Archive for September, 2011

More on Debacle III IN RE LOFTON

More on Debacle III IN RE LOFTON

In Re: Harry and Crystal Lofton.

Case No. 10-37223.

United States Bankruptcy Court, D. New Jersey.

Evidentiary Hearing June 28, 2011.

August 22, 2011.

Ryan Lamb, Esquire, Law Offices of Georgette Miller, Trenton, New Jersey.

William M.E. Powers III, Esquire, Powers Kirn, LLC, Lawnside, New Jersey.

KATHRYN C. FERGUSON, Bankruptcy Judge.

Dear Counsel:

Harry and Crystal Lofton (“Debtors”) filed a Chapter 13 petition on September 1, 2010. On Schedule A, the Debtors list the current value of 14 Owen Lane, Willingboro, NJ as $147,000. In the plan, the Debtors list the amount of the first mortgage on the property as $163,796, and the second mortgage held by Wells Fargo Bank as $23,325. Based on those numbers, the Debtors propose to cram down Wells Fargo’s second mortgage and treat it as an unsecured claim.

On June 28, 2011, the court held an evidentiary hearing for the purpose of determining the value of 14 Owen Lane, Willingboro, NJ for confirmation purposes. The Debtors and Wells Fargo each presented appraisals of the property. The parties stipulated to the admissibility of the appraisals. Wells Fargo submitted an appraisal prepared by Donald A. Schulte. Mr. Schulte opined that the fair market value of the property as of September 1, 2010 was $195,000. The Debtors submitted an appraisal prepared by Walter A. Kirk. Mr. Kirk opined that the fair market value of the property as of February 22, 2011 was $125,000.

The five comparables in Wells Fargo’s report range in price from $183,580 to $243,000 and were sold during the period of October 2009 through July 2010. The six comparables in the Debtors’ report range in price from $101,000 to $157,000 and were sold during the period from April 2010 through October 2010. The primary difference between the two appraisal reports was that Wells Fargo’s report excluded distressed properties and the Debtors’ report included them.

During cross-examination, Wells Fargo’s appraiser, Mr. Schulte, was asked why all but one of comparables he chose were in excess of $200,000 when there had been lower value sales in the same time period. Mr. Schulte responded that he had excluded all “short sales” or bank owned properties. When pressed as to why he had done so, Mr. Schulte stated that the REO sales (foreclosures) simply were not good indicators of value. He made that statement despite the fact that in his report he checked “yes” next to the question: “Are foreclosure sales (REO sales) a factor in the market?” Mr. Schulte then noted that “Approximately 25% of the sales over the last 12 months were REO properties. They are a factor in the subject’s market place.” Wells Fargo Appraisal Report at 19. Mr. Schulte also testified that REI properties have an effect on value. At the hearing, Mr. Schulte never satisfactory explained why excluding a quarter of the subject market results in a more accurate estimation of fair market value. It is notable that in the month of October 2010 (one month from the date of the Wells Fargo report) three houses1 in the immediate neighborhood of the subject property were sold and not one of them was sold for in excess of $200,000.

By contrast, the Debtors’ appraiser, Mr. Kirk, persuasively testified that it is appropriate to use foreclosure sales as comparables because that is the reality of this market and a buyer will be comparing the price of the subject house with those in the neighborhood. He explained that given the principal of substitution, a buyer will not pay more for a product when a similar, lower-priced product is readily available. In cross-examination, Wells Fargo’s counsel pressed Mr. Kirk about the propriety of using foreclosed properties as comparable sales. Mr. Kirk responded that the comparable sales he chose best illustrated the market in that neighborhood at that time and if the sales are non-traditional it indicates by the sheer number that foreclosures are a significant portion of the market. Mr. Kirk said that his educated guess would be that at least 20% of the properties in Willingboro are distressed sales at this time.

The court concurs with Mr. Kirk’s decision to include distressed sales in his valuation. The general rule of not including foreclosure sales when determining fair market value simply does not stand up in the current market. To exclude a quarter of the market would result in a skewed estimate of value. The Debtors’ appraiser reasonably pointed out that the primary motivation for people to sell at the current time is to avoid foreclosure; homeowners in good financial shape are not putting their houses on the market because the market is so depressed.

The court also found the Debtors’ appraisal to be more reliable because the comparables their expert relied upon required little to no adjustments. Willingboro, being a Levittown, presents a unique opportunity to compare numerous nearly identical houses. Mr. Kirk testified that for the comparables he chose only the exact same model home as the Debtors’ home and only those located in the Debtors’ neighborhood of Garfield East. Wells Fargo’s expert, because he chose to exclude distressed sales, had to use comparables that were different models and some of the them were outside the Garfield East neighborhood. As a result, adjustments had to be made for homes that were larger than the Debtors’ home and in far superior condition. Logically, the fewer adjustments that need to be made, the more accurate the comparison.

In addition to finding that the Debtors’ appraiser chose more accurate comparables, the court is disinclined to rely on the valuation in the Wells Fargo appraisal because of internal inconsistencies in the report itself. On the first page of the report it states: “Market conditions in subject’s neighborhood indicate a relatively stable value trend.” But on the following page it states: “According to TrendMLS data the median sales prices decreased 10.7% from September 2009 to September 2010″. In the sales comparison analysis section it states that only two of the five comparables have been sold in the last twelve months but the “Date of Sale/Time” entry for all five comparables indicates that they all sold within twelve months of the date of the report. Such inconsistences, even if mere typos, seriously undermine the reliability of the appraisal.

Overall, the court finds the appraisal report and the testimony of the Debtors’ appraiser to be the most persuasive and will use the value of $125,000 as the starting point. The Debtors’ appraisal report was not a retrospective analysis and gave a value as of February 22, 2011. When Mr. Kirk was asked at the hearing what the value would have been on September 1, 2010 (the date of filing) he estimated 5% more. Based on that, the court will assign a value of $131,250 to the property for confirmation purposes.


HomePath® Buyer Incentive: June 14 – October 31

Special Offers

HomePath® Buyer Incentive: June 14 – October 31

Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through October 31, 2011. A $1,200 selling agent bonus is also available to selling agents who close on an owner occupant property and meet all eligibility requirements and terms and conditions.

Terms and Conditions:•Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer.
•Initial offer must be submitted on or after June 14, 2011 and close by October 31, 2011. Initial offers made prior to June 14 are not eligible for the June 14 – October 31 incentive.
•Sale must close on or before October 31, 2011. No exceptions will be made to this deadline. (Note: Initial offers submitted after September 15, 2011 may not close by the incentive deadline of October 31, 2011.)
•Buyers must be purchasing a HomePath property to use as their primary residence to receive closing cost assistance. Second homes and investment properties are excluded from the incentive.
•Sales closed via the retail channel are eligible, including those utilizing public funds. Pool and auction sales are ineligible.
•Buyers must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
•Buyers with total closing costs under 3.5% are not eligible to receive the difference as a credit.
•Properties where Fannie Mae acquired the property in connection with financing under a reverse mortgage are not eligible. Ask the listing agent for details.
•Buyers should consult their lenders for guidance on financing. Lenders and mortgage products may impose their own limitations on the use of the 3.5% incentive. For example, the lender may consider the incentive a Seller Contribution and limit the amount to 3.0%. In those instances, the remaining 0.5% will no longer be available to the buyer.
•Fannie Mae reserves the right to remove any property from promotion or end the promotion at any time. Any dispute over the payment of the incentive shall be resolved by Fannie Mae in its sole discretion.


Fannie Mae hiring appraisers

Fannie Mae hiring appraisers

Fannie Mae in Dallas is currently seeking 30 individuals who have 10+ years of residential appraising experience for REO Appraisals.

Also looking for National review appraisers. Must have worked on the National Review Desk for a financial institution, or have commensurate experience. 7+ years appraisal experience.

Contact info:
Phone: (805) 217-9966
Fax: (703) 935-7803




Typically, the Sales Comparison Approach is the most applicable approach to estimate the market value of a REO property. Appraisers may utilize sales comparables from other REO transactions only when such sales are deemed to be the best available for the market area and they meet all of the following criteria:

· located in the subject neighborhood or reasonable proximity
· comparable property subject to reasonable adjustment
· sold with a willing buyer and seller
· exposed to the market for a reasonable period

Appraisers are reminded that an explanation, as well as support, must be provided for any adjustments to the sales price of comparable sales that exceed the guidelines set forth in Revised Appendix D: Appraisal Protocol, pages D-31, D-68, D-98 and D-127, attachment to Mortgagee Letter 2005-48.


Appraiser Pleads Guilty In Mortgage Fraud Scam

Appraiser Pleads Guilty In Mortgage Fraud Scam

Here’s a quote:

“Reck’s appraisals reported values that were often double that of the true market values of the properties. There were two main methods that Reck used to inflate the values of the properties. He typically “cherry-picked” comparables, meaning that when seeking properties purportedly comparable to the subject properties, he selected properties that were superior in location and condition, and often ignored truly comparable properties.”

“Reck’s second method was to overstate the conditions of the subject properties. By representing that the subject properties were in better condition than they actually were, Reck was able to compare subject properties to superior comparable properties as if they were truly comparable.”

“Judge Ambrose scheduled sentencing for Jan. 3, 2012. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the criminal history, if any, of the defendant.”



Debacle III

Debacle III

Sale or Financing Concessions

Note: This field, comprised of two lines, is used to capture sale type, financing type,

and any concessions. The information must be entered on line 1 and line 2 as


Line 1

The appraiser must indicate the sale type for each comparable property. If more than

one sale type applies to the comparable property, the appraiser must start at the top of

the list and identify the first sale type that applies. The valid values are:




REO REO sale

Short Short sale

CrtOrd Court ordered sale

Estate Estate sale

Relo Relocation sale

NonArm Non-arms length sale

ArmLth Arms length sale

Listing Listing

Note, The appraiser may report any other relevant information regarding the sale type,

including whether more than one sale type applies, elsewhere in the appraisal report.

Curtis D. Harris, BS, CGREA, REB
Bachelor of Science in Real Estate, CSULA
State Certified General Appraiser
Real Estate Broker
ASTM E-2018 Commercial Real Estate Inspector
HUD 203k Consultant
HUD/FHA Real Estate Appraiser/Reviewer
FannieMae REO Consultant

CTAC LEED Certification

The Harris Company, Forensic Appraisers and Real Estate Consultants
*PIRS/Harris Company and the Science of Real Estate-Partners*

1910 East Mariposa Avenue, Suite 115
El Segundo, CA. 90245
310-337-1973 Office
310-251-3959 Cell



Commercial Appraiser Blog:

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Communicate, in a timely Fashion, each appraisal, analysis, and opinion without bias or partiality

Abstain from behavior that is deleterious to our clients, the appraisal profession, and the public

Hold paramount the confidential nature of the appraiser/consultant – client relationship


Comply with the requirements of the Uniform Standards of Professional Appraisal Practice and the
Code of Professional Ethics of the National Society of Real Estate Appraisers

IT’S THE LAW-Designation Discrimination is Illegal [FIRREA, Sec. 564.6]: Professional Association Membership Membership in an appraisal organization: A State Certified General Appraiser may not be excluded from consideration for an assignment for a federally related transaction by virtue of membership or lack of membership in any particular appraisal organization, including the appraisal institute.

CONFIDENTIALITY/PRIVILEGE NOTICE: This transmission and any attachments are intended solely for the addressee. The information contained in this transmission is confidential in nature and protected from further use or disclosure under U.S. Pub. L. 106-102, 113 U.S. Stat. 1338 (1999), and may be subject to consultant/appraiser-client or other legal privilege. Your use or disclosure of this information for any purpose other than that intended by its transmittal is strictly prohibited and may subject you to fines and/or penalties under federal and state law. If you are not the intended recipient of this transmission, please destroy all copies received and confirm destruction to the sender via return transmittal



Help Is at Hand
Q. Who should I contact if I have questions about the Uniform Mortgage Data ProgramSM (UMDPSM) and its components?

A: We would recommend first visiting to view resources posted on our UMDP and related pages. You can also contact your Fannie Mae representative for assistance. But don’t wait. If you have challenges with understanding and implementing these requirements, the sooner you reach out for help the better.
DU for Government Loans September Release Implemented
Fannie Mae successfully implemented the Desktop Underwriter® (DU®) for government loans September 2011 release. This release included a new field for the FHA TOTAL Mortgage Scorecard, FHA loan limit changes and message updates, and updates for HUD Mortgagee Letter 2011-11.
New B2B File Transfer Solution Coming Soon
Fannie Mae’s National Underwriting Center (NUC) is introducing a new business-to-business (B2B) file transfer solution. Users will be able to transfer documents to NUC electronically, helping to reduce paper handling and shortening the time required to fulfill requests. B2B provides secure file transmission and delivery, and enables bulk transfers of files. Select lenders will begin onboarding around September 26, 2011. For details, review the Quality Assurance System page and access the B2B Reference Materials.

September 20, 2011

Underwriter’s Puzzler
Risky Business?
Jane Youngbuyer has applied for a mortgage loan. You must underwrite the loan manually. How can you determine the overall risk of this loan and determine if it is eligible for sale to Fannie Mae? What’s the answer?

Economic Insight
Fannie Mae Releases August Consumer Indicators
Americans are growing more pessimistic about the economy, home prices, and household finances, according to Fannie Mae’s August National Housing Survey. Information from the August 2011 survey can help focus our collective efforts on stabilizing the housing market.

Certificate of Completion Available for Using the Uniform Appraisal Dataset Tutorial
Using the Uniform Appraisal Dataset is a self-paced tutorial that reviews how to apply the new UAD requirements and guidelines when completing appraisal data files. Underwriters can use the information in the tutorial to interpret appraisal data files completed using the UAD standards. We have now added a Certificate of Completion to the tutorial, which participants can print out after completing the tutorial and its accompanying course evaluation.
Temporary High-Balance Loan Limits Set to Expire September 30
The High-Cost Area (HCA) loan limits for high-balance mortgage loans (HBLs) will change for loans originated after September 30, 2011. Barring congressional action, the “temporary” loan limits now in place will expire on that date, and loans with mortgage note dates on or after October 1, 2011, will be subject to the “permanent” limits.


Freddie Mac Says It Won’t Dump Foreclosed Homes

Freddie Mac Says It Won’t Dump Foreclosed Homes

Noting that steep price cuts could destroy the housing market, Freddie Mac has said it will not dramatically discount its backlog of foreclosed homes, American Banker reported Sept. 9.

The government-sponsored enterprise in a September letter told investors who are interested in acquiring properties in bulk through its REO sales unit HomeSteps that Freddie is currently selling 90 percent of its real estate-owned properties at asking prices and is not considering “significant discount pricing,” according to American Banker.

Observers have said that such discounts could help Freddie unload its backlog of foreclosed homes. But experts point out that dumping so many properties at once could also drive down housing prices broadly and harm an already faltering economy, a Freddie spokesman said.

“We absolutely don’t want to tank the housing market,” spokesman Brad German told American Banker.

Freddie properties spend an average of 110 days on the market before being sold, and their pricing is based on two broker price opinions: one from a listing agent and another from an independent broker, according to American Banker’s story.

In August, federal regulators issued a request for information on options for unloading foreclosed properties owned by the GSEs and the Federal Housing Administration. The deadline for submissions is Sept. 15.

At the end of June, Freddie had 60,569 REO properties and Fannie had 135,719. American Banker noted that many of the REO properties are not listed for sale because they may still be occupied or need repairs.


FHA Appraiser and Lender Training Comes to Chicago, IL:

This is the HUD national homeownership center reference guide mailing list for real estate industry professionals that are interested in updates to HUD Mortgagee letters, notices and guidebooks, & FHA Housing Industry Training. Please visit our homepage at: Servicing lenders can visit HUD’s National Servicing Center at: This list does not provide HudHome property listings.

FHA Mortgagee Letter 2011-33 Correction:

FHA Mortgagee Letter 2011-33, “Record Changes and Data Reconciliation,” dated September 6, 2011, incorrectly stated the telephone number for HUD’s National Servicing Center. The correct number is (877) 622-8525. We apologize for any inconvenience this may have caused. The National Servicing Center can also be contacted via email at:

To read FHA Mortgagee Letter 2011-33 and any attachments in their entirety, please visit: view the 2011 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.

For FHA technical support, please contact the FHA Resource Center at: You can also get email technical support at:


FHA Appraiser and Lender Training Comes to Chicago, IL:

September 27-28, 2011 – Chicago, IL. FHA Appraiser and Lender Training. The credit training includes an overview of 203k, 203k Streamline and Energy Efficient Mortgages. In addition we will review recent Mortgagee Letters and discuss general underwriting do’s and don’ts. The appraiser training will cover recent Mortgagee Letters, appraising HUD REO properties, 203k inspections, and defining required repairs vs. cosmetic deficiencies. Registration required, no fee. More info at:


From DataQuick: Southland August Home Sales Climb, Median Price Falls Again

From DataQuick: Southland August Home Sales Climb, Median Price Falls Again
A total of 19,654 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in August. That was up 8.6 percent from 18,090 in July and up 6.0 percent from 18,541 in August 2010, according to San Diego-based DataQuick.

August was the first month since June 2010 to post a year-over-year gain in home sales. Last month was also the first since November 2009 in which all six Southland counties logged higher sales than a year earlier. One reason it’s getting easier to beat the year-ago sales numbers: Home sales fell off sharply last summer after federal and state homebuyer tax credits expired.

Last month’s sales picture changes when viewed in terms of the average number of homes sold daily. Last month had 23 business days (the most for any August since 2007) on which home sales could be recorded, compared with 20 business days in July and 22 in August 2010. The average number of homes sold daily last month fell about 6 percent from July and rose less than 1 percent compared with a year earlier.

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 34.6 percent of the Southland resale market in August, up from 34.5 percent in July but down from 37.6 percent a year earlier. Foreclosure resales peaked at 56.7 percent in February 2009.

Short sales, where the sale price fell short of what was owed on the property, made up an estimated 17.9 percent of Southland resales last month. That was up from 17.3 percent in July but down from 18.9 percent a year ago. Two years ago the estimate was 14.5 percent.
So 34.6 percent were foreclosure resales and 17.9 percent were short sales – over 50% were distressed sales in August!


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