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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 76 February 2024 J O U R N A L counseling services for homebuyers, homeowners, and renters. "Housing counselors across the country connect Americans—particularly those from disadvantaged communities— to affordable, safe, and quality housing in the communities of their choice," HUD Secretary Marcia L. Fudge said. "The fund- ing we are announcing will help hard- working people find homes for themselves and their families." Through the 2023 Office of Housing Counseling Comprehensive Notice of Funding Opportunity (NOFO), HUD plans to award grants to more than 150 housing counseling agencies and interme- diary organizations. These funds will equip individuals and families with the education and resources they need to make informed decisions regarding their housing needs. Funds will also support an array of counseling ser- vices provided by HUD-approved agencies on topics including financial management and literacy, homeownership, and afford- able rental housing. Three million dollars of the available funding will be allocated to Historically Black Colleges and Universities, other Mi- nority Serving Institutions, and partnering agencies to help bridge the racial home- ownership gap and support underserved communities. "We're pleased to make these funds available to housing counselors to help American households identify and ad- dress their housing needs," Assistant Sec- retary for Housing and Federal Housing Commissioner Julia Gordon said. "Hous- ing counseling continues to play a vital role in helping homebuyers, homeowners, and renters access and sustain suitable housing, particularly as housing instability and costs are on the rise." "These awards are instrumental in helping families tap into the wealth-build- ing potential of homeownership and en- abling renters to live in decent, affordable homes," Deputy Assistant Secretary for Housing Counseling David Berenbaum said. FHFA: APPRAISERS UNDERUTILIZING APPRAISAL TIME ADJUSTMENTS U nderappraisals spiked to 15% in 2021 and 12% in 2022, when home prices experienced rapid growth, according to the Federal Housing Finance Agency (FHFA), while house price growth and underappraisal rates returned to more typical levels in early 2023. As 2024 is predicted to see some similarities to 2023's chaotic market, home purchases remain complicated for many due to appraisals that come in below the homebuyer's contract price offer. From 2013-2020, the annual rate of appraisals below the contract price ranged from 7% to 9% of transactions. Low apprais- als can also impact refinance borrowers by leading to less attractive loan terms, limiting borrowing amounts, or resulting in can- celed transactions. Appraisers can consider price changes that have occurred since the time the comparables were sold and make adjustments known as market conditions adjustments or time adjustments. National Trends in Time Adjustment During the analysis period, from Q3 2018 through Q4 2021, home prices generally rose, especially in 2021. National house prices grew annually from 5 to 18% over this period. For residential real estate, recent sales of comparable properties are commonly used to determine a property's valuation. Because comparable sales in this anal- ysis are typically six months old at the time of the appraisal, expected time adjustments would range from approximately 2.5% to 9% of the sales price on average. However, time adjustments are not very common. During much of the analysis period, appraisers time-adjusted fewer than 10% of comparable sales. Even during the rapid price increases of 2021, time adjustment frequency rose only to about 25%. While adjustments are not necessarily expected in every case, these rates seem to be considerably lower than local price growth would warrant. Appraisers and Time Adjustments: When Are They Necessary? When comparable sales are recent or home price growth is slow or flat, there may be no need for a time adjustment. Apprais- ers adjusted only about 5% of these proper- ties, perhaps because these adjustments are too small to have much impact. In conclusion, adjustments were unnecessary for, at most, 36% of proper- ties where the predicted adjustment was between -1% and 2%. This result implies that appraisers should have time-adjusted 64% of comparables, far greater than the 13% adjusted. Are Time Adjustments Accurate? For predicted adjustments from 1% to 3%, actual time adjustments are within a few tenths of a percentage point. However, as the expected adjustment gets larger, the discrepancy grows. When the predicted ad- justment is 5%, actual adjustments average 3%. At 10%, actual adjustments average 5%. The report concluded that appraisers underutilize and underestimate time ad- justments but do not attempt to determine the cause or propose potential solutions. One potential reason for underutilization is that these adjustments are some of the more analytically complex calculations appraisers might perform.