DS News

49 » VISIT US ONLINE @ DSNEWS.COM APPRAISING APPRAISALS Homeowners may be overvaluing their homes compared to appraisals, according to the Quicken Loans' National Home Price Perception Index (HPPI). e HPPI stated that the average appraisal was 0.78% lower than homeowners expected, widening the gap between homeowners and appraisers more than 50%. "is month's fluctuation in the HPPI was driven more by a dip in home values than a change in the owners' viewpoint. Homeowners are often reluctant to believe their house has lowered in value, even at a slight monthly fluctuation," said Bill Banfield, EVP of Capital Markets at Quicken Loans. "Depending on the area, appraised values are either growing at a much more measured pace, or have taken a step back from their meteoric rise. Homeowners are usually slower to realize change—in either direction—than the appraisers who study the market on a daily basis. is can lead to a slight widening of the perception gap when there is a turn in the market." Overall, appraisal values dipped in March month-over-month. Quicken's National Home Value Index (HVI) reported appraisal values dipped 0.20% from February to March. Regionally, the West saw the biggest increase in home values, up by 0.79%. e annual growth ranged from a 2.19% year-over-year increase in appraisal values in the West, to a 4.11% annual rise the Midwest. According to Quicken, these increases are more modest than we have seen over the last few years, but more in line with inflation and wage growth. "Some of the rampant buyer demand that we've seen over the last few years has subsided because of the affordability issues many areas are having, driven by a lack of availability," Banfield said. "Would-be buyers have decided to sit on the sidelines to see if more home inventory becomes available at the price-points where they're shopping. e entire housing industry is watching to see what will happen in the coming months—whether owners and builders will provide the home inventory the buyers have been waiting for, amid the recent drop in interest rates." GE'S $1.5B DEPARTMENT OF JUSTICE SUBPRIME SETTLEMENT e U.S. Department of Justice (DOJ) announced that General Electric will pay $1.5 billion to end the DOJ's claims over subprime home loans that have been bundled into risky securities. According to the DOJ, GE misrepresented the quality of its subprime loans through its former mortgage business, WMC, and will pay its penalty under the under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). "e financial system counts on originators, which are in the best position to know the true condition of their mortgage loans, to make accurate and complete representations about their products. e failure to disclose material deficiencies in those loans contributed to the financial crisis," Justice Department Assistant Attorney General Jody Hunt said in a statement. "As today's resolution demonstrates, the Department of Justice will continue to employ FIRREA as a powerful tool for protecting our financial markets against fraud," Hunt continued. "is settlement contains no admission of any allegations and concludes the FIRREA investigation of WMC," a GE spokesperson said in a statement to CNBC. "is is another step in our ongoing efforts to de-risk GE Capital. is agreement represents a significant part of the total legacy exposure associated with WMC, and we are pleased to put this matter behind us." According to the DOJ, WMC originated more than $65 billion dollars in mortgage loans between 2005 and 2007. According to a member of GE's Corporate Audit Staff (CAS) involved in audits of WMC observed in April 2007, WMC " jacked up volume without controls," leading to WMC receiving more mortgage applications containing fraud or other defects than its competitors. e DOJ alleges that by late 2005 and early 2006, investment banks were kicking out more of WMC's loans than ever, and after a review in March 2006, WMC found that 78 percent of the loan files reviewed contained at least one piece of false information.

• Cover