I almost hesitate to write this, but as for REO’s –
Suppose a place has a lot of REO’s, and sells them at large reductions in a particular area. Suppose they are also actively underwriting in that area. Suppose, for example, that in one area I sold 100 SFR at a median of $230,000 in the space of two or three months, and during the same two or three months I underwrote 450 SFR loans in that area at a median of $275,000. On later inspection, that might raise substantial questions.
The main problem is the refis. If you can’t support the needed refi amount with an appraisal, no loan, no fee, no business.
For any institution holding whole loans in one area, having to sell a bunch of REO at large discounts in that area undercuts their own collateralization. But for originators, it also raises some questions when the REO count gets high enough.
Automated valuation systems are already beginning to kick out more refi appraisals, and there is probably a valuation bomb in the pipeline in 8-12 areas.
For an inside look at appraisal problems: http://forum.brokeroutpost.com/loans/forum/2/82006.htm
“This type of request is almost typical of most California brokers/lenders. They have an almost adament attitude that the appraiser MUST hit their value or they don’t get the assignment.
I had another one call me up the other day. First off, I told him that his request was highly illegal for any appraiser to accept as it was written. First off, instead of just saying “ESTIMATED VALUE” it said “VALUE NEEDED”. It went on to say “IF UNABLE TO GIVE THE VALUE LISTED ABOVE PLEASE CALL THE LOAN OFFICER ASAP”. All of that was preprinted on the form. He continued in his own handwritting, “PLEASE CALL ME TO SET THE APPT. IF THE VALUE IS THERE”. When I told him I could not guarantee of hitting his number (after I clearly told him I didn’t want him to put a number on his request when he first called) he hung up on me. The company name was NATIONWIDE WHOLESALE LENDING out of Woodland Hills, CA.
This is how I would say 90% of the calls I get from California goes.”
