Archive for May, 2011

Captured: The Ruins of Detroit

May 27, 2011


Up and down Detroit’s streets, buildings stand abandoned and in ruin. French photographers Yves Marchand and Romain Meffre set out to document the decline of an American city. Their book “The Ruins of Detroit“, a document of decaying buildings frozen in time, was published in December 2010.

From the photographers’ website:

Ruins are the visible symbols and landmarks of our societies and their changes, small pieces of history in suspension.

The state of ruin is essentially a temporary situation that happens at some point, the volatile result of change of era and the fall of empires. This fragility, the time elapsed but even so running fast, lead us to watch them one very last time : being dismayed, or admire, making us wondering about the permanence of things.

Photography appeared to us as a modest way to keep a little bit of this ephemeral state.


Captured: The Ruins of Detroit


William Livingstone House #

Captured: The Ruins of Detroit


Michigan Central Station #

Captured: The Ruins of Detroit


Woodward Avenue #

Captured: The Ruins of Detroit


Atrium, Farwell Building #

Captured: The Ruins of Detroit


18th floor dentist cabinet, David Broderick Tower #

Captured: The Ruins of Detroit


Bagley-Clifford Office of the National Bank of Detroit #

Captured: The Ruins of Detroit


David Whitney Building #

Captured: The Ruins of Detroit


United Artists Theater #

Captured: The Ruins of Detroit


Fort Shelby Hotel #

Captured: The Ruins of Detroit


Ballroom, American Hotel #

Captured: The Ruins of Detroit


Melted clock, Cass Technical High School #

Captured: The Ruins of Detroit


Donovan Building #

Captured: The Ruins of Detroit


Old First Unitarian Church #

Captured: The Ruins of Detroit


Piano, Saint Albertus School #

Captured: The Ruins of Detroit


Luben Apartments #

Captured: The Ruins of Detroit


Woodward Avenue Presbyterian Church, built in the Gothic revival style in 1911 #

Captured: The Ruins of Detroit


Rich-Dex Apartments #

Captured: The Ruins of Detroit


Classroom, St Margaret Mary School #

Captured: The Ruins of Detroit


Biology classroom, Wilbur Wright High School #

Captured: The Ruins of Detroit


St Christopher House, ex-Public Library #

Captured: The Ruins of Detroit


Fisher Body 21 Plant #

Captured: The Ruins of Detroit


Room 1504, Lee Plaza Hotel #

Captured: The Ruins of Detroit


Detroit?s Vanity Ballroom with its unsalvaged art deco chandeliers. Duke Ellington and Tommy Dorsey once played here. #

Captured: The Ruins of Detroit


Packard Motors Plant #

Captured: The Ruins of Detroit


Waiting hall, Michigan Central Station #

Captured: The Ruins of Detroit


East Methodist Church #

Captured: The Ruins of Detroit


East Side Public Library #

Captured: The Ruins of Detroit


Offices, Highland Park Police Station #

Captured: The Ruins of Detroit


Biology classroom at George W Ferris School in the Detroit suburb of Highland Park #

Captured: The Ruins of Detroit


The ballroom of the 15-floor art-deco Lee Plaza Hotel, an apartment building with hotel services built in 1929 and derelict since the early 1990s #

Captured: The Ruins of Detroit


Michigan Theatre #

Captured: The Ruins of Detroit


Packard Motors Plant #

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Cracking The Credit Card Code

May 27, 2011


There’s hardly a more prominent financial product in America today than the almighty credit card. Nearly everybody has at least one — almost 80% of consumers in 2008, according to the Federal Reserve Bank of Boston – and many use it on a daily basis. Without a doubt, there are also those consumers who know their credit card numbers by heart (makes online shopping and booking travel so much easier, if anything). But how many of you know what those numbers really mean? Contrary to what you may think, they aren’t random. Those 16 digits are there for a reason and, knowing a few simple rules, you could actually learn a lot about a credit card just from its number. This infographic shows you how to crack that code.


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Fannie Mae servicers to evaluate more borrowers for imminent default

May 27, 2011


Fannie Mae notified its mortgage servicers this week to begin evaluating borrowers for imminent default not just for the Home Affordable Modification Program but for any initiative.

Borrowers who do not qualify for HAMP and are less than 60-days delinquent on their mortgage must be evaluated for imminent default if they request a modification. If the servicer determines the borrower has less than $25,000 in cash reserves, the servicer must submit the loan to Freddie Mac‘s imminent default indicator, which evaluates the borrower’s financial characteristics, such as credit score and property valuation, to determine if a default is likely.

If the test comes back negative, the borrower must provide documentation showing a specific hardship such as the death of a borrower or co-borrower, a prolonged illness or a divorce.

Both Fannie and Freddie completed 119,000 modifications in the fourth quarter, according to the latest report from their regulator, the Federal Housing Finance Agency. Roughly 20% of those were HAMP permanent modifications. Expanding the evaluation for imminent default to this larger percentage of non-HAMP workouts could boost numbers, as total modifications on Fannie and Freddie loans dropped 18% from the previous quarter.

When modification options failed, Fannie and Freddie conducted roughly 27,000 short sales and deeds-in-lieu of foreclosure in the fourth quarter.

A recent study from CoreLogic (CLGX: 17.96 -0.39%) showed the risk of losses from these transactions due to fraud. Fannie released new guidance for servicers to mitigate some of the same risks highlighted in the report.

Fannie will require servicers to obtain either a broker price opinion or an appraisal from an approved network of providers before completing a short sale or deed-in-lieu of foreclosure.

According to the new guidance, servicers have until July 15 to comply. The list of providers, much like Fannie’s attorney network, will be updated from time to time.

Servicers cannot request more than 75% of its BPOs or appraisals from one provider, and it must wait at least 120 days after the original order for gathering an updated value.

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DeMarco criticizes Republican GSE bills

May 26, 2011


In a subcommittee hearing Wednesday the chief regulator for Fannie Mae and Freddie Mac punched holes in the latest seven reform bills sponsored by House Republicans.

After the Treasury Department released its white paper on the future of housing finance, Republicans on the House Financial Services Committee announced 15 bills regarding how to wind down Fannie and Freddie. Since conservatorship in 2008, the two companies have drawn roughly $164 billion from the Treasury.

Edward DeMarco, acting director of the Federal Housing Finance Agency, addressed drafts of the latest seven introduced in mid-May, pointing out redundancies in some and the potential dangers in others.

The first bill drafted by Rep. Don Manzullo (R-Ill.) would prevent the Treasury from lowering the 10% dividend payment the GSEs are required to make each quarter.

DeMarco said the bill is consistent with the current conservatorship agreements, and the GSEs have been making quarterly payments at this rate.

The mortgage finance giants "frequently have had to draw additional funds from Treasury in order to ‘pay’ the dividend to Treasury," according to DeMarco. He said fixing the rate at 10% would limit resolution options and would hurt the ability of the GSEs to build up reserves and exit conservatorship. However, when responding to questions during the hearing, DeMarco said the bill is consistent with what Fannie and Freddie are doing, and there is no plan to change the dividend.

DeMarco said the GSEs still face "a significant number of hurdles" before getting out of conservatorship even if the rate is reduced.

Another bill from Rep. Michael Fitzpatrick (R-Pa.) would cap any federal funds used for GSE bailouts at $200 billion plus any deficiency amounts the companies owe. DeMarco said the cap is already consistent with the conservatorship agreement.

A third bill introduced by Rep. Ed Royce (R-Calif.) would abolish the Affordable Housing Trust, but DeMarco said the GSEs have not contributed to the trust since entering conservatorship in 2008, and it would be inappropriate for them to do so.

Rep. Jason Chaffetz (R-Utah) sponsored one bill that would subject Fannie and Freddie to Freedom of Information Act requests. DeMarco reiterated these are still private companies working in conservatorship. The two companies, he claimed, would incur significant costs responding to such requests, including "significant litigation requests."

A bill sponsored by Rep. Robert Hurt (R-Va.) would require Fannie and Freddie to dispose of all "nonmission critical assets." DeMarco asked the lawmakers for regulatory discretion to preserve and conserve the GSE’s assets to the FHFA’s best judgment.

"Moreover, FHFA has already begun to fulfill the intent of Mr. Hurt’s draft bill regarding the sale of nonmission critical assets," DeMarco said.

A bill drafted by Rep. Randy Neugebauer (R-Texas) would prohibit taxpayer dollars from funding legal fees for former Fannie and Freddie employees.

DeMarco said the companies have a serious challenge attracting and retaining employees. Neugebauer’s proposal would require the FHFA to establish a process for setting the standard of "reasonableness" for these fees. If an employee is subjected to these lawsuits, they could be rendered bankrupt by the escalating legal cost even if they are found innocent, DeMarco said.

"Further, the proposal would have to be prospective in nature to avoid undermining the status of current employees," he said. "The language currently would cover conduct occurring before the effective date of a regulation and that would make it retrospective in nature."

DeMarco plans to work with the lawmakers on the ongoing drafts and help them move toward a final resolution.

"I also recognize the critical and contemporaneous need to provide market participants with greater clarity and assurance about the ultimate role of the government in housing finance beyond the issues surrounding the enterprises," DeMarco said.

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U.S. Commercial Real Estate Prices Decline to Post-Crash Low, Moody’s Says

May 26, 2011


U.S. commercial property prices fell to a post-recession low in March as sales of financially distressed assets weighed on the market, according to Moody’s Investors Service.

The Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement today.

The national index has fallen for four straight months as sales of distressed properties hurt real estate values. Investor demand is strongest for well-leased buildings in such major markets as New York and Washington as vacancy rates decline and the economy grows.

The index “continues to bounce along the bottom as a large share of distressed transactions preclude a meaningful recovery of overall market prices,” Tad Philipp, Moody’s director of commercial real estate research, said in the statement. “Indeed, the post-peak low in price has been reached in the same period as a post-peak high in distressed transactions has been recorded.”

So-called trophy properties in New York, Washington, Boston, Chicago, Los Angeles and San Francisco are helping those markets avoid the drag caused by distressed asset sales nationwide, Moody’s reported. Prices of properties of $10 million or more have risen 23 percent since their July 2009 low, according to a separate report issued today.

No Recovery Signals

The overall index shows “no sign of recovery,” Moody’s said.

Almost a third of all March transactions measured by Moody’s were considered distressed, meaning the properties’ owners faced foreclosure, had difficulty covering their mortgage payments or experienced other financial problems. It was the largest proportion of distressed property sales in the history of the index, Moody’s said.

Price increases for high-profile properties in major markets “appear to have taken a breather, providing less of a positive effect on overall market results than it has in recent months,” according to today’s report. Transactions involving such assets also fell, meaning that those properties that did sell were more likely to be troubled, Moody’s said.

CoStar Report

Prices for investment-grade properties in the U.S. fell 4.9 percent in March from the previous month, CoStar Group Inc. (CSGP), a real estate data service based in Washington, said May 11. Values were up 2.2 percent from March 2010 and down 38 percent from the peak in June 2007, according to the company.

CoStar, unlike Moody’s, tracks transactions of less than $2.5 million.

Green Street Advisors Inc., a real estate research company in Newport Beach, California, reported rising prices in April. Commercial property values increased 2 percent from the previous month and 18 percent from a year earlier, the company said May 5. Prices are down 13 percent from the August 2007 peak.

Green Street’s index includes deals that are in negotiation or under contract, and is weighted by asset value. Moody’s tracks completed sales.

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U.S. Neighborhoods With the Biggest Houses

May 26, 2011


Some might call it a simpler time. Others might say life was just less comfortable. In 1973, about three people lived in each household in the U.S. The average single-family home built that year was one story, 1,660 sq. ft., and had two or three bedrooms. It was very rare to have more than two bathrooms.

Home life transformed in the following decades: Increased access to financing allowed first-time home buyers to buy larger residences. More homes were built with two stories, and at least four bedrooms and three bathrooms, U.S. Census Bureau data show. Siblings were no longer expected to share bedrooms. Such new amenities as media rooms were added. By 1990 the average American household had shrunk to about 2.6 people, yet the average single-family home built that year was 2,080 sq. ft.—about an extra 400 sq. ft. (just larger than the average U.S. hotel room, which is 325 sq. ft., according to PricewaterhouseCoopers) compared with 1970.

"The standard of living increased, and most households strived very hard to meet that standard," says Stephen Melman, director of economic services at the National Association of Home Builders.

A small percentage of new homes were even larger: By 2000, 66,000 new homes, about 5 percent of homes built that year, measured 4,000 sq. ft. or more, according to Census Bureau data. By 2006 the total more than doubled to 137,000 homes, 8 percent of homes built that year. In 2007 the average size of completed homes peaked at 2,521 sq. ft.

Some cities around the country—many of them wealthy communities—had a greater proliferation of large homes. Data based on home listings in 20,000 Zip Codes and 200 metro areas provided to by Altos Research, a real-time real estate data company in Mountain View, Calif., show that the median size of homes for sale with a Cherry Hills Village, 80113 address was the largest in the U.S.: 7,654 sq. ft.—more than three times the U.S. median. The listed homes had a median of six bedrooms and seven bathrooms.

Cherry Hills Village, an affluent suburb 10 miles south of downtown Denver, has a high median household income of $226,552, according to U.S. Census Bureau estimates. Most of the largest residences on the market—those bigger than 10,000 sq. ft.—were built in the last decade, according to a search on

Americans Downsizing

Palatial living will always appeal to those who can afford it, yet practical home buyers are expressing interest in just slightly smaller homes. After the recession, the average size of single-family housing starts fell slightly—by 5 percent since 2007—to 2,382 sq. ft. in 2010, according to U.S. Census Bureau estimates.

In a survey by real estate search company, 55 percent of people prefer a home from 1,401 to 2,600 sq. ft.; only 9 percent prefer a home larger than 3,200 sq. ft. Even though homes have grown in size over the last few decades, only 3.6 percent of nearly 4.8 million homes on are larger than 4,000 sq. ft., according to Daisy Kong, a spokesperson for the company.

While the large number of empty nesters and first-time home buyers will likely prefer smaller, affordable homes, "growing families seek larger homes that most efficiently contribute to their lifestyle demands," says NAHB’s Melman.

In this new age, Melman adds, "now buyers are mostly concerned with affordability, controlling energy costs, and moving into a home that supports their lifestyle—even if it falls short of their ideal."

Here are the 10 American neighborhoods with the largest houses:

No. 10: Hidden Hills, CA., 91302

Median size: 5,522 sq. ft.

Median no. bedrooms: 5

Median no. bathrooms: 5.5

No. homes for sale: 50

Median list price: $2,897,500

Hidden Hills, a wealthy community incorporated in 1961, has a population of about 2,000 and about 648 home sites, according to the city website. The 8,259 sq. ft. home at 25015 Abercrombie Lane featured above is listed for $2.88 million, according to Coldwell Banker Previews.

No. 9: Wexford, PA., 15090

Median size: 5,767 sq. ft.

Median no. bedrooms: 4

Median no. bathrooms: 3

No. homes for sale: 102

Median list price: $399,950

The area known as Wexford, located near Sewickley (the No. 14 area on this list) and Gibsonia (the No. 20 area on the list), is split among municipalities including Franklin Park, McCandless, Pine Township, and Marshall Township. The 8,389 sq. ft. home pictured above, 160 Windwood Drive, is listed for $1.1 million, according to

No. 8: Greenwood Village, CO., 80121

Median size: 5,786 sq. ft.

Median no. bedrooms: 5

Median no. bathrooms: 5

No. homes for sale: 60

Median list price: $1,249,000

Greenwood Village, just south of Cherry Hills Village, has a median household income of $114,460, according to U.S. Census Bureau estimates. The 11,276 sq. ft. home above, at 5761 S. Maple Court, has six bedrooms and nine bathrooms (including five full bathrooms) and is listed for $4,995,000, according to the website of Kentwood Real Estate broker associate Sandy Weigand.

No 7: Coral Gables, FLA., 33143

Median size: 5,791 sq. ft.

Median no. bedrooms: 5

Median no. bathrooms: 6

No. homes for sale: 52

Median list price: $2,925,000

Known for Mediterranean-style architecture, Coral Gables boasts tree-lined streets and waterfront homes. The house featured above, 330 Dolias Court, is 19,475 sq. ft. and is listed for $4,799,900, according to Avatar Real Estate Services.

No 6: Pittsburgh, PA., 15238

Median size: 5,792 sq. ft.

Median no. bedrooms: 4

Median no. bathrooms: 3.5

No. homes for sale: 136

Median list price: $567,450

This area, which includes part of Fox Chapel and Indiana, Pa., has many large homes, both contemporary and built before 1980. The 7,081 sq. ft., seven-bedroom home pictured above, 815 Fox Chapel Road, was reduced to $1,295,000, according to Howard Hanna agent Betsy Monteverde.

No. 5: Atherton, CA., 94027

Median size: 5,900 sq. ft.

Median no. bedrooms: 5

Median no. bathrooms: 5

No. homes for sale: 31

Median list price: $5,200,000

Atherton, on the San Francisco Peninsula in Northern California, is a wealthy Zip Code with median household income of $185,000, estimates the U.S. Census Bureau. The 11,000 sq. ft., seven-bedroom home above, 120 Selby Lane, was built in 1906 and is for sale for $7,995,000, according to Coldwell Banker.

No.4: Venetia, PA., 15367

Median size: 6,178.5 sq. ft.

Median no. bedrooms: 4

Median no. bathrooms: 3.5

No. homes for sale: 95

Median list price: $498,000

Venetia, about 20 miles south of downtown Pittsburgh, is one of the towns in Peters Township. The five-bedroom home at 132 Justabout Road (pictured above), listed for $3.2 million, has 12,000 sq. ft. of living space and sits on 4.8 acres, according to Karen Marshall Group Keller Williams Realty.

No. 3: Leawood, KS., 66211

Median size: 6,312 sq. ft.

Median no. bedrooms: 5

Median no. bathrooms: 5

No. homes for sale: 39

Median list price: $1,199,000

Leawood, about 15 miles from downtown Kansas City, has a median household income of $127,162, estimates the Census Bureau. The six-bedroom home above, 11129 Brookwood Ave. in Hallbrook Farms, is listed for $1,995,000 and measures 8,550 sq. ft., according to Hallbrook Realty.

No. 2: Rancho Santa Fe, CA., 92067

Median size: 6,424 sq. ft.

Median no. bedrooms: 5

Median no. bathrooms: 6

No. homes for sale: 222

Median list price: $3,425,000

Large homes are standard in Rancho Santa Fe, an exclusive community about 25 miles north of San Diego. The median household income in Rancho Santa Fe is $197,446, according to Census Bureau estimates. The home above, 17231 Camino De Montecillo, is 10,836 sq. ft. and is on the market for $3,499,000, according to a listing from Global One Real Estate agent Talechia Principato.

No. 1: Cherry Hills Village, CO., 80113

Median size: 7,654 sq. ft.

Median no. bedrooms: 6

Median no. bathrooms: 7

No. homes for sale: 81

Median list price: $2,395,000

This exclusive Denver suburb, just north of this list’s No. 8 area, Greenwood Village, has homes priced from about $700,000 to $12 million, according to real estate website The area has many estate-size properties, some of which have horse stables, in contemporary, classic ranch, Mediterranean, and French Country styles, according to The 20,198 sq. ft. home above, at 7 Cherry Hills Park Drive, has six bedrooms and nine bathrooms (including four full bathrooms) and is for sale for $8.75 million, according to the website of Kentwood Real Estate broker associate Sandy Weigand.

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Condo Associations Get Tough on Fees

May 25, 2011

Wall Street Journal

Three years ago, Claudia Pinchasson defaulted on two mortgages used to purchase apartments at Spring West condominiums here. The units have been turned into rental property, but not by Ms. Pinchasson or her lender. They are being rented out by the condo association.

Condo associations, which have been struggling as troubled homeowners stop paying their condo assessments, are becoming increasingly aggressive about finding ways to recoup unpaid fees. And they have lawmakers on their side.

In Nevada, homeowners associations recently tallied a victory when state legislators quashed two laws that would have limited the amount of fees that the associations can assess on delinquent borrowers.

Florida’s state legislature earlier this month passed a law that makes it easier for homeowner associations to collect rent from tenants in delinquent units, with monthly payments going to the associations, instead of the units’ owners, until all unpaid fees are covered.

"Two years ago, there would have been a lot more complacency" about homeowners not paying dues, says Donna D. Berger, a partner with Katzman, Garfinkel & Berger, one of several Florida law firms that lobbied for the law. Now, "frustration over seeing people continuing to live in their homes for years without paying" or seeing condos sit empty for years without producing fees, has driven more associations to take action, she says.

Florida, with 60,000 homeowner and condo associations, is at the center of debate over unpaid fees. In many cases, questions have been raised about the rights of homeowners versus those of homeowner associations. The associations have the right to collect fees and assessments to pay for maintenance, utilities and other services, and now, they also have the right to take control of a unit and rent it out when fees on the unit go unpaid. But that right clashes with the rights of delinquent homeowners, who may want to rent out the units themselves and pocket the cash.

Ms. Pinchasson has charged, in a complaint sent by her lawyer to her homeowner association, that the group illegally took possession of her condos, and she wants all the rent on the two units—about $10,000—given to her. She says she is worried that with tenants in her units, she may be liable in case of an accident or other problems. "I just want the tenants out, and I want the bank to foreclose" so she doesn’t have to worry about liability, Ms. Pinchasson says.

Leaders of the association declined to comment, but in February, they filed to foreclose on Ms. Pinchasson’s units, citing unpaid association fees of more than $12,000.

Typically, associations let lenders deal with nonpaying members. That often meant waiting a few months for lenders to foreclose and resell the unit. But five years into the foreclosure crisis, buyers are scarce and banks are having more trouble foreclosing in a timely manner, due in part to challenges by some who believe lenders acted improperly when seizing property.

The time it takes lenders to foreclose has grown longer each year. Nationwide, residential properties are in foreclosure an average of 400 days, up from 151 days four years ago, according to foreclosure-data firm RealtyTrac Inc. In Florida, it is even longer, growing to an average of 619 days as of the first quarter of 2011, from 169 days in 2007.

The banks are "letting these properties sit, and it’s killing the associations," says Steven F. Cohen, who runs A&N Management, a company in Boca Raton that manages properties on behalf of about 50 South Florida homeowners and condo associations. "We’re just trying to help these associations fight back."

Mr. Cohen said nearly every association he represents has had an instance where they were forced to foreclose on a homeowner or ask a judge to appoint a receiver for the unit.

Until the new law, homeowner associations could seek a lien in court against a property, based on the unpaid fees. Now, associations can demand that rent payments on delinquent units be paid to the association simply by sending a letter to the tenant. If the association wants to evict a delinquent homeowner and find its own tenants, or find new renters for a unit abandoned by its owner, it must foreclose on the unit ahead of the bank and take title to the property.

At the Gulfside luxury condominium in Naples earlier this year, its condo association foreclosed on a unit with a $710,000 mortgage because its owners owed the association $19,000.

When a unit-owner stops paying, "you’ve got to stop the bleeding as quickly as possible," said Ewing Sutherland, president of Gulfside’s owners association. The group has foreclosed on two of its 112 units for unpaid condo fees.

Tom Salomone, a Coral Springs real-estate agent, says associations’ foreclosing on units are problematic because they have no obligation to pay off the mortgage debt on the unit, and that might make lenders reluctant to make future loans on properties in that community.

At Ironwedge, in Boca Raton, its association recently blocked a short sale arranged by Mr. Salamone—in which he convinced the lender to accept a price lower than the debt on the house—in favor of foreclosing and renting the house out. Now, the house’s fate is in limbo, and it likely won’t be sold until the bank, which holds the first lien on it, decides to foreclose. "It’s an absolute mess," Mr. Salamone said.

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Majority of Banking Executives See Difficulty Addressing Tax Implications of Dodd-Frank Act and Basel III: KPMG Survey

May 25, 2011

Yahoo! Finance

Financial executives in the banking industry believe it will be difficult for their institutions to address the various tax implications of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and Basel III, according to a recent survey from KPMG LLP, the U.S. audit, tax and advisory firm.

In the KPMG survey, 64 percent of the nearly 100 financial executives in the banking industry said it would be difficult for their business to address the tax implications of the Dodd-Frank Act and Basel III.  When asked at what stage their bank was in preparing for the Dodd-Frank Act and Basel III from a tax perspective, 48 percent of the respondents said they were still trying to understand the tax implications, while 27 percent said they were in the process of incorporating scenarios into tax planning.

"Various tax issues related to the Dodd-Frank Act and Basel III have broad and potentially significant implications," said Tony Anzevino, national leader of KPMG LLP’s Banking and Finance practice.  "Senior management should be engaged with their finance and tax teams to understand how these tax issues may impact the business from a strategic, risk and earnings perspective. Ideally, banks at this stage should be well along in determining a way forward."

Thirty-one percent of the respondents in the KPMG survey said they anticipate the tax implications of the Dodd-Frank Act and Basel III will have a significant impact on their business.  Capital and liquidity rules established by the Dodd-Frank Act and Basel III are expected to have the greatest impact from a tax standpoint, according to 41 percent of the respondents.  Derivatives-related issues ranked a distant second with 16 percent saying it would have the greatest impact.

"It’s critical for CFOs, tax directors and other executives to be aware of the tax implications of the Dodd-Frank Act and Basel III," said Mark Price, KPMG’s Banking and Finance practice national tax leader.  "Tax-related issues arising from new bank capital requirements, securitization reform, new rules affecting the derivatives markets, business changes in response to new consumer financial protections, and restructuring activities are all areas that need to be examined now."

In the KPMG survey, 49 percent of the respondents said their bank was currently considering restructuring activities in order to comply with the Dodd-Frank Act or Basel III.

"Many banks are considering legal entity rationalization and dispositions in response to the living will and Volcker Rule provisions, while others are looking at operational and debt-related changes to meet new capital requirements," said Price.  "All of these restructuring-related activities will raise tax issues that need to be considered as banks make these strategic decisions."

In a smaller respondent pool of nearly 60 finance and tax executives in the banking industry, 64 percent said their board of directors had not requested information related to tax planning efforts around the Dodd-Frank Act and Basel III.  In addition, 60 percent said they update the CFO about tax issues related to the Dodd-Frank Act and Basel III on a regular basis or as they deem appropriate, while 40 percent said they don’t update the CFO.

KPMG White Paper Can Help Banks Understand Tax Implications of Dodd-Frank Act

KPMG’s Washington National Tax practice and its Americas’ Financial Services Regulatory Center of Excellence also jointly released a white paper today titled "An Introduction to the Tax Implications of the Dodd-Frank Wall Street Reform and Consumer Protection Act."  The white paper examines the various provisions that have tax implications for banks — such as living wills, the Volcker Rule, derivatives, capital and liquidity requirements, and executive compensation — and provides insight on the tax issues raised by them.  The white paper can be downloaded here.

The KPMG survey was conducted in late March during a KPMG Tax practice-sponsored event focused on the tax implications of the Dodd-Frank Act and Basel III.


KPMG LLP, the audit, tax and advisory firm (, is the U.S. member firm of KPMG International Cooperative ("KPMG International").  KPMG International’s member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.

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Correcting the Public’s Reverse Mortgage Misconceptions

May 23, 2011

Reverse Mortgage Daily


A common frustration exists among reverse mortgage professionals when it comes to equipping potential borrowers with good, accurate information about their products.

It isn’t that borrowers aren’t open to learning about the loans, but they sometimes come to the table already having been turned off by news articles or misinformation presented by mainstream media or political figures. While they are small in number compared with the major media networks reaching millions across the nation, lenders and originators agree it is essential to work toward changing the false notions out there—one borrower, newscaster and politician at a time.

“Misinformation and disinformation are hurting our industry and the borrowers we would otherwise be helping who are not considering our product because of fear,” says Jeff Lewis, founding member of the Coalition for Independent Seniors and chairman of Generation Mortgage. “We need to counter the negative press, negative statements by advocates and politicians as well. If we don’t, who will?”

The timing of the housing crisis and financial meltdown hasn’t helped, says George Downey, founder of Braintree, Mass-based Harbor Mortgage Inc. “The preponderance of the press has been negative in the wake of the mortgage meltdown and subprime crisis. Unfortunately, many articles have been writing with misinformation and a rehash of old information that has already been printed. It has a similar effect on regulators and legislators.”

A recent National Reverse Mortgage Lenders Association study aims to provide an accurate response of current reverse mortgage borrowers, as well as the response from potential borrowers and their children. The results of the survey, Downey says, are overwhelmingly positive, with a more than 90% reporting satisfaction of the loans. Using the NRMLA study and other positive information is one way to address the inaccuracies surrounding the product.

“Collectively, the industry is constantly trying to disseminate good information. If there are 1000 media outlets and one NRMLA, how many times can the association respond? We’re better off to keep educating on the right information rather than trying to fight misinformation,” says Michael Gruley of 1st Financial Reverse Mortgages..

But drawing attention to the negative press can be an unwanted result whenever the question of misinformation comes up.

“We don’t wrestle with the pig,” says Gruley. “We try to correct errors, but the more we engage ourselves in trying to correct, the more we shine light on it.”

Downey says he engages potential borrowers, instead, and asks them about misinformation about the product when he encounters it.

“In talking with people who have these [negative] feelings, I think the better response is, ‘That’s interesting. Why do you say that?’ Then draw them out as to what it is that led them to that conclusion. What I find out almost 100% of the time, is they don’t have specific facts, or they have misconceptions. Generally speaking, it’s what they heard somebody else say.”

The hope is that when reverse mortgages become more mainstream, the education will become easier.

“We believe seniors are starting to ignore it,” Gruley says. “I suppose, in time, we have to hope the truth will prevail rather than fight all the naysayers.”

“One day, this will be a mainstream product, but it isn’t right now,” says Downey.

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How the $8,000 Tax Credit Cost Home Buyers $15,000

May 23, 2011


The government’s recent $8,000 cash incentive for first-time home buyers has proved even more costly for recipients than for taxpayers, according to data released Monday. Typical buyers have lost twice as much to price declines as they received from the program.

The median home value fell to about $170,000 in March from $185,000 a year earlier, according to That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value. Those who bought earlier in the program have done worse; the median price is down $20,000 from March 2009.

"The $8,000 first-time home buyers tax credit . . . has brought many new families into the housing market," the White House boasted in November 2009 upon announcing an extension and expansion of the program. Judging by sales declines since, that seems beyond doubt. Over the past year, the pace of existing home sales has fallen more than 6% and that of new home sales has fallen 22%.

The credit wasn’t great for taxpayers, either. IRS says it paid $26 billion in home buyer credits in 2009 and 2010, enough to cover the maximum $8,000 credit for more than 3 million buyers. (It says at least $513 million went for fraudulent claims. Some claimants hadn’t bought houses. Some filed twice. Some were under age 18 or incarcerated.)

In October 2009, when the extension of the $8,000 credit for homebuyers was under consideration, I outlined five reasons the U.S. didn’t need more housing perks. These included already-high prices and an abundance of benefits, the questionable stimulus value of home subsidies and a gaping budget deficit. In January 2010, with the extension passed, I recommended that eager buyers wait at least nine months and purposely miss the $8,000 tax credit deadline to take advantage of price declines after. The median price fell about $8,000 over the next nine months and another $8,000 since.

I realize that writing an apology for this program’s failure probably isn’t high on Congress’s or the President’s list of priorities right now. But just in case someone’s conscience is bothering them, let me offer a simple draft:

"We thought the $8,000 tax credits would raise house prices and spur the economy. We were wrong. For starters, it makes no sense for a housing affordability program to have the stated goal of raising prices, because higher prices mean less affordability, not more. Another thing: The program didn’t work. We squandered taxpayer cash, increased the debt and lured many Americans into losses. We’re deeply sorry. We’ll try not to repeat the mistake. If anything, in light of America’s daunting fiscal challenges, we’re going to consider sun-setting costly, existing programs that lure house buyers, like the mortgage interest deduction and capital gains exemption, which together are more than 10 times as expensive as the expired tax credit program, costing about $1,200 per household last year alone."

For homeowners who are wondering if prices are done falling, and for renters who want to know if now is the time to buy, here’s my best guess. In April 2007, when I first wrote that renting had come to make more financial sense than home-ownership, I calculated that prices would have to decline by half to restore the historic relationship between prices and rents. Since then, they’ve fallen 30% nationwide. Inflation has eaten another 8% of their value. So the worst of the plunge seems done, but prices might drift lower or lose ground to inflation in coming years. In some hard-hit markets, of course, houses are a good deal. For a very rough gauge of value in a specific area, divide recent sale prices by the yearly amount charged to renters for comparable properties. If the result is over 20, prices are probably too high. If it’s less than 10, houses might be a steal. If it’s in between, well, it’s in between.

For another take on prices, consider something I and others have argued about the natural rate of price increase for houses. It’s exactly the rate of inflation. Houses, after all, are sticks and stones and other ordinary things, and inflation by definition is the gradual rise in the price of ordinary things. If house prices forever rose faster than the rate of inflation, they’d become infinitely expensive relative to rents, incomes and the cost of building materials.

House prices indeed tracked the rate of inflation during the 1970s, 1980s and 1990s, straying only slightly and briefly and returning each time. In 2000, house prices began to detach from the inflation rate and race ahead of it. Therefore, normalcy might be restored once the house price rise since 2000 matches the rate of inflation since then.

Houses are up 41% since 2000. Inflation has increased other costs by 32%. By this measure, too, prices on a national level seem nearly back to normal but not quite there yet.

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