Front Range Real Estate Market Feeling Burn of Appraiser Ahortage

Home appraisals are taking longer to complete and costing more, and that is vexing home buyers, mortgage borrowers, real estate agents and loan officers along the northern Front Range.

“As the Denver real estate market has roared back, we’ve been met with a shortage of appraisers to keep up with the record number of homes that are going under contract and being sold each month,” said Anthony Real, chairman of the market trends committee at the Denver Metro Association of Realtors.

Rael’s research shows that the cost to appraise a standard home in metro Denver, which ran around $350 a few years back, is now costing closer to $600 and looks headed on its way to $800. Some of that increase reflects the rush fees that already overloaded appraisers are charging to meet closing deadlines.

Closing deadlines are getting pushed back because of the appraiser shortages and complicating life for buyers and sellers alike, and in some cases causing tempers to flare, Rael said.

“It is worse than you know,” said Lou Barnes, a veteran loan officer with Premier Lending Group in Boulder. “There are simply fewer appraisers. We are running into a time-versus-price auction.”

The tightness became noticeable when the metro Denver housing market started heating up again in 2013. But the breaking point came this summer when the Brexit vote caused interest rates to plunge, setting off a surge in mortgage refinancings in the middle of the peak home selling season.

Appraisers, booked solid, charged premiums to get the work done and the level of desperation grew.

Warren Boizot III and Ned Garber both work seven days a week, 12 hours a day with their Denver firm BLG Appraisal Group, taking only two weeks off a year for vacation to recharge and a day now and then to attend courses to stay on top of their craft.

They have followed that crazy schedule, winter and summer, since 2013, motivated by memories of the housing crash where work was hard to come by.

“We are working as hard as we can,” said Garber, who is quick to add he isn’t complaining.

The appraisers said they are booked three weeks out. If someone wants to get in faster, they and other appraisers charge a fee, which irks some in the real estate industry. But if they promise a delivery date, it is as good as gold.

“It is a grind. Some day I will wish I had a Sunday off,” Boizot said.

Boizot said for every appraisal he accepts, there are about 15 to 20 that he turns away, either because the timing doesn’t work or the customer doesn’t want to pay a rush fee.

He uses the analogy of someone needing to see a dentist on short notice for a hurting tooth. Dentists book patients months ahead, but can keep the office open late on short notice at an added cost.

As with so many things wrong about today’s real estate market, the problems go back to the housing boom and bust. When the housing market came to a screeching halt, a lot of appraisers had to find other work to survive.

Regulators cracked down, trying to create distance between those requesting appraisals and those doing them and they boosted training requirements and the amount of time it took to do an appraisal.

Licensed appraisers must have an associate degree or 30 credits of college coursework and take 150 hours of appraisal-related courses. Certified appraisers, a step up, need a bachelor’s degree or equivalent.

Back in 2007, Colorado had 3,431 licensed and certified appraisers, but this year that count is running close to 2,500, said Eric Turner, education, communication and policy manager with the Colorado Division of Real Estate.

Not only are there fewer appraisers, but as a group they are getting older, with an average age nationally of 53. And hardly any new ones are coming into the fold in Colorado, even though work is plentiful.

Last year, the state issued just 52 new licenses or approved an upgrade of a licensed appraiser to certified. This year, the number of new entrants or upgrades is running around 37.

“Out of that 52, more were upgrades than new licensees,” Turner said. Contrast that with the loss of about 100 appraisers a year on average in Colorado since 2007.

So why aren’t more college-educated and underemployed millennials rushing into the field?  To obtain a license, an appraiser must spend 2,000 hours in an apprenticeship over the course of a year or more with an experienced appraiser. A certified appraiser must spend 2,500 hours across two or more years.

The only way to become an appraiser is by doing appraisals, and there’s the rub.

Garber and Boizot said they are so busy, they don’t have time to train anyone. Even if they did, they don’t know of a noncompete agreement strong enough to keep an apprentice in this market from walking out the door with a year’s worth of training on their dime.

“No one wants to take an apprentice under their wings,” Garber said.

Not only are there far fewer people doing appraisals, each appraisal takes much longer to complete — about six to eight hours on average — and the penalties that come with getting it wrong are much higher.

“The way the system has changed, it is becoming more cumbersome and less profitable,” said Thomas Raff,  a certified appraiser in Westminster. “The report is more comprehensive now than it has ever been. It takes much more time.”

Trying to pin down values in a rapidly moving market like Denver’s is a more complicated task than working in a flat and stable one, which in turn exposes appraisers to more risks if they get it wrong.

“The analysis of comparables is a black art and very valuable,” Barnes notes.

Buyers, after getting repeatedly outbid, can become so desperate to win that they make inflated offers above already elevated list prices, leaving appraisers to absorb their wrath when the valuation comes up short.

“My job is not to hit that contract price,” Garber said. “We are not obligated to hit that number.”

Coming in low, if anything, actually is more time-consuming, in that it requires dealing with more complaints. But appraisal objectivity is an important line of defense in protecting the financial system, he said.

Boizot said one change that could go a long way toward making the home sales process more efficient would be basing the list price on an actual appraisal, rather than an agent’s estimate.

Appraisals are one of the last pieces to fall into place, and buyers and sellers rush toward a closing. Any kind of delay further up the chain often shortens the time appraisers have to get the job done, he said.

Housing sales are already leveling off as summer moves into fall and a slowdown could become a more permanent feature. If mortgage rates rise, that too could put a dent in demand for refinancings.

Still, the more pressing problem of not enough appraisers working the craft remains.


Controversial FHA Payoff Rule To End

WASHINGTON — Can you be charged interest on your mortgage even after you’ve fully paid it off? Can the meter keep running when you owe the bank nothing — your principal balance is zero?

Surprise! Much to the chagrin of large numbers of home sellers and refinancers, the answer for years has been yes. If your loan was insured by the Federal Housing Administration and you paid it off before maturity, at closing you’d be expected to cough up a full month’s interest, no matter what day of the month you actually settled.

Even if you closed on March 2, for instance, you’d be charged interest by your loan servicer through March 31, potentially adding hundreds of dollars to your costs in the transaction. The FHA’s practice has been unique among major players in the housing finance marketplace. Fannie Mae, Freddie Mac and the Department of Veterans Affairs all require interest to be collected only to the day of principal payoff. After that, the meter stops.

But change is on the horizon. Thanks to a regulatory mandate from the Consumer Financial Protection Bureau, the FHA has agreed to end its controversial full-month interest policy, but only for future borrowers. The FHA has until Jan. 21 to make the switch, so sellers and refinancers who currently have FHA-insured mortgages are cut out of the deal. Many will still get hit with extra interest charges.

Here’s a quick overview of what’s behind the agency’s belated retreat. For the last decade, homeowners and realty brokers have complained that the FHA’s interest payment policy amounts to gouging. Not only were many sellers unaware of the FHA’s odd requirement, but they didn’t factor the extra costs into their financial plans.

The National Assn. of Realtors, which began publicly criticizing the practice in 2004, said that by insisting on full months of interest payments, the FHA effectively has been squeezing tens of millions of dollars in unjustifiable extra charges out of sellers. In one year alone, 2003, according to the association, FHA borrowers paid an estimated $587.4 million in “excess interest fees.”

In 2011, complaints from constituents prompted Sen. Ben Cardin (D-Md.) to introduce legislation that would have banned full-month interest charges and required FHA loan servicers to compute payoffs on a per-diem basis.

Cardin’s bill ultimately went nowhere. The FHA brushed off its critics, arguing that by guaranteeing bond investors a full month’s interest on mortgages, its interest rates were slightly lower than its competitors’ rates. One mortgage industry estimate put the rate break at roughly 0.10% to 0.15%.

Real estate industry experts, however, said the true beneficiaries of the long-standing practice were loan servicers, who could earn interest on the “float” — the money they collected from borrowers and had free use of until the end of the month, when they had to disburse final interest payments to bond investors.

But financial system overhaul legislation passed by Congress in 2010 — the Dodd-Frank Wall Street Reform and Consumer Protection Act — got in the way of this game. The law empowered the new consumer bureau to write regulations banning prepayment penalties. Under the rule the bureau adopted, the FHA’s full-month interest policy amounted to such a penalty — essentially a fine on borrowers who couldn’t or didn’t pay off at the end of the month. Since home buyers rather than sellers typically schedule closing dates, many sellers were unable to control the exact date their FHA loans were paid off — leading to hefty interest penalties under the consumer bureau’s definition.

Tucked away in a Federal Register notice announcing its plan to change the policy, the FHA finally came clean on whether the tiny interest break that borrowers received was ever worth the extra interest amounts they could face if they prepaid the loan. New borrowers next year “can expect to pay a slightly higher rate,” the agency said, “but they would also receive full benefit from lower interest costs [at closing] when they prepay … in most cases more than offsetting the cost of the higher rate.”

Aha! So in fact under the old practice, the FHA’s customers paid more than they should. And presumably some of the estimated 7.8 million existing FHA mortgage borrowers who are not covered by the forthcoming policy change will continue to be vulnerable to paying more than they should.

The only way around it: If you are a seller or refinancer paying off an FHA loan, insist that your closing is at the end of the month, not the beginning.

FHA Mortgage Premium To Rise On April 1

Borrowers who want to get a mortgage insured by the Federal Housing Administration should act quickly to avoid changes the agency is making to shore up its faltering insurance fund.

The U.S. Department of Housing and Administration announced the changes on Wednesday but didn’t announce the effective dates until Thursday.

Here’s the timing: FHA will raise the annual mortgage insurance premium on most loans that have a case number starting April 1 or later. To get a case number before the April 1 deadline and avoid the increase, borrowers should apply with a lender no later than March 25, says Julian Hebron, vice president with RPM Mortgage in San Francisco.

On most FHA loans, the annual premium will increase by 0.10 percentage point, or $100 per year for each $100,000 in loan amount.

For loans greater than $625,000 with a term longer than 15 years, the increase will be 0.05 percentage point, or $50 per year for each $100,000 in loan amount.

The premium itself varies depending on the loan size, term and loan-to-value ratio, but here’s an example:

For a $500,000, 30-year loan with a loan-to-value ratio greater than 95 percent, the new premium will be 1.35 percent, or $6,750 per year, up from 1.25 percent, or $6,250 per year. On a monthly basis, the premium increase amounts to about $42.

For a chart showing premiums increases for various loan types, check out Hebron’s blog at These premium increases do not apply if a borrower refinances an existing FHA loan that was endorsed on or before May 31, 2009, into a new FHA loan under the streamline refinancing program.

FHA is not changing the one-time premium borrowers pay up front; it remains at 1.75 percent of the loan amount.

Bigger hit

In a potentially bigger hit, FHA borrowers will have to continue paying annual mortgage insurance premiums for a longer period of time – in most cases for the life of the loan.

This change will apply to new loans with case numbers starting June 3. To avoid this change, borrowers should try to apply by May 24, Hebron says.

In the past, FHA automatically canceled mortgage insurance on most loans when a borrower, anytime after five years, had made enough payments to reduce the balance to 78 percent of the original loan amount.

A borrower taking out a 30-year loan with 10 percent down could usually eliminate mortgage insurance after about six years making normal payments, or after five years if they made extra principal payments, Hebron says.

(If the original loan term was 15 years or less, the five-year rule didn’t apply; FHA would cancel the insurance when the balance dropped to 78 percent.)

In the future, if the borrower starts off with a loan-to-value ratio above 90 percent, FHA will collect the premium for the life of the loan. If the original ratio is between 78 and 90 percent, FHA will cancel the premium if the balance drops below 78 percent of the original loan amount anytime after 11 years.

Program for school employees

The California Housing Finance Agency is planning to reinstate a program that provided down-payment assistance for teachers and other employees working in low-performing schools.

To help with a down payment, the program provided what’s known as a sleeping second mortgage of up to $15,000 in high-cost areas and $7,500 in the rest of the state. The second mortgage did not require payments until the borrower refinanced or paid off the first mortgage, or sold the home.

Borrowers had to be first-time home buyers, live in the house and meet income requirements. Interest on the second accrued at a rate that was reduced to zero over three years if the borrower remained employed at an eligible school.

The program was designed to recruit teachers and administrators to the worst schools, but participation was limited and it was later expanded to include more schools and other employees such as janitors and bus drivers.

When it was suspended in December 2008, borrowers had to work at a school in the bottom half of those ranked by Academic Performance Index (API ranking of 1 of through 5).

The program was originally funded with bond proceeds but was suspended after that money ran out.

When borrowers repay their loans, that money goes back into the fund and can be recycled into new loans. With interest rates plummeting, many borrowers have refinanced their loans, and that has provided enough money to reactivate the program within the next two months, says Kenneth Giebel, a spokesman for the agency.


Steady Mortgage Rates Contribute to Housing Market Improvements

by Ed Ferrara

An application for REALTORS® –>It was good news this past week for housing when data for pending home sales showed an unexpected jump in May.

According to the National Association of Realtors, pending homes sales, which represents the number of contracts signed, increased 5.9% to 101.1 from 95.5 in April. Construction Spending also rose 0.9% in May, according to the Commerce Department, which was the biggest gain since December. While some area markets are stabilizing, S&P/Case-Shiller Index of Property Values showed that the decline in home prices during the month of April was at the lowest since November, 2010. Home prices are still down even as the housing market sees some improvement.’s survey of wholesale and direct lenders shows that mortgage rates have remained steady with 30 year fixed mortgage rates at 3.375%, 15 year fixed mortgage rates at 2.750% and 5/1 adjustable mortgage rates at 2.125%, all available with 0.7 to 1% origination fee for well qualified borrowers. As these mortgage rates continue at historic lows, home affordability is still high which is helping those who wish to purchase a home. It is necessary to have good credit and qualifications for conforming mortgage approval and many consumers have taken the time to clean up their credit so that they could take advantage of this opportunity.

Even with a low 5% down payment, obtaining a conforming mortgage with private mortgage insurance is possible and available. With mortgage rates this low, it is a really good time to obtain a mortgage refinance, and now existing borrowers who have mortgages that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, have HARP 2.0 available for those underwater mortgages. In many instances, HARP will not require an appraisal or other detailed information since it has been expanded to include unlimited loan to values.

Although HARP guidelines do differ from lender to lender due to overlays, many borrowers have been receiving successful approvals. There are still millions of borrowers who are eligible for HARP which is available until the end of 2013. Seeking a HARP refinance with an online inquiry can bring more success since it opens the door to a variety of lenders who are willing to assist.

The FHA Streamline Refinance is now another popular mortgage product for borrowers who have existing FHA mortgages that were endorsed prior to June 1, 2009. With no cash out, there is no need for an appraisal or other documentation and verifications. The biggest perk for this program is the extremely low upfront mortgage insurance premium at .01% which gives all eligible borrowers the opportunity to refinance to lower FHA mortgage rates. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%.

FHA mortgages for home buyers are still available with different programs to fill a variety of needs. The FHA rehab mortgage is now a favorite especially when purchasing foreclosures or short sales. Borrowers who use the FHA rehab mortgage are able to complete the home improvements and repairs without the need of a second loan. Even though FHA closing costs are high because of the upfront mortgage insurance premium and other FHA fees, FHA still offers one of the lowest down payment requirements and flexible credit qualifying, which is not found with other mortgages. Since any FHA approved and participating lender can handle FHA loans, including the FHA streamline refinance, seeking information online has become very popular and successful for many borrowers.

Jumbo 30 year fixed mortgage rates dropped .125% this week and are currently at 4.125%. Jumbo 15 year fixed mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rates are at 2.250%. Excellent credit is required in order to receive these lowest jumbo mortgage rates with 0.7 to 1% origination fee. The jumbo mortgage market is still somewhat tight right now, but is starting to see some improvements. Private mortgage insurance companies, such as Radian, are beginning to expand their involvement with jumbo mortgages which will help make these loans more readily available for suitable borrowers. Since jumbo mortgages are private loans that are held within a lender’s portfolio, they are usually stricter, although high end borrowers usually have the means to meet the guidelines.

This past week, even though stocks took back some of their losses, MBS prices were able to hold on which kept mortgage rates steady. MBS prices affect mortgage rates which move in the opposite direction. Consumer sentiment was reported as weaker than expected, but personal income matched predictions.

The Conference Board’s Sentiment Index fell to 62 as consumers express increased concern over jobs and income, although the Commerce Department reported that the economy grew at a 1.9% annual pace for the first quarter. Core PCE inflation came in lower than expected rising at a 1.8% annual rate. While Durable Orders for May increased 1.1%, ISM Manufacturing was weaker for May. Jobless claims were 386,000 and close to expectations. The Euro zone continues to be a major global issue as Euro leaders have now turned to the European Central Bank for help to keep markets calm. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

Published: July 4, 2012

What You Need To Know About Cancellation Of Mortgage Debt

By Linda Goold

This column is brought to you by the NAR Real Estate Services group.

A lender will, on occasion, forgive some portion of a borrower’s debt. The general tax rule that applies to any debt forgiveness is that the amount forgiven is treated as taxable income to the borrower. Some exceptions to this rule are available, but, until recently, the borrower was required to pay tax on the debt forgiven. A new law enacted in December 2007 provides relief to troubled borrowers when some portion of mortgage debt is forgiven. However, this relief expires on December 31, 2012 and NAR will be working to obtain an extension throughout the year. Read the rest of this entry »

Economic Worries Keep Lid On Mortgage Rates

A weekly survey of lenders by Freddie Mac showed mortgage rates at or near record lows for a fourth consecutive week amid growing expectations that Europe is headed for a recession that will slow U.S. growth.

A separate survey by the Mortgage Bankers Association showed applications for purchase loans jumped to the highest level since August, but demand remained below levels seen at the same time last year.  Read Article:

What Your Clients Can Do If Rejected for a Loan

Lending experts say buyers shouldn’t give up if rejected for a loan — they may still be able to qualify for a mortgage if they keep trying.  They should take a close evaluation of why the original mortgage application was turned down, and find ways to address those issues.  Applicants can, by law, find out why they were rejected in a mortgage application.  Some borrowers may need to save up for a larger down payment or take steps to improve their credit score.  Others may find shopping around for other lenders can help.  Read article: