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					 Vol. 12, No. 5/6, March 2011

 Government Update—Commercial/General
    •    SEC Investigates CRE Restructuring [Posted March 9, 2011]
    •    San Francisco Fed Promotes Research Director to President [Posted March 9, 2011]
    •    IRS Includes Real Estate in Latest Plea for Disclosure [Posted March 2, 2011]

 Government Update—Residential
    •    House Committee Passes Bill to Kill Housing Relief Programs [Posted March 9, 2011]
    •    GSE Dissolution to Take Two Years to Commence: Geithner [Posted March 9, 2011]
    •    Freddie Sets 95 Percent Loan-to-Value Ratio [Posted March 9, 2011]
    •    OCC, FDIC Propose 20 Percent Down Payment Requirement [Posted March 9, 2011]
    •    Foreclosure Settlement Could Include Quotas [Posted March 9, 2011]
    •    Obama to Servicers: Pay into $20 Billion Foreclosure Fund [Posted March 2, 2011]
    •    Appraiser Identifiers Required under New Fannie Guidelines [Posted March 2, 2011]
    •    New Resource Available to Help Appraisers Adopt Uniform Appraisal Dataset [Posted March 2, 2011]
    •    FHA’s REO Inventory Volume Spikes 47 Percent; Worth $9.1 Billion [Posted March 2, 2011]
    •    GSEs Stem Losses in Fourth Quarter, Request More Aid [Posted March 2, 2011]
    •    GSEs Plan “Robo-Signing” Penalties, Anti-Foreclosure Rewards [Posted March 2, 2011]

 In the States
    •    Texas AMC Bill Calls for “Reasonable and Customary” Fees [Posted March 2, 2011]

 Around the Industry—Market Trends
    •    Residential Varied, Commercial Gaining Traction in Fed’s Latest Beige Book [Posted March 9, 2011]
    •    Housing Deflation Continues, Expect More Pressure in 2011: Zelman [Posted March 9, 2011]
    •    Home Prices to Drop 2.3 Percent this Year, Economists Say [Posted March 9, 2011]
    •    Construction Rate Dips Slightly in January: Commerce [Posted March 9, 2011]
    •    Attitudes toward Housing Warming: Fannie Mae Survey [Posted March 9, 2011]
    •    CRE Developments Coming Back to Life: The Wall Street Journal [Posted March 2, 2011]
    •    CRE Sales Double in 2010, Defaults Decline: Real Capital Analytics [Posted March 2, 2011]
    •    Office Rents to Grow Moderately in 2011: CBRE [Posted March 2, 2011]
    •    New Home Sales Drop 12.6 Percent: Commerce [Posted March 2, 2011]
    •    Pending Home Sales Index Eases for Second Consecutive Month: NAR [Posted March 2, 2011]
    •    Residential Originations to Drop by 40 Percent in First Quarter: MBA [Posted March 2, 2011]
    •    UK Rental Market Takes Off [Posted March 2, 2011]

 Around the Industry—Financial News
    •    FASB, IASB Water Down Lease Requirements [Posted March 9, 2011]
    •    Delinquencies Continue Upward, Even if Slightly: Trepp [Posted March 9, 2011]
    •    Delinquencies Dip for CRE/Multifamily, Rise for CMBS [Posted March 9, 2011]
    •    Purchases, Refinances Push Mortgage Application Activity Up: MBA [Posted March 9, 2011]
    •    Long-Term Fixed Rates Drop for Third Consecutive Week: Freddie Mac [Posted March 9, 2011]


550 W. Van Buren St., Suite 1000, Chicago, IL 60607 | T 312-335-4100 F 312-335-4400 | www.appraisalinstitute.org
    •    FASB Guidance on Troubled Debt Restructuring May Mean Work for Appraisers [Posted March 2, 2011]
    •    U.S. Dominates Global CRE Volume in 2010: RCA [Posted March 2, 2011]
    •    Mortgage Rates Ease, Freddie Mac Survey Finds [Posted March 2, 2011]
    •    MBA Weekly Mortgage Survey: Interest Rates, Mortgage Activity Down [Posted March 2, 2011]

 Around the Industry—Industry Insider
    •    AI, ASFMRA Write to Supersede Labor’s Fiduciary Rule [Posted March 9, 2011]
    •    AI, Labor Discuss ‘Fiduciary’ Proposal, Assistance with Enforcement [Posted March 2, 2011]
    •    AI President Featured on Delta, US Airways In-flight Radio [Posted March 2, 2011]
    •    Mercury Network Enters BPO Market [Posted March 2, 2011]
    •    Flood Map Changes May Cause Economic Damages: The Appraisal Journal [Posted March 2, 2011]

 Inside the Institute
    •    AI in the News: AI President Advises Consumers on In-Flight Radio [Posted March 9, 2011]
    •    AI Leadership Resource Registry Reopens; National Deadline Aug. 15 [Posted March 9, 2011]
    •    Appraisal Institute Honors Five Members as “Volunteer of Distinction” Honorees in March [Posted
         March 9, 2011]
    •    AI in the News: AI’s Latest Book Featured in National Trade Media [Posted March 2, 2011]
    •    Appraisal Institute Designates 21 Members in February [Posted March 2, 2011]
    •    In Memoriam [Posted March 2, 2011]

 Economic Indicators – January 2011




2 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Government Update – Commercial/General
SEC Investigates CRE Restructuring
The Securities and Exchange Commission is taking a closer look at U.S. banks that have restructured
troubled loans to make them appear healthier than they are, The Wall Street Journal reported March 3.
The SEC will also be investigating practices known as “extend and pretend” or “amend and pretend”
modifications.

The latter practice, in which a bank gives a borrower more time to repay a loan, is permitted, however
SEC officials are concerned about the way some banks are accounting for such loans, the Journal
reported.

While it is unclear which banks are being investigated, several institutions have disclosed that they are
the subject of SEC inquiries related to commercial loans prior to 2010.

Fifth Third Bancorp, which has been subpoenaed as part of the investigation, told the Journal that the
SEC has not told the bank about the specific purpose of the inquiry. Fifth Third’s “loan accounting is and
has been appropriate," Fifth Third Chief Financial Officer Daniel Poston told the Journal.

Meanwhile, a report from the Federal Deposit Insurance Corp.'s Office of the Inspector General
concluded that ShoreBank Corp., which collapsed in 2010, failed to "accurately identify and account for"
troubled debt restructurings, the Journal reported.

Although the Financial Accounting Standards Board is expected to finalize criteria outlining how banks
should account for troubled loans, investment bank Keefe, Bruyette & Woods Inc. said that the proposed
criteria could result in fewer loan modifications, more losses or higher levels of nonperforming assets.

In related news, a recently released Federal Reserve survey projected a slow recovery for the commercial
real estate sector, the Journal said. Data from research firm Trepp LLC showed that U.S. banks hold
roughly $156 billion in souring commercial real estate loans, with about two-thirds of the loans maturing
from now through 2015 underwater. However, as of the fourth quarter 2010, Trepp data showed that the
delinquency for commercial mortgages held by banks fell to 7.8 percent, down from 8.6 percent a year
ago, the Journal reported.

San Francisco Fed Promotes Research Director to President
John C. Williams, formerly research director for the Federal Reserve Bank of San Francisco, replaced
Janet Yellen as the bank’s president March 1. The San Francisco Fed represents a nine-state western
region that accounts for 20 percent of the economy and has had 73 commercial banks fail since 2004,
Bloomberg reported.

Williams, who had served as executive vice president and research director since 2009, “has
distinguished himself as one of the most respected economists in the Federal Reserve System because
of his extraordinary work in the field of monetary policy analysis,” Douglas W. Shorenstein, the San
Francisco Fed’s board chairman, said in a statement. Williams will participate in policy discussions and
vote on the Federal Open Market Committee once every three years, starting in 2012, according to
Bloomberg.


3 | Appraiser News Online Vol. 12, No. 5/6, March 2011
While supporting the Fed’s asset purchases, Williams’ views on inflation have sometimes conflicted with
those of Fed Chairman Ben Bernanke. In a 2009 paper titled, “Heeding Daedalus: Optimal Inflation and
the Zero Lower Bound,” Williams contended that the Fed’s goal for 2 percent inflation may be too low,
obstructing its ability to provide stimulus, Bloomberg reported.

During testimony on March 1 before the Senate Banking Committee in Washington, Bernanke rejected
the idea of allowing inflation to exceed 2 percent. “We do not have the illusion that allowing inflation to get
high is in any way a constructive thing to do,” he said, according to Bloomberg.

Gerald O’Driscoll, a former Dallas Fed vice president, told Bloomberg that the appointment of Williams
reflects a move away from a prominent economist – Yellen – in favor of a less well-known insider at the
Fed. Williams joined the staff of the Federal Reserve board in 1994, and spent eight years in Washington,
D.C., before becoming an adviser to the San Francisco regional bank in 2002.

IRS Includes Real Estate in Latest Plea for Disclosure
The Internal Revenue Service has included real estate among the parameters of its 2011 Offshore
Voluntary Disclosure Initiative, a renewed push for the swift disclosure of foreign assets, which the
agency announced Feb. 8.

This is the second disclosure program from the agency; the first was launched in 2009 as a way to bring
offshore money back into the U.S. tax system and help people with undisclosed income from hidden
offshore accounts get current with their taxes. This round of the program involves stricter regulations than
its first iteration, as well as a new penalty structure and an increased emphasis on enforcement through
criminal investigations, raising concerns among practitioners.

The new penalty framework requires individuals to pay a penalty of 25 percent of the amount in the
foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010
time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties. Participants must also pay
back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency
penalties.

During a Feb. 18 webcast sponsored by Bureau of National Affairs’ Tax & Accounting, former IRS Chief
of Criminal Investigations Mark Matthews, now with Morgan, Lewis, & Bockius LLP, Washington, D.C.,
noted that a new feature is the inclusion of international real estate in the penalty base if it is purchased
through an undisclosed account.

According to the IRS website, the 25 percent offshore penalty is intended to apply to all of the taxpayer’s
offshore holdings that are related in any way to tax non-compliance, regardless of the form of the
taxpayer’s ownership or the character of the asset. The penalty applies to all assets directly owned by the
taxpayer, including financial accounts holding cash, securities or other custodial assets; tangible assets
such as real estate or art; and intangible assets such as patents or stock or other interests in a U.S. or
foreign business.

According to the IRS, “If such assets are indirectly held or controlled by the taxpayer through an entity,
the penalty may be applied to the taxpayer’s interest in the entity or, if the Service determines that the


4 | Appraiser News Online Vol. 12, No. 5/6, March 2011
entity is an alter ego or nominee of the taxpayer, to the taxpayer’s interest in the underlying assets. Tax
noncompliance includes failure to report income from the assets, as well as failure to pay U.S. tax that
was due with respect to the funds used to acquire the asset.”

Matthews expressed concern regarding the number of taxpayers living abroad who could be harshly
penalized under the new initiative, despite having owned and lived in properties abroad for many years
without the intention of hiding assets. He noted that the millions of U.S. citizens living outside of the
country would have to have global audits of their resources, which could be difficult to accomplish within
the limited months before the Aug. 31 deadline. During the webcast, Matthews said, “This is one of the
areas where we hope IRS will rethink.”

According to a Feb. 24 BNA Tax Daily article, IRS Deputy Chief of Criminal Investigations Rick Raven
cautioned that if the IRS uncovers a taxpayer's name before that taxpayer comes in, the program that
offers a set civil penalty structure and the chance to avoid criminal prosecution will no longer be available.
He stressed that his office is receiving a “wealth of information” from the IRS’s Whistleblower’s Office as
well as cooperation with foreign governments and other agencies, and that taxpayers should disclose
their assets voluntarily before they become the subject of an ever-increasing number of criminal
investigations.

For the full IRS news release, visit www.irs.gov/newsroom/article/0,,id=235695,00.html, which includes a
link to more information on the Offshore Voluntary Disclosure Initiative program, including frequently
asked questions.




5 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Government Update – Residential
House Committee Passes Bill to Kill Housing Relief Programs
On March 9, the U.S. House will take up two housing relief bills that the House Financial Services
Committee approved March 3. The legislation would terminate two federal programs aimed at assisting
delinquent and at-risk homeowners. The committee reconvenes March 9 to review two additional
housing-related programs.

H.R. 830, the FHA Refinance Program Termination Act, would end the Federal Housing
Administration’s Short Refi Option, which is geared toward aiding homeowners whose home is worth less
than the amount remaining on the mortgage, and H.R. 836, the Emergency Mortgage Relief
Program Termination Act, would end the Emergency Homeowners Loan Program, which assists
homeowners who have lost their jobs. Before either bill could become law, they would have to pass the
House and the Senate and be signed by President Obama.

The voting was split along the party lines (33-22) in committee, where Republicans have the majority for
the first time since 2006. However, the two resolutions the committee voted on were introduced by Rep.
Robert Dold, R-Ill., and Rep. Jeb Hensarling, D-Texas, respectively.

Dold told MBA NewsLink March 4 that H.R. 830 would save $1 billion and that FHA’s Short Refi Option
has failed taxpayers and the very people it was designed to help – underwater homeowners.

In the program, if the lender will write down 10 percent of the loan principal, the FHA will refinance the
remaining debt and, in some cases, at a lower rate. The program began in September, and FHA reported
to the committee that 44 loans have been modified to date. FHA is authorized to access the $700 billion
Troubled Asset Relief Fund to pay for any loans that default, according to Bloomberg Businessweek.
However, no loans have defaulted.

Hensarling predicted a savings of $8 billion if H.R. 836 is signed into law. He told Mortgage Bankers
Association’s NewsLink the program was redundant, wasteful and that the private sector has the
resources to handle these matters.

Even though it remains in the planning stage, the Emergency Homeowners Loan Program would provide
temporary, interest-free loans to borrowers who have lost their jobs. The Department of Housing and
Urban Development estimated the program could assist as many as 30,000 people, Businessweek
reported.

The other two federal homeowners assistance programs scheduled for review by the committee are the
Home Affordable Modification Program and the Neighborhood Stabilization Program. The committee will
mark up and vote on H.R. 839, the HAMP Termination Act of 2011, and H.R. 861, the NSP
Termination Act, on March 9.

The bills come on the heels of the latest figures for HAMP modifications. In January, 17,863 loans were
modified under the program, up from 16,982 in December, but significantly down from the 49,535 made in
January 2010, according to a March 3 report by MortgageDaily.com. Overall 539,493 permanent
modifications have been made under HAMP.


6 | Appraiser News Online Vol. 12, No. 5/6, March 2011
http:///
GSE Dissolution to Take Two Years to Commence: Geithner
The Obama administration wants Congressional approval by 2013 to begin dissolving Fannie Mae and
Freddie Mac, Treasury Secretary Timothy Geithner told the House Financial Services Committee March
1. Geithner added that the entire process could take up to seven years to complete, according to
Appraiser News Online sources.

Committee Chairman Spencer Bachus, R-Ala., characterized Geithner’s testimony as a good starting
point for bipartisan negotiations and added he was eager to meet and begin writing legislation, The
Washington Post reported.

Geithner’s appearance before the committee came three weeks after the President issued a report calling
for a reduction of the federal government’s role in the nation’s housing market. Obama proposed limiting
the number of mortgages the GSEs can buy and raising their fees so that borrowers will favor private
lenders. Both actions would require congressional approval. Additional steps, such as decreasing the size
of loans the GSEs may buy and restricting the Federal Housing Administration’s role in making loans, do
not require congressional action.

When the housing crisis occurred, the federal government provided a $150 billion bailout to the GSEs.
Geithner said the administration predicts the ultimate cost of the bailout will be $75 billion at most,
according to the Post. According to an ANO source present at the meeting, Geithner told the committee
that taxpayers “will not recover” the cost of the bailout.

The Obama administration is touting three options for the dissolution:
   • Limit the GSEs to assisting poor and middle-class borrowers via agencies like the FHA;
   • Allow the GSEs to back private mortgages, specifically during an economic crisis; or
   • Allow GSEs to reinsure mortgage investments already guaranteed by private insurers.

At the hearing, Geithner said that under all three options, “it will be more expensive to buy a home” than it
is currently with the GSEs and FHA dominating the market.

While both parties agree on dismantling the GSEs, they differ on the speed and aggressiveness with
which the dissolution should be completed. Republicans favor far-reaching moves, while Democrats want
to protect low-income borrowers. The Post reported some Democrats have criticized Obama’s report for
not adequately addressing low- and moderate-income families or minorities that need protection from
discrimination in lending.

The bad news for borrowers is that if the GSEs are eliminated, the 30-year mortgage may disappear. The
30-year loan became available by an act of Congress in 1954. Most 30-year loans have been issued
since then only with government support. Most private lenders cannot make that accommodation. The
New York Times reported March 3 that most private lenders will prefer a 20-year mortgage with an
adjustable rate. However, some lenders may offer 30-year financing for borrowers who can make large
down payments or those who have better credit scores.

Freddie Sets 95 Percent Loan-to-Value Ratio



7 | Appraiser News Online Vol. 12, No. 5/6, March 2011
As of June 1, Freddie Mac will cover only loans with a maximum loan-to-value ratio of 95 percent,
according to its March 1 bulletin to lenders. Meanwhile, regulators are drafting rules to exempt certain
mortgages from the 5 percent risk retention rule of the Dodd-Frank Act.

Freddie Mac’s new requirement affects all conventional loans by the government-sponsored enterprise,
including home equity lines of credit, other than relief refinance mortgages.

According to the bulletin, mortgages with higher loan-to-value ratios have not performed acceptably, and
the change is an “effort to support responsible lending and sustainable homeownership.” The rule is
designed to ensure lenders bear a portion of the risk of the mortgages they sell, and it is in line with the
risk-retention requirement of the Dodd-Frank Act, which calls for mortgage lenders to retain 5 percent of
the risk of each loan.

For more information on current proposals to create qualified loan guidelines that avoid this requirement,
see “OCC, FDIC Propose 20 Percent Down Payment Requirement.”

For Freddie Mac’s full bulletin, visit www.freddiemac.com/sell/guide/bulletins/pdf/bll1104.pdf.

OCC, FDIC Propose 20 Percent Down Payment Requirement
The Federal Deposit Insurance Corp. and the Office of the Comptroller of Currency agreed March 1 to
promote a 20 percent down payment requirement for “qualifying residential mortgages,” loans that meet
stricter underwriting criteria in order to gain exemption from the risk retention requirements of the Dodd-
Frank Act.

The agreement came during a meeting with the Federal Reserve to work out national mortgage servicing
standards and guidelines for risk retention, according to American Banker’s coverage. In recent weeks,
the FDIC has taken the position that servicing standards must be part of risk retention. The OCC, on the
other hand, said regulators do not have the legal authority to put servicing standards in the risk-retention
rule.

The two regulators also agreed proposals requiring borrowers to maintain a 75 percent loan-to-value ratio
for refinances and a 70 percent loan-to-value for cash-out refinances in which the borrower refinances
into a larger loan, The Wall Street Journal reported.

The proposal has sparked intense debate among legislators, and the North Carolina-based consumer
group the Center for Responsible Lending has expressed concern regarding its potential impact on the
future of American homeownership. Founded in 2002 by Self-Help, CRL’s goal of “a fair, responsible and
transparent market for sustainable loans” is supported by a consortium of philanthropic organizations.

In a Feb. 25 statement, the CRL asserted that a high down payment requirement would effectively shut
the door to homeownership for a large portion of the American middle class, stifling a major driver of
economic recovery. “Increasing down payment requirements would materially shrink the mortgage market
with little increase in loan performance,” the group said. The statement also noted that in the current
market, “it would take 14 years for the typical American family to save enough money for a 20 percent
down payment,” based on average home prices and reasonable savings rates.




8 | Appraiser News Online Vol. 12, No. 5/6, March 2011
The CRL also claimed that the requirement is a misguided effort to regain stability and that low down
payment mortgages are not the same as the subprime mortgages at the root of the housing crisis and
have been a safe part of the mortgage lending system for decades. Citing July 21, 2010, comments made
by Genworth Financial to the U.S. Department of the Treasury on Public Input on Reform of the Housing
Finance System, the CRL says that the path to recovering stability in the mortgage lending industry lay in
“full underwriting documentation and reasonable debt-to-income ratios.” The group contends that
mortgage loan performance will improve under new origination standards in the Dodd-Frank Act without
having to add on additional higher down payment requirements.

Overall, the risk-retention guidelines will mandate actions servicers must take, including offering loss-
mitigation and establishing standards to deal with second liens when a first mortgage is modified. The
OCC-FDIC agreement would require servicers to offer loss mitigation when a borrower’s home is worth
more than its value in foreclosure. The loss mitigation should be offered within 90 days of the borrower
becoming delinquent. In the case of second mortgages, the creditor must disclose how the second lien
would be dealt with in the event of delinquency. Creditors would also report if they service both the first
and second mortgages.

The future of the OCC-FDIC proposal remains uncertain as lawmakers continue to debate its major points
and it awaits approval by other financial agencies including the Securities and Exchange Commission,
Federal Housing Finance Agency and the Department of Housing and Urban Development.

The FDIC is expected to release the proposal in its entirety at its March 15 board meeting. The definition
of a “qualified residential mortgage” is due by mid-April.

Foreclosure Settlement Could Include Quotas
Sources say the Obama administration may require servicers guilty of improper foreclosure procedures to
modify a certain number of loans, The Washington Post reported March 3. The requirement would be part
of a proposal that may include establishing a $20 billion fund for loan workouts.

State attorneys general and nearly a dozen federal agencies are involved in settlement discussions with
some of the country’s largest lenders spawning from questionable foreclosure practices that surfaced this
past fall. Officials have been pursuing a settlement that would penalize servicers and provide resources
for underwater borrowers.

However, lawmakers are struggling with how to structure quotas within the settlements. Under one option,
the government would set a number of loans that the mortgage servicers as a group would have to
modify, while a second option would entail quotas for individual providers. A third approach would require
servicers to spend a certain amount of money modifying troubled loans.

A final round of face-to-face negotiations with banks will be held soon, the Post reported. If the
settlements are finalized, they could resolve a range of allegations that go beyond the flawed foreclosure
practices. However, the Office of the Comptroller of the Currency, which is independent of the
administration, has raised concerns that potential fines placed on servicers may be too excessive and
that servicers may be required to adopt mortgage procedures that do not make financial sense.




9 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Critics argue that forcing banks to reduce the principal on distressed loans could pose its own set
problems. According to the Post’s coverage, if banks are required to meet loan quotas, top priority might
be placed on modifying mortgages for borrowers who need relatively little help in an attempt to limit
losses.

If the settlements impose new obligations on servicers, it would be a shift in the Obama Administration’s
Home Affordable Modification Program, which has come under attack for significantly falling short of its
goal of helping 3 million to 4 million borrowers. Because the program only has helped up 600,000
borrowers, House Republicans are trying to dismantle the initiative.

Meanwhile, the Office of the Comptroller of the Currency has sent draft orders to its banks requiring
changes in how they modify mortgages in default. The draft orders also seek to minimize the financial
risks for banks arising from mortgage modifications and foreclosure processes.

Obama to Servicers: Pay into $20 Billion Foreclosure Fund
The Obama administration is trying to implement a settlement over mortgage-servicing breakdowns that
could force America's largest banks to pay more than $20 billion in civil fines or to fund a comparable
amount of loan modifications for distressed borrowers, according to a Feb. 24 Wall Street Journal article.

Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan
balances of underwater borrowers, sources told the Journal. The cost of those write downs would be
borne by banks, not the investors who purchased mortgage-backed securities, sources said.

But developing a settlement may be challenging. A deal would have to win approval from federal
regulators and state attorneys general, as well as some of the nation's largest mortgage servicers,
including Bank of America Corp., Wells Fargo & Co. and J.P. Morgan Chase & Co., the Journal reported.

The settlement terms remain flexible and haven’t been presented to banks, sources told the Journal.
Exact dollar amounts haven't been agreed on by U.S. regulators and state attorneys general. The deal
wouldn't create any new government programs to reduce principal. Instead, it would allow banks to devise
their own modifications or use existing government programs, sources said. Banks would also have to
reduce second-lien mortgages when first mortgages are modified, the Journal reported.

The settlement proposal focuses on requiring servicers who mishandled foreclosure procedures to writing
down loans that they service on behalf of clients. Those clients include Fannie Mae and Freddie Mac, as
well as investors in loans that were securitized by Wall Street firms, according to the Journal.

According to bank executives, principal cuts don't necessarily improve payment patterns, and principal
reductions could raise new complications. First, it will be difficult to determine who gets reductions and
who doesn't. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured
with that number is limited, sources told the Journal.

An amount of $20 billion "would accomplish little" in addressing borrowers who currently owe $744 billion
more on their mortgages than their homes are worth, Chris Flanagan, a Bank of America mortgage
strategist, told the Journal.




10 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Asking servicers to assume the costs of all write downs is unfair unless the administration can pinpoint
the "source of harm," Bob Davis, executive vice president of the American Bankers Association, told the
Journal. If the loans are going bad because of economic conditions and job loss, "it's not clear why
servicers would bear the brunt because it's outside their control," he added.

Appraiser Identifiers Required under New Fannie Guidelines
Appraiser license or certification numbers are required for all loans delivered to Fannie Mae on or after
July 29, according to a Feb. 22 Fannie Mae letter. Those identifiers are already required for loans
secured by properties located in states that have met their deadlines for transitioning licensing with the
Nationwide Mortgage Licensing System and Registry.

Lender Letter LL 2011-02 announced that the system will begin accepting registrations for mortgage loan
originators employed by agency-regulated institutions. In accordance with the Secure and Fair
Enforcement for Mortgage Licensing Act and the agencies’ final rules, lenders must deliver the loan
originator identifier and the loan origination company identifier for mortgages with loan application dates
on or after July 29 that are delivered to Fannie Mae.

The full Lender Letter is available at https://www.efanniemae.com/sf/guides/ssg/2011annlenltr.jsp.

New Resource Available to Help Appraisers Adopt Uniform Appraisal
Dataset
As part of the Uniform Mortgage Data Program, Freddie Mac and Fannie Mae have teamed up to develop
the Uniform Appraisal Dataset, which aims to enhance appraisal data quality and consistency, and
promote the collection of electronic appraisal data, according to a Feb. 23 Freddie Mac news release.

In tandem with the Uniform Appraisal Dataset, which defines the fields required for an appraisal
submission for specific forms as well as standardizes definitions and responses for a key subset of fields,
the two government-sponsored enterprises are in the process of developing a Uniform Collateral Data
Portal, which will be a single portal for the electronic submission of appraisal data.

Lenders will be required to use the portal to deliver electronic appraisal data that conforms to the Uniform
Appraisal Dataset. This requirement applies to all conventional mortgage loans for which an appraisal
report is required.

All appraisals must comply with the Uniform Appraisal Dataset standardization requirements by Sept. 1,
with caveats for future submission deadlines of Dec. 1 and March 19, 2012.

To prepare appraisers, Fannie Mae and Freddie Mac have developed a 90-minute, interactive webinar
that reviews the scope of the Uniform Appraisal Dataset and the Uniform Collateral Data Portal. Sessions
are scheduled in late March and throughout April. For specific dates and locales, visit
www.freddiemac.com/sell/secmktg/uniform_appraisal.html.

For more information on Freddie Mac and Fannie Mae’s Uniform Appraisal Data Program visit,
www.efanniemae.com/sf/lqi/umdp/index.jsp.

FHA’s REO Inventory Volume Spikes 47 Percent; Worth $9.1 Billion


11 | Appraiser News Online Vol. 12, No. 5/6, March 2011
As of December 2010, the Federal Housing Administration held 60,739 properties repossessed through
foreclosure worth $9.1 billion on its books, up 47 percent from a year ago, according to a Feb. 22
HousingWire.com report. Combined with Fannie Mae and Freddie Mac’s third quarter figures, the federal
government REO inventory totaled roughly 360,000 units.

Such REO properties, combined with number of delinquent loans still in the process, are of concern to
analysts who have dubbed them the country’s “shadow inventory.” Estimates of shadow inventory vary
significantly.

Data provider CoreLogic, in Santa Ana, Calif., estimates shadow inventory to be at roughly 1.3 million
properties, while Toronto-based analytics firm Capital Economics estimates it to be closer to 5.3 million.
With such high levels of problem loans and devalued properties after foreclosure, house prices are
expected to decline throughout 2011, Capital Economics said in a Feb. 22 report cited by HousingWire.

According to FHA’s report, nearly 600,000 mortgages are in serious delinquency, which represents 8.78
percent of the FHA insurance currently in force, HousingWire reported.

GSEs Stem Losses in Fourth Quarter, Request More Aid
Despite stemming losses in fourth quarter 2010, Fannie Mae and Freddie Mac have requested a total of
$3.1 billion more in aid from the Treasury Department, according to news releases issued Feb. 24 by the
government-sponsored enterprises. Together the two GSEs own or guarantee more than half of all U.S.
home mortgages.

Freddie said its fourth-quarter loss decreased to $113 million, compared to a $2.5 billion loss in the third
quarter of 2010. Meanwhile, Fannie reported net income in the fourth quarter of $73 million. Fannie
experienced a net loss of $1.3 billion in the third quarter of last year.

Both Fannie and Freddie indicated their deficits have been due largely to the quarterly dividends they pay
to the U.S. Treasury. The two GSEs have been operating under government conservatorship since 2008,
with Treasury owning more than 79 percent of both companies.

Fannie requested $2.6 billion from Treasury to help cut its $2.5 billion net-worth deficit, while Freddie
asked for $500 million.

Since taking over conservatorship, Treasury has poured $154 billion into the companies, $20 billion of
which has been returned to taxpayers through dividend payments, according to a Feb. 25 Bloomberg
article. Bloomberg also reported taxpayer aid to Fannie and Freddie could total $224 billion by the close
of 2012, with $55 billion of that being returned in dividends.

Fannie ranked as the largest issuer of secondary market mortgage-related securities in 2010, accounting
for 44 percent of the market for single-family homes. In addition to new loans, the company said it
modified 403,506 loans in 2010, including those under the Home Affordable Modification Program. That’s
more than a four-fold increase from 2009, when Fannie modified 98,575 loans.

Freddie’s CEO Charles E. Haldeman, Jr., said the GSE has been substantially strengthened in the last
year, noting in the Feb. 24 news release, “We did this by improving the quality of our new business,


12 | Appraiser News Online Vol. 12, No. 5/6, March 2011
streamlining our operations and efficiently managing our expenses – reducing administrative expenses by
over $100 million from the prior year.”

Fannie’s CEO Michael J. Williams was equally optimistic, noting his company has built “a strong new
book of business.”

However, as reported in Appraiser News Online, both GSEs are scheduled for eventual dissolution under
the Obama administration’s white paper on mortgage finance reform issued Feb. 11. For more
information on the housing reform plan, visit
www.appraisalinstitute.org/ano/DisplayArticle/Default.aspx?volume=12&numbr=3/4&id=13360.

GSEs Plan “Robo-Signing” Penalties, Anti-Foreclosure Rewards
Fannie Mae and Freddie Mac will issue penalties on mortgage servicers who participated in “robo-
signing” last year, according to a Feb. 24 article in Bloomberg. Conversely, the two government-
sponsored enterprises announced Feb. 23 the creation of a rewards program designed to encourage
servicers to help homeowners avoid foreclosure.

Fannie’s and Freddie’s penalties, which will be announced by the end of the first quarter, could include
fines based on unpaid loan balances, length of loan delinquency and other factors, Bloomberg reported.
Among the mortgage servicers under review by the Financial Fraud Enforcement Task Force are
JPMorgan Chase & Co., Bank of America Corp., Citigroup, Wells Fargo & Co., PNC Financial Services
Group, U.S. Bancorp and HSBC Holdings.

However, servicers who support housing market recovery by helping Americans stay in their homes could
see rewards. In a Feb. 23 news release, Fannie announced its Servicer Total Achievement and Rewards
program, which will offer incentive awards and recognition to servicers based on their performance in
helping homeowners and improving customer experience.

“The efforts of servicers are critical to preventing foreclosures and providing homeowners assistance,”
Leslie Peeler, vice president of servicing portfolio management at Fannie, said in the news release. “By
creating measurable expectations for our services aligned with Fannie Mae’s business objectives, we
hope to sharpen servicers’ focus and encourage them to continue to work with us toward our shared
priority: keeping people in their homes.”

For more information on the STAR program, visit
www.fanniemae.com/newsreleases/2011/5309.jhtml;jsessionid=1HJENTQW0Q1IDJ2FQSHSFGQ?p=Me
dia&s=News+Releases.




13 | Appraiser News Online Vol. 12, No. 5/6, March 2011
In the States
Texas AMC Bill Calls for “Reasonable and Customary” Fees
A bill introduced Feb. 7 in the Texas Legislature would require appraisal management companies to
provide appropriate compensation for appraisers as well as to separate those fees from those they
collects for themselves. H.R. 1146 also requires AMCs to become registered with a state oversight board.

According to the informally titled “Texas Appraisal Management Company Registration and Regulation
Act,” AMCs must pay appraisers within 60 days of the service performed, except in cases of breach of
contract or substandard performance. AMCs must also “compensate appraisers at a rate that is
reasonable and customary for appraisals being performed in the market area of the property being
appraised without the services of an appraisal management company,” in accordance with this section.

The bill states that appraisal management companies “may not prohibit an appraiser from recording the
fee that the appraiser was paid by the company for the performance of the appraisal in the appraisal
report that is submitted by the appraiser to the company; or include any fees for appraisal management
services performed by the company in the amount the company charges for the actual completion of an
appraisal by an appraiser.”

The bill also requires that AMCs separately state both the fees charged by the company for the appraisal
management services and the fees paid to an appraiser for the completion of an appraisal. This is in line
with Federal Housing Administration requirements of disclosure, enacted Jan. 1, 2010, which attempted
to mitigate the issue of transparency of funding.

According to a Feb. 15 statement from the Foundation Appraisers Coalition of Texas, an independent
non-legislative body, the legislation introduces much-needed accountability to AMCs, among the only
entities within the home valuation process that have yet to become subject to regulation or oversight.
FACT claimed that some AMCs fund their organizations by retaining a disproportionate amount of the
overall fees paid by consumers, resulting in loss of revenue for appraisers.

The bill also provides guidelines regarding the removal of appraisers from AMC panels, allowing AMCs to
remove appraisers only if it notifies them in writing of their reasons for removal, including violations of the
Uniform Standards of Professional Appraisal Practice or other applicable laws, and provides the appraiser
the opportunity to respond to the notification. Appraisers may file a complaint with the board, which must
be reviewed and resolved within 180 days.

Additionally, the bill prohibits AMCs from using automated valuation models, broker price opinions or
coercion, and covers geographic competence, lines of communication and use of comps, among other
items. The full text of the bill is available at
www.legis.state.tx.us/BillLookup/Text.aspx?LegSess=82R&Bill=HB1146.




14 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Around the Industry – Market Trends
Residential Varied, Commercial Gaining Traction in Fed’s Latest Beige
Book
While all 12 Federal Reserve districts maintain that the overall level of home sales and construction
remains low, some districts reported a slight increase in residential activity while others reported
improvements in commercial sales and leasing, according to the central bank’s latest Beige Book,
released March 2.

Richmond, Atlanta and Chicago reported slight improvements in residential real estate activity, while
Boston noted that activity was mixed across the region. New York described the housing market as stable
with some pockets of improvement, while Cleveland, Atlanta, Minneapolis and Kansas City described
residential construction activity as either flat or down.

San Francisco reported that residential housing demand remained steady. However, Philadelphia,
Kansas City and Dallas described the market as sluggish, with St. Louis noting that sales continued to
decline. Philadelphia and Atlanta attributed weaker buyer traffic in January to inclement weather.
However, Philadelphia, along with Richmond, Kansas City and Dallas, indicated that buyer traffic
increased in early February.

Reports on home prices were mixed among the districts. Cleveland and Chicago reported that prices
remained relatively flat, while Atlanta and Kansas City reported downward pressure on prices and
Philadelphia reported that prices continued to fall. However, Kansas City, Atlanta, Dallas and San
Francisco expect modest improvements this spring.

While Philadelphia noted that sales are expected to remain stagnant, Chicago and San Francisco expect
a slight uptick in construction.

In the commercial sector, Boston, Chicago and Dallas reported that commercial real estate activity
improved overall, while Richmond, Kansas City and San Francisco noted increases in leasing activity.
Kansas City described the market as stabilizing, while Philadelphia and Minneapolis reported that
markets were flat.

Boston, Philadelphia, Atlanta, Chicago, St. Louis and Dallas reported weak construction activity, while
Chicago noted a slight pickup. Meanwhile, Cleveland cited an increase in the number of project inquiries
and Minneapolis reported an unexpected growth in commercial construction.

Demand for residential real estate loans increased in Philadelphia, Atlanta and Dallas but was weaker in
New York, Cleveland, St. Louis and Kansas City. New York, Philadelphia, Richmond, Chicago and San
Francisco reported improvements in commercial loan applications, while Dallas reported mixed demand
and St. Louis noted that demand was unchanged or weaker.

Most districts reported that credit standards were unchanged or tighter. Kansas City reported standards
were unchanged for all types of loans, while New York noted some tightening of commercial loan
standards but little change in the standards for residential mortgages. Atlanta reported increased




15 | Appraiser News Online Vol. 12, No. 5/6, March 2011
standards for residential mortgage loans. St. Louis indicated standards had tightened somewhat for
commercial mortgages, but were unchanged or somewhat tighter for residential mortgages.

Atlanta noted improvements in credit conditions for all loan segments except those related to residential
construction and real estate. Cleveland, Richmond, Chicago, Kansas City and Dallas indicated steady to
improving credit quality, and New York reported steady to lower delinquency rates.

To access the Fed’s latest beige book report, officially titled “Summary of Commentary on the Current
Economic Conditions,” visit www.federalreserve.gov/FOMC/BeigeBook/2011/20110302/default.htm.

Housing Deflation Continues, Expect More Pressure in 2011: Zelman
House prices will dip another 2 percent in 2011, according to a Feb. 25 report from investment analyst
firm Zelman & Associates. In “The Art of Measuring Home Prices,” Zelman also addresses the various
methodologies of measuring home prices and the inability to recognize any single one as a “flawless”
measurement.

Zelman’s price index was aggregated from data from various sources, including the National Association
of Realtors, Standard & Poor’s/Case-Shiller, CoreLogic, the Federal Housing Finance Agency, Radar
Logic and Zillow.

According to the report, the aggregated home price index shows a year-over-year decline of 3.1 percent.
Zelman estimates that home prices are down 28 percent since the peak in May 2006. Zelman also
projects a 1.5 percent sequential decline in January, resulting in 3.3 percent year-over-year deflation.
Distressed transactions are at the root of excessive deflation, according to data cited from CoreLogic, and
entry-level price points account for the most price declines, according to Case-Shiller data.

Based on the observed rate of deflation and tempered beginning to the spring selling season, Zelman
modestly lowered home price expectations, forecasting a 2 percent drop by the end of the year. Zelman
predicts that improving employment, confidence and home transactions will drive demand for solutions to
the deflation, but competitive foreclosure supply will remain a headwind.

Zelman notes that each data source used in the report holds incremental value in understanding overall
market trends, but none is considered an entirely accurate source. The assertion follows closely on the
heels of CoreLogic’s Feb. 15 report that called into question NAR’s methodologies. Both organizations’
data are used by Zelman. (For more information, see “NAR’s Existing Home Sales Figures from 2007 to
Present Called into Question” in the Feb. 23 issue of Appraiser News Online, at
www.appraisalinstitute.org/ano/DisplayArticle/PastIssue/Default.aspx?volume=12&numbr=3/4&id=13429.

The statement underscores Zelman’s assertion that “measuring home prices is more of an art than a
science.” In support of this notion, Zelman notes three factors for consideration when measuring home
prices – stock vs. flow, averaging vs. point-to-point measurement, and seasonality.

Stock vs. flow – When viewing transactions as a sample of home pricing, there can be disparity between
the value of the home and the actual selling price. This is especially true if it was a distressed transaction
such as a short sale or foreclosure, which Zelman estimates to be 30 percent of home sales in the current




16 | Appraiser News Online Vol. 12, No. 5/6, March 2011
market. As such, those transactions cannot be compared apples-to-apples when measuring other home
prices, Zelman said.

Averaging vs. Point-to-Point – These two differing methods of measurement can yield significantly
different answers to the same question, according to Zelman. Averaging home prices over a single period
can skew results dramatically over measuring change from a given point to the next. Each method is
used for different valuation purposes but there can be no single correct answer.

Seasonality – Home price indices exhibit a clear seasonal pattern, tending to soften in fall and winter and
strengthen in spring and summer; these patterns can be attributed to a number of factors and reasons,
which can dilute their significance for the purpose of analysis, Zelman said.

Home Prices to Drop 2.3 Percent this Year, Economists Say
Existing home prices are expected to fall 2.3 percent in 2011, despite a recent upswing in sales, followed
by a slight recovery in 2012, according to a Reuters survey of economists released March 2. The survey
showed that prices should be down roughly 35 percent since peaking in 2006.

According to the survey, which analyzed predictions from 26 leading economists, the pace of existing
home sales likely will inch up to an annualized rate of only 5.48 million units by the fourth quarter of 2011
from January 2011’s rate of 5.36 million units.

While the rise in distressed home sales has helped clear the path for a recovery, survey respondents
doubt the momentum will last as the pace of foreclosures drags out. "One of the big question marks that
people are not paying enough attention to is not just the number of foreclosures, but the speed of
foreclosures," David Wyss, chief economist at Standard & Poor's, told Reuters.

Meanwhile, 18 of the 26 respondents indicated that foreclosures should begin to subside in 2011. "Price
expectations are probably more important than foreclosures at this time," Donald Ratajczak, an economist
at Morgan Keegan, told Reuters.

Respondents also indicted that interest rates likely will not have a negative effect on the housing market
in 2011. They predicted the average 30-year fixed-rate mortgage will settle at 5.1 percent in 2011. The
rate was at 4.84 percent the week of Feb. 24, according to Freddie Mac – up from the 4.19 percent it hit
in mid-October, its lowest reading since 1951.

Construction Rate Dips Slightly in January: Commerce
Despite gains in private residential construction spending, overall spending on construction in the U.S. fell
in January to a seasonally adjusted annual rate of $791.8 billion, down 0.7 percent from December’s
revised estimate of $797.6 billion, according to a U.S. Commerce Department report released March 1.

January’s figure is still 5.9 percent below the January 2010 estimate of $841 billion.

In the private sector, spending on construction through January was at a seasonally adjusted annual rate
of $490 billion, down 1.2 percent from December’s revised estimate of $495.9 billion, the Commerce
Department reported. Nonresidential construction, which was at a seasonally adjusted annual rate of
$244.4 billion in January, fell 6.9 percent from December’s revised estimate of $262.7 billion.


17 | Appraiser News Online Vol. 12, No. 5/6, March 2011
On a seasonally adjusted basis, residential construction reached an annual rate of $245.6 billion in
January, up 5.3 percent from December’s revised estimate of $233.2 billion. The rise in residential
spending was driven mainly by the remodeling sector, the National Association of Homebuilders said.

In the public sector, spending on construction through January was at a seasonally adjusted annual rate
of $301.8 billion, up 0.1 percent from December’s revised estimate of $301.6 billion, the Commerce
Department reported. Educational construction was at a seasonally adjusted annual rate of $70.2 billion,
up 1.7 percent from December’s revised estimate of $69 billion, while highway construction was at a
seasonally adjusted annual rate of $85.4 billion, down 0.7 percent from December’s revised estimate of
$86.1 billion.

To view the Commerce Department’s December construction report, visit
www.census.gov/const/C30/release.pdf . Commerce will release February data on April 1.

Attitudes toward Housing Warming: Fannie Mae Survey
Fannie Mae’s latest national survey shows that while Americans are more confident about home prices
than they were one year ago, they still have doubts about the strengthening economy. The results of
Fannie’s Fourth Quarter National Housing Survey of more than 3,400 homeowners and renters were
released Feb. 28.

Fannie Mae found that 78 percent of respondents believe housing prices will remain the same or increase
in 2011 – up from 73 percent in January 2010. However, the number of those polled who thought prices
will go up, dipped – with 26 percent forecasting an increase compared to 37 percent in January 2010 –
while 52 percent forecast they would remain steady, compared to 36 percent in January 2010.

Nearly two-thirds (62 percent) of respondents believe the economy is on the “wrong track,” a statistic that
remains unchanged since the January 2010 survey.

Hispanics, African-Americans and Generation Y – defined as ages 18-34 – are more positive about
owning a home compared to the general population, according to Fannie Mae. Thirty-four percent of
Hispanics and 35 percent of African Americans indicated they will buy a home in the next three years.
Only 23 percent of all other Americans plan to buy a home in that timeframe.

Generation Y showed the sharpest decline in homeownership of all age groups during the housing crisis
from nearly 44 percent when housing prices peaked in 2006 to fewer than 40 percent in 2009.

Fannie Mae also found that 84 percent of consumers believe in owning a home versus renting. That
statistic is unchanged since January 2010. Of those that rent, 28 percent believe renting makes more
sense than purchasing a home – up from 20 percent in January 2010.

Although Americans’ attitude toward housing is improving, the survey showed the majority of respondents
(64 percent) don’t believe home ownership is a safe investment. In addition, 74 percent believe it will be
harder for future generations to obtain a mortgage.




18 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Of delinquent borrowers, nearly one out of three (31 percent) told surveyors they considered defaulting on
their mortgage in the fourth quarter. However, the percentage of those that considered defaulting fell from
39 percent in the first quarter.

For more information on the survey results, go to:
www.fanniemae.com/media/survey/index.jhtml;jsessionid=JEDV0OAXR300ZJ2FQSHSFGQ.

CRE Developments Coming Back to Life: The Wall Street Journal
A flood of capital into U.S. commercial real estate is sparking some long-stalled development projects and
unleashing new construction in the multi-family, office and retail property sectors, The Wall Street Journal
reported Feb. 23.

The moves show that the battered commercial real estate industry is beginning to recover – at least in the
nation's largest and healthiest markets. Analysts say the improved economy is generating demand for
new commercial space, while low yields on other investments are provoking investors to seek higher
returns, the Journal reported.

Although plagued by billions of dollars in bad CRE loans, U.S. banks are treading softly back into the
market. J.P. Morgan Chase & Co. financed as much construction lending in the first six weeks of 2011 as
it did in all of 2010, the Journal reported. Atlanta-based development company OliverMcMillan told the
Journal it secured $300 million in private-equity funding to complete an unfinished, eight-acre
development of shops, residential units and office space. In Atlantic City, N.J., the developer of the half-
built, 1,100-room Revel casino resort secured $1.15 billion in financing to complete the project, the
Journal reported.

Despite some of the higher profile moves, it will take years to replace the more than two million
construction jobs, or about 30 percent of the 2006 peak, lost since the real estate bubble popped, the
Journal reported.

Office buildings and new development projects could help cushion the U.S. economy if public-sector
building declines due to expected government budget cuts and waning economic-stimulus aid, the
Journal reported.

An index of new construction lending by hundreds of federally insured savings institutions rose 12 percent
to $489 million in the fourth quarter from the third quarter, according to Trepp LLC. That was the index's
first increase in more than a year, though loan volume remains far smaller than 2007 levels. Most banks
don't report construction loan originations, the Journal reported.

In addition to an increase in loan volume, the American Institute of Architects' billings index, considered a
leading indicator of future construction, held steady for January after rising in November and December –
the first two-month increase since mid-2007 – according to a Feb. 23 AIA news release.

CRE Sales Double in 2010, Defaults Decline: Real Capital Analytics
Commercial real estate sales volume more than doubled in 2010 to $134.1 billion, according to Real
Capital Analytics data cited by Investors.com Feb. 24. Sales topped $27.4 billion in December alone – the




19 | Appraiser News Online Vol. 12, No. 5/6, March 2011
highest monthly total since 2007. RCA credited sales, along with lower vacancy rates, with a decline in
commercial mortgage defaults.

RCA also reported that property portfolio sales rose nearly threefold from 2009 to 2010; the average deal
size increased from $11 million in 2009 to $18 million in 2010; and strong gains in deal counts and sizes
were seen in the office, hotel and apartment sectors in 2010.

Data from other research firms support Real Capital’s findings. In its 2011 real estate financing outlook,
Jones Lang LaSalle noted an ongoing recovery in the market for commercial mortgage-backed securities,
Investors.com said. According to Jones Lang LaSalle, new CMBS issuance rose five-fold from 2009 to
2010 to $10.9 billion and is expected to top $40 billion in 2011.

"The CMBS market has really come back strong," Tom Fish, co-head of Jones Lang LaSalle's real estate
investment banking group, told Investors.com. "Demand has begun to exceed supply."

According to a Wells Fargo Securities report, which is based on data from the National Council of Real
Estate Investment Fiduciaries, commercial real estate prices increased 19 percent in 2010, Investors.com
reported. It was the second-largest yearly gain in the series, which tracks CRE purchases by nonprofit
institutional investors.

Meanwhile, RCA data showed that CRE defaults fell to 4.28 percent in the fourth quarter of 2010 from the
previous quarter’s rate of 4.36 percent – the first drop in nearly five years – Bloomberg Businessweek
reported. RCA bases its analysis on bank filings and data from the Federal Deposit Insurance Corp.

Sam Chandan, RCA’s global chief economist, said that the drop suggests that CRE defaults may have
reached a plateau. “As market conditions improve, particularly in larger metros, banks are slowly working
to charge off more bad loans,” Chandan said in a Feb. 24 statement.

Banks held about $1.07 trillion of commercial mortgages and $214.8 billion of apartment mortgages as of
the fourth quarter, Businessweek reported.

Defaults on apartment mortgages fell to 3.74 percent in the fourth quarter, down from 4.67 percent the
previous quarter and 4.43 percent a year ago, according to RCA. Defaults on loans for offices, shopping
malls, hotels and other commercial property types reached about $45.8 billion in the fourth quarter, up
from $41.8 billion a year earlier but down from $46.8 billion the previous quarter.

Office Rents to Grow Moderately in 2011: CBRE
According to CB Richard Ellis Group Inc., U.S. office rents will improve for the first time in three years in
2011, with growth “modest and limited to key markets” before a more widespread recovery accelerates in
2012, Bloomberg reported Feb. 22.

Office rents nationwide are expected to reach $29 a square foot by the end of 2013, the firm said, and
rents could return to their 2008 peak of $30.57 by 2014. CBRE said vacancy could drop to 13.3 percent
by 2014, the lowest since 2007, according to Bloomberg.




20 | Appraiser News Online Vol. 12, No. 5/6, March 2011
The vacancy rate at U.S. offices fell 0.2 percentage points in the fourth quarter to finish 2010 at 16.4
percent without any significant job growth, CBRE said. Rents in 2010 dropped to $25.62 a square foot
from $26.84 in 2009. The firm predicts they will rise to $26.08 in 2011, Bloomberg reported.

San Francisco rents probably will lead the charge, with an average annual increase of at least 9 percent
during the next two years, CBRE said. New York will follow at more than 7 percent. Phoenix and Orange
County, Calif., may lag behind, with rents dropping at an annual rate averaging more than 4 percent,
Bloomberg reported.

CBRE figures are based on the rate at which leases are signed rather than the rents landlords advertise,
Art Jones, senior economist for CBRE Econometric Advisors, told Bloomberg. Its calculations are
adjusted to account for free-rent incentives offered by landlords and don’t include allowances for office
renovations.

New Home Sales Drop 12.6 Percent: Commerce
New single-family home sales jumped 12.6 percent to a seasonally adjusted annual rate of 284,000 units
in January from December’s revised rate of 325,000, according to Department of Commerce data
released Feb. 24. New home sales are down 18.6 percent from the January 2010 rate of 349,000 units.

Sales in the Northeast and Midwest moved up 54.5 percent and 17.1 percent, respectively, in January
from the previous month. However, sales in the West and South slid 36.5 percent and 12.8 percent,
respectively.

Median new home prices logged in at $230,600 in January, while the average sales price came in at
$260,300, according to Commerce Department data.

New home inventory fell in January from the previous month to 188,000 units on a seasonally adjusted
basis, according to Commerce Department data. Based on the current sales pace, there is now a 7.9-
month supply of new homes on the market on a seasonally adjusted basis.

Pending Home Sales Index Eases for Second Consecutive Month: NAR
The National Association of Realtors’ pending home sales index, released Feb. 28, slipped 2.8 percent in
January to 5.36 million units, its second consecutive monthly decrease. The index is down 1.5 percent
from the same period a year ago.

The index fell to 88.9 in January from December’s downwardly revised figure of 91.5. 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 that while the housing market is healing, sales will fluctuate at
times, deepening on the flow of distressed properties entering the market.

“While home buyers over the past two years have been exceptionally successful with historically low
default rates, there is still an elevated level of shadow inventory of distressed homes from past lending
mistakes that need to go through the system,” Yun said in an accompanying news release. “We should
not expect the recovery to be in a straight upward path – it will zig-zag at times.”


21 | Appraiser News Online Vol. 12, No. 5/6, March 2011
By region, the pending home sales index in the Midwest fell 7.3 percent in January to 78, down 3.2
percent from a year ago. The West slipped 5.2 percent to 98.7, down 0.9 percent from a year ago. The
Northeast dropped 2.4 percent to 73.5, down 3 percent from a year ago. However, the South gained 1.4
percent to 97.7, down 0.4 percent from a year ago.

Residential Originations to Drop by 40 Percent in First Quarter: MBA
Residential mortgage originations are projected to plummet to $960 billion by 2012 after reaching $995
billion in the fourth quarter of 2010, according to a Feb. 23 MortageDaily.com report. The drop in
originations is in line with the current fall in refinance activity.

In its Mortgage Finance Forecast, the Mortgage Bankers Association said it expects originations to reach
$271 billion during the first quarter of 2011, down from $462 billion the previous quarter. According to
MBA, volume is expected to inch up to $275 billion in the second quarter of 2011 before bottoming at
$181 billion in the first-quarter 2012.

Refinance activity came in at 78 percent in the fourth quarter of 2010, up from 74 percent the previous
quarter. Refinancing is expected to log in at 63 percent in the first quarter of 2011 before plunging roughly
to 25 percent in the fourth quarter of 2011.

The share of borrowers opting for an adjustable-rate mortgage is expected to increase to 6 percent in the
first quarter of 2011, up from 5 percent in the fourth quarter of 2010, before topping out at 7 percent in the
second quarter – where it is expect to remain steady until at least the end of 2012.

UK Rental Market Takes Off
Rental properties accounted for 14 percent of sales in the United Kingdom last year – up from 9 percent
in 2005, according to U.K. Office of National Statistics data cited Feb. 23 by The Wall Street Journal. The
trend mirrors the U.S. market as residential property prices plummet, mortgage lending tightens, and
more people become renters.

Uncertainty about the economy and the lack of home mortgages is putting pressure on the rental market,
allowing Grainger plc, the U.K.’s largest listed residential landlord, to raise rents an average of 10 percent
for new tenants, Andrew Cunningham, chief executive officer of Grainger, told the Journal. The company
has also become more selective in its acquisitions, choosing properties that provide steady income.

There is also strong demand for rental housing in London, despite escalating prices of for-sale residential
properties in trendy neighborhoods such as Knightsbridge and Kensington. According to Knight Frank's
prime central London index, property prices in central London have recovered almost the entire 24
percent plunge suffered between March 2008 and March 2009, the Journal reported.

Aviva Investors, a unit of insurer Aviva PLC and manager of funds with more than $370 billion in assets
under management, is raising up to $407 million for a new central London residential property fund. Its
plan, Andrew Appleyard, head of U.K. real estate specialist funds at Aviva, told the Journal, is to invest in
existing developments or acquire existing buildings in need of refurbishing.




22 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Demand for rental housing in the U.K. will likely stay strong throughout 2011 if home prices are any
indicator. While they've improved in some parts of London and the Southeast, they continue to drop in the
rest of the country, according to the Journal.

The U.S. is experiencing a similar situation. While U.S. home prices have plunged by 26 percent since
their peak in June 2006, the rate at which rentals sit empty has dropped to its lowest level in seven years,
Gluskin Sheff chief economist and strategist David Rosenberg said. Vacancies dropped from 11.1
percent during the three months ending in September 2009 to 9.4 percent during the three months ending
in December 2010, Rosenberg told CNNMoney.com on Feb. 24. Rosenberg predicted that there will be
many more renters in the future as a true housing recovery is not expected in the near future.




23 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Around the Industry – Financial News
FASB, IASB Water Down Lease Requirements
Standards proposed in August 2010 that would require landlords and tenants to note leases as liabilities
or assets in balance sheets were softened by the Financial Accounting Standards Board and the
International Accounting Standards Board during a Feb. 17 joint board meeting in London.

The original proposal aimed to create a consistent approach to lease accounting, requiring that
companies record all leases as “right to use” assets and “future lease payment” liabilities. Previously,
leases classified as “operating leases” did not require that disclosure. During the comment period, which
ended Dec. 15, 2010, the proposal drew fire from many in the commercial real estate industry who
claimed that the requirements could stifle gradual real estate market recovery and encourage tenants to
sign shorter leases.

According to the minutes of the meeting, the boards moved to create two new definitions for leases —
finance and other-than-finance — which still allow for the distinction currently used. Finance leases would
be recorded as liabilities on balance sheets as proposed, but other-than-finance leases would essentially
be treated in the same manner as operating leases.

The specific indicators that distinguish the two types of leases have not been established; however, the
minutes of the meeting clarify that “a finance lease [requires] a profit or loss recognition pattern consistent
with the proposals in the Aug. 17 Exposure Draft” and “an other-than-finance lease [requires] a profit or
loss recognition pattern consistent with an operating lease under existing International Financial
Reporting Standards/U.S. Generally Accepted Accounting Principles.”

During the meeting, the boards also directed staffs to seek feedback from stakeholders on the lease type
classifications in order to guide future decisions on those definitions. The boards also has defined a lease
as “a contract in which the right to use a specified asset is conveyed, for a period of time, in exchange for
consideration,” but discussed ways to incorporate comments received on the exposure draft to further
clarify the definition and associated principles.

For the full meeting minutes, visit
http://www.fasb.org/cs/ContentServer?site=FASB&c=FASBContent_C&pagename=FASB%2FFASBCont
ent_C%2FActionAlertPage&cid=1176158252007.

Delinquencies Continue Upward, Even if Slightly: Trepp
According to data analytics firm Trepp, the delinquency rate for commercial mortgage-backed securities
reached a record high in February at 9.39 percent – a slight increase from 9.34 percent in January, The
Wall Street Journal reported March 2.

Of all property sectors, the office sector generated one of the larger jumps, with 7.1 percent of office loans
delinquent, up from 6.88 percent in January. Multifamily apartments performed the worst, with 16.61
percent of loans delinquent in February, although that rate was down from a peak of 16.85 percent in
January, the Journal reported.




24 | Appraiser News Online Vol. 12, No. 5/6, March 2011
The majority of troubled CMBS loans were made in 2006 and 2007. At least $22 billion of those loans are
expected to mature in 2011, according to Fitch Ratings.

Delinquencies Dip for CRE/Multifamily, Rise for CMBS
Commercial and multifamily mortgage delinquency rates remained low for life insurance companies,
Fannie Mae and Freddie Mac; fell for banks and thrifts; and increased to a record-high of 8.95 percent for
loans held in commercial mortgage backed securities in fourth quarter 2010, according to Mortgage
Bankers Association data released March 3.

“The recession’s downward pull on commercial and multifamily mortgage performance has slackened,”
Jamie Woodwell, MBA’s vice president of commercial real estate research, in the report. He also noted
the delinquency rates for commercial and multifamily mortgages at banks and thrifts peaked at “levels
well below those of the last recession.”

Woodwell also noted the performance of loans held by life insurance companies, Fannie Mae and
Freddie Mac have been “relatively strong throughout the downturn.” He pointed out that the CMBS market
has continued to experience elevated levels of stress, but the rate of increase has moderated.

The MBA analyzes the delinquency rate of the five largest inventor groups: commercial banks and thrifts,
CMBS, life insurance companies, Fannie Mae and Freddie Mac. Altogether these groups hold more than
85 percent of the outstanding commercial and multifamily mortgages in the United States.

With the exception of CMBS loans, delinquency rates remain below levels seen in the last major real
estate downturn during the early 1990s and some by large margins.

Between the third and fourth quarter of 2010, the 90-day plus delinquency rate on loans held by banks
and thrifts insured by the Federal Deposit Insurance Corporation decreased 0.22 percentage points to
4.19 percent – the first recorded decrease since the first quarter of 2006. The fourth quarter 2010
delinquency rate was 2.39 percentage points lower than the series high of 6.58 percent reached in the
second quarter of 1991.

The 60-plus day delinquency rate on loans held in life insurance company portfolios decreased 0.03
percentage points to 0.19 percent – a far cry from the high of 7.37 percent, reached during fourth quarter
1993. Those held by Fannie Mae increased 0.06 percentage points to 0.71 percent – down from a high of
3.62, reached during the fourth quarter 1991. And those held by Freddie Mac decreased 0.04 percentage
points to 0.31 percent – 6.50 percentage points lower than the series high reached in 1992

Based on the unpaid principal balance of loans, delinquency rates for each group at the end of the fourth
quarter were as follows:
   • CMBS: 8.95 percent (30 or more days delinquent or in REO);
   • Life company portfolios: 0.19 percent (60 or more days delinquent);
   • Fannie Mae: 0.71 percent (60 or more days delinquent);
   • Freddie Mac: 0.31 percent (60 or more days delinquent);
   • Banks and thrifts: 4.19 percent (90 or more days delinquent or in nonaccrual).




25 | Appraiser News Online Vol. 12, No. 5/6, March 2011
For the full report, visit
www.mortgagebankers.org/files/Research/CommercialNDR/4Q10CommercialNDR.pdf.

Purchases, Refinances Push Mortgage Application Activity Up: MBA
Refinancing application activity reached its highest level since Jan. 14 in the week ending March 4, while
purchase application activity reached its highest level this year, according to the Mortgage Bankers
Association’s weekly Mortgage Applications Survey, released March 9.

The survey showed that the Market Composite Index, which measures mortgage loan application activity,
jumped 15.5 percent on a seasonally adjusted basis from the previous week. On a non-adjusted basis,
the index increased 16.1 percent from the previous week. The four-week moving average for the Market
Index rose 2.7 percent on a seasonally adjusted basis.

The Refinance Index increased 17.2 percent from the previous week. Refinancing made up 65.5 percent
of applications, up from 64.9 percent the previous week, while adjustable-rate loan activity nudged up 0.5
percent to 6 percent. The four-week moving average for the Refinance Index rose 3.6 percent on a
seasonally adjusted basis.

The MBA’s March 4 Purchase Index increased 12.5 percent from the previous week on a seasonally
adjusted basis. On a non-adjusted basis, the index rose 14.3 percent from the previous week, down 14.3
percent from a year ago. The four-week moving average for the Purchase Index increased 1.2 percent on
a seasonally adjusted basis.

The average rate on a 30-year fixed loan increased from the prior week’s 4.84 percent to 4.93 percent,
while points, including origination fees, fell from 1.29 to 0.87 for 80 percent loan-to-value ratio loans,
according to the MBA. The average rate on a 15-year fixed loan remained steady at 4.17 percent, while
points, including origination fees, inched up from 1.07 to 1.15.

Long-Term Fixed Rates Drop for Third Consecutive Week: Freddie Mac
Fixed mortgage rates eased for the third straight week, according to Freddie Mac's March 3 Weekly
Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage inched down 0.08 percentage points from the previous week to 4.87
percent, down from 4.97 percent a year ago. The 15-year fixed-rate dipped 0.07 percentage points to
4.15 percent, down from 4.33 percent a year ago. Meanwhile, five-year Treasury-indexed adjustable-rate
mortgages slid 0.08 percentage points to 3.72 percent, down from 4.11 percent a year ago, and one-year
rates fell 0.17 percentage points to 3.23 percent, down from 4.27 percent a year ago.

"Mortgage rates saw an overall improvement this week. Interest rates for 30-year fixed mortgages were
almost 0.2 percentage points below this year's high set just three weeks ago," Freddie Mac Chief
Economist Frank Nothaft said in an accompanying news release. "However, housing demand still
remains weak. New home sales in January were near record lows dating back to 1963 when the data
began, according to the Census Bureau. Similarly, pending sales of existing homes fell for the second
consecutive month in January, according to the National Association of Realtors."

For the complete survey, including regional breakdowns, visit www.freddiemac.com/pmms/release.html.


26 | Appraiser News Online Vol. 12, No. 5/6, March 2011
FASB Guidance on Troubled Debt Restructuring May Mean Work for
Appraisers
The Financial Accounting Standards Board plans to issue its final guidance on Troubled Debt
Restructurings by the end of March, according to minutes from the agency’s Feb. 23 meeting. The new
guidelines could lead to more work for appraisers as more troubled debt enters refinancing.

Currently, there are no clear guidelines to assist creditors in determining whether a loan or other debt
modification meets the criteria to be considered a TDR, both for recording and disclosure purposes. In
announcing the guidance initiative last year, FASB Acting Chair Leslie Seidman stated that the guidance
should result in more consistent application of generally accepted accounting principles for debt
restructurings.

The board’s Feb. 23 deliberations focused on insignificant delays in cash flows in the context of
restructurings and on finalizing effective date and transition for proposed TDR accounting literature. The
board clarified that insignificant delays may or may not be indicative of a concession.

While the board affirmed its decision that the TDR amendments for nonpublic entities will be effective for
the first interim or annual period beginning on or after Dec. 15, the board revised its guidance for public
entities to require the amendments to be effective on or after June 15.

The board also voted to supplement the proposed TDR guidance with factors that entities should consider
when determining whether a delay is insignificant and therefore would not meet the criteria of a TDR.
Entities would therefore need to evaluate their current policies for identifying TDRs.

Seidman said the general principle is that the nature of the modification, whether it is timing or amount or
the terms of the loan is insignificant, in relation to for example the maturity, the principle or the nature of
the underlying loan.

For the full minutes, visit
www.fasb.org/cs/ContentServer?site=FASB&c=FASBContent_C&pagename=FASB%2FFASBContent_C
%2FActionAlertPage&cid=1176158268338.

U.S. Dominates Global CRE Volume in 2010: RCA
While London and Tokyo held onto their top spots from 2009, U.S. markets dominated the 2010 global
rankings with 12 of the world’s top 30 commercial real estate markets by sales volume, according to Real
Capital Analytics. The analysis came in the company’s Jan. 27 U.S. Capital Trends report.

No other country approached the U.S. tally. Australian markets were the next best represented, with three
of the top 30. China and Germany each held two spots on the rankings.

With $16.3 billion in sales, nearly triple the previous year’s total, the New York City metro displaced Paris
in taking third place globally in 2010. New York was followed by Washington, D.C., (ranked sixth), Los
Angeles (seventh) and San Francisco (eighth). No other country had more than one market in the top 10.




27 | Appraiser News Online Vol. 12, No. 5/6, March 2011
U.S. markets not only dominated the top 30 rankings, but they also registered the most observable year-
over-year spikes in transaction volume. San Francisco and Chicago both saw volume more than triple
from 2009. Only Sao Paolo outpaced Chicago’s gains, reporting a near-300 percent rise in activity.
Atlanta was the only U.S. market in the top 30 where volume did not at least double.

Overall, the U.S. markets in the top 30 averaged year-over-year increases of 160 percent, significantly
outpacing the 80 percent average for non-U.S. markets. The only markets to measure declines in activity
were in the Asia Pacific region, with Shanghai, Seoul and Taipei each reporting drops in sales volume.

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
www.appraisalinstitute.org/myappraisalinstitute/real_capital_analytics_reports.aspx.

Mortgage Rates Ease, Freddie Mac Survey Finds
Fixed mortgage rates eased despite conflicting reports on inflation, according to Freddie Mac's Feb. 24
Weekly Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage inched down 0.05 percentage points from the previous week to 4.95
percent, down from 5.05 percent a year ago. The 15-year fixed-rate also dipped 0.05 percentage points to
4.22 percent, down from 4.4 percent a year ago. Meanwhile, five-year Treasury-indexed adjustable-rate
mortgages slid 0.07 percentage points to 3.8 percent, down from 4.16 percent a year ago, and one-year
rates inched up 0.01 percentage points to 3.4 percent, down from 4.15 percent a year ago.

“Fixed mortgage rates eased again this holiday week amid mixed inflation data reports,” Freddie Mac
Chief Economist Frank Nothaft said in an accompanying news release. “Although the core consumer
price index for January rose slightly above the market consensus, house prices fell 4.1 percent in the
fourth quarter of 2010 compared to the same period in 2009, according to the S&P/Case-Shiller National
Index.”

For the complete survey, including regional breakdowns, visit www.freddiemac.com/pmms/release.html.

MBA Weekly Mortgage Survey: Interest Rates, Mortgage Activity Down
Mortgage application activity decreased despite drops in interest rates in the week ending Feb. 25,
according to the Mortgage Bankers Association’s weekly Mortgage Applications Survey, released March
2.

The survey showed that the Market Composite Index, which measures mortgage loan application activity,
dropped 6.5 percent on a seasonally adjusted basis from the previous week. On a non-adjusted basis,
the index fell 5.5 percent from the previous week. The four-week moving average for the Market Index fell
2.5 percent on a seasonally adjusted basis.

The Refinance Index slipped 6.5 percent from the previous week. Refinancing made up 64.9 percent of
applications, down from 65.7 percent the previous week, while adjustable-rate loan activity nudged down
0.1 percent to 5.5 percent. The four-week moving average for the Refinance Index fell 2.7 percent on a
seasonally adjusted basis.




28 | Appraiser News Online Vol. 12, No. 5/6, March 2011
The MBA’s Feb. 28 Purchase Index decreased 6.1 percent from the previous week on a seasonally
adjusted basis. On a non-adjusted basis, the index slid 3.5 percent from the previous week, down 19.6
percent from a year ago. The four-week moving average for the Purchase Index dropped 2.2 percent on a
seasonally adjusted basis.

The average rate on a 30-year fixed loan fell from the prior week’s 5 percent to 4.84 percent, while points,
including origination fees, increased from 0.96 to 1.3 for 80 percent loan-to-value ratio loans, according to
the MBA. The average rate on a 15-year fixed loan decreased from 4.28 percent to 4.17 percent, while
points, including origination fees, inched up from 0.8 to 1.07.




29 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Around the Industry – Industry Insider
AI, ASFMRA Write to Supersede Labor’s Fiduciary Rule
In a March 4 letter to Rep. Devin Nunes, R-Calif., the Appraisal Institute offered suggestions to improve
the Public Employee Pension Transparency Act, which Nunes introduced Feb. 9. AI sees the bill as an
opportunity to oppose the Department of Labor’s proposed rule that would extend fiduciary status to real
estate appraisers.

The bill, H.R. 567, intends to amend the Internal Revenue Code of 1986 to provide for reporting and
disclosure by state and local public employee retirement pension plans.

In the letter, AI and the American Society of Farm Managers and Rural Appraisers remind Nunes that
“real estate appraisers do not act as advocates, but rather objective third parties who provide opinions of
value based on research and analysis. Moreover, an appraiser is defined as ‘one who is expected to
perform valuation services competently and in a manner that is independent, impartial and objective.’”

The groups hope that similar language can be included in H.R. 567. If the bill is signed into law, it will
supersede the Department of Labor’s Proposed Rule that would extend fiduciary status under the
Employee Retirement Income Security Act to real estate appraisers.

For a full copy of H.R. 567, which has been referred to the House Ways & Means Committee, visit
www.govtrack.us/congress/billtext.xpd?bill=h112-567.

To read the letter, visit www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2011/AI-
ASFRMA_to_NunesHR567FiduciaryAmendment.pdf.

AI, Labor Discuss ‘Fiduciary’ Proposal, Assistance with Enforcement
The Appraisal Institute reiterated its objection to the Department of Labor’s Definition of Fiduciary
Proposed Rule in a face-to-face Feb. 24 meeting with senior staff from the department’s Enforcement
Division. The meeting was held in advance of March 1-2 hearings on the rule, which would define real
estate appraisers as “fiduciaries.”

The proposed rule offers a wholesale revision to its regulation that defines the term “fiduciary” under the
Employee Retirement Income Security Act, to include appraisers who work with pension and 401(k)
plans. AI echoed its comments from its Jan. 5 letter to Labor objecting to the inclusion of appraisers in the
definition of “fiduciary.”

Labor department officials commented in the meeting that in the development of their proposal, they
thought it was “worth considering” including appraisers in the definition of “fiduciary,” but indicated real
estate appraisers were not the primary targets of the proposed rule, according to attendee Brian Rodgers,
Appraisal Institute manager, federal affairs. Rodgers said Labor officials indicated that business valuers
and appraisers of Employee Stock Ownership Plans were the primary focus of the proposed rule. Labor
department staff indicated comments relating to real estate appraisers and potential negative unintended
effects were being taken into consideration, Rogers said.




30 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Also discussed was how AI could help the department better understand the appraisal process and assist
with enforcement and appraisal reviews. AI provided training to the Federal Bureau of Investigation for
agents and analysts involved in residential and commercial mortgage fraud issues. Labor officials agreed
this was an area that deserved greater outreach with the appraisal community professional organizations,
Rogers said.

For AI’s complete comments on the proposed rule, visit
www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2011/AI-
ASFRMAonFiduciaryResponsibilityFinal.pdf.

AI President Featured on Delta, US Airways In-flight Radio
Appraisal Institute President Joseph C. Magdziarz, MAI, SRA, is currently being featured on Delta Air
Lines’ and US Airways’ in-flight radio programming, which is expected to reach more than 11 million
travelers during March and April.

In an interview with former CNN anchor Dennis Michael, Magdziarz talks about why some improvement
projects don’t pay off when owners sell their homes, which projects offer the best and worst returns on
investment, and how real estate appraisers can help owners make smart decisions when renovating their
homes.

Delta, the nation’s second largest airline, serves 351 destinations (109 international and 242 domestic)
with 5,681 flights daily. US Airways, the fifth largest domestic airline, has 3,182 daily departures and 200
destinations (156 domestic and 44 international).

To listen to the three-minute interview, go to: https://appraisalinstitute.box.net/shared/dvdt2nn0j.

Mercury Network Enters BPO Market
Real estate technology provider a la mode, inc., announced Feb. 23 it is expanding its Mercury Network
vendor management platform to include broker price opinions. Users will be able to select providers
based on preferences, including proximity to subject property and average turn-around times.

Residential appraiser Gary Crabtree, SRA, from Bakersfield, Calif., lamented the news as a harbinger of
things to come.

By offering BPO ordering to lenders, “AMCs and servicers indicate that they are evolving with the current
market climate to meet the demands of these entities that require faster, cheaper and lower quality
evaluations not constrained with the likes of USPAP,” Crabtree told Appraiser News Online.

“In the not-too-distant future, it is likely that evaluations under the statutory threshold of $250,000 will be
performed by a combination of automated valuation models and BPOs,” he added. “For the time being,
appraisals are still the gold standard for loan origination, but even that is under attack on a state-by-state
basis.”

As if on cue, California-based appraisal management company InHouse Inc. announced that it is offering
technology to manage multiple BPO vendors, including BPO companies, appraisers and individual real
estate agents and brokers, DSNews.com reported Feb. 24. The company’s Connexions software enables


31 | Appraiser News Online Vol. 12, No. 5/6, March 2011
lenders and servicers to geographically target BPO vendors while managing specific state credential
guidelines.

Flood Map Changes May Cause Economic Damages: The Appraisal Journal
Changes to Federal Emergency Management Agency flood zone maps may cause economic damages to
property owners, and governments may need to pay them substantial compensation, according to an
article published Feb. 28 in The Appraisal Journal’s Winter issue.

The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the
nation’s largest professional association of real estate appraisers. The materials presented in the
publication represent the opinions and views of the authors and not necessarily those of the Appraisal
Institute.

“Flood Zone Revisions and Economic Loss: An Example from Florida” – by William Cole; Bruce Stephan,
MAI; Nathan Chouinard; J. Howard Finch, Ph.D.; and H. Shelton Weeks, Ph.D. – examines how revisions
to existing flood zones can negatively affect land value and cause economic loss to a property owner.
Under Florida’s Harris Act, as well as under case law, property owners may ask the courts to deem a
change in regulation as a “regulatory taking” and may ask the government for compensation.

The authors address how to compute the amount of loss, and consequently the amount of compensation,
that a property owner would receive for the economic loss from a regulatory taking. The value of the
compensation due to a new property regulation is determined by appraisal analysis of the value of the
property before and after the government’s action.

The article presents a case study of a light industrial manufacturing operation within a newly designated
flood zone in southwest Florida. The change in the flood zone restrictions affected the property value
because the owners now are not allowed to substantially upgrade, expand or replacement of the building
on their property. The authors use the sales comparison approach and the income capitalization
approach to determine the value of the case study property before and after the regulation change. In this
case, the estimated decline in value was $760,000, or 29 percent of the original property value.

The authors conclude by advising appraisers, property owners and regulatory officials to consider the
implications of regulatory takings and the economic consequences associated with revising existing flood
zone maps.

Other articles in The Appraisal Journal’s Winter 2011 issue cover wind farms; the impact of tax-deferred
exchanges on agricultural land values; and direct capitalization versus yield capitalization. For more
information or to subscribe to the Journal, visit www.appraisalinstitute.org/taj/default.aspx.




32 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Inside the Institute
AI in the News: AI President Advises Consumers on In-Flight Radio
Appraisal Institute President Joseph C. Magdziarz, MAI, SRA, is currently being featured on Delta Air
Lines’ and US Airways’ in-flight talk radio programming, which is expected to reach 11 million travelers
during March and April.

In the interview, Magdziarz provides consumers with insights on which home improvement projects best
add value to a home and why some projects do not. Magdziarz also talks about the role appraisers play in
the sale of a home, appraisers’ experience, education and other qualifications, and what the Appraisal
Institute is and does.

Also appearing in national media coverage this past week were Associate members Joseph Callan and
Allison Syms, in CoStar Advisor; George Demopulos, SRA, in Scotsman Guide; Laurel Keller, Associate
member, in HotelNewsNow.com; and William Cole, Associate member, Bruce Stephan, MAI, and Nathan
Chouinard, Associate member, in Mortgage News Daily and Mortgage Mag.

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: Herbert Sass III, MAI, The
(Charleston, S.C.) Post and Courier; Delbert Denkins, Associate member, Herald Palladium (St. Joseph,
Mich.); John Scott, MAI, The Charlotte (N.C.) Observer; Tom Keith, MAI, SRA, The Fayetteville (N.C.)
Observer; Ken Simpson, SRA, and Craig Steinley, SRA, Rapid City (S.D.) Journal; Keith Murray, MAI,
Biloxi-Gulfport (Miss.) Sun Herald; Laurel Kelly, Associate member, TCPalm.com (Stuart, Fla.); Vern
Gardner, MAI, SRA, Foster’s Daily Democrat (Dover, N.H.); Gail Lissner, SRA, Chicago Tribune; Mark
Verrett, Associate member, KSET-AM 1300 (Beaumont, Texas); Richard Hagar, SRA, WPLU-FM 88.5
(Seattle); and Pam Dubov, Associate member, WUSF-FM 89.7 (Tampa, Fla.).

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.

AI Leadership Resource Registry Reopens; National Deadline Aug. 15
The Appraisal Institute’s Leadership Development and Training Committee opened the 2012 Leadership
Resource Registry for member submissions on March 7. Members have the opportunity to submit their
preferences for volunteer service on the chapter, region and national level. The deadline for entries to the
National registry is Aug. 15.

Members may also indicate their interest for service on future project teams, panels and other leadership
positions through the updated Service Registry.

To access all levels of the registry, members should log in to their account via the AI website,
www.appraisalinstitute.org; visit AI's new Volunteer Opportunities page, under the “Membership” tab; and


33 | Appraiser News Online Vol. 12, No. 5/6, March 2011
click on “Volunteer Today.” Members may now also review job descriptions of positions on the national
and regional level posted on the registry page.

Once in the registry, members can specify the chapter, region and/or national committees or panels on
which they have an interest in serving. The reports generated from submissions collected are reviewed by
leadership for consideration when selecting for open positions.

For questions regarding chapter committees, members should contact their chapter's executive director.
For questions on the region and national level, contact Ashley Forman at aforman@appraisalinstitute.org.

Appraisal Institute Honors Five Members as “Volunteer of Distinction”
Honorees in March
The Appraisal Institute announced March 9 the recognition of five members as a “Volunteer of Distinction”
honorees for March. Members recognized were: Ralph Biondi, Associate member, Region IV; Diane
Christiana, MAI, Region VI; Howard Fram, Associate member, Region VII; Sandra McAlister Winter, MAI,
Region IX; and Ryan Zink, MAI, Region X.

The Appraisal Institute’s “Volunteer of Distinction” program recognizes one member in good standing per
region each month who has contributed to the Appraisal Institute, the profession and their local
community.

Biondi, a member of the Connecticut Chapter, has worked in the real estate valuation profession for 37
years and has been a member of the Appraisal Institute for 33 years. As chair of his chapter’s Legislative
Affairs Committee since 1995, he is an active participant in the chapter’s contributions to state and federal
legislative initiatives and has led many panel discussions for professional organizations including
legislative updates and seminars at meetings of the local MLS board and Board of Realtors. He has also
taught Appraisal Continuing Education courses for the city of Waterbury, Conn.

Christiana, a member of the Metro New Jersey Chapter, has been a member of the Appraisal Institute for
six years and has been involved in the real estate valuation profession for seven years. She currently
serves as a member of her chapter’s Board of Directors, is chair of the chapter’s Government Relations
Committee and was instrumental in her chapter being appointed to the New Jersey Smart Growth
Economic Development Coalition. In service to her community, Christiana is a member of the borough of
Roseland’s Board of Adjustment, and has been a Town Council member as well as past member of the
Roseland Board of Education and the Roseland Women’s Club. Christiana is also an instructor for the
Appraisal Institute.

Fram, a member of the San Diego Chapter, has been a member of the Appraisal Institute since he first
became a real estate valuation professional eight years ago. His service to the Appraisal Institute
includes roles on the chapter’s Board of Directors in 2008-2010, as chair of the Associate Guidance
committee in 2007 and the Education Committee this year and as a member of the Technology
Committee in 2010. He was involved in planning the San Diego Apartment and Housing Seminar in 2007-
2010 and chaired the committee in 2008.

Winter, a member of the Atlanta Area Chapter, has worked in the real estate valuation profession for 22
years and has been a member of the Appraisal Institute since 1989. Winter has served her chapter in a



34 | Appraiser News Online Vol. 12, No. 5/6, March 2011
variety of roles, including as chair of the Admissions and Public Relations Committees and as a Board
member, treasurer, secretary, vice president and, in 2009, president. She currently serves as vice chair of
the Georgia Real Estate Appraiser’s Board, a role she has held since 2004. In her community, she is a
frequent school volunteer.

Zink, a member of the East Florida Chapter, has worked in real estate valuation for 14 years and has
been a member of the Appraisal Institute since 1999. Zink has served his chapter as Associate member
representative, public relations chair from 2006 to 2010 and member of the chapter’s Board of Directors
for the last two years. He works on behalf of his chapter with the University of Central Florida’s real estate
department, moderating and participating in expert panels and forums since 2009 and assisting in
graduate job placement. Zink’s community service includes participation on the AMCAR Community
Service Committee, Habitat for Humanity and local homeowner associations, as well as coaching a youth
basketball team.

Appraisal Institute members may nominate members by submitting the nomination form to their chapter’s
executive director or president. Each region’s honorees then are chosen by their regional executive
director in conjunction with the region’s chair and vice chair. The nomination form and additional
information about the “Volunteer of Distinction” program can be found at
www.appraisalinstitute.org/membership/VolunteerOfDistinction.aspx.

AI in the News: AI’s Latest Book Featured in National Trade Media
The Appraisal Institute’s latest book, "Appraising Conservation and Historic Preservation Easements" by
Richard J. Roddewig, MAI, garnered media coverage from several national trade outlets the week of Feb.
21, including National Mortgage Professional Magazine, RISMedia.com, The Niche Report and Mortgage
News Daily.

The landmark book draws on legal, regulatory and professional appraisal literature to examine the
valuation of conservation and historic preservation easements from the contradictory perspectives of the
Internal Revenue Service, the courts, easement-holding organizations and appraisers. The book also
includes a series of detailed examples and sample sections of appraisal reports relating to various
conservation and preservation easement properties and appraisal situations.

Also appearing in national media coverage this past week were Joseph C. Magdziarz, MAI, SRA, in The
Real Deal (New York); William Pittenger, MAI, SRA, in DSNews.com; and Tom Horn, SRA, in Valuation
Review.

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: Pam Dubov, Associate
member, TBNweekly.com (Tampa Bay, Fla.); Vern Gardner, MAI, SRA, Portsmouth (N.H.) Herald; Jeffrey
Sherman, MAI, Crain’s Cleveland Business; Arnold Grant, MAI, Milford-Orange Bulletin (New Haven,
Conn.); Patrick Lemp, MAI, The Day (New London, Conn.); Steven Schleider, MAI, New York Real
Estate Journal and REJournal.com; Dennis Lopez, MAI, SRA, The (Phoenix) Arizona Republic; Keith
Sablik, MAI, North Bay Business Journal (Santa Rosa, Calif.); and Laurel Kelly, Associate member,
WPBF-25 (ABC), Palm Beach, Fla.


35 | Appraiser News Online Vol. 12, No. 5/6, March 2011
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.

Appraisal Institute Designates 21 Members in February
The Appraisal Institute designated nine MAI members and 12 SRA members in the month of February,
bringing to 48 the number of members receiving a designation so far in 2011.

The members receiving their MAI designation in February were: Benjamin R. Becker, MAI, San Mateo,
Calif.; James M. Bray, MAI, El Cajon, Calif.; Barbara Cantrell, MAI, Columbia, Md.; Richard A. Jander,
MAI, Flower Mound, Texas; Ross Park, MAI, Boise, Idaho; Lara Sue Watson, MAI, Brentwood, Tenn.;
Jiao Yi, MAI, Beijing; Joseph A. Zavac, MAI, Toledo, Ohio; and Wensui Zheng, MAI, Shanghai.

The members receiving their SRA designation in February were: M. Elizabeth Baldwin, SRA, Durham,
N.C.; Christina N. Brockett, SRA, Adamstown, Md.; Kathy Cline, SRA, Lincoln, Calif.; Denis A. DeSaix,
SRA, Dublin, Calif.; Gary M. Hamilton, SRA, Tampa, Fla.; David Harmon, SRA, Shaker Heights, Ohio;
Glen D. Katz, SRA, Louisville, Ky.; Charles A. Minzenberger, SRA, Chicago; Michael E. Reed, SRA,
Seattle; John A. Stobba, SRA, Sebastopol, Calif.; Erin Taffera, SRA, Chicago; and Mary D. Yankauer,
SRA, Sacramento, Calif.

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.

In Memoriam
The Appraisal Institute regrets the passing of the following Designated members who were reported to
Appraiser News Online in February: Don E. Boyson, MAI, SRA, Centennial, Colo.; Howard R. Brower Sr.,
MAI, SRA, Seaford, N.Y.; and Marvin D. Hansen, SRA, Vancouver, Wash.

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.




36 | Appraiser News Online Vol. 12, No. 5/6, March 2011
ECONOMIC INDICATORS – January 2011
Market Rates and Bond Yields
                                                        Jan11         July10          Jan10           July09        Jan09         Jan08
 Reserve Bank Discount Rate                             0.75          0.75            0.50            0.50          0.50          4.48
 Prime Rate (monthly average)                           3.25          3.25            3.25            3.25          3.25          6.98
 Federal Funds Rate                                     0.17          0.18            0.11            0.16          0.15          3.94
 3-Month Treasury Bills                                 0.15          0.16            0.06            0.18          0.13          2.75
 6-Month Treasury Bills                                 0.18          0.20            0.15            0.27          0.30          2.75
 3-Month Certificates of Deposit                        0.29          0.41            0.20            0.35          1.02          3.84
 LIBOR-3 month rate                                     0.39          0.61            0.43            0.91          1.73          3.95
 U.S. 5-Year Bond                                       1.99          1.76            2.48            2.46          1.60          2.98
 U.S. 10-Year Bond                                      3.39          3.01            3.73            3.56          2.52          3.74
 U.S. 30-Year Bond                                      4.52          3.99            4.60            4.41          3.13          4.33
 Municipal Tax Exempts (Aaa)†                           n/a           3.69            3.96            4.36          4.64          4.12
 Municipal Tax Exempts (A)†                             n/a           4.39            4.79            5.33          5.59          4.49
 Corporate Bonds (Aaa)†                                 5.04          4.72            5.26            5.41          5.05          5.33
 Corporate Bonds (A)†                                   n/a           5.25            5.76            6.09          6.46          6.06
 Corporate Bonds (Baa)†                                 6.09          6.01            6.25            7.09          8.14          6.54

Stock Dividend Yields
 Common Stocks—500                                      1.84          2.10            1.92            2.31          3.01          2.06

O t h e r B e n c h m a r k s^
 Industrial Production Index*,¶                         95.1          93.5            90.5            86.7          89.1           100.1

 Unemployment (%)¶                                      9.0           9.5             9.7             9.4           7.6            4.9
 Monetary Aggregates, daily avg.¶
  M1, $-Billions                                       1,853.8†† 1,731.0†† 1,681.0†† 1,661.5†† 1,573.8                             1,364.6
  M2, $-Billions                                       8,837.7†† 8,615.3†† 8,469.5†† 8,452.8†† 8,302.6                             7,498.6
 Consumer Price Index
  All Urban Consumers                                   220.2         218.0           216.7           215.4           211.1        211.1

                                                        4Q10         3Q10          4Q09           3Q09         4Q08        3Q08       4Q07
Per Capita Personal Disposable
 Income Annual Rate in Current $s††                     37,006       36,771        36,049         35,888       35,677 36,060 35,042
Savings as % of DPI††                                   5.4          5.9           5.5            5.6          5.2    3.6    2.1


* 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.
^
   As of March 2008, the Federal Reserve stopped issuing the “Member Bank Borrowed Reserves.” As such, this figure no longer appears in
   Appraisal Institute publications.
¶
   Seasonally adjusted
†
   Source: Moody's Bond Record
††
   Revised figures used




37 | Appraiser News Online Vol. 12, No. 5/6, March 2011
Conventional Home Mortgage Terms


                                                          Jan11       July10          Jan10       July09        Jan09          Jan08
 New House Loans—U.S. Averages
 Interest rate (%)                                        4.75          4.87          5.04         5.40          5.11            6.02
 Term (years)                                             28.4          28.8          28.5         29.0          29.0            29.0
 Loan ratio (%)                                           73.2          73.2          74.2         75.0          74.7            78.6
 Price (thou. $)                                          350.5         374.7         346.4        328.1         356.6           360.2

 Used House Loans—U.S. Averages
 Interest rate (%)                                        4.82          4.90          5.08         5.34          5.21            6.04
 Term (years)                                             27.1          27.4          27.6         28.3          28.3            28.5
 Loan ratio (%)                                           73.4          74.6          72.4         74.9          75.2            78.3
 Price (thou. $)                                          280.2         303.4         308.7        315.5         292.6           292.1

Conventional Home Mortgage Rates by Metropolitan Area

                                                       4Q10       4Q09       4Q08       4Q07
Atlanta                                                4.63       5.04       6.14       6.42
Boston-Lawrence-NH-ME-CT#                              4.51       4.78       5.78       6.27
Chicago-Gary-IN-WI#                                    4.55       5.11       5.97       6.44
Cleveland-Akron#                                       4.40       5.05       6.17       6.57
Dallas-Fort Worth#                                     4.51       5.06       6.07       6.40
Denver-Boulder-Greely#                                 4.50       5.12       5.85       6.39
Detroit-Ann Arbor-Flint#                               4.56       4.98       6.34       6.53
Houston-Galveston-Brazoria#                            4.60       5.03       5.91       6.40
Indianapolis                                           4.45       5.32       6.34       6.65
Kansas City, MO-KS                                     5.22       4.94       5.74       6.12
Los Angeles-Riverside#                                 4.60       5.10       6.06       6.43
Miami-Fort Lauderdale#                                 4.64       5.19       6.17       6.59
Milwaukee-Racine#                                      4.50       5.09       6.09       6.38
Minneapolis-St. Paul-WI                                4.51       5.09       5.98       6.36
New York-Long Island-N. NJ-CT#                         4.45       5.06       6.00       6.44
Philadelphia-Wilmington-NJ#                            4.49       5.14       6.06       6.41
Phoenix-Mesa                                           4.79       5.18       6.30       6.45
Pittsburgh                                             4.42       5.14       6.07       6.16
Portland-Salem#                                        4.44       5.03       5.83       6.35
St. Louis-IL                                           4.59       5.13       6.15       6.62
San Diego                                              4.59       5.08       6.03       6.43
San Francisco-Oakland-San Jose#                        4.54       5.03       6.09       6.46
Seattle-Tacoma-Bremerton                               4.47       5.00       5.88       6.36
Tampa-St. Petersburg-Clearwater                        4.63       5.13       6.08       6.49
Washington, DC-Baltimore-VA#                           4.41       5.07       6.02       6.49

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




38 | Appraiser News Online Vol. 12, No. 5/6, March 2011

				
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