Appraiser News Online
Vol. 9, No. 21 & 22, November 2008
Geithner Nominated as Treasury Secretary; Summers Appointed Head of Econ Council [Posted
November 26, 2008]
TARP Update: Paulson Directs Funds to Banks, Not Toxic Mortgages [Posted November 26, 2008]
Agencies Seek Comment on Proposed Interagency Appraisal and Evaluation Guidelines [Posted
November 19, 2008]
Frank Holds Hearing on TARP Implementation; Treasury Backs Off on Mortgages as Priority
[Posted November 19, 2008]
Appraiser Groups Call Upon FDIC to Abandon BPOs in Loss Sharing Proposal [Posted November 19,
Inside the Beltway: Fannie, Freddie Awaiting Word from FHFA on HVCC [Posted November 12, 2008]
Congressional Appraiser Champion Re-Elected [Posted November 5, 2008]
Fannie, Freddie Announce Temporary Foreclosure Suspension; Modify At-Risk Mortgages
[Posted November 26, 2008]
Fed to Buy Housing-Related GSE Debt, MBSs [Posted November 26, 2008]
Uncertain Future of Fannie, Freddie Debated [Posted November 26, 2008]
FHA Mortgage Program Activity Booms during Fiscal 2008 [Posted November 26, 2008]
Fannie Mae Releases Market Conditions Addendum [Posted November 19, 2008]
Inside the Beltway: Scrutinizing HUD’s Final Rule on RESPA [Posted November 19, 2008]
FDIC Details Plan for Modified Loans [Posted November 19, 2008]
Lockhart, Kashkari Remark on GSE, HOPE NOW Streamlined Loan Modification Program [Posted
November 19, 2008]
Bush Announces Flexibility for Hope for Homeowners Program [Posted November 19, 2008]
In the States
Michigan Bills Tighten Appraiser Independence Requirements [Posted November 26, 2008]
Nevada BPO Task Force Recommendations Advance to Legislative Council for Review [Posted
November 26, 2008]
Maryland Lenders to Help Struggling Homeowners [Posted November 19, 2008]
Proposed Legislation Affects North Carolina Appraisers [Posted November 5, 2008]
Around the Industry
Architecture Billings Drops to Lowest Level [Posted November 26, 2008]
Hanley Wood: Increased Sales, Falling Prices Produce Mixed Housing Signals [Posted November
First America Announces Two New Business Lines [Posted November 26, 2008]
Banks Weigh Tackling Defaults by Writing Down the Principal [Posted November 26, 2008]
Federal Regulators Close Three Banks [Posted November 26, 2008]
CMBS Market Begins to Show Fissures [Posted November 26, 2008]
Fidelity National Financial Cancels LandAmerica Merger [Posted November 26, 2008]
550 W. Van Buren St., Suite 1000, Chicago, IL 60607 | T 312-335-4100 F 312-335-4400 | www.appraisalinstitute.org
Paul Welcome to Lead National Appraisal Board [Posted November 26, 2008]
G-20 Leaders Agree on High Priority Financial Markets Reforms [Posted November 19, 2008]
Appraisers Beware: Seller Financing Making a Comeback [Posted November 19, 2008]
Distressed Commercial Real Estate Webinar Rated a Great Success [Posted November 19, 2008]
Seattle Chapter Holds Fall Real Estate Conference [Posted November 19, 2008]
Fidelity National Financial, LandAmerica Announce Definitive Merger Agreement [Posted November
September House Price Index Data Shows Promise Amid Worsening Market [Posted November 19,
Appraisal Institute Debuts Supervising Appraisal Trainees Online [Posted November 19, 2008]
New Discounted Specialty Book Packages Available [Posted November 19, 2008]
Retail Outlook Sparks CMBS Exposure Concerns [Posted November 19, 2008]
Appraisal Institute Supports IRS Notice on Charitable Contribution Deduction [Posted November 12,
Appraisals Get New Level of Scrutiny by Lenders [Posted November 12, 2008]
Appraisal Institute Comments on Financial Accounting Statement 157 [Posted November 12, 2008]
Conforming Loan Limits to Remain $417k in 2009, Except Some Areas [Posted November 12, 2008]
S&P: Commercial Property Prices Remain Flat [Posted November 12, 2008]
Lenders Become Developers in CRE Slump; Foreclosures Expected to Increase [Posted November
Appraisal Institute Offers Valuation of Green Residential Properties Online [Posted November 12,
Osenbaugh, MAI, Presides over CREW Network 2008 Conference [Posted November 12, 2008]
Appraisal Groups Release Model AMC Legislation; Invite Public Comment [Posted November 5, 2008]
Massive Effort to Save Mortgages via Loan Modifications [Posted November 5, 2008]
CMPS Institute Calls for Foreclosure Moratorium, Independent Appraisals [Posted November 5, 2008]
FAF Urges SEC Not to Suspend FAS 157 [Posted November 5, 2008]
FASB Staff Director: Independent Rulemaking Needed [Posted November 5, 2008]
C&I Loans See Deterioration [Posted November 5, 2008]
Pullback in Secondary Market Hits SBA Lenders [Posted November 5, 2008]
Tax Court Rejects Being Bound by USPAP; Uses Comparable Sales to Determine ‘Facade
Donation' Overestimated [Posted November 5, 2008]
Appraisal Standards Board Addresses USPAP Intricacies in October’s Q&A [Posted November 5,
Falling House Prices Increase Affordability, Lower Inventory [Posted November 5, 2008]
S&P Case-Shiller Report: Home Prices Continue to Decrease [Posted November 5, 2008]
IREM Reports Offered at Discount to AI Members [Posted November 5, 2008]
New Highest and Best Use Course Premieres in December; $50 off Before November 17 [Posted
November 5, 2008]
Appraisal Institute Offers Rates and Ratios Seminar Online [Posted November 5, 2008]
Inside the Institute
Appraisal Institute Posts New 45-Day Notice for January Meeting [Posted November 26, 2008]
Appraisal Institute Board Votes Down NAR Affiliation [Posted November 12, 2008]
Joseph Magdziarz, MAI, SRA, Elected as Appraisal Institute 2008 Vice President [Posted November
2 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Lucco Receives AI’s Bert L. Thornton President’s Award [Posted November 19, 2008]
In Memoriam [Posted November 26, 2008]
Economic Indicators – October 2008
3 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Government Update – Commercial/General
Agencies Seek Comment on Proposed Interagency Appraisal and
On November 13, the federal bank, thrift and credit union regulatory agencies jointly issued proposed
Interagency Appraisal and Evaluation Guidelines intended to reaffirm supervisory expectations for sound
real estate appraisal and evaluation practices. The agencies have set aside a 60-day comment period,
during which time industry groups will be able to provide their opinions on all aspects of the proposed
Building on the existing federal regulatory framework to clarify risk management principles and improve
internal controls for financial institutions' real estate collateral valuations, the proposed guidance is
designed to respond to growing concerns over appraisals and credit quality. As written, the new guidance
would replace the 1994 Interagency Appraisal and Evaluation Guidelines and would apply to all real
estate lending functions within a federal financial institution, including commercial and residential lending
departments, capital market groups, and asset securitization and sales units.
Key points of the proposed guidance revisions include:
Additional detail on the agencies' expectations for an independent appraisal and evaluation
Greater explanation of the agencies' minimum appraisal standards, including clarification of
requirements for appraisals of residential tract developments
Revisions to the Uniform Standards of Professional Appraisal Practice, which are incorporated by
reference in the agencies' appraisal regulations
Risk-focused appraisal and evaluation reviews separate and apart from an institution's
The Appraisal Institute’s Government Relations Committee is reviewing the proposed guidelines and will
develop a comment letter on behalf of the organization. Members are encouraged to convey concerns to
the Government Relations Committee representatives in their Region so they can be considered in the
Appraisal Institute’s comment letter. Comments may also be submitted directly to the Appraisal Institute
Washington office, at firstname.lastname@example.org.
The Interagency Appraisal and Evaluation Guidelines are available at
Frank Holds Hearing on TARP Implementation; Treasury Backs Off on
Mortgages as Priority
House Financial Services Committee Chairman Barney Frank, D-Ma., held an oversight hearing
November 18 to discuss the Troubled Asset Relief Program being managed by the Treasury Department
and related initiatives taken by the Federal Reserve Bank and the FDIC in response to the turmoil in
domestic and global financial markets. The results of the hearing were not available at press time, though
according to the House Financial Services Committee, senior officials, institutions using or affected by the
initiatives, and academic and other experts were scheduled to speak.
4 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
According to Frank, the Committee had prioritized three primary areas of interest: “First, the effort to
recapitalize financial institutions. Second, the effort to reduce volatility and restore liquidity to financial
markets. Third, the effort to reduce foreclosures and mitigate the erosion of housing values, which were,
and remain, the epicenter of the current economic crisis.”
Meanwhile, in remarks made November 12 regarding the Financial Rescue Package, Treasury
Department Secretary Henry Paulson urged banks to resume lending to credit worthy borrowers while
asserting that the government would not use any of the $700 billion to buy bad assets from banks.
Secretary Paulson’s comments mark a shift in strategy for the Treasury Department, which had originally
proposed that a portion of the federal bailout package be used to purchase illiquid mortgage-related
assets dragging down the balance sheets of U.S. financial institutions.
Now, however, Paulson is hoping to find alternative ways to mitigate foreclosures. One possible plan may
be to adopt the model put in place by the Federal Deposit Insurance Corp. since its takeover of IndyMac
Federal Bank FSB, in which eligible mortgages are reworked by reducing interest rates, extending their
durations and lowering principal due on them. To date, loans modified under the FDIC plan have reduced
payments for participating homeowners by an average of $380 month, or about 23 percent.
Secretary Paulson’s plan to deter bailout money away from struggling mortgages was not met without
opposition. FDIC Chairwoman Sheila Bair, in a break with the administration, vocally pressed for $24
billion in bailout funds to stem the growing wave of American foreclosures (see related story below). In
addition, some members of Congress have raised questions regarding the Treasury Department’s plan
and approach to dealing with the $700 billion in allocated funds.
To read Secretary Paulson’s full remarks, visit www.treas.gov/press/releases/hp1265.htm.
FDIC Details Plan for Modified Loans
The Federal Deposit Insurance Corp. said it could prevent 1.5 million foreclosures by using $24 billion in
government guarantees to modify roughly 2.2 million troubled loans. The centerpiece of the plan, unveiled
November 14, envisions the government sharing up to half of a modified loan's losses if it goes into
default again. However, the plan has received pushback from Secretary of the Treasury Henry Paulson,
who called the plan "an important program" but added that it would be "a subsidy or spending program,"
which is not consistent with the Troubled Asset Relief Program. The TARP has favored direct capital
injections into financial institutions.
The FDIC said, "A loss-share guarantee on redefaults of modified mortgages can provide the necessary
incentive to modify mortgages on a sufficient scale, while leveraging available government funds to affect
more mortgages than outright purchases or specific incentives for every modification."
The FDIC said as many as 4.4 million loans could be considered for a modification under the program.
They include 1.4 million loans 60 days or more past due, as well as three million more projected to
become delinquent by the end of 2009. The program would be limited to owner-occupied properties.
Inside the Beltway: Fannie, Freddie Awaiting Word from FHFA on HVCC
Fannie Mae and Freddie Mac are still waiting to hear from the Federal Housing Finance Agency if there
will be a revised Home Valuation Code of Conduct released and if so, what the time for implementation
5 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
will be. The last public comment made by FHFA Director James Lockhart – that indicated FHFA was
planning to release a revised HVCC sometime in October – is the last thing the GSEs have heard, reps
said. The news was among the highlights as the Appraisal Institute’s “Inside the Beltway” reporters
checked in live from onsite at the 2008 Valuation Expo Held November 10-12 in Las Vegas. The opening
session was comprised of policy updates from representatives of Fannie Mae, Freddie Mac, Federal
Housing Administration and the Veterans Affairs who addressed the latest issues.
Fannie and Freddie also relayed that they are close to releasing an addendum to their appraisal forms on
market conditions. The addendum is one page and is intended to help appraisers conduct market
analysis. The addendum, which applies to all Fannie/Freddie forms, is likely to become effective April 1
once it is released.
Federal Housing Administration officials indicate that they are continuing to work on a Mortgagee Letter
that would implement changes to FHA Appraiser Roster requirements. The letter, which they hope to
release soon, would implement provision of the Housing and Economic Recovery Act.
Also, the FHA says that its market share is up dramatically. Total endorsement growth is 2008 rose by
more than 600,000, and the agency is projecting total endorsements of 1.75 million in 2009.
Veterans Affairs officials indicated that they will not be conducting a new recruitment drive for Fee Panel
appraisers in order to serve those who served the agency through tough times in recent years. However,
VA regional offices will be encouraged to add appraisers if there are shortages. Like FHA, VA market
share has increased this year, although no figures were available.
VA officials indicate they are receiving inquiries on Capitol Hill regarding the effectiveness of the
“Tidewater Initiative,” which puts forth a procedure for “Reconsideration of Value” by VA appraisers. To
date, VA says its experience with the reconsideration procedure has been positive.
Appraiser News Online will provide periodic updates of all of these issues as each is released throughout
the coming weeks and months.
Congressional Appraiser Champion Re-Elected
In a race that had significant implications on real estate appraisal regulatory modernization legislation,
Rep. Paul Kanjorski, D-Pa., held off a fierce challenge from Republican Lou Barletta and was elected to a
13th term. Kanjorski, Chairman of the House Financial Services Committee Subcommittee on Capital
Markets, Insurance and Government Sponsored Entities won with 52 percent of the vote, despite polls
showing him trailing until the end.
Kanjorski has been an outspoken advocate of the appraisal profession and the need to strengthen Title XI
of FIRREA, the appraisal regulatory structure. In October, 2007, Kanjorski introduced H.R. 3837, the
Escrow, Appraisal and Mortgage Servicing Improvements Act, which included provisions on appraisal
independence and Title XI reform. The bill was then added as an amendment to H.R. 3915, the
Mortgage Reform and Anti-Predatory Lending Act, which passed the House of Representatives in
November of 2007. It is currently pending in the Senate.
6 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
In Mississippi’s 1 District, Democrat Travis Childers, the only appraiser serving in Congress and a
member of the House Committee on Financial Services, cruised to re-election with 54 percent of the vote.
In May, Childers surprised many by winning a special election in a typically safe Republican district.
Elsewhere, Senate Banking Committee member Elizabeth Dole, R-N.C., was defeated by Democrat Kay
Hagan. Dole, the wife of former Republican Presidential Nominee Bob Dole, was a member of the Senate
Committee on Banking and was a vocal opponent of the Cuomo-Fannie/Freddie/OFHEO Agreement this
7 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Government Update – Residential
Fannie Mae Releases Market Conditions Addendum
On November 14, Fannie Mae released a “Market Conditions Addendum to the Appraisal Report” (Form
1004MC) that will be required with all appraisals of one-to-four unit properties effective April 1, 2009. This
form is intended to provide lenders with a clear and accurate understanding of the market trends and
conditions prevalent in the subject neighborhood. According to Fannie Mae, the form provides appraisers
with a structured format to report the data and to more easily identify current market trends and
conditions. For instance, the appraiser’s conclusions are to be reported in the “Neighborhood” section of
the appraisal report.
Accompanying the release is a Frequently Asked Questions document that provides guidelines for using
the newly introduced Market Conditions Addendum to the Appraisal Report, as well as FAQs about the
Addendum, new policies and clarifications of existing policies, and other general appraisal topics.
Information about Fannie Mae’s appraisal policies can be found at www.efanniemae.com and the FAQ
document is available at www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/appraisalfaqs.pdf.
Appraisal Institute seminars and courses that provide education on Fannie Mae (and Freddie Mac) forms
are being updated to provide information on the new Addendum. Specifically, the Appraisal Institute’s
Appraisal Challenges: Declining Markets and Sales Concessions seminar, which is currently scheduled in
more than 20 locations across the country, will have expanded talking points and specific information
devoted to the new Addendum. Appraisal Institute members are encouraged to attend this seminar to
receive information on the new Addendum, and other important topics that are relevant to the current
Inside the Beltway: Scrutinizing HUD’s Final Rule on RESPA
On November 17, the U.S. Department of Housing and Urban Development published its final rule to
reform the Real Estate Settlement Procedures Act. The final rule, which is more than six years in the
making, has a profound effect on every settlement service provider, including real estate appraisers,
mortgage lenders, mortgage brokers, title insurance companies, settlement agents, real estate brokers
and homebuilders. Much has changed from the proposed rule, and the Appraisal Institute is continuing to
analyze the final rule. Most visibly, the final rule requires the use of a new three-page Good Faith
Estimate and it revises the HUD-1 Settlement Statement into a three-page form.
Information on the final rule, including the new forms, can be found at
www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm. Several key provisions are discussed further below.
Volume Discounts - Among the good, HUD dropped its proposal to advance volume based discounts,
which would have placed extreme pricing pressure on appraisers, particularly small businesses. The final
rule only reiterates HUD’s contention that all settlement service providers may negotiate discounts as
long as they go to the consumer.
Appraisal Management Fees - The final rule, however, fails to distinguish between appraisal fees and
management fees within the appraisal fee classification. Professional appraisal organizations have
8 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
argued management fees should really be disclosed as loan processing charges, not appraisal fees.
Ultimately, this issue will remain a point of interest and discussion with HUD, as it falls under issues of
enforcement rather than in the final rule.
Average Costs - Further, settlement service charges are blurred, somewhat, by a provision expressly
stating that RESPA permits the listing of “average charges” on the HUD-1. The final rule is qualified to
some degree providing that an average charge may be used for any settlement service, provided that the
total amounts received from borrowers for that service for a particular class of transactions do not exceed
the total amounts paid to the providers of that service for that class of transactions. Professional appraisal
organizations urged that actual charges be clearly disclosed to consumers. A simpler and more
consumer-friendly approach would require the disclosure of all actual charges to consumers, rather than
10 Percent Tolerances - The final rule requires that loan originators stay within a 10 percent range for a
total aggregate amount for groups of settlement service charges. Real estate appraisals are grouped with
credit reports, tax services, flood certifications, and mortgage insurance premiums. Provisions were
included in the final rule to describe when a GFE can be revised beyond the 10 percent tolerance. The
final rule clarifies the different types of circumstances (defined as “changed circumstances” in the final
rule) that can be a basis for providing a revised GFE. The final rule emphasizes that market price
fluctuations by themselves are not changed circumstances. For example, if an appraiser that a loan
originator intends to use for a particular transaction raises its prices by $50 after the loan originator has
already provided a GFE, that increase would not have constituted a changed circumstance under the
proposed rule. Such a price increase by the appraiser would not be a “changed circumstance” allowing
the issuance of a new GFE. The final rule, however, clarifies that the other circumstances warrant
changed circumstances, including situations where information particular to the borrower or the
transaction either changes or is later found to be different from what was known at the time the GFE was
provided. For example, new information affecting the borrower’s credit quality or a change in the loan
amount might occur often enough to be “reasonably foreseeable,” but it would still fall within the types of
circumstances included in the second clause of the definition of “changed circumstances.” At the time of
this writing, it is unclear whether appraisal services fall under the “information particular to the borrower or
the transaction” clause, given that appraisals are specific to the property, but the Appraisal Institute is
seeking clarification on this, and will report this, and other information to its members.
The final rule is set to go into effect in 2010, although some provisions take effect sooner. Congress has
kept a watchful eye on HUD’s RESPA rule, and this issue may see some consideration in the 111
Given the magnitude of these issues, we would like your comments on the final rule, as we are continuing
scanning issues of concern to our membership. Please share your comments with Inside the Beltway at
Appraiser Groups Call Upon FDIC to Abandon BPOs in Loss Sharing
In a November 19 letter, the Appraisal Institute strongly urged the Federal Deposit Insurance Corporation
to require the use of appraisals performed by licensed or certified appraisers as part of its program, Loss
Sharing Proposal to Promote Affordable Loan Modifications. Currently, the program permits the use of
9 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
broker’s price opinions to ascertain loan-to-value ratios as part of the modification of “underwater loans” –
loans where the value of the collateral is less than the loan amount – that are in default.
The Appraisal Institute was joined by the American Society of Appraisers, American Society of Farm
Managers and Rural Appraisers, and National Association of Independent Fee Appraisers in penning the
While the letter supported the overall intent of the Loss Sharing Proposal – reducing the number of
homes in foreclosure – the groups pointed out that use of a BPO for any purpose other than establishing
a purchase or selling price of property is illegal in at least 24 states. Further, it was argued that FDIC
regulations and guidance require the use of appraisals for loan modifications when there has been any
material change in market conditions. Lastly, the groups mentioned that allowing the use of BPOs, which
answer the question of price rather than value, was a significant step toward loosening valuation
requirements at a time when the federal government should be ensuring that taxpayer “bailout” dollars
are not exposed to unnecessary risk.
Further, since these are all troubled loans, many properties may have deferred maintenance. Because of
this, the organizations believe the most prudent approach is for the FDIC to require an interior inspection
appraisal. However, the groups also recognized that a complete appraisal report may not be the most
appropriate valuation product in some circumstances, and suggested that USPAP gives appraisers the
flexibility to modify their scope of work consistent with the needs of their clients. The groups requested
that the FDIC consider the use of other appraisal products such as limited appraisals and appraisal
updates. The groups also pointed to the work being done to develop new appraisal tools that strike a
balance between cost and efficiency and the risk associated with the transaction.
To view a copy of the FDIC’s proposal visit www.fdic.gov/consumers/loans/loanmod/index.html. For the
full letter, visit www.appraisalinstitute.org/newsadvocacy/letrs_tstimny.aspx#Comments.
For more information on the rest of the FDIC’s Loss Sharing proposals, including a proposed $24 billion
allocation, see related story.
Lockhart, Kashkari Remark on GSE, HOPE NOW Streamlined Loan
On November 11, Federal Housing Finance Agency Director James Lockhart and Treasury Interim
Assistant Secretary for Financial Stability Neel Kashkari delivered remarks regarding a new GSE
mortgage modification program designed to greatly reduce preventable foreclosures and to get struggling
homeowners into mortgages that they can afford.
“This streamlined modification program will have uniform requirements and will be supported by a
consistent, efficient process approved by key industry participants,” said Lockhart in a statement. “It is an
achievable goal if homeowners, banks, mortgage servicers, investors, Fannie Mae and Freddie Mac all
“[The] announcement by FHFA, the GSEs, and HOPE NOW is an important step forward to make sure
the system has capacity to help all qualifying homeowners who are reaching out for help,” said Kashkari.
“The Treasury Department is committed to continuing to take strong action to stabilize our financial
10 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
system and we welcome this important announcement to help homeowners avoid preventable
The new loan modification program – which targets the highest-risk borrowers who have missed three
payments or more, own or occupy their property, and have not filed for bankruptcy – creates a fast-track
method of getting troubled borrowers to an affordable monthly payment.
According to Lockhart, the term “affordable” is defined as “your first mortgage payment, including
homeowner association condo dues of not more than 38 percent of the household's monthly gross
Lockhart added that creating an affordable payment will be achieved through a mix of reducing the
mortgage interest rates, extending the term of the mortgage, or even deferring payment on a part of the
principal. It is the servicers who will have the flexibility to use this mix to achieve that goal of affordable
“This unified effort on the part of Fannie Mae, Freddie Mac, private lenders and servicers, and the federal
agencies represented here is a bold attempt to create a nationwide program that can quickly and easily
reach many of these troubled borrowers here – and, in doing so, stabilizing their families, their
communities, and their neighborhoods,” concluded Lockhart.
Bush Announces Flexibility for Hope for Homeowners Program
On November 19, U.S. Housing and Urban Development Secretary Steve Preston announced that the
HOPE for Homeowners (H4H) Board of Directors has approved changes to the program to help more
distressed borrowers refinance into affordable, government-back mortgages and keep their homes.
Among the changes are increasing the loan-to-value ratio to 96.5 percent for some H4H loans; simplifying
the process to remove subordinate liens by permitting upfront payments to lienholders; and allowing
lenders to extend mortgage terms from 30 to 40 years. The changes, allowed under the new authority
provided under the Emergency Economic Stabilization Act of 2008, will reduce the program costs for
consumers and lenders alike while also expanding eligibility by driving down the borrower's monthly
"Clearly, meaningful changes were needed. These modifications should increase lender participation and
help more families who are having difficulty paying their existing mortgages, but can afford a new
affordable loan insured by HUD's Federal Housing Administration," Preston said.
Federal Housing Administration Commissioner Brian D. Montgomery said, "These changes will further
encourage lenders to take a hard look at this program before heading down the path to foreclosure and
will provide families with another resource to refinance into a loan they can afford. HOPE for
Homeowners will continue to serve as another loss mitigation tool that can be used to help families keep
HOPE for Homeowners will continue to only offer affordable, government-insured fixed rate mortgages.
Further, this program will maintain FHA's long-standing requirement that new loans be based on a
family's long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured
11 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
The HOPE for Homeowners program was authorized by the Housing and Economic Recovery Act of
2008. A Board of Directors was charged with establishing underwriting standards to ensure borrowers,
after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage. The
program began October 1, 2008, and will end September 30, 2011.
The HOPE for Homeowners Board of Directors includes HUD Secretary Steve Preston, Treasury
Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and FDIC Chairman Sheila
Bair. They have named the following people to serve on the board as their designees: FHA
Commissioner and Chairman of the Board Brian Montgomery, Federal Reserve Board Governor
Elizabeth Duke, Treasury Assistant Secretary for Economic Policy Phillip Swagel, and Federal Deposit
Insurance Corporation Director Tom Curry.
For more information on HOPE for Homeowners, visit www.hud.gov/hopeforhomeowners.
12 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
In the States
Maryland Lenders to Help Struggling Homeowners
In response to the housing crisis, Maryland Gov. Martin O'Malley announced an agreement between the
state and some of the nation's largest loan servicers to help distressed homeowners avoid foreclosure.
Six mortgage lenders including HSBC, Ocwen, GMAC ResCap, Litton Loan Servicing, AmeriNational
Community Services and Citi have agreed to a "cooling-off period" with homeowners facing foreclosure.
During that time, foreclosure actions and the accrual of fees and penalties will be placed on hold for 60
days. The lenders, which service about 23 percent of home loans in Maryland, have agreed to pool
together representatives to work with distressed homeowners and to follow certain practices when
helping borrowers modify their loans. "These agreements are one important component in a broad-based
strategy in homeownership preservation," Thomas Perez, Maine’s Secretary of the Department of Labor,
Licensing and Regulation, said. "If you buy people time, you purchase the ability to work things out."
The agreements come as the percentage of overdue mortgages in Maryland continues to increase.
According to September 2008 data, about one in 10 mortgages in Maryland are two months late. "Far too
few people are getting meaningful help," said Perez. "For us, the goal is a meaningful and timely
modification that will help homeowners stay in their homes." Maryland also has made mortgage fraud a
crime, is requiring that lenders verify a borrower's ability to repay a loan, and is strengthening licensing
requirements for mortgage professionals. "There are some right now who have been so intransigent, so
irresponsible, so cavalier and so downright arrogant in the face of the damage that's being done to
homeowners," said O'Malley.
Proposed Legislation Affects North Carolina Appraisers
North Carolina appraisers would be required to open a physical office if the state goes forward with draft
legislation it is currently preparing. The legislation would require anyone holding a professional license
regulated by the state to have a “brick and mortar” storefront office and that such an office would have to
be staffed a minimum of 30 hours per week.
The legislation would apply to anyone holding a professional license regulated by North Carolina
including real estate appraisers, mortgage brokers, real estate brokers, attorneys, general contractors,
and psychologists. The rationale behind the proposal would be to link a physical business address with a
professional person. Appraisers practicing in North Carolina advocate that the draft legislation will create
financial hardships not only for appraisers, but also for a host of other professionals who work from home
by increasing business costs and reducing productivity.
13 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Around the Industry
Joseph Magdziarz, MAI, SRA, Elected as Appraisal Institute 2008 Vice
At its November 5-6, 2008, meeting, the Appraisal Institute Board of Directors elected Joseph C.
Magdziarz, MAI, SRA, to serve as 2008 Vice President. He will assume the office on January 1, 2009. He
will then serve as President-Elect in 2010 and President in 2011.
Magdziarz’s nomination by the Appraisal Institute’s Leadership and Development Nominating Committee
had been submitted to the Appraisal Institute’s Board of Directors at its June meeting in Austin, Texas.
Magdziarz, President of Appraisal Research, Inc., located in Rockford, Ill., has been an active member of
the Appraisal Institute for 38 years. He has served on numerous Appraisal Institute committees, including
the National Audit Committee for three years, of which he spent a year as Chair. Magdziarz also has
been Chair of the Instructor and Faculty Committees, Chair of the Publications Committee, and presently
is completing his fifth year as Chair of the Education Committee. Furthermore, Magdziarz also has served
and held office in the Appraisal Institute at the local and regional levels.
With regard to the Appraisal Institute’s future, Magdziarz said, “We must continue to be the leader in
providing education for the real estate valuation profession. We must continue to discover, redefine
ourselves, and adapt to rapid changes in client services, the world economy, and technology.” He added,
“We must move quickly to foster and promote our presence as the world leader in valuation services.”
Magdziarz has degrees in finance and real estate from Rockford College and Rock Valley College. He
resides in Rockford, Ill., with his wife of 41 years, Sandra, and his bulldog, Bella.
G-20 Leaders Agree on High Priority Financial Markets Reforms
Leaders of the Group of Twenty, meeting in Washington earlier this month, agreed on common principles
to stabilize the global financial system and implement reforms to strengthen financial markets and
regulatory regimes to avoid future crises.
These principles include:
Accounting standards setters should work to enhance guidance for valuation of securities, taking
into account the valuation of complex, illiquid products, especially during times of stress.
Regulators should develop recommendations to mitigate pro-cyclicality, including reviewing how
valuation and leverage, bank capital, executive compensation and provisioning practices may
exacerbate cyclical trends. Longer term, the group countries will review of the scope of financial
regulation, with special emphasis on unregulated institutions, instruments and markets.
Authorities should ensure that financial institutions maintain adequate capital to sustain
confidence. International standards setters should adopt strengthened requirements for banks'
structured credit and securitization activities.
The countries' finance ministers are expected to take action to implement these and other principles by
March 31, and the group intends to meet again April 30.
14 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
For more information, visit www.whitehouse.gov/news/releases/2008/11/20081115-5.html.
Appraisers Beware: Seller Financing Making a Comeback
As capital continues to prove scarce, seller financing is making a comeback – and not just in traditional
small real estate transactions. More large deals have turned to the idea of financing part of a property’s
purchase price in order to ensure that that same property moves. It’s a business decision primarily
impacting sellers who are under pressure to raise cash.
And the number of transactions involving seller financing are expected to grow. According to Marcus &
Millichap, a commercial real-estate brokerage, through the first eight months of the year, 6 percent of the
total deals its tracked have involved seller financing, compared with 2007, when only about 2 percent of
deals tracked were seller-financed. In 2009, the number of seller financed transactions is expected to
continue to grow, with some estimates anticipating as high as 15 percent of transactions requiring seller
Distressed Commercial Real Estate Webinar Rated a Great Success
The Appraisal Institute’s most recent webinar—Appraising Distressed Commercial Real Estate: Here We
Go Again—was attended by a record 516 participants on November 12. Jim Amorin, MAI, SRA, 2008
President-Elect of the Appraisal Institute, moderated the 60-minute interactive event, which covered the
issues that are affecting commercial appraisal in today’s turbulent economy.
Robert White, Jr., CRE, FRICS, founder and president of Real Capital Analytics, gave a historical
overview of the commercial market and the current financial crisis while Ted Anglyn, MAI, CCIM, Director
of Acquisitions at Forge Capital Partners, discussed the capital markets’ impact on real estate
transactions and the challenges of determining market value in inactive markets. Don Damron, CCIM,
Chief Appraiser at Capital One Bank, concluded the presentation with his perspectives on what bank
regulators are requiring of regulated institutions with distressed commercial real estate, and what services
appraisers can offer to assist financial institutions.
"This was a very valuable and timely presentation. It was one of the best educational offerings I have
attended in a long time," said one attendee.
A recording of the November 12 webinar is now available for purchase through the Appraisal Institute’s
Web site at www.appraisalinstitute.org/store/p-140-appraising-distressed-commercial-real-estate-here-
we-go-again-webinar-recording.aspx. For more information about the recording, the November 12
webinar or upcoming webinars, e-mail email@example.com.
Seattle Chapter Holds Fall Real Estate Conference
Michael J. Parks, Editor and Publisher of Marple’s Pacific Northwest Letter. said that while the country is
in a recession, “a depression is unlikely.” His comments came as keynote speaker November 5 at the
Seattle Chapter’s second annual fall real estate conference. The conference, sponsored by CB Richard
Ellis, GVA Kidder Mathews, Banner Bank and Lamb Hanson Lamb, drew over 230 participants.The
relative health of the Puget Sound economy was a theme throughout the day as panel members
discussed various aspects of residential and commercial real estate. Most speakers indicated that both
local and national vacancy and investment rates would increase as the recession deepens, but the Puget
Sound region should see fewer problems than the rest of the country.
15 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Panel members included top leaders in their respective fields, including those who make the deals, those
who analyze the deals and those who provide the details. David Stinebaugh, a finance specialist at CB
Richard Ellis, discussed financial markets and current loan conditions. Gary Carpenter, Executive Vice
President and Chief Operating Officer at Bentall USA, addressed a packed crowd during the Office: 2008
A Transitional Year in Review breakout session. Allen Safer, MAI, Managing Director at Integra Realty
Resources, moderated a session that focused on repositioning distressed properties, and Doug Bennett,
Executive Vice President and Real Estate Lending Manager at Banner Bank, discussed the residential
Fidelity National Financial, LandAmerica Announce Definitive Merger
Fidelity National Financial Inc. agreed to acquire battered title insurer LandAmerica Financial Group Inc.
in an attempt to stave off financial troubles that has burdened both companies in lieu of the credit freeze
and a dramatic downturn in business. “We have always had great respect for LFG and we are confident
the combination of our two companies will create the strongest and most financially sound title insurer in
the country with an unrivaled geographic and commercial footprint,” Bill Foley, FNF’s chairman, said.
Both title insurers have taken a beating from the housing market downturn over the past year. FNF
reported a net loss of $198.3 million in the third quarter of this year compared with net earnings of $2.76
million the same period last year. LandAmerica had a net loss of $50 million in the second quarter this
year compared with net income of $7.9 million the same period last year.
The agreement would give LandAmerica shareholders 0.993 shares of FNF common stock for each
LandAmerica share. Pending approval by regulators and LandAmerica’s shareholders, the merger would
reduce debt among both companies by about $250 million. Chicago Title Insurance Co., a subsidiary of
FNF, will provide $30 million to help LandAmerica’s liquidity once FNF’s due diligence and the merger are
complete. Based on data from the Demotech Performance of Title Insurance Companies 2008 Edition,
the merging of the two title insurers would create a company with 46.3 percent of the market share, FNF
September House Price Index Data Shows Promise Amid Worsening
According to Integrated Asset Services’ IAS360 House Price Index for September 2008, national house
prices declined 2.1 percent, with an annual decline of 13.3 percent. However, of the 360 counties
included in the report, 75 experienced positive increases. “Housing prices at the national and MSA levels
are still seeing declines, but we’re seeing positive signs at the county level, and even more encouraging
signs at the neighborhood level,” said Dave McCarthy, President and CEO of Integrated Asset Services,
pointing to “pockets of the country that may be showing signs of improvement.”The House Price Index
county level data is an aggregate of the 15,000 neighborhoods IAS tracks,
According to the report, house prices are declining in all four U.S. Census regions. Both the South and
West regions are experiencing annual double digit declines of -11.2 percent and -19.0 percent,
respectively. Compared to September of 2007, house prices in the Western and Midwestern regions
improved slightly while the Northeast and South regions continued to weaken. Moreover, all nine U.S.
Census divisions posted declines with the West South Central region leading the way with a decline of
16 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
4.5 percent. The New England, South Atlantic and Pacific regions posted declines of 3.0 percent, 2.5
percent and 1.9 percent, respectively.
Appraisal Institute Debuts Supervising Appraisal Trainees Online
The Appraisal Institute’s Supervising Appraisal Trainees is now available in an online format. Led by
instructor Sandra K. Adomatis, SRA, this online seminar provides an overview of appraisal supervisor and
trainee roles and responsibilities.
Through four modules, Supervising Appraisal Trainees will teach participants to: identify skill sets of
supervisors and trainees, understand how to develop a good training program; and review USPAP,
signature and security, and Scope of Work issues that are of concern to the supervisor/trainee
relationship. It features several documents and forms that will enhance participant’s learning experience
and can be implemented in their own practice.
Supervising Appraisal Trainees is approved for four hours of Appraisal Institute continuing education
credit. Registration fee is $58 for members, $69 for non-members.
For more information and to register, visit
New Discounted Specialty Book Packages Available
The Appraisal Institute is offering four new book packages at a 20 percent discount. This brings to five the
total number of packages offered, as the new titles join the previously announced AI Essentials Package,
which is also still available at a 20 percent discount. The subjects addressed in the new book packages
are: residential valuation, commercial valuation, environmental and legal issues, and math and
technology. Each of the book packages includes three publications that focus on these topics.
The Residential Valuation Book Package includes Historic Properties: Preservation and the Valuation
Process, The Valuation of Apartment Properties and Valuation and Market Studies for Affordable
Housing. The package is available for $115 for nonmembers; $90 for members.
The Commercial Valuation Book Package includes Analysis and Valuation of Golf Courses and Country
Clubs, Market Analysis and Valuation of Self-Storage Facilities and The Valuation of Billboards. The
package is available for $$110 for nonmembers; $80 for members.
The Environmental and Legal Issues Book Package includes Uniform Appraisal Standards for Federal
Land Acquisitions, Valuing Contaminated Properties: An Appraisal Institute Anthology and Valuation of
Wetlands. It is available for $90 for nonmembers; $60 for members.
The Math and Technology Resources Book Package, which includes GIS in Real Estate: Integrating,
Analyzing, and Presenting Locational Information, Guide to Appraisal Valuation Modeling and Practical
Applications in Appraisal Valuation Modeling, is available for $100 for nonmembers; $75 for members.
The four new packages join the previously announced AI Essentials Package, which is still available at a
20 percent discount. The essentials package includes the following five texts: The Dictionary of Real
Estate Appraisal, Scope of Work, Market Analysis for Real Estate: Concepts and Applications in
17 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Valuation and Highest and Best Use, Property Inspection: An Appraiser's Guide and The Appraisal
Writing Handbook. It is available for $165 for members; $210 for non-members
For more information or to order online, visit
www.appraisalinstitute.org/publications/specialtypackages.aspx or call 800-504-7440 (8 a.m. - 5 p.m. ET)
to order. Use promotion code AIE08E when ordering.
Retail Outlook Sparks CMBS Exposure Concerns
Retail sales in the United States fell a record 2.8 percent in September, and now retailers have an
unintended build-up of inventory. Furthermore, retail properties backed by commercial mortgage-backed
securities face store closings, bankruptcies and a tight credit environment.
“Retail sales are dropping faster than retailers can trim inventory,” said Tim Quinlan, economic analyst at
Wachovia Economics Group, Charlotte, NC. He said the numbers for September set a record for lowest
consumer confidence rating and its highest monthly drop in retail sales.
Electronics retailer Best Buy Inc. forecast lower earnings, while J.C. Penney Co. and Abercrombie & Fitch
Co. reported a sharp drop in their third-quarter profits and gave lower outlooks for the fourth-quarter and
full-year, as did Kohl's Corp. and Nordstrom Inc.
Tightening credit increased refinancing concerns among retail investors. “We expect that refinancing
efforts will continue to be challenging in 2009 and 2010, as an increasing number of retail loan maturities
come due,” said Larry Kay, managing director at Standard & Poor’s, New York.
S&P said specialty clothing and department stores and teen and luxury segment retailers showed
declines, while discounters, wholesalers and drug stores had increases in sales during the year. “While
we believe the overall picture seems bleak from a macro perspective, in our opinion, the aggregate data
hides the fact that certain types of stores are actually performing quite well in this environment," Kay said.
"Clearly, consumers are favoring locations that offer a 'one-stop' shopping experience [Wal-Mart], as well
as those that offer the most value for their dollars in this tough economic environment."
Despite some success for one-stop retailers, current weakness in retail still concerns some analysts at
the cusp of the holiday shopping season. “We expect holiday sales will decline between zero and 2
percent,” said Anika Khan, economist at Wachovia Economics Group.
S&P’s report said CMBS transactions with exposure to retail tenants declaring bankruptcy trump tenants
that announce store closings. Mervyn's, for example, filed for bankruptcy July 28, and announced
liquidations of all its stores on October 17.
“Underperforming stores are usually systematically selected for closure, and the market is typically made
aware of closures well in advance,” Kay said. “Tenant bankruptcies, however, can sometimes put a chain
of stores out of business in a relatively short period of time.”
S&P rated 288 CMBS transactions with exposure to troubled retail tenants and said overall exposure by
transaction is “very low, reflecting the industry and tenant diversity found in CMBS deals. The highest
troubled tenant exposure in a transaction is 8.3 percent,” Kay said.
18 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Appraisal Institute Supports IRS Notice on Charitable Contribution
In a November 5 letter, the Appraisal Institute applauded the Internal Revenue Service for the goals and
intent of the Advanced Notice of Proposed Rulemaking (ANPR) that the agency recently issued regarding
Substantiation and Reporting Requirements for Cash and Noncash Charitable Contribution Deductions.
Specifically, the ANPR proposes definitions for the terms “qualified appraisal” and “qualified appraiser,”
which the appraisal profession had been eagerly awaiting.
While the Appraisal Institute’s letter commended the IRS for elevating recognition of USPAP in its
definition of “qualified appraisal” and for the proposed treatment of the “Valuation Effective Date” (giving
appraisals essentially a 60-day shelf life), the organization also asked the IRS to extend its proposed
definitions to include all IRS valuation assignments.
As the Appraisal Institute stated in its letter, “We believe it is important for the IRS to develop consistent
rules that apply across program areas, including estate, gift, and income tax. In fact, doing otherwise
would seem to add to an overly complex and oftentimes confusing tax regime. This concern could be
avoided if the IRS chose to establish a single set of clear and consistent rules for all fair market valuations
The IRS is expected to issue their final regulation sometime next year. For the current version, visit
www.irs.gov/irb/2008-40_IRB/ar13.html. For the full version of the Appraisal Institute’s letter, visit
Appraisals Get New Level of Scrutiny by Lenders
In a recent Washington Post article, reporter Ken Harney asked, “How old can comps be before lenders
won’t use them?” and found that lenders are placing a greater emphasis on the comparable sales
residential appraisers are using today when developing their opinions of value than they were when
markets were seeing home values appreciate. Whereas lenders used to allow comps from anywhere
between six to 12 months old, today lenders are requiring comps that are not older than 90 days.
Among those Harney interviewed include Appraisal Institute members Pat Turner, SRPA, SRA, Kerry
Leiman, SRA, and Tim McCarthy, SRA.
According to Turner, his firm has seen "numerous" cases where using newly mandated 90-day-or-newer
comps has contributed to valuations lower than the price on the sales contract. The biggest issue on the
appraisal side is finding comps that fall within the 90-day range. Turner noted that he must sometimes
persuade realty agents to disclose the prices on pending sales, which otherwise are not reported or listed
until closing. Or he must go into the local multiple listing service and statistically derive adjustment
indexes for small geographic areas based on the percentage difference between original asking prices
and selling prices.
While finding fresh comps can be challenging, Turner, Leiman and McCarthy all agreed that in general,
the stricter timeline for comparable sales information improves valuation accuracy for lender purposes.
19 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
To read Harney’s full article, visit www.washingtonpost.com/wp-
Appraisal Institute Comments on Financial Accounting Statement 157
The Appraisal Institute has sent a letter to the Securities and Exchange Commission and Financial
Accounting Standards Board expressing its strong support for the underlying tenets of fair value
accounting and urging both agencies to use their authority judiciously as it relates to Financial Accounting
Statement (FAS) 157.
The Appraisal Institute, which was joined in its letter by the American Society of Farm Managers and
Rural Appraisers wrote, “Our organizations believe it is critical for the financial markets to go back to
basics, particularly as it relates to the value of the underlying collateral backing commercial paper,” said
Bill Garber, director of government and external relations for the Appraisal Institute. “We believe many of
the write downs that are being taken by financial institutions are excessive when compared to the value of
the underlying collateral within the securitized loan pools.”
FAS 157 is an accounting standard that lays out guidelines for companies to come up with market, or fair,
values. It is a rule that many in the appraisal industry believe makes it easier to understand the current
market value of assets reported by companies on their financial statements. But it is also a standard that
has raised many concerns, particularly in regards to the impact fair value has had on the current credit
Banking and other financial organizations have previously expressed opposition to applying fair value
rules to financial assets, or commercial paper, believing that fair value as it relates to performing financial
assets may overstate declines in value, ultimately, restricting credit availability. The point was not lost on
the appraisal organizations.
“We understand there are many concerns about the application of FAS 157 in the current market,” said
Garber. “We believe many of the current credit concerns could be addressed if more attention were paid
to the value of the underlying collateral of each of the individual components comprising these financial
assets. In fact, we believe that would likely result in more realistic, and often lesser, writedowns, freeing
To view the appraisal organizations’ letter in its entirety, visit
Conforming Loan Limits to Remain $417k in 2009, Except Some Areas
The Federal Housing Finance Agency announced the conforming loan limit will remain $417,000 for 2009
for most areas in the U.S. but specified higher limits in certain cities and counties. Loan limits for two-,
three-, and four-unit properties in 2009 will remain at 2008 levels as well: $533,850, $645,300, and
$801,950 respectively, for homes in the continental U.S.
The national limit was left unchanged at $417,000 based on declines in FHFA’s monthly and quarterly
house price indexes over the past year. The monthly purchase-only index declined 5.9 percent over the
12 months ending August 2008, and the quarterly all transactions index dropped 1.7 percent from second
quarter 2007 to second quarter 2008.
20 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Virtually every other measure of house prices has also fallen, with many showing even larger declines.
FHFA has not yet determined whether it will continue to use a currently existing FHFA price index to
gauge price movements in future years. For 2008, however, all reliable metrics point to lower prices, and
a price decline of any size is sufficient to determine that the national limit will not change. Following the
provisions of HERA, the FHFA has set loan limits for “high-cost” areas in 2009. These limits are set equal
to 115 percent of local median house prices and cannot exceed 150 percent of the standard limit, which is
$625,500 for one-unit homes in the continental U.S. The new limits affect loans purchased by an
Enterprise in 2009, unless the loans were made permanently eligible for purchase under the Economic
Stimulus Act enacted earlier in 2008 and has generally higher limits.
Under rules set forth in the Stimulus Act, loans originated in 2008 and the second half of 2007 are subject
to limits of 125 percent of local price medians up to a maximum of $729,750. As a result of the difference
in the formula for determining high-cost area limits, many of the high-cost area loan limits are different for
2009 than they were for 2008. They are generally lower because of the lower median price multiplier in
HERA (i.e., loan limits are 115 percent rather than 125 percent of median prices) and the lower ceiling
($625,500 rather than $729,750). For loans originated during the period covered by the Stimulus Act, the
higher of those limits and the 2009 limits will apply.
As in previous years, the 2009 maximum conforming limits are higher in Alaska, Hawaii, Guam, and the
U.S. Virgin Islands than in the contiguous U.S. In those areas, loan limits vary from $625,500 to $721,050
for one-unit properties.
For a link to a PDF of the higher loan limit areas, visit www.fhfa.gov/GetFile.aspx?FileID=134. For an
Excel spreadsheet of all loan limits for every U.S. county, visit www.fhfa.gov/GetFile.aspx?FileID=135.
S&P: Commercial Property Prices Remain Flat
Annual prices in commercial real estate are flat versus July 2007, according to the July 2008 Standard &
Poor’s Commercial Real Estate Indices. The indices, which measure changes in commercial real estate
prices by geographic region and property sector in the United States, show that annual prices are well
below the August 2006 peak of 14.7 percent. The Midwest and Mid Atlantic South regions—which both
had slightly positive returns for July 2008—had the best annual returns of 4.9 percent and 3.3 percent,
According to the monthly report, which measures the monthly returns and compares them to a year prior,
the Mid Atlantic South region was the best performer with a return of 1.0 percent from June 2008 to July
2008. The Pacific West region performed the worst with a return of -3.0 percent from June to July. The
Desert Mountain West region reported its fifth consecutive month of declines in commercial real estate
prices with an annual return of -2.7 percent.
All four property sectors reported negative returns in July. The Warehouse sector—the only sector
reporting negative returns on a year-over-year basis—returned -1.7 percent from June to July.
Apartments was the highest performing sector over the past 12 months with an annual return of 0.4
percent. Office was the only sector that saw an increase in its annual growth rate over the last month.
21 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
The indices are maintained and published under agreement between Standard & Poor’s and Global Real
Analytics/Charles Schwab Investment Management. For more information, visit
Lenders Become Developers in CRE Slump; Foreclosures Expected to
The bankruptcy of developers across the nation has thrust lenders into positions they’ve never been in
before: the lenders are becoming the developers. As the economy continues to decline, and defaults and
delinquencies on commercial loan properties are expected to rise, some lenders are being forced to
continue the incomplete development projects of their former clients in the hopes of staying afloat
It’s not an ideal situation for developer or lender, but it is an increasingly common situation that effectively
illustrates the types of struggles that lenders are facing as the state of the weakened economy takes its
toll on commercial real estate projects.
And the problem could get worse. The years 2005-2007 are considered by most industry analysts to be
the period of time in which the highest volume of lending with loose standards took place. If that’s the
case, many in the industry are predicting that the real surge of commercial foreclosures will occur
between 2010 and 2012, when those loans come due.
If credit remains as tight in 2010 as it is now, that could seriously impact the health of the commercial real
estate industry for many years down the (undeveloped) road.
Appraisal Institute Offers Valuation of Green Residential Properties Online
The Appraisal Institute has developed an online version of its new Valuation of Green Residential
Properties seminar. Led by instructor Alan F. Simmons, SRPA, the online seminar explores the principles
of green building as they apply to residential construction. Through six modules, Valuation of Green
Residential Properties emphasizes the elements that make a building “green” and how they affect the
appraisal process. The seminar also addresses market acceptance of the latest green program initiatives
and the rapidly changing technologies in this field.
Registration fee is $114 for members, $137 for non-members, and is approved for seven hours of
Appraisal Institute continuing education credit. For more information and to register, visit
Appraisers needing continuing education credit by the end of 2008 are encouraged to look into the
December classroom premieres in Denver, Little Rock and New Orleans. Information and registration for
the classroom version is available at
Osenbaugh, MAI, Presides over CREW Network 2008 Conference
The Commercial Real Estate Women Network held its 2008 conference October 15–17 with nearly 900
professionals converging in Houston, Texas. This year’s event, presided over by CREW President Lynny
Osenbaugh, MAI, took a fresh look at the state of commercial real estate with a focus on how to navigate
the current market and economic challenges facing the industry.
22 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Featured speakers included management guru Tom Peters, who discussed leadership strategies and
tactics during times of uncertainty, and Arianna Huffington, who Time magazine named as one of the
world’s 100 most influential people in 2006. During a luncheon sponsored by the Appraisal Institute, Dr.
Mark Dotzour, Chief Economist and Director of Research for the Real Estate Center at Texas A&M
University, discussed how both global forces and the economy might influence real estate decision
markers in 2009.
Breakout sessions included The Greening of Corporate America: The Business of Sustainability, where
participants explored the reasons and issues that are driving corporations to take a public stance on
climate change and sustainability, and Real Estate Women in the Energy Industry, which discussed
domestic and international real estate valuing issues that companies in the energy industry face. At the
convention’s Network Marketplace, the Appraisal Institute’s national office along with the Houston
Chapter of the Appraisal Institute teamed up by sponsoring a booth where staff and members distributed
membership information as well as promoted the value that designated appraisers bring to the industry.
As a network of roughly 8,000 professionals representing all real estate disciplines—including appraisal—
CREW Network is dedicated to advancing the success of women in commercial real estate. “Women are
still a minority in commercial real estate,” noted Osenbaugh. “A formidable network brings empowerment
and that is imperative, particularly now.”
Appraisal Groups Release Model AMC Legislation; Invite Public Comment
In response to the growing number of appraisal management companies in the United States, the
Appraisal Institute has called for the registration and regulation of such entities in draft legislation that it
hopes will form the basis of legal guidance. The Appraisal Institute’s draft legislation was issued
November 3 in conjunction with the American Society of Appraisers, the American Society of Farm
Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers. The
organizations are inviting comment and discussion from all stakeholders regarding the model and the
overall topic of the future regulation of AMCs.
“The nation’s real estate appraisers are excited to be at the forefront on this very important issue. We
look forward to a robust discussion regarding AMC registration and regulation. The model is intended to
be a starting point from which the appraisal community, state appraiser boards, and state legislatures can
begin to draft their own legislation and regulation,” explained Bill Garber, director of government and
external relations for the Appraisal Institute.
Garber further explained that the language in the model is intended to give state appraiser boards the
statutory authority that they need to develop and implement registration requirements for appraisal
management companies operating in their states.
“Today, AMCs are presenting themselves as appraisal service providers to the public, charging
consumers appraisal fees on their HUD-1 statements,” Garber explained. “Yet these entities are currently
outside the bounds of state appraisal regulatory agencies. This model bill is intended to address this
As currently drafted, the model:
23 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Requires the registration of AMCs operating in the state that order residential appraisals from
independent appraisers. Provides exemptions for “in-house” appraisal departments, AMCs that
order less than 10 appraisals in a state in a year, and for appraisers that subcontract to other
appraisers on an incidental basis;
Prohibits AMCs from being owned by individuals who have had an appraiser license or
certification denied, refused, cancelled or revoked;
Requires the identification of a “controlling person” for each AMC;
Requires AMCs to have systems in place to verify that they only utilize licensed or certified
appraisers, and that all appraisals are in compliance with USPAP;
Enacts requirements that ensure that appraisers are free from coercion or inappropriate influence
from AMCs; and
Provides for the adjudication of disputes between AMCs and independent appraisers.
“The organizations look forward to working with state legislators, state boards and our local chapters as
they begin discussions on this extremely important topic in their states,” said Garber.
A copy of the draft model legislation is available at
www.appraisalinstitute.org/newsadvocacy/downloads/modelprovisionsAMC.pdf. For more information, or
to provide feedback, on the model legislation, please contact Scott DiBiasio, Appraisal Institute manager
of state and industry affairs at 202-298-5593 or firstname.lastname@example.org.
Massive Effort to Save Mortgages via Loan Modifications
Under intense political pressure to address the foreclosure problem, the banking industry is taking action
to modify loans. In late October, J.P. Morgan Chase & Co. launched a plan to modify the terms of $70
billion in mortgages for borrowers who are behind on their payments or soon could be. Bank of America
Corp. already has two loan-modification pools in place.
Overall, the purposes of these plans are intended to halt rising home foreclosures while also absorbing
some of the acute focus that the public has placed on the banking industry for the turmoil in global
financial markets. Economists and government officials have agreed that the economy and financial
markets can't fully revive until there is a halt to the decline in housing prices. Yet how much the current
bleeding can be slowed remains to be seen.
While the U.S. government has recently tackled problems in the banking system and credit markets, it
hasn't yet taken serious steps to halt the growing number of foreclosures. Though it soon may.
With Moody’s Economy.com estimating that 7.3 million American homeowners are expected to default on
their mortgages between 2008 and 2010, more government intervention may be on the horizon. In the
meantime, however, banks are improving the value of their loan portfolios through mass modifications,
which produce fewer losses than foreclosures.
CMPS Institute Calls for Foreclosure Moratorium, Independent Appraisals
On October 31, the CMPS Institute asked the Treasury Department to issue a 90- to 180-day nationwide
moratorium on foreclosures and requested a reduction in all home mortgage balances to not more than
90 percent of the home owner’s current home value as established by one or more independent
appraisers. Their call was for all mortgages and not just those that are “troubled,” under the reasoning
24 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
that while 93 percent of loans are not considered “troubled,” the stigma from those that are could reduce
home values across the board.
CMPS’ comments were delivered to the Treasury Department as part of the comment period allotted for
the public to provide input on the US Treasury’s Troubled Asset Guarantee program. The Troubled Asset
Guarantee program is part of the $700 billion financial rescue package that has yet to be created and
According to Gibran Nicholas, Chairman of the CMPS Institute, his organization’s comments were
focused on what they believe to be the three root causes of the financial crisis:
- Uncertainty regarding the value and performance of underlying mortgage loans
- Decline in housing values and negative homeowner equity
- De-leveraging among financial institutions and mark-to-market accounting
“Troubled mortgage assets such as Residential Mortgage Backed Securities, Collateralized Mortgage
Obligations, Collateralized Debt Obligations and other mortgage loan derivatives, cannot be effectively
insured without first examining the value and likely performance of the underlying mortgage loans,”
explained Nicholas. “It is unwise for the government to assume liability for insuring whole loans unless
there is a reasonable expectation that the loans will perform well.”
The comprehensive CMPS proposal calls for a 90- to 180-day nationwide moratorium on foreclosures,
during which time a large-scale systematic restructuring of mortgage loans will occur. Lenders will have
the option of re-writing the loans entirely as part of their participation in the FHA Hope for Homeowners
program, or they could participate in a government-mandated program of mass-modifications that would
include, in addition to the 90 percent write-down, government insures against any further decline in
mortgage value (below the 90 percent of current home value) over a three-year timeframe.
“Although this proposal would require financial institutions to book massive losses in reducing mortgage
balances, they could quickly recapitalize and restore adequate capital ratios through direct injection of
funds by the Treasury Department as is already being implemented,” said Nicholas. “Consumers,
financial institutions, taxpayers, the U.S. government and the entire U.S. and global economy will benefit
from the enormous economic stimulus and boost to consumer confidence and spending that will occur as
a result of reductions to overall home owner debt and debt service levels.”
The CMPS Institute is a training, examination, certification and ongoing membership program for financial
professionals who provide mortgage and real estate equity advice.
To view the CMPS Institute’s full proposal, visit www.cmpsinstitute.org/pdf/CMPSCommentsonEESA.pdf
FAF Urges SEC Not to Suspend FAS 157
In an October 27 letter the Financial Accounting Foundation urged Securities and Exchange Commission
Chairman Christopher Cox to reject any appeals he receives from financial industry groups to suspend
accounting on fair value measurements. Of concern to the FAF is the possibility that overriding Financial
Accounting Standard No. 157, Fair Value Measurements (FAS 157), would be detrimental to investor
confidence. The FAF’s letter, which though vague on naming financial groups who may have pressured
the SEC, expressed concern over appeals the group believes have been made to override the recently
25 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
issued FASB Staff Position, FAS 157-3, Determining the Fair Value of a Financial Asset when the Market
for that Asset Is Not Active.
The FAF is responsible for the oversight of the Financial Accounting Standards Board, which was set up
to provide an independent standard-setting process free from political intervention. The October 27 letter
is the second the FAF sent in October regarding the safeguarding of the integrity and independence of
the standard-setting process.
FASB Staff Director: Independent Rulemaking Needed
Suzanne Bielstein, a staff director at the Financial Accounting Standards Board, called last month for
independent rulemaking in financial reporting. Bielstein’s remarks, which were made during a conference
held to discuss the shift of companies in the U.S. from reporting under generally accepted accounting
principles to international financial reporting standards, come at a time when global accounting standards
setters have been feeling pressure as a result of the current financial crisis.
Noting efforts from financial industry groups to have the Securities and Exchange Commission override
certain existing FASB standards, Bielstein remarked how the International Accounting Standards Board,
which issues the international standards, and the SEC need to function independently in order to ensure
the best interests of all parties are safeguarded.
According to Bielstein, it is “very important to strengthen the IASB and make it independent and
sustainable.” Just how independent the IASB can be, however, is a matter of debate, seeing as since the
IASB's budget was established in 2001, the board has depended largely on voluntary contributions from
the companies that apply its standards.
C&I Loans See Deterioration
The reporting of third-quarter results by banking companies confirmed what many in the industry were
fearing, that commercial and industrial lending deterioration has become a major problem. Some analysts
are even predicting that the downturn is likely to be a prolonged slump that could last up to four years.
Though a nationwide problem in scope, the deterioration of C&I loans is mostly impacting banking
companies in regions with rising unemployment and plummeting home prices. In large part, the loans in
these regions are stagnating due to delayed retail projects planned near unfinished housing
developments. And as the economy gets worse, experts expect C&I loan deterioration to get worse as
“C&I loans are so closely tied to the vitality of the economy that when the economy takes a dip, C&I loans
feel a drop,” said Bill Garber, director of government and external relations for the Appraisal Institute.
“Banking companies are getting hit hard.”
Among the banking companies hit hardest, Comerica Inc. reported that its third-quarter earnings dropped
85 percent from a year earlier, while UnionBanCal Corp. reported that its third-quarter earnings fell 18
percent from the previous year.
Pullback in Secondary Market Hits SBA Lenders
26 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Small Business Administration lenders are feeling the squeeze during these tough economic times, with
many SBA loan offices closing their doors amid the drought in the secondary market. Key among the
plight of SBA office closings has been the loss of interest from investors when it comes to buying
securities backed by SBA loans. Shrinking profit margins are to blame.
As investors look for places to invest, many are turning to commercial mortgage-backed securities, which
are viewed as more attractive than the SBA loans. The SBA, for their part, is hoping that the recent
economic stimulus plan reinvigorates lending and boosts their businesses.
For the time being, however, the market for 7(a) loans has slowed to a point that lenders are only able to
sell SBA loans at a 1 to 3 percent premium, if they receive any bid at all. That’s a far decline from the 8-
10 percent premiums of just a few years ago.
Tax Court Rejects Being Bound by USPAP; Uses Comparable Sales to
Determine ‘Facade Donation' Overestimated
In an opinion released October 30, the U.S. Tax Court rejected both the cost and income approaches to
valuing a “facade donation” by the owner of a New Orleans hotel, instead using the comparable sales
approach to determine the value of the servitude was $1.792 million and not the $7.445 million claimed by
the owner. Also in the case, the judge ruled that the court was not bound to accept the Uniform Standard
of Professional Appraisal Practice as the defining standard of reliability. Furthermore, according to the
Tax Court, an accuracy-related penalty was applicable to the Whitehouse Hotel Limited Partnership
because it failed to make a good faith investigation prior to claiming the charitable contribution, which
precluded the reasonable cause exception.
Whitehouse objected to the government's expert witness on the grounds that he was not qualified to
testify as an expert and that his written report was unreliable since it was not in accordance with USPAP.
However, Judge James S. Halpern ruled that the court would not supplant its responsibility to assess an
expert appraiser's reliability by accepting USPAP as the defining standard of reliability, stating that federal
rules of evidence only require that expert testimony be based on reliable principles and methods.
According to Halpern, the principal question before the court was whether Whitehouse overstated the
charitable contribution deduction to which it was entitled for 1997 on account of its making a qualified
conservation contribution of servitude to a nonprofit historical organization, which is a qualified
organization. The servitude was a conservation restriction related to the building facade.
The partnership contended that—under a cost comparable sales, and modified income approach—it was
entitled to a $7.445 million charitable contribution deduction. The Internal Revenue Service argued that
Whitehouse was only entitled to a $1.15 million deduction. The court also found that Whitehouse had
failed to prove that, in addition to obtaining the necessary appraisal , it made a good faith investigation
into the value of the servitude. Therefore, it failed to satisfy the prerequisite for the reasonable cause
Appraisal Standards Board Addresses USPAP Intricacies in October’s Q&A
Adequacy of workfile documentation, USPAP applicability in valuation for financial reporting, and
assignments involving analysis of leases were the main topics addressed by the Appraisal Standards
Board’s October Uniform Standards of Professional Appraisal Practice Q&A.
27 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
In one guidance, the ASB stated that if using Multiple List Service and other data sources to develop
conclusions regarding neighborhood value ranges and market trends, it is not necessary to include copies
of the research documents in the workfile. The ASB said that references to the location of the
documentation used to support an appraiser’s analyses, opinions, and conclusions are adequate. The
Record Keeping section of the Ethics Rule state the the workfile must include: “all other data, information,
and documentation necessary to support the appraiser’s opinions and conclusions to show compliance
with this Rule and all other applicable Standards, or references to the location(s) of such other
The ASB also advised that USPAP is applicable when performing valuations of business interests and
assets for financial reporting purposes in accordance with Financial Accounting Standards Board
standards. Regardless of the intended use of the work performed, when represented as an appraiser,
compliance with USPAP is required, the ASB ruled. There is no obligation for non-appraisers to comply
with USPAP, they said.
The ASB also said that when completing assignments involving electronic lease-by-lease analysis files
and conclusions of market value, the service should comply with USPAP as it is an appraisal. In order to
be in compliance with USPAP, the appraiser must observe the development and reporting requirements
applicable to a real property appraisal (Standards 1 and 2). USPAP prescribes the minimum content
requirements for three property appraisal reporting options: Self-Contained Appraisal Report, Summary
Appraisal Report, and Restricted Use Appraisal Report. The communication of the appraisal results
solely through the delivery of an electronic lease-by-lease analysis file does not satisfy the reporting
requirements of USPAP.
For the full Q&A, visit
Falling House Prices Increase Affordability, Lower Inventory
With home prices continuing to fall, home affordability rates have increased. Affordability for median-
priced new homes is at its highest level since June 2003 while affordability for median-priced existing
homes is at its highest level since February 1998. New home prices remained weak with median new
home prices at $218,400, the lowest median price recorded since September 2004. September new
home sales increased 2.7 percent to a seasonally adjusted annual pace of 464,000 units. New home
inventory declined to 396,000 units, its lowest level since June 2004.
Annualized sales of total existing homes in September increased from its August level of 5.180 million
units by 5.5 percent, its highest level since August 2007 and a 1.4 percent increase from September
2007. Median existing home prices declined to $191,600 in September, the lowest since August 2004.
Inventory figures continued to improve as the number of existing homes for sale fell to 4.266 million units.
As reported in the Primary Mortgage Market Survey, national average mortgage rates increased to 6.46
percent. In the week ending October 29, the MBA’s seasonally adjusted Purchase Index increased from
279.3 to 303.1.
S&P Case-Shiller Report: Home Prices Continue to Decrease
28 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Prices of existing single-family homes show continued declines across the United States according to the
August 2008 S&P Case-Shiller Home Price Index. The report shows record annual declines in both the
10-City and 20-City Composite Home Price Indices of 17.7 percent and 16.6 percent, respectively. Of the
20 regions, nine are reporting annual declines. Both Miami and Tampa are reporting losses of 28.1
percent and 18.1 percent, respectively. The three California markets are down more than 25 percent from
values reported a year ago. Moreover, Las Vegas is reporting an annual return of -30.6 percent and
Phoenix is reporting an annual return of -30.7 percent. From the latest month’s figures, San Francisco’s
return of -3.5 percent was the largest monthly decline.
“The downturn in residential real estate prices continued, with very few bright spots in the data. David M.
Blitzer, Chairman of the Index Committee at Standard & Poor’s, noted. “The 10-City Composite and the
20-City Composite reported record 12-month declines. Furthermore, for the fifth straight month, every
region reported negative annual returns. This started when Charlotte, North Carolina, was the last region
to turn negative back in April 2008. Both the 10-City and 20-City Composites have been in year-over-year
decline for 20 consecutive months. Of the 20 regions, 13 of them had their annual returns worsen from
last month’s report.”
There was some good news in the report with Boston posting a 0.1 percent return in home prices from
July to August and Cleveland posting a 1.1 percent return. Moreover, Boston has been showing positive
monthly returns for the past five months. However, it is Dallas and Charlotte that showed the best
performance year-over-year, with Dallas down 2.7 percent over the year and Charlotte down 2.8 percent
from August 2007 levels.
To view Standard & Poor’s October 2008 Residential Real Estate Indicators, visit
IREM Reports Offered at Discount to AI Members
As a benefit to members, the Appraisal Institute is offering the Institute of Real Estate Management
Income/Expense Analysis Reports at a 20 percent discount. The yearly reports include income and
expense data for properties throughout the U.S. and Canada and cover five property types. The
Income/Expense Analysis® books are available in both print and electronic formats, and the
Income/Expense Metropolitan Area Reports, which cover specific metropolitan areas, are available in
electronic format only.
For more information, visit www.appraisalinstitute.org./membership/benefits.aspx.
New Highest and Best Use Course Premieres in December; $50 off Before
The essential relationships between market analysis, highest and best use, the three approaches to
value, and the final value opinion are among the topics of the new General Appraiser Market Analysis &
Highest and Best Use course. Debuting December 1-4 in Chicago, the course, led by instructors Richard
L. Parli, MAI, and David C. Lennhoff, MAI, SRA, analyzes the skills needed to develop thorough market
analysis for retail, office and residential properties.
General Appraiser Market Analysis & Highest and Best Use is approved for 30 continuing education
hours (28 classroom plus two-hour exam). Prerequisites are Basic Appraisal Principles and Basic
29 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Appraisal Procedures. Furthermore, General Appraisal Income Approach/Part 1 is recommended. Cost is
$450 for designated members, $525 for members, and $650 for non-members. Early bird registrants who
sign up before November 17 save $50 from those prices. For more information and to register, visit
call the Chicago Chapter at 312-616-9400.
Appraisal Institute Offers Rates and Ratios Seminar Online
The Appraisal Institute’s Rates and Ratios: Making Sense of GIMs, OARs, and DCFs seminar is now
available in an online format. The seminar explores how various rates and ratios used in the income
capitalization approach relate to each other and the effect that their relationships may have on the
selection and interpretation of data from comparable sales. Through five modules, Rates and Ratios:
Making Sense of GIMs, OARs, and DCFs emphasizes key relationships among models, ranging from
gross income multipliers to discounted cash flow models, which have important implications for how
differences in rates and multipliers are interpreted.
Led by instructor Kenneth M. Lusht, PhD, MAI, SRA, this online seminar teaches participants to produce
more consistent and defensible reports, understand differences in the various levels of rates and ratios,
and recognize how relationships between rates affect selection and interpretation of data from
Registration fee is $114 for members, $137 for non-members, and is approved for seven hours of
Appraisal Institute continuing education credit.
For more information and to register, visit
30 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Inside the Institute
Lucco Receives Appraisal Institute’s Bert L. Thornton President’s Award
Frank J. Lucco, SRA was recently awarded the Bert L. Thornton President’s Award by the Appraisal
Institute. The award honors an Appraisal Institute member who is: committed to the organization, active
and engaged in its activities, an effective spokesperson for the organization, and in touch with the needs
of its members and the changes the organization must make to help its members.
“The award means the world to me. Not only because it was presented to me by President Pugh, one of
my closest friends and colleagues, but because I was chosen over many who have made great
contributions to the organization,” Lucco said.
Of the 30 years that Lucco has been serving the Appraisal Institute locally, regionally and nationally, he
said, “I have enjoyed the daily challenges that require initiative and creativity.” In 2000, he was president
of the Houston Chapter. In that same year, he and three colleagues worked on a white paper for the AI
that predicted many of the events impacting the residential real estate appraisal industry today. Currently,
he serves as vice chair of strategic planning and chair of long-range planning for the Appraisal Institute.
Lucco is the managing director of IRR-Residential Appraisers & Consultants with offices in Houston,
Austin and San Antonio. For the last 12 years, he has focused on residential consulting, forensic reviews
and litigation support. Lucco is regularly featured on radio and television programs as an expert resource
on issues concerning the housing market and valuation. He has been appraising residential properties in
Texas since graduating from the University of Houston in 1978.
Appraisal Institute Board Votes Down NAR Affiliation
In a November 6 vote, the Appraisal Institute Board of Directors voted not to pursue affiliation with the
National Association of Realtors. The vote, which occurred during the Board’s fall meeting in San Antonio,
Texas, follows year-long meetings between the organizations during which possible terms and conditions
were discussed. In the end, though, the two organizations could not come to agreement on how best to
Over the past year, at the direction of the Board of Directors, an Appraisal Institute project team met
many times with a project team from NAR to discuss the issues involved with affiliation, to identify the
potential terms and conditions, and to determine the potential advantages and disadvantages. Also at the
direction of the Board, members of the Appraisal Institute’s Executive Committee engaged in discussion
and negotiation with NAR leadership. According to Appraisal Institute President R. Wayne Pugh, MAI, the
Board considered the proposed terms and conditions of affiliation with NAR that resulted from these
discussions and negotiations and determined that based on all the information presented, it is in the best
interest of the Appraisal Institute for the Appraisal Institute and NAR to remain as separate, unaffiliated
“We wish NAR well and will look forward to cooperating (with them) on issues of common interest in the
future,” Pugh said.
31 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
In a November 7 letter to the membership, Pugh thanked NAR and its President Dick Gaylord for
“reaching out to the Appraisal Institute to explore affiliation.” He also thanked the Appraisal Institute
membership for their “input and support” during the process.
32 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
ECONOMIC INDICATORS – October 2008
Market Rates and Bond Yields
Oct08 Apr08 Oct07 Apr07 Oct06 Oct05
Reserve Bank Discount 1.81 2.49 5.24 6.25 6.25 4.75
Prime Rate 4.56 5.24 7.74 8.25 8.25 6.75
Federal Funds Rate 0.97 2.28 4.76 5.25 5.25 3.78
3-Month T Bills 0.67 1.29 3.90 4.87 4.92 3.71
6-Month T Bills 1.20 1.55 4.01 4.86 4.92 3.99
3-Month CD 4.32 2.85 5.08 5.31 5.33 4.13
LIBOR-3 month rate 5.31 3.03 5.15 5.34 5.36 4.13
5-Year Bond 2.73 2.84 4.20 4.59 4.69 4.33
10-Year Bond 3.81 3.68 4.53 4.69 4.73 4.46
30-Year Bond* 4.17 4.44 4.77 4.87 4.85 4.74
Municipal Tax Exempts Aaa 5.15 4.49 4.20 3.99 3.91 4.49
Municipal Tax Exempts A 5.89 4.91 4.41 4.30 4.39 4.63
Corporate Bonds Aaa 6.28 5.55 5.66 5.47 5.51 5.34
Corporate Bonds A 7.58 6.30 6.13 5.99 5.94 5.75
Corporate Bonds Baa 8.88 6.97 6.48 6.39 6.42 6.29
Stock Dividend Yields
Common Stocks—500 2.83 2.09 1.84 1.84 1.83 1.90
Industrial Production Index** 107.3** 111.2** 114.0** 113.0** 112.0** 108.3**
Unemployment (seasonally adjusted) 6.5 5.0 4.7 4.5 4.4 5.0
Monetary Aggregates (seasonally adjusted)
M1, $ Billions 1,473.1 1,367.7 1,370.3 1,376.9 1,369.1 1,357.8
M2, $ Billions 7,878.9 7,676.7 7,395.6 7,218.9 6,939.3 6,619.2
Member Bank Borrowed Reserves
$ Billions n/a n/a 0.254 0.079 0.229 0.284
Consumer Price Index
All Urban Consumers 216.6 214.8 208.9 206.7 201.8 199.2
Per Capita Income
3Q08 2Q08 3Q07 2Q07 3Q06 2Q06 3Q05
Per Capita Personal
Disposable Income 35,152 35,579 33,820 33,441 32,380 32,038 30,557
Annual Rate in Current $s
Savings as % of DPI(††) 1.3 2.7 0.5 0.3 0.5 0.6 -0.7
*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-
** 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.
33 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008
Conventional Home Mortgage Terms
Oct08 Apr08 Oct07 Apr07 Oct06 Oct05
New Houses Loans—U.S. Averages
Interest rate 6.10 5.98 6.55 6.21 6.69 6.03
Term 29.3 28.9 29.4 29.5 29.7 29.4
Loan Ratio 75.2 76.4 78.6 76.3 75.7 75.1
Price 333.7 346.3 350.7 368.4 349.7 338.6
Used House Loans—U.S. Averages
Interest rate 6.23 6.03 6.56 6.34 6.60 6.03
Term 28.6 27.9 28.9 29.4 29.0 28.3
Loan Ratio 76.4 77.4 80.0 79.7 77.3 73.9
Price 283.9 303.5 280.0 285.6 293.5 297.8
Conventional Home Mortgage Rates by Metropolitan Area
3Q08 3Q07 3Q06 3Q05
Atlanta 6.44 6.73 6.77 5.84
Boston-Lawrence-NH-ME-CT# 6.12 6.65 6.55 5.61
Chicago-Gary-IN-WI# 6.45 6.78 6.60 5.73
Cleveland-Akron# 6.16 6.74 6.80 5.87
Dallas-Fort Worth# 6.47 6.78 6.78 5.82
Denver-Boulder-Greely# 6.46 6.74 6.83 5.73
Detroit-Ann Arbor-Flint# 6.36 6.79 6.79 5.75
Houston-Galveston-Brazoria# 6.48 6.84 6.92 5.86
Indianapolis 6.57 6.82 7.00 6.18
Kansas City, MO-KS 6.18 6.50 6.46 5.66
Los Angeles-Riverside# 6.48 6.72 6.79 5.60
Miami-Fort Lauderdale# 6.53 6.86 7.06 5.93
Milwaukee-Racine# 6.47 6.76 6.61 5.73
Minneapolis-St. Paul-WI 6.37 6.65 6.66 5.63
New York-Long Island-N. NJ-CT# 6.30 6.66 6.71 5.73
Philadelphia-Wilmington-NJ# 6.27 6.73 6.86 6.06
Phoenix-Mesa 6.56 6.79 6.81 5.85
Pittsburgh 6.15 6.57 6.56 6.01
Portland-Salem# 6.39 6.71 6.63 5.75
St. Louis-IL 6.58 6.88 6.78 5.57
San Diego 6.40 6.68 6.65 5.58
San Francisco-Oakland-San Jose# 6.48 6.77 6.72 5.68
Seattle-Tacoma-Bremerton 6.28 6.72 6.72 5.87
Tampa-St. Petersburg-Clearwater 6.50 6.87 6.95 5.91
Washington, DC-Baltimore-VA# 6.37 6.83 6.85 6.01
* 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
^ The Fed stopped releasing this figure in 2008
34 | Appraiser News Online Vol. 9, No. 21 & 22, November 2008