Appraiser News Online
Vol. 12, No. 1/2, January 2011
SEC Adopts Rules for Asset-Backed Securities, Repurchases [Posted Jan. 26, 2011]
Volcker Approves of ‘Volcker Rule’ Implementation Plan [Posted Jan. 26, 2011]
Three Banks Fail So Far This Year; 2011 Total Could Reach 150 [Posted Jan. 19, 2011]
Appraisal Groups Denounce Proposed Extension of ‘Fiduciary Status’ to Appraisers [Posted Jan. 12,
Appraisal-Related Mortgage Fraud Remains at 6 Percent [Posted Jan. 12, 2011]
SEC Proposes Additional Reporting on Asset-Backed Securities [Posted Jan. 12, 2011]
Consumer Protection Bureau, State Banks Team up to Monitor Financial Rules [Posted Jan. 12, 2011]
SBA Unveils New Website, Programs for Underserved Communities [Posted Jan. 5, 2011]
White House Starts Monitoring TARP Recipients [Posted Jan. 5, 2011]
FHA to Require Individual Appraisal of Units within Larger Project [Posted Jan. 26, 2011]
HUD Weighs Extending ‘Flip Rule’ Suspension [Posted Jan. 26, 2011]
FHFA Takes Steps to Curb Reckless Lending, Thwart Foreclosures [Posted Jan. 26, 2011]
FHA Volume Falls 20 Percent in 2010 [Posted Jan. 26, 2011]
Fannie Mae Predicts 2012 Housing Recovery [Posted Jan. 26, 2011]
Treasury Department’s Silence on GSEs Indicates Lack of Plan, Analysts Say [Posted Jan. 19, 2011]
Bernanke: Housing Can't Recover before Fannie, Freddie Addressed [Posted Jan. 19, 2011]
Ginnie Mae MBS Issuance Dips in December, Down 12 Percent for Year [Posted Jan. 19, 2011]
CBO Weighs Three Options for Future of Fannie Mae, Freddie Mac [Posted Jan. 12, 2011]
Five Largest Lenders May Be First to Settle AG Foreclosure Probe [Posted Jan. 12, 2011]
Fannie, Freddie Recover $3.3 Billion from Bank of America, Ally in Repurchase Settlement [Posted
Jan. 5, 2011]
Inside the States
Delaware Transportation Department under Scrutiny Again [Posted Jan. 19, 2011]
Toxic Mortgage Lawsuit against Bank of America Chugs Along [Posted Jan. 12, 2011]
Massachusetts Court Rejects Wells Fargo, U.S. Bank Claim in Foreclosure Case [Posted Jan. 12,
Nebraska Clarifies Licensing Requirements for Out-of-State Appraisers [Posted Jan. 5, 2011]
Colorado Conservation Easement Rules Now Require Valid Appraisal License [Posted Jan. 5, 2011]
Around the Industry
International Standards Council Addresses Discounted Cash Flow [Posted Jan. 26, 2011]
Faulty Default Notices May Derail Foreclosure Proceedings [Posted Jan. 26, 2011]
Ally Financial Resubmits Some Foreclosures [Posted Jan. 26, 2011]
‘Shadow Inventory’ May Soon Overshadow Housing Hopes [Posted Jan. 26, 2011]
November Home Prices Fall in S&P/Case-Shiller, Stabilize in FHFA [Posted Jan. 26, 2011]
Existing Home Sales Rise Sharply in December: NAR [Posted Jan. 26, 2011]
New Home Sales Jump in December: Commerce [Posted Jan. 26, 2011]
550 W. Van Buren St., Suite 1000, Chicago, IL 60607 | T 312-335-4100 F 312-335-4400 | www.appraisalinstitute.org
Mortgage Rates a Mixed Bag Week of Jan. 20 [Posted Jan. 26, 2011]
Refinance, Purchase Activity Hit Low Levels: MBA [Posted Jan. 26, 2011]
Homebuying Cheaper than Renting in 72 Percent of Cities: Trulia [Posted Jan. 26, 2011]
CRE Fundamentals Show Moderate Improvement: Moody’s [Posted Jan. 26, 2011]
Moody’s: CRE Prices up for Third Straight Month [Posted Jan. 26, 2011]
CRE Values Show Stabilization for 2011: Integra Realty Resources [Posted Jan. 26, 2011]
CRE Construction Spending to Dip 2 Percent before Rebounding [Posted Jan. 26, 2011]
Increase in CRE Loan Modifications Almost Offset New Defaults [Posted Jan. 26, 2011]
CRE Collateral Debt Obligations Rise to 13.6 Percent in December [Posted Jan. 26, 2011]
Global Transactions Double in 2010: Jones Lang LaSalle [Posted Jan. 26, 2011]
Cap Rates, Defaults, Bifurcation to Face Investors in 2011: RCA [Posted Jan. 26, 2011]
Despite 4Q10 Occupancy Boost, Are Offices Becoming Obsolete? [Posted Jan. 26, 2011]
Appraisal Institute Launches ‘Green’ Valuation Program [Posted Jan. 26, 2011]
Thomas Kubert, MAI, Appointed to Nebraska Board [Posted Jan. 26, 2011]
Appraisal Demand Picks up in Fourth Quarter: Zelman [Posted Jan. 19, 2011]
Residential Real Estate Remains Weak, Commercial Mixed: Fed [Posted Jan. 19, 2011]
Foreclosures Drop in December, Remain up for 2010 [Posted Jan. 19, 2011]
Architecture Billings Index Jumps Again in December [Posted Jan. 19, 2011]
Builder Confidence Remains Unchanged for Second Straight Month: NAHB [Posted Jan. 19, 2011]
Housing Starts Dip in December; Completions and Permits Rise: Commerce [Posted Jan. 19, 2011]
Predictions for Housing Starts in 2011 Vary between 500,000 and 750,000 [Posted Jan. 19, 2011]
Home Prices Decrease for Fourth Month in November: CoreLogic [Posted Jan. 19, 2011]
Housing Prices to Hit Bottom in Spring, Rise in 2011: Freddie Mac [Posted Jan. 19, 2011]
AI Comments on USPAP Exposure Draft [Posted Jan. 19, 2011]
Mortgage Rates Down for Second Straight Week: Freddie Mac [Posted Jan. 19, 2011]
Homebuyer Sentiment Surveys Point to Smaller Homes, Open Spaces [Posted Jan. 19, 2011]
Global Bank Regulators Move to Shield Taxpayers from Failure [Posted Jan. 19, 2011]
Atlanta Deal Signals Signs of Life in Secondary CRE Market [Posted Jan. 19, 2011]
CoreLogic to Buy Australian Data Firm [Posted Jan. 19, 2011]
ING May Be Close to Selling Real Estate Division [Posted Jan. 19, 2011]
Appraisal Institute Releases E-books [Posted Jan. 19, 2011]
Appraisal Institute Unveils Appraisal Tips for Consumers [Posted Jan. 12, 2011]
Appraisal Foundation Seeks Candidates for Vacancies on Board of Trustees [Posted Jan. 12, 2011]
Appraisal Named in Top Six ‘Performing Industries’ for 2011 [Posted Jan. 12, 2011]
Insurer’s General Counsel Predicts Legal Problems for AMCs [Posted Jan. 12, 2011]
CMBS Market Heats up with $4 Billion in Pipeline [Posted Jan. 12, 2011]
REITs up 28 Percent in 2010; 4.5 Percent Increase Expected in 2011 [Posted Jan. 12, 2011]
California Realtors Say Servicers Holding up Short Sales [Posted Jan. 12, 2011]
Refinancings Rise in Third Quarter; Boom May Be Over [Posted Jan. 12, 2011]
MBA Weekly Mortgage Survey Shows Second Straight Slide in 30-Year Rate [Posted Jan. 12, 2011]
AI/ABA Telebriefing on Jan. 19: Interagency Appraisal and Evaluation Guidelines [Posted Jan. 12,
Jan. 28 Webinar to Address Loan Quality Initiative and Residential Collateral Data Delivery [Posted
Jan. 12, 2011]
Foreign Interest in U.S. Real Estate at 10-Year High: AFIRE [Posted Jan. 12, 2011]
Hotel Acquisitions Could Rise 25 Percent in 2011: Jones Lang Lasalle [Posted Jan. 12, 2011]
2 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Builder Magazine: Top 10 Least Recommended Residential Designs [Posted Jan. 12, 2011]
Oregon Group Lays out Top 10 Green Building Trends for 2011 [Posted Jan. 12, 2011]
Incentives-driven Home Energy Efficiency Programs Expanding: NHPC [Posted Jan. 12, 2011]
Office Rents up, Vacancies down in Fourth Quarter [Posted Jan. 12, 2011]
Apartment Sector to Continue Surge in 2011: Green Street [Posted Jan. 12, 2011]
Appraisers Found Guilty of Password, Data Sharing [Posted Jan. 12, 2011]
AI Urges Fed to Revise ‘Customary Fee’ Clause in Interim Rule [Posted Jan. 5, 2011]
Loan Modifications Decline, Foreclosures Spike in Third Quarter [Posted Jan. 5, 2011]
Economist Predictions: Housing, Jobs to Barely Improve in 2011, or 2012 [Posted Jan. 5, 2011]
Pending Home Sales Recovery Continues; 2011 Improvements Dependent on Job Market [Posted
Jan. 5, 2011]
New Home Sales Rebound in November [Posted Jan. 5, 2011]
November Construction Spending Rises: Commerce Department [Posted Jan. 5, 2011]
Fixed Rate Mortgages Remain at Historically Low Levels: Freddie Mac [Posted Jan. 5, 2011]
MBA Weekly Mortgage Survey Shows Increase in Applications after Christmas [Posted Jan. 5, 2011]
Single-family Home Prices Rise in October: Case-Shiller Study [Posted Jan. 5, 2011]
Home Prices Decline in October, Down by 4 Percent Year over Year: CoreLogic [Posted Jan. 5, 2011]
Basel to Address Liquidity Standards, Global Resolution Mechanisms in 2011 [Posted Jan. 5, 2011]
2010 Ends as Worst Year for Bank Failures Since 1992 [Posted Jan. 5, 2011]
FASB Interim Chair Moves into Top Spot [Posted Jan. 5, 2011]
Jan. 11 AI Webinar to Cover Use of Investor Surveys [Posted Jan. 5, 2011]
Two AI Green Courses to Premiere in January [Posted Jan. 5, 2011]
Inside the Institute
AI Media Coverage Potentially Seen by More than 2 Billion in 2010 [Posted Jan. 26, 2011]
AI in the News: AI Member Featured on Local Television News [Posted Jan. 26, 2011]
AI in the News: AI’s Consumer Tips Featured across the Country [Posted Jan. 19, 2011]
Appraisal Institute Refreshes Website for 2011 [Posted Jan. 12, 2011]
AI in the News: MAI Member’s article Featured in Distressed Assets Investor [Posted Jan. 12, 2011]
AI Recognizes ‘Volunteer of Distinction’ Honoree for January [Posted Jan. 12, 2011]
Nominations for 2012 AI Vice President Due Feb. 4 [Posted Jan. 5, 2011]
AI in the News: SRA Member Featured on PBS “Nightly Business Report” [Posted Jan. 5, 2011]
Appraisal Institute Rounds Out 2010 with 28 New Designees [Posted Jan. 5, 2011]
In Memoriam [Posted Jan. 5, 2011]
Economic Indicators – November 2010
3 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Government Update – Commercial/General
SEC Adopts Rules for Asset-Backed Securities, Repurchases
The Securities and Exchange Commission adopted a rule Jan. 20 that requires securities issuers to
review or have a third party review the assets underlying each security, checking to ensure the underlying
loans match the loans that are being described to investors, according to an SEC news release.
The results and conclusions of the review would have to be made public, The Wall Street Journal
In addition, the SEC adopted a rule requiring issuers to report and disclose requests from lenders to
repurchase loans starting in February 2012, giving investors another tool to evaluate securities. Issuers
would have to disclose repurchases dating back three years before an initial SEC filing. SEC Chairman
Mary Schapiro addressed concerns that information would not be available, calling for "relief for issuers
who cannot obtain the information," the Journal reported.
Third, the SEC approved rules requiring rating agencies to provide information about the representations
issuers make about a security.
The rules, first proposed in October, are designed to protect investors by giving them more information
about asset-backed securities. They were approved unanimously, according to the Journal.
For the full rules, visit www.sec.gov/news/press/2011/2011-18.htm.
Volcker Approves of ‘Volcker Rule’ Implementation Plan
The Financial Stability Oversight Council’s Jan. 18 guidelines for implementing the section of the Dodd-
Frank Act known as the “Volcker Rule” has received support from the rule’s namesake: former Federal
Reserve Chairman Paul Volcker, according to The Wall Street Journal.
The so-called Volcker Rule prohibits banks benefiting from Federal Deposit Insurance on customer
deposits from participating in proprietary trading and from investing in or sponsoring hedge funds and
private equity funds with some exceptions.
The FSOC is a panel formed by the passage of the Dodd-Frank Act. Chaired by the Secretary of the
Treasury, it is comprised of the federal financial regulators, an insurance expert appointed by the
President, and state regulators.
The Jan. 18 study outlines 10 recommendations for implementation of the Volcker Rule. Among those are
a requirement for supervisory review of banking entities’ trading activities to ensure they are permitted; a
prohibition against banks investing in or sponsoring hedge or private equity funds except to a trust,
fiduciary or investment advisory customer; and a prohibition against banks bailing out hedge or private
In Feb. 2, 2010, testimony before the Senate Banking Committee, Volcker said, “What we can do, what
we should do, is recognize that curbing the proprietary interests of commercial banks is in the interest of
fair and open competition as well as protecting the provision of essential financial services.”
4 | Appraiser News Online Vol. 12, No. 1/2, January 2011
According to the Journal, Volcker called the new study recommendations “an appropriate approach,” and
praised the suggestions that bank CEOs and boards maintain a close watch on enforcement of the
Under the Volcker Rule, banking entities will still be able to engage in activities similar to proprietary
trading. For example, they can engage in market making, hedging, and underwriting on behalf of
Study authors clearly indicated, however, that these “permitted activities are subject to a prudential
‘backstop’ that prohibits such activity if it would result in material conflicts of interest, material exposure to
high-risk assets or high-risk trading strategies, a threat to the safety and soundness of the banking entity,
or a threat to the financial stability of the United States.”
Three Banks Fail So Far This Year; 2011 Total Could Reach 150
Regulators have announced the first three bank casualties of 2011, shutting down banks in Florida,
Arizona and Georgia. Former Federal Deposit Insurance Corporation executive Christie Sciacca told
Bank Info Security Jan. 14 that he expects between 125 and 150 banks to fail in 2011.
The first two banks of 2011 to close were First Commercial Bank of Florida and Legacy Bank of
Scottsdale, Ariz., both of which were shuttered Jan. 7.
First Commercial Bank of Florida had about $598.5 million in total assets and $529.6 million in total
deposits as of Sept. 30, according to the FDIC. Boca Raton, Fla.-based First Southern Bank will assume
all of First Commercial’s deposits, The Wall Street Journal reported Jan. 10. The bank’s failure is
expected to cost the FDIC about $78 million, according to Yahoo Finance. First Commercial was the
second-largest bank headquartered in Orlando as ranked by deposits and the 13 largest bank in Central
Florida overall, the Orlando (Fla.) Sentinel reported Jan. 8.
Legacy Bank had two branches, $150.6 million in total assets and $125.9 million in total deposits as of
Sept. 30, according to the Journal. St. Louis-based Enterprise Bank & Trust has agreed to assume the
assets and deposits of Legacy Bank. The bank closing will cost the FDIC about $27.9 million, according
to Yahoo Finance.
Oglethorpe Bank was closed down Jan. 14 by the Georgia Department of Banking and Finance,
according to Mortgage Daily. It owned $70 million in residential loans, $50 million in commercial mortgage
holdings and $29 million in construction-and-land-development assets. Bank of the Ozarks will assume
the assets and deposits of the failed bank. Oglethorpe will cost the FDIC $80 million, according to
The FDIC reported 181 bank failures in 2010, 140 in 2009 and just 25 in 2008, according to Yahoo
Finance. Sciacca, a director with global economic advisory firm LECG who spent 13 years at the FDIC
overseeing bank rescue projects, said that signs suggest the United States is recovering from the three-
year recession, pointing to increased consumer spending and an improving employment rate as
5 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Appraisal Groups Denounce Proposed Extension of ‘Fiduciary Status’ to
The Department of Labor’s proposal to extend fiduciary status to real estate appraisers would needlessly
increase costs on users of appraisal services and drive highly qualified appraisers from performing
appraisals where they are sorely needed, according to an Appraisal Institute Jan. 5 letter to the
The comments were made in response to a proposed rule issued Oct. 28 by the Department of Labor that
would make wholesale revisions to regulations of the Employee Retirement Income Security Act and the
Internal Revenue Service and the definition of “fiduciary.” The proposal will affect whether appraisers and
many other industries, who work with pension and 401(k) plans and IRAs will be deemed to be fiduciary
AI was joined by the American Society of Farm Managers and Rural Appraisers in expressing serious
concerns with the proposal. In the letter, the appraisal organizations implicitly asked Labor to “suspend
the effort to extend fiduciary status to real estate appraisers given that they do not provide ‘investment
advice,’ and in light of the many enforcement outlets that protect the appraisal profession and users of
The groups wrote that “offering investment advice is vastly different than providing objective opinions of
value” in that one who offers investment advice is “acting as an advocate for their client.” They also wrote
that a fiduciary is someone who advocates at all times for their clients.
The groups pointed out that under the Uniform Standards of Professional Appraisal Practice, it is
prohibited for appraisers to accept contingent fees; that under the Ethics Rule of USPAP, an appraiser
“must not advocate the cause or interest of any party or issue”; and that USPAP does not permit an
appraiser to accept an assignment if the appraiser would be biased.
“Given conditions facing the real estate market and the economy as a whole, arming investors with
competently prepared and unbiased real estate information is of critical importance and central to the
economic recovery,” the organizations stated.
As an alternative to the department’s proposal, the appraisal organizations offered to assist them with
oversight and enforcement through training, education, appraisal reviews and expert witness testimony.
For the department’s proposal, visit
For the AI’s full letter, visit http://appraisalinstitute.org/newsadvocacy/letrs_tstimny.aspx#Comments.
Appraisal-Related Mortgage Fraud Remains at 6 Percent
Mortgage loan fraud accounted for about 9 percent of all suspicious activity reports from banks and thrifts
in the third quarter of 2010, the same percentage as the third quarter of 2009, the Treasury Department’s
Financial Crimes Enforcement Network reported Jan. 6. Of those, 6 percent were appraisal-related, also
the same year-over-year.
6 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Borrowers were identified in more than half (52 percent) of the 16,693 third quarter mortgage-related
SARs, followed by brokers being identified in 9 percent, appraisers in 6 percent and customers in 5
percent. Other subjects – including employees, agents and attorneys – were each identified in less than 1
percent of the filings.
Filers are also able to indicate “other” activity characterizations in conjunction with mortgage loan fraud,
which they did 2 percent of the time from Oct. 1, 2009, through Sept. 30, 2010 – which constitutes fiscal
year 2010. On those 2,480 filings, appraisal fraud was listed in 1 percent of instances.
California had the highest number of mortgage-related SAR filings in the third quarter, with 7,176,
followed by Florida (5,404), New York (1,812) and Illinois (1,751). Based on filings per capita, Florida was
the highest, followed by California, Nevada and Arizona.
More than 80 percent of mortgage loan fraud SARs involved suspicious activity amounts that are less
than $500,000. Of those SARs that indicated a loss amount, nearly all indicated losses of less than
$500,000. However, 75 percent of mortgage loan SARs did not indicate loss amounts.
FinCEN's third quarter 2010 Mortgage Loan Fraud update is available at
As reported in the Dec. 22 Appraiser News Online, FinCEN released its first and second quarter 2010
findings on Dec. 14. To view FinCEN’s first quarter suspicious activity report, visit
www.fincen.gov/news_room/rp/files/MLF_Update_1st_Qtly_10_FINAL.pdf. The second quarter report is
available at www.fincen.gov/news_room/rp/files/MLF_Update_2nd_Qtly_10_FINAL.pdf.
SEC Proposes Additional Reporting on Asset-Backed Securities
The Securities and Exchange Commission proposed rules Jan. 6 that would require all asset-backed
issuers to file reports with the agency for the life of the security, according to The Wall Street Journal.
Previously, securities held by fewer than 300 people were only due the year in which they were
The Dodd-Frank financial-regulation law that passed in July eliminated that reporting relief. The law also
directs the SEC to draft new rules permitting the suspension of reporting requirements, according to the
The SEC’s Jan. 6 proposal would allow the suspension of the requirements in very limited circumstances.
Asset-backed issuers would only be provided with a suspension of ongoing reporting when there are no
longer any securities held by non-affiliates of the depositor that were sold in registered transactions.
In response to concerns raised by the American Securitization Forum, the SEC issued a Jan. 6 letter
stating that existing asset- backed deals would essentially be treated under the old rules.
The proposed rule is available at www.sec.gov/rules/proposed/2011/34-63652.pdf. The SEC is accepting
comment through February 7.
7 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Consumer Protection Bureau, State Banks Team up to Monitor Financial
The Consumer Financial Protection Bureau is teaming up with the Conference of State Bank Supervisors
to promote cooperation at the federal and state levels in supervising providers of consumer financial
products and services, including home mortgages, the groups announced Jan. 4.
Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act last year, the CFPB is
currently part of the U.S. Department of Treasury and is the only federal agency charged with the sole
task of protecting consumers in their interaction with financial service providers.
This latest partnership, established by a memorandum of understanding, will help the new agency
cooperate with state legislators in the enforcement of federal and state consumer protection laws and will
also help promote greater transparency in lending practices among both banks and non-bank lenders.
“The new consumer financial agency and the state banking regulators are forging an alliance to protect
American families,” Elizabeth Warren, special advisor on the CFPB, said in a U.S. Treasury news release.
“This agreement allows us to bring thousands of financial service providers out of the shadows and to
begin the process of ensuring that lenders comply with the same basic rules.”
SBA Unveils New Website, Programs for Underserved Communities
The U.S. Small Business Administration’s newly re-designed website, unveiled Dec. 21, features new
content, small business search, improved navigation, integration of www.business.gov content, interactive
location-based maps, user-rated content and a dynamic new web tool called SBA Direct.
Located at www.sba.gov, SBA Direct allows website visitors to personalize their browsing experience
according to their business type, geography and needs and then delivers targeted information based on
the user’s personalization. SBA Direct also provides information on SBA programs that can help
businesses succeed, such as financial assistance, exporting and government contracting opportunities,
counseling and training.
In other news, the SBA announced two new loan initiatives Dec. 15: Small Loan Advantage and
Community Advantage. They are aimed at increasing the number of lower-dollar SBA 7(a) loans going to
small businesses and entrepreneurs in underserved communities.
Small Loan Advantage and Community Advantage will offer a streamlined application process for SBA-
guaranteed 7(a) loans up to $250,000. These loans will come with the regular 7(a) government
guarantee, 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000. Small
Loan Advantage will be available to the 630 financial institutions across the country in the agency’s
Preferred Lender Program.
Community Advantage will expand the points of access small business owners have for getting loans by
opening the SBA’s 7(a) loan program to “mission-focused” financial institutions, including community
development financial institutions, certified development companies and non-profit micro lending
intermediaries. Community Advantage will leverage the experience these institutions already have in
lending to minority, women-owned and start-up companies in economically challenged markets, along
with their management and technical assistance expertise, the SBA said.
8 | Appraiser News Online Vol. 12, No. 1/2, January 2011
The two new loan initiatives will be implemented by March 15, and the agency will end its existing
Community Express pilot loan program on April 30, according to an SBA news release.
White House Starts Monitoring TARP Recipients
Citing Treasury Department officials, The Washington Post reported Dec. 28 that the Obama
administration is examining the board meetings of nearly 20 banks that received emergency taxpayer
assistance but repeatedly failed to pay the required dividends. The administration may soon install
directors on some of their boards, the Post reported.
The efforts are in response to the fact that 132 banks in the program – one of five – failed to make at least
one dividend payment to the government in the fourth quarter. Of those, 19 have missed six or more
dividend payments, up from seven during the third quarter. These "deadbeats," as they are sometimes
called, are virtually all community lenders and collectively received billions of dollars in taxpayer
assistance, according to the Post.
In addition to the 132 deadbeat banks, seven others have closed, resulting in the total loss of the
government's investment, according to the Post’s story.
For the most part, the Troubled Assets Relief Program has been a source of good news recently. The
largest banks have paid back tens of billions of dollars in aid, with interest. And other developments, such
as the initial public offering of General Motors, have further bolstered TARP's return, the Post reported.
The repayment and profits generated by aiding big banks will far overshadow any financial loss among
smaller firms, according to the Post. Still, issues with community banks indicate that the Treasury
Department did not properly determine which institutions received access to the financial rescue, analysts
told the Post.
9 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Government Update – Residential
FHA to Require Individual Appraisal of Units within Larger Project
Developers will no longer be able to complete a master appraisal report to cover multiple units in a
proposed subdivision. Instead, each individual unit will need its own appraisal for Federal Housing
Administration insured mortgages, according to FHA’s Jan.12 Mortgagee Letter.
The Mortgagee Letter retires forms HUD-91322, HUD-91322.1, HUD-91322.2 and HUD-91322.3, as well
as HUD Handbook 4115.3, Master Conditional Commitment Procedure.
“As economic instability continues to impact many segments of the economy and the housing market in
particular, the department has determined that it is in the best interest of the Insurance Fund to prohibit
the use of MARs and to require an appraisal be performed on each individual unit within a larger housing
project to determine the maximum mortgage amount of the property to be security for the mortgage,” the
According to the letter, lenders used master appraisal reports to cut costs and loan processing times, and
to ensure that similar units were being consistently valued. However, because master appraisal reports
used to be valid for one to two years, allowing lenders to cut costs and loan processing times, the FHA
cut the validity period to four months in 2009, largely removing the advantages of developing a master
To view the complete set of policy changes introduced by the FHA, visit
HUD Weighs Extending ‘Flip Rule’ Suspension
The Department of Housing and Urban Development may suspend for another year its “anti-flipping” rule,
American Banker reported Jan. 24. HUD suspended the rule – designed to prevent Federal Housing
Administration lenders from financing single-family properties that are resold within 90 days – last
February to help promote sales of foreclosed properties.
In 2009, real estate investors complained the anti-flipping rule was hampering them from renovating
foreclosed properties and then quickly reselling them, according to American Banker’s article. In a Jan. 14
news release, HUD secretary Shaun Donovan agreed, saying that the rule was hindering economic
recovery by shutting out first-time homebuyers who could not qualify for traditional financing out of the
With the rule temporarily suspended, first-time homebuyers can use FHA loans to purchase foreclosed
properties that have been purchased and “flipped” by investors in less time than that 90-day window.
But the suspension comes with some hard rules. For example, there can be no intersection of interest
between the buyer and seller of the property in question, nor are FHA loans admissible in cases where
the sales price of the property is more than 20 percent higher than the seller’s cost to acquire the
FHFA Takes Steps to Curb Reckless Lending, Thwart Foreclosures
10 | Appraiser News Online Vol. 12, No. 1/2, January 2011
The Federal Housing Finance Agency has directed Fannie Mae, Freddie Mac and the Department of
Housing and Urban Development to develop new alternatives for servicing mortgages on single-family
homes, the agency announced Jan. 18. A service model for the proposal is expected by summer 2012.
Edward J. DeMarco, acting director of FHFA, said the present servicing compensation model was not
designed to accommodate the current market conditions. The joint venture will explore alternative models
for single-family mortgage servicing compensation that better serve the needs of all those impacted, he
MBA NewsLink reported that Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan,
in a letter to FHFA, supported the project, calling the current system “broken.”
Critics say the “current system makes it more lucrative for a bank to foreclose than to find ways to modify
the loans,” The Washington Post reported Jan. 18.
FHFA recognizes the difficulty private firms and government programs will have in making modifications
to loans in order to keep homeowners in their homes. Thus, it is willing to consider many options for
determining how banks should manage the loans, according to the Post’s story.
Mortgage servicers profit from foreclosures. They collect payments on loans and pass some of the money
to the investors that own the mortgage. If loans are modified, as proposed by FHFA, payments to
servicers may decline – unless the borrower is in default. In that case, the servicer can actually add fees.
FHFA proposes reducing these fees to help cut the number of foreclosures, the Post reported.
The FHFA said it is also exploring a compensation structure where servicers would receive fees for
restructuring mortgages to avoid foreclosures.
In related news, the Treasury Department came out in support of the Dodd-Frank law’s specification that
banks be mandated to retain a portion of the investment, including the risks, according to the Post.
Under current regulations, banks are able to pool loans into an investment and sell it to investors around
FHA Volume Falls 20 Percent in 2010
Federal Housing Administration endorsements fell 20 percent in 2010 and are projected to fall further in
2011, according to a Jan. 20 Mortgage Daily report.
FHA endorsed 133,603 loans totaling $26.4 billion in December, according to Department of Housing and
Urban Development data, up from the previous month’s rate of 131,258 loans totaling $26.1 billion but
down from a year earlier when 179,155 loans totaling $32.5 billion were endorsed.
By category, December’s rate included 60,884 refinance transactions totaling $12.9 billion, 6,554 home-
equity conversions totaling $1.7 billion, 1,562 Section 203(k) loans, 6,389 condominium loans and 1,966
manufactured housing loans.
11 | Appraiser News Online Vol. 12, No. 1/2, January 2011
During 2010, FHA endorsed 1,624,836 mortgages totaling $302.3 billion, down from 2009, when they
endorsed 2,022,636 loans totaling $375.8 billion.
As of December 2009, mortgage insurance in force stood at 5,815,006 loans totaling $750.3 billion;
however, the numbers climbed to 6,745,827 loans totaling $921 billion in September and to 6,812,689
loans totaling $934.2 billion by December 2010.
During FHA's fiscal year 2011, which started Oct. 1, 2010, 390,044 loans have been endorsed totaling
$76.7 billion. However, applications in December fell to 112,500 from November’s total of 141,199, and
the rate is expected to continue to fall in January. By the end of the fiscal year in September 2011,
endorsements are projected to reach 1.5 million loans totaling $288.7 billion.
Meanwhile, outstanding FHA loans reached $1 trillion in 2010, and are projected to surpass the threshold
in 2011. The 90-day delinquency rate for FHA-endorsed loans climbed to 8.8 percent in December, up
from 8.7 percent in November but down from 9.5 percent a year ago.
Fannie Mae Predicts 2012 Housing Recovery
Fannie Mae released its January 2011 Economic Outlook Jan. 18 with predictions of slight growth this
year and more growth in 2012. The new forecast predicted an 18 percent increase in housing starts in
2011 and a five percent increase in home sales.
Fannie Mae’s Economics & Mortgage Market Analysis Group, which released the outlook report, does not
anticipate “a growth-oriented view” in the housing sector until 2012.
“The economy has regained momentum entering 2011 and we see significant improvement in the
economy’s ability to grow compared to 2010,” Fannie Mae Chief Economist Doug Duncan said in an
accompanying news release. “We expect a small rise in home sales this year, but significant amounts of
supply and shadow inventory of expected foreclosures will continue to hamper a robust housing picture
for some time.”
Fannie Mae said it revised its growth outlook higher based on “an improving backdrop during the past two
months,” noting, in particular, a jump in consumer spending.
Fannie Mae predicted the economy is situated to improve steadily and sustain “above-par growth” of 3.6
percent in 2011, compared with an estimated 2.8 percent in 2010.
In its January 2011 Economic Outlook, Fannie Mae cited a number of factors in the continued
improvement in the economy, including improving labor market conditions and consumer confidence. The
survey showed the amount of layoffs in December was the lowest since mid-2000; the Department of
Labor’s weekly initial unemployment claims have been decreasing since August 2010; and while
households pared down their spending during the recession, consumer spending increased slightly at the
end of 2010. For instance, automobile sales rose 29 percent in November and December.
According to the Fannie Mae report, the Bureau of Census Housing Vacancy Survey shows the number
of vacant homes for sale or rent is resting above its normal level as 2011 begins. In addition, a long
shadow inventory of homes is expected to reach the market this year. (See “’Shadow Inventory’ May
12 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Soon Overshadow Housing Hopes.”) Federal Open Market Committee members noted their concern at a
Dec. 14 meeting that the unusually large supply of homes on the market will support drops in prices.
For Fannie Mae’s full economic forecast, visit
For its housing forecast chart, visit:
Treasury Department’s Silence on GSEs Indicates Lack of Plan, Analysts
With the Treasury Department remaining silent on plans for Fannie Mae and Freddie Mac, analysts
believe the Obama administration lacks a concrete proposal for reforming the government-sponsored
enterprises and instead will provide guiding principles for reform, American Banker reported Jan. 14.
Despite the fact a plan was mandated by the Dodd-Frank Act, the Obama administration is unlikely to
offer more than a guiding philosophy of direction by its Jan. 31 deadline, and the Treasury almost
certainly will not release a plan before the President’s State of the Union address on Jan. 25, according to
American Banker’s article.
With Republicans now controlling the House, it’s unlikely the Obama administration would receive much
support for any restructuring plan it offered anyway, American Banker reported, noting that the White
House and the Treasury probably will offer some alternatives and then leave the rest to Congress.
The crux of the debate over GSE reform is how much support the housing market should receive from the
federal government, according to the American Banker article. Republicans would prefer to see Fannie
Mae and Freddie Mac abolished, while Democrats seek to maintain some form of government guarantee.
Analysts expect Treasury to discuss the possibility of establishing a government guarantee for mortgage-
backed securities as well, not unlike the guarantees offered by the Federal Deposit Insurance
Bernanke: Housing Can't Recover before Fannie, Freddie Addressed
Speaking at a Jan. 13 informal gathering of the Federal Deposit Insurance Corporation, Federal Reserve
Chairman Ben Bernanke said he does not anticipate the housing market to recover until the Obama
administration offers recommendations for the future operations of Fannie Mae and Freddie Mac,
according to HousingWire.com.
Bernanke said the nation must find a way to reduce the dominance of government-sponsored enterprise
in the financing of U.S. mortgages.
Rep. Michelle Bachmann, R-Minn., also expressed concerns about Fannie Mae and Freddie Mac in
introducing H.R. 87, which would repeal the Dodd–Frank Wall Street Reform and Consumer Protection
Act. Signed into law by President Obama on July 21, 2010, Dodd-Frank was designed to promote greater
transparency in the American financial system, end government bailouts of industry and to protect
consumers from unethical and abusive financial practices.
13 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Bachmann filed H.R. 87 Jan. 5. In a news release, she said the Dodd-Frank Act had “failed to address the
taxpayer-funded liabilities of Fannie Mae and Freddie Mac.” She contended that both GSEs “were a
leading cause of our economic recession.”
Co-sponsors of Bachmann’s bill include Reps. Darrell Issa, R-Calif., chair of the Committee on Oversight
and Government Reform; Todd Akin, R-Mo.; Tom McClintock, R-Calif.; and Bill Posey, R-Fla.
Ginnie Mae MBS Issuance Dips in December, Down 12 Percent for Year
Ginnie Mae guaranteed more than $33.5 billion in mortgage-backed securities in December, down from
$34.3 billion in November and $42.4 billion a year ago, according to a Jan. 11 news release from the
Ginnie Mae issued $399 billion in 2010, down from $454 billion in 2009, National Mortgage News
reported Jan. 14.
“Our issuance has been steady over the last few months, approximately $30 to $35 billion per month,”
Ginnie Mae President Ted Tozer said in the news release. “That represents a substantial percentage of
the secondary mortgage market. This sustained activity demonstrates that investors understand and
recognize the value of the Ginnie Mae MBS and the importance of the government guaranty.”
Issuance for Ginnie Mae II single-family pools totaled $18.46 billion in December, the same as November;
however, the issuance for Ginnie Mae I single-family pools dropped from November’s total of $13.88
billion to $12.28 billion, according to the company.
Meanwhile, issuance of mortgage-backed securities for home-equity conversion mortgages totaled $1.02
billion in December, up from $870 million in November, according Ginnie Mae data. Multifamily issuances
in December reached $1.74 billion, up from $1.2 billion the prior month.
CBO Weighs Three Options for Future of Fannie Mae, Freddie Mac
The Congressional Budget Office is examining three options for the future structure of Fannie Mae and
Freddie Mac, according to a Dec. 22 statement from CBO Director Douglas Elmendorf. Among them are
a hybrid public/private model, a fully public model and a fully private model.
The CBO’s “Fannie Mae, Freddie Mac, and the Federal Role in the Secondary Mortgage Market” study,
available at www.cbo.gov/ftpdocs/120xx/doc12032/12-23-FannieFreddie.pdf, defines the hybrid
public/private model as one in which the government would help ensure a steady supply of mortgage
financing by providing explicit guarantees on privately issued mortgages or mortgage-backed securities
that met certain qualifications. A fully public model would feature a wholly federal entity guaranteeing
qualifying mortgages or mortgage-backed securities, while a fully private model would have no special
federal backing for the secondary mortgage market, according to the CBO.
The alternatives involve different choices about whether the federal government should continue to
guarantee payment on certain types of mortgages or mortgage-backed securities and, if so, what the
scope, structure and pricing of those guarantees should be, Elmendorf wrote. The proposals also involve
14 | Appraiser News Online Vol. 12, No. 1/2, January 2011
choices about support for affordable housing and the competitive structure and regulation of the
The CBO’s analysis focuses primarily on the long-term strengths and weaknesses of the alternative
approaches, not on the transition from the status quo to a new model. Transitional issues – such as what
to do with the existing portfolios and obligations of Fannie Mae and Freddie Mac – are important by
themselves, but are largely separate from the questions about the long-term future of the secondary
mortgage market, Elmendorf wrote.
To view Elmendorf’s statement, visit http://cboblog.cbo.gov/?p=1739.
Five Largest Lenders May Be First to Settle AG Foreclosure Probe
The country’s five largest loan servicers may be the first to settle with the 50-state attorneys general
coalition that is investigating allegations of improper foreclosure paperwork practices, Bloomberg reported
While settlement agreements have not yet been reached, Iowa Attorney General Tom Miller said that the
coalition has had at least one face-to-face meeting with representatives from Bank of America, JPMorgan
Chase, Citigroup, Wells Fargo and Ally Financial, along with follow-up phone calls, according to
Although the group is not pursuing criminal investigations, it plans to reach individual settlements rather
than a global agreement with the servicers.
“What we’re looking at is five separate agreements with the five largest servicers,” Miller told Bloomberg.
“We’re still a ways away (from reaching agreements). We’re working very hard to figure out what should
be in the settlement.”
The problem of improper foreclosure processes came to light in early fall when banks, including Ally
Financial, Bank of America and JPMorgan Chase, halted foreclosures because of revelations about
shoddy mortgage documentation practices. They, along with other large mortgage servicers, have
admitted to “robo-signing” affidavits without checking the contents and failing to have required documents
Although the investigation has widened to include other mortgage practices, the collation is pushing for an
overhaul of the loan modification and foreclosure process, barring foreclosures when loan modifications
are being worked out and creating a general fund to compensate homeowners who wrongfully lost their
Paul Leonard, a director at the Center for Responsible Lending, said that the coalition “offers one of the
most promising avenues to increasing loan modification and servicer accountability that we have seen so
far,” Bloomberg reported.
Fannie, Freddie Recover $3.3 Billion from Bank of America, Ally in
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Ally Financial and Bank of America have agreed to pay more than $3.3 billion to Fannie Mae and Freddie
Mac in response to the government-sponsored enterprises’ buyback requests, according to a Jan. 3
announcement from the Federal Housing Finance Agency, which oversees the two GSEs.
The agreements “reflect FHFA's ongoing efforts to ensure the enterprises enforce claims for violations of
representations and warranties incurred by the enterprises or breaches of other legal obligations,” FHFA
Acting Director Edward J. DeMarco said in FHFA’s news release. “While these agreements are an
important step, the enterprises have other outstanding claims across a range of counterparties and they
are being pursued.”
Fannie Mae’s agreement with Bank of America calls for the bank to pay $1.52 billion to settle an unpaid
principal balance of $3.9 billion of residential mortgage loans delivered to Fannie Mae by affiliates of
Countrywide Financial Corporation, according to a Jan. 3 statement from Fannie Mae President and Chief
Executive Officer Michael J. Williams. The bank paid $1.34 billion on Dec. 31 and received credit for
payments recently made or to be made.
Fannie Mae’s agreement with Bank of America addresses approximately 44 percent of the $7.7 billion in
repurchase requests (measured by unpaid principal balance) the GSE had outstanding with all of its seller
servicers as of Sept. 30, according to Williams. For the full statement, visit
Bank of America also agreed to pay $1.28 billion to Freddie and set aside $3 billion for the fourth quarter
— enough to cover both the cost of the settlements and its remaining exposure to GSE losses, according
to a Jan. 4 American Banker story.
At the end of last year, Ally Financial Inc. agreed to pay $465.1 million to resolve all mortgage repurchase
liabilities with Fannie Mae, according to a Dec. 27 company news release. The auto and mortgage lender,
formerly known as GMAC, reached a similar deal with Freddie Mac in March.
Although the deals are a major step forward for Ally and Bank of America, none of the new agreements
address representations and warranties with regard to mortgage servicing or foreclosure processing,
according to the FHFA. Both banks have been under intense scrutiny from both federal and state
regulators in recent months after admitting to faulty paperwork and other errors related to foreclosure
affidavits filed with state courts.
Since falling under federal conservatorship in Sept. 2008, the GSEs have been more aggressive in
enforcing representation and warranty obligations of its mortgage lending and servicing partners. The
FHFA, which reviewed and approved the agreements with Bank of America and Ally Financial, noted that
several more outstanding claims are likely to be resolved in 2011, according to a Jan. 4 story from the
Bureau of National Affairs’ Banking Daily.
As of Sept. 30, Fannie Mae had a total of $7.7 billion of outstanding repurchase requests issued to
mortgage sellers and servicers, while Freddie had $5.6 billion in such requests, according to BNA’s
16 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Bose George, an analyst at Keefe, Bruyette & Woods, told American Banker that "now these agreements
are out there, there will be more." Chris Gamaitoni, an analyst at Compass Point Research and Trading
LLC, agreed. "It wouldn't surprise me if more settlements come down the road, and it would help from a
regulatory issue to show recoveries for losses," he told American Banker. He said he expects Bank of
America will be hit with another $5.5 billion in losses from Fannie, which would be above its current
Bank of America's statement on the settlement is available at:
www.bankofamerica.com/index.cfm?page=about by clicking on newsroom. The Ally statement is
available at http://media.ally.com/index.php?s=43&item=437. The FHFA statement can be found at
17 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Inside the States
Delaware Transportation Department under Scrutiny Again
A Jan. 11 report from Delaware Gov. Jack Markell’s office alleges that the state’s Department of
Transportation entered into land deals with roughly calculated, “back of the envelope” appraisals in lieu of
formal appraisals, The (Wilmington, Del.) News Journal reported. The report calls for appraisals to be
conducted, effective immediately.
The 53-page report concludes the transportation agency displayed incompetence, lack of good sense and
ignorance of real estate fundamentals when it struck three land deals related to the proposed U.S. 113
bypass, according to The News Journal’s story. The land deals led to millions of taxpayer dollars being
paid to developers not to build.
In one 2008 agreement, DelDOT promised to pay Patriots Landing LLC $50,000 a month not to build
homes on its 158-acre property on U.S. 113 in Millsboro. By Dec. 1, 2010, about $1.7 million had been
paid, the report said. The report calls for DelDOT to complete an appraisal of the Patriots Landing project,
according to The News Journal’s article.
The second deal, reached in May 2010, called for DelDOT to pay a group led by developer Preston
Schell $10,100 a month not to proceed with a housing community on 79 acres near Dagsboro. The
agreement was made through letters only and DelDOT did not insist the developer sign a contract, the
report stated. Through Dec. 1, $160,000 had been paid to the group. The report calls for DelDOT to reach
a formal, signed agreement for the project.
The third deal, reached in June 2007, involved a project in Georgetown that resulted in payments of
$25,000 a month, totaling $402,632. Although the agreement ended in October 2007, Thomas
McGonigle, Gov. Jack Markell’s chief of staff, expressed concerns about the timing of the payments for
the 19-acre project. DelDOT "made an offer to Village Developers just four days before announcing that
the department was no longer going to need the property," the report stated.
Besides personnel changes, the report lists other recommendations for improving so-called land
reservation agreements, including: independent appraisals, a review of financial controls, more detailed
reviews by the Advanced Acquisition Committee and a review of all agreements by legal counsel, The
News Journal reported.
This marks at least the second time in three months that the DelDOT has come under scrutiny for land
deals involving, or not involving, appraisals. As reported in the Nov. 24 Appraiser News Online, the
Federal Highway Administration ordered DelDOT to revamp its real estate transaction procedures to
ensure transparency and prevent the misuse of federal funds. As a result, DelDOT hired an independent
appraiser to determine fair market value both before and after improvements were made to the properties
Toxic Mortgage Lawsuit against Bank of America Chugs Along
A mortgage lawsuit against Bank of America likely will proceed on schedule after the New York State
Supreme Court ruled that MBIA Insurance can pursue its case by relying on a statistical sampling of
6,000 disputed loans, according to a Jan. 1 story in The Washington Post.
18 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Bank of America had tried to require MBIA to individually evaluate the files of 368,000 disputed loans. To
do so would have required MBIA to spend four years and $75 million, delaying the case for years,
according to the Post.
Like many lenders who issued hundreds of thousands of mortgages during the real estate boom and then
sold the loans to investors, Bank of America is facing demands over transactions involving “money-back
guarantees.” The bank is dealing with the possibility of having to buy back billions of dollars worth of
loans from investors because the loans reportedly did not comply with the bank’s representations and
warranties, according to a Dec. 29 article in Bloomberg Businessweek.
Businessweek and the Post reported MBIA is suing Bank of America over loans issued by Countrywide
Financial, a mortgage lender taken over by Bank of America. MBIA insured those loans when they were
sold to investors. Now that some of those loans are in default, MBIA is trying to recoup the money it has
lost in making good on its insurance policies. The insurance company has to prove the loans have a valid
defect before Bank of America can be required to pay them back. This latest procedural ruling will make
that task a little bit easier, according to the Post’s story.
Bank of America is facing a similar lawsuit from Allstate Insurance.
Massachusetts Court Rejects Wells Fargo, U.S. Bank Claim in Foreclosure
The Supreme Judicial Court of Massachusetts rejected the right of Wells Fargo & Co. and U.S. Bancorp
to seize two homes after the banks failed to show they were the mortgage holders at the time of
foreclosure, according to Reuters. The Jan. 7 ruling could further slow foreclosure processes nationwide.
This is one of the first cases to address the issue of improper documentation that has led to the
nationwide foreclosure paperwork scandal, though there are similar cases pending in courts across the
country. According to Reuters, all 50 state attorneys general are examining whether lenders are following
proper procedures when foreclosing on homes.
According to a Jan. 10 article in American Banker, both Wells Fargo and U.S. Bancorp attempted to
argue that, as securitization trustees, they did not have to prove their authority to foreclose on two
separate homes. In the case of Ibanez vs. U.S. Bank, the lender argued that it could convey mortgages to
securitized trusts “in blank,” meaning it did not need to specify in writing who the new mortgage owner
The Massachusetts ruling says that’s not the case and that banks can’t submit documentation after filing
for foreclosure. “There must be proof that the assignment was made by a party that itself held the
mortgage,” Justice Ralph D. Gants wrote in the decision.
The judges in the Massachusetts case noted that their decision had no bearing on the fact that the
homeowners did indeed default on their loans, but they pointed out that the legal standards for
foreclosure go beyond merely showing the homeowner is in default. Mortgage holders have to make sure
they are following proper documentation procedures, too.
19 | Appraiser News Online Vol. 12, No. 1/2, January 2011
After the ruling, both Wells Fargo and U.S. Bancorp watched their share prices fall even though, as
trustees, the ruling had no financial impact on them, according to Reuters. American Home Mortgage
Servicing is the servicer on both mortgages.
While the decision applies only in Massachusetts, and need not be followed by federal judges or by
courts in other states, the ruling is likely to slow down foreclosures across the country even further as
banks focus on making sure their paperwork is in order, and it will likely inspire further lawsuits by both
investors and homeowners related to foreclosures already in process, according to Reuters.
Nebraska Clarifies Licensing Requirements for Out-of-State Appraisers
The Nebraska Real Property Appraisal Board confirmed Dec. 16 that appraisers doing appraisals of
property in the state are required to obtain a resident, reciprocal or temporary credential to perform
appraisal services, irrespective of residence or office location.
The Nebraska board had been considering adding this language to the Nebraska Real Property Appraiser
Act §76-2220 since its Oct. 28 meeting.
The new language is a reaffirmation of existing Nebraska Real Property Appraisal Board policy. Prior to
the adoption of this language, it was not clear whether or not an appraiser located outside of Nebraska
that was providing appraisal services for a property located inside Nebraska was required to hold a
Nebraska license or certification.
According to Richard Maloy, MAI, SRA, chair of the Appraisal Institute’s Government Relations
Committee, the Appraisal Institute generally supports the licensing and certification of appraisers by the
state in which the property is located. “We believe this can be accomplished through streamlined
issuance of temporary practice permits and reciprocal licenses,” he said. The Appraisal Institute sought
inclusion of language similar to the “mandatory state” verbiage in the Dodd-Frank Act, but lenders
objected and it was removed, according to Maloy.
While licensing or certification is always mandatory for federally related transactions under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, only about half of all states are mandatory
Colorado Conservation Easement Rules Now Require Valid Appraisal
Colorado property owners who donate conservation easements to governmental or charitable entities
now will be denied a claim for a tax credit certificate if the appraiser of the easement doesn’t have a valid
general appraiser license, according to a Dec. 23 Bureau of National Affairs’ Tax Report story.
Claims also will be denied if the appraiser fails to meet the education and experience requirement under
Colorado Revised Statutes Section 12-61-719(7), if the easement holder is not certified by the Division of
Real Property or if the easement holder fails to comply with the requirements stipulated in the credit
statute under Section 24-33-112. The change took effect Dec. 30.
20 | Appraiser News Online Vol. 12, No. 1/2, January 2011
The credit is limited to donations that qualify as conservation contributions as described in Internal
Revenue Code Section 170(h). To claim the credit, a taxpayer must have recorded a valid deed of
conservation easement, BNA’s Tax Report said.
According to the final rule, a credit cannot be claimed prior to the year for which a tax credit certificate is
issued, according to BNA’s Tax Report. However, if a revised appraisal increases the value of the
donation, a second claim may be submitted.
To view the final rule in its entirety, visit
Discuss Now: Appraisal Institute members can discuss this story by logging in to the Tax Valuation
Community of Practice.
21 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Around the Industry
International Standards Council Addresses Discounted Cash Flow
The Professional Board of the International Valuation Standards Council released a Jan. 19 exposure
draft offering international guidance on the principles that should be applied when using different
valuation methods, particularly the discounted cash flow method for real property and business
In an accompanying news release, IVSC Professional Board Chairman Jean-Florent Rerolle noted that a
number of discounted cash flow methods are used in various markets around the world. He said the goal
of the paper is to set high-level standards for discounted cash flow users.
“Our objective is to promote consistency in the fundamental application of the technique while recognizing
that in dynamic markets there has to be room for flexibility,” Rerolle said.
Discounted cash flow models employ anticipated future net income streams to help determine current
value of real property and businesses, and their use is becoming more widespread. Nevertheless, IVSC
feels the models are not always understood by either investors or regulators.
According to the Jan. 19 news release, IVSC is engaged in a number of projects to improve valuation
standards in part as a response to concerns that poor valuation methods were a contributing factor to the
global economic crisis.
The IVSC is an independent, not-for-profit, private sector organization charged with, among other things,
the creation of an independent and transparent international valuation standards setting process, as well
as issuing the International Valuation Standards, which first appeared in 1985. The latest draft, the eighth,
was issued in 2007.
IVSC’s Exposure Draft can be reviewed at http://www.ivsc.org/pubs/exp_drafts/1101_dcf_method.pdf.
The Professional Board is accepting comments on the draft until April 30.
Faulty Default Notices May Derail Foreclosure Proceedings
On the heels of thousands of delayed foreclosures last fall associated with the robo-signing scandal in the
23 states where the process is handled in court, a new controversy could complicate foreclosures in the
27 non-judicial states, American Banker reported Jan. 21.
In addition to rubber-stamping affidavits in the robo-signing cases, default notices in some instances have
been signed by lenders who did not verify critical information. Because of this, several lawsuits filed in
non-judicial states, including California, Arizona and Nevada, contend that such actions constitute
grounds to stop a foreclosure, according to American Banker’s article.
The suits also allege that the default notices are invalid because the employees who signed them worked
for companies that did not have legal authority to foreclose, American Banker reported.
"They are starting foreclosures on behalf of companies with no authority to foreclose," attorney Robert
Hager told American Banker. "The policy of these companies is to just have a signer execute a notice of
22 | Appraiser News Online Vol. 12, No. 1/2, January 2011
default starting foreclosure without any documentation to determine whether they are starting an illegal
Nevada’s non-judicial foreclosure statute states that the only company authorized to sign a notice of
default is the one who has authority to foreclose, Hager noted. However, in a deposition on Jan. 4,
Stanley Silva, a title officer at Ticor Title of Nevada Inc., said he never reviewed any documents or knew
which company was the holder of an original note when signing default notices.
Walter Hackett, a lawyer with Inland Counties Legal Services, also has filed several cases contesting
notices of default on similar grounds. "A huge percentage of notices of default and notices of trustee sales
are legally questionable and probably void," Hackett told American Banker. "Nobody with the authority to
trigger the non-judicial foreclosure process is triggering it — only third parties who claim they have the
right to do so are triggering it."
Overall, lawyers said homeowners face a bigger legal burden in non-judicial states because they have to
file a lawsuit against the holder of the note to bring an action in court. "Because there's no court reviewing
anything in non-judicial states," abuses are "probably even more rampant," O. Max Gardner III, a
consumer bankruptcy attorney at Gardner & Gardner PLLC, told American Banker. "This is just another
example of robo-signing in a different context."
Ally Financial Resubmits Some Foreclosures
Ally Financial announced that it is withdrawing all of its foreclosures in Maryland that were approved by
Jeffrey Stephan, an employee who admitted to signing off on thousands of foreclosures with little or no
review, The Washington Post reported Jan. 19.
The move may force other lenders who also used robo-signers to follow suit.
While Ally said about 250 Maryland cases signed by Stephan will be dismissed and re-evaluated,
consumer advocates say that the company should dismiss similar cases across the country.
"What they're doing is triage," Ira Rheingold, executive director of the National Association of Consumer
Advocates, told the Post. "They're thinking: We've got a problem in Maryland. Let's get in front of it. But
they're naive if they think that what they're doing in Maryland is going to shut the door on their troubles
Ally’s move comes as struggling homeowners are achieving some success as they challenge
foreclosures in court. In January, for example, the Massachusetts Supreme Court voided two foreclosures
because the banks failed to show paperwork proving they owned the loans. In Maryland, a circuit court
judge dismissed a foreclosure based on allegations that Ally committed widespread fraud.
However, Gina Proia, a spokeswoman for Ally, said that the firm’s decision to rescind active foreclosures
in Maryland was not in response to court cases, but instead a move to offer homeowners added time to
"exhaust all their options" to avoid foreclosure.
23 | Appraiser News Online Vol. 12, No. 1/2, January 2011
As for other states, Proia said, the company has yet to find "any evidence to date, in any state, in which
(it) has pursued a foreclosure action based upon a potentially affected affidavit and the borrower was not
Anthony DePastina, a lawyer at Baltimore-based Civil Justice Network, told the Post that the homeowners
he represented agreed to the dismissal only because Ally told the court it had begun to resubmit all the
active Maryland cases involving Stephan. Thomas Cox, an attorney in Maine, said Ally probably agreed
to the dismissal to avoid losing a legal battle. "They're trying to avoid a ruling that would set a legal
precedent around the country," Cox told the Post.
The results may not even be welcome by some of the homeowners who are getting another shot to keep
their houses, consumer advocates say. Although Ally’s dismissals will give some struggling borrowers a
chance to negotiate for better mortgage terms or find alternatives to foreclosure, the relief is unlikely to
last since the lender is committed to resubmitting the foreclosures.
"It's good for those who are in their homes," DePastina said. "It's bad for those who left their homes and
maybe even moved out of the area. … Maybe they don't want their houses back.”
‘Shadow Inventory’ May Soon Overshadow Housing Hopes
About 1.7 million homes will be flooding the real estate market in 2011. Known as “shadow inventory,”
these homes either have been repossessed or are in some state of foreclosure. CNNMoney.com reported
Jan. 20 the homes may delay economic recovery.
Duane Westerbeck, managing director for Standard & Poor’s, told CNNMoney.com the problem with this
influx of shadow inventory is that it will most likely hit the market and cause a negative impact on the
S&P estimates it will take 44 months for the 2011 shadow inventory to sell. S&P defines shadow
inventory as properties where borrowers are or were delinquent on mortgage payments by 90 days or
more and properties that are in or recently were in foreclosure.
CNNMoney.com reported that the Mortgage Bankers Association estimates that more than 2 million
Americans were “seriously delinquent” on their mortgages by the end of the third quarter of 2010. S&P
reported that 80 percent to 85 percent of these loans were foreclosed on in 2008 compared with 50
percent to 55 percent in 2009. Banks are now looking toward modifying loans and working with struggling
homeowners rather than foreclosing.
Banks also are taking longer to foreclose on homes than usual, causing this shadow inventory to linger,
Westerbeck told CNNMoney.com. He said banks are having difficulty dealing with the large volume, as
last year nearly 2.9 homes received some type of foreclosure notice. In addition, he noted, foreclosure
procedures themselves are taking longer.
Miami was the only market where shadow inventory did not expand by the end of third quarter of 2010,
S&P reported. In Minneapolis, it increased by 61 percent between Dec. 31, 2009, and Sept. 30, 2010.
New York has the longest shadow inventory list with almost 10 years of homes.
24 | Appraiser News Online Vol. 12, No. 1/2, January 2011
November Home Prices Fall in S&P/Case-Shiller, Stabilize in FHFA
Home prices fell in 19 of the 20 metropolitan statistical areas, as well as in both the 10- and 20-city
composites, in November compared to October, according to the Standard & Poor’s/Case-Shiller Home
Prices Indices released Jan. 25. Meanwhile, the latest Federal Housing Finance Agency data shows
home prices stabilized.
S&P/Case-Shiller’s 10-city composite was down 0.4 percent in November compared to a year ago, and
the 20-city composite was down 1.6 percent.
“With these numbers, more analysts will be calling for a double-dip in home prices. The series are now
only 4.8 percent and 3.3 percent above their April 2009 lows, suggesting that a double-dip could be
confirmed before spring,” David Blitzer, chair of Standard & Poor’s Index Committee, said in the report.
“Certainly nine cities setting new lows, and with the only positive news concentrated in Southern
California and Washington, D.C., the data point to weakness in home prices.”
According to S&P/Case-Shiller, 17 of the 20 MSAs showed a deceleration in annual growth rates in
November, and Los Angeles, San Diego, San Francisco and Washington, D.C., were the only MSAs to
show year-over-year gains.
Overall composite indices remained above spring 2009 lows, despite Atlanta, Charlotte, Chicago, Detroit,
Las Vegas, Miami, Portland, Seattle and Tampa hitting their lowest levels since home prices peaked
during the real estate boom.
Meanwhile, the Federal Housing Finance Agency’s monthly House Price Index released Jan. 25 found
that U.S. house prices remained unchanged on a seasonally adjusted basis in November from the
previous month. November’s figure, is down 4.3 percent from a year ago, and 14.9 percent from its April
The FHFA downwardly revised October’s previously reported increase of 0.7 percent to 0.2 percent.
For the nine Census divisions, seasonally adjusted monthly price changes from October to November
ranged from a 1.9 percent drop in the Mountain Division to a 1.3 percent gain in the West South Central
Different methodologies account for the two surveys’ different conclusions. The FHFA monthly index is
calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by
Fannie Mae or Freddie Mac.
To view the FHFA’s monthly House Price Index, visit
To view Standard & Poor’s latest Case-Shiller Home Price Indices, visit
Existing Home Sales Rise Sharply in December: NAR
25 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Sales of existing homes rose 12.3 percent in December to a seasonally adjusted annual rate of 5.28
million units from November’s upwardly revised rate of 4.7 million units, the National Association of
Realtors reported Jan. 20. The pace is down 2.9 percent from the December 2009 rate of 5.44 million
“The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to
an adequate, sustainable level,” NAR Chief Economist Lawrence Yun said in a news release. “The
pattern over the past six months is clearly showing a recovery,”
Yun predicted that the recovery would continue as “job growth gains momentum and rising rents
encourage more renters into ownership while exceptional affordability conditions remain.”
Single-family existing home sales rose 11.8 percent in December to a seasonally adjusted annual rate of
4.64 million units from the previous month’s rate of 4.15 million units, NAR reported. That marked a 2.5
percent drop from the 4.76 million units recorded a year ago. Existing condominium and co-op sales
increased 16.4 percent in December to a seasonally adjusted annual rate of 640,000 units from the
previous month’s rate of 550,000 units, down 5.2 percent from the 675,000 units reported a year earlier.
Existing home sales in the Northeast rose 13 percent in December to an annual rate of 870,000 units,
down 5.4 percent from a year ago. The Midwest increased 11 percent to an annual rate of 1.11 million
units, down 4.3 percent from a year ago. The South jumped 10.1 percent to an annual rate of 1.97 million
units, down 2.5 percent from a year ago. The West surged 16.7 percent to an annual rate of 1.33 million
units, down 1.5 percent from a year ago.
NAR found that first-time buyers accounted for 33 percent of home purchases in December, up from 32
percent the previous month but down 43 percent from a year ago; investors accounted for 20 percent, up
19 percent from the previous month and 15 percent from a year ago. Repeat buyers accounted for the
remaining transactions. All-cash sales accounted for 29 percent, down from 31 percent the previous
month but up from 22 percent a year ago, while distressed homes accounted for 36 percent, up from 33
percent from the previous month, according to NAR.
The median existing home price for all home types logged in at $168,800 in December, down 0.1 percent
from a year ago. The median existing single-family home price came in at $169,300, down 0.2 percent
from a year ago, while the median existing condominium price was $165,000, down 7.4 percent from a
year ago, according to NAR.
By region, the median price in the Northeast was $237,300, down 1.4 percent from a year ago. The
Midwest came in at $139,700, down 3.3 percent from a year ago. The South logged in at $148,400,
unchanged from a year ago. The West came in at $204,000, down 5.6 percent from a year ago.
Existing home inventory fell 4.2 percent in December to 3.56 million units, NAR said. Based on the
current sales pace, there is now an 8.1-month supply of existing homes on the market, down from the
previous month’s 9.5-month supply.
New Home Sales Jump in December: Commerce
26 | Appraiser News Online Vol. 12, No. 1/2, January 2011
New single-family home sales surged 17.5 percent to a seasonally adjusted annual rate of 329,000 units
in December from November’s revised rate of 280,000, according to Department of Commerce data
released Nov. 24. New home sales are down 7.6 percent from December 2009.
Sales in the West, Midwest and South moved up 71.9 percent, 3.2 percent and 1.8 percent, respectively,
in December from the previous month. However, sales in the Northeast slid 5 percent.
Median new home prices logged in at $241,500 in December, while the average sales price came in at
$291,400, according to Commerce Department data.
New home inventory fell in December from the previous month to 190,000 units on a seasonally adjusted
basis, according to Commerce Department data. Based on the current sales pace, there is now a 6.9-
month supply of new homes on the market on a seasonally adjusted basis, down from November’s supply
of 8.4 months.
Mortgage Rates a Mixed Bag Week of Jan. 20
Both long- and short-term mortgage rates showed mixed results – with the 30-year rate rising slightly and
the 15-year rate falling slightly – according to Freddie Mac's Jan. 20 Weekly Primary Mortgage Market
The 30-year fixed rate mortgage inched up 0.03 percent from the previous week to 4.74 percent, down
from 4.99 percent a year ago. The 15-year fixed rate nudged down 0.03 percent to 4.05 percent, down
from 4.4 percent a year ago. Meanwhile, five-year Treasury-indexed adjustable-rate mortgages fell 0.03
percent to 3.69 percent, down from 4.27 percent a year ago, while one-year rates gained 0.02 percent to
3.25 percent, down from 4.32 percent a year ago.
“Mortgage rates were little changed during the holiday week amid reports that inflation remains tame.
Both the December core producer price index and consumer price index matched the market consensus,”
Freddie Mac Chief Economist Frank Nothaft said in an accompanying news release. “Compared to
December 2009, core consumer prices rose at a 0.8 percent rate, the smallest yearly increase since
records began in 1958."
For the complete survey, including regional breakdown, visit
Refinance, Purchase Activity Hit Low Levels: MBA
The Refinance Index reached its lowest level since January 2010 while the Purchase Index hit its lowest
level since October 2010 in the week ending Jan. 21, according to the Mortgage Bankers Association’s
weekly Mortgage Applications Survey, released Jan. 26.
The survey showed that the Market Composite Index, which measures mortgage loan application activity,
decreased 12.9 percent on a seasonally adjusted basis from the previous week. On a non-adjusted basis,
the index dropped 12 percent from the previous week. The four-week moving average for the Market
Index fell 1 percent on a seasonally adjusted basis.
27 | Appraiser News Online Vol. 12, No. 1/2, January 2011
The Refinance Index slid 15.3 percent from the previous week. Refinancing made up 70.3 percent of
applications, down from 73 percent the previous week, while adjustable-rate loan activity nudged up 0.2
percent to 5.2 percent. The four-week moving average for the Refinance Index fell 0.1 percent on a
seasonally adjusted basis.
The MBA’s Jan. 21 Purchase Index dropped 8.7 percent from the previous week on a seasonally
adjusted basis. On a non-adjusted basis, the index fell 3.1 percent from the previous week, down 20.8
percent from a year ago. The four-week moving average for the Purchase Index dropped 3.7 percent on a
seasonally adjusted basis.
The average rate on a 30-year fixed loan rose to 4.8 percent from the prior week’s 4.77 percent, while
points, including origination fees, fell from 1.2 to 1.19 for 80 percent loan-to-value ratio loans, according to
the MBA. The average rate on a 15-year fixed loan decreased from 4.16 percent to 4.12 percent, while
points, including origination fees, increased from 0.9 to 1.26.
Homebuying Cheaper than Renting in 72 Percent of Cities: Trulia
Homeownership is cheaper than renting in 72 percent of the largest U.S. cities, with Miami and Las
Vegas being the frontrunners, according to Trulia’s latest Rent vs. Buy Index, released Jan. 24. Trulia is a
website geared toward homebuyers, sellers and renters.
The two most affordable cities for buying a home also have among the highest mortgage-default rates. In
Miami, one in every 309 homes received a foreclosure filing in December, and in Las Vegas, one in every
76 did, according to RealtyTrac data released Jan. 13.
In addition to those two cities, Arlington, Texas; Mesa, Ariz.; and Phoenix rounded out the top five cities
for home affordability, according to Trulia. The top 10 cities all resided in Florida, Nevada, Texas, Arizona
and California. Except for Texas, those states were among the five with the highest foreclosure rates in
2010, according to RealtyTrac data.
As reported in the Jan. 12 issue of Appraiser News Online, an increase in foreclosures is raising the
demand for apartments. A record 2.87 million homes received notices of default, auction or repossession
in 2010, according to RealtyTrac. People forced to rent after losing their homes to foreclosure helped
boost rates and send U.S. apartment vacancies to a two-year low in the fourth quarter, according to Reis
Inc. data cited by Bloomberg.
Renting is less expensive than buying in only four cities that Trulia tracks: New York, Seattle, San
Francisco, and Kansas City, Mo. Ten cities – including Boston and Cleveland – have relative affordability
for renting, though "buying may still be a financially sound long-term decision," Trulia said.
For access to the full report, as well as more analysis, visit
CRE Fundamentals Show Moderate Improvement: Moody’s
Commercial real estate markets across the country remained stable or improved moderately in the third
quarter, according to the latest Red-Yellow-Green report from Moody’s Investors Service released Jan.
28 | Appraiser News Online Vol. 12, No. 1/2, January 2011
19. Six of seven property types that secure commercial mortgage-backed securities now have yellow
scores, according to Mortgage Bankers Association’s NewsLink.
Moody’s Red-Yellow-Green fourth quarter report, which relays data from the third quarter, ranks markets
on a scale of 0 to 100 (0-33 is red, 34-66 is yellow, and 67-100 is green). Most U.S. commercial real
estate markets remain yellow, though the majority are still showing improvement, according to NewsLink;
red markets are decreasing significantly.
The only property type showing a green score was the multi-family sector.
While 55 percent of U.S. markets were noted as yellow in the third and fourth quarter reports, the third
quarter report showed 18 percent in red and 27 percent in green, while the fourth quarter report showed
12 percent in red and 33 percent in green, according to NewsLink.
NewsLink reported that the limited-service hotel sector saw the biggest jump with its score increasing
from 46 to 53. Revenue per available room in this sector increased from 5.1 to 9.1 percent in the quarter.
The full-service hotel sector saw a smaller increase of three points to reach a score of 57 with revenue
per available room increasing 10.3 percent from the same quarter last year and a positive supply-demand
imbalance of 1.1 percent.
The industrial sector showed a modest two-point increase to 59 with a stable vacancy rate of 14 percent,
and central business district offices showed only minimal improvement and a small increase in vacancies
from 13 to 13.1 percent with a growth in projected demand of 0.2 percent.
The top cities, based on dollar volume, were New York, Los Angeles, Washington, D.C., and San
Francisco, all with scores ranging from 69 to 77, while Philadelphia, Miami, Chicago, Houston, Atlanta,
and Dallas showed scores of 51 to 65, according to NewsLink
The nation’s top five markets are Honolulu (at 81), New York (at 77), Los Angeles (at 75), Washington,
D.C. (at 74), and Orange County, Calif. (at 73). The worst performing markets include Trenton, N.J. (at
37), Detroit (at 41), Phoenix (at 43), Las Vegas (at 45) and Indianapolis (at 48).
The full report is available for $550 at www.alacrastore.com/research/moodys-global-credit-research-
Moody’s: CRE Prices up for Third Straight Month
Commercial real estate prices recorded a third consecutive month of price gains, increasing 0.6 percent
in November from the previous month, according to the Moody’s/REAL Commercial Property Price Index
released Jan. 24. Commercial real estate prices have now moved up 6.4 percent since August 2010,
according to Moody’s.
The index is up 2.8 percent from a year ago, but down 31.6 percent from two years ago and 41.6 percent
from October 2007’s peak.
29 | Appraiser News Online Vol. 12, No. 1/2, January 2011
“We expect the choppiness of the CPPI to continue in the months ahead,” Nick Levidy, a managing
director at Moody’s, said in an accompanying statement. “A clear positive trend is unlikely to develop until
markets become convinced that the recovery of the broader global economy has real staying power.”
The Moody’s/REAL Commercial Property Price Indices are based on repeat sales of the same U.S.
properties at different points in time. There were 121 repeat-sales transactions worth $1.7 billion in
November, up from 110 sales totaling $1.4 billion in October.
In November, approximately 24 percent of the total repeat-sales transactions used to calculate the indices
were considered distressed, down from the prior month and slightly below the yearly average of 26
“Due to the small number of overall repeat-sales transactions, only a few distressed sales can swing the
total percentage of distressed sales above or below the annual average,” Levidy explained.
CRE Values Show Stabilization for 2011: Integra Realty Resources
Commercial real estate property is showing signs of stabilization in 2011, according to Integra Realty
Resources’ 4Q 2010 Commercial Property Index released Jan. 24. The survey determines the rate of
change in property values across the country and in all property types, including multifamily, lodging,
industrial, retail and office.
“For the latter part of 2010, only the multifamily property type achieved stabilization, but now we are
projecting stabilization across all major property types in 2011,” Jeffrey Rogers, president and COO of
Integra Realty Resources, said in an accompanying news release. “This sector, along with the office
market, will lead the way toward a commercial real estate recovery taking hold in 2011.”
The multifamily sector and the industrial sector increased in value in the fourth quarter, by 2 percent and
1 percent, respectively. While relatively small gains, the remaining property sectors stabilized, with no
increases or decreases in value during the quarter.
Over the past 12 months, lodging and retail properties experienced the greatest decline, slipping 5
percent and 3 percent, respectively, according to Integra. In the next six months, however, all commercial
property sectors should increase in value and enter recovery mode.
Regionally, the East continues to demonstrate the strongest performance while the West displayed
significant gains from the previous quarter, according to Rogers.
In the fourth quarter, the West surpassed the East as the best performing region with its multifamily sector
increasing 2 percent in value; its office, retail and industrial sectors increasing 1 percent; and its lodging
sector remaining stable, according to Integra. The South and Central regions of the country performed the
worst, with the South’s industrial sector and the Central region’s lodging sector both experiencing a 1
percent rate of decline.
Regionally, Integra sees at least one of the property types improving in each sector, and no property
types declining. In the East, retail property will increase 1 percent in value, while the office, industrial, and
lodging sectors will increase 2 percent and the multifamily sector will increase 3 percent. In the West,
30 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Integra expects office, retail and lodging to increase 1 percent in value; industrial to increase 2 percent;
and multifamily to increase 3 percent. Integra anticipates that lodging and retail will stabilize in the Central
region, while office, industrial and multifamily properties will increase in value by 1 percent. Southern
industrial will also stabilize and its multifamily sector will increase 2 percent. The region’s remaining
sectors will increase 1 percent, according to Integra.
The Integra survey also shows that certain regions have finally exited the recessionary market cycle and
entered recovery. The Eastern and Western regions have 33 percent and 37 percent, respectively, of
their commercial assets classified as distressed, while the Central and Southern regions are still in
recessionary mode with 47 percent and 45 percent of commercial real estate classified as distressed
assets, according to Integra.
For the full report, visit www.irr.com/Publication-CommercialPropertyIndex/Index.htm.
CRE Construction Spending to Dip 2 Percent before Rebounding
While construction activity for institutional projects should hover near 2010 levels this year, overall
nonresidential construction spending will drop by 2 percent before rebounding in 2012 with an increase of
five percent in inflation adjusted terms, according to the American Institute of Architects’ semi-annual
Consensus Construction Forecast, released Jan. 26.
The commercial/industrial sector will experience higher volatility, falling by 4.2 percent in 2011 and
rebounding by 10.9 percent in 2012, while institutional spending will undergo a much more moderate
fluctuation, dropping by 0.2 percent before rebounding slightly by 1.6 percent in 2012, according to AIA.
“The key factors that have prevented an accelerated recovery include historically low lending rates for
real estate projects, the lingering effects of general overbuilding and an unfavorable bond market that has
hampered the ability for municipalities to get the requisite funding to build new schools and hospitals,”
said AIA Chief Economist, Kermit Baker, PhD. “Conditions should improve later this year and gain
momentum as we move into 2012, particularly for hotel, retail and office building projects.”
The AIA predicts the ride for office buildings to go something like: drop by 7.9 percent in 2011, rise by 7.1
percent in 2012. Hotels will take an even bumpier ride: down by 6.2 percent in 2011 before rising by 15.6
percent in 2012. Retail will only drop 1 percent in 2011, but rise by 10.9 percent in 2012.
The subsectors of industrial construction will also fluctuate, but not as drastically. Public safety growth will
drop by 6.7 percent in 2011 and continue to drop, by 2.3 percent, in 2012. Education will drop 3.1 percent
in 2011, but rise by 1.7 percent in 2012. The rest of the categories – health care, religious and
amusement/recreation – will all increase in 2011, by 1.1 percent. 1.3 percent and 1.4 percent,
respectively, and continue that growth in 2012.
“Two areas that are of concern that may adversely affect the design and construction industry are the
increasing federal budget deficit that will force private sector borrowing costs to increase, and the
likelihood that energy costs will increase in the coming years – as crude oil prices have doubled from their
recent low in 2009,” Baker added.
31 | Appraiser News Online Vol. 12, No. 1/2, January 2011
The twice-yearly Consensus Construction Forecast projects business conditions in the construction
industry over the coming 12 to 18 months. To view the full results, visit
Increase in CRE Loan Modifications Almost Offset New Defaults
While banks and loan servicers are modifying or otherwise resolving commercial mortgage loans that are
overdue because of missed payments, the volume of newly troubled loans – some of which already have
been modified – continues to outpace the new modifications, according to a Jan. 21 Fitch Ratings report
cited by Bloomberg.
In third quarter 2010, $27.9 billion in loans in commercial mortgage-backed securities were moved out of
special servicing – greater than the balance of all loans that were transferred out of special servicing
between 2006 and 2009, according to Fitch. In addition, the rate of loans entering special servicing fell for
the first time in more than two years, declining to $90.1 billion as of the end of the third quarter. It stood at
$92 billion at the end of the second quarter, Fitch said.
However, there was a spike in loans moving into the special servicing category in the fourth quarter,
according to Fitch. Meanwhile, some of the troubled loans that end up getting modified and brought
current are not staying that way.
"There is no guarantee that modifications will result in a full payoff at maturity or end of term," said
Stephanie Petosa, Fitch Ratings' managing director. "Recovery rates for loans with losses will also
continue to see more instability."
CRE Collateral Debt Obligations Rise to 13.6 Percent in December
U.S. commercial real estate loan collateralized debt obligation delinquencies closed out at 13.6 percent in
December, up from 12.7 percent in November, according to Fitch Ratings data cited by MBA NewsLink
on Jan. 20.
Stacey McGovern, director at Fitch, blamed the increased delinquency rate on credit-risk securities
increase, including default on real estate investment trust debt and credit impaired commercial mortgage-
backed securities. She told MBA NewsLink that she did not expect the current delinquency rate increase
to have an impact on ratings because each analysis of Fitch-rated CRE CDOs takes into account
New December delinquencies included one matured balloon, one term-default and 10 credit risk
securities. December's resolutions included the removal of a previously delinquent extended matured
balloon loan. December's realized losses of less than $10 million was well below the monthly average of
nearly $60 million in 2010 as total realized losses for the year included 3.5 percent of current collateral,
McGovern told MBA NewsLink.
Global Transactions Double in 2010: Jones Lang LaSalle
Aided by fourth quarter activity, which reached $100 billion for the first time since 2007, global transaction
volumes amounted to $316 billion in 2010, up more than 50 percent from 2009 levels, according to
research from Jones Lang LaSalle’s global capital markets experts released Jan. 19.
32 | Appraiser News Online Vol. 12, No. 1/2, January 2011
“At the beginning of 2010, we predicted total global volumes to land near $300 billion, and the fourth
quarter surpassed our estimates,” said Arthur de Haast, head of the firm’s International Capital Group.
“Barring further sovereign debt crises or financial shocks, the momentum of 2010 is expected to continue
over the next 12 months and we predict global volumes for 2011 should increase by 20 to 25 percent.”
Although the Americas and Europe experienced the greatest decline in total volumes in 2008 and 2009,
they have bounced back the strongest.
Volumes in the Americas more than doubled from $45 billion in 2009 to $97 billion in 2010. Investment
activity peaked in the fourth quarter 2010 at $38 billion, reaching the highest transaction level since the
first quarter 2008 and representing a 150 percent increase over the fourth quarter 2009, according to
Jones Lang LaSalle.
As for the Europe, Middle East and Africa region, which recorded the highest overall volume of the three
regions in 2010, full-year volumes reached €102 billion ($136 billion), up by nearly 40 percent from a year
ago. Jones Lang LaSalle said fourth quarter volumes reached $49 billion, marking the highest level since
the first quarter of 2008 ($60 billion) by a significant margin.
Jones Lang LaSalle reported that Europe’s largest markets – the United Kingdom, Germany and France
– made up over half of the region’s direct commercial real estate volumes confirming the global trend of
investor thirst for core product in mature and transparent markets.
In the Asia Pacific region, 2010 volumes measured $83 billion, up 25 percent from 2009. Several major
markets saw significant growth in volumes including Singapore (up 219 percent year-over-year), Australia
(up 77 percent year-over-year), China (up 41 percent year-over-year) and Hong Kong (up 28 percent
year-over-year). Investment volumes in the fourth quarter 2010 increased quarter-to-quarter by 17
percent to $23 billion and were up by 24 percent over the fourth quarter 2009, JLL reported.
Jones Lang LaSalle predicted EMEA volumes to exceed €110 billion in 2011, up a further 10 to 15
percent over 2010 levels. Asia Pacific volumes for 2011 are estimated to come in at $95 billion, a 15
percent increase from 2010. And the Americas 2011 volumes are expected to settle at $135 billion, a 40
percent increase over 2010 levels. If the regions perform as expected, that would mean total global
volumes in 2011 will be up 20 to 25 percent from 2010.
For the full report, visit Error! Hyperlink reference not valid..
Cap Rates, Defaults, Bifurcation to Face Investors in 2011: RCA
Among the questions property investors will face in the coming year, according to Real Capital Analytics,
are: whether rising interest rates will also mean higher capitalization rates, how slower default rates will
impact opportunities in distressed properties, and if pricing between top asset properties and almost
everything else will narrow.
The analysis came in the company’s U.S. Capital Trends report released Dec. 16.
While low interest rates drove much of the investment activity last year, interest rates are likely to rise in
2011. According to RCA, however, that does not necessarily mean cap rates will rise, too. RCA reported
33 | Appraiser News Online Vol. 12, No. 1/2, January 2011
benchmark 10-year U.S. Treasury rates rose 50 basis points in the month leading up to the Dec. 16
RCA predicts the cushion in the spreads of both property yields and mortgage rates likely will absorb any
initial increase in base rates, meaning cap rates might actually fall even more if the rise in rates is not very
steep. RCA reported that current spreads for commercial properties are 500 basis points (400 basis
points for multi-family), which leaves about 150 basis points of give until the spread reaches its historical
average of 350 basis points. With increasing access to capital for investment in commercial property, it’s
clear that confidence is high that spread will contract before cap rates rise.
Despite the fact that the number of commercial mortgages going into default, foreclosure or bankruptcy
has declined, indecision on the part of lenders means that many distressed properties still have not
reached the market. Commercial property accounted for only 11 percent of the $17.9 billion in distressed
sales volume last year, but RCA predicts distressed sales in the commercial sector in 2011 to be the
highest yet in the cycle, which is good news for investors. RCA reported that at least $186 billion in
distressed property will still require recapitalization in the coming years.
Many of the top markets have seen yields bid down in the last year, particularly in places like Manhattan
and Washington, D.C. The result, according to RCA, is that investors seeking higher yields will need to
consider a wider array of markets in 2011. RCA reported non-traded REITs will become particularly
attractive to those investing in secondary markets. Investment in secondary markets will also likely grow
because of the increased availability of financing and return of commercial mortgage-backed securities
lenders. However, investors are likely to remain gun-shy of commercial properties that remain vacant or
are at high risk of losing tenants.
Select U.S. Capital Trends reports, including the Dec. 16 report, are available to Appraisal Institute
members in the members-only section of the Appraisal Institute website. To access them, log in at
Despite 4Q10 Occupancy Boost, Are Offices Becoming Obsolete?
Despite a Jan. 20 report from Jones Lang LaSalle that office landlords in 27 U.S. markets boosted
occupancy in the fourth quarter, a leading analyst from Grubb & Ellis Landauer Appraisal and Valuation
questions whether the office building as it currently exists is obsolete, according to Investor’s Business
The increase in occupancy is sparking hope that hiring will increase to further accelerate occupancy, and
eventually rents. But layoffs, other workplace shifts and efforts to cut real estate costs threaten to make
many office buildings obsolete sooner than expected, Investor’s Business Daily reported.
Adding to the battle is the increased number of telecommuters. According to a study commissioned by
WorldatWork, 17.2 million employees worked or "telecommuted" from home at least one day a month in
2008, a 39 percent increase from two years earlier.
Due to staffing adjustments of all kinds, companies renewing leases or moving to different buildings often
are taking less space or are paying less, or both, Douglas Haney, MAI, president of Grubb & Ellis
34 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Landauer Appraisal & Valuation, told Investor’s Business Daily. "You could make a case that office
buildings are almost a dinosaur today," Haney said. The trends "don't bode well for long-term office use."
If offices are indeed becoming a thing of the past, what should be done with office buildings? San Marino,
Calif.-based Haney suggests that some downtown Los Angeles office buildings are financially outmoded
and would generate returns if turned into housing. "There are going to be residential needs, and
conversions are a very good re-use of buildings," he told Investor’s Business Daily.
But converting has its critics. Gary Painter, director of research at the University of Southern California's
Lusk Center for Real Estate, argues that the lack of demand for offices has been a function of a down
economy. "As the economy picks back up, I think we'll see renewed demand for office space," Painter
Appraisal Institute Launches ‘Green’ Valuation Program
The Appraisal Institute launched its Valuation of Sustainable Buildings Professional Development
Program on Jan. 24, educating appraisers on the intricacies of valuing high-performance residential and
“There is a tremendous need for this type of education within the real estate sector,” said Appraisal
Institute President Joseph C. Magdziarz, MAI, SRA. “High-performance buildings represent a rapidly
growing area of the real estate market, and reliable valuations are critical both to banks’ risk management
and to developers’ sound development practices. The Appraisal Institute is proud to continue its leading
role in educating appraisers on such an important topic.”
Building on existing Appraisal Institute education, the Valuation of Sustainable Buildings Professional
Development Program is intended to arm professional appraisers with the most advanced guidance, case
studies, methods and techniques on valuing high-performance buildings, positioning them as solution
providers for the real estate sector, according to the Appraisal Institute.
The Appraisal Institute’s program consists of three educational courses: “Introduction to Green Buildings:
Principles and Concepts” and “Case Studies in Appraising Residential Green Buildings” were unveiled
Jan. 24 and 25, respectively, in Chicago. The third, “Case Studies in Appraising Commercial Green
Buildings,” will debut later this year. All three courses, which have been approved for continuing
education by the U.S. Green Building Council, will be taught multiple times in numerous locations
throughout the country.
Magdziarz acknowledged that misconceptions about green valuation exist among many non-appraisers,
including a failure to realize that cost does not always equal value. He noted that appraisers need to have
all information from underwriters, builders, real estate agents and home inspectors related to energy
efficient features in order to recognize them and to make appropriate, market-based adjustments.
“As analysts of the real estate market, appraisers will look at the actions of buyers and sellers of real
estate by analyzing data, conducting interviews and applying applicable approaches to value,” Magdziarz
said. “A critical issue to the advancement of high-performance buildings is market recognition of the
actual or perceived benefits of a green building. Do market participants view high-performance features
35 | Appraiser News Online Vol. 12, No. 1/2, January 2011
as an enhancement to the market value of the property or as an over-enhancement? This is a critical
question that will likely be unique to the particular property and local real estate market.”
In addition to the new Valuation of Sustainable Buildings Professional Development Program, the
Appraisal Institute’s past contributions to the field of green appraising includes: being among the
sponsors of the Vancouver Valuation Accord (www.vancouveraccord.org/); contributing to the Green MLS
Tool Kit (www.GreentheMLS.org); and the publication of “An Introduction to Green Homes,” by Alan
Simmons, SRPA, LEED AP (www.appraisalinstitute.org/store/p-216-an-introduction-to-green-
To learn more about the Appraisal Institute’s Valuation of Sustainable Buildings Professional
Development Program, visit www.appraisalinstitute.org/education/green_FAQs.aspx.
Thomas Kubert, MAI, Appointed to Nebraska Board
Nebraska Gov. Dave Heineman appointed Thomas W. Kubert, MAI, of Lincoln, to a five-year term on the
state’s Real Property Appraiser Board on Jan. 24. The five members of the Nebraska Real Property
Appraiser Board are responsible for licensing and disciplinary actions involving real estate appraisers
credentialed within the state.
The Board also regulates appraisal education in Nebraska and ensures state compliance with federal
regulations affecting appraisers.
“I recognize the responsibility that goes with this appointment,” Kubert said. “I look forward to the
opportunity to give back to the appraisal profession through this service.”
Kubert, president of Great Plains Appraisal Inc. in Lincoln, joined the company in 1992 after serving as a
senior staff appraiser with the Lancaster County Assessor. He has been a partner with Great Plains since
2003. Kubert holds a Bachelor of Arts degree from the University of Nebraska.
Appraisal Demand Picks up in Fourth Quarter: Zelman
Demand for appraiser services in the fourth quarter was stronger than in any of the prior three quarters,
led by non-residential asset classes, according to Zelman & Associates’ “Appraiser 4Q10 Survey,”
released Jan. 12.
The survey found that on a 0 to 100 scale, the strongest demand for appraiser services was for multi-
family buildings, posting 59.3 versus 53.9 in the third quarter and 52.1 in the second quarter. The
industrial space exceeded 50 for the first time in 2010, registering a score of 52.2 in the fourth quarter, up
from 44.2 in the third quarter. Demand for all residential asset classes remain rated below 41, with
seasonality being blamed for the relative weakness.
The survey also found that pricing trends in the fourth quarter improved across the non-residential sector.
On the 0 to 100 scale, with 100 equal to “rapidly increasing,” pricing for multi-family buildings was rated
58.3, compared to 56.1 in the third quarter and 53.5 in the second quarter. The multi-family sector has
measured most positively for the last three quarters on a relative basis, according to the survey. Health
care and industrial ratings of 50 and 49.9, respectively, suggest that prices are relatively stable; however,
36 | Appraiser News Online Vol. 12, No. 1/2, January 2011
minor deflation was reported for retail (45.9), office (45.3) and lodging (44.3). Still, the survey score was
more favorable for all five of these sectors relative to the third quarter.
As for residential assets, pricing was negative in absolute terms and relative to the third quarter,
according to the survey. Undeveloped residential land screened most negatively, posting a score of 36.4,
down from 40.8 in the third quarter. Finished land and home prices, registering scores of 40.9 and 41.8,
respectively, implied further deflation, and at a pace that accelerated from the third quarter, although a
portion of this is likely typical for the seasonally slow fourth quarter, according to the survey.
For the first time in 2010, the weighted index of vacancy rates for non-residential assets improved,
reaching 57.3 on a 0-100 scale, with any reading over 50 denoting sequential improvement. Feedback for
the multi-family sector was especially positive, with an index of 80.6 versus 78.6 in the third quarter.
Vacancy rates were stronger for healthcare (65.2), industrial (59.1) and lodging (53.8) and steady for
office (50). Only the retail sector demonstrated weaker results (47), according to the survey.
As for capitalization rates, survey respondents quantified A-class rates at 7.9 percent in the fourth
quarter, 30 basis points tighter than in the third quarter. On a relative scale, cap rates were lowest for
multi-family buildings at 7 percent, down 30 basis points from the third quarter. On the contrary, lodging
cap rates compressed to 8.9 percent in the fourth quarter, down from 9.4 percent in the third. Cap rates
for B-class assets averaged 8.6 percent in the fourth quarter, 20 basis points tighter than the third quarter.
Over two-thirds (71 percent) of respondents said that the new Interagency Appraisal and Evaluation
Guidelines issued Dec. 2 were important for the industry. The guidelines – issued collectively by the
Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union
Administration – replace the 1994 minimum regulatory standards for appraisals. While the updated
guidelines are still new and many appraisers noted that their firms already adhered to the thresholds
implied by the guidance, they should improve the quality and independence of future appraisals,
according to the survey.
Appraisal Institute members can gain access to the full report at
www.appraisalinstitute.org/myappraisalinstitute/downloads/Zellman_4Q10.pdf (username and password
Residential Real Estate Remains Weak, Commercial Mixed: Fed
Residential real estate markets remained weak across all 12 Federal Reserve districts while commercial
markets displayed mixed results, according to the central bank’s latest Beige Book, released Jan. 12.
Commercial construction activity was described as very limited across most districts, while leasing activity
for commercial real estate increased modestly in the Richmond, Chicago, Minneapolis and Kansas City
districts. Dallas reported tentative improvements in leasing. While high across the country, vacancy rates
fell marginally in the Kansas City District and in New York City's office market. Leasing market
fundamentals held steady in Boston, Philadelphia and San Francisco.
Two thirds of the districts – Boston, New York, Cleveland, Atlanta, Chicago, Minneapolis, Dallas and San
Francisco – characterized local housing markets as weak and sluggish with little change from the
37 | Appraiser News Online Vol. 12, No. 1/2, January 2011
previous reporting period. Kansas City noted further weakening, while Richmond received reports of both
flat activity and further declines. St. Louis saw additional declines in existing home sales, but also cited
increased new home construction permits.
All districts attributed the slumping activity to concerns about the pace of economic recovery, while
Philadelphia, Atlanta and Chicago noted difficulty obtaining credit as an additional constraint.
Most districts reported that high levels of existing home inventories continued to dampen the pace of new
home construction; however, Boston, Richmond, Dallas and San Francisco noted increases in multifamily
Home prices generally declined or held steady in eight of the 12 districts – New York, Philadelphia,
Cleveland, Richmond, Atlanta, Chicago, Kansas City, Minneapolis and San Francisco – with four of those
(New York, Atlanta, Chicago and San Francisco) noting that distressed properties continue to place
downward pressure on prices. Boston reported rising median home prices across most states in its
Most districts expect commercial leasing to improve modestly in 2011; however, the outlook for
construction activity was mixed. Outlooks for residential real estate in 2011 were mixed as well, with most
districts expecting weak conditions to continue.
Reports on credit activity were mixed. Lenders in the New York, Cleveland, Minneapolis, Kansas City and
San Francisco districts noted a drop in residential mortgage refinancing whereas Richmond reported
strong demand for home refinancing.
Demand for residential real estate loans eased in New York and Kansas City, remained weak in
Cleveland and Dallas, increased in Richmond and declined in St. Louis. Lending in the commercial
mortgage category increased in New York, was unchanged in Kansas City and was weak in Dallas, with
the exception of multifamily.
To access the Fed’s latest beige book report, officially titled “Summary of Commentary on the Current
Economic Conditions,” visit
Foreclosures Drop in December, Remain up for 2010
While foreclosures in December were the lowest in several years, more than 1 million homes were
repossessed in 2010 – the most since 2005, according to a Jan. 13 RealtyTrac news release.
While December foreclosures were the lowest since June 2008, filings that were halted in the fourth
quarter are likely to proceed in 2011, leading RealtyTrac to predict that 2011 will be the worst year for
foreclosure filings since the housing crisis began in 2006.
RealtyTrac reported one in 45 houses received foreclosure filings in 2010, up 1.67 percent from the
previous year. There were 3,825,637 foreclosure filings, including default notices, scheduled auctions and
repossessions on U.S. properties last year. Of those filings, RealtyTrac reported that 257,747 were filed
38 | Appraiser News Online Vol. 12, No. 1/2, January 2011
in December. That is a decrease of almost two percent from November and 26 percent from December
2009. RealtyTrac reported that 799,064 homeowners received foreclosure filings in the fourth quarter,
Many major lenders temporarily halted foreclosure proceedings in the fourth quarter “triggered primarily
by the continuing controversy surrounding foreclosure documentation and proceedings,” James. J.
Saccacio, chief executive officer of RealtyTrac, said in the release.
After allegations that evictions were being handled improperly, banks stepped back on filings to review
their processes and temporarily halted taking action against borrowers behind in payments. To date,
RealtyTrac reported that about 5 million borrowers are at least two months behind on mortgage
Saccacio estimated as many as a quarter million filings may have been stopped in late 2010, and will
likely be re-started in 2011. Altogether, RealtyTrac predicts as many as 1.2 million homes will be
repossessed this year.
Factors that will promote the continued rise in foreclosure filings include high unemployment, strict credit
standards for those wishing to refinance, and a decrease in home values. Rick Sharga, senior vice
president at RealtyTrac, told The Associated Press that he expects home values to fall another 5 percent
this year before hitting bottom. That will push borrowers even further underwater on their mortgages. One
in five homeowners already owes more on their homes than they are worth.
Architecture Billings Index Jumps Again in December
After reaching its highest level since 2007 in November, the December Architecture Billings Index jumped
again – marking its third month in positive territory within the last four months, the American Institute of
Architects reported Jan. 19. The index rose in December to 54.2 from the previous month’s reading of 52.
Scores lower than 50 represent declining conditions, while those greater than 50 indicate an industry-
wide increase in billings.
“This is more promising news that the design and construction industry is continuing to move toward a
recovery,” AIA Chief Economist Kermit Baker, Ph.D., said in an accompanying news release. However,
historically December is the most unpredictable month from a business standpoint, and therefore the
most difficult month from which to interpret a trend. The coming quarter will give us a much better sense
of the strength of the apparent upturn in design activity.”
The regional averages in December were 52.9 for the Midwest, 55.3 for the Northeast, 48.4 for the West
and 54.8 for the South. The sector index breakdown in December included multifamily residential at 60.1,
institutional at 50.6, mixed practice at 47.8 and commercial/industrial at 52.7. New project inquiries in
December came in at 62.6, up from the previous month’s reading of 61.4. New project inquiries also
operate on the 50-point threshold, with scores over 50 indicating an increase in inquiries.
The index is an economic indicator of construction activity that shows a nine- to 12-month lag time
between architecture billings and non-residential construction spending. It is derived from a monthly
“Work-on-the-Boards” survey and produced by the AIA Economics and Market Research Group. For
more information, visit www.aia.org.
39 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Builder Confidence Remains Unchanged for Second Straight Month: NAHB
Builder confidence in the single-family home market remained steady at 16 for the second consecutive
month in January, according to the latest National Association of Home Builders/Wells Fargo Housing
Market Index released Jan. 18. Scores lower than 50 indicate more builders see conditions as poor than
"The HMI and its subcomponent indexes are holding steady following a below-expectations finish in
2010," NAHB Chief Economist David Crowe said in an accompanying news release."At this point,
housing remains on the sidelines of a weak economic recovery as consumers and builders wait for clear
and consistent indications that jobs and economic output are reviving. Meanwhile, the problems that
builders continue to confront in obtaining production financing, and in maintaining performing lines of
credit, threaten to significantly slow the onset of a housing recovery."
By region, the homebuilder confidence index in the Midwest increased one point to 14 while the West
increased four points to 15. However, the South dipped one point to 17 and the Northeast dropped two
points to 17.
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells
Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales
expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic
of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component
are then used to calculate a seasonally adjusted index where any number over 50 indicates that more
builders view conditions as good than poor.
Housing Starts Dip in December; Completions and Permits Rise:
While the number of housing starts dipped in December, the number of building permits authorized rose
16.7 percent over November according to U.S. Census Bureau information released Jan. 19. The
seasonally adjusted annual rate of 635,000 was above the November rate of 544,000, but fell 6.8 percent
below the December 2009 estimate of 681,000.
Single-family authorizations in December were at a rate of 440,000 – 5.5 percent above the revised
November figure of 417,000. Authorizations of units in buildings with five units or more were at a rate of
172,000 in December, according to Commerce data.
Single-family housing starts in December were at a rate of 417,000, which is 9 percent below the revised
November figure of 458,000. The December rate for units in buildings with five units or more was
102,000, Commerce reported.
The one shining spot for housing starts was in the West, where they rose 45.8 percent, jumping to 140
starts compared to November’s 96 starts. However, the other three regions pulled the overall activity
down, with housing starts decreasing by 38.4 percent in the Midwest, 24.7 percent in the Northeast and
2.2 percent in the South.
40 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Single-family housing completions in December were at a rate of 463,000, which is 5.5 percent above the
revised November rate of 439,000. The December rate for units in buildings with five units or more was
For the full report, visit www.census.gov/const/newresconst.pdf.
Predictions for Housing Starts in 2011 Vary between 500,000 and 750,000
David Crowe, chief economist for the National Association of Home Builders, expects single-family
housing starts to increase 21 percent to 575,000 units, MarketWatch.com reported Jan. 12.However,
because single-family construction activity has fallen 80 percent from its 2007 peak, the projected gain
will have little impact on the economy.
Frank Nothaft, chief economist for mortgage giant Freddie Mac, said, “You have to keep in mind that
these increases are off a very low base. These numbers are still far, far below the levels we’d seen before
the downturn.” Both his and Crowe’s remarks came at the International Builders Show held Jan. 12-15 in
Nonetheless, any gain in residential construction would be welcome. “We hit a soft spot in the last half of
2010 that I believe can be made up in 2011. But it’s a tough conviction at this point,” Crowe told
attendees. “It was one bad month after another in 2010, so you can see why there is a certain amount of
pessimism among home builders.”
Adding to the pessimism surrounding the industry, economists are in disagreement as to how robust the
housing start rebound will be. Edward Sullivan, chief economist for the Portland Cement Association, told
attendees that he projects 492,000 single-family housing starts in 2011, an increase of only 3.4 percent
compared to 2010. Moreover, Sullivan said that foreclosures will have a negative impact on home
construction in 2011, increasing inventory levels while placing downward pressure on prices.
On a positive note, Nothaft pointed out that short-term factors, including near-record low mortgage rates
and low prices, are helping the industry, adding that prices should stabilize in 2011.
Despite the slow upswing projected for 2011, both Crowe and Sullivan agree that housing starts will see a
significant improvement in 2012. According to Crowe, housing starts could surge 50 percent in 2012 while
Sullivan predicted that starts will jump 40 percent. If job creation increases average 200,000 each month
in 2011, Crowe and Nothaft noted, home-building gains will be even larger through 2015.
Meanwhile, a separate study conducted by The Wall Street Journal showed that economists are
increasingly optimistic about the pace of the economic recovery. Survey respondents indicated that the
U.S. economy should grow more than 3.2 percent in each quarter of 2011, the Journal reported Jan. 14.
However, after more than 12 months of forecasting modest home price gains, economist now expect that
home prices will fall in 2011. One reason: over-supply. According to the survey, economists expect
housing starts to reach 700,000 units in 2011, well above the other two predictions made at the
International Builders conference, but well below the 1.5 million units averaged from 1959 to 2007, the
41 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Home Prices Decrease for Fourth Month in November: CoreLogic
National home prices, including distressed sales, declined by 5.07 percent in November 2010 compared
to November 2009, according to CoreLogic’s November Home Price Index released Jan. 11. This follows
a 3.35 percent decline in October 2010 – revised from 3.93 percent in last month’s report – compared to
Excluding distressed sales, year-over-year prices declined by 2.21 percent in November 2010 compared
to November 2009 and declined by 2.24 percent in October 2010 – revised from 1.5 percent in last
month’s report – compared to October 2009. Distressed sales include short sales and real estate owned
The national CoreLogic house price index is down 30.9 percent from the 2006 peak, and is only 1.2
percent above the low set in March 2009, according to Jan. 11 analysis from Calculated Risk.
Including distressed sales, the five states with the highest appreciation were: Maine (up 8.58 percent),
North Dakota (up 4.41 percent), Wyoming (up 3.67 percent), New York (up 2.07 percent) and Vermont
(up 1.78 percent). Excluding distressed sales, the five states with the highest appreciation were:
Wyoming (up 6.47 percent), North Dakota (up 4.91 percent), Maine (up 4.46 percent), New York (up 3.96
percent) and the District of Columbia (up 3.54 percent).
Including distressed sales, the five states with the greatest depreciation were: Idaho (down 13.56
percent), Alabama (down 11.18 percent), Arizona (down 10.38 percent), Oregon (down 9.26 percent) and
Mississippi (down 8.37 percent). Excluding distressed sales, the five states with the greatest depreciation
were: Idaho (down 10.42 percent), Alabama (down 7.82 percent), Arizona (down 7.81 percent), Nevada
(down 6.13 percent) and Washington (down 6.05 percent).
“We’re continuing to see the influence of seasonal declines that typically depress home prices during the
latter part of the year, but the fact that the rate of decline increased for November is indicative of the uphill
battle we’re facing with the housing recovery,” Mark Fleming, chief economist for CoreLogic, said in an
accompanying news release.
The CoreLogic HPI provides a multi-tier market evaluation based on price, time between sales, property
type, loan type (conforming vs. nonconforming) and distressed sales. It incorporates more than 30 years
worth of repeat sales transactions, representing more than 55 million observations sourced from
CoreLogic industry-leading property information and its securities and servicing databases.
Full-month November 2010 national, state-level and top core-based statistical area-level data can be
found at www.corelogic.com/About-Us/ResearchTrends/Home-Price-Index.aspx.
Housing Prices to Hit Bottom in Spring, Rise in 2011: Freddie Mac
Freddie Mac Vice President and Chief Economist Frank Nothaft said that housing prices will hit bottom
this spring and steadily rise the rest of the year. His comments came Jan. 12 at the annual International
Builder’s Show in Orlando, Fla., Reuters reported.
Freddie Mac and the National Association of Home Builders are projecting a 20 to 21 percent increase in
new housing starts this year, going from 475,000 in 2010 to 575,000 in 2011, according to Reuters.
42 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Nothaft reminded reporters that while a 20 percent increase is large, it is coming “off a very low base."
(See also “Housing Starts Expected Somewhere above 500,000 in 2011.”)
In a Jan. 14 news release, NAHB reported that the national inventory of new homes is at a 40-year low. It
is estimated that two million people who normally would have moved into their own homes stayed put
through the recession, many of them young adults who remained in their parents' homes or continued to
share living quarters with roommates. NAHB forecasts many of these buyers will be ready to purchase a
home in 2011.
For NAHB’s full analysis, visit www.nahb.org/news_details.aspx?sectionID=122&newsID=11949.
AI Comments on USPAP Exposure Draft
The Appraisal Institute expressed concern about the proposed changes to the definitions of both
“extraordinary assumption” and “hypothetical condition” in the Fourth Exposure Draft of Proposed
Changes for the 2012-13 edition of the Uniform Standards of Professional Appraisal Practice. AI’s
comments came in a Jan. 14 letter to the Appraisal Standards Board.
In the case of “hypothetical condition,” the AI said it is unclear whether the knowledge of the condition is
as of the effective date, or the condition itself (that which exists) is as of the effective date. The same
issue exists for extraordinary assumptions, the Appraisal Institute wrote.
AI applauded the ASB’s decision to drop its proposal to require the labeling of extraordinary assumptions,
saying that the same rationale should be applied to the remaining proposal to require the labeling of
The Appraisal Institute also wrote in opposition to the proposed requirement to disclose exposure time. AI
wrote that “the existing requirement in Standard 1 to develop an opinion of exposure time linked to the
market value opinion should be removed (as) it addresses methodology, not standards. Further, exposure
time is but one element of a market value definition, and there is no reason to emphasize it above others.”
AI called for the abandonment of the proposed revisions to Standards Rules 2-3, 3-6, 6-9, 8-3 and 10-3,
which adds to a requirement to disclose prior services that was added to USPAP with the 2010 edition. AI
stated this requirement is “unworkable in practice and should be removed entirely from USPAP … it
causes confusion and mistrust in the market.”
The Appraisal Institute said it supports the proposal to retire Standards 4 and 5 – Real Property Appraisal
Consulting Development and Reporting – since “the concept is adequately addressed in the balance of
USPAP,” but suggests the issuance of an Advisory Opinion in their place.
AI voiced concern against the proposed record keeping rule and related edits to the Conduct section of
the Ethics rule. While the ASB’s rationale states that “record keeping does not correspond to any of the
other rules in USPAP), the AI said that keeping records “is an ethical obligation of appraisers, is rightfully
part of the Ethics rule and that the existing structure of USPAP ought to be preserved.”
43 | Appraiser News Online Vol. 12, No. 1/2, January 2011
For the Appraisal Institute’s Jan. 14 letter, visit
www.appraisalinstitute.org/newsadvocacy/letrs_tstimny.aspx#Comments. For the ASB’s Dec. 10 fourth
exposure draft, visit https://appraisalfoundation.sharefile.com/d/se001d41a1384c57b.
Mortgage Rates Down for Second Straight Week: Freddie Mac
Rates for both long- and short-term mortgages dropped for the second consecutive week – with the 30-
year fixed-rate reaching a four-week low – according to Freddie Mac's Jan. 13 Weekly Primary Mortgage
The 30-year fixed-rate mortgage inched down 0.06 percent from the previous week to 4.71 percent, down
from 5.06 percent a year ago. The 15-year fixed-rate dipped 0.05 percent to 4.08 percent, down from 4.45
percent a year ago. Meanwhile, five-year Treasury-indexed adjustable-rate mortgages dropped 0.03
percent to 3.72 percent, down from 4.32 percent a year ago, and one-year rates fell 0.01 percent to 3.23
percent, down from 4.39 percent a year ago.
“Bond yields drifted lower following the release of the December employment report, which was weaker
than the market consensus forecast and implied that the labor market is still in a sluggish recovery,”
Freddie Mac Chief Economist Frank Nothaft said in an accompanying news release. “Fixed mortgage
rates followed bond yields lower for a second consecutive week, bringing them to a four-week low.”
For the complete survey, including regional breakdowns, visit
Homebuyer Sentiment Surveys Point to Smaller Homes, Open Spaces
New surveys of consumer preferences presented on Jan. 13 at the International Builders’ Show in
Orlando, Fla., indicate that today’s homebuyers want smaller residences with more open spaces,
according to coverage by BuilderOnline.com.
National Association of Home Builders Assistant Vice President for Survey Research Rose Quint reported
that home sizes continued trending downward in 2009. The average size of American homes completed
in 2009 was 2,377 sq. ft.; whereas, in 2008, the average size was 2,438 and in 2007, it was 2,570. She
added, however, that the average size of homes put under construction in 2009 was actually up at 2,400
American household size is shrinking, too. According to BuilderOnline.com, one- and two-person
households now represent more than 63 percent of U.S. households with married couples representing
less than 50 percent of the market. But with population growth on a steady rise, Quint said she expects
housing demand to remain strong. The U.S. population is projected to grow to 322.4 million by 2015.
Builders are responding to the new market. BuilderOnline.com reported that 52 percent of builders
surveyed by NAHB say they will be building smaller homes in 2011, and three-fifths of those builders also
expect to be building less expensive residences. Builders say homebuyers want larger family rooms,
more combined living spaces, low-E windows and programmable thermostats. They also expect more
and more homes to be Energy Star rated.
44 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Despite the emphasis on smaller houses, Jill Waage, editorial director of Better Homes & Gardens’ Home
Content Core, told attendees that her surveys show 40 percent of current homeowners expect their next
home to be larger, BuilderOnline.com reported. Homebuyer priorities include more efficient HVAC
systems and appliances, more outdoor living spaces, low-maintenance exteriors, and private backyards.
Global Bank Regulators Move to Shield Taxpayers from Failure
The Basel Committee of the Bank for International Settlements set out rules Jan. 13 requiring holders of
hybrid bank debt to take the losses if a lender fails before exposing taxpayers to loss, Reuters reported.
One of the biggest controversies of the late financial crisis is how taxpayers have footed the bill to rescue
banks from failure while holders of subordinated bank capital debt escaped financial liability. Under new
rules, according to Reuters, debt holders will have to agree to their bonds being written down or
converted to equity if a bank fails or is supported through public funds.
In the U.S, regulators have similar concerns. The Office of the Special Inspector General for the Troubled
Asset Relief Program, also referred to as Sigtarp, issued a Jan. 13 statement noting that unless large
financial institutions like Citigroup, which the federal government bailed out in 2008, are left to assume the
consequences of their own risky behaviors, the prospect of government bailouts will continue to fuel bad
behavior on the part of the nation’s largest lenders, according to The Wall Street Journal’s coverage.
The Dodd-Frank Act, passed last summer, was designed to prevent the rescue of failing financial
institutions with taxpayer dollars, but Treasury Secretary Timothy Geithner told Sigtarp in December that
the government could be forced to take extreme measures once again to protect the nation’s financial
system, according to the Journal.
The Journal reported that in November 2008, the federal government guaranteed $306 billion in assets
for Citigroup and then injected $20 billion in new capital into the failing company, working on the idea that
the bank was too big to fail without harming the nation’s entire financial system. While Citigroup has since
returned a $12 billion profit, Sigtarp is concerned that if big banks feel insulated from failure, it will give
them an unfair advantage in the marketplace, and they will be able to raise funds more easily than small
Atlanta Deal Signals Signs of Life in Secondary CRE Market
Investor interest in major cities like New York and Washington, D.C., is starting to spill over into
secondary markets, according to a Jan. 12 story in The Wall Street Journal. The Journal examined a
recent commercial real estate deal in Atlanta that may signal the next wave of potential revitalization.
In December, American International Group Inc. sold several pieces of the high-profile Atlantic Station
development in Atlanta to a fund managed by CB Richard Ellis Investors. Located on the site of a 138-
acre former steel-mill site in Midtown Atlanta, the property has been heralded as one of the country's
most ambitious mixed-use developments. The CB Richard Ellis fund purchased the 534,000-square-foot
office building, the 586,000-square-foot Atlantic Town Center retail complex, a parking garage and 14.3
acres of undeveloped land for $165 million, according to Real Capital Analytics Inc data cited by the
45 | Appraiser News Online Vol. 12, No. 1/2, January 2011
But the 25-story office building is only 40 percent occupied. Since its completion in 2009, it has struggled
to keep tenants in the competitive market. The retail complex is about 88 percent leased, although Vance
Maddocks, president of the CB Richard Ellis fund, told the Journal that there are a number of expiring
leases and some of the tenants aren't paying rent.
But Maddocks added that he is confident that CB Richard Ellis, along with its retail joint-venture partner,
North American Properties, can reposition the properties in time to benefit from the recovery of Atlanta's
economy. He plans to spend more than $10 million fitting out the office building and will be looking for
new retailers for the Atlantic Town Center property, which now contains such stores as the fashion retailer
H&M, a supermarket and movie theaters, according to the Journal.
Investors in Atlanta still seem to be throwing caution to the wind, as demonstrated by relatively low sales
activity. The combined volume of retail and office sales in the Atlanta region rose just 6 percent in 2010 to
$901 million, from $846.8 million in 2009, according to Real Capital data cited by the Journal. By
comparison, investment sales of retail and office properties in New York and its suburbs more than tripled
to $7.4 billion in 2010 from $2.3 billion in 2009, The Journal reported.
CoreLogic to Buy Australian Data Firm
Santa Ana, Calif.-based information provider CoreLogic announced Jan. 11 that it has reached an
agreement to buy Australian company RP Data Ltd. for $194 million Australian dollars ($191 million).
CoreLogic currently owns 40 percent of RP Data, which collects property data in Australia and New
The deal would be for the remaining stake at a price of AU$1.65 ($1.63) per share, plus the assumption
of AU$45 million ($44.5 million) in debt, CoreLogic said.
On Dec. 23, CoreLogic announced the sale of its Employer and Litigation Support businesses for $265
million with the stated intent to distribute those proceeds into strategic acquisitions. The acquisition of RP
Data significantly expands the international efforts of CoreLogic and serves as a platform for broader
expansion into the Asia-Pacific Region, the company said.
CoreLogic expects the transaction to close in the second quarter.
ING May Be Close to Selling Real Estate Division
Netherlands-based financial services company ING Group is currently in negotiations with several
potential bidders interested in the purchase of ING REIM, the company’s real estate investment division,
according to a Jan. 17 article in The Wall Street Journal.
Financial Times reported Jan. 14 that U.S. property management firm CB Richard Ellis Group, Inc., is
most likely to acquire the majority of ING REIM, with Vornado Realty Trust and Jones Lang LaSalle, Inc.,
as other potential bidders. The deal could be worth as much as $1.34 billion, according to Financial
ING REIM has been for sale since last year. The Journal reported the real estate unit has €65 billion ($87
billion) in assets in 20 countries on four continents. The real estate financing and project development
divisions are not up for sale.
46 | Appraiser News Online Vol. 12, No. 1/2, January 2011
At the height of the financial crisis, the Dutch government bailed out ING, and the firm still has to repay €5
billion ($6.7 billion) in addition to a €2.5 billion ($3.35 billion) penalty, according to the Journal. Analysts
indicate the sale of ING REIM may help the firm repay its debts. ING is also gearing up to sell its
insurance division, Westland Utrecht Bank NV, and ING Direct USA.
Appraisal Institute Releases E-books
The Appraisal Institute released five of its publications in the electronic book format through Amazon.com
on Dec. 15, offering readers multiple ways and price points at which to access the books’ contents. The
electronic offerings – ranging in price from $9.99 to $14.29 – include three of AI’s latest titles and two
other seminal works.
“Appraising the Appraisal: The Art of Appraisal Review,” by Richard C. Sorenson, MAI, is available for
$14.29. The softcover version remains available at $45 for members and $60 for nonmembers. “An
Introduction to Green Homes,” by Alan F. Simmons, SRPA, LEED AP, is available as an e-book for $9.99.
The softcover is available through the Appraisal Institute for $35 for members, $45 for nonmembers. “An
Insider's Guide to Home Buying,” by Mark R. Rattermann, MAI, SRA, with a softcover price of $14 for
members, $18 for nonmembers, is available as an e-book for $9.99.
Rattermann’s 2007 book, “Valuation by Comparison: Residential Analysis and Logic,” is $9.99 through
Amazon, while the softcover is $40 for nonmembers, $30 for members; and “Scope of Work,” the 2006
edition by Stephanie Coleman, MAI, SRA, also is available as a $9.99 e-book. The spiral-bound version
remains available for $30 for members, $40 for nonmembers.
To order the e-books, visit www.amazon.com and conduct a title search for any of the above. To order
the physical versions, visit www.appraisalinstitute.org/store/c-18-all-books.aspx.
The books will be available as e-books on http://ebookstore.sony.com/, www.barnesandnoble.com and
other e-book sites in the upcoming weeks.
Appraisal Institute Unveils Appraisal Tips for Consumers
The Appraisal Institute urged homeowners and buyers to make sure their lender hires a qualified
appraiser – such as a designated member of the Appraisal Institute – and to request a copy of the
appraisal report from the lender. The suggestions were among consumer tips the Appraisal Institute
issued Jan. 12.
The tips provide guidance for homeowners and buyers seeking to ensure their sales are completed in a
timely manner, as well as how to protect themselves and avoid unnecessary frustration when selling or
buying a home, according to an Appraisal Institute news release.
“Too many consumers in this struggling real estate market face problems with appraisals when attempting
to buy or sell a home,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “But rather
than passively endure delays in closing a sale, homeowners and buyers can take proactive steps to avoid
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Other tips included: accompanying the appraiser during the inspection of the property if possible;
examining the appraisal report and asking questions; appealing the appraisal if appropriate; and filing
legitimate complaints with appropriate state board or professional appraisal organizations. The list also
suggested asking the lender to order a second appraisal by a qualified and designated appraiser.
“Credible opinions of value can help to stabilize the real estate market,” Magdziarz said. “Appraisals are
especially important because they are an objective and unbiased source of information. Unlike others
involved in real estate transactions, the appraiser is an independent professional who performs a service
for a fee rather than for a commission.”
Magdziarz noted that normal declines in the real estate market have led to increased caution by lenders.
That caution has led to delays in completing some real estate transactions.
“Appraisers today are doing the same thorough, fact-based research and analysis they have always
done,” Magdziarz said. “Nothing has changed in that regard.”
Magdziarz added that appraisers have been wrongly accused of prolonging the nation’s real estate
downturn by developing value opinions that are below proposed sale prices. Specifically, he said, they’ve
been unfairly criticized for including comparable sales in the valuation process that provide opinions that
are below the cost to build.
It serves neither the lender nor the consumer to enter into an upside-down mortgage, he noted. Some
real estate agents, mortgage brokers and homebuilders have used the Home Valuation Code of Conduct
and Interagency Appraisal and Evaluation Guidelines as a scapegoat for current declines in the real
estate market caused by the weak economy and the general oversupply of homes in the market,
The entire list of tips is available at
Appraisal Foundation Seeks Candidates for Vacancies on Board of
The Appraisal Foundation announced Jan. 6 that it is accepting applications for three at-large seats on its
Board of Trustees. Applications are due by April 1 for the positions, which will commence Jan. 1, 2012.
One of the openings is earmarked for a representative from academia and another is reserved for a
licensed/certified real estate appraiser not affiliated with an appraisal sponsor of The Appraisal
Foundation. Further, the Foundation said it is interested in expanding the diversity of its Board by
considering applications from business leaders with an interest in valuation or involved in various
The Board of Trustees is charged with funding the work of and appointing members to the Appraisal
Practices Board, Appraiser Qualifications Board and Appraisal Standards Board, as well as providing
oversight of these three boards. The search for qualified candidates for the Foundation’s three other
boards will begin in late spring.
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The Board of Trustees meets twice a year, in the spring and fall. Trustees are reimbursed for travel
expenses and are not compensated for their time. Application packages for the At-Large Trustee
vacancies are available at https://appraisalfoundation.sharefile.com/d/sc03e71fdc33436fa.
To request an application package via e-mail, contact Arika Cole at email@example.com with
the phrase “2011 At-Large Application Information” in the subject line and include your full name email
address and phone number.
Appraisal Named in Top Six ‘Performing Industries’ for 2011
California-based research company IBISWorld has named real estate appraisal among the top six
industries poised to grow in 2011. Among the criteria judged were revenue growth, employment growth,
current profits and barriers to entry. IBISWorld predicts an 8.8 percent revenue growth and a 3.8 percent
employment growth for the appraisal industry.
“Recovery in the battered real estate market is likely to be slow going, but this area should be among the
first to improve,” according to Inc. magazine, which reported IBISWorld’s findings. “Existing home sales
are expected to pick up, giving appraisers plenty of work. Additionally, as the recession wanes and low
interest rates persist, businesses looking to expand will boost the commercial markets as well.”
Inc. magazine said that since most firms in the industry are single-owner operated or small independents,
they don't need to take on employees to grow.
The other five fields are: debt collection agencies, e-commerce and online auctions, environmental
consulting, advertising agencies, job training and career consulting.
For the full list, visit www.inc.com/ss/6-top-performing-industries-for-2011.
In a separate study, IBISWorld listed multifamily homebuilding as one of the top 10 growth industries for
2011, according to The Street. After revenue tumbled from $40 billion in 2006 to just $19 billion in 2010,
this industry is projected to finally see growth again in 2011, The Street said in a Dec. 24 article. Rental
income will be the key to the industry's revival as an economic recovery is expected to increase demand
for properties that have rentable apartments.
"The cyclical recovery of the real estate market, including improvements in property values, rental rates
and transaction volumes, will support this industry," said IBISWorld Senior Industry Analyst Toon van
Beeck, who authored the study.
For the entire list, see www.thestreet.com/story/10954318/1/top-growth-industries-for-2011.html.
Insurer’s General Counsel Predicts Legal Problems for AMCs
Several appraisal management companies likely will be sued by the Federal Deposit Insurance
Corporation in 2011, according to predictions by Peter Christiansen, general counsel for LIA
Administrators & Insurance Services. Christiansen, an Associate member of the Appraisal Institute, made
his predictions in a Dec. 21 posting on Appraiser Law Blog.
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Based on both existing trends and emerging issues, Christiansen noted that several AMCs likely will be
sued relating to appraisals performed for failed lenders, principally for loans made from 2005 to early
2008. Additionally, he expects that more AMCs will be named as defendants in lawsuits filed by
borrowers and lenders alleging claims about poor quality appraisals.
Christiansen also expects that a handful of lenders will sue AMCs to enforce appraisal warranties, which
obligates an AMC to pay losses and costs for mortgage repurchases and other losses blamed on faulty
appraisals. Also, with new authority under some state AMC laws, he said LIA expects that a few national
AMCs will be penalized by state regulators this year.
To read Christiansen’s complete list of 11 predictions for appraisal management companies in 2011, visit
CMBS Market Heats up with $4 Billion in Pipeline
Despite the fact that nationwide commercial building vacancies are high, the commercial-mortgage
backed securities market is heating up. Two large deals worth a total of $4 billion are in the works, and
J.P. Morgan expects CMBS sales to reach $45 billion in 2011, according to a Jan. 4 Bloomberg article.
Deutsche Bank and UBS are preparing to issue $2.5 billion in CMBS bonds linked to office buildings,
hotels and malls, while J.P. Morgan is planning a similar sale amounting to $1.5 billion, Bloomberg
Citigroup Global Markets reported $6.17 billion in new deals on Dec. 17 – more than twice the amount
reported for the first three quarters of last year all together, according to a Jan. 4 story from Bureau of
National Affairs’ Banking Daily. Citigroup’s analysts fully expect the market’s momentum to continue to
rise in 2011.
Jeffrey Berenbaum, Citi's director of CMBS strategy and analysis, told BNA’s Banking Daily his group
estimates the dollar volume of CMBS issuance in 2011 between the high $20 billions to $40 billion,
slightly lower than J.P. Morgan estimates.
Citigroup analysts credit the federal government’s Term Asset-Backed Securities Loan Facility, despite
its expiration in early 2010, with spurring CMBS investments. CMBS issuances in 2010 were just under
$10 billion, they told BNA’s Banking Daily. Of the six CMBS issued last quarter, four were multiple-loan
packages, with an average of 26 loans per deal. Citigroup says that’s a big leap from the first three
quarters of 2010, when CMBS deals averaged 11 loans per deal.
Sales of these CMBS are a shot in the arm for property owners who have wanted to refinance loans in a
gun-shy lending environment. According to Bloomberg, Morgan Stanley, Bank of America, Wells Fargo &
Company and Royal Bank of Scotland are all preparing debt sales linked to commercial real estate
For example, another large CMBS deal – an $876.5 million offering involving more than 40 properties
across the country that was issued by Citi Global Realty and Goldman Sachs – includes $45 million to
refinance Philadelphia’s landmark Wachovia (formerly Fidelity) building, according to a Jan. 4
Philadelphia Inquirer article.
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Current Wachovia landlord SSH Real Estate and financial partner Michael F. Young – who own the top
25 floors of the 29-story building – bought the $45 million offering. Since their share of the building was
recently appraised at more than $70 million, at cheaper interest rates they didn’t have to put in any new
cash in order to refinance the property.
REITs up 28 Percent in 2010; 4.5 Percent Increase Expected in 2011
Real estate investment trusts gained nearly 28 percent in 2010, according to the All-REIT Total Return
Index, issued Jan. 4 by London-based FTSE and the National Association of Real Estate Investment
In 2010, REITs outperformed both the S&P 500, which gained just over 15 percent for the year, and the
NASDAQ Composite, which gained a little over 16 percent for the year, according to a Jan. 5 NAREIT
All sectors of the U.S. REIT market delivered positive returns in 2010, and all but two sectors produced
strong, double-digit returns, NAREIT said. Top performing industry segments for the year were
apartments, up 47.04 percent; lodging/resorts, up 42.77 percent; and commercial mortgage financing, up
41.99 percent. Retail REITs were up 33.41 percent for the year, while industrial REITs were up 18.89
percent and office REITs were up 18.41 percent, NAREIT said.
As the economy improves and interest rates climb, REITs, will not be as an attractive an investment as
they were last year despite projected growth in rents and demand for office space, Brad Case, vice
president of research and industry information for NAREIT, told REIT.com. While equity REITs’ present
dividend yields of 3.5 percent are nothing to jump up and down over, he said, they’re still quite high
compared to other assets on the market. That’s likely to change in the coming months, however, as low
interest rates gradually disappear and investors begin to focus on growth industries.
Wall Street analysts anticipate REIT dividends to grow by 4.5 percent this year, according to a Jan. 4
CNBC article. The fastest earning jumps will likely be short-term lease facilities like hotels and
apartments, whereas office properties will show fewer earnings because of their dependence on
For more analysis of the FTSE-NAREIT index, visit
California Realtors Say Servicers Holding up Short Sales
Concerned about the shortage of short sale opportunities, the California Association of Realtors recently
set up a task force to review the shortcomings of the Home Affordable Foreclosure Alternatives program,
which was instituted by the U.S. Department of Treasury in 2009.
According to a Jan. 6 article in American Banker, the state’s Realtors argue that HAFA is not enforcing its
own guidelines, leading short sales to become such a hassle that most lenders avoid them.
California Association of Realtors President Beth Peerce told American Banker that the biggest problem
is that servicers are ignoring HAFA guidelines. The process of review and approval in short sales has
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become so long and involved that buyers either avoid short sales altogether or often walk away from
them once in progress, she said. There have been only 400 successfully completed HAFA transactions
nationwide through the end of September 2010, according to American Banker.
While HAFA guidelines require servicers to respond to a request for short-sale approval in 10 business
days, Peerce said many are taking months to respond to borrowers. And while short sales are supposed
to close in 45 days, the vast majority reportedly take many months.
Part of the problem, according to the California Association of Realtors, is that in cases of second liens,
the second lien holder is refusing to accept HAFA-approved pay-offs and demands more from the
borrower, making short sales particularly unattractive.
Lack of HAFA enforcement isn’t the only obstacle to short sales, however according to a Jan. 4 article on
GlobeSt.com. California also recently enacted legislation that may further deter short sales by making
them a gamble for lenders. California Senate Bill 931, which took effect Jan. 1, obligates lenders to
accept short sale proceeds as full payment of debt. Thus, it could prevent lenders from recovering
remaining debt through collateral or other guarantors, according to GlobeSt.com’s article.
Neil Rubenstein, a shareholder in San Francisco’s office of Buchalter Nemer, told GlobeSt.com that the
legislation creates significant risks for lenders and will likely incline them to foreclose rather than take on
the potential financial risks of a short sale.
Refinancings Rise in Third Quarter; Boom May Be Over
Third quarter mortgage refinancings through the Home Affordable Refinance Program jumped 26 percent
in the third quarter of 2010, according to data released by the Federal Housing Finance Agency Dec. 20.
However, experts at Fannie Mae and Freddie Mac do not expect that increase to hold steady into 2011.
Refinancing represented more than 70 percent of all mortgage applications for the week preceding the
Christmas holiday as well as for the week following, according to Mortgage Bankers Association data
released Jan. 5. But the anticipated rise in mortgage interest rates will likely stem refinancing activity in
the coming months.
Another issue, according to a Jan. 7 report in HousingWire.com, is that 45 percent of 30-year mortgage
borrowers do not have the wherewithal or credit history to refinance at advantage. Banks are not rushing
to refinance borrowers with marginal credit for loans they didn’t originate anyway.
In comparison to HARP, the Home Affordable Modification Program, saw loan modifications through
Fannie Mae and Freddie Mac increase by 16 percent in the third quarter, according to Federal Housing
Finance Agency data.
In order for refinancings to continue at their current rate or increase, there would have to be a substantial
easing of underwriting standards, according to analysts at Barclays Capital, who told HousingWire.com
that they only foresee continued tightening of standards. Those ever more rigorous standards include
increases in loan-level delivery fees by Fannie Mae and Freddie Mac, the Federal Housing
Administration’s plans to more aggressively pursue the buying back of troubled mortgage-backed
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securities, and the likelihood that loan originators will be raising debt-to-income and FICO score
MBA Weekly Mortgage Survey Shows Second Straight Slide in 30-Year
The 30-year fixed rate slid for the second consecutive week in the week ending Jan. 7 and is now 15
basis points lower than the survey’s seven-month high observed two weeks ago, according to the
Mortgage Bankers Association’s weekly Mortgage Applications Survey, released Jan. 12.
The survey showed that the Market Composite Index, which measures mortgage loan application activity,
increased 2.2 percent on a seasonally adjusted basis from the previous week. On a non-adjusted basis,
the index surged 47.5 percent from the previous week. The four-week moving average for the Market
Index fell 5.3 percent on a seasonally adjusted basis.
The Refinance Index increased 4.9 percent from the previous week. Refinancing made up 72.1 percent of
applications, up from 71 percent the previous week, while adjustable-rate loan activity nudged down 0.1
percent to 4.9 percent. The four-week moving average for the Refinance Index fell 7.5 percent on a
seasonally adjusted basis.
The MBA’s Jan. 7 Purchase Index dropped 3.7 percent from the previous week on a seasonally adjusted
basis. On a non-adjusted basis, the index jumped 41.9 percent from the previous week, down 10.5
percent from a year ago. The four-week moving average for the Purchase Index dropped 1 percent on a
seasonally adjusted basis.
The average rate on a 30-year fixed loan fell to 4.78 percent from the prior week’s 4.82 percent, while
points, including origination fees, fell from 1.1 to 0.91 for 80 percent loan-to-value ratio loans, according to
the MBA. The average rate on a 15-year fixed loan decreased from 4.23 percent to 4.15 percent, while
points, including origination fees, inched up from 1 to 1.01.
AI/ABA Telebriefing on Jan. 19: Interagency Appraisal and Evaluation
The Appraisal Institute and the American Bankers Association will host a Jan. 19 telephone briefing titled
“New Interagency Appraisal and Evaluation Guidelines: A Primer for Commercial Lenders and
The live presentation will highlight the major provisions of the updated Interagency Appraisal and
Evaluation Guidelines as they relate to the appraisal of commercial real estate. It will cover details and
clarifications relating to the use of third parties, examiner expectations regarding appraisal reviews and
communications with fee appraisers, clarifications concerning the development of "evaluations" and
acceptability of valuation services, and enhanced guidance for collateral valuation, loan modifications and
The cost for the Jan. 19 telebriefing is $255 per site license for ABA and AI members; $385 per site
license for nonmembers. Each site license entitles participants to one phone and one Internet connection
at one location where an unlimited number of listeners can participate. The two-hour telebriefing starts at
1 p.m. CST and is approved for two hours of AI continuing education credit. It is not approved for state
53 | Appraiser News Online Vol. 12, No. 1/2, January 2011
continuing education credit. For more information and to register, visit
Jan. 28 Webinar to Address Loan Quality Initiative and Residential
Collateral Data Delivery
During the Appraisal Institute’s Jan. 28 webinar, “Understanding the Loan Quality Initiative and
Residential Collateral Data Delivery,” panelists will discuss Fannie Mae and Freddie Mac’s new loan
initiative, which was announced Dec. 17.
The new loan initiative will require that all appraisal reports on loans for sale to government-sponsored
enterprises be delivered consistently with an appraisal dataset and through a data portal. Under the new
loan initiative, GSEs will require that all appraisers provide more complete and consistent data through
appraisal report forms to assist in collateral risk management.
The webinar will cover the new Uniform Mortgage Data Program, which includes the Uniform Appraisal
Dataset and the Uniform Collateral Data Portal; how appraisal report forms will change and why; what
lenders and appraisal software vendors are doing to implement these changes; what appraisal data
standardization means; and how electronic data delivery will be implemented.
The panelists are Robert Murphy, director of collateral and valuation policy, risk policy and reporting,
enterprise risk management, Fannie Mae; Dawn Molitor-Gennrich, SRA, co-owner of Heyn, Molitor-
Gennrich, LLC; Elizabeth Green, director of Appraisal.com; and Timothy Dick, collateral policy manager in
Freddie Mac’s credit & counterparty risk management division.
The two-hour webinar will be presented at noon CST on Jan. 28. The webinar is $35 for AI members and
$75 for nonmembers. It is approved for two hours of AI credit; it is not approved for appraiser state
continuing education credit. For more information and to register, visit
Foreign Interest in U.S. Real Estate at 10-Year High: AFIRE
Global investor interest in U.S. commercial real estate is at a 10-year peak, according to Jan. 3 survey
from the Association of Foreign Investors in Real Estate. More than 60 percent of respondents think the
U.S. offers the best opportunities for capital appreciation, AFIRE said.
Seventy-two percent said that they plan to increase their U.S. CRE investments in 2011 over 2010,
according to an accompanying news release. AFIRE Chief Executive Jim Fetgatter attributed the
increased interest from abroad to an improving economic outlook and said investors are selective about
location: “Except for multifamily housing, they are not scattering their interest throughout the U.S., but
rather narrowly targeting it to New York City and Washington, D.C.”
Along with the U.S., the United Kingdom, Germany, China and France were the top countries targeted for
commercial real estate investment in 2011. New York and Washington were the top two cities worldwide
being targeted by non-U.S. investors, followed by London, Paris and Shanghai. In the U.S., investors also
expressed interest in the major metropolitan markets of Boston, San Francisco and Los Angeles,
according to the AFIRE survey.
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For the full results from the survey, visit www.afire.org/foreign_data/2010/PressRelease-
USCitiesLeadtheWay.pdf. For accompanying graphs, visit www.afire.org/foreign_data/2010/Graphs.pdf.
Hotel Acquisitions Could Rise 25 Percent in 2011: Jones Lang Lasalle
Hotel sales and acquisitions in the Americas may reach $13 billion in 2011, a 25 percent jump from the
$10.5 billion spent in 2010, according to a Jan. 4 statement from Jones Lang LaSalle Hotels. JLL said
real estate investment trusts and foreign investors seeking to disperse funds will drive the market.
“Due to additional capital raises, REITs are expected to continue to be dominant buyers in 2011 and
private equity groups and institutional investors will increasingly join the mix as leverage levels and terms
improve,” Arthur Adler, managing director and Americas chief executive officer at Jones Lang LaSalle
Hotels, said in the statement.
The U.S. will be one of the most active markets for deals globally, according to JLL. Investors from the
Middle East will help increase transactions on the U.S. East Coast in 2011. Asian buyers, who accounted
for about 8 percent of U.S. purchases in 2010, will continue to boost demand and target primarily the
western U.S., Bloomberg reported Jan. 4.
An Association of Foreign Investors in Real Estate survey confirms foreign investors’ thirst for U.S.
commercial real estate. The survey found that global investor interest in U.S. commercial real estate is at
a 10-year high. (See “Foreign Interest in U.S. Real Estate at 10-Year High: AFIRE.”)
Builder Magazine: Top 10 Least Recommended Residential Designs
Residential design trends for 2011 include smaller single-family homes on smaller lots with open floor
plans, less facade ornamentation, more everyday usable space and greater energy efficiency, according
to a Dec. 21 overview in Builder magazine.
Because there’s a steady stream of large custom homes for wealthy clients, and first-time buyers scoop
up smaller homes, mid-size homes may end up lacking in the market, Builder reported.
Architectural facades such as turrets, corbels and colonnades, considered extravagant touches, are being
eliminated from homes, as are unnecessary volume spaces – such as a two-story entry – known as
“I would say the overall theme now is clean and simple,” architect Donovan Davis told Builder.
And although energy efficient building practices are making strides and green aesthetics have improved,
some architectural models still aren’t ready for widespread use. For example, geodesic dome structures –
spherical shell structures or a lattice shell based on a network of great circles lying on the surface of a
sphere – will not be popping up in neighborhoods anytime soon, Doug Moslehi, director of field services
at Resitect in St. Louis, told Builder.
The usefulness of rooms and practicality of kitchen and bathroom upgrades has become of utmost
importance in the economic downturn, industry observers told Builder. Living rooms and dining rooms
have disappeared from most middle-class homes now that architects are pressured to make every square
foot usable on a daily basis. Also, rarely used industrial-grade kitchen ranges and impractical spa tubs
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are diminishing from homes. “Use it or lose it” is the new motto for right-sized kitchens and baths, Builder
As for new neighborhoods, there won’t be many new outlying master-planned communities breaking
ground in 2011. Instead, builders are turning their attention to smaller infill neighborhoods or homes in
established communities, Brian Brunhofer, founder of Meritus Homes, told Builder. Also, it’s not just about
what’s inside a home. The streetscape and inclusion of parks, amenities and neighborhood connections
to the community is in demand, John M. Thatch, a principal with Dahlin Group Architecture and Planning,
Technology is changing home design, too. Moving forward, homeowners will be able to control their home
entertainment, security system, appliances and lighting remotely with smart phone applications, Brian
Goldberg, a partner with LG Development Group, told Builder.
Oregon Group Lays out Top 10 Green Building Trends for 2011
The development of new business models and technologies is making high-performance homes more
accessible to all homeowners, according to a Jan. 6 release from Earth Advantage Institute. Affordability
was among the top 10 green building trends the Oregon-based certification and education company
shortlisted for 2011.
Other trends to watch for include grey water use, tracking home energy use and lifecycle analysis of
materials, the company said.
The affordable green homes trend is being led by affordable housing groups like Habitat for Humanity and
local land trusts, according to Earth Advantage.
Additionally, the Internet is allowing homeowners to share and compare home energy use. As social and
purchasing sites like Facebook and Groupon add millions of members, the sharing of home energy
consumption data for rewards is not far behind. For example, Earth Aid’s website, www.earthaid.net, lets
users track home energy usage and earn rewards for energy savings from local vendors.
Outcome-based energy codes are gaining popularity. The codes allow owners to pursue the retrofit
strategy that they decide is most effective for their building and its tenants. After choosing their strategy,
they are required to achieve a pre-negotiated performance target through mandatory annual reporting,
Earth Advantage said.
Communities and neighborhoods are increasingly banding together to obtain better pricing on materials
such as solar panels and save on installation costs. Group purchasing creates a 15 to 25 percent savings
below current prices, according to Earth Advantage.
“Grid-aware” appliances – those endowed with more sophisticated energy management capabilities and
timers – are fueling the convergence of smart grid and smart homes. Grid-aware appliances offer
homeowners machines that monitor and report their own electricity usage and increase or decrease that
usage by remote command, Earth Advantage said.
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With fewer people moving or building due to the housing market, accessory dwelling units are gaining
traction. The small independent units, which can be used for offices, studios or in-law space, allow for
energy savings and sustainable construction. As detached or attached rental units, they help cities
increase urban density and restrict sprawl, while allowing homeowners to add value to their property,
according to Earth Advantage.
Another trend will be the increased efficiency of residential heating and cooling, including ductless homes,
or those without a furnace. Geothermal heating and cooling, where piping loops are run through the
ground to absorb warmth in the winter and cool air in the summer, are also gaining broader acceptance,
Earth Advantage said.
The recycling of grey water – any household wastewater with the exception of toilet water – is picking up,
especially in areas with impending water shortages, such as the Southwest and Southern California.
Benefits include reduced water use, reduced strain on septic and stormwater systems, and groundwater
replenishment, Earth Advantage said.
Lifecycle analysis – which examines the impact of materials over their lifetime through the lens of
environmental indicators including embodied energy, solid waste, air and water pollution and global
warming potential – is becoming more common. Lifecycle analysis for building materials allows architects
to determine what products are more sustainable and what combination of products can produce the
most environmentally friendly results, according to Earth Advantage.
Incentives-driven Home Energy Efficiency Programs Expanding: NHPC
More than half of the country’s whole-home energy-efficiency retrofit programs offer free energy audits
and financing to pay for the cost of an energy efficiency retrofit, according to a Dec. 15 study from the
National Home Performance Council.
The NHPC found that 86 percent of retrofit programs offer financial incentives, typically in the form of
rebates, with the amount varying by program. For example, New Smyrna Beach, Fla., runs a program that
offers a $200 rebate for duct sealing and $375 for insulation upgrades. And utilities companies in New
Hampshire offer an incentive of 75 percent of the cost of eligible measures up to a cap of $4,000. Typical
retrofit measures include insulation, air sealing and replacement of inefficient heating and cooling
systems with high-efficiency models.
An energy-efficiency retrofit can save homeowners as much as 20 to 40 percent on monthly utility bills,
according to the NHPC study. If all outdated, inefficient homes were remodeled to energy-efficient
standards, the estimated national savings each year would be $21 billion, the group said.
The NHPC report, titled Residential Energy Efficiency Retrofit Programs in the U.S.: Financing, Audits
and Other Characteristics, is available at www.nhpci.org/images/NHPC_WHRetrofitReport_201012.pdf.
Office Rents up, Vacancies down in Fourth Quarter
U.S. office market rents increased and vacancies fell in the fourth quarter, the first such improvements in
nearly three years and a sign that the market may be recovering, Reuters reported Jan. 4.
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Asking rent nationwide inched up 0.1 percent in the fourth quarter from the third to $27.53 per square
foot, according to commercial real estate data provider Reis. It was the first increase since the third
quarter of 2008. Taking into account months of free rent and other perks, Reis said effective rent rose 0.2
percent from the prior quarter, the first rise since second quarter 2008, Reuters reported.
The vacancy rate, which reached a 17-year high in the third quarter, slipped by a minuscule 0.04
percentage points to 17.57 percent in the fourth quarter, as 2.5 million more square feet were occupied
than were vacated or came onto the market vacant – the first time in three years that more space was
occupied than vacated, according to Reis. During the fourth quarter, only 2.3 million square feet of new
office space came onto the market, the lowest amount since Reis began collecting quarterly data in 1999,
Although rents are up and vacancies are down, the overall office market recovery remains weak,
according to Reis. Average rents are still well below highs of more than $25 per square foot in mid-2008,
The Wall Street Journal reported Jan. 4.
Real estate developers predict further challenges in 2011 as more debt comes due, refinancing options
remain limited for many and supply continues to exceed demand in overbuilt markets such as Phoenix
and Las Vegas, the Journal reported. But a handful of markets across the U.S. are experiencing signs of
improvement. The biggest increases in average rents in the fourth quarter came in Pittsburgh, New York
City and San Francisco, according to the Journal’s story.
Apartment Sector to Continue Surge in 2011: Green Street
The apartment market should continue its positive trends in 2011 due to expected improvement in the
U.S. labor market and the continued decline in the homeownership rate, according to Green Street
"When you combine positive demand trends with the lowest level of new supply entering the market in
two decades, that sets the stage for a good environment for apartment operating fundamentals," Green
Street Advisors Senior Analyst Andy McCulloch told REIT.com Jan. 3.
Green Street expects the Northeast and San Francisco Bay areas to be among the strongest markets for
apartments. Washington, D.C., and its surrounding areas were top performers in 2009 and 2010, and
while McCulloch expects them to stabilize, they will still rank in the middle of the pack in 2011. Southern
California, where growth is expected, should lag other markets, according to McCulloch.
McCulloch said all of this positive news means apartment real estate investment trusts are likely to post
healthy revenue and net operating income growth in 2011. As landlords continue to roll leases into higher
rental rates, results should improve even further in 2012, McCulloch told REIT.com.
Appraisers Found Guilty of Password, Data Sharing
A U.S. Federal Court in Greenbelt, Md., has awarded CoStar Group, Inc., more than $1.1. million in
damages in a case involving appraisers who shared passwords and data in violation of CoStar’s terms of
use agreements, according to the company’s Dec. 22 news release.
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The case involved defendants in Orange County, Calif., Houston and Palm Beach Gardens, Fla., who
illegally resold their CoStar passwords to provide unauthorized access to CoStar’s online commercial real
“This verdict is a victory for CoStar’s legitimate customers who are unfairly forced to compete with those
who have illegal access to CoStar’s products,” CoStar’s general counsel, Jonathan Coleman, noted in the
Dec. 22 statement. According to the company’s news release, the company regularly monitors its online
services for unauthorized use and generally offers violators settlements and the opportunity to become
legitimate subscribers. But the repeated violations of the defendants in this case led the company to
pursue restitution in court.
No Appraisal Institute members were among the defendants, who included: Russ Gressett, an appraiser
in Houston doing business as TGC Realty Counselors, and Orange County, Calif.-based Pathfinders
Mortgage Corporation. The court ordered Gressett to pay CoStar $683,280 for sharing his username and
password with a number of Houston-based commercial real estate companies. Gressett is also liable for
$120,000 in copyright violation damages for unauthorized use of CoStar photographs. The court ordered
Pathfinder to pay $483,120 for using password data assigned to another company, according to the
Orange County Register.
The court made a judgment in default against Mark Field of apparently now-defunct Alliance Valuation
Group. Field failed to appear in court and, according to CoStar, has apparently left the country.
AI Urges Fed to Revise ‘Customary Fee’ Clause in Interim Rule
The Appraisal Institute has urged the Federal Reserve Board to revise the customary and reasonable
fees section of its Interim Final Rule addressing appraiser independence. In a Dec. 27 letter, the AI
expressed concern that appraisal management company fees are an acceptable component of the
AI was joined by the American Society of Farm Managers and Rural Appraisers, the American Society of
Appraisers and the National Association of Independent Fee Appraisers in sending the letter. The groups
urged the Fed not to adopt an interim rule, set to take effect April 1, that was “inconsistent, or
alternatively, weak, ineffective and contrary to the spirit” of the Dodd-Frank Act’s appraisal provisions.
Under the IFR, lenders and their agents are provided with two presumptions of compliance in terms of
paying “reasonable and customary fees,” according to the Appraisal Institute’s letter. Under the first, the
amount of compensation must be reasonably related with recent rates (last 12 months) for appraisal
services performed in the geographic market of the property. The creditor or its agent must identify recent
rates and make any adjustments necessary to account for specific factors, such as the type of property,
the scope of work and the fee appraiser's qualifications. The creditor and its agent cannot engage in any
anticompetitive actions in violation of state or federal law that affect the rate of compensation paid to fee
appraisers, such as price-fixing or restricting others from entering the market.
At issue is the Fed’s commentary on the first presumption, in which it states that AMC fees are an
acceptable component of the factors used by creditors and their agents to establish compliance with the
statute’s customary and reasonable mandate.
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Unlike the first presumption, the second presumption does not include consideration of compensation
paid to fee appraisers for appraisals ordered by appraisal management companies. Instead, a lender or
agent is presumed to comply if it bases its rate on third-party information, including fee schedules, studies
and surveys prepared by independent third parties such as government agencies, academic institutions
and private research firms, in the geographic market of the property being appraised.
“We believe that the Federal Reserve has incorrectly interpreted Congress’ plain language, intent and
public policy purposes by allowing the consideration of fees paid by AMCs under the first presumption of
compliance with customary and reasonable fee requirements imposed by the Dodd-Frank Act and these
regulations,” the organizations wrote. “Our groups strongly urge the Board to amend the first presumption
to explicitly exclude fees paid by AMCs from consideration under the first presumption, so that it comports
with the statute and the second presumption of compliance, which the Board correctly interpreted and
implemented in the proposed interim final rule.”
The organizations also urged the Fed to adopt certain safe harbors for lenders and agents who use the
second presumption of compliance when relying on objective, third-party fee studies and surveys which
comport with generally accepted survey methodologies. The organizations also recommended the Fed
use their authority under the Real Estate Settlement Procedures Act to require the separate disclosure of
fees paid to appraisers and fees paid to AMCs on the HUD-1 form.
To view the full comment letter, visit
Loan Modifications Decline, Foreclosures Spike in Third Quarter
The number of new residential loan modifications fell in the third quarter to 470,321, down 17 percent
from the previous quarter and 32 percent from a year ago, according to a Dec. 29 joint news release from
the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
“You’ll probably see some more stabilization now,” Bruce Krueger, lead mortgage expert for the Office of
the Comptroller, said in a Dec. 29 conference call, Bloomberg reported. “I really can’t forecast whether
there’s going to be a continuing decline, but I think we’re going to see more stability.”
Loan modifications fell in the third quarter as more delinquent homeowners lost their properties,
Bloomberg reported. The number of foreclosures and short sales rose to 244,840 in the third quarter, up
63 percent from a year ago and 11 percent from the previous quarter.
“Completed foreclosures, which have risen for six consecutive quarters, are expected to continue rising
as servicers and borrowers exhaust home retention options to assist borrowers with seriously delinquent
mortgages,” the Treasury Department said in an accompanying report.
The number of homeowners who qualified for permanent loan modifications through the government’s
main program, Home Affordable Modification Program, totaled 504,648 as of November, short of its 3
million target, the Treasury Department said, while an additional 1.9 million homeowners started loan
modifications under private programs.
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Meanwhile, data from Jacksonville, Fla.-based mortgage servicing and information company Lender
Processing Services Inc. showed that 6.92 million properties were delinquent or in foreclosure as of Nov.
30, down from the 8.12 million peak in January 2010, Bloomberg reported. In November, the number of
foreclosure filings plunged 14 percent from a year ago – reaching a two-year low – according to a Dec. 16
report from RealtyTrac Inc. cited by Bloomberg.
Economist Predictions: Housing, Jobs to Barely Improve in 2011, or 2012
Economists are skeptical about the recovery of the housing and job markets heading into 2011, according
to a CNNMoney.com survey released Dec. 22. The overriding sentiment of the survey indicated that
home prices will remain flat in 2011 before increasing 2.2 percent in 2012.
According to the survey of 23 leading economists, December’s unemployment rate should fall to 9.7
percent, down 0.1 percent from November’s rate. The rate is expected to improve slightly by the end of
next year to just under 9 percent, and should drop to 8.2 percent by the end of 2012. However, most
respondents indicated that unemployment will not dip below 8 percent until 2013.
Survey respondents indicated that the annual growth rate for fourth quarter 2010 should reach 3.1
percent, up from the 2.5 percent rate predicted three months ago and up from the second quarter rate of
2.6 percent. Meanwhile, economists have revised that annual growth rate estimate for 2011 from 2.8
percent to 3.3 percent, with 2012’s rate increasing to 3.4 percent.
"If you go back and look at forecasts a year ago, economists generally got growth right, but they got
unemployment wrong," John Ryding, chief economist of New York-based consultant RDQ Economics,
told CNNMoney. "We probably need 5 percent growth to significantly lower unemployment. It's just a
question of how deep a hole we're digging out of."
For more information on CNNMoney’s survey and to view individual participant responses, visit
Pending Home Sales Recovery Continues; 2011 Improvements Dependent
on Job Market
The National Association of Realtors’ pending home sales index, released Dec. 30, rose 3.5 percent in
November, continuing its upward trend over the past five months. The index is down 5 percent from the
same period a year ago.
The index increased to 92.2 in November from October’s downwardly revised figure of 89.1. An index of
100 is equal to the average level of contract activity during 2001, which was the first year NAR examined
existing-home sales data.
NAR Chief Economist Lawrence Yun said affordable housing and improving economic conditions are
attracting homebuyers. “In addition to exceptional affordability conditions, steady improvements in the
economy are helping bring buyers into the market,” Yun said in an accompanying news release. “But
further gains are needed to reach normal levels of sales activity.”
By region, the pending home sales index in the West jumped 18.2 percent in November to 123.3, up 0.4
percent from a year ago. The Northeast climbed 1.8 percent to 72.6, down 6.2 percent from a year ago.
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The Midwest slipped 4.2 percent to 78.3, down 7.7 percent from a year ago. The South fell 1.8 percent to
91.4, down 7.2 percent from a year ago. The West inched down 0.4 percent to 104.3, down 15.6 percent
from a year ago.
Meanwhile, NAR said it expects the 30-year fixed rate mortgage to increase to 5.3 percent by the end of
2011, and unemployment to drop to 9.2 percent. Yun said gross domestic product should grow 2.5
percent in 2011, while the Consumer Price Index should climb 2.3 percent.
“All the indicator trends are pointing to a gradual housing recovery. Home price prospects will vary
depending largely upon local job market conditions,” Yun said. “The national median home price,
however, is expected to remain stable even with a continuing flow of distressed properties coming onto
the market, as long as there is a steady demand of financially healthy homebuyers.”
Existing home sales are projected to rise about 8 percent in 2011 to 5.2 million units, with an additional
gain of 4 percent in 2012, according to NAR. The median existing home price also is expected to inch up
0.6 percent in 2011 to $173,700. Although it is expected to remain below historic averages, new home
sales are projected to increase 24 percent in 2011 to 392,000 units, while housing starts is forecasted to
jump 21 percent to 716,000 units.
New Home Sales Rebound in November
New single-family home sales jumped 5.5 percent to a seasonally adjusted annual rate of 290,000 units
in November from the previous month’s near-record low, according to Department of Commerce data
released Dec. 23. New home sales are down 21.2 percent from November of last year.
Sales in the West and South climbed 37.3 percent and 5.8 percent, respectively, in November from the
previous month. However, sales in the Northeast and Midwest plunged 26.7 percent and 13.2 percent,
Median new home prices logged in at $213,000 in November, while the average sales price came in at
$268,700, according to Commerce Department data.
New home inventory fell in November from the previous month to 197,000 units on a seasonally adjusted
basis, according to Commerce Department data. Based on the current sales pace, there is now an 8.2-
month supply of new homes on the market on a seasonally adjusted basis, down from October’s supply
of 8.6 months.
November Construction Spending Rises: Commerce Department
Spending on construction in the U.S. inched up $810.2 billion in November, according to a U.S.
Commerce Department report released Jan. 3. November’s increase marks a 0.4 percent increase from
October’s revised estimate of $806.7 billion.
Despite the projected increase over the previous month, the November figure remains 6 percent below
the November 2009 estimate of $861.5 billion.
During the first 11 months of this year, construction spending has amounted to $753.9 billion, or 10.6
percent below the $843.1 billion for the same period in 2009, according to the Commerce Department.
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In the private sector, spending on construction through November was at a seasonally adjusted annual
rate of $491.8 billion, 0.3 percent higher than the revised October estimate of $490.5 billion, the
Commerce Department reported. Residential construction was at a seasonally adjusted annual rate of
$235.7 billion in November, 0.7 percent above the revised October estimate of $234.1 billion, while
nonresidential construction was at a seasonally adjusted annual rate of $256.1 billion, 0.1 percent below
the revised October estimate of $256.3 billion.
In the public sector, the estimated seasonally adjusted annual rate of construction spending was $318.5
billion, 0.7 percent above the revised October estimate of $316.2 billion. According to the Commerce
Department, educational construction was at a seasonally adjusted annual rate of $73.4 billion, 1 percent
above the revised October estimate of $72.7 billion. At the same time, highway construction was at a
seasonally adjusted annual rate of $86.8 billion, 1 percent below the revised October estimate of $87.7
To view the Commerce Department’s latest construction report, visit
www.census.gov/const/C30/release.pdf. Data for December will be released Feb. 1.
Fixed Rate Mortgages Remain at Historically Low Levels: Freddie Mac
Despite increases in most categories, mortgage rates continue to remain at incredibly low levels,
according to Freddie Mac's Dec. 30 Weekly Primary Mortgage Market Survey.
The 30-year fixed rate mortgage inched up 0.05 percent from the previous week to 4.86 percent, down
from 5.14 percent a year ago. The 15-year fixed rate also rose 0.05 percent to 4.2 percent, down from
4.54 percent a year ago. Meanwhile, five-year Treasury-indexed adjustable-rate mortgages increased
0.02 percent to 3.77 percent, down from 4.44 percent a year ago, while one-year rates fell 0.14 percent to
3.26 percent, down from 4.33 percent a year ago.
“Interest rates on fixed mortgages and the five-year hybrid ARM rose slightly over the holiday week, but
we’re still below the year’s highs set in the first half of 2010,” Freddie Mac Chief Economist Frank Nothaft
said in an accompanying news release. “For the year as a whole, 30-year fixed mortgage rates averaged
just below 4.7 percent, which represented the lowest annual average since 1955 when secondary market
yields on FHA mortgages were above 4.6 percent and the average price of a home was $22,000.”
For the complete survey, including regional breakdown, visit
MBA Weekly Mortgage Survey Shows Increase in Applications after
After losing ground the week before Christmas, mortgage application activity increased the week ending
Dec. 31 from the prior week, according to the Mortgage Bankers Association’s weekly Mortgage
The survey, released Jan. 5, showed that the Market Composite Index, which measures mortgage loan
application activity, increased 2.3 percent on a seasonally adjusted basis from the previous week. On a
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non-adjusted basis, the index slid 10 percent from the previous week. The Refinance Index increased 3.1
percent from the previous week.
Refinancing activity made up 71 percent of applications, up from 70.3 percent the previous week.
The MBA’s Dec. 31 Purchase Index inched down 0.8 percent from the previous week on a seasonally
adjusted basis. On a non-adjusted basis, the index decreased 12.2 percent from the previous week, down
6.1 percent from a year ago.
The average rate on a 30-year fixed loan decreased to 4.82 percent from the prior week’s 4.93 percent,
while points, including origination fees, increased from 0.63 to 1.11 for 80 percent loan-to-value ratio
loans, according to the MBA. The average rate on a 15-year fixed loan increased from 4.22 percent to
4.23 percent, while points, including origination fees, nudged down from 1.34 to 1.
For a recap of the entire two weeks, visit
Single-family Home Prices Rise in October: Case-Shiller Study
Home prices fell in all 20 metropolitan statistical areas as well as the 10- and 20-city composites in
October compared to September, according to the Standard & Poor’s/Case-Shiller Home Prices Indices
released Dec. 28. The 10-city composite was down 1.2 percent and the 20-city composite was down 1.3
With a drop of 2.9 percent, Atlanta posted the largest monthly decline, with 14 other metropolitan
statistical areas also posting drops of 1 percent or more in October compared to the previous month.
Compared to the previous year, 18 of the 20 metropolitan statistical areas, as well as both composites,
showed a deceleration in the annual growth rate. The 10-city composite was up only 0.2 percent
compared to a year ago, while the 20-city was down 0.8 percent.
“There is no good news in October’s report. Home prices across the country continue to fall. The trends
we have seen over the past few months have not changed.” David Blitzer, chair of Standard & Poor’s
Index Committee, said in an accompanying news release. “The tax incentives are over and the national
economy remained lackluster in October. … Existing homes sales and housing starts have been reported
for both October and November, and neither is giving any sense of optimism.”
Blitzer noted that home sales are down more than 25 percent on a year-over-year basis, inventory is
about 50 percent above where it was a year ago and housing starts are still hovering near 30-year lows.
According to the report, home prices across the country were at mid-2003 levels as of October. From
peak levels, the 10-city composite was down 29.7 percent as of October and the 20-city composite was
down 29.6 percent.
The report showed that average home prices in Detroit are more than 30 percent below their January
2000 values, while Las Vegas, Cleveland and Atlanta are nearing their 2000 levels. Overall, Los Angeles,
New York and Washington have fared the best, retaining most of their mid-2000s price gains.
64 | Appraiser News Online Vol. 12, No. 1/2, January 2011
To view Standard & Poor’s latest Case-Shiller Home Price Indices, visit
Home Prices Decline in October, Down by 4 Percent Year over Year:
U.S. home prices declined for the third month in a row in October, according to CoreLogic’s October
Home Price Index released Dec. 16. National home prices, including distressed sales, declined by 3.93
percent compared to October 2009 after declining by 2.43 percent in September compared to September
September 2010 data was revised from an earlier projection of a 2.79 percent decline, according to
CoreLogic, a leading provider of information, analytics and business services. Excluding distressed sales,
year-over-year prices declined by 1.5 percent in October compared to October 2009.
The five states with the highest appreciation in October were: North Dakota, which rose 4.61 percent,
West Virginia (3.43 percent), Vermont (2.59 percent), Maine (1.97 percent) and Wyoming (1.93 percent).
Not including distressed sales, the five states with the highest appreciation in October were: Wyoming,
which rose 5.67 percent, North Dakota (5.35 percent), Hawaii (2.97 percent), New York (2.93 percent)
and Vermont (2.84 percent).
Including distressed sales, the five states with the greatest depreciation in October were: Idaho, which
dropped 15.06 percent, Alabama (down 9.3 percent), Oregon (8.5 percent), Arizona (8.25 percent) and
Florida (8 percent). Excluding distressed sales, the five states with the greatest depreciation were: Idaho,
which dropped 10.6 percent, Arizona (down 6.37 percent), Washington (down 5.94 percent), Michigan
(down 5.91 percent) and Oregon (down 5.6 percent).
Including distressed transactions, the peak-to-current change in the national HPI from April 2006 to
October 2010 was –30.2 percent. Excluding distressed transactions, the peak-to-current change in the
HPI for the same period was –20.9 percent, according to CoreLogic.
“We are continuing to see the weakness in home prices without artificial government support in the form
of tax credits. The stubborn unemployment levels and seasonality are also coming into play,” said Mark
Fleming, chief economist for CoreLogic. “When you combine these factors with high shadow and visible
inventories, the prospect for a housing recovery in early 2011 is fading.”
Full-month October 2010 national, state-level and top CBSA-level data can be found at
Basel to Address Liquidity Standards, Global Resolution Mechanisms in
The Basel Committee on Banking Supervision is expected to tackle liquidity standards, a capital
surcharge on the biggest lenders and a global resolution mechanism for failing firms in 2011, Bloomberg
Businessweek reported Dec. 22.
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The committee’s most significant achievement in 2010 was an agreement to increase the amount of
capital banks need to hold, but this rule won’t go into full effect for eight years. That rule was part of the
more than 400 pages of rules drafted via dozens of meetings in 2010.
In July, the committee agreed to narrow the definition of what counts as bank capital, focusing on
common equity, which includes money received for selling shares and retained earnings. During the
crisis, other forms of capital permitted under current rules – future benefits from servicing mortgages and
tax deferrals – failed to provide a buffer against losses. Those are mostly prohibited under Basel III, the
latest round of rules, according to Businessweek.
Also in July, the Basel committee adopted a 3 percent leverage rule, meaning that for every $3 of capital,
a bank can borrow no more than $97. While the percentage is tentative and subject to review before it
goes into effect, it has already been scrutinized by banks in Europe and Asia, which say it will restrict their
borrowing capacity and inhibit lending.
But there is evidence that this is not the case. Jeremy Stein, a professor of economics at Harvard
University, and two colleagues looked at data going back to the 1920s and found no correlation between
higher capital ratios and costlier lending by banks. They published their findings in a July paper. In an
October paper, Anat Admati and three fellow professors at Stanford University also concluded that
increased equity levels don’t restrict lending, according to Businessweek.
Nonetheless, a majority of the 27 European Union countries oppose adopting the ratio, people close to
the discussions told Businessweek. Therefore, the EU may exclude the leverage ratio when it converts
Basel rules into law in 2011.
A global leverage ratio that would cap banks’ borrowing was also discussed in July. When the committee
was debating how to define capital, the U.S. agreed to some easing in exchange for Germany and France
accepting a leverage ratio, some members told Businessweek. Supporters of the leverage ratio, or equity
as a percentage of liabilities, say it’s a more straightforward way to prevent lenders from becoming too
indebted. Unlike capital ratios, which are based on risk-weighting and can be manipulated, the leverage
ratio counts all assets regardless of their risk, Businessweek reported.
U.S. Federal Deposit Insurance Corp. Chair Sheila Bair, who sits on the Basel committee’s top decision-
making body, first advocated the idea of an international leverage ratio in a speech to committee
members in Merida, Mexico, in 2006. She still expects global adoption, according to Businessweek.
Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, said the leverage
ratio may not make it in the end. “Beyond tightening the definition of capital, nothing can be really counted
as having been achieved,” Matthews said of the Basel committee’s work in 2010. “There’s continuing
bickering over liquidity and leverage regimes. They’re still studying too-big-to-fail issues, and it might be
too late to finalize them as events take them over,” she told Businessweek.
New liquidity rules are still in limbo. After banks showed they’d have to raise as much as $6 trillion in new
long-term debt to be in compliance with the committee’s liquidity standard, the committee delayed a final
decision on the rule, setting up an “observation period” of four to six years. The rules will likely be revised,
according to members.
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The collapse of Lehman Brothers Holdings Inc. showed the need for a cross-border mechanism to wind
down failing banks that have a global reach. More than 80 worldwide proceedings against the firm have
complicated recovery by creditors and destroyed much of the value of its assets, Businessweek reported.
The Financial Stability Board, which includes most Basel committee members as well as finance ministers
from the Group of 20 nations, struggled to come up with a resolution mechanism in 2010. The FSB
postponed a decision until 2011, members told Businessweek. The group has been unable to agree on
how to distribute losses among countries when a global bank fails and how different legal jurisdictions can
recognize a single authority to pay creditors, the members said.
The FSB is also responsible for determining which banks are systemically important and whether to
impose additional capital requirements on them. The group may propose setting up national resolution
authorities, rather than an international body, members told Businessweek.
According to Bair, another remaining challenge is the reliance on banks’ internal models for measuring
risk. While smaller banks use standard risk-weightings prescribed by Basel, the largest banks use their
own formulas to determine how much risk to assign their assets in calculating capital ratios. That leads to
wide variations in how risk-weighted assets are tallied, Bair told Businessweek.
2010 Ends as Worst Year for Bank Failures Since 1992
According to the Federal Deposit Insurance Corp., the 157 U.S. banks that failed in 2010 – up from 140 in
2009 – was more than in any year since 1992, The Washington Post reported Dec. 28. As recently as
2006, there were none.
The FDIC's list of "problem" banks – those whose weaknesses "threaten their continued financial viability"
– numbered 860 as of Sept. 30, the highest since 1993. Historically, about a fifth of banks on the watch
list end up failing, the Post reported.
As of Sept. 30, bank failures left the FDIC insurance fund with a balance of negative $8 billion, but the
agency predicts that it will have more than enough money to meet the anticipated cost of failures through
2014, as the worst is thought to be over, according to agency spokesman Greg Hernandez. "Going
forward, the FDIC looks to see fewer failures," Hernandez told the Post.
The trouble is already lessening due to the fact that on average, the banks that failed in 2010 were much
smaller than the 2009 failures. The 2010 bank failures had assets totaling $92.1 billion, a decrease of
45.7 percent from the $169.7 billion in assets of the banks that failed in 2009. About half of the 2010
failures involved banks headquartered in four states: California, Florida, Georgia and Illinois, according to
Some of the nation's largest banks survived as a result of government assistance and are not included in
the list of failures. In 2009, for instance, aid went to eight banks – including Countrywide and Bank of
America – whose combined assets totaled $1.9 trillion, according to the Post.
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The FDIC’s list of failed institutions includes community banks that would not be considered "too big to
fail." The loans that brought these banks down were mostly commercial loans, which separates them from
the banking giants whose problems stemmed from home mortgages, Hernandez told the Post.
FASB Interim Chair Moves into Top Spot
Leslie F. Seidman has been named chair of the Financial Accounting Standards Board, The New York
Times reported Dec. 23. Seidman has been a member of the board since 2003 and acting chair since
September. Her term ends in 2013, although she could be reappointed, according to the Times.
John J. Brennan, the Financial Accounting Foundation’s chairman, told the Times that Seidman would
bring “both unparalleled standard-setting experience and outstanding leadership skills to her new role.”
Seidman, a former auditor and accountant for JPMorgan, assumes her new position at a time of
uncertainty for the board, since its role may change if the Securities and Exchange Commission decides
to allow American companies to use rules promulgated by the International Accounting Standards Board,
according to the Times.
The two standards boards hope to implement new accounting standards by June and are in discussions
regarding three areas – accounting for financial instruments, leases and revenue recognition. All the
proposals drew extensive public comment, some hostile, which the boards now must analyze, the Times
“The challenge before us,” Seidman told the Times, “is to work through all the feedback we have
received, and end up with standards that are of high quality and also are understandable and
implementable by companies, so we can restore confidence in financial reporting on these important
Jan. 11 AI Webinar to Cover Use of Investor Surveys
During the Appraisal Institute’s Jan. 11 webinar, “Understanding and Using Investor Surveys Effectively,”
panelists will discuss why surveys are excellent vehicles for certain situations, the inherent limitations of
surveys and the correct way to use them.
Panelists will describe how to access the Real Estate Investor Survey, formerly known as the
PricewaterhouseCoopers Korpacz Real Estate Investor Survey, and how the data is compiled and
refined. Other topics will include: typical questions asked by survey users; uses for surveys in addition to
simply obtaining cap rates and yield rates; and how to use the right survey.
The panelists are David C. Lennhoff, MAI, SRA, president of PGH Consulting, LLC; Susan M. Smith, MAI,
a director in the asset management group of PricewaterhouseCoopers; and David Wentworth, vice
president of research for the American Council of Life Insurers.
The two-hour webinar will be presented at noon CST on Jan. 11. The webinar is $35 for AI members and
$75 for nonmembers. It is approved for two hours of AI credit; it is not approved for appraiser state
continuing education credit. For more information and to register, visit
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Two AI Green Courses to Premiere in January
Two one-day “green” courses from the Appraisal Institute, an internationally recognized leader in green
valuation, will premiere in January in Chicago: “Introduction to Green Buildings: Principles & Concepts”
and “Case Studies in Appraising Green Residential Buildings.”
“Introduction to Green Buildings: Principles & Concepts,” premiering Jan. 24, focuses on the evolution of
green buildings, the concept of sustainability in buildings, and the principles, practices and components
that distinguish sustainable from traditional buildings.
Topics that will be covered include: competency and Uniform Standards of Professional Appraisal
Practice implications of appraising green buildings; the evolution and six elements of green buildings;
benefits and costs of green buildings; green building certification and ratings programs for energy
conservation and sustainability; primary areas of green reporting; highest and best use implications; and
the three approaches to value in the context of green buildings.
Course developer H. Taylor Watkins, an AI Associate member, is the president of Watkins & Associates,
a Portland, Ore.-based appraisal firm. The firm has specialized in data collection on and appraisal of
green properties in the Portland area for more than seven years.
“Case Studies in Appraising Green Residential Buildings,” premiering Jan. 25, will feature in-depth, real-
life case studies from 2009 and 2010 provided by builders, real estate agents and appraisers.
Topics include: ways to assess potential contributory value of green or energy-efficient items; how gross
rent multiplier analysis and paired analysis support adjustments for green building; issues requiring
careful verification of comparables for green buildings; and the three approaches to value in context of
green residential buildings.
The developer, Sandra Adomatis, SRA, has been appraising Green Certified and Energy Star houses in
Florida since 2006. She has co-presented seminars on the valuation of high performance houses with
Energy Star and was a reviewer for the Appraisal Institute’s “Valuation of Green Residential Properties”
seminar. Independently, Adomatis developed a seminar, “Inspecting the Residential Green House,” and
has spoken about valuing high performance houses at home builder association meetings across Florida
Each course is approved for eight hours of Appraisal Institute continuing education credit (including one-
hour exam). The cost for each course is $300 for AI members; $350 for nonmembers. To register for
“Introduction to Green Buildings,” visit
http://appraisalinstitute.org/education/course_descrb/Default.aspx?prgrm_nbr=826&key_type=C . To
register for “Case Studies,” visit
Discuss Now: Appraisal Institute members can discuss this story by logging in to the Sustainable Green
Buildings Community of Practice.
69 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Inside the Institute
AI Media Coverage Potentially Seen by More than 2 Billion in 2010
Media coverage of the Appraisal Institute and its members was potentially seen, read or heard by an
audience of more than 2 billion in 2010, resulting in a publicity value of more than $1.5 million, the
Appraisal Institute announced Jan. 26.
Last year the Appraisal Institute and its members appeared in 2,005 stories that ran in 746 newspapers,
magazines, television and radio stations and online media outlets. This coverage generated
2,044,115,560 impressions (defined as the number of times a story may have been read, seen or heard).
This resulted in a publicity value of $1,456,468 (based on a vendor’s proprietary formula that
approximates how much the coverage is worth).
The Appraisal Institute and its members regularly appeared in national media coverage in 2010: daily
newspapers such as The Wall Street Journal, USA Today and The New York Times; television networks
such as CNBC and PBS; radio networks such as NPR; magazines such as Money, Ladies’ Homes
Journal and Smart Money; and online sites such as Bloomberg, MSN and CNNMoney. AI and its
members also were featured in local media, appearing in statewide newspapers, on local radio stations
and on network affiliate television newscasts across the country.
AI and its members regularly were quoted as national experts, addressing issues such as the Dodd-Frank
Act, green valuation, the Gulf oil spill, home improvement projects and a wide variety of other topics.
To see the latest appraisal-related media coverage, go to the members-only area of the Appraisal
Institute website at www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the
headlines under “AI in the News.” Media coverage is updated daily.
AI in the News: AI Member Featured on Local Television News
Gary Crabtree, SRA, of the Central California Chapter, was featured Jan. 21 in a KGET-17 (ABC) story in
Bakersfield, Calif., regarding allegations of mortgage fraud he made against real estate firm Crisp and
Cole in 2006.
Now, Crabtree can enjoy a measure of vindication after blowing the whistle, KGET reported. After federal
officials investigated Crabtree’s allegations over the past four years, indictments were recently issued to
Crisp and Cole.
"I did what was right. I reported the crime, but it was much bigger than most people thought it was.
Victims? There were numerous victims. The straw buyers who lost their credit and homes and the lenders
themselves," Crabtree told KGET. "In this particular case, losses of up to $40 million, and the taxpayers
lose because we're the ones who had to bail them out. And when I started seeing sales that didn't make
any sense in the market, I started doing additional work and uncovered this can of worms."
Other Appraisal Institute members appearing in local media coverage included: James Jones, Associate
member, Honolulu Star Advertiser; Michael Hobbs, Associate member, Today’s Chicago Woman
magazine; Jeffrey Bowling, MAI, East Cobber (Marietta, Ga.); Christopher Starkey, MAI, Florida Real
Estate Journal; Herbert Sass III, MAI, SRA, Charleston (S.C.) Post and Courier; Tom Cook, MAI, Greater
70 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Baton Rouge (La.) Business Report; Ray Carroll, Marco Eagle (Marco Island, Fla.); and Walter Price,
SRA, Orlando (Fla.) Sentinel.
Appearing in national media coverage this past week were Greg Hartmann, MAI, on
businessjournals.com, and Jonathan Miller, Associate member, in Bloomberg Businessweek.
All of those stories are among the recent media coverage currently included in the “AI in the News”
feature on the members-only section of the Appraisal Institute website. To access, visit
www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the headlines under “AI in
the News.” Media coverage is updated daily and also includes the latest news releases from the
AI in the News: AI’s Consumer Tips Featured across the Country
The Appraisal Institute garnered widespread media coverage across the country – appearing in nearly
250 print and online media outlets – after releasing consumer tips that provide guidance for homeowners
and buyers seeking to ensure sales are completed in a timely manner. The tips potentially were seen by
millions of readers.
"Too many consumers in this struggling real estate market face problems with appraisals when
attempting to buy or sell a home," said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. "But
rather than passively endure delays in closing a sale, homeowners and buyers can take proactive steps
to avoid pitfalls."
The Appraisal Institute’s list of helpful tips for consumers is available at:
Also appearing in national media coverage this past week were Fitzhugh Stout, MAI, in
TradingMarkets.com; Ruth Agnese, MAI, in Bisnow.com; Daniel Lesser, MAI, in at least 29 business
journals and other news sites; and Jonathan Miller, Associate member, in Bloomberg Businessweek.
Miller also appeared in the New York Post.
Those stories are among the recent media coverage currently included in the “AI in the News” feature on
the members-only section of the Appraisal Institute website.
Appraisal Institute members appearing in local media coverage included: David Heinowski, MAI,
Dearborn (Mich.) Times-Herald; Mark Hepner, SRA, Daily Journal of Commerce (Portland, Ore.); Tom
Cook, MAI, Greater Baton Rouge (La.) Business Report; Lee Pallardy, MAI, RM, Tampa (Fla.) Tribune;
and Maria Hopkins, SRA, Michael Tarello, MAI, Andrew LeMay, SRA, SRPA, George Shahwah Jr., MAI,
and William McGovern, SRA, in the New England Real Estate Journal.
To see the latest media coverage about the real estate valuation profession, the Appraisal Institute and its
members, go to the members-only area of the Appraisal Institute website at
www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the headlines under “AI in
the News.” Media coverage is updated daily and also includes the latest news releases from the
71 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Appraisal Institute Refreshes Website for 2011
The Appraisal Institute unveiled upgrades to its website Jan. 12, including a revised homepage, new pop-
up roll-over menus that deliver a “sneak peek” of key pages in each section, and a new “Choose Your
Path” drop-down menu to enable users to locate relevant content in fewer clicks.
The website now features jumbo roll-over menus that provide a preview of all items in each section. Each
menu features colorful ads to help users stay up-to-date on the latest AI news and offerings. Additionally,
the new drop-down menu, “Choose Your Path,” has been added to the upper left corner of the
homepage, which allows members and other key audiences to navigate to relevant content simply by
selecting their current needs from the list, including: members, aspiring appraisers, homeowners, lenders,
international constituents, college students, attorneys, accountants and media.
Other homepage revisions include relocating the AI Service Center’s toll-free number as well as links to
the “Join” and “Media” pages to the top right corner and a new call-out button for AI Communities in the
bottom left corner. Through a reduction in ad space, and the revised placement of advertising to the
center of the page, the new homepage also features more room for AI and industry news and topics.
The AI also created a new "My Appraisal Institute" drop-down menu to help members and chapters
navigate the resources and online tools that are available to members/chapters only.
Visit www.appraisalinstitute.org for the new interface and increased functionality.
AI in the News: MAI Member’s article Featured in Distressed Assets
An article written by Peter Brooks, MAI, from the Metropolitan New York Chapter is featured in the
January 2011 issue of Distressed Assets Investor magazine. In the article, Brooks questions whether a
new real estate bubble is forming.
Brooks wrote that although the volume of distressed property and loan sales continues to be
disappointing, certain high-profile transactions have attracted multiple bidders, leading to higher than
anticipated sale prices.
“The new bubble is not yet fully developed, but it is growing as we speak,” Brooks wrote. “If this
phenomenon leads to euphoric price levels before real estate fundamentals recover, the inevitable bust
will follow quickly.”
Also appearing in national media coverage this past week was Jonathan Miller, Associate member, in
Financial News USA, RISMedia.com, Targeted News Service, Inman News, Yahoo! Finance and
Those stories are among the recent media coverage currently included in the “AI in the News” feature on
the members-only section of the Appraisal Institute website.
Appraisal Institute members appearing in local media coverage included: Scott Churchill, SRA, Pittsburgh
Tribune-Review; Dennis Lopez, MAI, SRA, Wisconsin State Farmer, The (Phoenix) Arizona Republic and
Tucson (Ariz.) Citizen; Larry Hirsh, MAI, SRPA, SRA, The (Wilmington, Del.) News Journal; Chris Jones,
72 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Associate member, Pensacola (Fla.) News Journal; Julian Stokes, MAI, Sarasota (Fla.) Herald Tribune;
Mark Seccombe, MAI, SRA, INDenverTimes.com; and Tom Cook, MAI, The Greater Baton Rouge
To see the latest media coverage about the real estate valuation profession, the Appraisal Institute and its
members, go to the members-only area of the Appraisal Institute website at
www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the headlines under “AI in
the News.” Media coverage is updated daily and also includes the latest news releases from the
AI Recognizes ‘Volunteer of Distinction’ Honoree for January
The Appraisal Institute recognized Jeffrey Bowling, MAI, a member of the Atlanta Area Chapter, as its
Region IX “Volunteer of Distinction” for January.
The Appraisal Institute’s member recognition program honors one member in good standing in each
region each month for their service to the organization, the profession and their community.
Bowling has been involved in the real estate profession for more than three decades, during which time
he has served as a director on the Atlanta Chapter of the Appraisal Institute’s Board of Directors and as a
member of its Membership Development Retention Committee. Bowling has mentored nearly two dozen
appraiser trainees entering the appraisal profession and has served as an instructor of appraisal
education. In his community, he volunteers his time with the Tom Glavine/Georgia Transplant Foundation.
He also serves as a member of the Cobb County, Georgia State University Alumni Association and
Buckhead Church. He holds a Bachelor of Business Administration degree from Georgia State University.
He earned his MAI designation in 1992.
To learn more about the Appraisal Institute’s December Volunteer of Distinction honorees, visit
Nominations for 2012 AI Vice President Due Feb. 4
The Appraisal Institute is seeking the names of members interested in serving as the organization’s 2012
vice president. The 2012 vice president will become president elect in 2013, president in 2014and
immediate past president in 2015. Deadline for submissions is Feb. 4.
Full qualifications for 2012 vice president can be found on “My Appraisal Institute” under the “About Us”
tab, under “National Officers and Committees.” Nominees cannot serve as a member of National
Nominating Committee at any time during the year in which his or her candidacy would be considered.
This does not preclude consideration for the office in future years.
Those interested in serving or recommending someone for the position, should submit recommendations
in writing to: Leslie P. Sellers, MAI, SRA; Chair, 2011 National Nominating Committee; c/o Darlene Grass;
Appraisal Institute; 550 W. Van Buren St.; Suite 1000; Chicago, Ill. 60607.
AI in the News: SRA Member Featured on PBS “Nightly Business Report”
Russ Haraus, SRA, of the Chicago Chapter was featured Dec. 28 in a PBS “Nightly Business Report”
story previewing the 2011 U.S. residential real estate market.
73 | Appraiser News Online Vol. 12, No. 1/2, January 2011
According to the report, seen by up to 2.6 million viewers, while mortgage rates are still near historic lows,
they have been trending upward in recent weeks. Haraus noted that this could spell trouble for sales and
home values, which have plummeted roughly 20 percent over the past three years.
“We may see somewhat of a pullback in the spring market price if that continues, and so we could see
somewhat of a price decline,” Haraus said.
Those stories are among the recent media coverage currently included in the “AI in the News” feature on
the members-only section of the Appraisal Institute website.
Also appearing in national media coverage this past week were Charlie Elliott Jr., MAI, SRA, in National
Mortgage Professional Magazine, and Jonathan Miller, Associate member, in The Wall Street Journal and
Appraisal Institute members appearing in local media coverage included: Dennis Lopez, MAI, SRA,
(Tucson) Arizona Daily Sun; Karen Mann, SRA, Sacramento (Calif.) Bee; George Bratcher Jr., MAI, Battle
Creek (Mich.) Enquirer; T.J. McCarthy, SRA, Northwest Indiana Times (Munster, Ind.); Chet Rogers, MAI,
and Patricia Amidon, MAI, Lewiston (Maine) Sun Journal; and Tom Cook, MAI, Greater Baton Rouge
To see the latest media coverage about the real estate valuation profession, the Appraisal Institute and its
members, go to the members-only area of the Appraisal Institute website at
www.appraisalinstitute.org/myappraisalinstitute/Default.aspx and click any of the headlines under “AI in
the News.” Media coverage is updated daily and also includes the latest news releases from the
Appraisal Institute Rounds Out 2010 with 28 New Designees
The Appraisal Institute designated 28 members in December, bringing to 279 the number of members
designated in 2010. Among those designated last month were 13 members who received the MAI
designation and 15 who received the SRA designation. For the year, 156 members received the MAI
designation, and 123 received the SRA designation.
Those receiving their MAI designation in December were: Michael Baldwin, MAI, Chicago; Darrell W.
Bullock, MAI, Sumner, Miss.; Yifan Chen, MAI, Shenyang, China; Hubert M. Geppert, MAI, Berlin,
Germany; Thomas J. Hawks, MAI, Overland Park, Kan.; Guo Jinlin, MAI, Beijing, China; John H.
Kjelstrom, MAI, Highlands Ranch, Colo.; Weiwen Li, MAI, Shenzhen, China; Yunhua Lu, MAI, Hangzhou,
China; Jun hui Luo, MAI, Beijing, China; Yasuyuki Mizuno, MAI, Nagoya, Japan; Stanley R. Sidor, MAI,
Tacoma, Wash.; and Liping Wang, MAI, Beijing, China.
Those receiving their SRA designation were: Trevor C. Hubbard, MAI, SRA, San Diego; Brian S. Barnes,
SRA, Akron, Ohio; Brian H. Brooks, SRA, Portland, Ore.; Cheryl L. Ewbank, SRA, Brownsburg, Ind.;
Ronald W. Inman, SRA, Indianapolis; Larry S. Jones, SRA, Lubbock, Texas; Randall J. Phillips, SRA,
Springfield, Ill.; Richard F. Phillips, Jr., SRA, Alexandria, Va.; Nicholas D. Pilz, SRA, Winter Garden, Fla.;
James R. Plante, SRA, Selmer, Tenn.; Sally Rea, SRA, Ventura, Calif.; J. Hans C. Schwab, SRA, East
74 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Lansing, Mich.; Jerry J. Sung, SRA, Arcadia, Calif.; Dwayne A. Toombs, SRA, La Vergne, Tenn.; J.
Christopher Tricomi, SRA, Warren, Ohio.
Designated members make a commitment to advanced education and defined ethical requirements. The
MAI designation is held by appraisers who are experienced in the valuation and evaluation of commercial,
industrial, residential and other types of properties, and who advise clients on real estate investment
decisions. The SRA designation is held by appraisers who are experienced in the analysis and valuation
of residential real property. Visit www.appraisalinstitute.org/membership/designated_mem.aspx for more
information on designations.
The Appraisal Institute regrets the passing of the following Designated members who were reported to
Appraiser News Online in December:
Thomas W. Appleby Sr., SRA, Oakhurst, N.J.; Andrea F. Applegate, MAI, Louisville, Ky.; Howard Drew,
MAI, SRA, Omaha, Neb.; Howard J. Johnston, MAI, Denver; Loren D. Leavitt, MAI, San Jose, Calif.;
Gaylord C. Lyon, MAI, Mobile, Ala.; and J. Kenneth Willison Jr., SRA, Waynesburg, Pa.
This information is listed in Appraiser News Online on a monthly basis. For a list covering the past several
years, go to the “In Memoriam” page of the Appraisal Institute website,
www.appraisalinstitute.org/findappraiser/memoriam.aspx, which is continually updated.
75 | Appraiser News Online Vol. 12, No. 1/2, January 2011
ECONOMIC INDICATORS – November 2010
Market Rates and Bond Yields
Nov10 May10 Nov09 May09 Nov08 Nov07
Reserve Bank Discount Rate 0.75 0.75 0.50 0.50 1.25 5.00
Prime Rate (monthly average) 3.25 3.25 3.25 3.25 4.00 7.50
Federal Funds Rate 0.19 0.20 0.12 0.18 0.39 4.49
3-Month Treasury Bills 0.14 0.16 0.05 0.18 0.19 3.27
6-Month Treasury Bills 0.18 0.22 0.15 0.30 0.73 3.46
3-Month Certificates of Deposit 0.27 0.45 0.21 0.57 2.36 4.97
LIBOR-3 month rate 0.40 0.48 0.45 1.30 3.11 5.02
U.S. 5-Year Bond 1.35 2.18 2.23 2.13 2.29 3.67
U.S. 10-Year Bond 2.76 3.42 3.40 3.29 3.53 4.15
U.S. 30-Year Bond 4.19 4.29 4.31 4.23 4.00 4.52
Municipal Tax Exempts (Aaa) 4.00 3.75 3.99 4.26 4.83 4.26
Municipal Tax Exempts (A) 4.86 4.44 4.84 5.25 5.68 4.56
Corporate Bonds (Aaa) 4.87 4.96 5.19 5.54 6.12 5.44
Corporate Bonds (A) 5.33 5.49 5.64 6.67 7.68 5.97
Corporate Bonds (Baa) 5.92 6.05 6.32 8.06 9.21 6.39
Stock Dividend Yields
Common Stocks—500 1.94 1.98 1.99 2.41 3.11 1.95
Industrial Production Index* 93.9 92.6 89.1 85.7 92.9 100.4
Unemployment (%) 9.8 9.7 10.0 9.4 6.8 4.7
Monetary Aggregates, daily avg.
†† †† †† ††
M1, $-Billions 1,831.9 1,706.0 1,687.5 1,608.5 1,523.2 1,363.8
†† †† †† ††
M2, $-Billions 8,804.2 8,573.0 8,523.3 8,436.7 7,982.1 7,425.0
Member Bank Borrowed Reserves
$-Billions n/a n/a n/a n/a n/a 0.366
Consumer Price Index
All Urban Consumers 218.8 218.2 216.3 213.9 212.4 210.2
3Q10 2Q10 3Q09 2Q09 3Q08 2Q08 3Q07
Per Capita Personal Disposable
Income Annual Rate in Current $s 36,792 36,704 35,888 36,115 36,060 36,556 34,579
Savings as % of DPI 5.8 6.2 5.6 7.2 3.6 4.8 1.8
* On June 25, 2010, the Federal Reserve Board advanced to 2007 the base year for the indexes of industrial production, capacity, and electric power
use. This follows the November 7, 2005, change to a 2002 baseline, from the previous 1997 baseline. Historical data has also been updated.
The Fed stopped releasing this figure in March 2008.
Source: Moody's Bond Record
Revised figures used
76 | Appraiser News Online Vol. 12, No. 1/2, January 2011
Conventional Home Mortgage Terms
Nov10 May10 Nov09 May09 Nov08 Nov07
New House Loans—U.S. Averages
Interest rate (%) 4.26 5.12 5.08 4.92 6.16 6.42
Term (years) 28.2 28.6 28.5 29.0 28.7 29.2
Loan ratio (%) 73.2 74.3 73.0 74.1 74.0 77.1
Price (thou. $) 328.9 328.1 312.9 342.7 346.4 366.8
Used House Loans—U.S. Averages
Interest rate (%) 4.54 5.09 5.09 4.95 6.26 6.41
Term (years) 28.0 27.3 27.9 28.2 28.7 28.9
Loan ratio (%) 75.4 74.1 74.1 74.2 77.4 79.4
Price (thou. $) 293.3 301.4 296.0 312.2 271.6 291.0
Conventional Home Mortgage Rates by Metropolitan Area
3Q10 3Q09 3Q08 3Q07
Atlanta 4.68 5.30 6.44 6.73
Boston-Lawrence-NH-ME-CT 4.55 4.98 6.12 6.65
Chicago-Gary-IN-WI 4.81 5.54 6.45 6.78
Cleveland-Akron 4.81 5.21 6.16 6.74
Dallas-Fort Worth 4.80 5.24 6.47 6.78
Denver-Boulder-Greely 4.69 5.36 6.46 6.74
Detroit-Ann Arbor-Flint 4.79 5.28 6.36 6.79
Houston-Galveston-Brazoria 4.65 5.33 6.48 6.84
Indianapolis 4.60 5.40 6.57 6.82
Kansas City, MO-KS 4.64 5.20 6.18 6.50
Los Angeles-Riverside 4.85 5.32 6.48 6.72
Miami-Fort Lauderdale 4.92 5.44 6.53 6.86
Milwaukee-Racine 4.63 5.30 6.47 6.76
Minneapolis-St. Paul-WI 4.61 5.30 6.37 6.65
New York-Long Island-N. NJ-CT 4.73 5.26 6.30 6.66
Philadelphia-Wilmington-NJ 4.71 5.33 6.27 6.73
Phoenix-Mesa 4.84 5.49 6.56 6.79
Pittsburgh 4.70 5.28 6.15 6.57
Portland-Salem 4.64 5.17 6.39 6.71
St. Louis-IL 4.77 5.23 6.58 6.88
San Diego 4.85 5.39 6.40 6.68
San Francisco-Oakland-San Jose 4.76 5.24 6.48 6.77
Seattle-Tacoma-Bremerton 4.65 5.15 6.28 6.72
Tampa-St. Petersburg-Clearwater 4.88 5.33 6.50 6.87
Washington, DC-Baltimore-VA 4.65 5.32 6.37 6.83
As of the first quarter 2003, the Federal Housing Finance Board no longer reported on the markets of Greensboro, Honolulu and Louisville.
Consolidated Metropolitan Statistical area
77 | Appraiser News Online Vol. 12, No. 1/2, January 2011