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									Appraiser News Online
Vol. 10, No. 13 & 14, July 2009

Government Update—Commercial/General
        Credit Rating Agencies Focus of Latest Regulatory Reform [Posted July 29, 2009]
        Bernanke Urges CRE Loan Workouts [Posted July 29, 2009]
        Geithner, Dugan Support CFPA; Clashes with Regulators Ahead [Posted July 29, 2009]
        Obama Plan to Create National Bank Supervisor Sent to Hill [Posted July 29, 2009]
        Senate Explores Lack of Progress in Foreclosure Programs [Posted July 22, 2009]
        Fed: Investors Start Applying for TALF CMBS Loans [Posted July 22, 2009]
        TARP Audit Reveals Bank Spending Habits [Posted July 22, 2009]
        Six Appointed to Financial Crisis Inquiry Commission [Posted July 22, 2009]
        Senate Grills Judge Sotomayor on Controversial Property Rights Legislation [Posted July 15, 2009]
        TALF Restrictions, Fed Assurance Leave Questions for CMBS Market [Posted July 15, 2009]
        Fed's CMBS Arm of TALF Closer to Starting [Posted July 15, 2009]
        Proposed Consumer Agency Would Have Far-Reaching Financial Powers [Posted July 8, 2009]
        Houses Passes Green Bill; Senate to Take Up Late July [Posted July 8, 2009]
        SBA Program Expanded to Cover Expansion, Refinancing Current Real Estate [Posted July 8, 2009]
        Treasury to Name 9 “Toxic Managers” [Posted July 8, 2009]
        Supreme Court Rules State AGs can Pursue National Banks; Appraisal Implications Possible
         [Posted July 1, 2009]
        Regulatory Reform Would Change Accounting Standards [Posted July 1, 2009]
        While Reform Debate Wages, Geithner Looks to Use Existing Options to Make Changes [Posted
         July 1, 2009]
        TALF Might Get Nibbles from REITs [Posted July 1, 2009]
        FDIC Shelves Public-Private Portion of Toxic Assets Plan; Treasury Moves Forward [Posted July 1,
         2009]
        Agencies Issue Rule to Clarify Capital for Modified Mortgage Loans [Posted July 1, 2009]
        Regulators Close Five More Banks [Posted July 1, 2009]

Government Update—Residential
        Fannie Mae Updates HVCC FAQs [Posted July 29, 2009]
        Renewed Interest in FHA 203(k) Program Boosts Appraisals [Posted July 22, 2009]
        New CEO to Take Helm of Freddie Mac [Posted July 22, 2009]
        Professional Affiliation among Freddie Mac's New Appraisal “Best Practices” [Posted July 15, 2009]
        Dodd, Frank Urge Regulators to Investigate Second Mortgage Valuation Practices [Posted July 15,
         2009]
        FHA, VA Loans at 36 Percent Market Share, Highest Since 1990 [Posted July 15, 2009]
        HUD Earmarks $1 Billion to Jumpstart Affordable Housing Construction [Posted July 8, 2009]
        HVCC Moratorium Bill Forwarded to House Committee; Appraisal Institute Responds [Posted
         July 1, 2009]
        Obama Administration Announces New Refi Plan with Appraisal Requirements [Posted July 1, 2009]

Inside the States
        Rhode Island Latest State to Enact Appraiser Independence Law [Posted July 29, 2009]



550 W. Van Buren St., Suite 1000, Chicago, IL 60607 | T 312-335-4100 F 312-335-4400 | www.appraisalinstitute.org
        Hawaii Enacts Appraiser Independence Law [Posted July 22, 2009]
        Louisiana Governor Signs Nation’s 5th AMC Bill into Law [Posted July 15, 2009]
        Delaware Latest State to Enact Appraiser Independence Law [Posted July 15, 2009]
        NY to Hold Exam for Future Eminent Domain Work [Posted July 15, 2009]

Around the Industry
        Moody’s Releases 2Q Red-Yellow-Green Property Report [Posted July 29, 2009]
        CMSA White Paper Addresses Regulatory Reform and CRE Finance [Posted July 29, 2009]
        More Bank Failures [Posted July 29, 2009]
        Banking Survey Finds AD&C Assets Do Not Reflect Market Values [Posted July 29, 2009]
        Moody’s: Commercial Property Declines Slowing [Posted July 29, 2009]
        CRE Loan Loss Provisions Mount as Property Values Decline [Posted July 29, 2009]
        Loan Extensions for Declining CRE Values May Postpone Problem [Posted July 29, 2009]
        Resolutions Low as Distressed Assets Grow: Real Capital Analytics [Posted July 29, 2009]
        New Home Sales: Greater Gain Than Expected [Posted July 29, 2009]
        Home Price Composites Improve: Case-Shiller [Posted July 29, 2009]
        Hanley Wood: Rise in Starts, Permits May Indicate Stabilization [Posted July 29, 2009]
        Architecture Billings Index Takes a Sharp Decline [Posted July 29, 2009]
        Genworth Move to Loosen LTV Criteria [Posted July 29, 2009]
        Green Leasing Gaining Popularity in Sustainable Buildings [Posted July 29, 2009]
        Final Project RESTART Guidelines Released [Posted July 22, 2009]
        Mediation Programs Help At-Risk Homeowners Avoid Foreclosure [Posted July 22, 2009]
        RealtyTrac: 1.5 Million Homes in Foreclosure in 2009 [Posted July 22, 2009]
        IASB Proposes Changes in Fair Value Rule [Posted July 22, 2009]
        Nation's Largest SBA Lender Escapes Bankruptcy, Barely [Posted July 22, 2009]
        Citi Close to Deal with Regulator [Posted July 22, 2009]
        Deutsche Bank Report: Commercial Real Estate Losses Could Reach $300 Billion [Posted July 22,
         2009]
        CRE Investor Survey Indicates Slow Recovery [Posted July 22, 2009]
        Multi-Family Demand Holds Steady as Other CRE Declines [Posted July 22, 2009]
        B of A: Manufacturing Facilities Might Be Lone Construction Bright Spot [Posted July 22, 2009]
        Moody’s: June CMBS Delinquencies Rise, Could Reach 6% by Year-End [Posted July 22, 2009]
        Travel Sanctions Lifted from Mexico; IVC Early Bird Ends Aug. 1 [Posted July 22, 2009]
        Data Verification Methods Online Seminar Now Available [Posted July 22, 2009]
        Green Building Provides New Opportunities for Appraisers [Posted July 22, 2009]
        WSJ: FDIC Handing Failed Banks over to Banks also at Risk [Posted July 15, 2009]
        Significant Downturn in Non-Residential Construction Activity Projected through 2010 [Posted July
         15, 2009]
        IAS: House Prices up 1.6 Percent in May [Posted July 15, 2009]
        Distressed CRE Doubles to $108 Billion [Posted July 15, 2009]
        Audio Conference to Focus on Appraisal Changes; AI Members Save 25% [Posted July 15, 2009]
        Appraisal Institute to Host Residential “Green” Webinar on Aug. 12 [Posted July 15, 2009]
        IFRS for Private Entities Released and Ready for Use in U.S. [Posted July 15, 2009]
        Past President William Harps, MAI, Passes Away [Posted July 8, 2009]
        AMC Competence, Fee Issues Debated in Latest ASB Q&A [Posted July 8, 2009]
        Warehouse Lending Declines under HVCC; Mortgage Brokers Consolidating [Posted July 8, 2009]



2 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
        Appraisal Foundation Seeks Candidates for AQB, ASB [Posted July 8, 2009]
        Bank-Owned Commercial Property Presents Unique Challenges [Posted July 8, 2009]
        California Hotel Defaults, Foreclosures Surge; Reflect Nationwide Trend [Posted July 8, 2009]
        Struggling REITs Post Biggest Gain since Debut [Posted July 8, 2009]
        Hanley Wood: Housing Market Shows More Signs of Stabilization [Posted July 8, 2009]
        Tranche Warfare Continues in CMBS Market [Posted July 8, 2009]
        Losses on High-Risk Mortgages Expected to Increase [Posted July 8, 2009]
        AI Releases Office Property Valuation Book [Posted July 8, 2009]
        Builder, Mortgage Lender Get up to $53 Million in Fines for Fraud [Posted July 8, 2009]
        Appraisal Organizations Call on HUD to Rescind AMC Fee Policy, Develop New AMC Rules
         [Posted July 1, 2009]
        Insurance Commissioners Approve Mods on CRE Capital Requirements [Posted July 1, 2009]
        Recent Studies Show Sustainable Buildings Command Higher Values [Posted July 1, 2009]
        Commercial Property Rates Fall to 2004 Levels [Posted July 1, 2009]
        Consultancy Group: Distressed CRE Property Rates Double Since March [Posted July 1, 2009]
        Falling Property Values Burden CRE Loan Workouts [Posted July 1, 2009]
        S&P Indices Record Third Month of Improvements in Home Prices [Posted July 1, 2009]
        No Significant Improvement in Architecture Billings Index [Posted July 1, 2009]
        Hotels Likely to Take Four Years to Get Back to 2008 Room Rates [Posted July 1, 2009]
        U.S. Called “New Emerging Market” for Real Estate Deals [Posted July 1, 2009]

Inside the Institute
        Appraisal Institute Hires Zimmermann as CFO [Posted July 29, 2009]
        Herbert Jourdan, Jr., MAI, SRA Elected to The Appraisal Foundation Board of Trustees [Posted July
         29, 2009]
        In Memoriam [Posted July 29, 2009]
        Appraisal Institute Contemplates Offering Appraisal Review Designations [Posted July 8, 2009]
        Promising Prognosis for AI Vice President [Posted July 1, 2009]
        AI Member Appointed Chair of Kansas Appraisal Board [Posted July 1, 2009]
        Appraisal Institute Members Now Save over 25% on Select FedEx Services [Posted July 1, 2009]
        Appraisal Institute Hires New Director of Communications [Posted July 1, 2009]
        In Memoriam [Posted July 1, 2009]

Economic Indicators – May 2009




3 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Government Update – Commercial/General
Obama Plan to Create National Bank Supervisor Sent to Hill
The Treasury Department sent its regulatory reform agenda that would create a national bank supervisor
to Capitol Hill last week. Under the proposed legislation, a national bank supervisor would be created
through the consolidation of the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the
Currency (OCC).

The proposed consolidation of the OTS and OCC would eliminate the thrift charter and thrift holding
company framework and remove what the Treasury has labeled as one of the central sources of arbitrage
in the bank regulatory system.

Among other components of the draft legislation, the proposed regulatory changes would require that
banks with more than $10 billion in assets pay bank examination fees, while banks smaller in size would
be assessed fees no higher than the average already charged by states to similarly-sized banks.

The Treasury believes the new fee assessment structure will benefit community banks by lowering their
fees while simultaneously eliminating the basis for the Federal Reserve and the Federal Deposit
Insurance Corporation to impose new fees on community banking institutions.

In addition, the proposed legislation would provide for a new resolution authority, which would be
responsible for supplementing existing bankruptcy laws and addressing systemic failure among financial
institutions. Use of the authority would be subject to two-thirds vote by the Federal Reserve, Board of the
FDIC or the Securities and Exchange Commission as well as the approval of the Treasury. If approved,
the authority would give the Treasury the right to appoint the FDIC or SEC as conservator or receiver for
a failing financial firm that threatens overall financial stability.

To access a summary of the proposed regulatory reform bill as well as to view sections of the draft
document, visit www.financialstability.gov/latest/tg229.html.



Geithner, Dugan Support CFPA; Clashes with Regulators Ahead
In testimony last week before the House Financial Services Committee, Treasury Secretary Timothy
Geithner and Comptroller of the Currency John Dugan voiced their support for the creation of a
Consumer Financial Protection Agency (CFPA) to enhance consumer protection standards for financial
service providers.

“It makes sense to consolidate all consumer protection rulewriting in a single agency, with the rules
applying to all financial providers of a product, both bank and nonbank,” Dugan told the Committee.

Geithner testified that he believes a new consumer agency is needed to protect consumers from abusive
lending practices and insufficient banking regulation. He also called for the new agency to have both rule-
writing and enforcement authority.

“If you give this agency only rule-writing authority but no enforcement authority, it will be too weak,”



4 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Geithner explained to the Committee.

But while the creation of the CFPA has the public support of Geithner and Dugan, both parties
acknowledge an uphill battle ahead to placate the existing financial regulatory authorities who would have
to concede powers.

Under the proposed CFPA rules, the authority of agencies such as the Federal Reserve would be
substantially impacted. Fed Chairman Ben Bernanke has already argued that his agency should retain its
powers to protect consumers.

Geithner admitted that it’s understandable for banking agencies to want to retain their powers, noting that
“They are not enthusiastic about giving up (their) authority.”

Dugan, who expressed reservations during his testimony about the lack of uniformity of the CFPA
structure, also is concerned that the CFPA could undermine the authority of the federal regulatory
agencies in charge of monitoring the financial services industry.

"To the extent the banking agencies have been criticized for consumer protection supervision, the
fundamental problem has been with the lack of timely and strong rules – which the CFPA would address
– and not the enforcement of those rules,” Dugan said.

"Moreover, moving these banking agency functions to the CFPA would only distract it from its most
important and daunting implementation challenge: establishing an effective examination and enforcement
regime for the 'shadow banking system' of the tens of thousands of nonbank providers that are currently
unregulated or lightly regulated, like the nonbank mortgage brokers and originators that were at the heart
of the subprime mortgage problem," he added.

To read Geithner and Dugan’s testimony from the House Financial Services Committee’s July 24 hearing,
visit www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_072409.shtml.



Bernanke Urges CRE Loan Workouts
Federal Reserve Board Chairman Ben Bernanke called for more workouts to repair commercial real
estate loans, like the modifications officials have urged for home loans. Senate Banking Committee
Chairman Christopher Dodd, D-Conn., told Bernanke that “some have suggested” the commercial market
“may even dwarf the residential mortgage problems” in the United States, according to Bloomberg.com.

The state of commercial real estate was one of the most popular subjects during lawmakers’ questioning
in Bernanke’s testimony on the economy. Bernanke told the Senate committee and the House Financial
Services Committee that it’s too early to tell how effective the Fed’s main initiative in the area will be.

Bernanke said the effort is part of a "two-pronged approach" to address commercial real estate problems
that resemble the earlier threats to the housing sector. The Fed also has tried funding private purchases
of commercial mortgage-backed securities through the Term-Asset Backed Securities Loan Facility, an
emergency program that lends to investors to purchase securities backed by consumer and business
loans. The Fed began accepting commercial mortgage-backed securities as collateral last month.



5 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Bernanke reiterated that he is open to extending the TALF, which has been slow to attract interest, if the
commercial mortgage-backed securities market has not opened up by the program's Dec. 31 expiration
date. In July 9 testimony before Congress’ Joint Economic Committee, Real Estate Roundtable President
and CEO Jeffrey DeBoer also advocated a one-year extension of TALF until Dec. 31, 2010, along with
other steps to help restore credit to commercial real estate.

In addition to trying to thaw the frozen CMBS market through TALF, the Fed is urging lenders to help
creditworthy borrowers refinance, Bernanke told House Financial Services Committee members. The
Real Estate Roundtable, as part of its five-point plan for restoring liquidity, has stated that banks should
be encouraged to extend performing loans that are maturing.



Credit Rating Agencies Focus of Latest Regulatory Reform
The Obama Administration’s efforts to reform regulatory agencies continues to surge ahead. In addition to
proposing a regulatory reform agenda last week that would create a national bank supervisor, the
Administration also sent credit rating agency reform legislation to Capitol Hill that would increase
transparency, tighten oversight and reduce reliance on credit rating agencies.

Presented to Congress by the Treasury Department, the proposed credit rating agency reforms would
essentially ban firms from providing consulting services to firms they rate and require agencies to disclose
fees issuers pay to obtain ratings. Furthermore, the proposed reforms would require the disclosure of
preliminary ratings sought by firms who shop for ratings — a practice in which companies seek a range of
preliminary ratings then pay for only the highest.

While many lawmakers and regulators are applauding the proposed reforms, some feel the government’s
efforts don’t go far enough.

The legislation makes no attempt to reform the methods through which major agencies generate revenue.
Nor does it address the issue of providing a path for investors to file lawsuits against credit rating
agencies if they believe those agencies have knowingly failed to review key information, which is
something Securities and Exchange Commission Chairman Mary Schapiro has said could result in higher
quality work from the rating firms.

If passed, the SEC stands to gain significant oversight authority over the supervision of rating agencies.
Under the proposed legislation, the SEC would be granted the power to examine policies and procedures
used in determining ratings. It also would get a dedicated office through which it could supervise ratings
agencies and, if it so desired, require credit rating agencies to register with its office.

To view the proposed credit rating agency reforms, visit
www.financialstability.gov/docs/regulatoryreform/titleIX_subtC.pdf.



Senate Explores Lack of Progress in Foreclosure Programs
At a hearing last week, the Senate Banking Committee vented its frustrations over the lack of progress
with the federal government’s foreclosure programs. Criticism came from both sides of the aisle as



6 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
members of the committee expressed their concerns about worsening foreclosure conditions in their
respective states.

Taking the brunt of the committee members’ dissatisfaction was Assistant Secretary of the Treasury Herb
Allison, who was asked repeatedly if he needed additional Congressional resources in order to better
accomplish his department’s foreclosure prevention goals. Allison stressed that the Treasury has the
necessary tools to stem the tide of foreclosures, a response that garnered additional criticism from
committee members who have indicated that they have heard reports of different problems with the
government’s modification plans.

Coming out of the meeting were the announcements of two new Treasury Department regulatory
changes. First, beginning Aug. 4, Treasury will require monthly public reporting on a servicer-by-servicer
basis to detail the number of trial modification offers extended, the number of trial modifications under
way, the number of official modifications offered and the long-term success of these modifications.

In addition, Treasury will establish specific operational metrics to measure the performance of each
servicer. Currently being developed, the operational metrics are likely to include such measures as
average borrower wait time in response to inquiries, the quality of information provided to applicants,
procedures for document processing and review and response time for completed applications.

Details of these new reporting requirements will be communicated to the servicers during a meeting the
Treasury Department will hold at the end of July.

Fed: Investors Start Applying for TALF CMBS Loans
The government’s efforts to ease credit, stabilize the financial system and help the economy has been
given an injection of life as investors last week applied for $668.9 million worth of Term Asset-Backed
Securities Loan Facility loans to invest in existing commercial mortgage-backed securities.

Last Thursday, the Federal Reserve Bank of New York began accepting investor requests for TALF loans
to help finance purchases of pre-2009 ("legacy") commercial mortgage-backed securities. There still has
been no movement from investors toward newly issued CMBS, according to the Fed, although industry
analysts believe this is largely due to the lead time needed to package new commercial mortgages into
securities.

The TALF program has the potential to generate up to $1 trillion in lending for businesses and
households, which should boost the availability of commercial real estate loans, help prevent defaults and
facilitate distressed property sales, according to the Fed. In addition to commercial real estate, investors
can use TALF loans to buy securities backed by, among other things, auto and student loans, credit
cards, business equipment and loans guaranteed by the Small Business Administration.

TARP Audit Reveals Bank Spending Habits
An audit by the special inspector general for the Troubled Asset Relief Program has shown that a majority
of banks receiving bailout money have used those funds to write new loans and make investments. It
found that a smaller portion of banks have used government dollars to buy rival lenders. But while Special
Inspector General Neil Barofsky’s report shed light on the allocation of taxpayer funds, it also has




7 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
exposed a rift between the Treasury Department and the public over how much information recipients of
TARP funds should be required to disclose.

According to Barofsky’s audit, of the 360 banks his team interviewed, 83 percent used bailout money for
lending purposes; 43 percent to protect their existing capital; 31 percent to make other investments; 14
percent to repay debt; and 4 percent to acquire other banks.

The Treasury has long maintained that banks receiving TARP funds may use those funds at their own
discretion. Their concern is that banks receiving bailout money may feel stifled by opinion when it comes
to bolstering their institutions.

To read the full SIGTARP report, go to http://media.ft.com/cms/f57ba3ea-748d-11de-8ad5-
00144feabdc0.pdf.

Six Appointed to Financial Crisis Inquiry Commission
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., last week
announced their six appointments to the Financial Crisis Inquiry Commission. The commission, which
was established by Congress, will examine and conduct hearings on the domestic and global factors that
contributed to the financial crisis, including the role of fraud and abuse, lending practices and regulatory
policy and enforcement. The commission will also include four additional members, who will be appointed
by the House and Senate minority leaders.

“The American people deserve nothing less than a full explanation of why so many people lost their
homes, their life’s savings and their hard-earned pensions,” Pelosi said. “The men and women we are
appointing today bring great experience and credibility to the work of the commission.” Reid echoed those
comments: “The American people are entitled to a thorough examination of what went wrong. … I am
confident that we have chosen the right people to lead that effort.”

Pelosi and Reid jointly named former California State Treasurer Phil Angelides, one of Pelosi’s three
appointments, as chair of the commission. Angelides has worked for California’s Housing and Community
Development agency and served as co-chair of the Sacramento Mayor’s Commission on Education and
the City’s Future. Angelides is currently chair of Canyon-Johnson Urban Funds, which focuses on the
development of urban properties in underserved neighborhoods.

Pelosi’s other two committee appointments were Brooksley Born and John Thompson. Former President
Bill Clinton appointed Born chair of the Commodities Futures Trading Commission in 1996, and she was
awarded the John F. Kennedy Profiles in Courage Award in 2009. Thompson is currently serving as chair
of Symantec Corporation’s Board of Directors, were he was the chief executive officer for 10 years.
Former President George W. Bush appointed Thompson to the National Infrastructure Advisory
Committee in 2002.

Reid’s appointments were former Sen. Bob Graham, D-Fla., Heather Murren and Byron Georgiou.
Graham has served as a senior member of the Senate Finance Committee and as the chair of the Senate
Intelligence Committee. He also served as Governor of Florida from 1979 to 1987 and is currently
involved with a training program for future political leaders that he founded. Murren was the group head
for Merrill Lynch’s Global Consumer Products Equity Research division and co-founded the Nevada



8 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Cancer Institute, where she is the chair of its board of directors. Georgiou currently serves on Harvard
Law School Program on Corporate Governance’s advisory board and has served as the legal affairs
secretary to former California Gov. Edmund Brown Jr.

Senate Grills Judge Sotomayor on Controversial Property Rights
Legislation
Two major real estate rulings came up during the second day of confirmation hearings for President
Obama’s Supreme Court nominee, Judge Sonia Sotomayor. Sen. Herb Kohl, D-Wis., brought up the
controversial Supreme Court 2005 ruling reached in Kelo v. City of New London, and Sen. Charles
Grassley, R-Iowa, had Sotomayor defend her ruling in the controversial Didden v. Village of Port Chester.

In a 5-4 ruling in Kelo v. City of New London, the Supreme Court ruled that it was constitutional under the
Takings Clause of the Fifth Amendment and eminent domain for local government to seize private
property for private economic development.

In response to Kohl’s asking what an appropriate "public use" for condemning private property is,
Sotomayor incorrectly claimed that Kelo upheld a taking in an economically blighted area. “Kelo is now a
precedent of the court. I must follow it. I am bound by a Supreme Court decision as a Second Circuit
judge. … [T]he court held that a taking to develop an economically blighted area was appropriate,”
Sotomayor asserted.

However, there were no allegations of blight in Kelo. As Justice John Paul Stevens noted in his opinion
on Kelo, “There is no allegation that any of these properties [that were condemned] is blighted or
otherwise in poor condition.” Although the court held that the government can condemn a person's
property and transfer it to someone else in order to promote economic development, many people were
alarmed about the consequences of this landmark ruling. Justice Sandra Day O’Connor wrote at the time,
“[N]othing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a
shopping mall or any farm with a factory.”

As for how she would rule in the same situation, or should she have an opportunity to revisit the case
during her tenure, Sotomayor said: “I understand the questions and I understand what state legislatures
have done, and would have to wait another situation -- or the court would -- to apply the holding in that
case.” Since the Kelo decision, many states have passed laws forbidding takings along the same lines as
the federal government did in Kelo.

Under questioning by Sen. Charles Grassley, R-Iowa, Sotomayor also defended her ruling in the
controversial Didden v. Village of Port Chester. In Didden, Sotomayor's federal appellate-court panel
upheld the government's condemnation of property after the owners refused to pay a private developer.
The plaintiffs challenged the condemnation on the ground that it was not for a public use, as the
Constitution's Fifth Amendment requires. However, Sotomayor's panel upheld the condemnation and
denied Didden a court appearance. In that decision, Sotomayor’s court ruled on the Statute of Limitations,
taking into account that the developer had rights under a contract with the state and Didden had rights
under the Fifth Amendment, but did not bring them in a timely enough manner so as to avoid the conflict.

For the complete transcript, visit www.nytimes.com/2009/07/14/us/politics/14confirm-text.html. The Kelo
passages are on pages 15-16 and Didden are on pages 31-34.



9 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
TALF Restrictions, Fed Assurance Leave Questions for CMBS Market
The Federal Reserve is expected to launch this week its program to boost U.S. commercial real estate
lending — and to provide potential relief for a sector of the real estate industry that has been particularly
hard hit by the ongoing credit crisis. Using the Term Asset-Backed Securities Loan Facility program,
investors who pledge to purchase commercial property bonds that help finance office, retail and
apartment buildings will be eligible for government loans.

But the two-part program, which will offer loans against new and old commercial mortgage-backed
securities in a bid to draw investor demand and lower borrowing rates, has already drawn controversy
over what investors view to be imposed limits, according to Reuters.

Particularly being disputed is a Federal Reserve mandate for bonds to carry only stable AAA ratings,
which is eliminating a huge chunk of the $700 billion CMBS market due to fresh downgrade threats by
Standard & Poor's. In addition, investors are upset over the Fed’s decision that bonds eligible for the
TALF program must have trade dates of July 2 or later.

Calls from investors and analysts for the Fed to ease its criteria have done little to change the Fed’s
position, though the agency tried to ally investor’s concerns late last week by informing investors that
most CMBS eligible under published guidelines for the TALF program will also meet other Federal
Reserve criteria.

This reassurance from the Fed helped raise CMBS derivative index prices late last week. However,
investors remain uncertain on exactly what bonds the Fed will accept for financing. As of press time, that
had not yet been revealed.

Fed's CMBS Arm of TALF Closer to Starting
The Commercial Mortgage-Backed Securities arm of the Term Asset-Backed Securities Loan Facility
program appears closer to getting under way now that the Treasury Department has named nine
investors to operate funds that will buy toxic securities from ailing financial institutions.

Under the terms of the public/private partnership, the Treasury will invest up to $30 billion to buy toxic
assets from banks in crisis. Each of the nine investment firms will be required to raise an initial $500
million in order to qualify for government financing. Firms that make the cut will then be able to take
advantage of both equity and debt financing from the federal government.

In concert with government support, the investment firms will help banks sell troubled real-estate
investments, including CMBS and RMBS whose plummeting values have crippled bank balance sheets
and forced lenders to absorb hundreds of billions of dollars in losses.

Under the rules of the program, investment firms will be able to raise money from any investor, including
sovereign-wealth funds and other foreign investors — although no single investor can hold more than 9.9
percent of any one fund. In return, the fund managers must operate the partnership for a minimum of
eight years and are required to provide monthly information to the Treasury, including details of the price
paid for each security.




10 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The selection of the nine investment managers comes after expectations of the government’s announced
Public-Private Investment Program had been scaled back. Though initially envisioned as a centerpiece of
the government's plan to help banks regain their footing, the future of the PPIP became cloudy when the
FDIC indefinitely postponed the launch of its part of the program, which was supposed to buy up to $500
billion in loans from banks. Recent events indicate the partnerships between the government and private
sector are moving forward. It remains to be seen whether the FDIC portion of the plan will ever see the
light of day, or if the Treasury will open up the public/private initiative to additional investors.

The Treasury selected the nine investment management firms to partner with after lengthy reviews of the
more than 100 applications received. To minimize concerns about political influence on the selection, the
eligible fund managers were selected by career staff at the Treasury. Those selections were then
approved by an investment committee established to vote on Troubled Asset Relief Program investments.

The list of the nine investment firms selected by the Treasury are: BlackRock Inc., Invesco Ltd.,
AllianceBernstein LP, Marathon Asset Management, Oaktree Capital Management, RLJ Western Asset
Management, the TCW Group Inc., Wellington Management Co. and a partnership between Angelo,
Gordon & Co. LP and GE Capital Real Estate.

Proposed Consumer Agency Would Have Far-Reaching Financial Powers
As part of the government's efforts to revamp regulation of the U.S. financial system, the Obama
Administration last week unveiled draft legislation for the creation of a new consumer-protection agency
that would be responsible for writing and enforcing rules across a broad spectrum of financial products
used by consumers.

As outlined by the Treasury Department, the Consumer Financial Protection Agency would be the
ultimate regulatory body charged with protecting consumers. The proposed agency would enhance the
government’s regulation of credit card providers, mortgages and financial firms, and would have the
power to probe any lender and impose penalties of up to $1 million a day in cases of wrongdoing, limit the
compensation of loan officers and mortgage brokers, and review banks for discriminatory practices

As expected, the proposed legislation has already drawn fire from the financial services sector. Banking
industry representatives are concerned that the agency could intervene in the daily business practices of
lenders and impact how loans are designed and employees compensated.

On the other side of the debate, the plan’s supporters, which include consumer groups and many
lawmakers, argue that a dedicated, stand-alone agency is crucial to reining in risky and deceptive
financial practices.

The White House is planning to work with Democrats in Congress to try to move the legislation quickly.
Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, has said that he will take
quick action and aims to approve the committee's version of the bill before Congress's summer recess
begins Aug. 3.

For its part, the Obama Administration has acknowledged that the proposal would grant the new
Consumer Financial Protection Agency with broader powers than bank regulators have under existing
law, which the Administration knows troubles financial institutions. However, the Administration also has



11 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
pointed out that the new agency would have a mandate to support growth and innovation, a key point it
hopes will appease the opposition.

Houses Passes Green Bill; Senate to Take Up Late July
In a 219 to 212 vote, the House of Representatives passed the American Clean Energy and Security Act
of 2009, which includes green building incentives for both residential and commercial buildings across the
country. The landmark energy and climate bill is now in front of the Senate for debate, and a vote is
expected in late July. If enacted, the comprehensive bill is expected to create millions of clean energy-
related jobs and to help increase the energy efficiency of existing residential and non-residential
buildings.

Included in the bill is the Retrofit for Energy and Environmental Performance program, which includes
retrofitting incentives for residential and commercial buildings. Under REEP, homeowners could qualify
for up to $3,000 in financial incentives for achieving a 10 to 20 percent increase in energy efficiency, with
another $150 for every additional percentage point of energy savings achieved. Buildings on the National
Register of Historic Places would be eligible for an additional 20 percent in financial incentives.

Another feature of the bill would establish national building codes for commercial real estate that would
mandate energy improvements for existing structures. It also would provide businesses up to $2.50 per
square foot for implementing major energy reduction enhancements.

“This bill recognizes that green building is a major part of the solution to our economic and energy
challenges,” said U.S. Green Building Council President and Chief Executive Officer Rick Fedrizzi. “With
this federal commitment, green building can help propel the new green economy by creating enormous
energy and cost savings for millions of Americans while accelerating unprecedented job creation.”

In related news, the USGBC recently added a requirement for building owners pursuing Leadership in
Energy and Efficient Design (LEED) certification. In a move to eliminate the gap between green-related
design features and actual post-development performance and operations, the organization now will
require building owners to provide operational performance data on a routine basis to maintain
certification.

“We’re convinced that ongoing monitoring and reporting of data is the single best way to drive higher
building performance, because it will bring to light external issues such as occupant behavior or
unanticipated building usage patterns, all key factors that influence performance,” said USGBC Senior
LEED Vice President Scot Horst.

SBA Program Expanded to Cover Expansion, Refinancing Current Real
Estate
The Small Business Administration's 504 loan lending program can now be used to refinance existing
commercial real estate while it also funds an expansion. The program, which allows borrowers up to 90
percent of the cost to build, buy or expand a commercial real estate building, can also be used for capital
equipment, furnishings, fixtures and fees incidental to the transaction. Examples of suitable real estate
include owner-occupied, commercial condominiums, offices, warehouses, franchises, restaurants, car
washes, bowling alleys and skating rinks. Investor-owned properties do not qualify.




12 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The refinancing enhancement allows borrowers money to pay off an existing commercial real estate
mortgage that is not involved with the expansion. It cannot exceed 50 percent of the expansion cost for a
new project. Thus if a project costs $4 million to build a new restaurant, borrowers can get up to $2 million
to pay off the loan on the existing restaurant. The total funding would be $6 million.

One of the caveats is job creation. "For every $50,000 guaranteed by the SBA, (the borrowers) must be
able to demonstrate that they are creating or retaining at least one job," said Karen Mills, SBA's
administrator. As part of the federal stimulus initiative, job creation has temporarily been relaxed to one
job per $65,000. The program "is administered by about 270 certified development companies in a
partnership with the commercial lenders and the SBA," Mills said.

Christopher Crawford, president and chief executive of the National Association of Development
Organizations – the trade association for the nation's CDCs – said, "Since this program has been created
in 1986, more than 3 million jobs have been created or retained by 504 loans, and that is by far the
largest economic development program within the federal, state or local governments."

For more information, visit tinyurl.com/yukpux.

Treasury to Name 9 “Toxic Managers”
The Treasury Department is expected in the next few days to name as many as nine investment
managers to operate funds that will buy toxic securities from ailing financial institutions. The public/private
program aims to have certain financial institutions dispose of troubled illiquid mortgage securities and
other packaged assets so they can provide new sources of lending to the economy.

Though the government is tapping more fund managers than initially expected, the size of the program
has been scaled back from what was originally planned. Earlier this year, the Treasury Department
suggested that the fund could reach up to $1 trillion in purchasing power, but most analysts don’t expect
the money fund managers to raise enough in the private market to reach that figure.

While it has yet to announce which investment firms have been selected for the program, it is believed
that the Treasury is choosing from between 12 to 15 applicants, narrowed down from the more than 100
applications received.

To help minimize concerns about political influence on the selection, the eligible fund managers are being
selected by career staff at the Treasury. Those selections must then be approved by an investment
committee established to vote on Troubled Asset Relief Program investments.

Once chosen, the selected fund managers will be required to raise at least $500 million each from private
sources, with the government providing additional financing. The fund managers will be able to tap a mix
of government equity and debt financing to aid their effort, but those familiar with the plan believe that
fund managers will likely face an overall cap on the amount of leverage provided to them.

In addition, the Treasury has hinted that the “toxic assets” program could grow as the government may
select additional fund managers beyond those initially chosen.




13 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Supreme Court Rules State AGs can Pursue National Banks; Appraisal
Implications Possible
In a landmark 5-4 decision, the Supreme Court ruled that state attorneys general are allowed to pursue
national banks that have allegedly broken state laws. The decision enhances the authority of states in
relation to federal financial regulators. Banking groups and the Office of the Comptroller of the Currency
argued that only the federal regulator has the authority. The ruling could have long-term effects on
appraisal-related matters.

The June 29 ruling overturned a lower court’s ruling in favor of the Office of the Comptroller of the
Currency’s assertion that it sole enforcement authority against national banks. While the Supreme Court
said that the OCC has sole "visitorial" powers to examine and subpoena a national bank, Justice Antonin
Scalia, who wrote the majority opinion, argued the agency had extended that logic too far.

How the impact of the case will play out overall is unknown. Under the ruling, state attorneys general
would not have the right to examine a national bank, or even subpoena it to get more information.
However, they would expressly have the power to enforce applicable state laws through other judicial
proceedings. Observers said it gives states an opportunity to pursue legal action against national banks in
enforcing state fair-lending laws, though it also limited their means to do so. Under the ruling, state
enforcement agencies cannot examine banks or use subpoenas to engage in so-called "fishing
expeditions," looking for evidence of wrongdoing. Still, observers agreed that attorneys general are likely
to try to use the opening if they acquire or develop evidence against a national bank.

In a June 29 statement, the Obama administration said it favors a wider role for states, and a lesser
degree of federal preemption. The administration, which has called for the creation of a new Consumer
Financial Protection Agency, wants states to be able to enact broader protective measures that, at
present, would be preempted by federal law. “States will be able to enforce their consumer protection and
civil rights state laws with respect to national banks. And federal law will act as a floor, not a ceiling, thus
allowing States to impose more stringent protections,” the administration said in its June 29 statement.


The ruling may have far-reaching implications for appraisal, says Bill Garber, Director of Government and
External Relations for the Appraisal Institute. According to Garber, the ruling could bolster arguments
made by some states that review appraisers working for federally regulated institutions should carry
applicable appraisal licenses. “It’s probably too early to tell, but the ruling seems to give some ammunition
to the states.” said Garber.


The case stems from, Cuomo v. Clearing House Association, which came about when, in 2005, New York
Attorney General Eliot Spitzer, and his successor Andrew Cuomo, demanded that banks in the state
disclose information about their lending patterns as part of an investigation into whether minorities were
being steered into bad mortgages. The U.S. District Court for the Southern District of New York prohibited
Spitzer from enforcing state laws through demands for records or "judicial proceedings." The U.S. Court
of Appeals for the Second Circuit affirmed the district's opinion.

However, in Monday’s ruling, Scalia, joining with the court's four liberal justices, argued that state
authorities must have the power to pursue cases against companies operating within their borders so
long as there is no federal law explicitly prohibiting it and they do so through the court system. The



14 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
decision was supported by consumer groups, who argue that state officials have often been more eager
to take action to protect consumers than have national regulators.

The full text of the June 29 decision may be found on the Supreme Court's Web site at
www.supremecourtus.gov/opinions/08pdf/08-453.pdf.

Regulatory Reform Would Change Accounting Standards
The White House’s proposal for financial regulatory reform—which was detailed in an 89-page white
paper released by the Obama Administration last month—has caught the attention of everyone involved
in the financial sector, including accounting professionals, who could see their field of work significantly
impacted.

As part of the Administration’s reform plan, the suggested overhaul of the financial regulatory structure
includes three recommendations addressed to accounting standard setters. According to the Treasury
Department’s white paper, the Administration would like accounting standard setters to:
      Clarify and make consistent the application of fair value accounting standards, including the
        impairment of financial instruments, by the end of 2009;
      Improve accounting standards for loan loss provisioning by the end of 2009 that would make the
        loan loss provisioning more forward looking, as long as the transparency of financial statements
        is not compromised; and
      Make substantial progress by the end of 2009 toward development of a single set of high quality
        global accounting standards.

The Administration’s plan is consistent with accounting standards recommendations made in April by the
Group of 20. The G-20, which is a collection of finance ministers and central bank governors of the
world’s most significant industrial and emerging economies, had called for accounting standard setters to
“work urgently with supervisors and regulators to improve standards on valuation and provisioning and
achieve a single set of high-quality global accounting standards.”

Though the G-20 has no official powers and its decisions depend upon the follow-through of member
countries, it is clear the Obama Administration is listening to the world’s financial leaders. What remains
to be seen, however, is if the Administration’s plans for reform will get past the wall of opposition
mounting from banks, hedge funds, other financial industry groups as well as from government agencies
that could see their powers of control ceded if reforms are implemented.

While Reform Debate Wages, Geithner Looks to Use Existing Options to
Make Changes
Treasury Secretary Timothy Geithner has indicated that while his agency prepares to submit to Congress
legislative language on a new consumer protection agency, he also will be working on regulatory reform
plans that use existing authorities.

The new consumer protection agency, which is part of the Obama Administration’s broad plan to
reorganize financial market supervision, is subject to Congressional approval and, thus, the specifics of
the plan need to be sent to Capitol Hill for both the Senate Banking and House of Representatives
Financial Services Committees to each review.




15 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
There are, however, powers held by the Treasury and other regulatory agencies that would enable
regulatory departments to create proposals and use their existing authorities to make reforms that do not
require legislative review.


For example, the Treasury and regulators, which form the President's Working Group on Financial
Markets, are said to be working on a process for a broader review of supervisory lessons learned in the
financial crisis, including starting a process for refining specific proposals for improving capital
requirements for financial institutions. The implementation of such a process would be controlled by the
collective agencies, which include the Securities and Exchange Commission, the Commodity Futures
Trading Commission, the Federal Reserve and other banking regulators.


TALF Might Get Nibbles from REITs
One of the largest Real Estate Investment Trusts in the retail sector, Developers Diversified Realty, is
said to be considering using the Term Asset-Backed Securities Loan Facility program to secure up to
$600 million in loans. The interest in TALF from a large REIT may help the revamped government
program gain popularity, especially if Developers Diversified proves successful in its quest for TALF-
sponsored commercial mortgage-backed securities financing.

Under the TALF program, potential investors in new CMBS can borrow money from the government to
buy AAA-rated CMBS bonds issued on or after Jan. 1, 2009. The TALF program has the capacity to open
space for owners to secure new CMBS loans on unencumbered assets and use the proceeds to pay
down outstanding debts. However as previously reported in ANO, the program’s initial deadline of June
16 passed without any loan requests, though many regulators predicted that TALF for CMBS may not see
its first new issue until July or August.

The TALF program is seen as vitally important for commercial real estate because in recent months
CMBS financing has been all but non-existent. The hope from the industry is to make the TALF program
work for new CMBS loans by providing investors with 10 percent or higher returns on CMBS bonds.

TALF funds were originally slated to draw investors back to securities backed by consumer debt, such as
credit card loans and car loans. With worsening conditions in the banking and commercial markets,
however, the Federal Reserve opted to extend TALF to use part of the emergency program’s $1 trillion in
loans to help revive the $760 billion market for CMBS.

FDIC Shelves Public-Private Portion of Toxic Assets Plan; Treasury Moves
Forward
The Federal Deposit Insurance Corp.’s plan to buy up “toxic assets” from banks has been significantly
scaled back as the initiative – called the Public-Private Investment Program, or PPIP – has lost
momentum. In June, the FDIC essentially shelved the arm of PPIP that included the government-financed
buying of bad bank loans. That arm, known as the Legacy Loans Program, signaled what many believed
would be the end of the Legacy Securities portion of the PPIP as well. However, recent testimony from
Assistant Treasury Secretary for Financial Stability Herbert Allison indicated that the Treasury may
embark on its first stage of PPIP soon. Speaking to the TARP Congressional Oversight Panel, Allison
stated, "We've been working very hard on [PPIP], and I'm confident that very soon we'll be launching
partnerships."



16 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The loss of momentum (and possibly favor) for PPIP can be attributed to the concerns of the banking
sector. Though bad debt sitting on the books of the nation's banks has saddled lenders with losses and
constricted ability to lend, banks both large and small have worried about the functionality of the proposed
program. In addition, investors have expressed concern regarding the role of the government in the
process and the potential repercussions they may face from politicians if big profits are eventually made.

The now slimmed-down PPIP will focus on Legacy – or toxic – Securities, which are troublesome for only
a fraction of the nation's banks. For hundreds of smaller banks burdened with growing piles of defaulted
loans, this is unwelcome news, especially as these banks are less able to tap capital markets than big
banks. Many smaller financial institutions can face serious problems if just a couple of their loans go bad,
as evidenced by the more than 70 banks that have failed since the start of last year (see related story
below). And without a program to allow banks to dump their troubled assets, analysts are warning that
hundreds of lenders may collapse in the next few years.

As a next step, the FDIC intends to use PPIP this month to auction loans the agency has seized from
failed banks. If successful, the portion of the program that buys up bad loans may be reintroduced.

Agencies Issue Rule to Clarify Capital for Modified Mortgage Loans
The federal bank and thrift agencies issued an interim final rule clarifying that mortgage loans modified as
part of the Treasury Department’s Making Home Affordable Program will retain the capital risk weight that
applied before the modification. For example, mortgage loans risk-weighted at 50 percent before
modification would continue to be risk weighted at 50 percent after modification, provided they continue to
meet other applicable criteria.

On March 4, the Treasury announced guidelines under the MHAP to promote sustainable loan
modifications for homeowners at risk of losing their homes to foreclosure. The interim final rule would
provide a common interagency capital treatment for mortgage loans modified under MHAP. Comments
on the rule, released June 26, are being accepted for 30 days since publication in the Federal Register.

The interim final rule, by the Office of the Comptroller of the Currency, Board of Governors of the Federal
Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, is available at
www.federalreserve.gov/newsevents/press/bcreg/bcreg20090626a1.pdf.

Regulators Close Five More Banks
Regulators closed five more banks across the nation on June 26 and appointed the Federal Deposit
Insurance Corporation as the receiver. The failures cost the agency $264.2 million, bringing this year’s
total cost of all 45 bank failures to $11.94 billion.

Of the banks that were closed, the FDIC could not find a buyer for the $199 million-asset Community
Bank of West Georgia, located in Villa Rica, Ga. The agency said it will mail checks to bank depositors for
the amounts of their insured funds. The institution had about $1.1 million in deposits that exceeded
insurance limits.

CharterBank, West Point, Ga., has agreed to assume $191.3 million in deposits of Neighborhood
Community Bank in Newnan, Ga. CharterBank also agreed to buy $209.6 million of the failed institution’s



17 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
$221.6 million in assets. Pine City, Minn.’s Horizon Bank’s $69.4 million in deposits will be assumed by
Stearns Bank N.A., St. Cloud, Minn., which also agreed to purchase $84.4 million of the failed bank’s
$87.6 million in assets.

MetroPacific Bank’s $73 million in deposits -- excluding $6 million in brokered deposits -- will be assumed
by Sunwest Bank, Tustin, Calif., which also agreed to buy virtually all of the failed Irvine, Calif. institution’s
$80 million in assets. Los Angeles’ Mirae Bank’s $362 million in deposits will be assumed by Wilshire
State Bank, Los Angeles, which also agreed to buy $449 million of the failed institution’s $456 million in
assets.




18 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Government Update – Residential
Fannie Mae Updates HVCC FAQs
Fannie Mae has released an updated version of its Home Valuation Code of Conduct Frequently Asked
Questions (FAQs) to provide appraisers and lenders with guidance on the implementation of HVCC
regulations. The revised FAQs, which were released this month, include new and updated information on
the issues of scope of coverage, selection of an appraiser and appraisal review.

Below is a listing of Fannie’s new and updated FAQs by section. To view the complete list of Fannie’s
HVCC FAQs, visit www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf.

Scope of Coverage

Q: Can you clarify the requirements around Section II of the Code requiring the borrower’s receipt of the
appraisal?

A: The Code requires that a borrower be provided a copy of the appraisal no less than three days prior to
the closing of the loan. The Code allows that the borrower may waive this three-day requirement.
Situations where a borrower is unaware of his or her right to a copy of the appraisal prior to the three
days and is then provided a waiver of that right at the closing table, would not be compliant with the intent
of the Code. The time period of rescission in a refinancing situation does not constitute a valid three-day
waiver period.

The Code does not specify what form the waiver must take or whether it be oral or written. In addition, the
Code does not prohibit that a waiver, given in a timely manner, be recorded at some later point when the
parties are available. Each lender must develop its own policies, procedures, and documentation. For
example, a lender may obtain a waiver from a borrower through an email, phone call, or some other
means, prior to the three-day period, and then have that waiver recorded in writing at the settlement table
or at some other time.

The three-day period begins on the day of the receipt of the appraisal. For example, in a non-waiver
situation, where a borrower received an appraisal on Monday, the closing could be held on Wednesday.
Saturday is included for purposes of counting the three-day period. Sundays and legal holidays are not
included for counting the three-day period.

Q: This new FAQ clarifies Section II of the Code. Lenders may have had different interpretations prior to
the issuance of this FAQ. May lenders submit to Fannie Mae their pipeline loans that were originated in
good faith compliance with their, possibly different, interpretation of Section II of the Code?

A: Yes; however, Fannie Mae expects that processes which comply with the clarification of Section II
above will be implemented as soon as reasonably possible, but no later than September 1, 2009.

Q: The Code requires the lender to provide the borrower a copy of any appraisal report concerning the
borrower’s subject property promptly upon completion. In this instance, what is meant by “completion”?




19 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
A: The word “completion” is meant to reflect when the lender has reviewed and accepted the appraisal to
include any changes or corrections required.

Q: How is “closing” of the loan defined? Is closing the date the documents are executed or the date the
funds are disbursed?

A: We define “closing” as the date the borrower executes the loan documents.

Q: Are processors, closers, secondary marketing employees, underwriters, etc. permitted to order
appraisals if they do not receive commission or incentives to close loans, but they ultimately report up to a
senior-level employee who is responsible for loan production?

A: The Code states that members of the lender’s loan production staff who are compensated on a
commission basis or who report to any officer of the lender not independent of the loan production staff
and process are not permitted to order appraisals or influence the selection of appraisers. Ideally, a Seller
should establish complete separation of appraisal activities from loan production activities. At an absolute
minimum, the degree of separation should be no less than one level up in the reporting structure. To
mitigate any potential conflict of interest due to reporting relationships, Sellers should establish, maintain,
and enforce written policies and procedures that are designed to reinforce independence.

Selection of an Appraiser

Q: Does the Code change any of Fannie Mae’s requirements regarding the role of the appraiser?

A: No. The Selling Guide requirements for the appraiser remain at their same high level. Fannie Mae
requires the appraiser to provide complete and accurate reports; to report neighborhood and property
conditions in factual and specific terms; to be impartial and specific in describing favorable or unfavorable
factors; and to avoid the use of subjective, racial, or stereotypical terms, phrases, or comments in the
appraisal report. The opinion of market value must represent the appraiser’s professional conclusion,
based on market data, logical analysis, and judgment.

Additionally, it is important to note that when an appraiser signs Fannie Mae’s residential appraisal report
form, the appraiser is also certifying the following:

“I have knowledge and experience in appraising this type of property in this market area.”

And

“I am aware of, and have access to, the necessary and appropriate public and private data sources, such
as multiple listing services, tax assessment records, public land records, and other such data sources for
the area in which the property is located.”

Q: Does the Code require or prohibit the use of foreclosure data by appraisers?

A: The Code does not speak to foreclosure data. It is up to the appraiser to determine if the data is
applicable and appropriate or not.



20 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Appraisal Review

Q: Who on the lender's staff, or on the staff of an authorized third party, may have communications with
an appraiser to request a correction of objective factual errors in an appraisal report?

A: Communications with an appraiser regarding the corrections of objective factual errors in an appraisal
report may be made by anyone on the staff of the lender, or on the staff of an authorized third party.

Q: Who on the lender's staff, or on the staff of an authorized third party, may have communications with
an appraiser relating to or having an impact on valuation, including ordering or managing an appraisal
assignment?

A: Anyone who is not part of loan production staff or who is not compensated on a commission basis
upon successful completion of a loan or anyone who does not report, ultimately, to any officer of the
lender not independent of the loan production staff or process, may have communications with an
appraiser relating to or having an impact on valuation, including ordering or managing an appraisal
assignment.

Q: Does the Code prohibit the appraiser from talking with the Realtor involved in the subject transaction?
Can the Realtor provide comparable data and/or explain their pricing strategy to the appraiser?

A: The Code does not prohibit the appraiser from talking with the Realtor; Realtors can often be a source
of data in the market in which the subject property is located. Any data provided by a third party must still
be researched and verified independently by the appraiser. In addition, the appraiser is required to be
provided a copy of the sales contract for a purchase money transaction.



Renewed Interest in FHA 203(k) Program Boosts Appraisals
The rash of foreclosures nationwide has resulted in some unanticipated effects: a boom in requests for
loans from the Federal Housing Administration’s 203(k) loan program and new sources of work for
appraisers.

Up to two appraisals are required under the FHA’s 203(k) program, which allows buyers to borrow tens of
thousands of dollars for repairs, as long as those repairs don't add so much to the purchase price that the
debt exceeds the value of the completed home. An appraisal is required to ensure that repairs meet the
projected cost. In addition, the FHA requires a second-opinion appraisal any time a property costs more
than $400,000.

Prior to the foreclosure meltdown, 203(k) loans typically went to individuals buying up neglected
properties, doing gut rehabs, or converting buildings into condos, among other things. Today, however,
the FHA is fielding substantial increases in loan requests from borrowers looking to buy foreclosed
properties and who need to make the necessary safety repairs in order to inhabit the property (or in some
cases to qualify for Department of Veterans Affairs loans).




21 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The spike in interest in the FHA program is evident by a comparison of loan requests received over the
last 18 months. During the fiscal year ending September 2008, the FHA insured 6,751 rehab loans. From
October through May, it had already insured 9,791.

New CEO to Take Helm of Freddie Mac
Freddie Mac recently announced that finance veteran Charles Haldeman, Jr., will become the company’s
chief executive officer effective August 2009. Haldeman will be the government-backed mortgage
company’s fourth chief executive in less than a year and will succeed interim chief executive officer John
Koskinen. Haldeman recently stepped down as chair of Putnam Investment Management, LLC, in June.

“I am delighted to have an executive of (Haldeman’s) caliber leading Freddie Mac at this critical time,”
Koskinen said in a Freddie Mac statement. “He has a wealth of experience in finance and an impressive
record of successfully leading companies through challenging transformations.”

The announcement comes during a turbulent period for Freddie Mac as it faces a soaring wave of loan
defaults. In an attempt to save Freddie from closing its doors, the government took over the mortgage
company last fall and has received nearly $51 billion in federal aid to stay afloat.

With the foreclosure rate continuing to escalate, Freddie Mac is playing a critical role in President
Obama’s effort to prevent at-risk homeowners from losing their property through loan modification
programs. “Freddie Mac has both the opportunity and responsibility to be a strong and consistent force for
the stability and health of both the housing market and the general economy, and I am honored to join the
company and to contribute to that fundamental task,” Haldeman said.

Professional Affiliation among Freddie Mac's New Appraisal “Best
Practices”
Among Freddie Mac’s newly revised guidelines for mortgage lenders is an emphasis on the use of
qualified and experienced real estate appraisers, including language that advocates hiring professionally
affiliated valuation professionals. According to revised Freddie Mac guidelines, “Sellers should consider
membership in a professional appraisal organization as a qualification criterion.”

Such language is seen as a victory by professional appraisal organizations, who for years have been
asking for greater emphasis on the qualifications of appraisers and policies that promote the use of highly
qualified and experienced appraisers.

“We applaud Freddie Mac for addressing this important requirement that will have a positive effect on
millions of home buyers and sellers,” said Jim Amorin, MAI, SRA, president of the Appraisal Institute.

Amorin said the recognition of professionally designated appraisers has been a missing component in
mortgage reform, particularly as banks look to mitigate their lending risks. “These new guidelines are the
right long-term solution for consumers and appraisers and will instill confidence in the safety and
soundness of the mortgage lending process,” he said.

Freddie’s revised guidelines are similar to the regulations already employed by Fannie Mae. According to
Fannie’s guidelines, “Professional appraisal designations can be helpful in evaluating an appraiser’s
qualifications, particularly when the designation is from a nationally recognized organization that has



22 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
formal experience, education and ethics requirements that are strongly administered.”

In addition to promoting professionally affiliated appraisers, Freddie’s revised guidelines also require that
an appraiser must be “familiar with the local market" in which the properties they are valuing are located;
must choose "appropriate comparable sales"; and must certify those comparables as the "most similar" to
the property being appraised.

Freddie Mac issued the appraisal bulletin to lenders last week amid industry criticism that the Home
Valuation Code of Conduct has had unintended consequences for the home buying and selling process.

To access Freddie Mac’s newly revised guidelines, visit
www.freddiemac.com/sell/guide/bulletins/pdf/bll0918.pdf.

Dodd, Frank Urge Regulators to Investigate Second Mortgage Valuation
Practices
Senate Banking Committee Chairman Chris Dodd, D-Conn., and House Financial Services Chairman
Barney Frank, D-Mass., recently sent a letter to regulatory agencies across the country requesting that
they investigate banks to determine if lenders are inflating the value of second mortgages, a practice that
severely hampers loan modification efforts.

As real estate values continue to fall, many homeowners are finding that their mortgages are larger than
the value of their homes. Instead of assisting homeowners who may be facing foreclosure, some lenders
are opting not to readjust home values on their balance sheets to reflect the lower values. This makes the
mortgage holder ineligible to take advantage of the HOPE for Homeowners program and the Helping
Families Save Their Homes Act.

The letter was generated in an effort to make available refinancing opportunities for struggling
homeowners who are currently not eligible for mortgage modifications because their loans do not reflect
current market values.

To read the letter in its entirety, visit
www.house.gov/apps/list/press/financialsvcs_dem/press_071009.shtml.

FHA, VA Loans at 36 Percent Market Share, Highest Since 1990
The market share of government-insured mortgage applications, consisting of Federal Housing Authority
and Veterans Affairs loans, is now at its highest level since November 1990. As reported in a recent
Mortgage Bankers Association’s Weekly Mortgage Application Survey, the June market share of 35.9
percent is a whopping increase over May’s figure of 25.7 percent and the previous year’s figure of 27.0
percent. The market share of government-insured purchase applications also climbed in June to 38.6
percent, up from last year’s figure of 27.8 percent.

The survey indicated that the market share for both mortgage and purchase applications reached their
lowest levels in August 2005 at 5.8 percent and 6.8 percent, respectively.

“A primary reason government-insured loans have retained a high share of the purchase market is that
these loans typically require lower down payments than conventional loans,” said MBA Associate Vice



23 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
President of Economic Forecasting Orawin Velz. “In addition, lending standards tend to be tighter for
conventional loans, especially for loans that require private mortgage insurance.”

Meanwhile, the market share of government-insured refinance applications increased to 33.6 percent in
June. While the government-insured market share in this category reached its highest level in October
2008 at 38.4 percent, the rate fell below 20 percent for most of 2009 because of falling mortgage rates
and increased conventional loan refinance activity. Moreover, the FHA endorsed 94,069 single-family
mortgages in June, the highest number in nine years. Refinance transactions totaled 48,200, purchase
transactions logged in at 41,600 and reverse mortgage came in at 4,600.

HUD Earmarks $1 Billion to Jumpstart Affordable Housing Construction
The U.S. Department of Housing and Urban Development is approving plans submitted by state housing
finance agencies for $1 billion to jumpstart affordable housing programs in states throughout the country
that are currently stalled due to the economic recession. Funded through the American Recovery and
Reinvestment Act of 2009, HUD's new Tax Credit Assistance Program will provide $2.25 billion to state
housing finance agencies to resume funding of affordable rental housing projects across the nation while
stimulating employment in the hard-hit construction trades.

HUD is awarding these TCAP grants by formula to 52 state housing credit agencies (all 50 states plus the
District of Columbia and the Commonwealth of Puerto Rico) to complete construction of qualified housing
projects that will ultimately provide affordable housing to an estimated 35,000 households. To promote
job creation, the Recovery Act requires state housing credit agencies to give priority to projects that can
begin immediately and be completed by Feb. 16, 2012.

The tax credits create an incentive for investors to provide capital to developers to build multi-family rental
housing for moderate- and low-income families. Since the contraction of the credit market, and as
traditional investors remain on the sidelines, the value of tax credits has plummeted. Consequently, as
many as 1,000 projects are on hold across the country.

HVCC Moratorium Bill Forwarded to House Committee; Appraisal
Institute Responds
Legislation (H.R. 3044) that would impose an 18-month moratorium on the Home Valuation Code of
Conduct was introduced in the House of Representatives last week in an effort to lift new
requirements temporarily for valuations and the way appraisals are ordered.

The bill’s cosponsors – Reps. Travis Childers, D-Miss., and Gary Miller, R-Calif., both serve on the House
Financial Services Committee, where the bill has been referred. According to Ben Lincoln, legislative
director at Childers’ Washington, D.C. office, Childers introduced the bill after local appraisers contacted
his office saying the Code negatively impacts their business. Furthermore, he said, it affects consumers
due to the Code’s inference that an appraisal management company is required in mortgage
transactions. Such a requirement is one of the myths exposed in the Appraisal Institute’s recent comment
on the HVCC, available at www.appraisalinstitute.org/newsadvocacy/downloads/HVCC_myths.pdf.

Richard Maloy, MAI, SRA, chair of the Appraisal Institute’s Government Relations Committee, which is
reviewing the legislation, said: “We applaud the appraiser independence provisions of the HVCC, yet we
are concerned with the unintended consequences relating to lenders and management companies and



24 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
their role in the ordering process. We are working with Congress, the bank regulatory agencies, and other
interested parties to advance comprehensive reforms to strengthen our system of mortgage finance.”

Maloy added, “We want our members to know that the Government Relations Committee is actively
engaged in seeking long term solutions that protect the integrity of the appraisal profession while ensuring
the economic livelihood of our members. It’s our goal to bring balance back into the system.”

Bill Garber, Director of Government and External Relations, noted the concerns regarding the business
practices of many appraisal management companies, which have existed before the implementation of
the HVCC. “We have testified before Congress twice this year that, too often, appraisers are being hired
not for their competency and qualifications, but for their turnaround time and price. Today, many
communities are facing material changes in market conditions and these conditions make for complex
appraisal assignments which should be prepared by only the most qualified appraisers,” commented
Garber.

By focusing on a broad structural solution, the Appraisal Institute believes the concerns expressed by
many appraisers, consumer groups, real estate agents, and builders relating to AMCs can be addressed
by requiring the use of qualified appraisers – those with the experience and training necessary for
complex assignments. Consumers, real estate agents, builders, and others can help mitigate potential
valuation related problems by demanding and using qualified appraisers.

In advocating for appraiser independence the Appraisal Institute has consistently called for use of
designated and qualified appraisal professionals. Suggesting that consumers should demand that their
lender utilize the services of the most qualified professional is part of that broader strategy. “While real
estate agents, builders, and others should not select or compensate the appraiser, they too can demand
lenders hire only qualified appraisers, such as those that have earned a professional appraisal
designation from the Appraisal Institute or one of the other nationally recognized professional appraisal
organizations,” said Garber.

Obama Administration Announces New Refi Plan with Appraisal
Requirements
The Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to expand the Home
Affordable Refinance Program (HARP) to homeowners who are current on their mortgage payments from
the present loan-to-value ratio ceiling of 105 to 125 percent. With these expanded refinance opportunities,
qualified borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie
Mac will be allowed to refinance those loans according to the terms of the Home Affordable Refinance
Program established earlier this year.

“The higher LTV refinancings will allow more homeowners to strengthen their finances by taking
advantage of lower mortgage rates,” said FHFA Director James Lockhart. “The Enterprises are also
incenting these borrowers to combine a lower mortgage rate with a faster amortization schedule, which
will enable them to get ‘above water’ on their mortgages more quickly. This program could assist many
homeowners who otherwise would have difficulty refinancing due to declining house prices,” Lockhart
said.




25 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Freddie Mac announced the details of their portion of the plan in Bulletin 2009-5. Freddie Mac’s Open
Access refinances require a new appraisal with an interior and exterior inspection of the property that
meets the requirements in Chapter 44, Appraisal Reports, Inspection Reports and the Property Inspection
Alternative. The use of Home Value Explorer point value estimates or automated valuation models are
not permitted in lieu of an appraisal on any loan that is not serviced directly by the lender.
Open Access mortgages being refinanced must have a Freddie Mac Settlement Date on or before May
31, 2009. Open Access mortgages may be refinanced as a one- to four-unit primary residence, a second
home, or one- to four-unit investment property mortgage, whether or not the mortgage being refinanced
was underwritten and sold to Freddie Mac as a one- to four-unit primary residence, second home, or
investment property mortgage.

For a complete overview of the Freddie Mac Relief Refinance Mortgage - Open Access program, visit
www.freddiemac.com/sell/factsheets/pdf/relief_refinance_openaccess_mha_816.pdf. For the full news
release, including a refinancing example, visit
www.appraisalinstitute.org/newsadvocacy/key_documents.aspx.




26 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Inside the States
Rhode Island Latest State to Enact Appraiser Independence Law
Rhode Island became the latest state to enact a new appraiser independence law on July 16 when House
Bill 5704, passed by the General Assembly, became law without the signature of Gov. Donald Carcieri.
The new law, which becomes effective July 31, states that a mortgage loan originator may not “make any
payment threat or promise, directly or indirectly, to any appraiser of a property, for the purposes of
influencing the independent judgment of the appraiser with respect to the value of the property.”

The new appraiser independence provision was enacted as part of much broader legislation regarding
the licensing of mortgage loan originators that is required under existing federal law – the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008. To date, legislatures in 46 states have enacted new
mortgage loan originator licensing laws that bring their state into compliance with the federal SAFE Act.
Of these 46 states, 30 states have included appraiser independence provisions in their SAFE Act
adoptions that are similar to what was enacted in Rhode Island. All told, 42 states now have appraiser
independence provisions in their state statutes in one form or another.

Under the new Rhode Island law, a mortgage loan originator found by the director of the Department of
Business Regulation to have violated the appraiser independence provisions can have their license
suspended, revoked, conditioned or non-renewed. In addition, mortgage loan originators are subject to
civil fines of up to $25,000 for each violation of the appraiser independence provisions.

A copy of the new law can be found at:
http://www.rilin.state.ri.us/BillText/BillText09/HouseText09/H5704A.pdf

A listing of all of the existing state appraiser independence laws can be found at:
http://www.appraisalinstitute.org/newsadvocacy/downloads/appraiserindependencelaws2-2.pdf3



Hawaii Enacts Appraiser Independence Law
Overriding a veto by Gov. Linda Lingle, the Hawaii Legislature enacted a bill that includes appraiser
independence language. The bill makes it a violation for a mortgage loan originator to “make any
payment, threat, or promise, directly or indirectly, to any appraiser of a property for the purpose of
influencing the independent judgment of the appraiser with respect to the value of a property.” The bill
was enacted in order to comply with the federal Secure and Fair Enforcement for Mortgage Licensing Act,
which requires states to enact more stringent licensing requirements for mortgage loan originators.

In vetoing the bill for reasons not related to the appraiser independence provision, Lingle stated, “This
legislation is objectionable because it does not establish a regulatory framework that complies with the
SAFE Mortgage Licensing Act. A review conducted by national officials found serious deficiencies in the
proposed legislation.” Lingle further stated that “the proposed bill neglects to address the regulation of
mortgage brokers.” The Governor’s veto was not unexpected. During consideration of the bill, the state’s
Department of Commerce & Consumer Affairs was opposed to the legislation on staffing and financial
grounds, and seemed prepared to allow the federal government to take over the licensing of Hawaii’s




27 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
mortgage loan originators as is permitted in the federal SAFE Act. The vote to override the Governor’s
veto was 24-0 in the Senate and 44-3 in the House.

Under the bill, mortgage loan originators who are found to have violated the appraiser independence
provision can have their licenses denied, suspended, revoked, conditioned or non-renewed. Further, the
Commissioner of Financial Institutions can levy a civil fine of up to $25,000 for each violation.

A copy of the new Hawaii law can be found at
www.capitol.hawaii.gov/session2009/Bills/SB1218_CD1_.HTM.

Louisiana Governor Signs Nation’s 5th AMC Bill into Law
As of Jan. 1, 2010, most appraisal management companies operating in Louisiana will have to register
with, and be regulated by, the Louisiana Real Estate Appraisers Board. AMCs operating in the state as of
July 10 – when Gov. Bobby Jindal signed House Bill 381 into law – may have until as late as Jan. 1,
2011, in which to register with the Board. Louisiana became the fifth state – joining Arkansas, Nevada,
New Mexico, and Utah – to enact a regulatory framework for appraisal management companies operating
in the state.

H.B. 381 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 – in late 2008 in order to
provide some transparency into who owns, operates and manages AMCs.

The Louisiana Chapter of the Appraisal Institute worked closely with the Louisiana Real Estate Appraisers
Board – which strongly supported the bill – and the Louisiana Association of Realtors during the
Legislature’s consideration of this bill. Bill Garber, the Appraisal Institute’s director of government and
external relations stated, “The Louisiana 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 Jindal signed the bill into law.”

Legislation similar to that enacted in Louisiana and the four other states is currently pending in California
and North Carolina. Several other states considered, but did not complete action on, similar legislation
during the 2009 state legislative sessions. The Appraisal Institute is aware that many other states will be
considering legislation during the 2010 sessions.

A copy of H.B. 381 can be found at www.legis.state.la.us/billdata/streamdocument.asp?did=666824.

Delaware Latest State to Enact Appraiser Independence Law
Delaware became the latest state to enact a new appraiser independence law July 6, when Gov. Jack A.
Markell signed Senate Bill 73 into law. Effective July 30, 2009, the law states that a mortgage loan
originator may not “make any payment threat or promise, directly or indirectly, to any appraiser of a
property, for the purposes of influencing the independent judgment of the appraiser with respect to the
value of the property.” The new appraiser independence provision was enacted as part of much broader
legislation regarding the licensing of mortgage loan originators that is required under existing federal law
– the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.




28 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Under the new Delaware law, a mortgage loan originator found by the State Bank Commissioner to have
violated the appraiser independence provisions can be ordered to cease and desist operating as a
mortgage loan originator. Furthermore, offenders can be subject to a civil penalty of up to $25,000 for
each violation.

A copy of the new law can be found at
http://legis.delaware.gov/LIS/lis145.nsf/vwLegislation/SB+73/$file/legis.html?open.

NY to Hold Exam for Future Eminent Domain Work
The New York State Department of Transportation will hold an examination Aug. 14 to accredit real estate
appraisers. Those appraisers then will be eligible to be hired as consultants to the Department and/or
local public agencies, on a fee basis, to do eminent domain real property appraisal work.

The examination will qualify a person certified to transact business as a real estate general appraiser to
be eligible to perform all types of eminent domain real estate appraisals, particularly those with complex
income producing capabilities involving the application of capitalization techniques for the Department of
Transportation and political subdivisions of the State.

Applications for the examination and other information may be obtained from the Real Estate Officer at
any New York DOT Regional Office. DOT Regional Offices are located in Schenectady, Utica, Syracuse,
Rochester, Buffalo, Hornell, Watertown, Poughkeepsie, Binghamton, Hauppauge and Long Island City.
Applicants may also write to the Director of the Appraisal Management Bureau at: NYSDOT, 50 Wolf Rd.,
POD 4-1, Albany, N.Y. 12232. Applications must be received no later than July 31, 2009. Qualified
applicants will be notified of the time and location of the examination. Examinations will be held in each
regional office depending on demand.




29 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Around the Industry
Moody’s Releases 2Q Red-Yellow-Green Property Report
“The downward spiral in commercial real estate market fundamentals has accelerated as the recession
persists,” Moody’s Investors Service said in its latest Red-Yellow-Green Quarterly Assessment of U.S.
Property Markets report. For the first time in six years, none of the seven property sectors tracked had
achieved a green (or strong) score, while four of the property sectors approached some of the lowest
scores on record. “Given the bleak forecasts, any significant improvement in Red-Yellow-Green scores is
unlikely in the coming quarters,” said Keith Banhazl, vice president and senior analyst at Moody’s.

The report ranks commercial real estate properties by traffic light colors – red scores represent weak
properties ranging from 0 to 33, yellow scores represent moderate properties ranging from 34 to 66 and
green scores reflect stronger properties ranging from 67 to 100. The second quarter report indicated that
the overall U.S. commercial real estate score fell eight points from the previous quarter to 34.

An increase in vacancy rates, as well as a decrease in demand, contributed to the central business
district office sector’s fall of six points from the previous quarter to a composite score of 42, while the
suburban office sector dropped five points to 27. The multi-family sector dropped six points as vacancy
rates rose from 7 percent last quarter to 7.3 percent and demand dropped from 0.7 percent to 0.2
percent. The multi-family supply pipeline remained at 1 percent.

The industrial sector vacancy rate jumped to 12.2 percent – causing the sector’s score to tumble from 27
to 19 – as the demand for space fell. The neighborhood and community retail centers sector fell nine
points from the previous quarter to 46 and both the full- and limited-service hotel sectors posted scores of
0 during the first quarter. Although the full-service hotel sector’s projected revenue per available room
improved during the first quarter to -4.1 percent, the figure is still down 20 percent on a year over year
basis.



CMSA White Paper Addresses Regulatory Reform and CRE Finance
A white paper released this month by the Commercial Mortgage Securities Association is calling on the
White House to carefully consider the way it addresses regulatory reforms and to pay close attention to
the “unique challenges” facing the $3.5 trillion commercial mortgage market. Specifically, the CMSA white
paper, titled “Regulatory Reform and Commercial Real Estate Finance,” details the five key issues the
trade group believes the Obama Administration should address in order to ensure that the
Administration’s efforts to restart securitized credit markets are successful.

The CMSA’s five key areas of concern are:
   1. 5 percent retention by originators and sponsors
   2. Elimination of the immediate recognition of “gain on sale” by originators for a securitization
   3. Ratings differentiation
   4. ABS issuers to disclose loan-level data
   5. Prohibition on hedging of the retained risk portion




30 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
According to the trade group’s white paper, “The new and unprecedented financial regulatory reform
proposal would undoubtedly change the nature of all securitized credit markets at the heart of the
Financial Stability Plan. At a time when policymakers hope to restart the CMBS market, certain aspects of
such a proposal could have the opposite and unintended result of stalling recovery efforts by making
lenders less willing or able to extend loans and investors less willing or able to buy CMBS bonds – two
critical components to the flow of credit in the commercial market.”

CMSA is quick to note that policymakers have the group’s full support in their efforts to help restore
liquidity in the commercial mortgage-backed securities market as well as the broader commercial real
estate market. The trade group’s concerns extend more to the implementation of proposed reforms,
which the CMSA fears may complicate the efforts to restart the securitized credit markets.

To read CMSA’s “Regulatory Reform and Commercial Real Estate Finance” white paper, visit
www.cmsaglobal.org/uploadedFiles/CMSA_Site_Home/Government_Relations/CMSA_Issues/TALF_Tre
asury_Plans/072209_CMSA_Reg_Reform.pdf.

More Bank Failures
The number of failures in 2009 continues to climb, as federal and state regulators shut more banks, most
of them in Illinois. The failures brought an estimated cost of $1.1 billion to the FDIC, and the number of
failures this year has reached 64 – more than double the total for 2008 and more than a 40 percent
increase in failures since June 19.

The FDIC said that PrivateBank and Trust Company of Chicago agreed to pay a 1.5 percent premium to
buy all of the bank's $848.9 million of deposits, and approximately $888.4 million of assets. Like most of
the other failures, the FDIC entered into a loss sharing agreement on approximately $617 million of the
assets. The FDIC estimated the failure would cost $188.5 million to the Deposit Insurance Fund.

Another failure was $70 million-asset John Warner Bank in Clinton, Ill. State Bank of Lincoln paid a 4.1
percent premium to acquire all of John Warner Bank's $64 million in deposits and about $63 million of its
assets, according to the Federal Deposit Insurance Corp. The FDIC and State Bank of Lincoln entered
into a loss-sharing transaction on approximately $31 million of John Warner Bank's assets. The FDIC
estimated the bank's failure to cost the Deposit Insurance Fund $10 million.

John Warner Bank's failure was followed by that of the $36 million-asset First State Bank of Winchester,
Ill. All of its $34 million in deposits were purchased by First National Bank of Beardstown, Ill., which paid a
two percent premium. First National Bank agreed to purchase approximately $33 million of assets, and
entered into a loss sharing agreement with the FDIC for $20 million of those assets. The FDIC estimated
First State Bank's failure would cost $6 million.

Regulators also shut the $77 million-asset Rock River Bank in Oregon, Ill. Harvard State Bank paid a 2
percent premium to acquire all of the bank's $75.8 million in deposits and agreed to buy $72.9 million of
its assets. The FDIC said it had entered a loss-share transaction with Harvard on approximately $51.3
million of assets. The FDIC estimated the failure would cost $27.6 million – almost 36 percent of its asset
size.




31 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Later, the Office of the Comptroller of the Currency shut $166 million-asset The First National Bank of
Danville, Ill. First Financial Bank of Terre Haute, Ind., agreed to pay a 5.36 percent premium to acquire all
of the bank's $147 million of deposits, and approximately $148 million of its assets. The FDIC said it
entered into a loss sharing agreement on approximately $97 million of Danville's assets. The FDIC said
its failure would cost $24 million.

Illinois state regulators also shut $55.5 million-asset The Elizabeth State Bank. Galena State Bank and
Trust paid a 1 percent premium to acquire all of the $50.4 million in deposits at the failed bank and to
purchase $52.3 million of its assets. The FDIC said it entered into a loss-share transaction on
approximately $44.5 million. The failure is expected to cost $11.2 million.

In the midst of the failures in Illinois, Texas state regulators shut $118 million-asset Millennium State Bank
of Texas in Dallas. State Bank of Texas in Irving agreed to purchase all $115 million of its deposits and
essentially all of its assets. The FDIC estimated its failure would cost $47 million.

Two California banks also bit the dust. Vineyard Bank, with $1.9 billion in assets, was closed after a deal
for the Rancho Cucamonga-based institution fell through. California Bank & Trust agreed to assume the
non-brokered portion of Vineyard's $1.6 billion in deposits, and take over $1.8 billion of its assets. The
FDIC said it will pay the bank's $134 million of brokered deposits directly. The FDIC and the acquirer
entered into a loss-sharing agreement for roughly $1.5 billion of Vineyard's assets. The failure is
estimated to cost the federal government $579 million, the agency said.

Regulators also closed $1.5 billion-asset Temecula Valley Bank, in Temecula, after the bank announced
that a group of private-equity investors would not, as previously planned, inject $210 million into the bank.
First-Citizens Bank and Trust Co., in Raleigh, N.C., agreed to assume the non-brokered amount of
Temecula Valley's $1.3 billion in deposits, and also to acquire virtually all of its assets. The FDIC said it
will pay the failed bank's $304 million in brokered deposits directly. The FDIC and the acquirer entered
into a loss-sharing agreement on roughly $1.3 billion of Temecula Valley's assets. The agency said the
failure is estimated to cost $391 million.

State regulators also closed smaller institutions in Georgia and South Dakota. BankFirst, a $275 million-
asset bank, closed in Sioux Falls, S.D. Alerus Financial in Grand Forks, N.D., agreed to assume all $254
million of BankFirst's deposits. The acquirer also took over roughly $72 million of the failed bank's assets.
In a separate transaction, Bank Beal Nevada in Las Vegas agreed to buy $177 million of BankFirst's
loans. The failure is estimated to cost the government $91 million, the FDIC said.

Georgia regulators closed $115 million-asset First Piedmont Bank in Winder, the 10th failed institution in
the state this year. First American Bank and Trust Co. in Athens paid a 1.01 percent premium for the
closed institution's $109 million of deposits. The acquirer also agreed to buy roughly $111 million of the
failed bank's assets, and entered into a loss-sharing agreement with the FDIC for $90 million of those
assets. First Piedmont's failure is estimated to cost the FDIC $29 million.

Just last week, regulators closed seven more banks, including six bank subsidiaries of Macon, Ga.-based
Security Bank Corp. with $2.4 billion in total deposits -- Security Bank of Bibb County, Macon, Ga.;
Security Bank of Houston County, Perry, Ga.; Security Bank of Jones County, Gray, Ga.; Security Bank of
Gwinnett County, Suwanee, Ga.; Security Bank of North Metro, Woodstock, Ga.; and Security Bank of



32 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
North Fulton, Alpharetta, Ga. Also closed was Waterford Village Bank of Clarence, N.Y., with $58 million
in deposits. The failures cost the FDIC $812.6 million.

The six Security Bank Corp. institutions’ deposits will be assumed by State Bank and Trust Co. of
Pinehurst, Ga., which agreed to buy $2.4 billion of the failed bank’s $2.8 billion in assets. Waterford
Village Bank’s deposits will be assumed by Evans Bank, N.A. of Angola, N.Y., which also agreed to buy
the failed bank’s $61.4 million in assets.



Banking Survey Finds AD&C Assets Do Not Reflect Market Values
The Zelman & Associates’ June 2009 Banking Survey indicates that, because of the tight credit market
and lending environment, assets — including acquisition, development and construction assets — may
not reflect their actual value. According to the survey, 78 percent of the respondents believe that the
banking industry has not adequately re-appraised its AD&C portfolios, up from 70 percent in March.

“Given that regulators do not specifically require an appraisal after a certain time period, the onus is
largely on the bank to determine if conditions have changed enough to warrant a new appraisal,” the
report noted. “This grey area and obvious incentive to ignore or glance over the reality of the market is
why many assets remain appraised at the original underwritten value.”

Respondents indicated that on average, only 9 percent of AD&C assets have been re-appraised over the
last month compared to 21 percent over the last three months, 36 percent over the last six months and 63
percent over the last year. In addition, survey participants noted that on average, assets that have
undergone re-appraisals had a 35 percent to 40 percent reduction in value.

The majority of respondents believe that the credit crisis will continue to at least 2010 or 2011. “This view
is partly driven by the unwillingness or inability to accurately mark AD&C assets to fair value and the fact
that commercial real estate is expected to pose a significant headwind to banks’ capital position,” the
survey stated.

For more information on the Banking Survey, visit http://www.zelmanassociates.com/



Moody’s: Commercial Property Declines Slowing
Commercial real estate in the U.S. took another blow in May as prices fell for the second month in a row,
Moody’s Investors Services said. Commercial real estate prices plunged 7.6 percent in May from the
previous month as measured by Moody’s/REAL Commercial Property Price Indices. The index, which
covers all property types, is now 28.5 percent below its level a year ago and 34.8 percent below the peak
reached in October 2007.

With the rise in unemployment, prices in the office and retail sectors have been hit the hardest, having
fallen 28.8 percent and 18.5 percent, respectively, on a year over year basis. The apartment sector is
down 16.1 percent, while the industrial sector dropped 12.3 percent.

Nick Levidy, a managing director at Moody’s, noted that to determine if commercial property is reaching
the bottom, there must be a steep price decline as well as a high transaction volume. As the data



33 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
indicates, prices have tumbled significantly; however, transaction volume is currently at its lowest level
since Moody’s began tracking the market.



CRE Loan Loss Provisions Mount as Property Values Decline
Higher loan-loss provisions without stronger earnings will create challenges for regional banks during the
second half of this year. Commercial mortgages at U.S. banks are falling at the fastest rate in nearly 20
years, The Wall Street Journal reported. The Journal estimated $30 billion in commercial real estate loan
losses by the end of the year, based on reports filed by more than 8,000 banks in the first quarter.

Large banks in the United States reported strong net earnings and income despite heavy commercial real
estate losses. Commercial real estate prices declined 7.6 percent in May, 28.5 percent below its level
from May 2008 and 34.8 percent below peak prices measured in October 2007, said Moody's/REAL
Commercial Property Price Indices.

For example, Goldman Sachs lost $700 million in commercial real estate losses despite $13.76 billion in
net revenues and $3.44 billion in net earnings. At Bank of America, net charge-offs in commercial real
estate hit $629 million in the second quarter with non-performing loans at $6.651 billion for the second
quarter despite a net income increase of $3.2 billion.

JP Morgan Chase reported record revenue of $27.7 billion and $2.7 billion in net income, but its non-
performing loans increased to $3.5 billion in the second quarter from $1.7 billion in the first quarter and
$3.2 billion during the second quarter of 2008. Net charge-offs were $433 million with a $438 million
allowance increase for loan losses. For commercial term lending, the increase was 32 basis points in net
charge-offs.

One regional bank affected, S&T Bancorp Inc., said it had a $10.2 million net loss for the second quarter
compared to $13.9 million net income after the second quarter last year because its commercial real
estate portfolio had higher loan-loss provisions and Federal Deposit Insurance Corp. premiums
increased. S&T reported its earning assets declined $176.2 million during the past six months, partly
because of a drop in commercial loan demand.

Despite declining commercial real estate demand, S&T said its residential mortgage and home equity
loan applications reached record levels during the first six months – $59.4 million of residential mortgage
loans and $80.2 million of home equity loans in originations – because of lower interest rates. The bank
said most of the new residential mortgage loans sold to Fannie Mae minimized interest-rate risk
associated with long-term mortgages in loan portfolios.

Fannie Mae also continues to expand its multi-family originations. The GSE said it provided $10.1 billion
during the first half this year in multi-family housing, including $7.1 billion in its mortgage-backed
securities product, $1.1 billion in small loans – loans of up to $3 million, or $5 million in high cost areas –
and $1.7 billion in structured transactions.

However, loan-loss provisions at the bank reached $59.2 million after the fourth quarter last year and the
first two quarters this year, which included $15 million of specific reserves for non-performing and other
troubled loans in the second quarter. Non-performing loans hit nearly $206 million in the past three



34 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
quarters – $71.4 million at the end of the second quarter compared to $92 million in the first quarter and
$42.5 million at the end of the fourth quarter.



Loan Extensions for Declining CRE Values May Postpone Problem
Currently, 60 percent of all commercial real estate loans in the U.S. are unable to obtain refinancing when
they reach maturity, according to a study by Bank of America-Merrill Lynch, compared to 15 percent to 20
percent the same period a year ago. Because of tighter underwriting standards, crashing property values
and decreasing cash flows, Richard Parkus, the head analyst of commercial mortgages at Deutsche Bank
Securities, noted that the greatest threat facing commercial mortgage-backed securities is not term
default risk, but maturity default/extension risk.

To avoid foreclosures on commercial loans, many lenders have been extending the terms of maturity
despite the rapid increase in the mortgage default rate. However, this approach may only lengthen the
time the commercial real estate sector remains in a depressed state. “In today’s environment, it’s
obviously not very attractive to foreclose on a borrower,” Matthew Anderson, a co-founder of real estate
consulting services firm Foresight Analytics, told Reuters. “They’re taking loans that don’t have a cash-
flow problem, but definitely have a valuation problem, and they’re pushing those out to the future.”

Because of the expenses involved and the losses incurred from selling in a distressed market, many
lenders are reluctant to foreclose on a property. Subsequently, the percentage of foreclosed loans has
been declining while the percentage of commercial loans past due has been growing. However, with
about $270 billion to $275 billion of loans set to mature in 2010, postponing foreclosures may lead to
more significant problems as the funds used to refinance the rolled over loans may deplete the capital
needed to originate new loans.



Resolutions Low as Distressed Assets Grow: Real Capital Analytics
Banks and other financial institutions face the middle of the distress cycle in commercial real estate,
nearly $108 billion, with little resolution in sight, said Real Capital Analytics, New York. In its July Troubled
Asset Radar report, troubled commercial real estate properties – defaults, foreclosures or bankruptcies –
more than doubled this year at $56.6 billion, but only $4.1 billion were resolved by banks or servicers.

The report said distressed assets increased $6 billion in May to $107.6 billion across the United States.
April’s mark broke a record at $19.5 billion in distressed assets after General Growth Properties of
Chicago declared chapter 11 bankruptcy. GGP's secured debt obligations consisted of 100 properties and
$18 billion of mostly securitized mortgages.

GGP's bankruptcy accounted for a 133 percent year-to-date increase, but the hotel sector’s distress
increased 216 percent, and office distress is up 118 percent for the year. GGP assets, however, are
performing, and its bankruptcy occurred because the real estate investment trust had significant
maturities and was unable to pay its debt.

Retail and hotel distressed properties combined for $58.5 billion in distressed assets with $29.6 billion
year-to-date. Apartment and office properties total $34.5 billion with $17 billion year-to-date in distressed
assets, RCA's report said.



35 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Las Vegas topped all U.S. markets for distress, followed by Detroit tertiary markets and Cincinnati. The
strongest performing markets with the least distressed assets include Seattle, San Jose and the
Washington, D.C., metropolitan area.



New Home Sales: Greater Gain Than Expected
Sales of newly constructed single-family homes spiked 11 percent in June to an annualized rate of
384,000 homes, but the median price fell 3 percent, according to Briefing.com. Still, the gain over May
was much greater than expected. A consensus of housing industry analysts had forecast seasonally
adjusted sales of 352,000, according to the report.

However, sales are still 21 percent below the levels of a year ago, when new homes sold in June at an
annualized rate of 488,000, according to the report released by the U.S. Department of Housing and
Urban Development. Four years ago, during the height of the housing boom, the sales rate for June was
1,374,000, nearly three and a half times higher than last month.

Still, the report was very positive, according to Peter Morici, an economics professor at the University of
Maryland who had forecast June sales to be at the 350,000 level, CNNMoney.com reported. Builders
have been more optimistic about market conditions as well – an index of builder confidence from the
National Association of Home Builders rose to 17 this month after languishing in single-digit territory.

The median price paid for a house sold in June 2009 was down about 3 percent to $206,200; the mean
price was $276,900. By the end of the month, the inventory of new homes had dropped to 281,000, an
8.8 month supply at current rates of sale. Last month, there were enough homes on the market to last
10.2 months at that rate.

"Normal" new home inventory is about 300,000, according to Pat Newport, a housing industry analyst for
IHS Global Insight. He added that the median time to sell a home is at an all-time high of 11.8 months.
Much of the selling struggle is because the housing stock is concentrated in exurbs – large homes far
from where most people work.

Perhaps the best news is that home construction may be ready to once again boost the economy. With
new home inventory more in balance, consumers may no longer be able to wring extras, such as high-
end appliances and even swimming pools, out of builders.

Meanwhile, the home vacancy rate fell to 2.5 percent in the second quarter, according to a Commerce
Department reported. That is down from 2.7 percent in the first quarter and marks two straight quarters
the rate has fallen. The last time it was as low as 2.5 percent was the third quarter of 2006.



Home Price Composites Improve: Case-Shiller
According to Standard & Poor’s Case-Shiller Home Price Index, which measures the residential housing
market, May marked the fourth consecutive month in which the annual rate of decline of 10-city and 20-
city home price composites improved.




36 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Released Tuesday, the index of 20 metropolitan areas showed an annual decline of 17.1 percent for the
month of May, a step up from April's 18.1 percent, while the 10-city index showed a 16.8 percent year-
over year decline compared with April.

While continued stabilization in 2009 is seen by analysts as promising, the numbers are sobering when
compared to 2008 statistics. The Case-Shiller Price Index for May of this year represents a 15.8 percent
drop when compared to a year ago. This is the steepest decline witnessed since the Case-Shiller Price
Index was introduced in 2000.

Additionally sobering is that no city in the Case-Shiller 20-city index saw price gains for the second
straight month. Overall, the monthly indices have not recorded home price increases now in any month
since August 2006.

The S&P Case-Shiller Home Price Indices are calculated on a monthly basis and published with a two
month lag. To access the Case-Shiller Home Price Indices, visit
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0
,0,0,0,0.html.



Hanley Wood: Rise in Starts, Permits May Indicate Stabilization
With building permits and housing starts gaining ground in June, along with the Leading Economic
Indicator Index reporting its third consecutive monthly gain, there are signs that the housing market and
the economy may be stabilizing. As reported by Hanley Wood Market Intelligence, total building permits
issued in June rose 8.7 percent from the previous month to a seasonally adjusted annual rate of 563,000
units. Single-family permits increased 5.9 percent and multi-family permits jumped 18.8 percent.

According to data from the Commerce Department, the South had the strongest amount of permitting
activity in June, increasing 13.9 percent for all housing types and 11.1 percent for single-family. The
Northeast and Midwest increased 5.4 percent and 3.4 percent, respectively, for all housing types while
single-family remained flat for both. The West reported a 1.9 percent increase for all housing types while
single-family climbed 1.2 percent.

June housing starts performed better than expected, but were still off 46 percent from the same period a
year ago. In June, housing starts increased 3.6 percent from May to a seasonally adjusted annual rate of
582,000 units. Most of the building activity was in the single-family sector, which surged 14.4 percent from
May to a seasonally adjusted annual rate of 470,000 units. The increase in activity may be related to
speculation to meeting inventory for buyers taking advantage of the government’s homebuyer tax credit
that is set to expire later this year.

Data from the Commerce Department showed that total housing starts in both the Northeast and Midwest
surged in June from the previous month, rising 28.6 percent and 24.3 percent, respectively. Single-family
climbed 33.3 percent and 26.4 percent, respectively, in the regions. Total starts dropped in the South and
West 1.4 percent and 14.8 percent, respectively, while single-family starts increased 8.1 percent and 15.2
percent, respectively.




37 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Mortgage rates declined to 5.14 percent in Freddie Mac’s Primary Mortgage Market Survey released on
July 16 – their lowest levels since the end of May. The Mortgage Bankers Association’s seasonally
adjusted Purchase Index for the week ending July 10 fell 9.38 percent to 258.8 from the previous week’s
figure of 285.6. The index – back to its lowest level since the end of May – dropped 28.05 percent from
the same period last year.



Architecture Billings Index Takes a Sharp Decline
Although the previous three months showed signs that the Architecture Billings Index was stabilizing, it
dropped five points in June to 37.7, according to the American Institute of Architects. The drop indicates a
sharp decline in the demand for design services. The index, which is an economic indicator of
construction activity, shows a nine- to 12-month lag time between architecture billings and construction
spending. Scores lower than 50 percent represent declining conditions, while those greater than 50
indicate an industry-wide increase in billings.

The regional averages for June were 40.5 for the South, 42.8 for the Northeast, 36.2 for the Midwest and
39.9 for the West. June’s sector index breakdown included mixed practice at 43.5, institutional at 37.0,
multi-family residential at 42.7 and commercial/industrial at 39.5. New project inquiries in June scored
53.8, representing the fourth month in a row with a score in the mid 50s.

“It appears as though we may have not yet reached the bottom of this construction downturn,” said AIA
chief economist Kermit Baker, PhD. “Architecture firms are struggling and are concerned that construction
market conditions will not even improve as soon as next year. There has also been little movement in
terms of stimulus funding allocated for design projects having the desired impact of leading to new work.”

The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by
the AIA Economics and 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 the AIA’s Web site at www.aia.org.



Genworth Move to Loosen LTV Criteria
Genworth Financial Inc.'s mortgage insurance unit removed 136 metropolitan areas from its
"Declining/Distressed Markets" list, a step that will effectively loosen loan-to-value requirements and FICO
scores for certain borrowers.

The Richmond, Va., company would not identify the markets removed from the list. However, Genworth
has told its lender clients that 14 states will remain on the list: Arizona, California, Connecticut, Florida,
Hawaii, Maryland, Michigan, Nevada, New Hampshire, New Jersey, Oregon, Rhode Island, Utah and
Vermont.

In Arizona, California, Florida and Nevada, the minimum FICO score to get a Genworth policy is 720. In
California, Genworth will not insure loan amounts above $417,000.




38 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Green Leasing Gaining Popularity in Sustainable Buildings
Building owners and tenants are entering into new types of lease agreements to meet the growing
demand of environmentally minded property owners and tenants interested in incorporating sustainability
goals into facility operations. Appraisers will want to familiarize themselves with such agreements, known
as green leases, which are becoming more common as savvy real estate investors see the benefit of
implementing sustainability into investment strategies.

A green lease incorporates provisions that provide incentives to both the building owner and the tenant to
reduce energy consumption through efficient energy management practices. Provisions contained in a
green lease may include setting environmental performance targets and benchmarks, as well as
instituting rules and regulations regarding energy use, indoor air quality, building materials and recycling.

Green leases are a two-way street. From a building owner’s perspective, a green lease helps to maximize
the long-term return obtained from a building as well as ensure that a tenant’s operations won’t negatively
affect a building’s performance. From a tenant’s perspective, green leases help increase profitability
through reduced operations costs obtained from the building’s energy efficient systems.

One such model green lease was recently released by the Corporate Realty, Design & Management
Institute. More information is available at www.squarefootage.net.



Final Project RESTART Guidelines Released
The American Securitization Forum has released its final proposed guidelines for its Project on
Residential Securitization Transparency and Reporting, or 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, including items relating to appraisal and
valuation. The guidelines are not legally binding but rather are a starting point for negotiations between
investors and mortgage companies when loans are packaged into securities.

According to the ASF’s latest guidelines, mortgage companies would be obligated to repurchase bad
loans if they should have been reasonably able to detect fraud by originators, borrowers, appraisers or
others who were a party to the transaction. In addition, mortgage companies would be required to verify a
borrower's income or determine that the income is reasonable. To view the final version of the RMBS
Disclosure and Reporting Packages, visit www.americansecuritization.com/story.aspx?id=3461.


Mediation Programs Help At-Risk Homeowners Avoid Foreclosure
A report by the Center for American Progress argues that federally backed mandatory mediation
programs at the state and local level provide struggling homeowners the best opportunity to avoid
foreclosure. The report said mediation helps because it allows banks and homeowners to sit down
together, look over all options and develop solutions that benefit all involved.

More than 80 percent of at-risk homeowners had not explored alternative solutions with their lenders by
the end of 2008, according to report authors Andrew Jakabovics and Alon Cohen. Estimates show that as
many as nine million homeowners may face foreclosure over the next four years. However, mandatory
mediation programs provide struggling homeowners a last chance to save their homes as well as provide
opportunities to consider alternatives other than loan modifications that also may prevent foreclosure.


39 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Jurisdictions in nine U.S. states have established alternative dispute resolution methods, including
mediation, to help at-risk homeowners avoid foreclosure. Although these programs are relatively new, the
states are finding that mediation unclogs the court system and provides participants with more favorable
solutions. Among the best programs, nearly 75 percent of cases have avoided foreclosure proceedings.

A Connecticut mediation program has 30 full-time staff, including a dedicated mediator and clerk based in
each county. A pilot program that uses a two-step mediation system was launched in Philadelphia, where
the court runs an open session once a week during which homeowners, counselors and attorneys
engage in informal negotiations. Cases that are not resolved are referred to formal mediation.

To read the Center for American Progress report on mediation, visit
www.americanprogress.org/issues/2009/06/pdf/foreclosure_mediation.pdf.

RealtyTrac: 1.5 Million Homes in Foreclosure in 2009
A record 1.53 million properties were in the foreclosure process – default notices, auction sale notices
and bank repossessions – during the first six months of 2009. That was nine percent more than the
previous six months and 15 percent more than the same period in 2008, according to a report released by
RealtyTrac.

There were a total of 1.91 million filings, resulting in one out of every 84 U.S. properties receiving at least
one filing in the first half of the year. Banks repossessed 386,800 properties. And there was no recorded
improvement in June, the last month of the cycle. More than 336,000 homes reported foreclosure filings,
the fourth straight 300,000-plus month. Filings were up 33 percent over last June and nearly five percent
compared with May.

The biggest problem affecting foreclosure figures is the recession. As job losses mount, more out-of-work
borrowers are falling behind on payments. And home prices are still falling, albeit at a slower rate, which
by itself is enough to drive more homeowners into default. Homeowners are apt to walk away from their
mortgages once their home values fall 15 percent below their mortgage balances, according to recent
research reported by Paola Sapienza of the Kellogg School of Management at Northwestern University
and Luigi Zingales of the University of Chicago Booth School of Business.

The Federal Housing Finance Agency, the government watchdog created to manage Fannie Mae and
Freddie Mac, reported that only 13,800 mortgages had been modified by Fannie and Freddie lenders in
April. That is down 12 percent from March. The statistics did not include workouts arranged through the
Home Affordable Modification Program, which kicked off in April. The program has resulted in more than
200,000 trial modifications and 20,000 refinancings. But borrowers with modified loans must make three
months of on-time payments before their restructuring can be recorded as a final modification.

The Sun Belt suffered more foreclosures than any other region during the last six months. California, with
391,611 filings, one for every 34 households, recorded more than any other state. Nevada had the
highest foreclosure rate with one for every 16 households. Arizona, with one for every 30, and Florida,
with one for every 33, were next. Utah had the fifth highest rate at one for every 69.

IASB Proposes Changes in Fair Value Rule


40 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The International Accounting Standards Board announced plans to change the fair value rule, known as
IAS 39, which would affect how banks and insurers report the value of financial instruments. The
proposals address how financial instruments are classified and measured, the IASB said in a statement.

The proposed changes would provide banks more freedom in how they report assets by allowing
investments that produce predictable cash flows to be valued using an accounting system that would
flatten market fluctuations while investments with unpredictable cash flows would be valued at current
market levels. Although the proposals could increase the number of investments reported at current
market values — which may improve transparency — volatility on earnings may increase.

“The proposals recognize that banks manage their portfolios differently, and that’s a huge step in the right
direction,” said Pauline Wallace, a partner at PricewaterhouseCoopers. The IASB plans to complete work
on IAS 39 during 2010, although the changes would not go into effect until at least 2012.

Nation's Largest SBA Lender Escapes Bankruptcy, Barely
The largest originator of SBA-backed loans to franchisees since 2000 is in financial dire straits. CIT
Group Inc. scrambled last week to obtain $3 billion of emergency financing from bondholders, which will
keep the struggling lender out of bankruptcy. But many analysts are predicting that the infusion of capital
may only delay CIT’s bankruptcy filing, according to Reuters.

Now that it has been rescued by several big bondholders, CIT will have the capacity to continue lending
while it attempts to restructure its debt and restore confidence in its name. Of immediate concern to the
lender is reversing the trend of borrowers drawing down their credit lines.

Prior to its rescue, CIT had sought emergency federal funding. Those talks broke down as the Obama
Administration has taken a more conservative approach to how readily it will bail out troubled companies.
The government already has a $2.33 billion investment in CIT from the Troubled Assets Relief Program.

CIT’s financial problems resulted from the lender’s expansion into subprime mortgages and student loans
earlier in the decade. Had the company gone bankrupt this week, its $75.7 billion of reported assets
would have made CIT the largest U.S. financial company to go bankrupt since Lehman Brothers Holdings
last September.

Citi Close to Deal with Regulator
Citigroup is close to an agreement with one of its main regulators that will increase scrutiny of the U.S.
bank and force it to fix financial, managerial and governance issues, according to Financial Times. The
proposed agreement requires, among other things, that Citi strengthen its board and governance,
improve asset quality, better manage expenses and provide more information to regulators on its capital
and liquidity, those close to the situation said.

The regulator’s action highlights concern over Citi’s financial health, governance and the strength of its
management team, led by Vikram Pandit, chief executive. The FDIC is known to be frustrated with the
slow pace of Citi’s “toxic” assets sales, its losses and the lack of commercial banking experience at the
top. Citi, which is about to cede a 34 percent stake to the U.S. government as part of its latest rescue,
struck a similar agreement with another regulator late last year, industry executives have said.




41 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Citi, which is expected to report a second-quarter loss, is already addressing some of the regulators’
concerns. It has hired five new directors and is looking for three more, bolstered its balance sheet and
recruited executives with commercial banking expertise. Also, it has pledged to sell billions of dollars in
non-core businesses and assets.

Deutsche Bank Report: Commercial Real Estate Losses Could Reach $300
Billion
According to the findings of a recent Deutsche Bank report on commercial real estate debt exposures,
commercial real estate and construction losses could reach as high as between $250 billion and $300
billion. Deutsche Bank's CMBS Research team estimated CMBS losses on 2005-2008 vintages will be 12
to 15 percent while construction losses at banks may be 25 percent or higher.

The latest Deutsche Bank CMBS Research report is a follow-up to an April report titled “The Future
Refinancing Crisis in Commercial Real Estate.” The latest report, “The Future Refinancing Crisis in
Commercial Real Estate, Part II: Extensions and Refinements,” seeks to analyze the magnitude of
potential refinancing problems faced by the commercial real estate debt markets over the coming decade
and to see what proportion of commercial mortgages in CMBS deals will qualify to refinance.

According to the CMBS Research team, “The startling conclusion was that, under reasonable
assumptions, an extraordinarily large proportion of loans, perhaps 65 percent, or more, might well fail to
qualify to refinance, at least without large equity infusions. In effect, the massive paradigm shift in
underwriting standards, combined with 35-45 percent price declines and severely depressed cash flows,
would likely strand a vast swath of the commercial real estate debt markets.”

The report concludes that the looming commercial real estate crash may well exceed the collapse that
took place in the early 1990s. The report goes on to state that those institutions most vulnerable to any
commercial real estate bust are regional and community banks, which tend to have very high exposures
to highly toxic construction and land development loans.

As reported in the June issue of Appraiser News Online, the Treasury Department has been particularly
concerned about the $154.5 billion of CMBS loans coming due between now and 2012. In its April report,
Deutsche predicted that about two-thirds of that likely won't qualify for refinancing. Deutsche also
projected back in April that the default rates on the $700 billion of outstanding CMBS eventually could hit
at least 30 percent, and loss rates, which take into account the amounts recovered by lenders, could
reach as much as 13 percent.

CRE Investor Survey Indicates Slow Recovery
Commercial real estate owners and investors anticipate property values will continue to fall over the next
12 months before a slow recovery materializes in 2011, according to findings in the second quarter
PricewaterhouseCoopers' Korpacz Real Estate Investor Survey. “We are not seeing the recovery
dominating sectors until the start of 2011 but really into 2012,” said Susan Smith, a director in PwC’s real
estate group. Smith noted that the first indications of recovery will include consistent job growth coupled
with an increasing demand for commercial space.

Survey respondents are bracing for an additional 10 percent decline on average in the value of
commercial properties across all sectors with apartments expected to drop 7.0 percent, regional malls 8.5



42 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
percent, warehouses 8.2 percent and offices 11.4 percent. Investors indicated that the recovery for the
warehouse and multifamily sectors should materialize at a faster pace than the office and retail sectors.

According to the survey, limited lending options remain a major obstacle for investors interested in
commercial real estate-related purchasing and refinancing activities. “Lenders are still very hesitant to
lend,” Smith said. “Many of them have portfolios out of balance in terms of debt and equity.”

The survey indicated that respondents are concerned about the drop in tenant demand as well as the
increase in the sublease rate, causing many investors to use a lower rent growth assumption rate when
performing valuation analyses. Increasing capitalization rates are also a concern. Moreover, investors
believe that sellers have not yet fully adjusted their asking prices to reflect current market values. “The
sales market is simply stalled and remains in a state of flux because neither buyers nor sellers know
exactly where pricing is right now,” Smith said.

Multi-Family Demand Holds Steady as Other CRE Declines
The dismal economy continued its stranglehold on the commercial real estate industry in the second
quarter, according to CBRE Econometric Advisors' released analysis, pushing up vacancies in the office,
industrial and retail property markets. Skyrocketing vacancies across the board were widely anticipated.
However, demand in the multi-family sector, despite the ongoing job losses that are hindering the
formation of new households, was essentially unchanged from the first quarter of the year. With a second
quarter vacancy rate of 7.3 percent, demand for apartments held steady from the first quarter, according
to the report.

Neither the central business district nor the suburban office market was able to put a lid on the growing
stock of available space. Suffering an increase of 80 basis points, office vacancy across the country rose
to an average of 15.5 percent. The numbers were most dire outside the CBD. The rate jumped 70 points
in downtown markets and 90 basis points in the suburbs for an average vacancy rate of 11.7 percent and
a whopping 17.6 percent, respectively. But things have been worse – the office market's average vacancy
rate is still quite far from the high of 19.1 percent reached in 1991.

The news is no less grim for the industrial market, which experienced an 80 basis points increase that
brought the vacancy rate up to 13 percent, the highest figure for the sector in the last six years. Numbers
escalated in the retail sector, but the increase was less severe than seen in office and industrial. With an
increase of 50 basis points, the average vacancy rate for the retail market hit 12 percent. The good news
is the rate of growth slowed down from the first quarter when there was a jump of 80 basis points from the
fourth quarter of 2008.

B of A: Manufacturing Facilities Might Be Lone Construction Bright Spot
Building equipment and housing data signal the worst may not be over for the U.S. construction industry,
even with President Obama’s stimulus spending, according to Bank of America Corp.

Sales at the world’s largest maker of bulldozers and excavators, Caterpillar Inc., based in Peoria, Ill., fell
43 percent in May compared with year-ago levels. Lower-than-expected construction spending “was
mostly driven by the residential market with some additional downside from public construction spending,”
Bank of America analysts said in a report.




43 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Construction of manufacturing facilities and power plants were among the areas of strength, the analysts
said in the July 1 report. U.S. equipment leasing and financing fell 41 percent in May from a year earlier to
$4.2 billion, according to the Equipment Leasing and Finance Association.

Moody’s: June CMBS Delinquencies Rise, Could Reach 6% by Year-End
Commercial Mortgage Backed Security delinquency rates tracked by Moody’s Investors Service jumped
in June to 2.67 percent from 2.27 percent the previous month. The delinquency rate was 0.46 percent
during the same period last year and 0.22 percent in July 2007. The agency expects the rate to surge to
between 5 and 6 percent by year-end as delinquencies continue to climb in all property sectors.

The hotel sector witnessed the largest increase in delinquencies, increasing from May’s figure of 2.02
percent to 3.26 percent in June. Although the multifamily delinquency rate remains the highest among all
sectors, delinquencies in this category increased only 0.02 percent in June to 4.58 percent. However, the
delinquency rate’s apparent leveling off in this sector is not expected to continue.

The retail delinquency rate increased in June to 2.92 percent. According to Moody’s, the delinquency rate
for this sector was skewed because of General Growth Properties’ bankruptcy activities. With about half
of the loans backed by the struggling real estate investment trust expected to becoming past due in the
coming weeks, the delinquency rate in this sector will likely surge. The industrial sector delinquency rate
rose 1.96 percent in June, while the office sector witnessed a smaller rise in its rate from 1.34 percent in
May to 1.60 percent in June.

Travel Sanctions Lifted from Mexico; IVC Early Bird Ends Aug. 1
Official warnings about travel to Mexico because of the H1N1 virus have been lifted, and preparations for
the International Valuation Congress, presented by the Appraisal Institute and Federación de Colegios,
Institutos y Sociedades de Valuadores de la República Mexicana, A. C., are moving forward. Early bird
rates end Aug. 1.

The IVC, taking place Nov. 11-13 in Cancún, 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.

Education sessions feature two new AI seminars: An Introduction to Valuing Green Buildings and
Appraising Distressed Commercial Real Estate: Here We Go Again. The green buildings seminar
provides students with the latest information in the commercial green building industry. In the commercial
real estate seminar, students will learn how distressed real estate will be valued in the present market
conditions.

The conference hotel is the Fiesta Americana Condesa Cancún, located in the city’s main hotel zone.
Group lodging rates are $151 for single occupancy and $170 for double occupancy. Conference
registration fees start at $200. Early bird registration rates end Aug. 1. For more information and to
register for the International Valuation Congress, visit www.appraisalinstitute.org/membership/iac.aspx.




44 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
To stay updated with travel news and information from Mexican tourism officials, visit www.mexico-
update.com/index.jsp.

Data Verification Methods Online Seminar Now Available
Data Verification Methods, the Appraisal Institute’s newest online seminar, offers a number of proven
alternatives to verifying a sale or lease transaction, an essential part of the appraisal process. Suitable for
both residential and general appraisers, students will learn a variety of professional techniques that
should increase success in verifying and confirming market data.

The cost is $81 for members, $96 for non-members. This seminar is approved for five hours of Appraisal
Institute continuing education credit. For state approval information, appraisers should check with their
state (a list of agencies is available at www.appraisalinstitute.org/education/regagncs.aspx). For more
information and to register, visit
www.appraisalinstitute.org/education/seminar_descrb/Default.aspx?sem_nbr=OL-633&key_type=OOS.

Green Building Provides New Opportunities for Appraisers
As the popularity of sustainable building gains momentum, and the number of buildings obtaining the U.S.
Green Building Council’s Leadership in Energy and Environmental Design certification escalates,
appraisers will increasingly be called on to consider green and sustainable elements in their valuations.
However, because sustainable building is a new trend, valuing green features may prove challenging.

“As with any new property type, the learning curve is great, but we’ll have to do the best we can. …
[appraisers] will need to get up to speed on what green buildings are, must understand clients’ goals and
objectives and must know green building systems and terminology,” noted Theddi Wright Chappell, MAI,
a managing director at Cushman & Wakefield, and the Appraisal Institute’s sustainable building liaison.

With LEED-certified buildings saving on average 30 percent on energy costs, 30 to 50 percent on water
use costs, and 50 to 90 percent on waste costs, there is evidence in some markets that sustainable
design does increase value. Moreover, LEED buildings are leasing well above market norms in some
regions and lease more rapidly. Although controversial, some studies suggest that green commercial
buildings provide a healthier and more enjoyable work environment, having a positive impact on
employee productivity, recruitment and retention.

Although the basic appraisal framework for a green building will not fundamentally change, appraisers will
have to enhance their knowledge of key sustainable features and potential value impacts. For a green
appraisal to be accurate, the appraiser needs to understand green performance differences. “Appraisers
have to increase their knowledge to gain the competence required under USPAP and apply their
judgment on key sustainable building valuation issues,” said Scott Muldavin, executive director of the
Green Building Finance Consortium.

With the industry exploding, appraisers who possess a high-level knowledge base of LEED standards will
have an advantage over their counterparts. To gain expertise in this area, many appraisers are obtaining
the USGBC’s LEED Green Associate and Accredited Professional designations (the GA being more
appropriate for appraisers’ needs), which demonstrates to clients that they have the latest knowledge and
understanding of green building practices. In addition, the Appraisal Institute’s Valuation of Green
Residential Properties and An Introduction to Valuing Commercial Green Buildings seminars, as well as



45 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
its Valuing High Performance Residential Properties webinar, are designed to give appraisers an edge
when approaching green building assignments.

To learn more about green building credentialing and educational opportunities, visit USGBC’s Web site
at www.usgbc.org and the Appraisal Institute’s Web site at www.appraisalinstitute.org.

WSJ: FDIC Handing Failed Banks over to Banks also at Risk
In a July 13 overview of recent bank failures – which has hit 53 this year – The Wall Street Journal said
the Federal Deposit Insurance Corp. has encountered a lack of solid financial institutions looking to buy
their assets and liabilities. Thus, many of the acquirers are dealing with such issues as a high exposure to
commercial real estate.

While the FDIC recently proposed requirements for non-banks wanting to buy banks, in the interim, many
banks that have absorbed the remains of collapsed institutions are in a risky position of their own,
according to The Wall Street Journal’s analysis.

For example, last month, United Community Banks, of Blairsville, Ga., acquired assets and liabilities of
Southern Community Bank, including $224 million of loans from the FDIC, which provided a loss-sharing
agreement. Yet United Community has commercial real estate exposure equivalent to more than 850
percent of its tangible common equity, or TCE. Such assets are risky as the real-estate market slumps.

Chicago’s PrivateBancorp, which this month acquired all the deposits and just over $900 million of assets
of Founders Bank ,has commercial real estate exposure equivalent to 590 percent of its TCE. And there
are other question marks. Brokered deposits, which have prompted regulatory unease because they can
be flighty, are up over 220 percent since the end of 2007. They helped fund a 326 percent increase in
corporate loans over the same period, according to The Wall Street Journal.

In March, Great Southern Bancorp, of Springfield, Mo., acquired certain deposits and $443 million of
loans from TeamBank. Great Southern's commercial real estate, which contains a large share of
construction loans, is 536 percent of TCE. Brokered deposits leaped 44 percent last year. And last year
the bank took a $35 million hit, equivalent to 21 percent of its TCE at the time, after a single loan to
another bank went bad.

Significant Downturn in Non-Residential Construction Activity Projected
through 2010
According to the American Institute of Architects, non-residential construction activity is approaching one
of its most significant declines, with a projected 16 percent drop in 2009 and an additional 12 percent
drop in 2010. The AIA’s recently released semi-annual Consensus Construction Forecast, which takes
into account inflation, projects that commercial projects will be affected most while institutional buildings
will experience more modest declines.

“While there are some indications that the overall economy is beginning to recover, non-residential
construction activity typically lags behind the rest of the economy,” said AIA chief economist Kermit
Baker, Ph.D. “Commercial facilities such as hotels, retail establishments and offices will feel the decline
most dramatically. The institutional market will fare much better as stimulus funding becomes available for
education, health care and government facilities.”



46 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Baker noted that architecture firms are beginning to see some moderation in billings, which may indicate
that the downturn in non-residential construction spending may be near the bottom of the cycle.

To read the report in its entirety, visit
http://info.aia.org/aiarchitect/thisweek09/0710/0710b_consensus.cfm.

IAS: House Prices up 1.6 Percent in May
The median sales price of detached single-family homes in the U.S. increased 1.6 percent in May — the
largest one-month increase since July 2005 — according to Integrated Asset Services’ IAS 360 House
price index released July 14. As reported in the index, the median sales price of detached single-family
homes in May was 6.4 percent lower since the economic downturn began in September 2008, an
improvement from April’s figure of 9.1 percent. The median sales price is currently 13.7 percent lower
than the real estate bubble’s peak in 2006.

All four regions the index tracks showed positive increases in May. The median sales price in the Midwest
increased 1.9 percent from the previous month, the Northeast moved up 3.2 percent, the South improved
1.9 percent and the West inched up 0.9 percent.

Out of the 10 largest metropolitan statistical areas in the country, nine reported positive median sales
price gains in May from the previous month. Boston was the highest performer with an increase of 3.7
percent while Chicago rose 1.5 percent, Denver increased 0.4 percent, Los Angeles jumped 2.8 percent,
Miami inched up 0.6 percent, New York rose 1.7 percent, San Diego improved 1.2, San Francisco gained
3.0 percent and Washington, D.C., logged in at 2.0 percent. Las Vegas continued to fall with a decline of
0.9 percent.

”For a while, the bulk of homes sales were distressed properties in declining neighborhoods. Home
affordability combined with tax credits have proven compelling. Sales are shifting back to more traditional
submarkets and neighborhoods,” John Burns, chief executive officer of John Burns Real Estate
Consulting, said in the report.

Distressed CRE Doubles to $108 Billion
The value of commercial properties in the U.S. that are in default, foreclosure or bankruptcy has more
than doubled since the start of the year, according to the latest release from Real Capital Analytics Inc. In
February, distressed U.S. commercial real estate totaled $49.2 billion, according to Delta Associates;
RCA now reports that figure as $108 billion.

There were 5,315 buildings in financial distress at the end of June, the New York-based real estate
research firm said in its report. That’s more than twice the number of troubled properties at the end of
2008. Hotels and retail properties are among the most “problematic” assets following bankruptcy filings by
mall owner General Growth Properties Inc. and Extended Stay America Inc., according to the report.

However, about $4.1 billion of commercial properties have emerged from distress, according to RCA.

Audio Conference to Focus on Appraisal Changes; AI Members Save 25%
New research sponsored by Inside Mortgage Finance suggests that appraisal issues have emerged as



47 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
one of the biggest obstacles for would-be homebuyers this summer. Find out what type of appraisal
problems have emerged and how to deal with them at this audio conference at 2 p.m. CDT July 29.

Why are appraisals taking so long? How is the quality of appraisals changing? What are the challenges of
the new “market conditions” form from the GSEs? Get answers to these questions and more from
executives at the Appraisal Institute, the National Association of Realtors, and other industry players.

Early bird registration ends July 17. Appraisal Institute members receive 25 percent off registration,
making their rates: $260 before July 17 ($281 with CD) and $283 thereafter ($299 with CD).

Call Inside Mortgage Finance at 800-570-5744 or register online at
www.imfpubs.com/catalog/audioconferences/1000011899-1.html.

Appraisal Institute to Host Residential “Green” Webinar on Aug. 12
An Aug. 12 Webinar, Valuing High Performance Residential Properties, will teach participants how to
recognize green features in new construction and rehabbed homes and understand how to make
justifiable adjustments. Attendees will gain insights from seeing real examples of how appraisers deal
with these special “green” features in their appraisal reports.

The Aug. 12 Webinar will cover topics including: incorporating green features in appraisal reports,
supporting adjustments when data is not readily available in the market, how the secondary market views
green adjustments, Freddie Mac’s directions on green homes, insights about the HVCC’s impact on how
lenders will select qualified appraisers and the differences between competing standards for measuring
green.

Speakers include Jacqueline Doty, Collateral Policy Director, Freddie Mac; Dave Porter, NAHB Built
Green Subcommittee, PorterWorks; Sandra Adomotis, SRA, Owner, Adomatis Appraisal Service; and
Taylor Watkins, Principal, Watkins & Associates. They will discuss the factors that make the valuation of
homes with energy efficient improvements different.

The 60-minute webinar will be presented at 1 p.m. CDT on Aug. 12. This webinar is approved for one
hour of Appraisal Institute continuing education credit. Cost is $50 for members; $75 for non-members.
For more information, visit www.appraisalinstitute.org/education/more_info.aspx?id=14448.

IFRS for Private Entities Released and Ready for Use in U.S.
After five years in development, the International Accounting Standards Board recently released a
simplified version of the full International Financial Reporting Standard tailored specifically for private U.S.
companies that publish general-purpose financial statements. Members of the American Institute of
Certified Public Accountants now have the option of using the scaled-down version – referred to as IFRS
for Small and Medium Entities – as an alternative to U.S. generally accepted accounting principles, which
is expected to ease some financial burden on the preparer.

The AICPA noted that besides being less costly and more relevant for certain companies, an organization
may consider implementing IFRS for SMEs if a foreign parent owns them or if they have certain
relationships with foreign investors or business partners.




48 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The new version eliminated several accounting topics that generally do not apply to private companies,
such as earnings per share and segment reporting. Instead, IFRS for SMEs focuses more on shorter-term
cash flows, liquidity, balance sheet strength, interest coverage and solvency issues.

For detailed information about IFRS for SMEs and to learn how it differs from U.S. GAAP, visit
www.ifrs.com or www.iasb.org.

Past President William Harps, MAI, Passes Away
William S. Harps, MAI, an entrepreneur, innovator and visionary, passed away June 30 at the age of 92.
Harps, of Silver Springs, Md., was the 1981 President of the American Institute of Real Estate Appraisers,
a predecessor organization to the Appraisal Institute. Harps was not only an active member of AIREA and
the Appraisal Institute, but a leader in breaking racial barriers in the appraisal industry.

Born in Philadelphia in 1916, Harps moved with his family to the small coastal town of Asbury Park, N.J.,
where the population of 15,000 greeted more than 500,000 visitors during the summer months. As a
young boy, Harps sold newspapers and later worked as a caddy at a golf course. He excelled in school
and received an academic scholarship to Howard University during the Great Depression in 1932.

In 1950, after 11 years in property management and real estate sales, Harps moved into real estate
appraising; in 1960, he became the first African-American to earn the MAI designation. By 1963, Harps
was serving on five AIREA committees. In 1974, he became a member of AIREA’s Governing Council
and moved on to become a regional vice president in 1977. He also served two years as chair of the
National Admissions Committee and as the president of the Washington, D.C., Metropolitan Area
Chapter. These posts served as his springboard to the presidency of AIREA in 1981.

In 1983, Harps’ dream of owning his own firm became a reality when he and his son, Richard Harps, MAI,
established Harps & Harps, Inc. “He was a role model for me. Like him, I have been actively involved
locally and nationally in AIREA and then the Appraisal Institute,” Richard noted in a 1999 Valuation
Insights & Perspectives article (available at
http://lumlibrary.org/webpac/pdf/VIP/MembersMakingNewsQ499.pdf).

During his career, William Harps served as a real estate appraiser and consultant to major banks and
corporations, including Prudential, Mobil, IBM and Bank of America. In addition to writing scholarly reports
for The Appraisal Journal, Harps contributed to the development of Appraisal Institute course materials
and taught advanced level appraisal courses.

Harps is survived by his wife of 66 years, Justine; two children, Richard Harps, MAI, and Eunice Harps; a
daughter-in-law, Leslie Harps; and two grandchildren, Joanna King and Jeffrey Harps.

AMC Competence, Fee Issues Debated in Latest ASB Q&A
In its June Uniform Standards of Professional Appraisal Practice Q&A, the Appraisal Standards Board
noted that when the appraiser is collecting a fee from the prospective borrower, on behalf of an appraisal
management company, the appraiser must disclose the fee if the fee was part of the compensation to
procure the assignment. It also addressed whether or not it is permissible for an appraiser to accept a
valuation assignment from an AMC when the subject property is located outside the appraiser’s primary
market.



49 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Citing USPAP’s Management section – which states, “Disclosure of fees, commissions, or things of value
connected to the procurement of an assignment must appear in the certification and in any transmittal
letter in which conclusions are stated” – the ASB concluded that if an appraiser did not pay a fee to
procure the assignment, then no disclosure is necessary. Simply collecting funds from one party on
behalf of another party is not, in and of itself, representative of paying a fee for procurement of the
assignment, they reasoned. The ASB noted, however, that if the specific facts of the appraisal
engagement agreement with the client led the appraiser or others to believe a fee was paid for
procurement of the assignment, disclosure that a fee was paid is required in the certification as well as
any transmittal letter in which the appraiser’s conclusions are stated.

In another AMC-related question, the ASB said that if an appraiser believes he or she lacks the proper
familiarity with the subject area, then that appraiser is not competent to complete the assignment. The
appraiser therefore must either decline the assignment, or the client must be notified and the appraiser
must take the necessary steps to become competent (and disclose such steps in the assignment report).

The ASB went on to note that the issue of geographic competency is also addressed by the Scope of
Work Rule in USPAP, which states the following:

“For each appraisal, appraisal review, and appraisal consulting assignment, an appraiser must:
      1. Identify the problem to be solved;
      2. Determine and perform the scope of work necessary to develop credible assignment results; and
      3. Disclose the scope of work in the report.”

The ASB noted that its USPAP Q&A may not represent the only possible solution to these issues, nor
may the advice provided be applied equally to seemingly similar situations. The USPAP Q&A, available
each month at www.appraisalfoundation.org, does not establish new standards or interpret existing
standards and is not part of USPAP.

Warehouse Lending Declines under HVCC; Mortgage Brokers
Consolidating
While only time can tell what the long-term effects of the Home Valuation Code of Conduct will be, in the
short term the HVCC is already being credited with the decline in warehouse lending, a major catalyst for
mortgage broker consolidation.

Citing the impact of the HVCC on underwriting standards and the perceived longer wait times for
appraisals, industry insiders are seeing independent mortgage brokers turn to branches to ensure
mortgage banker business. In the past, mortgage brokers shied away from mortgage bankers because
they wanted lender variety. But with warehouse lending drying up, brokers today are more hospitable to
shifting into branch organizations.

The trend appears to be consolidation. Bigger companies continue to grow while smaller companies seek
to merge. The apparent move toward more centralized control has an upside for brokers in that it allows
their businesses — many of which do not have the capacity to become Federal Housing Agency lenders
on their own — to move into branch companies that will provide FHA coverage and help broker
businesses survive in the current market.



50 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
And this industry shift may not be limited only to the present. If enacted, the Mortgage Reform and Anti-
Predatory Lending Act (H.R. 1728) includes a reference to yield spread premiums, a sign that industry
observers believe supports the shift from mortgage broker to mortgage banker moving forward.

Appraisal Foundation Seeks Candidates for AQB, ASB
The Appraisal Foundation seeks qualified candidates to serve on the Appraiser Qualifications Board and
the Appraisal Standards Board. Completed applications for these vacancies must be received by Aug.
14.

There are up to two vacancies on the AQB with both incumbents eligible for re-appointment. There are
three vacancies on the ASB with two incumbents eligible for re-appointment. For the third vacancy on the
ASB, the Board of Trustees is specifically interested in individuals with a background in the valuation of
personal property.

The AQB is responsible for setting minimum qualification criteria for state licensure and certification of
real estate appraisers and has established voluntary qualification criteria for personal property
appraisers. Familiarity with appraiser qualifications is a pre-requisite of service on the AQB, and a
minimum of 10 years of appraisal experience is required. The AQB meets four times per year for
approximately 10 days in total.

The ASB is charged with developing, interpreting and amending the Uniform Standards of Professional
Appraisal Practice. Familiarity with USPAP is a pre-requisite of service on the ASB, and a minimum of 10
years of appraisal experience is required. The ASB meets five times per year for approximately 15 days
in total.

Individuals serving on the AQB and ASB are compensated for their time and are reimbursed for travel
expenses. The individuals selected for the AQB positions will serve a term of up to three years
commencing Jan. 1, 2010.

Application packages are available on the Foundation Web site at
www.appraisalfoundation.org/asb_aqb_apply or by contacting Anne Ramsey at
anne@appraisalfoundation.org. When requesting information on the applications via e-mail, use the
phrase "2009 AQB/ASB APPLICATION INFORMATION" in the subject line, and include your full name,
mailing address and phone number.

Bank-Owned Commercial Property Presents Unique Challenges
Although foreclosed commercial property holdings have been relatively few, problems are expected to
build as large amounts of debt come due amid constrained liquidity and tighter lending terms, and after
steep price drops have pushed many properties into financial turmoil, according to a July 1 American
Banker story. In general, lenders are less anxious to get involved with failing businesses that are
associated with complex issues. However, growing weaknesses in the commercial property sector could
become an “operating albatross” for banks who become “accidental landlords.”

Such arrangements often include lawsuits and public relations issues. For example, after receiving
millions of dollars in federal bailout funds, Bank of America and Wells Fargo obtained unwanted publicity



51 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
when their roles as creditors for the failing manufacturers Hartmarx Corp. and Republic Windows and
Doors drew national headlines.

Many lenders that are confronted with distressed commercial properties therefore avoid foreclosure by
selling the loans before they become problematic. “Lenders are generally not in the foreclosure mode
because it’s time consuming, it’s expensive, and then they obtain the property and have to manage it, run
it, lease it, sell it,” Jeffrey Lenobel, a partner with Schulte Roth & Zabel LLP, told American Banker. “They
have to hire a managing agent. They have to deal with the economics of the property. If it’s an office
building, they have to lease it. … If it’s a hotel, you have to enter into a franchise or operating
arrangement.”

Conversely, other lenders are reluctant to sell distressed commercial real estate loans because taking
such hits at current market rates could ruin them. The desire to hold a property until the market rebounds
provides an economic incentive to retain certain holdings. However, when banks do foreclose, many often
put the collateral in a special-purpose, bankruptcy remote entity to avoid exposure to liability issues
associated with operating a business.

California Hotel Defaults, Foreclosures Surge; Reflect Nationwide Trend
In news that could have national implications for the hotel industry, 175 hotels in California are in default
on their loans and an additional 31 have been foreclosed, according to a June 28 report by Atlas
Hospitality Group. While the Washington, D.C., hotel market is holding up well, Manhattan, Chicago,
Dallas, Atlanta and Miami are struggling, as are Florida, Nevada, Arizona and California.

The Atlas report noted that more than 75 percent of the California loans were obtained between 2005 and
2007 as conventional, commercial mortgage-backed securities or Small Business Administration loans.
During that time, more than 2,500 California hotels either refinanced or obtained new purchase loan
financing, which could indicate that more defaults and foreclosures are on the horizon.

A sharp decline in room revenues, combined with a jump in cap rates, has contributed to significant
declines in property values, the report indicated. “We estimate that [property] values are currently 50 to 80
percent lower than at the market’s peak in 2006 and 2007,” said Alan Reay, the report’s author and
founder of Atlas Hospitality. “The last time we saw declines like this was 1931.”

According to University of California economist Kenneth Rosen, as many as one in five hotel loans in the
United States may default through 2010. According to Frank Innaurato, managing director of Realpoint’s
CMBS analytical services, “Rates, revenue and cash flow levels across the hotel industry are projected to
continue to decline. If those projections stay true, a lot of these hotel loans that are scheduled to mature
are at high risk for defaulting.”

Analysts project that hotel owners will likely face at least two more years of low revenues. “There is a lot
more pain ahead for all commercial real estate, and particularly for hotels,” Butler added. “It is not going
to get better quickly. There needs to be a complete reset in the industry — a reset of values, leverage and
expectations.”

Struggling REITs Post Biggest Gain since Debut



52 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The Dow Jones Equity All REIT Total Return Index, which tracks 114 publicly traded real estate
investment trust stocks, posted its biggest quarterly gain since its debut in 1989, jumping 28.9 percent
during the second quarter. All but five of the REITs in the index posted gains, and seven had returns
exceeding 100 percent.

Hotels, regional malls, retail and hotels posted the strongest results. Hotels surged 73.8 percent while
regional malls and retail jumped 59.3 percent and 43.2 percent, respectively. Health care rose 21.1
percent and, with an increase of only 4.9 percent, manufactured homes logged in as the weakest
performer.

The positive gains experienced in the second quarter are the result of REITs issuing more stocks, which
raised about $13 billion. However, the infusion of shares has caused existing stock values to decline,
which in turn has weakened the balance sheets of many REITs. In addition, the increase didn’t erase the
31.6 percent decline experienced during the first quarter of 2009 and the 38.8 percent drop in the fourth
quarter of 2008.

For most long-term investors, the safest REITs will be those that have strong balance sheets and that do
not need to refinance large amounts of debt. Some analysts report that REITs need to raise at least an
additional $35 billion to improve their balance sheets in the next year or two.

Hanley Wood: Housing Market Shows More Signs of Stabilization
Pending home sales in May suggest that the housing market may be stabilizing, in part because of higher
affordability levels and the government’s homebuyer tax credit. As reported by Hanley Wood Market
Intelligence, existing home sales continued to grow in May while new and existing homes prices
increased as well.

New home sales fell slightly in May by 0.6 percent to a seasonally adjusted 342,000 units from April’s
revised figure of 344,000 units. New home inventory dropped in May to 289,000 units from April’s non-
seasonally adjusted figure of 298,000 units. Median new home prices in May rose 4.2 percent to
$221,600 from April’s revised figure of $212,600, but are still down 3.4 percent from the same period last
year. Based on the current sales pace, there is now a 10.2-month supply of new homes on the market on
a seasonally adjusted basis.

Annualized sales of existing homes rose to 4.77 million units in May, a 2.4 percent increase from April’s
level. However, sales are still down 3.6 percent from the 4.95 million units reported during the same
period a year ago. Median existing home prices in May climbed to their highest level since December
2008, increasing to $173,000 from April’s figure of $166,600. Existing home inventory declined 3.53
percent in May to a preliminary figure of 3.798 million units from April’s figure of 3.937 million units. Based
on the current sales pace, there is now a 9.6-month supply of existing homes on the market.

Mortgage rates declined to 5.32 percent in Freddie Mac’s Primary Mortgage Market Survey released on
July 2. The Mortgage Bankers Association’s seasonally adjusted Purchase Index for the week ending
June 26 fell to 267.7 from the previous week’s figure of 280.3, a 21.91 percent decrease from the same
period last year.

Tranche Warfare Continues in CMBS Market


53 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
With $736 billion of outstanding debt in the commercial mortgage-backed securities market, according to
the Mortgage Bankers Association, and more than $100 billion of b-notes and mezzanine debt issued
since 2000, according to Jones Lang LaSalle, Chicago, conflict between senior and junior commercial
mortgage lenders continues to simmer as maturities move closer.

At the end of December 2008, with $806 billion of commercial/multi-family mortgages in or related to
CMBS, collateralized debt obligations or other asset-backed securities, $90.5 billion was scheduled to
mature this year and $61.9 billion in 2010, nearly 19 percent of the outstanding balance, said MBA's
Commercial/Multifamily Survey of Loan Maturity Volumes. The MBA said that in 2011, $51.5 billion of
current unpaid principal balance will mature in CMBS, CDOs and other ABS with $60.4 billion in 2012,
$48 billion in 2013 and $53 billion maturing in 2014.

Nearly 60 percent of participants in a joint webinar sponsored by JLL and Hunton & Williams said they
expect to begin making investments within the next six months, while 33 percent plan to invest in senior
debt and 30 percent said they will invest in equity.

Losses on High-Risk Mortgages Expected to Increase
Standard & Poor’s increased its projections for losses on subprime and Alt-A residential U.S. mortgage-
backed securities by as much as 40 percent, which may indicate continuing struggles for the housing
market. According to S&P, bonds originally carrying AAA ratings will likely be significantly impacted.

The agency increased its loss projections for subprime loans issued in 2005 from 10.5 percent to 14
percent. For loans issued at the peak of the market in 2006 and 2007, projections jumped from 25
percent and 31 percent to 32 percent and 40 percent, respectively. Loss projections for Alt-A loans issued
in 2005 were increased from 7.75 percent to 10 percent, while loans issued in 2006 and 2007 rose from
17.3 percent and 21 percent to 22.5 percent and 27 percent, respectively.

Loss severities for subprime bonds issued in 2006 and 2007, which include declines in property value and
costs associated with foreclosing and liquidating, are expected to rise to 70 percent, while Alt-A bonds are
expected to increase to 60 percent. S&P noted that some severities have already exceeded 100 percent.
“We have observed increases in loss severities, and we expect them to continue to rise until we reach the
trough of the market value decline, which we believe will be in the first half of 2010,” S&P noted.

Meanwhile, S&P estimates defaults on subprime loans issued in 2005 will reach 11 percent, while
defaults on loans issued in 2006 and 2007 will reach 30 percent and 49 percent, respectively.

AI Releases Office Property Valuation Book
In the Appraisal Institute’s newest book, The Valuation of Office Properties: A Contemporary Perspective,
author Barrett A. Slade, MAI, PhD, discusses the terminology, concepts, principles and analytical
techniques needed to value complex, multi-tenant office buildings.

This new text covers: the history of the office building, characteristic attributes of different types of office
buildings, site and improvement inspection and analysis, and industry measurement criteria. Real-world
examples and an in-depth case study examine office leases, the forecasting of cash flows, and the
estimation of rents, vacancies and operating expenses.




54 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Cost is $40 for members, $50 for non-members plus shipping and handling. To order, visit
www.appraisalinstitute.org/store/p-162-the-valuation-of-office-properties.aspx.

Builder, Mortgage Lender Get up to $53 Million in Fines for Fraud
Beazer Homes USA Inc. has agreed to pay the United States $5 million dollars, plus contingent payments
of up to $48 million dollars to be shared with victimized private homeowners, to resolve allegations that it,
and Beazer Mortgage Corp., were involved in fraudulent mortgage origination activities in connection with
federally insured mortgages.

The settlement resolves allegations that when Beazer Mortgage Corp. made Federal Housing
Administration insured mortgage loans for the purchase of homes built by Beazer Homes USA Inc., the
companies fraudulently and improperly: 1) required purchasers to pay "interest discount points" at closing,
but then kept the cash and failed to reduce interest rates; 2) provided cash "gifts" to home purchasers
through certain charities, so purchasers could come up with minimum required down payments, with
assurances the "gifts" would not have to be repaid, and then increased home purchase prices to offset
the amount of the gifts; 3) obscured which of its branches made defaulting mortgage loans to avoid FHA
detection of excessive default rates, and; 4) ignored "stated income" requirements in making loans to
unqualified purchasers.

As a consequence, unqualified home buyers were induced to enter into FHA-insured mortgages, whose
interest rates and mortgage amounts were improperly inflated, and Beazer Mortgage branches involved
in fraudulent activity were hidden from the FHA. When mortgages that resulted from these fraudulent
activities defaulted, holders of the loans made FHA mortgage insurance claims and the FHA was
wrongfully required to pay inflated claims, and to pay for the management, maintenance, rehabilitation
and marketing of defaulted properties.

Appraisal Organizations Call on HUD to Rescind AMC Fee Policy, Develop
New AMC Rules
Today, the Appraisal Institute and three partner professional appraisal organizations formerly requested
the Department of Housing and Urban Development rescind a policy relating to the use of appraisal
management companies, a move the groups say will help remove caps placed on fees of independent
appraisers. Further, the organizations called on HUD to follow through on a previous commitment to write
comprehensive rules relating to the use of AMCs.

The policy in question (Mortgagee Letter 97-46) requires FHA lenders that use AMCs to charge
consumers the “customary and reasonable fee for an appraisal in the market area where the appraisal is
performed.” The Mortgagee Letter makes no distinction between the fee paid to the individual who
performs the appraisal and any fee charged for the administration of the appraisal process (the AMC
charges), effectively requiring lenders and AMCs to seek reductions in the fee paid to the appraiser.

“Given the rapidly growing reliance by residential mortgage lenders on AMCs to provide appraisal
services, the restriction on total appraisal fees to ‘no more than’ the customary fee for an appraisal has
driven down the fees paid to large numbers of appraisers to well below what has been customary and
reasonable in given market areas,” the groups wrote. Such restrictions, they say, is causing many
experienced and qualified appraisers to turn down assignments, adding “unnecessary and substantial
risk” to the FHA program.



55 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
The groups also point out that Mortgagee Letter 97-46 has led to consumers interpreting the charges as
“the customary fee for the highest level of service from an appraiser who has substantial experience in
performing appraisals in their geographic area when, in fact, the consumer is receiving a much lower level
of service – often from appraisers who do not know the local market – in many cases.”

In addition to rescinding the Mortgagee Letter, the groups called on HUD to follow through on a
commitment to propose rules for public comment relating to AMCs that would ban inappropriate practices,
such as hiring an appraiser primarily on price or turnaround time, without consideration of competency or
qualifications. “The positive impact of such rules on the lending community, consumers, and the appraisal
community would be profound,” they wrote.

Mortgagee Letter 97-46 can be found at link
www.fhasecure.gov/offices/adm/hudclips/letters/mortgagee/files/97-46ml.txt. To view the letter, visit
www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2009/AI-ASA-ASFMRA-NAIFAonML97-
46-Final.pdf.

Insurance Commissioners Approve Mods on CRE Capital Requirements
The National Association of Insurance Commissioners approved modifications to capital requirements for
this year only on commercial mortgage loan investments made by life insurance companies. Moody's
Investors Service, New York, said the significance of the change is limited from a credit perspective and
the ratings agency does not plan to take action.

Several U.S. life insurers face significantly higher capital requirements on their CML portfolio because of
increasing delinquencies, Moody's said in its Weekly Credit Report. The current NAIC mortgage loan
portfolio quality measure – Mortgage Experience Adjustment Factor – can cause sudden and substantial
increases (possibly up to seven times more) to capital requirements for companies once their delinquency
rate rises above industry average. The higher capital factor applies to the entire mortgage portfolio rather
than just against the delinquent loan, Moody's said.

However, a revised regulatory approach that encourages life insurers to retain and work out problem
mortgage loans when economically beneficial can diminish loan losses and strengthen the financial
profile of insurers over time, said Arthur Fliegelman, vice president and senior credit officer at Moody’s.

The NAIC's Capital Adequacy Task Force will monitor market conditions and progress on proposals that
may result in modifying or extending the proposal beyond this year. Moody's said insurance regulators
may implement an individual loan-based CML quality rating system, similar to insurers' securities
holdings, which evaluates each mortgage loan for its credit quality and determines the loan’s regulatory
capital requirement.

Recent Studies Show Sustainable Buildings Command Higher Values
A recently released study helps bridge the gap between the building/design and the financial/investment
communities by identifying how high-performance sustainable features aid at increasing the value of
commercial buildings. The study, conducted by Cascadia Region Green Building Council, the Vancouver
Valuation Accord and Cushman & Wakefield, analyzed how value was determined for three office




56 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
buildings, indicating how sustainable attributes impacted costs, savings, investment income and capital
value.

“The intent of the study is to bridge the communication gap that exists between the architectural and
design communities and the valuation and investment communities relative to asset value,” said Theddi
Wright Chappell, MAI, a managing director at Cushman & Wakefield and a co-author of the report.
“Hopefully the study will lead to more collaboration between these groups and greater sharing of
information. This should facilitate better valuation reports and greater understanding of what Market Value
can and does consider.”

The study points out how the lack of comparable data presents challenges when performing valuations
for commercial sector green buildings. The authors note that the key to valuing high-performance green
buildings is to determine to what degree the various aspects of sustainable development impact market
value. To view the report in its entirety, visit www.cascadiagbc.org/news/index.html/GBValueStudy.pdf.

Meanwhile, in a separate study released earlier this month, Earth Advantage Institute documented the
performance of certified green homes over noncertified homes. The study, which examined homes in the
Portland and Seattle metropolitan areas, indicated that certified green homes in the Seattle market sold
for 9.7 percent more than noncertified homes while the Portland market achieved a price premium of 3.0
to 5.0 percent. In addition, certified homes in the Portland metropolitan area sold more quickly than their
noncertified counterparts by about 18 days.

“This investigative research demonstrates the clear value of certified homes to homeowners and
professionals in the home construction and sales industry,” said Sean Penrith, executive director of Earth
Advantage. To read more about the report, visit Earth Advantage’s Web site at www.earthadvantage.org.

Commercial Property Rates Fall to 2004 Levels
The overall value of apartments, malls, offices, hotels and warehouses tracked by the Moody's/REAL
National All Property Type Aggregate Index has fallen to its 2004 level, Moody's said. The declines were
most severe in the South, where values dropped more than 20 percent.

The index hit 135.31 (100 on the index equals December 2000 prices) in April, down 8.6 percent from
March and 25.3 percent from 2008. The report’s authors say the numbers suggest that more owners are
beginning to accept the decline in value and put distressed assets on the market. Sales activity remains
dull, however, due to the lack of financing available for sellers, according to market participants.

The Moody’s/REAL index measures the value of real estate by surveying the change in sales prices of
actual properties. It uses a similar methodology for commercial real estate as the often cited Standard &
Poors Case-Schiller Home Price Indexes do for residential property. Case-Shiller’s March 2009 home
price numbers were at 2002 levels.

Consultancy Group: Distressed CRE Property Rates Double Since March
The total value of distressed commercial real estate in June 2009 was $97.4 billion – twice the $49 billion
of March and quadruple that of December at $25.6 billion, according to the Distressed Asset Recovery
Team, a new consultancy consisting of Delta Associates, Beers+Cutler, Fore Consulting and Blackwell
Advisors.



57 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Retail properties represent the largest distressed segment in June, at $29.7 billion, boosted by General
Growth Property’s recent bankruptcy filing and retailing’s sector malaise. Other asset classes also
showed deterioration in fundamentals: even office properties, which recorded the smallest increase, was
up 33 percent to $15.3 billion.

According to a report from Real Capital Analytics, the Manhattan market has the highest volume of
distressed real estate assets, followed by Los Angeles-Orange County. Miami has the highest ratio per
capita. Even the D.C. area, which is relatively strong, is experiencing its share of defaults. Greg Leisch,
principal of Delta Associates, estimated that the D.C. area will see $4 billion in commercial real estate
defaults by the end of the year, primarily by developers that were unable to refinance.

Falling Property Values Burden CRE Loan Workouts
Falling commercial real estate values, tight credit and no sales transactions could eventually force banks
to grapple with five-year maturities on numerous commercial real estate loans financed in 2006 and 2007.
While some income-producing properties still keep loans performing, Miller Frishman Group’s Andrew
Miller said borrowers will not have the ability to refinance at maturity because of falling property values,
and a similar event that took place in the residential sector will increase non-performing or sub-performing
loans in commercial real estate.

Commercial banks and thrifts hold more than $99 billion in commercial real estate mortgage maturities
from this year through 2012 while credit companies, warehouse and other lenders hold $134.8 billion in
commercial real estate loans that mature through 2012 – $233.8 billion total, the Mortgage Bankers
Association said in its Commercial/Multifamily Survey of Loan Maturity Volumes.

In March, the Federal Deposit Insurance Corp. sold performing and non-performing commercial real
estate assets to bidders at sales prices ranging from 9 percent to 100 percent of book value, based on
this year's Distressed Assets Resource Guide on Real Estate Loan Sales from the Distressed Asset
Coalition, Beverly Hills, Calif.

While some performing loans sold at 100 percent of book value, other investors won bids at 38 percent of
book price on 126 performing loans and 41 percent of book value on 109 performing loans. Non-
performing loans sold to one investor at 10.2 percent of book value or $9.3 million for 45 loans. Another
investor purchased 48 non-performing loans at 16.19 percent of $7.6 million in book price. For
commercial mortgage-backed securities, special servicers have tighter constraints because of fiduciary
responsibilities to bondholders and legal agreements through pooling and servicing agreements that
affect any extensions and forbearance terms.

Despite plans for private equity fund allocations—up to $92.5 billion—and potential rule changes to add
flexibility for special servicers, Miller said rule changes risk investor confidence in CMBS and falling
property values remain the primary dilemma for banks all across the spectrum.

S&P Indices Record Third Month of Improvements in Home Prices
Although still in negative territory, both the 10-city and 20-city composites have recorded improvements in
annual returns for the third consecutive month, according to April 2009 data reported in the latest
Standard & Poor’s/Case-Shiller Home Price Indices. However, the 10-city composite still was down 18.0



58 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
percent in April and the 20-city composite was down 18.1 percent compared to the same period a year
ago. Overall, home prices recorded in April are back up to mid-2003 levels.

“The pace of decline in residential real estate slowed in April,” said David Blitzer, chairman of Standard &
Poor’s Index Committee. “In addition to the 10-city and 20-city composites, 13 of the 20 metro areas also
saw improvement in their annual return compared to that of March. Furthermore, every metro area,
except for Charlotte, recorded an improvement in monthly returns over March.”

The strongest performing cities continue to be Denver, Dallas and Boston with annual declines of 4.9
percent, 5.0 percent and 7.7 percent, respectively, as of April. The weakest performing cities as of April
continue to be from the Sunbelt, with Phoenix reporting a decline of 35.3 percent during the last 12
months, Las Vegas falling 32.2 percent and San Francisco decreasing 28.0 percent.

From the housing market peak in the second quarter of 2006 through April 2009, the 10-city composite
has fallen 33.6 percent and the 20-city composite has dropped 32.6 percent. Dallas has fared the best,
falling only 9.6 percent from its peak in June 2007, while Phoenix has been hit the hardest, dropping 54.1
percent from its peak in June 2006.

To access the Standard & Poor’s/Case-Shiller Home Price Indices, visit
www.homeprice.standardandpoors.com.

No Significant Improvement in Architecture Billings Index
According to the American Institute of Architects, May’s Architecture Billings Index rating logged in at
42.9—a fraction higher than April’s rating of 42.8—suggesting that an economic recovery may have
stalled. May’s score continues to show an industry-wide decline in demand for design services. The
index, which is an economic indicator of construction activity, shows a nine- to 12-month lag time
between architecture billings and construction spending. Scores lower than 50 represent declining
conditions, while those greater than 50 indicate an industry-wide increase in billings.

The regional averages for May were 41.3 for the South, 48.3 for the Northeast, 41.5 for the Midwest and
39.4 for the West. May’s sector index breakdown included mixed practice at 44.5, institutional at 38.0,
multi-family residential at 45.5 and commercial/industrial at 43.1. New project inquiries in May scored
55.2, representing the third month in a row with a score in the mid 50s.

“The design and construction marketplace is extremely competitive right now,” said AIA chief economist
Kermit Baker, PhD. “Prospective clients are casting a wider net causing numerous firms to bid for the
same project, which is why the high level of inquiries is not necessarily translating into additional billings
for project work at many firms.”

The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by
the AIA Economics and 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 the AIA’s Web site at www.aia.org.

Hotels Likely to Take Four Years to Get Back to 2008 Room Rates


59 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc. are among U.S. hotel operators
that may need until 2012 or even 2013 to restore room rates to 2008 levels after slashing prices to spur
demand.

The average U.S. daily hotel rate, calculated as room revenue divided by rooms sold, dropped 9.8
percent in May from a year earlier to $97.03 and is down 8.5 percent since January 1, according to Smith
Travel Research. U.S. daily room rates peaked at $106.69 in 2008. Hoteliers also may face the lowest
average annual occupancy level this year in 20 years of records, Mark Woodworth, president of PKF
Hospitality Research, said. Occupancies will likely hit 55.5 percent compared with a record high of 64.8
percent in 1995.

Reduced travel prompted by the recession led Marriott, the biggest U.S. hotel chain, and Host Hotels &
Resorts Inc., the largest U.S. real estate investment trust that invests in lodging, to report first-quarter
losses this year. InterContinental Hotels Group Plc, owner of the Holiday Inn brand, said first-quarter net
income sank 56 percent as room rates declined in the recession. InterContinental’s April room rates fell to
an average $103, an eight percent drop from the year earlier.

Starwood’s first-quarter revenue per available room declined 24 percent, driven mostly by lower rates, the
company said. New York rates decreased the most of any top U.S. market, showing a 29 percent drop.

U.S. Called “New Emerging Market” for Real Estate Deals
Forget about real estate investments in Brazil, Russia, India and China. There's another emerging market
for commercial real estate opportunities – the United States. The U.S. commercial real estate crash – in
which prices are down more than 20 percent and are expected to fall 40 to 50 percent – has created a
landscape of what is expected to be a land of vast opportunity for those with cash.

Real estate investment firm GoldenTree InSite Partners stopped investing in U.S. real estate in early
2006 and has since focused most of its attention and cash on Brazil, where it has invested in residential
and office properties. But with about a $1 billion to use, it is poised to return to the U.S. market and take
advantage of the right projects that need or will need money when they come up short, a spokesman
said.

Tom Shapiro, president of GoldenTree Insite, said, in big cities, such as Los Angeles and New York,
downtrodden commercial real estate markets tend to rebound strong. He also mentioned that residential
land and hotels are of note because they are bottoming out.




60 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Inside the Institute
Appraisal Institute Hires Zimmermann as CFO
The Appraisal Institute has hired William T. Zimmermann as chief financial officer.

Zimmermann will begin his duties Aug. 3. He will report to Chief Executive Officer Frederick H. Grubbe.

“We look forward to benefitting from Bill’s years of not-for-profit financial management experience at a
pivotal point in our organization’s history,” Grubbe said.

Zimmermann spent six years as chief financial officer of the American Dental Association. During that
same time period, he also served as chief executive officer of ADA Business Enterprises, Inc., a wholly
owned for-profit subsidiary of the ADA. He also worked 16 years at the American Medical Association,
including nine years as chief financial officer and vice president, financial services and real estate. The
ADA and AMA, like the Appraisal Institute, are based in Chicago.

A Certified Public Accountant, Zimmermann is a graduate of DePaul University.

Herbert Jourdan, Jr., MAI, SRA Elected to The Appraisal Foundation Board
of Trustees
Appraisal Institute member Herbert Jourdan, Jr., MAI, SRA, has been elected to serve on The Appraisal
Foundation’s Board of Trustees. Jourdan’s will serve a three-year term on the board beginning January
2010.

The Appraisal Foundation is governed by the Board of Trustees and is charged with funding the work of,
and appointing members to, the Appraiser Qualifications Board and the Appraisal Standards Board, as
well as providing oversight of these two Boards. The board, which is composed of 27 members, conducts
meetings in the spring and fall of each year.

Jourdan is currently the chief appraiser at JVI Appraisal Division, LLC, in Lake Mary, Fla. “It is an honor
for JVI to have Herb elected to the Board of Trustees,” Ron Nation, MAI, SRA, president and founder of
JVI, said. “Having our chief appraiser involved in the oversight of the activities of the Appraisal
Qualifications Board and the Appraisal Standards Board means that Herb is at the pulse of decision
making for The Appraisal Foundation and for standards for appraisals and qualifications for appraisers
nationwide.”



In Memoriam
The Appraisal Institute regrets the passing of the following designated members, which were reported to
us in July: Lawrence R. Anderson, MAI, SRA, Dearborn, Mich.; Richard D. Booker, MAI, SRA, Richmond,
Va.; Richard G. DeGrouchy, SRA, Stone Harbor, N.J.; and Terry L. Payne, MAI, Little Rock, Ark.

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.



61 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Appraisal Institute Contemplates Offering Appraisal Review Designations
Proposed amendments to the Appraisal Institute Bylaws and Regulations that would create general and
residential appraisal review designations, as well as the requirements for such designations, will be taken
up by the Appraisal Institute Board of Directors at its August 22-23 meeting in Chicago.

According to the proposal’s rationale, the requirements for the MAI and SRA designations might be
impractical for review appraisers, since they are directed toward field appraisers. Thus, the proposed
designations and designation requirements would provide Associate Members involved in appraisal
review a direct route to Appraisal Institute designation. MAI, SRPA and SRA designated members also
could seek the review designations.

Among the proposed requirements for the general review appraiser are a four-year undergraduate
college degree; 4,500 hours of Specialized Experience as described in Regulation No. 1, including at
least 1,000 hours of work that meets Standard 3 requirement; passing a general appraisal review
comprehensive examination; and successful completion of numerous core Appraisal Institute courses.

Among the proposed requirements for the residential review appraiser include an Associate degree, or
higher, from an accredited college, junior college, community college or university – or passing 21 hours
of collegiate subject matter in specifically identified subject areas; credit for 3,000 hours of Residential
Experience as described in Regulation No. 2, including at least 1,000 hours of review work that meets
Standard 3 requirements; passing a residential appraisal review comprehensive examination; and
successful completion of numerous core Appraisal Institute courses.

If the Board of Directors adopts the proposed appraisal review designations and requirements as set forth
in this notice, the specialized review courses and examinations will be developed, and other start-up
actions deemed necessary and appropriate by the Board will be taken. Upon completion of such
development and actions, the proposed Bylaws and Regulation changes would become effective and
members could begin to seek the appraisal review designations.

The full text of the proposed changes, including a fuller list of requirements, is available on the "My
Appraisal Institute" page of the Appraisal Institute's Web site at www.appraisalinstitute.org, by entering a
username and password on the home page. The full text is also available upon request to the National
Office by e-mailing 45daynotice@appraisalinstitute.org.

Members wishing to submit comments on the proposed changes should contact their elected Directors
and/or send 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.

Promising Prognosis for AI Vice President
Appraisal Institute 2009 Vice President Joseph Magdziarz, MAI, SRA, is currently recuperating at his
home and is in good condition after undergoing successful quadruple bypass surgery this past April.
Magdziarz is undergoing physical therapy three times a week and is expecting to make a full recovery.

“I’m looking forward to the August and November [Appraisal Institute] Board of Director meetings and
seeing many of my friends again. I will also be pleased when my granddaughter and I can go golfing, and



62 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
I plan to take as many of my six grandchildren fishing if I can get them all together at once,” said
Magdziarz.

During his recovery, Magdziarz has been an active participant on Appraisal Institute Executive Committee
conference calls, is continually monitoring the trade association’s finances and is looking forward to
attending The Appraisal Foundation’s Industry Advisory Council meeting in Sacramento on July 9 and 10.

Magdziarz anticipates returning to work full time, as well as resuming his Appraisal Institute-related
responsibilities, the first week in August. “I plan to serve the [Appraisal Institute] well and look forward to
teaching and visiting chapters and regions soon,” he said.

AI Member Appointed Chair of Kansas Appraisal Board
At its June meeting, the Kansas Real Estate Appraisal Board elected Appraisal Institute member Bruce
Fitzsimons as its board chair. The one-year term begins today, during which Fitzsimons will preside over
board meetings and perform official duties including signing consent agreements, appraiser licenses and
official board statements and letters.

The board, which Fitzsimons has served on since 2005, consists of seven members that are appointed by
the governor. The board regulates real estate appraiser licenses, establishes licensing criteria, reviews
license applications, interprets professional standards, reviews amendments to statutes and rules,
enforces regulations and communicates rules and policies. Fitzsimons also serves on the board’s
Investigative Committee.

Fitzsimons is actively involved with the Kansas City Chapter of the Appraisal Institute where he currently
severs as a chapter director and a government relations co-chair. In addition to his involvement with the
Kansas Real Estate Appraisal Board, Fitzsimons is president-elect of the Association of Appraiser
Regulatory Officials, editor of its newsletter and chair of its Program Committee and Publications
Committee. Fitzsimons has been employed with First National Bank of Olathe since 1990 where he is the
chief appraiser and vice president of Credit Administration, Mortgage and Consumer Lending.

Appraisal Institute Hires New Director of Communications
The Appraisal Institute has hired former White House aide Ken Chitester as director of communications. A
communications aide in the Clinton White House, Chitester most recently was a public relations
consultant with his own firm, Chitester Communications. He previously was vice president and deputy
director of Midwest public affairs at Hill & Knowlton, one of the world’s largest communications
consultancies. He will report to Appraisal Institute Chief Executive Officer Frederick H. Grubbe.

“We are thrilled to bring aboard someone with Ken’s extensive background as we expand our internal and
external communications activities,” said Appraisal Institute President Jim Amorin, MAI, SRA. “The 25,000
members of the Appraisal Institute are proud of the work they do and are anxious to tell their story to a
broader audience. Ken will help us increase awareness, promote understanding and communicate the
value of appraisers, the appraisal profession and the Appraisal Institute.”

Chitester brings more than 14 years of public relations and public affairs consulting experience to his new
position. An Indianapolis native and journalism graduate of Indiana University in Bloomington, Chitester spent




63 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
six years as an award-winning newspaper reporter and editor. He also is the author of “Aboard Air Force One:
200,000 Miles with a White House Aide” (Fithian Press).

“I’m excited about the opportunity to join such a dynamic organization that promotes professional and
ethical standards in a vital profession,” Chitester said. “I look forward to working with appraisers across
the country and around the world to help enhance their reputation, as well as that of the profession and
the Appraisal Institute.”

Appraisal Institute Members Now Save over 25% on Select FedEx Services
The Appraisal Institute is now working with FedEx to provide discount shipping options to its members,
according to Rebecca Anderson, Manager, Member Recruitment and Retention. Highlights include up to
26 percent savings on select FedEx Express U.S. services and select FedEx Express international
services, as well as up to 12 percent savings on select FedEx Ground services and up to 10 percent
savings on select FedEx Home Delivery services.

Members must log in to www.appraisalinstitute.org/myappraisalinstitute/FedEx_Program.aspx to gain
access to the special URL and passcode required for this member benefit. The discounts are
automatically applied to a user’s FedEx account number once they have enrolled in the FedEx Advantage
Program, according to Anderson. Furthermore, there are no costs and no minimum shipping
requirements to take advantage of this great member benefit, Anderson added.

In Memoriam
The Appraisal Institute regrets the passing of the following designated members, which were reported to
us in June: Louis E. Clark, Jr., MAI, Tallahassee, Fla.; William S. Harps, MAI, Silver Springs, Md.; and
Donald C. McCandless, MAI, Sandy Spring, Md.

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.




64 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
ECONOMIC INDICATORS— May 2009
Market Rates and Bond Yields
                          May 09                                           Nov08          May08          Nov07          May07           May06
Reserve Bank Discount     0.50                                             1.25           2.25           5.00           6.25            5.93
Prime Rate                3.25                                             4.00           5.00           7.50           8.25            7.93
Federal Funds Rate        0.18                                             0.39           1.98           4.49           5.25            4.94
3-Month T Bills           0.18                                             0.19           1.73           3.27           4.73            4.72
6-Month T Bills           0.30                                             0.73           1.82           3.46           4.78            4.82
3-Month CD                0.57                                             2.36           2.66           4.97           5.31            5.15
LIBOR-3 month rate        1.30                                             3.11           2.84           5.02           5.34            5.18
5-Year Bond               2.13                                             2.29           3.15           3.67           4.67            5.00
10-Year Bond              3.29                                             3.53           3.88           4.15           4.75            5.11
30-Year Bond*             4.23                                             4.00           4.60           4.52           4.90            5.20
Municipal Tax Exempts Aaa 4.26                                             4.83           4.36           4.26           4.04            4.37
Municipal Tax Exempts A   5.25                                             5.68           4.78           4.56           4.33            4.91
Corporate Bonds Aaa       5.54                                             6.12           5.57           5.44           5.47            5.95
Corporate Bonds A         6.67                                             7.68           6.30           5.97           6.01            6.40
Corporate Bonds Baa       8.06                                             9.21           6.93           6.39           6.39            6.75


Stock Dividend Yields
Common Stocks—500                                           2.41           3.11               2.07       1.95           1.81            1.90


Other Benchmarks
Industrial Production Index**             95.8**                           106.1**        110.9**        113.9**         112.7**        112.1**
Unemployment (seasonally adjusted)         9.4                               6.8            5.5            4.7             4.5            4.6
Monetary Aggregates (seasonally adjusted)
 M1, $ Billions                           1,596.0                          1,524.1        1,363.5        1,363.8        1,377.3 1,394.1
 M2, $ Billions                           8,327.9                          7,972.5        7,684.6        7,425.0        7,226.8 6,796.6
Member Bank Borrowed Reserves
 $ Billions**                               n/a**                            n/a**          n/a**          0.366          0.103          0.175
Consumer Price Index
 All Urban Consumers                       213.9                           212.4            216.6          210.2          207.9          202.5

Per Capita Income
                                                            1Q09          4Q08          1Q08            4Q07          1Q07        4Q06         1Q06
Per Capita Personal
 Disposable Income                                          35,213        34,821        34,351          34,179        33,307 32,754 31,791
Annual Rate in Current $s
Savings as % of DPI(††)                                     4.4           3.2           0.2             0.4           1.1         0.9          1.0
*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.




65 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009
Conventional Home Mortgage Terms

                                                           May09          Nov08         May08         Nov07          May07         May06
New Houses Loans—U.S. Averages
Interest rate                                              4.92           6.16          6.01          6.42           6.22          6.69
Term                                                       29.0           28.7          29.2          29.2           29.4          29.5
Loan Ratio                                                 74.1           74.0          77.3          77.1           77.0          75.2
Price                                                      342.7          346.4         339.4         366.8          355.0         350.0

Used House Loans—U.S. Averages
Interest rate                                              4.95           6.26          6.10          6.41           6.43          6.65
Term                                                       28.2           28.7          28.3          28.9           29.4          28.8
Loan Ratio                                                 74.2           77.4          77.6          79.4           81.1          76.7
Price                                                      312.2          271.6         298.3         291.0          286.0         298.6


Conventional Home Mortgage Rates by Metropolitan Area


                                                   1Q09       1Q08        1Q07       1Q06        1Q05
Atlanta                                            5.10       6.10        6.29       6.36        5.78
Boston-Lawrence-NH-ME-CT#                          4.98       6.12        6.19       6.20        5.50
Chicago-Gary-IN-WI#                                5.24       6.00        6.58       6.36        5.69
Cleveland-Akron#                                   5.30       6.15        6.12       6.41        5.96
Dallas-Fort Worth#                                 5.07       6.09        6.46       6.50        5.88
Denver-Boulder-Greely#                             5.14       6.00        6.42       6.29        5.65
Detroit-Ann Arbor-Flint#                           5.75       6.04        6.58       6.52        5.65
Houston-Galveston-Brazoria#                        5.19       6.07        6.51       6.40        5.95
Indianapolis                                       5.26       6.19        6.76       6.41        6.07
Kansas City, MO-KS                                 5.14       5.84        6.18       6.11        5.78
Los Angeles-Riverside#                             5.13       6.03        6.43       6.12        5.54
Miami-Fort Lauderdale#                             5.21       6.27        6.67       6.47        5.87
Milwaukee-Racine#                                  5.14       5.98        6.54       6.36        5.84
Minneapolis-St. Paul-WI                            5.04       5.95        6.37       6.19        5.64
New York-Long Island-N. NJ-CT#                     5.14       6.00        6.31       6.24        5.67
Philadelphia-Wilmington-NJ#                        5.16       6.04        6.40       6.45        6.00
Phoenix-Mesa                                       5.31       6.05        6.46       6.29        5.82
Pittsburgh                                         5.18       5.83        5.81       5.98        5.94
Portland-Salem#                                    5.08       5.90        6.29       6.30        5.80
St. Louis-IL                                       5.07       6.04        6.48       6.36        5.97
San Diego                                          5.11       5.99        6.23       6.11        5.45
San Francisco-Oakland-San Jose#                    5.15       5.98        6.24       6.16        5.45
Seattle-Tacoma-Bremerton                           5.04       5.89        6.37       6.03        5.62
Tampa-St. Petersburg-Clearwater                    5.14       6.16        6.52       6.50        5.87
Washington, DC-Baltimore-VA#                       5.04       6.09        6.45       6.55        5.87
*    As of the first quarter 2003, the Federal Housing Finance Board no longer reported on the markets of Greensboro, Honolulu and Louisville.
¶    Seasonally adjusted
†    Source: Moody's Bond Record
††   Revised figures used when available
#    Consolidated Metropolitan Statistical area




66 | Appraiser News Online Vol. 10, No. 13 & 14, July 2009

								
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