 percent last quarter to 7 percent. Multi-family represented the




29 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
only property type with a positive absorption projection for the coming year, but the supply-demand
imbalance is still an unfavorable negative 0.3 percent.

Retail slipped to 55, joining central-business-district office at 48 and industrial at 46 in yellow territory.
The score for neighborhood and community retail centers dropped 15 points in fourth quarter, falling from
green 70 to yellow 55. Overall, 37 regional markets saw their scores decrease, indicating a broad general
trend toward increased vacancies, Moody's said.

Offices in CBDs fell 11 points to a composite score of yellow 48, its lowest score since 2003, when
Moody's began reporting separate CBD and suburban scores. Eight of the top 10 markets also saw their
scores decrease as absorption eroded. Suburban office scores crossed into red territory; it slid five points
during the quarter, ending at 32.

The industrial sector dropped 16 points to yellow 46 as both absorption projection and supply-demand
imbalance reversed their slight positive movements of the previous quarter. The lower score was caused
by a low absorption projection of -0.8 percent and a supply-demand imbalance of -1.3 percent, Moody's
said.

Moody's said the overall commercial real estate composite score for the United States is 42—a ―dramatic‖
16-point drop from last quarter, Moody's said. The two largest markets supporting commercial mortgage-
backed securities, New York and Los Angeles, continued to weaken significantly during the quarter, with
both falling deep into yellow from green. Moody's rated Oklahoma City, (72); Pittsburgh (61); Honolulu
(60); Wilmington, Del. (57) and San Francisco (55) as the strongest-performing markets. It ranked the five
worst markets as Phoenix (12); Detroit (24); Memphis (26); Trenton, N.J. (27); and San Antonio (27).

BofA, Wells Fargo Top 2008 Commercial/Multifamily Originations
Bank of America and Wells Fargo ranked as top commercial/multi-family originators in 2008, according to
a set of listings released by the Mortgage Bankers Association. Rounding out the top 10 in 2008
commercial/multi-family originations were: PNC Real Estate, Holliday Fenoglio Fowler LP, Wachovia, GE
Real Estate, Capmark Financial Group Inc., CBRE|Melody, Deutsche Bank Commercial Real Estate and
KeyBank Real Estate Capital.

Eight different companies topped the 11 lists reporting originations by investor groups: Capmark Financial
Group as top originator for Freddie Mac, FHA/Ginnie Mae and specialty finance; Bank of America for
commercial banks/savings institutions and conduits; MetLife Real Estate Investments for life insurance
companies; PNC Real Estate for Fannie Mae; KeyBank Real Estate Capital for REITs, mortgage REITs
and investment funds; TIAA-CREF for pension funds; GE Real Estate for credit companies; and Wells
Fargo for other investors.

By dollar volume, the top five intermediaries in 2008 were Holliday Fenoglio Fowler, CBRE|Melody, Wells
Fargo, NorthMarq Capital and PNC Real Estate. The top five lenders were Bank of America, Wells Fargo,
Wachovia, PNC Real Estate and GE Real Estate.

The MBA study, which presents a comprehensive set of listings of commercial/multi-family mortgage
originators and the different roles they play, is available in the MBA's Online Store at
store.mortgagebankers.org/ProductDetail.aspx?product_code=EC6-300017-RP-I.



30 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
April 23 Audio Conference: GSEs Explain New Refinance and Loan Mod
Programs
In an April 23 audio conference, officials from Fannie Mae and Freddie Mac will discuss the ins and outs
of the GSEs‘ new loan modification and refinance programs, including differences between the two
programs; property valuation policies and appraisal standards; loan-to-value ratios and net present value;
and how quickly the new plan will gain traction.

The Refis and Loan Modifications: Understanding the Latest GSE Initiatives audio conference is
presented by Inside Mortgage Finance. Guy Cecala, Publisher, Inside Mortgage Finance, will moderate a
panel of Fannie Mae representatives Dave Worrall, VP Servicing, and Jef Kinney, VP Innovation
Development, and Freddie Mac speakers Patricia McClung, VP Single Family Sourcing, and Robert R.
Padgett, Managing Director of Non-Performing Loans. .

The 90-minute audio conference will be presented at 3 p.m. ET on April 23. Registration fee is $377 per
dial-in site. For more information or to register, visit
www.imfpubs.com/catalog/audioconferences/1000011275-1.html.

Appraisers File Law Suit against Wells Fargo Alleging Appraisal Pressure
Two real estate appraisers filed a lawsuit against Wells Fargo and its appraisal subsidiary, Rels
Valuation, claiming the two organizations pressured them to submit inflated home values in an effort to
increase profits. Filed under the Racketeering Influenced and Corrupt Practices Act, the lawsuit alleges
that plaintiffs Don Pearsall and Timothy Savage were pressured by Wells Fargo to inflate appraisal
values. After refusing, the suit claims that Rels blacklisted both from its approved list of appraisers.

―We plan to show Rels effectively tells the appraisers what they want to see in the valuation, and if they
don‘t deliver, they are locked out of future work,‖ said Steve Berman of Hagens Berman Sobol Shapiro,
the attorney representing the plaintiffs. The firm is involved in other lawsuits against Wells Fargo and
Rels.

According to Berman, Rels Valuation provides appraisers with predetermined figures called Borrower
Estimated Values and expects appraisal reports to contain values exceeding the supplied figure. In
addition, the complaint alleges that the two companies have compromised appraiser independence by
providing valuers with predetermined comparable properties when performing appraisals.

―We‘ve heard from appraisers across the country sharing similar stories—bullied into inflating prices and
blacklisted when refusing,‖ Berman added. ―Apparently the treatment that both Tim and Don experienced
is the same for hundreds, if not thousands of appraisers.‖ The lawsuit seeks to represent all state-
licensed and state-approved appraisers nationwide who have been removed from Wells Fargo or Rels
Valuation‘s approved appraiser list.

Short Sales May Require More Appraisals
With several foreclosure moratoriums expiring over the past few months, lenders are looking for ways to
deal with an anticipated surge of distressed properties, including determining which borrowers will be
eligible for loan modifications and which will go into foreclosure. Included in this mix is providing
homeowners with the opportunity to avoid foreclosure by selling their property through a short sale.



31 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
In an attempt to cut losses and make it easier for distressed borrowers to sell their homes prior to
foreclosure proceedings, Bank of America Corp. recently changed its policy on short sales. Instead of
requiring 10 percent of the purchase price from a sort sale going towards paying off home equity lines of
credit, Bank of America and its subsidiary Countrywide Financial Corp. lowered the requirement to 5
percent of the purchase price.

However, home equity lenders are reluctant to jump on the sort sale bandwagon fearing that the primary
lien holder will likely receive almost the entire purchase price of a home, leaving little or nothing for the
secondary lien holders.

As a major secondary lien holder, Chase Home Finance has a systematic approach when dealing with
short sales. First, Chase determines if the buyer‘s offer is at fair market value, which often requires a new
appraisal. Secondly, the lender investigates the distressed borrower to determine if any
misrepresentations were made and to ensure that the sale was not part of a non-arm‘s length transaction.
During the investigation, the distressed borrower also must submit hardship information to determine their
ability to contribute to the sale‘s shortfall.

Raffi Tal, chief operating officer of I Short Sale Inc., said second lien holders are often offered payoffs of
$1,000 to $3,000 in short sale transactions. However, many such deals are held up or cancelled because
the secondary lien holders refuse to accept the terms. ―The banks are holding short sales hostage,‖ Tal
said.

On the contrary, Tony Renzi, president of GMAC Mortgage and chief operating officer of Residential
Capital LLC, pointed out that second lien holders are becoming more flexible largely because of the
volume of foreclosures expected. ―There‘s more of a recognition, given that the second lien would rather
take something than see the property go through liquidation and have the second lien charged off.
Getting something is better than nothing.‖

AARO, State Regulatory Committee Hold Joint Meeting
In a meeting held on April 3 in conjunction with the Association of Appraiser Regulatory Officials, the
State Regulator Advisory Group heard from a variety of appraisal industry leaders regarding issues and
initiatives that are at the forefront of the valuation profession for 2009. Among those who presented to
SRAG was Appraisal Institute Director of Government and External Relations Bill Garber, who addressed
                           th
expectations of the 111 Congress.

Speaking to the new policies that are affecting the valuation profession, Garber informed SRAG of the 23
states that currently have appraiser independence laws on the books and highlighted that more than 20
states have also proposed similar legislation. In addition, Garber spoke about the SAFE Act for mortgage
originators, which he described as a ―Title XI for mortgage originators,‖ in that it will prescribe, among
other things, education requirements for all mortgage originators.

Garber also addressed a common misinterpretation of the Home Valuation Code of Conduct. While many
believe the HVCC requires lenders to order appraisals through an appraisal management company,
Garber noted that this is incorrect. Lenders may continue to directly order appraisals as long as the
lenders are accountable for the appraisals.



32 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
In addition to Garber‘s presentation, SRAG heard from representatives for The Appraisal Foundation, the
Appraiser Qualifications Board and the Federal Housing Agency.

Speaking on behalf of TAF, John Brenan, director of research and technical issues, identified several
major initiatives the organization has planned for 2009. Among the initiatives he mentioned are:
     The establishment of a task force to develop recommended disciplinary guidelines for states to
         consider when enforcing USPAP. These would be not mandatory, but rather offered as
         guidelines, as TAF has found that disciplinary actions tend to vary widely between jurisdictions.
     The development of a white paper on how to improve the current appraiser regulatory system in
         response to the current economic crisis and the likelihood of a review/revision of Title XI of
         FIRREA. The major elements of the white paper will be circulated to TAF‘s advisory councils for
         review and the white paper will be sent to all appropriate government leaders upon completion.
     The creation of a Best Practices Task Force to discuss and develop an enforceable set of best
         practices and core principles regarding appraisal methodology. It will be composed of
         representatives from TAF, ASC, AARO, AQB, ASB and the Appraisal Sponsors.

In response to questions regarding the effect of the 2008 AQB education changes, Gary Taylor, MAI,
SRA, presented statistics on behalf of the AQB detailing pass rates on the national exam. They are as
follows:
      35-40 percent of students meeting only pre-2008 requirements pass the LR exam on their first try,
         compared to 60-65 percent of those meeting 2008 requirements.
      40-45 percent of students meeting only pre-2008 requirements pass the CR exam on their first
         try, compared to 85-90 percent of those meeting 2008 requirements.
      55-60 percent of students meeting only pre-2008 requirements pass the CG exam on their first
         try, compared to 90-95 percent of those meeting 2008 requirements.

Overall, Taylor emphasized the AQB‘s belief that the exams are working as intended.

Speaking on behalf of HUD/FHA policies and upcoming policy changes was Ada Bohorfoush, a policy
analyst with HUD. She reported on the FHA requirement that an appraisal be performed for every FHA
loan. In addition, she noted the FHA policy shift that now requires a second appraisal to be performed for
high-risk loans, such as when loan amounts exceed $417K or there is an 85 percent or greater cash-out
refinance.

Lastly, Bohorfoush also pointed out that when valuing a property in a declining market, FHA appraisers
will be required to fill out Form 1004MC as well as include a minimum of two comparable listings. This is
the requirement that was established in Mortgagee Letter 09-09.

Speaking on behalf of the Appraisal Subcommittee, Vicki Ledbetter, Acting Director, discussed changes
within the ASC and introduced the ASC‘s new executive director, Jim Park. Most significant is a revised
state field review process that will include a letter of findings sent to the state appraisal boards for a 60-
day review and comment prior to any posting on the Appraisal Subcommittee Web site. Previous policy
involved an official letter from the ASC to the state board outlining concerns and posting of this letter and
others in response. Ledbetter also said the ASC is reviewing their one-year policy for states to process
complaints against appraisers.



33 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Report Explores Appraisers' Role in Housing Bubble
The Center for Public Integrity has released a report that has found that lenders often pressured
appraisers to inflate home values. The report‘s findings, which were released last week, are the result of
an analysis exploring the role appraisers may have played in inflating the housing bubble.

Pressure on appraisers to inflate values, especially in thriving markets, is nothing new. Bill Garber,
director of government and external relations for the Appraisal Institute, who was quoted in the report,
notes how appraiser pressure has been an ongoing problem that is just now receiving the attention it
deserves, despite his organization‘s repeated testimony in front of Congressional committees dating back
to 2001.

―In times when lenders were looking to make the largest loans possible and sell to investors, competent
and ethical appraisers were shunned by many in the mortgage industry,‖ explained Garber.
―Unfortunately, similar practices are being perpetuated today with lenders and their agents disregarding
appraiser qualifications from the appraiser hiring process altogether. What we need to start doing is to
build incentives to use competent and ethical appraisers.‖

According to the results of a 2007 study conducted by October Research, a real estate news provider,
more than 90 percent of 1,200 appraisers polled reported feeling pressure to change property values,
usually from lenders, mortgage brokers or real estate agents. That number was staggering and raised red
flags at both the federal and state levels.

Since 2007, Congressional representatives have introduced several pieces of legislation designed to
promote appraiser independence and place stiff penalties on parties who interfere in the appraisal
process. While these actions have been met with banking industry resistance and mixed success, one
new development has had a profound effect on the mortgage lending industry.

In 2007, following an investigation into the abuses in the appraisal process, New York Attorney General
Andrew Cuomo filed a lawsuit against First American Corp. and its subsidiary First American eAppraiseIT,
charging that eAppraiseIT allowed loan production staff at Washington Mutual to pressure appraisers to
inflate home values. Though the lawsuit is still pending, the aftershocks of Cuomo‘s actions are being felt
today.

As a result of Cuomo‘s lawsuit, and the launch of an investigation into whether Fannie Mae and Freddie
Mac knowingly bought loans that included inflated appraisals, the mortgage lending industry agreed to
change. Thus was born the Home Valuation Code of Conduct, an industry standard which affects all
loans eligible for purchase by Fannie and Freddie and bans lenders from pressuring appraisers or
threatening to withhold business. Going into effect on May 1, 2009, the HVCC is intended to safeguard
appraisers from lender pressure.

However, as the Center for Public Integrity‘s report notes, the incentive to pressure appraisers still exists,
especially for supposedly independent appraisal management companies. This is a concern to the
appraisal industry and lenders, many of whom have voiced strong concerns over the shortcomings of the
HVCC.




34 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
―Unfortunately, the HVCC promotes the use of appraisal management companies, which were ironically
what New York Attorney General Cuomo went after in the first place,‖ Garber noted. ―While the HVCC
has its merits, it also contains a good deal of language that is simply lip service to cleaning up the
industry. Unless appraisal management companies become regulated, they are just as capable of
pressuring appraisers as anyone else.‖

To read the report issued by the Center for Public Integrity, visit
www.publicintegrity.org/investigations/luap/articles/entry/1264.

Discount Retailers Score in Down Economy
Discount retailers are poised to reap what rewards are to be had in the current economic environment,
according to the recently released first half 2009 Single-Tenant Outlook retail research report from
Marcus & Millichap‘s research services group.

In line with the report findings, Dollar General Corp. plans to open 450 new stores, which it says will
create as many as 4,000 new jobs. The company‘s same-store sales in February 2009 – the most recent
period reported – were up 15.1 percent over the prior year. Family Dollar Stores Inc. has also seen
business increase. Its comparable store sales for the second quarter of its fiscal year were up 6.4 percent
from a year earlier.

Other cost-friendly retailers, including membership-based wholesalers like BJ‘s Wholesale Club Inc.,
Costco Wholesale Corp. and Sam‘s Club, are seeing mostly positive sales trends as well. For BJ‘s,
comparable store sales (excluding gasoline) for March 2009 were up 8.5 percent from a year earlier and
Sam‘s Club saw a 6.2 percent increase in comparable sales (excluding gasoline) for March 2009.
However, Costco‘s comparable sales for March were down 5 percent from a year earlier.

Some brokers say these consumer shopping trends are translating into single-tenant retail property
market activity. ―Transaction velocity for discount stores picked up 17 percent last year, while the median
price rose 22 percent to $104 per square foot,‖ the Marcus & Millichap report states. ―Some of the price
growth is attributable to new properties trading during that time, rather than across-the-board
appreciation,‖ it added.

Gill Warner, senior director of Stan Johnson Co. is less optimistic. While he hears the sales pitches for
―recession-proof tenants,‖ he says he doesn‘t necessarily see a significant volume in deal activity taking
place. In part, that‘s because not many properties leased to perennial favorites like Wal-Mart and Target
Corp. are ever on the market, he says. And as for dollar stores, which are much more plentiful among
properties available for purchase, he says, ―They‘re not flying off the shelf. They‘re still not priced right.‖

Second Largest Mall Owner Files Chapter 11
Chicago-based General Growth Properties, the second largest owner of malls in the United States, filed
for Chapter 11 bankruptcy last week in what may be the country‘s largest commercial real estate failure in
history. After months of negotiations with its creditors, General Growth was unable to set up new terms for
its $27 billion debt, most in the form of short-term mortgages that are due next year. Approximately $15
billion of its debt had been securitized into commercial mortgage-backed securities.




35 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The mall owner got into trouble after its aggressive expansion during the height of the real estate boom
when cheap lending was plentiful. ―While we have worked tirelessly in the past several months to address
our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing
debt outside of Chapter 11,‖ said Adam Metz, chief executive at General Growth. Prior to filing for
bankruptcy protection, the company had defaulted on several mortgages and placed some of its most
prized properties up for sale.

The company said it will continue to explore strategic alternatives during bankruptcy protection, including
cutting its corporate debt and extending the terms of its mortgage maturities. To stay afloat during
bankruptcy protection, Growth Properties secured a $375 million commitment from Pershing Square
Capital Management, which first must be approved by a bankruptcy court.

What began as a crisis in the residential market has made its way into the commercial real estate market
as office and retail vacancy levels continue to increase. As reported by research firm Reis, Inc., mall
vacancy levels are at their highest level in nearly 10 years. At the end of 2008, the mall vacancy rate was
7.1 percent compared with 5.8 percent the same time last year.

With billions of dollars in CMBS issued during the real estate boom, General Growth‘s decision to file for
Chapter 11 may indicate that bankruptcies and foreclosures, rather than long-term workouts, could be
commonplace. ―We‘ve never had significant CMBS defaults,‖ said Lloyd Lynford, chief executive of Reis
Inc. ―We‘re moving into a brave new world on this.‖

Industry experts now are setting off warnings of an impending surge in CMBS defaults. According to a
recent report issued by Deutsche Bank, two thirds of the $154.5 billion CMBS loans that become due
between now and 2012 will not qualify for refinancing. Worried about such defaults, the Federal Reserve
is considering modifying the Term Asset-Backed Securities Loan Facility to help stabilize the CMBS
market.

Construction Activity Remains Tight as Economy Continues to Struggle
The country‘s struggling economic climate and tight credit markets continue to impact construction activity
in varying magnitudes across all building sectors. As reported by research firm Reis, Inc., completions of
multifamily projects totaled 22,833 units for the first quarter of 2009, which is slightly lower than the
22,955 units that became available during the same period last year. Leading the country with multifamily
completions during the first quarter of 2009 were: Austin (3,535 units), Houston (2,159 units), San Antonio
(1,493 units), Dallas (1,318 units) and Phoenix (1,252 units).

Based on information provided by developers, over 90,000 multifamily units are schedule for completion
in 2009. Although delays and cancellations are expected, new completions will face a competitive leasing
environment as well as pressure to lower both asking and effective rents because of decreasing
occupancy levels.

Office sector completions in the first quarter of 2009 totaled 12.345 million square feet, which is 17
percent lower than 2008‘s first quarter figure of 14.987 million square feet. Leading the country in office
completions during the fourth quarter of 2008 were: New York (2.10 million square feet), Houston (1.14
million square feet), Miami (0.83 million square feet), San Jose (0.77 million square feet) and Suburban
Virginia (0.61 million square feet).



36 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Although 50 million square feet of total office space is projected to become available by the end of 2009,
Reis remains skeptical of the sector‘s ability to achieve this figure citing tight credit availability as well as
the rising level of sublease space availability.

Meanwhile, the retail sector saw approximately 3.3 million square feet of space become available during
the first quarter of 2009, representing the lowest figure on record since Reis began tracking quarterly data
in 1999. Leading the country in retail completions during first quarter 2009 were: Palm Beach (0.32 million
square feet), Seattle (0.30 million square feet), Houston (0.30 million square feet), Oakland East-Bay
(0.27 million square feet) and Central New Jersey (0.24 million square feet).

International RE Group Launches U.S. Annual Index; Unveils May 27 in NY
Investment Property Databank, a performance analyst for the owners, investors, managers and occupiers
of real estate, will launch their first U.S. Annual Index in New York on May 27. IPD will unveil the results of
the 2008 U.S. IPD Annual Index, and compare those to its first quarter 2009 quarterly indicator.

The event will feature a panel of leading investors who will comment on the real estate market returns
and investment uncertainties currently afflicting both the U.S. and global markets. Moderated by Wylie
Greig, former head of research at RREEF, the panel will include Michael Giliberto, Managing Director JP
Morgan Asset Management; Phil McAndrews, Managing Director, TIAA-CREF; and Peter Hobbs, Head of
Global Research, RREEF. Prior to the panel discussion, Christian Menegatti, Managing Editor and Lead
Analyst, RGE Monitor, will give a macro-economic overview. Following the panel, there will be a short
demonstration of Bloomberg‘s Commercial Real Estate applications.

The free event starts at 8:30 a.m. and will be held at Bloomberg Offices, located at 731 Lexington Ave. To
make a reservation, contact Max Arkey at max.arkey@ipd.com.

ABA: HUD Should Withdraw or Suspend RESPA Changes
In a comment letter dated April 9, the American Bankers Association voiced its opinion that the
Department of Housing and Urban Development should withdraw or suspend changes to a section of the
Real Estate Settlement Procedures Act rules, pending further review and coordination with the Federal
Reserve‘s Truth in Lending Act reform efforts.

The proposed rule change in question is one that would amend the definition of ―required use,‖ which the
ABA believes would have serious unintended consequences, conflict with other requirements, and
constitute a dangerous and disruptive regulatory burden in the current market-crisis environment.

―ABA believes that these unintended consequences result from an overly-complicated regulatory scheme
that must be entirely reanalyzed, first in the context of RESPA‘s Section 8 structure, and second, in terms
of the broader system of federal regulations that affect mortgage finance,‖ noted the ABA letter.

HUD‘s proposed changes to RESPA are scheduled to take effect on Jan. 1, 2010.

To read the ABA‘s letter in its entirety, visit www.aba.com/aba/documents/News/RESPALetter41009.pdf.

Germany Makes $384M Takeover Bid for Hypo Real Estate


37 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The United States is not the only country entertaining the thought of nationalizing its banks. Overseas, the
German government last week launched an effort to nationalize battered lender Hypo Real Estate
Holding AG, announcing a voluntary takeover offer worth nearly 290 million Euros ($384 million USD).
The money for the takeover would come from the German government‘s bank rescue fund.

The German government already owns an 8.7 percent stake in Hypo Real Estate, which it purchased for
$60 million Euros last month. Potentially standing in the way of a full government takeover, however, is
the 21.7 percent of the bank that is owned by U.S. private equity firms. For nationalization to occur, the
German government would have to negotiate with private investors to secure their approval for the sale.

Perhaps sensing the potential hurdle to nationalization, German President Horst Koehler signed a new
law last week that would allow the government to expropriate shareholders if voluntary efforts to purchase
stock fail. It has until June 30 to take such action.

If the German government nationalizes Hypo Real Estate, it will set a precedent that countries like the
U.S. will surely watch closely.

Counselors of Real Estate Optimistic about Capital Markets
When it comes to a timeline for the recovery of the nation‘s real estate markets, no ―white knight to the
rescue‖ should be expected, at least according to a panel of experts who spoke at a meeting last week of
the Counselors of Real Estate. However, the experts do see reasons to be optimistic about capital
markets, despite anticipating that declines in value are expected to average in the range of 30–40 percent
before recovery, and that today the market has seen only a 10–20 percent decline in published data. The
comments came during CRE‘s 2009 Mid-Year Meeting in New York, featuring experts in capital markets
and valuation of commercial properties.

As panelist Woody Heller, executive managing director and group head of Capital Transactions Group at
Studley, Inc., pointed out, the world has gotten used to huge returns that are not sustainable. He went on
to note that when investors disregard the ―bubbles‖ of exuberance in the stock market and consider Dow
Jones returns from 1929–1994, the approximate average return was five percent. Heller concludes that
putting realistic expectations in place could return investors to optimism about the future of both the
markets and real estate.

In addition, panelists agree that the U.S. Government‘s Public Private Investment Partnership program
will likely help the real estate industry. Other panelists, including Robert M. White, CRE, president of Real
Capital Analytics, Inc., and Brian Corcoran, MAI, SRA, CRE, executive vice president at Cushman &
Wakefield in New York, suggested optimism can be inferred from the difference between the current
economic cycle and past corrections in the commercial property sector. As supply and demand were
close to equilibrium and construction pipelines were ―less full‖ than prior cycles, panelists predicted that
when capital flows resume to the commercial sector, recovery will be quicker than past real estate
recoveries.

TARP Eligibility Extended to Life Insurers; Good News for CRE Sector
The Treasury Department announced that funds from TARP‘s Capital Purchase Program will be made
available to struggling life insurance companies that own federally charted banks. The development




38 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
brings positive news to the commercial real estate industry as life insurers are a key source of funding for
that sector.

With mortgage-backed securities in their portfolios, toxic assets appear to be at the core of the problem
for many life insurance companies. Liquidity concerns have prompted rating companies to either
downgrade or sound warnings about many insurers, making it difficult for some to raise funds. Further
downgrades could put considerable pressure on some companies, forcing them to take additional write-
downs.

In addition, the struggling economy has prompted many insurers to scale back on commercial real estate
allocations. For example, MetLife typically invested between $7 billion to $10 billion in CRE portfolios. In
2009, however, the figure is expected to be between $4 billion to $5 billion according to Mark Wilsmann, a
managing director at MetLife. Although TARP funding does not necessarily translate into increased CRE
funding, it is expected that insurers will be able to maintain future allocations.

Along with banks and auto manufacturers, the addition of life insurance companies adds a third industry
eligible to receive federal bailout funding. The American Council of Life Insurers sees the Treasury‘s
action as a positive step for the economy. ―As we have argued all along, allowing life insurers to
participate in the CPP would be consistent with the stated goals of the program to increase the flow of
financing to U.S. businesses and stabilize the credit markets,‖ said Frank Keating, chief executive of the
industry group.

Life Insurance Companies Face High Exposure to CMBS
The top 20 life insurance companies holding commercial mortgage-backed securities held more than
$118.67 billion by the end of last year, creating potentially higher exposure for some to CMBS
delinquencies.

Hartford Life Insurance Co., Hartford, Conn., held more than $9 billion in total CMBS with $6.29 billion in
non-first lien A or lower status, said SNL Financial, Charlottesville, Va., in its year-end report of life
company exposure to CMBS. Hartford Life‘s total CMBS assets reflected more than 219 percent of capital
and reserves, the report said, while the company's non-first lien A or lower-rated CMBS was 153.1
percent of capital and reserves, reflective of CMBS exposure to the firm's total assets.

Northwestern Mutual Life Insurance Co., Milwaukee, held $4.93 billion of its $4.95 billion total CMBS in
non-first A or lower-rated classes but its percentage in capital and reserves was 36.7 percent. However,
Allianz Life Insurance Co., Minneapolis, held all its CMBS, $6.85 billion, as non-first lien A or lower and
327.1 percent capital and reserves, SNL Financial said. Allianz had $66.37 billion in total assets at the
end of the year.

Other life companies with high percentages of non-first lien A or lower-rated CMBS as a percentage of
capital and reserves include Security Life of Denver Insurance Co. at 161.6 percent and $2.4 billion, John
Hancock Life Insurance Co., Boston, at 130.6 percent and $4.28 billion of A-rated or lower CMBS and
Allstate Life Insurance Co., Northbrook, Ill., at 128 percent with $4.41 billion.

During the first quarter, Fitch Ratings, Standard and Poor‘s Rating Services and Moody‘s Investor
Services in New York City downgraded CMBS and commercial real estate loan collateralized debt



39 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
obligations, or placed them on CreditWatch Negative. While super senior AAA ratings in CMBS remain
unencumbered, Fitch downgraded some CREL CDOs, which included CMBS, from AAA to BBB ratings.

CBRE: Increased Cap Rates in Most Markets
Over the past year, capitalization rates increased by an average of 150 basis points in 33 of 35
metropolitan markets according to CB Richard Ellis‘ March 2009 Cap Rate Study. The survey showed
higher increases for Class A assets compared to Class B and C assets, as well as value-added
compared to stabilized deals. Historically, Class B and C capitalization rates tended to increase at a
faster pace than Class A rates.

CBRE cited ―deterioration in both capital markets and real estate fundamentals‖ for the increases. ―Given
the recent volatility in the market, we realize that cap rates are rapidly shifting and difficult to pinpoint,‖ the
report said. ―The upward bias of cap rates continues to manifest itself in the market.‖

Markets reporting the highest capitalization rate increases included Atlanta; Austin; Dallas; Charlotte,
N.C.; Houston; Miami; New York; Phoenix; Portland, Ore.; Orange County, Calif.; Orlando; San
Francisco; and Seattle. Markets reporting the lowest increases included Chicago; Cincinnati; Detroit;
Kansas City; Minneapolis; Indianapolis; St. Louis; and Washington, D.C.

FDIC Appoints Deposit Insurance National Bank after State Regulators
Closure
After no buyer emerged for New Frontier Bank, in Greeley, Colo., which state regulators closed earlier
this month, the Federal Deposit Insurance Company established a deposit insurance national bank — a
last resort in which the Deposit Insurance Fund sidesteps a large payout by giving the failed institution's
depositors 30 days to shop for a new bank. The FDIC has used this strategy only five times before, most
recently in July 1982, with the failure of Penn Square Bank of Oklahoma City.

Brokered deposits made up 43 percent of New Frontier's $1.67 billion of deposits as of December 31,
2008, and it was paying handsomely to retain those deposits. For example, FDIC spokesman David Barr
said signs in the bank's lobby declare, "Earn CD-like interest on checking accounts." The failed bank's
vast sum of high-rate CDs and brokered deposits means the newly created bank hardly resembles its
predecessor. It will hold only 10 percent — or about $150 million — of New Frontier's deposits.

Experts said the arrangement could become more common in this downturn, because many of the banks
that are in trouble lack core deposits, making them unattractive to buyers, whose numbers are limited by
capital constraints.

State regulators also closed Cape Fear Bank, Wilmington, N.C., and the FDIC was appointed receiver.
Cape Fear Bank‘s $403 million in deposits will be assumed by First Federal Savings and Loan
Association of Charleston, Charleston, S.C., which also agreed to buy $468 million of the failed
institution‘s $492 million in assets.

U.S. Apartment, Office, and Retail Center Vacancies Hit Highs
U.S. apartment rents fell in the first quarter and the vacancy rate rose to a five-year high as job losses
and falling incomes reduced demand, said Reis Inc. Vacancies climbed to 7.2 percent from 6 percent a
year earlier and 6.6 percent in the fourth quarter, according to the New York-based research firm.



40 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Vacancies were at the same level as the first quarter of 2004, matching the highest since Reis began
conducting its survey in 1999.

Rents paid by tenants fell 1.1 percent from the previous quarter to $984 on average. They were up 0.1
percent from a year earlier, Reis said. Occupied space fell by a net 31,878 square feet, the largest one-
quarter drop since the first three months of 2002, excluding apartments lost to condominium conversions,
said the research firm. Its survey measured 9.56 million apartments, including 22,833 units completed last
quarter.

Reis expects more than 90,000 new units to come to market this year, comparable to the annual average
from 2006 to 2008, when the economy was stronger. This suggests rents could fall further as landlords
offer price breaks, said Reis.

U.S. office vacancies are even higher than U.S. apartment vacancies. Struggling to cut costs in a raging
recession, companies dumped a near-record 25 million square feet of office space in the first quarter,
driving vacancy up and rents down, according to Reis. The office vacancy rate nationwide rose to 15.2
percent from 14.5 percent in the previous quarter, and likely will surpass 19.3 percent over the next year,
according to Reis. That would put the vacancy above the level seen in the real-estate bust of the early
1990s, the worst on record.

Effective rents, which include free rent and other landlord concessions, fell two percent in the first quarter
to a national average of $24.16 per square foot, the largest drop since the first quarter of 2002, according
to Reis. Sublet space, on average, is going for between 10 percent and 15 percent less than what
landlords are charging. Currently, there are about $8.8 billion worth of distressed office assets, or 211
properties, and that number is growing by about 30 properties each month, according to Real Capital
Analytics.

Meanwhile, the retail sector has not fared any better. Vacancies at U.S. malls and shopping centers rose
to their highest in more than 10 years as consumer spending fell and stores closed in the recession,
according to first-quarter data released by Reis. Victor Calanog, director of research at Reis, forecasts
that the declines will last through next year.

Retail vacancies at shopping centers reflected a net decrease in occupied space of 8.7 million square
feet, the biggest drop for a single quarter and more than the 8.65 million square feet given back during all
of 2008. Rents paid by tenants fell 1.8 percent from the previous quarter and 2.9 percent from a year ago,
while landlords‘ asking rents fell 0.6 percent from the prior quarter, the most on record.

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent
the previous quarter and 7.7 percent a year ago, according to Reis.

FASB Updates Troubled Assets Report Rules
Under pressure from Congress, the Financial Accounting Standards Board recently issued formal
guidance affording banks and other financial companies greater leeway in reporting the value of troubled
assets, including mortgage securities. Supporters of the move argue that the previous version of the rules
forced financial institutions to value assets at fire-sale prices, causing a downward spiral in write-downs.
Under the recent changes, banks now will be able to report higher profits by assuming that securities are



41 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
worth more than current market value. Critics, however, believe that the new guidelines could further
damage the credibility of financial institutions by allowing them to hide the real value of troubled assets.

The new guidelines, which take effect in the second quarter for most companies, explain how financial
companies should use mark-to-market when a market is not active. In addition, the guidelines stipulate
that companies must provide greater disclosure about expected cash flows and credit losses when sharp
write-downs are taken.

Rep. Barney Frank, D-Mass., Chair of the House Financial Services Committee, applauded FASB for its
recent action. ―The FASB believes the rule can be applied more fairly and take into account the currently
dysfunctional state of some markets. The integrity of the standard-setting process is preserved, while
avoiding the pro-cyclical effects of improper valuation practices,‖ Frank said. ABA President Edward
Yingling, whose association lobbied for the changes, echoed Frank‘s view, saying that the decision
should ―improve information for investors by providing more accurate estimates of market values.‖

CRE Construction Loans Burdening Smaller Banks
Every construction loan "is almost a workout project" right now because exit strategies put on paper two
or three years ago are not panning out as intended, said Robert Barone, senior vice president at IVI
International, a loan workout group in New York. As such, distressed construction loans, particularly in
condominiums, are catching up with regional and community banks.

Foresight Analytics, California, estimated total delinquency rates in commercial mortgages increased to
nearly 2.6 percent in the fourth quarter, 50 basis points higher than the third quarter and 1.2 percent
higher than the end of 2007. The increase took place at the most rapid rate since delinquencies started
an upward trend in 2006.

Karen Trebach, senior director at Fitch Ratings, New York, said the delinquency rate in commercial real
estate collateralized debt obligations (CREL CDO) stood below three percent late last year, and many
asset managers exercised their right to repurchase poorer performing loans in their pools. However,
CREL CDO delinquencies increased to 5.4 percent and reported repurchases dwindled to none in the
past two months because illiquidity continues in the commercial real estate capital markets.

The report, Dangerous Unintended Consequences: How Banking Bailouts, Buyouts and Nationalization
Can Only Prolong America’s Second Great Depression and Weaken Any Subsequent Recovery, said
1,372 commercial and savings banks are at risk of failure with $1.79 trillion in assets, and 196 savings
and loan associations are at risk with $528 billion in assets. Also, 1,568 banks and thrifts are at risk of
failure with assets of $2.32 trillion because of weak capital, asset quality, earnings and other factors.

Lack of liquidity from the credit crisis and declining property values took condominium projects from
selling out to no longer leasing.

Hanley Wood: Modest Gains Seen in the Housing Sector
With steps taken by the government to help bolster the economy, the housing sector has experienced
incremental gains over the past several weeks. In an April 7 release, Hanley Wood Market Intelligence
reported that new home sales jumped in February to a seasonally adjusted 337,000 units from January‘s
revised figure of 322,000 units. The inventory of new homes dropped to 325,000 units—their lowest level



42 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
since April 2002—from January‘s figure of 339,000 units. On a seasonally adjusted basis, there is now a
12.2-month supply of new homes on the market. However, median new home prices dropped in February
to $200,900 from January‘s revised figure of $206,800.

In February, annualized sales of existing homes increased 5.1 percent from January‘s figure of 4.72
million units, but still 4.6 percent lower from the same period last year. Median existing home prices
increased slightly in February to $165,400 from January‘s figure of $164,800. Inventory of existing homes
increased to a preliminary 3.8 million units from January‘s revised figure of 3.6 million units. There is now
a 9.7-month supply of existing homes on the market.

The Mortgage Bankers Association‘s seasonally adjusted Purchase Index for the week ending March 27
increased to 268.0 from last week‘s figure of 267.8, representing a 0.07 percent gain from the previous
week, but a 24.72 percent decline from the same period last year. According to Freddie Mac‘s April 2
Primary Mortgage Market Survey, average mortgage rates fell the previous week to 4.78 percent. Fixed
rates are now at their lowest levels since Freddie Mac started collecting the data in 1971.

IAS Index: House Prices Remain in Critical Condition
House prices dropped another 3 percent in February according to Integrated Asset Services‘ IAS360
House Price Index released in April. According to the index, from the peak of the real estate bubble in
2006 through February 2009, the median sales price of detached single-family homes in the U.S. dropped
17.9 percent. As reported by Standard & Poor‘s/Case-Shiller Home Price Indices, from the peak through
January 2009, single-family home prices fell 30.2 percent in the 10-city composite and fell 29.1 percent in
the 20-city composite.

―We have seen no indication of a positive turn in the housing markets we track, if anything the rate of
decline in some areas has increased,‖ said Dave McCarthy, President and CEO of Integrated Asset
Services.

As reported in the IAS Index, the median sales price of detached single-family homes dropped 10.9
percent since the economic downturn began in September 2008. Among the four regions tracked in the
index, as of February 2009, the median sales price in the Northeast dropped 4.6 percent from the
previous month and 12.8 percent from September 2008. The South declined 3 percent and 12.8 percent
during the same periods, and the West dropped 2.5 percent and 10.2 percent. The Midwest was the only
region that did not have double-digit declines with drops of 2.3 percent and 8.9 percent during the same
periods.

Out of the 10 largest metropolitan statistical areas in the country, from September 2008 through February
2009, six have experienced double-digit declines in the median sales price as reported in the ISA Index.
Boston, San Francisco and Miami reported the largest drops with declines of 20.3 percent, 19.3 percent
and 18.1 percent, respectively, during the same period. As reported in the S&P Index, all 20 metropolitan
areas tracked experienced annual declines as of January 2009, and nine fell more than 20 percent in
2008.

Appraisal Institute Challenges State Boards to Tackle Enforcement, AMCs
and BPOs



43 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Addressing the Association of Appraiser Regulatory Officials on April 5, Bill Garber, Director of
Government and External Relations challenged the state boards to take consistent and aggressive
enforcement action against bad actors in the appraisal profession. ―Aggressive enforcement is a critical
element to rebuilding investor confidence and the state appraisal boards can and should be a part of the
solution,‖ he said.

Garber presented several findings from a recent review conducted by the Appraisal Institute of 2008
enforcement actions by state appraisal boards. The review analyzed appraiser licenses that were revoked
or voluntarily surrendered in 2008, and several findings were presented, including:
     A total of 258 individuals revoked or surrendering licenses in 2008
     A disproportionate percentage (50 percent) of revocations and surrenders involved Licensed
        appraisers (who make up only 20-25 percent of the appraiser population)
     Fifteen states did not take any action to revoke or surrender any license in 2008.
     The number of nonmember appraisers that received a license suspension or revocation was 23
        times greater than Appraisal Institute members
     7.5 times more nonmember appraisers received a license suspension or revocation than
        Appraisal Institute members received in 2008 (adjusting for population)

The analysis did not include suspension actions taken by state appraisal boards.

Garber also challenged the state boards to assert themselves in appraisal management company
regulation, applauding recent actions by several states to establish state registration and regulatory
requirements. Further, Garber urged state boards to take aggressive action and to partner with sister
state licensing agencies to prosecute unauthorized practice of appraisal, particularly in states that require
appraiser licensing for market value opinions for compensation.

Garber noted that the performance of a BPO or CMA is limited to being used as part of the real estate
listing process in some 23 states. The performance of a BPO for any other purpose in these 23 states is
prohibited, he said, and should be challenged by state boards as the unlicensed practice of appraisal.

―With these issues, professional appraisal organizations pledge to you our support and resources through
model legislation and regulation and grassroots assistance,‖ Garber vowed.

Appraisals Listed in WSJ's "Call to Action"
In a March 30 ―Call to Action,‖ the Wall Street Journal recommended the strengthening of underwriting
standards, including the establishment on ―national real estate appraisal standards.‖ The
recommendation topped the list of 20 principles for rebuilding the financial system, as developed by
participants in The Wall Street Journal Future of Finance Initiative.

Frank Lucco, SRA, Managing Director of IRR-Residential Appraisers & Consultants in Houston, said, ―I
believe the recommendation indicates that industry leaders feel that the latest financial meltdown has
been partially caused by having state, instead of national, appraisal regulation. The entire regulatory body
of the U.S. government is looking to streamline and consolidate those that are responsible for the
supervision and the accountability of various industries such as insurance, banking and securities, among
others.‖




44 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Bill Garber, Director of Government and External Relations provided additional perspectives on the Call to
Action. ―It‘s hard to determine what is meant by the recommendation without further information, but it‘s
possible that many are unaware that national real estate appraisal standards already exist in the form of
USPAP, and that a federally-mandated form of appraisal regulation has been in place for nearly 20 years.
The lack of awareness and understanding of these structures by the public, and particularly leaders in
real estate finance, is a problem in and of itself.‖

Other calls to action included in the list of top 20 principles were recommendations to: bolster funds
provided to the Federal Deposit Insurance Corporation; create a new clearinghouse to enhance
transparency for standardized credit-default-swap contracts; reform rating agencies by eliminating special
status; and limit foreclosures through interest and principle reductions, rent-to-own and other creative
solutions.

Fed Takes Lead in Defining Stress Tests for Banks
According to sources familiar with the Treasury‘s plan to ―stress test‖ the financial system‘s 19 largest
banks, the Federal Reserve has been tasked with the primary testing oversight, a move which appears
intended to satisfy critics who believe that testing oversight by different federal agencies may adversely
affect the thoroughness of the testing process.

The February 10 ―stress test‖ results are expected to be reported to Treasury Secretary Timothy Geithner
in late April and will be used to determine how much capital each bank is required to raise. Under the
terms of the February plan, firms will be given six months to raise the necessary funds either from private
investors or the government.

The stress tests are part of the Obama administration‘s effort to remove distressed mortgage assets from
banks‘ balance sheets in order to free up lending to consumers and businesses. Officials aim to have the
first purchases of the toxic assets by private investors financed by the government within weeks of the
conclusion of the capital-need assessments.

FASB Proposes Fair-Value Overhaul that Might Improve Bank Profits
Acquiescing to lobbying efforts by the U.S. Chamber of Commerce as well as the American Bankers
Association and a range of private companies, the Financial Accounting Standards Board has voted to
relax fair-value accounting rules. It is believed that the eased mark-to-market accounting rules, which
proponents say will help business in slowed markets, may improve bank profits by more than 20 percent.

Those in favor of the FASB move cite that fair-value rules were in need of revision as the market for
mortgages and other assets was not working. Financial institutions felt the old FASB requirement, in
which banks marked assets each quarter to reflect market prices, was punishing financial companies.

In addition to financial industry support for the FASB rule change, 65 members of the U.S. House of
Representatives had urged that FASB-mandated fair-value accounting be suspended. The general belief
is that the shift to market value accounting standards will provide investors with a more accurate picture
of what real property is worth.

Opponents, however, disagree. Many in the industry view fair-market value accounting standards as a
means of market transparency and as a way to reinstall public confidence in U.S. markets. There is



45 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
concern that FASB has simply caved to political pressures instead of maintaining a fair-value accounting
standard that is more transparent than the new rules.

For its part, FASB staff said it was not FASB‘s intent ―to change the objective of a fair-market value
measurement.‖ FASB staff noted that banks should only disregard fair-value accounting rules when
reporting transactions that weren‘t ―orderly,‖ including situations in which the seller was near bankruptcy
or needed to sell the asset to comply with regulatory requirements.

John Hancock Tower Sale May Signal Trouble for Commercial Real Estate
In a move that may more concretely signal the current state of the commercial real estate market,
Boston‘s tallest building, the John Hancock Tower, recently sold in a foreclosure auction for just slightly
more than half of its $1.3 billion 2006 selling price. Two of the building‘s creditors – Normandy Real
Estate Partners and Five Mile Capital Partners – acquired the 62-story building containing 1.76 million
square feet of rentable space for $660.6 million.

When Broadway bought the Hancock Tower in 2006 for $1.3 billion, the building‘s occupancy level was at
99 percent, debt financing was readily available, and office property owners had no trouble increasing
rents and filling vacant space. Investors were willing to pay inflated prices for prime buildings on the
assumption that rents and occupancies would continue to rise. Some investors even considered
impending vacancies a selling point because it meant they would be able to charge higher rents when
leases came up for renewal or when new tenants signed contracts.

However, with the struggling economy, tight credit markets and rising unemployment rates, office vacancy
rates across the country began increasing while rents began falling, making it difficult for owners to
service debt. Not being immune to the economic climate, the Hancock Tower‘s occupancy level fell to
84.5 percent causing Broadway to default on some of the loans it used to buy the building.

Prime Loan Foreclosures Jump in February; Insured Mortgage Defaults
Drop
Foreclosure starts and foreclosure sales of homes purchased with prime loans jumped from January to
February, while those associated with subprime loans dropped 5 percent, according to data from Hope
Now. In related news, defaults on privately insured U.S. mortgages in February fell 15.7 percent from the
previous month, but were up 47 percent from the same time last year, as reported by the Mortgage
Insurance Companies of America.

According to data from mortgage servicers participating in the Hope Now alliance of major mortgage
servicers, foreclosure starts on prime loans totaled 157,000 in February, a 25 percent increase from the
month before. At the same time, foreclosure starts on subprime loans fell 5 percent to 86,000. February‘s
combined total of 243,000 foreclosure starts represents a 12 percent increase from January‘s figure and a
36 percent increase from the same time last year.

While Hope Now mortgage servicers made more than twice as many loan modifications for subprime
borrowers in February—91,333 compared to 42,503 prime borrowers—only 46,033 subprime borrowers
negotiated repayment plans compared to 64,608 prime borrowers.




46 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Hope Now said it helped 244,000 borrowers avoid foreclosure in February by instituting workouts
including loan modifications and repayment plans. According to Faith Schwartz, Hope Now‘s executive
director, the industry is working hard to provide at-risk homeowners with options to avoid foreclosure. ―We
expect the trend to continue as many companies expand their offerings to include the administration‘s
Making Home Affordable refinance and modification programs,‖ she said. ―The mortgage lending industry
is responding to the needs of its customers and offering solutions that are appropriate to the current
market and economic conditions.‖

In terms of privately insured mortgages, according to MICA, 89,722 insured borrowers were at least 60
days late on payments in February compared to the record-setting 106,484 defaults reported in January.
The previous record was set in December with 105,110 defaults.

With government and lender efforts to keep at-risk borrowers in their homes, the MICA also reported that
borrowers who were near foreclosure but are now back on track was nearly 33 percent higher in February
than the month before, increasing from 51,093 to 67,767. February‘s total of those back on track was 41
percent higher than the same time last year.

At the same time, demand for traditional mortgage insurance policies issued in February dropped. The
number of policies issued in February totaled 56,210, a 5.6 percent dip from January‘s figure of 59,569
policies, according to MICA. The drop may be related to the implementation of tighter underwriting
standards, forcing prospective homeowners to either come up with larger down payments, buy less costly
homes or defer buying.

S&P: Downward Trend in Housing Values Continues in 2009
Existing single-family home prices across the United States continued to fall in January according to the
March Standard & Poor‘s/Case-Shiller Home Price Indices. Both the 10-city and 20-city composites set
new record annually declines in January of 19.4 percent and 19.0 percent, respectively. From the housing
market‘s peak in 2006, the 10-city composite is down 30.2 percent and the 20-city composite is down
29.1 percent.

According to David Blitzer, chairman of Standard & Poor‘s Index Committee, all 20 of the metro areas
reported annual declines, and nine of the MSAs fell more than 20 percent in the last year. Phoenix, Las
Vegas and San Francisco reported the largest annual declines in January, with drops of 35.0 percent,
32.5 percent and 32.4 percent, respectively. The best performing cities included Dallas, Denver and
Cleveland with annual declines of only 4.9 percent, 5.1 percent and 5.2 percent, respectively. Looking at
the data from peak-through-January 2009, Phoenix has suffered the most, declining 48.5 percent from its
peak in June 2006. Dallas, however, has fared the best with only a 10.8 percent drop from its peak in
June 2007.

REO Sales Having Impact on Home Prices
According to a new study from Lender Processing Services, Jacksonville, Fla., foreclosure sales have
had a significant impact on home prices in key U.S. markets. The study of changes in regional home
prices between 2007 and 2008 in the nation‘s top housing markets found that the spread between REO
sales prices and non-REO sales prices widened and showed signs of widening further, said Nima
Nattagh, senior vice president of LPS's Applied Analytics division.




47 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The largest drop in prices of REO sales took place in Riverside County, Calif., where home prices fell by
28 percent in 2008 versus 2007; however, including REO sales, prices fell by 34 percent compared to
2007. The study also found that, including REO sales, home prices declined by 29 percent during 2008 in
the Phoenix market, where analysts cite significant overbuilding. When REO sales were excluded from
the analysis, though, the price decline was less severe at 19 percent year over year.

The gap between home prices with and without REO sales was smallest in Seattle, New York and
Cambridge, Mass. Nattagh said that while the national housing market has been affected, the current
turmoil suggests that the current downturn in the housing market is regional, with western states,
Michigan and Florida seeing double-digit declines in home prices, while other regions have fared much
better.

The study's methodology uses a repeat sales model that looks at the sales value of the same home over
time. Nattagh said this particular model is advantageous in that it is not subject to other changes in values
due to mix of properties selling.

To review specific information supporting these findings, visit www.lpsvcs.com/NewsRoom/IndustryData.

Grubb and Ellis: Industrial Space Rates Hold Despite Vacancy
Despite rising vacancy rates and double-digit property value declines, asking rental rates fell ―very little‖
for industrial space, primarily in the logistic market, during the fourth quarter, according to Grubb & Ellis
Co.‘s Logistic Market Trends report. National average asking rental rates for logistic or warehouse
properties fell to $4.16 per square foot per year triple net, ending the fourth quarter at three percent less
than their cyclical peak of $4.29 in the fourth quarter of 2007, the report said. However, vacancy rates
gained 260 basis points and ended the year at 11.7 percent.

The Moody's/REAL National All Property Type Aggregate Index from Real Estate Analytics LLC
measured a yearly decline for industrial property values, 13.3 percent from January 2008 through
December on a national basis. Values for all commercial real estate properties dropped more than 19
percent and, from December to January, values dropped a record 5.5 percent for all property types, the
Index reported.

However, the fourth quarter showed industrial property markets strengthened in the western region of the
United States, up more than three percent, the Index said. Grubb & Ellis said Southern California linked
the industrial supply chain because the area's ports handle more than 40 percent of all U.S. container
imports, and 14 million consumers can be reached within a two-hour truck trip from the twin ports of Los
Angeles and Long Beach.

The Inland Empire of California and Los Angeles ranked second and fifth, respectively, as the top five
markets for logistic space in the U.S., Grubb & Ellis said.

The Moody's/REAL Index said U.S. industrial property prices in the top 10 Metropolitan Statistical Areas,
MSAs with the most transactions by dollar volume, fell by 1.6 percent for the quarter and 7.1 percent for
the year. Industrial property values in the South fell by nearly 11 percent for the year, and Southern
California industrial property values fell 6.2 percent for the year.




48 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
MBA Expresses Objections to Proposed Project Restart Standards
In a recent letter to the American Securitization Forum, the Mortgage Bankers Association reiterated its
objections regarding proposed standards under Project Restart, a major industry-led effort to help
increase securitization industry transparency by imposing various disclosure and reporting practices
involving residential mortgage-backed securities.

The letter applauds the ASF for its efforts in addressing systemic confidence issues, but objects to the
way in which proposed standards have been developed. ―As standards that impact specific business
practices are developed, broad-based industry and trade association participation will be critical to their
successful adoption and implementation. MBA continues to urge ASF to ensure that sufficient
representative samples of originators, servicers and other market participants take part in all elements of
Project Restart‘s development and implementation,‖ the letter said.

Among the MBA‘s objections is that Equifax and Standard & Poor‘s are being proposed as possible
vendors to provide unique loan identifiers to all loans while Mortgage Electronic Registration Systems
(MERS Inc.), which was created by the mortgage industry, including the MBA, to enhance the industry's
transfer to electronic data management, was not. The MBA noted that MERS has already assigned
identifier numbers to roughly 60 percent of loans in the market. Last month, the MBA announced that the
day-to-day operations of its Mortgage Industry Standards Maintenance Organization have been
transferred to MERS.

MBA also expressed concern regarding the proposed disclosure package, which would require the
originator to file a request for a Transcript of Tax Return from the Internal Revenue Service. Although the
proposal has good intentions, the MBA argues that compliance costs could outweigh investor benefits if
implemented.

To view the MBA‘s letter in its entirety, visit
www.mortgagebankers.org/NewsandMedia/PressCenter/68221.htm.

New Edition of Shopping Center Appraisal Book Now Available
The Appraisal Institute‘s recently released book Shopping Center Appraisal and Analysis, second edition,
examines the valuation process for the full spectrum of retail properties, from strip malls to superregional
shopping centers.

The new edition contains significant updates, including new chapters on the market analysis process and
the three types of retail analysis; analysis of investment markets associated with shopping centers;
discussion of recent retailing trends, non-traditional shopping centers, new development strategies and
current market conditions; and a thorough overview of a complex property market and specific guidelines
for property analysis and appraisal.

Cost is $45 for members, $55 for non-members plus shipping and handling. To order, visit
www.appraisalinstitute.org/store/p-145-shopping-center-appraisal-and-analysis.aspx.

CCIM/STDB Host Technology Expo, April 24-25 in Fort Worth
The CCIM Institute and Site-to-do-Business will host the Fort Worth Technology Expo, April 24-25, at the
Omni Hotel in Fort Worth, Texas. At the event, technology companies will exhibit their products and



49 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
services and educate commercial real estate professionals about how to use their technologies to
increase productivity.

Exhibitors include: CCIM, STDBonline, ESRI, REI Wise, expresscopy.com, Lead-Trac, Property Line,
RealHound® LIVE! Retail Lease Trac, Environmental Record Search, USretailcenters.com, and RE
BackOffice. Attendees will have the opportunity to purchase technologies at a discount.

Registration fees vary. For more information and to register, visit www.stdbevents.com.

Appraisal Institute Releases HVCC ―Myths and Realities‖ Document
To dispel some of the misinformation in the marketplace today regarding the Home Valuation Code of
Conduct, the Appraisal Institute has released a Myths and Realities document, which the organization is
asking its members to share with clients. The Myths and Realities document addresses and answers
common questions related to the HVCC and separates myth from reality when it comes to how the new
code will impact the ordering of appraisal services.

―In general, there is confusion and misinformation in the marketplace regarding HVCC compliance and
appraisal policies, particularly in regard to use of third-party vendor management firms,‖ noted Bill Garber,
Director of Government and External Relations for the Appraisal Institute. ―We felt a Myths and Realities
document was needed to inform appraisers and clients of appraisal services as to how their relationships
will (and will not) be affected.‖

Perhaps the most common myth currently circulating around the industry is that the HVCC will require all
lenders to use AMCs when ordering appraisals. However, as Garber points out, this is not the reality of
the situation. ―The HVCC makes no stipulation that lenders must use AMCs and, in fact, the Code allows
lenders to engage appraisers directly without using third parties,‖ said Garber.

Another popular misconception is that loan production staff will be prohibited from communicating with
appraisers. As the Myths and Realities document shows, however, loan production staff will have the
ability to communicate with the appraiser, but may not select, recommend or influence the selection of an
appraiser for a given assignment.

―Loan production staff will be prohibited from having substantial talks with appraisers or AMCs relating to,
or having an impact on, a valuation assignment,‖ informed Garber. ―But these individuals will still be
allowed to ask necessary questions and ensure appraisal quality.‖

To view the Appraisal Institute‘s HVCC Myths and Realities document, visit
www.appraisalinstitute.org/newsadvocacy/downloads/HVCC_myths.pdf.

AI Offers VFR Webinar, Podcast to Help Expand Business Opportunities
The Appraisal Institute is offering a Webinar and a podcast to help appraisers become familiar with the
financial reporting industry and the work that comes from those who prepare and rely on financial reports
as well as the authoritative standard-setters that govern their requirements. As the financial reporting
industry continues to change to meet the needs of investors, it is relying less on historical cost-based
accounting and moving to a market-based, fair value system. By understanding valuation for financial
reporting, appraisers have an opportunity to fulfill a growing need in this changing climate.



50 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The 60-minute webinar, Introducing Valuation for Financial Reporting, will be held April 16 at 10 a.m.
Pacific Time. The program, which is free to appraisal institute members and is $75 for nonmembers, is
approved for one hour of Appraisal Institute continuing education credit for Appraisal Institute members.

Participants who are new to VFR will:
     Learn about the need for real property valuation services.
     Discover what VFR is and isn't, and why fair value is important.
     Gain an understanding of the language of VFR and learn how to speak to clients.
     Realize how their existing appraisal skill set is suited to the role of "real property valuation
        specialist."
     Become familiar with Financial Accounting Standards No. 157.
     Review case studies of financial reporting assignments.
     Recognize how VFR relates to the International Valuation Standards.

Presenters include Pat Asay, MAI, Manager of Lands and Permitting, Northwestern; Thomas Boyle, MAI,
Chief Appraiser, U.S. Bancorp Real Estate Tech Services; Michael Hedden, MAI , Managing Director,
American Appraisal Associates; Andrew Smith, MAI, Partner, KPMG LLP; and Jesse B Vance, Jr., MAI,
SRA, President, Vance Real Estate Services.

In addition to the webinar, the Appraisal Institute has a free VFR podcast currently available for download
as well as a 7-hour seminar debuting May 14. In the Appraisal Institute's new podcast, Micheal Lohmeier,
MAI, SRA, developer and instructor of AI's Introduction to Valuation for Financial Reporting seminar,
explains the meaning of VFR and the role it plays in the appraisal profession. To listen to the podcast,
visit www.appraisalinstitute.org/profession/podcast.aspx.

To learn more about the new classroom seminar, Introduction to Valuation for Financial Reporting,
debuting May 145 in Chicago, visit
www.appraisalinstitute.org/education/seminar_descrb/Default.aspx?sem_nbr=813&key_type=S.

Tenant Credit Analysis Webinar Recording Now Available
A March 25 webinar recording covering topics including tenant credit, tenant creditworthiness, warning
signals that indicate potential credit problems and how credit impacts real estate valuations is now
available for download on the Appraisal Institute‘s Web site. The Appraisal Institute‘s Tenant Credit
Analysis webinar addressed commercial vacancy rate increases and how to analyze tenants and their
creditworthiness for commercial appraisal assignments.

The 84-minute minute recording is $15 for members; $45 for non-members and can be purchased at
www.appraisalinstitute.org/store/p-146-tenant-credit-analysis-webinar-recording.aspx.

MBA Calls for Uniform National Regulation of Mortgage Lending
In a letter to members of key House and Senate committees, the Mortgage Bankers Association called for
legislation to establish a tough new federal regulatory framework for mortgage lending to protect
borrowers nationwide. Among the provisions in a new national lending standard the MBA is calling for are
improvements to the mortgage origination, servicing and appraisal processes.




51 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
MBA's plan, called the Mortgage Improvement and Regulation Act, calls for new lending standards and a
new regulator, the Federal Mortgage Regulatory Agency. MIRA would establish, and FMRA would be
responsible for implementing and updating, new mortgage lending and servicing standards as well as
regulating independent mortgage bankers and mortgage brokers in partnership with state regulators.

In addition to improvements to the mortgage origination, servicing and appraisal processes, the MBA is
also urging: recently promulgated Home Owner Equity and Protection Act regulations; a new duty of care
for mortgage bankers and mortgage brokers to ensure that consumers get the facts they need about loan
options available and costs of their loan transaction; and a requirement that a borrower affirmatively opt-
in, in writing, to a non-traditional mortgage product.

As part of MIRA, HUD and the Federal Reserve would be required to work together in consultation with
the new regulator to develop greatly simplified consumer disclosure forms, including combining Real
Estate Settlement Procedures Act and Truth in Lending Act disclosures to help consumers better
navigate the mortgage process.

Additionally, MIRA would increase resources for investigating and prosecuting mortgage fraud and
establish a national financial literacy and counseling program. As part of that program, MBA suggests
mandatory pre-purchase counseling on certain mortgage products, primarily for first-time home buyers.

For a copy of the letter and an executive summary of the bill, as well as a more detailed outline, visit
www.mortgagebankers.org/MIRA.

Appraisal Subcommittee Hires Jim Park as Executive Director
On March 31, the Appraisal Subcommittee announced the hiring of Jim Park as its Executive Director.
Park has over 23 years of appraisal and mortgage banking experience. The Executive Director
supervises the day-to-day ASC operations and ASC staff as well as represents the ASC before state
appraisal regulatory officials and various appraisal industry groups. Under direction of the ASC, the
Executive Director is responsible for implementing ASC policies, overseeing its programs, and developing
recommendations to the ASC members.

During his career, Park has held executive management and leadership roles at several financial
institutions, as well as four years as the Director of Research and Technical Issues at The Appraisal
Foundation. Park holds a B.A. in organizational communications from the University of Colorado and a
certified general appraiser credential in the Commonwealth of Virginia.

2009 European Hotel Valuation Index Shows 10 Percent Decline in Value
Despite starting 2008 fairly steady, the European hotel market suffered a 10.8 percent decrease in hotel
values, according to the European Hotel Valuation Index 2009 report. As 2008 progressed, there were
more subdued growth rates and a fourth quarter drop off due to a decrease in business travel and
consumer spending, according to the report, issued by Hospitality Valuation Services.

Although 21 cities experienced a double-figure fall in value in 2008, this was not the case uniformly
across Europe – five cities showed either an increase in value or static values: Geneva, Istanbul, Zurich,
Brussels and Berlin.




52 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Added in this year‘s analysis is the division of Europe into four regions: North, South, East and West. In
2008, Western Europe showed the smallest overall fall in values and Eastern Europe the largest.
Although the division is subjective, it demonstrates the importance of location on the performance of the
hotels and their values. In 2008, location returned as the driving force in investment decision-making. The
trend for the year ahead is deleveraging in prime locations, established markets and good-quality
products, according to the report.

The HVI is a hotel valuation benchmark developed by HVS. It monitors annual percentage changes in the
values of typically four-star and five-star hotels in 36 major European markets. To sign up for the free
HVS newsletter, visit www.hvs.com/Register.

Major CMBS Assets Face Tougher Times Ahead
Commercial real estate investors said they do not expect a rebound in any of the commercial real estate
sectors until well into 2010, according to the first quarter PricewaterhouseCoopers Korpacz Real Estate
Investor Survey. More than 115 respondents said they expect pressure on most major property types to
continue in commercial real estate until 2010 at the earliest. Scarce financing, declining tenant demand,
opaque pricing and rising cap rates limited sales activity, along with a wide bid-ask price gap, investors
said.

Moody's Investors Service, in its review of U.S. commercial mortgage-backed securities for large loan and
single-borrower transactions, rated from 1997 through 2008, upgraded three tranches of $48.9 million and
affirmed ratings on 358 tranches, representing $30.4 billion. However, the ratings agency also
downgraded nearly 420 CMBS loans, a $15.5 billion total. Hotels accounted for 42 percent of the loan
balances, office secured 37 percent and retail backed 12.5 percent of balances.

Fitch Ratings said retail loan losses and defaults in U.S. CMBS would likely trend upward for the next
several years. The average retail vacancy rate during the 2002 recession was 12 percent, coinciding with
K-Mart's bankruptcy, but Property and Portfolio Research reported 15 percent vacancies at the end of
2008, and it forecasts nearly 18 percent by the end of this year.

The International Council of Shopping Centers forecasts 73,000 store closings during the first half of
2009, and retail loan losses could increase up to 34 percent to 60 percent as tenant losses mean
operating shortfalls for borrowers, which would cause special servicers to eventually foreclose on
properties, Fitch said.

Retail delinquencies now account for $1.7 billion of the $6.2 billion total delinquent in Fitch's loan
delinquency index. The index across all property types, at 1.28 percent, includes 1.17 percent of all retail
loans currently delinquent, and Fitch said it expects retail sector defaults to contribute a greater
percentage toward the index into 2010 as unemployment increases and consumer spending declines.

Different options to maximize retail recoveries include marketing single-tenant spaces to non-traditional
entertainment tenants, subdividing space to attract smaller tenants or selling back space to large mall
operators for redevelopment, Fitch said.

Minnesota Financier's Fall Indicative of Unregulated System



53 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
A look into the sprawling dealings of a single unregulated financial lender in Minnesota provides a
glimpse into the interconnected mess that the real estate market finds itself in. As reported in the
Minnesota Star-Tribune, a lender named Lakeland Construction Finance LLC loaned hundreds of millions
of dollars to developers, sometimes without visiting sites or requiring an appraisal.

Work at more than a dozen Lakeland projects has been halted during the past two years as the firm
defaulted on more than $400 million in loans from the Bank of Scotland. Since Lakeland is not a bank,
had no customer deposits, and lent money to land speculators and home builders and not home buyers, it
was relatively free from regulatory oversight, allowing it to back developers and write loans that banks
might avoid.

So, when banks wouldn't talk to developer Alan Gilyard after a medical condition forced him to file for
personal bankruptcy years earlier, he turned to Lakeland to partner on more than 20 housing projects
scattered throughout central Minnesota. Gilyard built a sprawling country home and bought 620 acres of
hunting land and three restaurants. "I owe everything I have to Lakeland. And now I'm losing it all,"
Gilyard said. His experience offers a window into the way Lakeland operated.

In a decade of doing business with Lakeland, Gilyard said, the firm never asked him for an appraisal or a
soil test -- standard requests by banks that make development loans. On most of Lakeland's land loans, it
was enough to give the firm a single piece of paper that showed how much the lots would sell for and a
schedule for how the loan would be repaid, Gilyard said. Unlike a bank, which often demands a down
payment of at least 10 percent on a development loan, Lakeland financed up to 100 percent of the cost of
a project.

Another Lakeland customer, Kurt Manley, vice president of Manley Brothers Construction, said "In all my
years with Lakeland, I don't ever recall them doing an appraisal. It definitely set them apart."

Survey: Wealthy Plan to Buy Commercial Real Estate
According to a recent survey from Knight-Frank and Citi Private Bank, more than half of all high-net worth
investors – those with investible assets of $1 million to $10 million, excluding their principal residence –
plan to add to their exposure of residential real estate in the next year or two, while about 47 percent plan
to add to their holdings of commercial real estate. That compares with only 12 percent of such investors
who plan to unload residential real estate. About a third plan to keep their holdings the same.

While they are eager to get further into the market, nearly two-thirds said their property holdings had
decreased in value, with another third saying the decrease was ―substantial.‖ About two-thirds said they
were ―concerned‖ about the declines.

Furthermore, the investment is not for their own residence, as most plan to stay put in their current
residences, with only 7 percent planning an upgrade. About a quarter plan to downsize the number of
vacation homes. ―Some of these sales may be forced,‖ the report said, ―but it is more likely to be a
reflection of a more considered and less-flamboyant approach to life in these recessionary time.‖

For the full report, visit www.knightfrank.com/wealthreport/TheWealthReport2009.pdf.




54 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
EDR and ExactBid Increase Access to Environmental Risk Data via
Partnership
Environmental Data Resources and ExactBid announced an agreement that enables EDR's
environmental risk data and solutions to be provided through ExactBid's Real-estate Information
Management System. RIMS enables lending institutions and others to manage real estate appraisals,
environmental studies and construction inspections. EDR and ExactBid's partnership will provide users
direct access to EDR's environmental risk management reports, including EDR LoanCheck Plus, within
the RIMS Web-based solution.

EDR's environmental records contain current and historic environmental issues affecting properties, such
as leaking underground tanks, hazardous-waste spills and Superfund sites. Understanding the
environmental status of a property helps lenders avoid unexpected risk, reduce default rate and comply
with regulatory requirements, according to the company.




55 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Inside the Institute
AI Closely Monitoring Swine Flu Outbreak
With an eye toward this fall‘s International Valuation Congress in Cancun, Mexico, the Appraisal Institute
is closely monitoring daily developments regarding the recent Swine Flu outbreak. And, although the level
of concern is very high, appropriate planning for this historic joint event with FECISVAL, the organization
of Mexican appraisers, will continue.

―The safety of our members attending the International Valuation Congress is of paramount importance.
As such, we encourage [attendees] to be well-informed and to exercise good and sound judgment, while
placing current headlines in the proper perspective,‖ said Appraisal Institute Jim Amorin, MAI, SRA.

The Regional Meetings and International Valuation Congress are currently scheduled for Cancun,
Mexico, November 10-14, 2009. The event is a joint conference with Federación de Colegios, Institutos y
Sociedades de Valuadores de la República Mexicana, A. C. (FECISVAL). For detailed information about
the Congress and other travel-related information, visit www.appraisalinstitute.org/ivc.

There, you will find links to the latest tourism information, travel updates and tips about Mexico, including
a link to www.mexico-update.com. For the latest State Department information, visit http://travel.state.gov,
where you also may access the Center for Disease Control Web site, www.cdc.gov/. These links are
repeated on the International Valuation Congress homepage.

Past President Charlie Akerson, MAI, 86, Passes Away
Charles B. Akerson, MAI, an internationally known real estate appraiser, counselor, teacher and author,
died April 23, at the age of 86. Akerson, of Weston, Mass., was the 1978 President of the American
Institute of Real Estate Appraisers, the predecessor organization to the Appraisal Institute.

Akerson started in the real estate business in 1947 after serving as a naval officer in World War II and
graduating from Tufts University with a degree in education. His background includes brokerage,
management, construction and valuation. He first worked in real estate in facility planning for Liberty
Mutual Insurance Company. His career associations included Akerson & Gifford, Nordblom
Company, Akerson Valuation Company, Laventhol & Horwath and Akerson & Wiley.

He joined AIREA in 1964, earned his MAI designation in May 1966, and retired from full-time real estate
appraising and consulting in 1997. During his time with the organization, Akerson was a prolific author,
including authoring the books Capitalization Theory and Techniques Study Guide, The Appraiser’s
Workbook and An Introduction to Mortgage-Equity Capitalization, as well as being the 1982 editor-in-chief
of The Appraisal Journal. He won the 1972 George L. Schmutz Memorial Award for his development of
appraisal nomograms and the ground-breaking 1970 article, "Ellwood without Algebra."

In addition to the Schmutz Award, Akerson was honored with the 1985 Harrison-Winder Memorial Award,
1987 Arthur A. May Memorial Award, 1988 Richard D. Simmon Award, and 1993 Grady Stebbins Award.




56 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
In addition to his 1978 AIREA presidency, Akerson also was the first chairman of the Appraisal Standards
Board of The Appraisal Foundation in 1989, and President of Union Panamericana de Asociaciones de
Valuacion (UPAV) from 1996 to 1998.

Always looking to extend the quality in the profession, in a 2007 interview for the Appraisal Institute‘s
Valuation magazine, Akerson said, ―Volunteerism is a great outlet for hard-working professionals who
love what they are doing, and it is also a good way to get to know the younger appraisers. Members can
be influential in inviting new appraisers to come to meetings, take courses, etc. Many senior appraisers,
including myself, have been active in teaching appraisal fundamentals.‖

J. B. Featherston, the 1980 President of AIREA, said Akerson ―had a profound influence on real estate
valuation practice and education for over a quarter of a century. His understanding of the principles and
mechanics of the income approach enabled him to make a complicated subject simple for his
students. [He was] instrumental in preparing appraisers for the changes which were coming down the
pike, including FIRREA, state certification and all the challenges which have engaged the profession for
the past 20 years or so. His leadership, example, and strength of character will be greatly missed.‖

Akerson is survived by his wife, Jean, and daughters Susan, Mary and Carol and their families. Memorial
service arrangements were pending at press time.

Phil Steffen, MAI, to Lead New PGP Phoenix Office
Phil Steffen, MAI, has been named executive managing director of PGP Valuation, Inc.‘s new office in
Phoenix, Ariz. Steffen will focus on developing valuation services for the Arizona markets as the growing
team supports client relationships across the multi-family, industrial, retail, office, land and residential
development markets.

Steffen is a recognized member of the valuation community and 30-year veteran of PGP. He joined PGP
in 1979 and helped establish PGP‘s initial presence in the Portland, Ore. market. In 1984, he moved to
the Puget Sound region and developed PGP‘s Seattle office into a successful 25-person, full service
appraisal operation.

The Phoenix office is being developed in conjunction with team members, and Appraisal Institute
associate members, Matt Steffen and Alexandra Esnard, both of whom transferred to Phoenix from
PGP‘s San Diego office. Current plans call for immediate expansion of the office which will be further
staffed with valuation specialists covering the full spectrum of appraisal needs on a state-wide basis and
leveraging PGP‘s extensive national and international client networks.

Appraisal Institute, Fecisval Host International Valuation Congress in
Cancún in November
The International Valuation Congress, presented by the Appraisal Institute and Federación de Colegios,
Institutos y Sociedades de Valuadores de la República Mexicana, A. C., will take place November 11-13
in Cancún, Mexico.The IVC will allow attendees to network with international clients and associates; gain
fresh perspectives on different cultures, laws and points of view that affect the global marketplace;
combine attendance at Appraisal Institute regional meetings, national programs and international
activities into one package; and increase their knowledge of international practice, theory and business
building.



57 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
The conference hotel is the Fiesta Americana Condesa Cancún, located in the city‘s main hotel zone.
Group lodging rates are $160 for single occupancy and $176 for double occupancy. Conference
registration fees start at $200. For more information or to register, visit
www.appraisalinstitute.org/membership/iac.aspx.

Three Candidates Announced for 2010 Appraisal Institute Vice President
The Appraisal Institute‘s National Nominating Committee announced that it will consider three candidates
for nomination to the position of 2010 vice president of the Appraisal Institute. The three candidates are
M. Ralph Griffin, Jr., MAI, of Spartanburg, S.C.; David C. Lennhoff, MAI, SRA, of Darnestown, Md.; and
Sara W. Stephens, MAI, of Little Rock, Ark. For more information on all of these candidates, visit
www.appraisalinstitute.org/about/2010vpnominees.aspx.

The National Nominating Committee invites input from Appraisal Institute members on the candidates.
Member input should be sent to the committee in care of Darlene Grass at dgrass@appraisalinstitute.org
or 550 W. Van Buren St., Suite 1000; Chicago, IL 60607.

The National Nominating Committee will make its nomination(s) to the Board of Directors at its May
meeting in Orlando, Fla., and the Board will elect the 2010 vice president at its November meeting in
Cancún, Mexico. The 2010 vice president will become president-elect in 2011, president of the Appraisal
Institute in 2012 and immediate past president in 2013.

Deadline for Contributions to Dictionary Development Database Looms
Appraisal Institute designated members have until the end of the month to contribute to the Dictionary
Development Database on the Appraisal Institute‘s Web site. The site is being used to develop the fifth
edition of the dictionary. Since the Database‘s debut in January, hundreds of entries in the dictionary
have been edited. The database will close on April 30, 2009.

To contribute, designated members should log in to their My Appraisal Institute page and open the
Dictionary Development Database. From there, they can:
    • Change the wording of an existing definition
    • Add a new definition to an existing term
    • Add a new term and definition for consideration
    • Comment on the wording of a definition

Designated members also have access to the Dictionary Development Community page for additional
discussion of ―big-picture‖ dictionary issues. Users can: 1) cast their vote in an online poll; 2) post a reply
to one of the topics in the Discussions area; or 3) connect with their peers.

To access the Dictionary Development Database, use the Dictionary Development link in the lefthand
navigation bar of the My Appraisal Institute page. Go to the Dictionary Development Community by
clicking the My Communities link on your My Appraisal Institute page.

Contact dictionary@appraisalinstitute.org with any questions about the dictionary.

AI Members Reappointed to Pennsylvania, Rhode Island Appraisal Boards


58 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Daniel A. Bradley, SRA, has been reappointed by Gov. Edward G. Rendell to serve on the Pennsylvania
State Board of Certified Real Estate Appraisers. Bradley, who was originally appointed to the board in
November 2004, is currently serving as board Vice-Chairman. The primary responsibilities of the board
are to issue certificates and renewals to qualified applicants, promulgate rules and regulations for
protection of the public, and discipline individuals who violate the laws and regulations of the appraisal
profession. Bradley is a Pennsylvania Certified General Appraiser and is also certified by the Appraiser
Qualifications Board to instruct courses in the Uniform Standards of Professional Appraisal Practice.

Bradley, a member of the Pittsburgh Metropolitan Chapter of the Appraisal Institute, is a graduate of
Clarion University of Pennsylvania. He has been affiliated with Czekalski Appraisal Services in Natrona
Heights, Pa., since 1987. He and his wife Michelle, who is also a certified appraiser and AQB-certified
USPAP instructor, reside in Sarver, Pa.

In addition, William E. Coyle, III, MAI, SRA, has been appointed by Gov. Donald L. Carcieri to a second
term on the Rhode Island Real Estate Appraisal Board, and has been elected to serve as Chairman.
Coyle is president of the appraisal firm William E. Coyle Jr., and Associates and is a Certified General
Appraiser in the states of Rhode Island, Connecticut and the Commonwealth of Massachusetts.

AI Vice President to Undergo Surgery
Appraisal Institute 2009 Vice President Joseph Magdziarz, MAI, SRA, recently was hospitalized after a
routine stress test indicated significant blockage in four arteries. Because of the location of the blockage,
Magdziarz will be undergoing quadruple bypass surgery this Friday. According to doctors, recovery will
take four to six weeks.

―The doctors are very confident about this common procedure and tell me that I‘ll be back stronger than
ever. I am so happy I decided to get tested, as it revealed something that could have become a major
problem if left untreated. With a good quality of life as the outcome, I feel blessed to be in the care of
outstanding doctors and to be embraced by the love of my family and friends,‖ Magdziarz said.

Magdziarz has been an active member of the Appraisal Institute for more than 38 years and has served in
a variety of capacities at all levels of the organization. The Appraisal Institute wishes Magdziarz a speedy
and quick recovery.

Appraisal Institute Issues 45-Day Notice of Proposed Amendments to
Bylaws and Regulations
Among the proposed amendments to the Appraisal Institute Bylaws and Regulations that the Appraisal
Institute Board of Directors will consider at its meeting on May 14-15 at the Peabody Hotel in Orlando, are
extending board member terms and policies relating to readmission to designated membership.

The annual meeting of the Appraisal Institute membership will take place on May 15 at the Peabody
Hotel. The meeting, during which the state of affairs of the Appraisal Institute will be discussed, will
commence at 1p.m. and run until all business is concluded.

One proposed change to the Bylaws would extend to four years the term of those members elected by
the Regions to the national Board of Directors. Under the current two-year term, one-half of the national
Directors elected by the Regions turn over every year. Eliminating this frequent turnover would increase



59 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
expertise, institutional memory, and experience on the Board of Directors, according to the proposed
change. A related proposed change to Regulation No. 9 also would extend the terms of Regional
Directors to five years, rather than the current three-year term.

The proposed changes to the Bylaws can be adopted by 60 percent of those Directors present and voting
at a quorum meeting of the Board of Directors. The proposed changes to Regulation No. 9 can be
adopted by a majority of those Directors present and voting at a quorum meeting of the Board of
Directors.

In the other proposed change, the Admissions and Designation Qualifications Committee has
recommended changing the continuing education and readmission review requirements for readmission
to designated membership, based on length of time since membership lapsed, whether the member was
the subject of certain types of peer review cases or discipline or suspension for failure to complete
continuing education, and the reason for termination — resignation, termination for failure to pay dues,
termination for failure to complete continuing education, or expulsion for violation of the Code of
Professional Ethics.

The proposed amendments to Regulation Nos. 4 and 10 to effectuate these changes can be adopted by
a majority of those Directors present and voting at a quorum meeting of the Board of Directors.

The full text of the proposed changes is available on the ―My Appraisal Institute‖ page of the Appraisal
Institute‘s web site at www.appraisalinstitute.org or upon request to the National Office. Those who have
any comments on the proposed changes should contact their elected Directors and/or send your
comments via e-mail to 45daynotice@appraisalinstitute.org. Comments sent to this e-mail address will be
compiled for distribution to the Board of Directors prior to the Board meeting.

Appraisal Institute Signs MOU with Italian Appraisal Groups
The Appraisal Institute has entered into a Memorandum of Understanding with two of the premiere Italian
appraisal and economic development groups in a mutual effort to harmonize international valuation
standards. The Appraisal Institute, the Istituto Italiano di Valutazione Immobiliare (IsIVI) and OSMI-Borsa
Immobiliare di Milano jointly signed the cooperative agreement during the MIPIM Congress held in
Cannes, France, in May.

―As global borders and business markets continue to shrink, we are excited to join together with our
Italian counterparts to explore the issue of improving international valuation and financial reporting
standards,‖ said Terry Dunkin, MAI, SRA, International Relations Chairman, who represented the
Appraisal Institute at the signing. ―As an organization committed to expanding our international relations
efforts, we look forward to the growth of these new relationships.‖

The memorandum marks a first for the Appraisal Institute with an Italian appraisal organization and is
reflective of the Appraisal Institute‘s continued development of key agreements with valuation groups
around the globe. In addition to IsIVI and OSMI-Borsa, the Appraisal Institute has established
relationships with valuation organizations in China, Egypt, Germany, Korea, Mexico, Russia, Ukraine and
Vietnam, among other countries.




60 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
―The financial crisis has highlighted the need for harmonized global criteria for the assessment of value of
real properties,‖ noted Dunkin. ―A recognized valuation standard, combined with accurate valuations,
provides investors with confidence to put money into financial markets. It is the goal of our organization to
ensure that we collaborate with like-minded appraisal groups to ultimately protect the interests of lenders,
investors, the government and consumers.‖

The Appraisal Institute and IsIVI are principal members of the International Real Estate Federation
(FIABCI). Both organizations will participate in FIABCI‘s World Congress in May in Beijing, China, to
address the current economic crisis. The recommendations from these conversations will then be
presented to the United Nations as suggestions for reducing the financial impact on global markets.

Appraisal Institute Chapter Conducts Timely Fraud Seminar
The collapse of the subprime mortgage market, as well as the recent economic downturn, has been met
with a corresponding increase in fraud and schemes connected to mortgages and related transactions.
To educate its members on this issue of national significance, as well as how it directly affects appraisers,
the West Coast Florida Chapter of the Appraisal Institute recently sponsored an innovative and timely
seminar titled How to Avoid Mortgage Fraud Schemes.

Before a standing-room only crowd consisting of members and other real estate professionals, Detective
Steven Firestone of the U.S. Attorney‘s Mortgage Fraud Task Force provided attendees with a
perspective on how appraisers have gotten involved in fraudulent mortgage valuation and offered
practical suggestion on how to avoid an unwitting entanglement. Also discussed were the serious
penalties involved with such crimes. Firestone,a highly decorated detective with more than two decades
of experience working white-collar crime investigations, was selected by both the Florida Insurance Fraud
Task Force and Florida Investigators Education Committee as the 2008 Investigator of the Year.

Firestone and his supervisor, Lieutenant John Womer, stayed after the seminar to answer additional
questions from appraisers. The seminar started a dialogue between the West Coast Florida Chapter and
the Florida State Department of Financial Services in which the chapter has offered to share appraisers‘
perspectives in training sessions for fraud investigators, according to 2009 West Cost Florida Chapter
President Sandra K. Adomatis, SRA.

In Memoriam
The Appraisal Institute regrets the passing of the following designated members, which were reported in
April: Charles B. Akerson, MAI, Weston, Mass.; James C. Hamilton, Jr., MAI Vicksburg, Miss.; William A.
Hammeke, SRA, Pocono Pines, Pa.; and Mercer W. Simmons, MAI, Lincolnton, N.C.

The Appraisal Institute regrets the passing of the following designated members, which were reported in
March: Ross A. Alexander, MAI, SRA, Dunedin, Fla.; E. T. Compere, Jr., MAI, Brownwood, Texas;
Michael S. Delyea, MAI, SRA, Austin, Texas; Wayne D. Georgeson, MAI, Naples, Fla.; Thomas B. Grady,
SRA, Ft. Myers, Fla.; Paul D. Iverson, MAI, Beaverton, Ore.; Lloyd H. McCracken, Sr., SRA, Jonesboro,
Ark.; Charles J. Reinagel, MAI, Manhattan Beach, Calif.; and William H. Wheeler, Sr., MAI, SRA,
Lakeland, Fla.




61 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
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.




62 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
ECONOMIC INDICATORS – February 2009
Market Rates and Bond Yields
                                                    Feb09        Aug08       Feb 08        Aug07        Feb07       Feb06
Reserve Bank Discount                               0.50         2.25        3.50          6.01         6.25        5.50
Prime Rate                                          3.25         5.00        6.00          8.25         8.25        7.50
Federal Funds Rate                                  0.22         2.00        2.98          5.02         5.26        4.49
3-Month T Bills                                     0.30         1.72        2.12          4.20         5.03        4.43
6-Month T Bills                                     0.45         1.92        2.04          4.38         4.96        4.52
3-Month CD                                          1.16         2.79        3.06          5.49         5.31        4.72
LIBOR-3 month rate                                  1.65         3.00        3.12          5.52         5.35        4.75
5-Year Bond                                         1.87         3.14        2.78          4.43         4.71        4.57
10-Year Bond                                        2.87         3.89        3.74          4.67         4.72        4.57
30-Year Bond*                                       3.59*        4.50*       4.52*         4.93*        4.82*       4.73*
Municipal Tax Exempts Aaa†                          4.56         4.44        4.44          4.30         3.93        4.30
Municipal Tax Exempts A†                            5.46         4.96        4.63          4.57         4.24        4.53
Corporate Bonds Aaa                                 5.27         5.64        5.53          5.79         5.39        5.35
Corporate Bonds A†                                  6.47         6.46        6.26          6.29         5.88        5.85
Corporate Bonds Baa                                 8.08         7.15        6.82          6.65         6.28        6.27

Stock Dividend Yields
Common Stocks—500                                   3.07         2.23         2.10         1.92         1.82        1.86

Other Benchmarks
Industrial Production Index¶**                      99.7**       110.3**      113.7**      114.4**      112.5** 109.4**
Unemployment¶                                       8.1          6.1          4.8          4.6          4.5     4.8
Monetary Aggregates¶
   M1, $ Billions                                   1,557.8      1,390.1      1,367.5      1,367.7      1,359.4 1,376.8
   M2, $ Billions                                   8,275.5      7,713.1      7,601.6      7,333.7      7,112.0 6,761.2
Member Bank Borrowed Reserves
   $ Billions^                                      n/a          n/a          0.157        0.975        0.030       0.053
Consumer Price Index
   All Urban Consumers                              212.2        219.1        211.7        207.9        203.5       198.7


Per Capita Income
                                      4Q08                      3Q08        4Q07          3Q07         4Q06      3Q06       4Q05
Per Capita Personal Disposable Income
   Annual Rate in Current $s          32,470                    33,337      32,664        32,325       31,194 31,031 29,934
   Savings as % of DPI(††)            3.2                       1.3         0.4           0.5          0.9    0.5    0.8

*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-rate/ltcompositeindex.html.
**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.
^ As of March 2008, the Federal Reserve no longer supplied the total reserves.




63 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009
Conventional Home Mortgage Terms
                                                  Feb09        Aug08     Feb08       Aug07   Feb07   Feb06
New Houses Loans—U.S. Averages
Interest rate                                     5.09         6.33      5.96        6.73     6.31   6.40
Term                                              28.9         29.1      29.2        29.6    29.5    29.3
Loan Ratio                                        74.2         75.2      78.1        78.6    76.3    75.4
Price                                             340.1        358.1     373.1       368.9   361.9   338.1


Used House Loans—U.S. Averages
Interest rate                                     5.12         6.53      5.94        6.79    6.46    6.47
Term                                              28.0         28.3      27.8        29.3    29.4    28.8
Loan Ratio                                        74.4         76.6      76.0        80.4    78.3    75.8
Price                                             290.3        296.7     298.1       284.2   291.0   298.7

Conventional Home Mortgage Rates by Metropolitan Area

                                                  4Q08        4Q07     4Q06   4Q05    4Q04
Atlanta                                           6.14        6.42     6.50   6.21    5.70
Boston-Lawrence-NH-ME-CT#                         5.78        6.27     6.32   5.95    5.54
Chicago-Gary-IN-WI#                               5.97        6.44     6.62   6.10    5.79
Cleveland-Akron#                                  6.17        6.57     6.67   5.93    5.88
Dallas-Fort Worth#                                6.07        6.40     6.51   6.20    5.80
Denver-Boulder-Greely#                            5.85        6.39     6.51   6.10    5.70
Detroit-Ann Arbor-Flint#                          6.34        6.53     6.56   6.31    5.69
Houston-Galveston-Brazoria#                       5.91        6.40     6.61   6.31    5.88
Indianapolis                                      6.34        6.65     6.80   6.26    5.83
Kansas City, MO-KS                                5.74        6.12     6.14   5.91    5.71
Los Angeles-Riverside#                            6.06        6.43     6.51   5.87    5.49
Miami-Fort Lauderdale#                            6.17        6.59     6.84   6.25    5.95
Milwaukee-Racine#                                 6.09        6.38     6.48   6.01    5.90
Minneapolis-St. Paul-WI                           5.98        6.36     6.43   6.02    5.51
New York-Long Island-N. NJ-CT#                    6.00        6.44     6.52   5.97    5.75
Philadelphia-Wilmington-NJ#                       6.06        6.41     6.63   6.43    5.97
Phoenix-Mesa                                      6.30        6.45     6.61   6.12    5.68
Pittsburgh                                        6.07        6.16     6.14   6.27    5.98
Portland-Salem#                                   5.83        6.35     6.44   6.11    5.71
St. Louis-IL                                      6.15        6.62     6.54   6.24    5.97
San Diego                                         6.03        6.43     6.26   5.90    5.25
San Francisco-Oakland-San Jose#                   6.09        6.46     6.52   5.90    5.47
Seattle-Tacoma-Bremerton                          5.88        6.36     6.56   5.90    5.57
Tampa-St. Petersburg-Clearwater                   6.08        6.49     6.62   6.26    5.79
Washington, DC-Baltimore-VA#                      6.02        6.49     6.54   6.47    5.85

¶                Seasonally adjusted
†                Source: Moody's Bond Record
††               Revised figures used when available
#                Consolidated Metropolitan Statistical area




64 | Appraiser News Online Vol. 10, No. 7 & 8, April 2009

								
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