TheMReport — News and strategies for the evolving mortgage marketplace.
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TH E M R EP O RT | 63 SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T peers at the institute agreed that this was something that needed attention in the marketplace. They have been great partners, showed a lot of hard work and leadership in setting up this class so that we could introduce this course into the market. M // How is the course set up to benefit appraisers? REUTER // The course is being offered in a couple of different ways. The pilot component is a four-hour course being offered to lenders and appraisers. We have also created a full seven-hour course so that it matches the continuing education (CE) needs of appraisers. This course is a full one-day CE option, which is ap- proved across the country as well. The course is also receiving some academic interest as well as interest from numerous future course instructors from across the country. To become a trainer for this course, appraisal train- ers actually take the course and must pass a one-hour exam. For appraisers, this course walks through various case studies to illustrate how the appraiser can develop a value for CHOICE manufactured homes. M // Within this training, what are some of the biggest challenges that appraisers and trainers are likely to face? REUTER // The most significant training challenge would be to walk appraisers through how to appropriately adjust a site-built home to a manufactured home. At Freddie Mac, we manage risk and there was a concern that by allow- ing the use of site-built comparable sales to a manufactured home, there would be a real risk of over- valuation of manufactured homes. But this challenge is also the driving force for this training to arm appraisers with the appropri- ate training and knowledge to appraise such homes. The training is really a practical, step-by-step guide to how you can appro- priately value the manufactured homes under our CHOICEHome Program. M // Is the training being offered only for the first year or will it continue beyond this phase? REUTER // We launched this train- ing in Dallas recently and are now rolling it out state by state. Once it's introduced across the country, it'll be in the permanent curricu- lum of the Appraisal Institute. To create this training program, the Appraisal Institute has put in a tremendous amount of rigor in terms of not only the content review but peer review as well. M // What are your takeaways from this project? REUTER // This project has been interesting because it's enlightened me to how this market acts and behaves nationwide. Many apprais- ers are in markets that are close to or on the periphery of where there is manufactured housing. Your typical appraiser, I'm told, will get anywhere from 12 to 15 manufac- tured home assignments a year if they're in a market where these are somewhat prevalent. From a practicing appraiser standpoint, that might be one a month. This course is also intended to be in the reference library for appraisers so that when they get these assignments, they can refer to the course booklet to appropriately walk through the steps they need to take to begin to gather their data, analyze it, developed the re- port, and finalize the value. We're also putting together a component for the underwriters and the lend- ers, to help them understand the appraising process better. One of the things we also did was to include a one-page job aid for underwriters and lenders. So hopefully that'll lessen some questions back to appraisers on manufactured home valuations. I'm sure we will, as we pilot and test and learn, make some more additions, but we're trying to be very thoughtful about how this may work its way through the system to allow, again, not only appropriate valuation, but also re- duce the back and forth between the appraisers, the lenders, and the underwriters, which defeats the efficiency. On the Right Path? Two experts discuss the feasibility and sustainability of GSE reform. R ecently, President Don- ald J. Trump signed a memorandum tasking the Treasury Department and Department of Housing and Urban Development (HUD) with preparing a reform plan for Fan- nie Mae and Freddie Mac. The White House memo directed that this plan be delivered "as soon as possible." In an opinion piece published by the Wall Street Journal, American Enterprise Institute fellows Peter J. Wallison and Edward J. Pinto discussed the fea- sibility of the Presidential memo and its proposed reforms. According to Wallison and Pinto, the memo's direction to the Treasury will lead to govern- ment housing-finance system that roughly replicates what existed before 2008, notably "government backing for the obligations of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and affordable-housing mandates requiring the GSEs to encourage and engage in risky mortgage lending." "These elements will be retained, but the problems they caused in 2008 are supposed to be mitigated by better regulation, more capital for the GSEs, and compensation to tax- payers for the risks they'll assume when the government guarantees the GSEs' obligations," Pinto and Wallison's op-ed states. "The hous- ing lobby misled the public before on the efficacy of these protections." According to Wallison and Pinto, the FHFA should shrink their footprint as the conservator of Fannie and Freddie over a period of five to 10 years. They suggest reducing the size and types of mortgages that the GSEs could buy and opening larger portions of the housing-finance market to the private sector, improving competition. "Most of the U.S. economy is open to the innovation and competition of the private sector," Wallison and Pinto said. "Yet for no discernible reason, the housing market—one-sixth of the U.S. economy—is and has been con- trolled by the government to a far greater extent than in any other developed country." The Presidential memo states that "in the decade since the financial crisis, there has been no comprehensive reform of the housing finance system despite the need for it, leaving taxpay- ers exposed to future bailouts." The memo went on to claim that "the Department of Housing and Urban Development's (HUD) housing programs are exposed to high levels of risk and rely on outdated business processes and systems." "Most of the U.S. economy is open to the innovation and competition of the private sector. Yet for no discernible reason, the housing market—one-sixth of the U.S. economy— is and has been controlled by the government to a far greater extent than in any other developed country." —Peter J. Wallison and Edward J. Pinto, American Enterprise Institute fellows