[caption id="attachment_11791" align="alignleft" width="140"] Stephen Wagner, president of the Appraisal Institute[/caption]

New appraisal thresholds could leave borrowers in an untenable, risky position.

The reason is that the Office of the Comptroller of the Currency, Department of Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. are considering raising the appraisal threshold for residential mortgages to $400,000 from $250,000.

For commercial mortgages, the threshold has already been raised to $500,00, from $250,000, and the National Credit Union Administration, the credit union regulator, is considering raising it to $1million. These thresholds are on the loan transaction value, not the housing value.

“The median price of a residential property last February was $255,000," said Stephen Wagner, president of the Appraisal Institute. "For regional and smaller banks, commercial properties they lend on are often in the $500,000 to $700,00 range. That’s their sweet spot. These new thresholds could mean a lot of loans going without appraisals which could put a lot of borrowers at risk.”

“Then there is the issue of timing.” said Wagner  “With the economy in a record long expansion, a contraction is likely to come in the near future.  At a time like this, shouldn’t you consider tightening underwriting standards, or at least leave them the same. There’s an old axiom, negative equity breeds foreclosure.”

Many industry analysts predict a contraction in 2020 or 2021.

Offering an alternative perspective in his blog, Steve Hurlburt, chief appraiser at Liberty Bank, thinks that raising thresholds will reduce the overall amount of exposure from appraisals.

“Lending volumes tend to increase and decrease faster than the supply of qualified appraisers. As a result, boom cycles can place extreme pressure on appraisers," wrote Hurlburt. "This scenario makes quality control extremely challenging. The option to leverage efficient evaluations on low-risk transactions can improve the risk management of the entire system by devoting limited appraisal resources to these transactions. Raising the De minimis threshold will enable lenders to focus scarce resources on the riskier transactions.”

Resources are expected to become more scarce as there has been a 2.6 percent average annual decline in appraisers since 2014. While regulatory changes might be under way, technology and big data are also changing the valuations side of the business, like it has throughout the mortgage process. For instance, drones allow appraisers to view hard to reach areas, and digital devices let appraiser complete floor plans. Blockchain will allow appraisers to share their timestamped data securely with all parties involved in the transaction, and the availability of big data means more accurate appraisal valuation models.

Wagner thinks the more data appraisers have available, the better job they will be able to do. One offshoot he now sees is that the government service organizations and the banks are looking for bifurcated appraisals in which the appraiser sits in the office and evaluates things while someone else does the actual site visit.

To head off future capacity issues, associations like the Appraisal Institute have been recruiting more younger appraisers. “We have masters degree programs at around a dozen universities. We have an outreach where we try to get non-members into the institution and try to get people thinking about appraisals," said Wagner. "CareersBuildingCommunities.com is a relatively new endeavor in which 27 organizations that have gotten involved and raised the awareness to all types of real estate careers, including appraisals. Candidates take an aptitude survey to see what positions they are best suited for.”

Making it easier for appraisers to handle more files would help relieve capacity issues. And, just as there is a nationwide Multistate Licensing System & Registry to assist originators, there could be one for appraisers.

“The current multi-state licensing system is handled at the state level and isn’t consistent," said Wagner. "There are a number of requirements that are similar, such as a background check and continuing education. These should be handled by a centralized authority that could share this information with each state rather than have appraisers have to go through the process again and again.”

Old Republic International Corporation (NYSE: ORI) today announced that it will publish first quarter 2019 results on April 25, 2019. The announcement will consist of the Company's regular news release format containing information about the financial results of its segmented and consolidated operations. In accordance with long-established practice, a statistical exhibit showing historical financial statistics will be posted concurrently on Old Republic's website at www.oldrepublic.com.

About Old Republic

Chicago-based Old Republic International Corporation is one of the nation's 50 largest publicly held insurance enterprises. It is a member of the Fortune 500 listing of America's largest companies. Its most recent financial statements reflect consolidated assets of approximately $19.32 billion and common shareholders' equity of $5.14 billion, or $17.23 per share. Its current stock market valuation is approximately $6.35 billion, or $20.96 per share.

The Company is organized as an insurance holding company whose subsidiaries actively market, underwrite, and provide risk management services for a wide variety of coverages mostly in the general and title insurance fields. A long-term interest in mortgage guaranty and consumer credit indemnity coverages has devolved to a run-off operating mode in recent years. Old Republic's general insurance business ranks among the nation's 50 largest, while its title insurance operations are the third largest in its industry.

The nature of Old Republic's business requires that it be managed for the long run. For the 25 years ended in 2018, the Company's total market return, with dividends reinvested, has grown at a compounded annual rate of 9.9% per share. For the same period, the total market return, with dividends reinvested, for the S&P 500 Index has grown at a 9.1% annual compound rate. During those years, Old Republic's shareholders' equity account, inclusive of cash dividends, has risen at an average annual rate of 8.9% per share, and the regular cash dividend has grown at an 8.5% annual compound rate.

According to the most recent edition of Mergent's Dividend Achievers, Old Republic is one of just 100 qualifying companies, out of thousands considered, that have posted at least 25 consecutive years of annual dividend growth. Moreover, Old Republic has paid a cash dividend without interruption since the World War II year of 1942 (78 years), and it has raised the annual cash dividend pay-out for each of the past 38 years.

Asurity Technologies announced the successful integration of the 2018 Home Mortgage Disclosure Act (HMDA) Modified LAR files into RiskExec, its comprehensive web-based compliance reporting and analysis platform that automates HMDA, CRA, redlining, and fair lending processes.

"Within days of the governments' release of 2018 HMDA Modified LAR, we have uploaded the entire validated peer data set and made it available to our customers in RiskExec," says Luke Wimer, Chief Operating Officer of Asurity Technologies. "Our SaaS model and scalable analytics platform allows us to lead the industry in providing data to our clients."

This current release of the downloaded 2018 HMDA data includes 5,619 institutions comprising 14,708,414 records. The count of total records is very similar to 2017 although this year's data contains HELOCs. The overall origination rate is also very similar at approximately 51%.

"The consistency in volume and originations shows stability and is a positive indicator of housing market health," says Dr. Anurag Agarwal, founder, president and chief architect of RiskExec. "In today's regulatory environment, it is critical for lenders to quickly and easily understand how the landscape is evolving, and how their lending profiles compare among peers. RiskExec will be updated weekly as this data is changed due to resubmissions leading to a final aggregate data released by CFPB later in the year."

From goal setting, dedicated redlining analysis and interactive mapping to peer rankings and data visualization, RiskExec provides executive and regulatory reporting for the Home Mortgage Disclosure Act (HMDA), Community Reinvestment Act (CRA), and fair lending compliance requirements.