Little interesting things from the Appraisal Institute's
Appraiser News Online, April 30 2007
Illinois Responds to Subprime Mortgage Woes
Illinois is one among many states that are planning legislation in response to the rising number of defaults associated with subprime mortgages. With tens of thousands of Illinoisans poised to lose their homes in the collapse of the subprime mortgage industry, Illinois Attorney General Lisa Madigan called for a coordinated statewide effort to assist homeowners facing foreclosure and curb abuses in the mortgage lending industry.
"We are in a crisis of potentially large proportions," said Madigan, noting that foreclosure filings statewide jumped 55 percent in 2006, totaling 72,455, and are projected to spike even higher in 2007. "As the outlook for many Illinois homeowners turns grim, it is critical that everyone with a stake in the problem – state and local government, lenders, regulators and housing advocates – come together now to implement solutions."
Madigan said she would spearhead a statewide strategy that includes working with State Rep. Dan Burke to pass legislation to enhance protections for homeowners who are already – or soon-to-be –in foreclosure and to impose duties on mortgage lenders and brokers to ensure future borrowers have the ability to repay their loans and keep their homes. Additionally, Madigan will convene two statewide "summits," one to develop a blueprint for expanding financial assistance for homeowners trapped in bad loans, the other to coordinate legal assistance resources for homeowners in distress. Madigan is working with Burke to introduce the legislation during the current session and plans to convene the two summits this spring and summer.
The incidence of subprime refinance lending in Illinois and the surrounding region is higher than the national average. Nationwide, one in four refinance loans made in 2005 was subprime, according to the Consumer Federation of America, a watchdog and policy group that tracks mortgage lending trends. By comparison, in the Midwest, subprime loans accounted for nearly one third (32.1 percent) of refinances originated that year. The numbers in some Illinois communities are even more unsettling. In Peoria, for example, subprime loans made up 45.4 percent of the refinancings done in 2005.
Obama, Durbin Reintroduce STOP FRAUD Act
On April 25, Sens. Barack Obama, D-Ill., and Dick Durbin, D-Ill., reintroduced the STOP FRAUD Act, legislation aimed at combating mortgage fraud and abuse. Their action comes after reports that the housing market experienced its worst sales-month in 18 years in March and foreclosures are up 47 percent compared to last year, when Obama and Durbin first introduced similar legislation.
The STOP FRAUD Act 2007, which is aimed at stopping mortgage transactions that promote fraud, risk, abuse and underdevelopment, will provide the first federal definition of mortgage fraud and authorize stiff criminal penalties against those who commit fraud. STOP FRAUD requires a wide range of mortgage professionals to report suspected fraudulent activity, and gives these same professionals safe harbor from liability when they report suspicious incidents. It also authorizes several grant programs to help state and local law enforcement entities fight fraud, provide the mortgage industry with updates on fraud trends, and further support the Departments of Treasury, Justice and Housing and Urban Development in their fraud-fighting efforts.
“Mortgage fraud and abuse are costing thousands of Americans their hard-earned life savings and their dream of homeownership,” Obama said. “As the number of foreclosures skyrocket and the housing market becomes more vulnerable, we must establish stiff penalties to deter fraud and protect consumers against abusive lending practices.” The Act also protects the legal rights of borrowers holding risky, subprime loans, which account for the greatest growth in the mortgage lending market. It is estimated that more than two million homeowners with subprime mortgages are at risk of losing their homes. If a borrower receives a subprime mortgage with any one of several high-risk characteristics, the Act would allow them to challenge lending practices in the event of foreclosure proceedings.
Last February, Obama and Durbin introduced a similar bill, S. 2280, which died in committee.
Note from JCH : Illinois had some major troubles the past few years wherein their Appraisal Board was underfunded, understaffed, and could not properly oversee the appraisers. This has been evident in some of the reports I have had to do Technical reviews on.
Lawmakers Take Sides in Arizona Board vs Zillow
Arizona is contemplating changes to its statutes to strengthen its definitions of “real estate appraiser” and “appraisal.” The move comes on the heels of the Arizona Board of Appraisal’s issuance of two cease-and-desist letters to Zillow.com to stop offering its online estimates of home values. The Board contends that Zillow needs an appraiser license to offer its "zestimates" in Arizona.
"It is the board's feeling that (Zillow) is providing an appraisal," said Deborah Pearson, Board of Appraisal executive director. However, lawmakers are not sure. Legislators moved April 23 to block that interpretation, spelling out that an Internet Web site that gives a free opinion of the value of real estate is not engaged in "appraisal." The language, crafted by Rep. Michele Reagan was tacked on to S.B. 1291, which makes various changes in state appraisal laws.
Currently, anyone who performs a real estate appraisal or appraisal review in Arizona is required to be licensed or certified by the state. In order to be a licensed or certified appraiser, an individual must meet certain criteria including character standards, age and U.S. citizenship, educational and practical experience as outlined, and passage of an examination, as well as continuing education requirements for license or certificate renewal. All criteria are established by the State Board of Appraisal.
S.B. 1291, introduced March 14, would redefine “appraisal” or “real estate appraisal” to mean any of the following: the act or process of developing an opinion of value; an opinion of value; pertaining to appraising and the related functions. The bill would also rewrite the language that currently exempts a corporation to include one who gives an opinion of value for corporate-owned property if the person does not receive special compensation and the opinion is not referred to as an appraisal.
The controversy about appraisals erupted in the wake of the state's efforts regarding Seattle-based Zillow. The Board of Appraisal, in June and November of 2006, sent cease-and-desist letters to Zillow, ordering it to stop offering its property-value estimates, which have made it one of the most popular real estate Web sites since its launch in February 2006. Zillow cautions users that its information is a starting point for consumers, not a definitive value. It claims 4 million users a month, including those curious about their home's value, and the value of friends' and neighbors' residences.
"We strongly believe that providing 'zestimates' in Arizona is completely legal and in fact an important public service, given that (they) are the result of our 'automated valuation model' and are not a formal appraisal," Zillow President Lloyd Frink said.
Pearson said the legislation is not aimed at Zillow but rather is intended to update statutes that have not changed since 1991.
In addition to language changes, the bill would modify the fee schedule for renewals, late renewals, reactivation and duplication of a license or certification. Additionally, it would require the Board to have actually entered into a reciprocity agreement with another state prior to allowing an applicant from that state to receive a reciprocal license or certification.
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