CA 2CCT

Contra Costa


Ruby Aldana-Bonite said she believes the new agreement by Fannie Mae and Freddie Mac to only buy mortgages with independent appraisals could help "keep everybody's noses clean."

"A lot of times, orders would be dangled in front of you, 'If you come in at this value, we have more work for you,'" she said. "It's not right."

The accord announced this week between the country's two largest mortgage purchasers and New York Attorney General Andrew Cuomo will likely benefit independent appraisal firms and could force lenders to close or sell off their appraisal operations.

Cuomo's office investigated billions of dollars of home loans that Fannie and Freddie bought from lenders. He says lenders have pressured appraisers to inflate the listed value of homes, contributing to a national mortgage crisis that is forcing families into foreclosure.

Aldana-Bonite, of Benicia-based Aldana-Bonite Appraisals, said that although she favored the new rule, there would be few changes for independent real estate appraisers.

"Banks have already gotten rid of in-house appraisers now and are now using a third party," she said. "And that's good if they're not getting that pressure from the loan officer and you're not pressured or leaned toward a certain value."

With the cost of a home appraisal running about $300 to $400, the industry has reaped billions in revenue during the recent housing boom.

The agreement ends the practice of lenders using their in-house staff for initial
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home appraisals and prohibits the use of appraisal-management companies owned or controlled by lenders.

Lenders that own such companies include Wells Fargo & Co. and Countrywide Financial Corp. Appraisal-management firms act as intermediaries between lenders and appraisers.

Rob Denton, owner of Denton Valuation in Walnut Creek, said it was a bit premature to speculate on what will happen to the appraisal industry because there are few safeguards for appraisers.

"I would like to see an independent agency or another department of a financial institution whose income or profits are not based on the origination of loans to oversee appraisals," he said. "That's the problem."

Denton said that "appraisal shopping," or when mortgage brokers and loan agents called multiple appraisers to find one who agreed to their price, was common in the housing boom.

"The feds are suggesting that when you are prompted by a broker to reach a certain value, those people should be reported," he said. "But there doesn't seem to be any clearinghouse for doing that. ... We're not going to accept work under those premises, but there are no avenues for corrections."

The American Society of Independent Appraisers said in a statement Tuesday that the Virginia-based trade organization favored the agreement but plans to take advantage of the 90-day comment period to point out areas of concern. The new regulations will become effective Jan. 1, 2009.

Jay Fishman, chairman of the appraiser group's governmental relations committee, stated, "This concern is ... the independence of the appraiser has less to do with where the appraiser is employed or who hired the appraiser, and much more to do with whether there are substantive and enforceable prohibitions against pressuring appraisers."

The trade group representing mortgage brokers, which can designate specific appraisers, protested the agreement and threatened legal action.

The agreement "will increase costs to consumers by removing thousands of small-business competitors from the marketplace," Roy DeLoach, executive vice president of the National Association of Mortgage Brokers, said in a statement.

Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com. The Associated Press contributed to this report.






The conservators who are running Cal State 9 said Wednesday they have begun to shop around the failed credit union.

The idea behind such a transaction is to continue to protect the assets of Cal State 9's members and to maintain the company's financial stability, according to the National Credit Union Administration. That group is managing Cal State 9 through the conservatorship, Melinda Love, a regional director with the credit union administration, stated in a letter posted on the Cal State 9 Web site.

"This week, NCUA representatives came to a decision to pursue the combination of Cal State 9 with another credit union," Love stated in her letter to the credit union's members.

Concord-based Cal State 9 would be combined with another credit union through a transaction that would enable the buyer to purchase some or all of Cal State 9's assets and assume some or all of the company's liabilities, including insured deposits.

"This transaction, known as a 'purchase and assumption,' represents the most financially sound decision and is in the best interest of Cal State 9's membership," Long wrote in her letter.

Despite Cal State 9's troubles, the state-ordered conservatorship has enabled the credit union to keep its doors open and to protect the assets of its members.

Still, the backdrop for any deal is the dreadful financial condition of Cal State 9. Losses at the credit union have accelerated dramatically.

During all of 2007, the credit
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union lost $61.6 million. In September, the credit union's losses totaled $45.9 million over the first nine months of the year. In June, Cal State 9's losses totaled $9.1 million. During 2006, Cal State 9 posted a profit of $9.5 million.

Cal State 9's woes were fueled by the credit union's venture into home equity loans. When the mortgage meltdown shredded the economy, Cal State 9 was saddled with a rising number of delinquent loans.

By year's end, Cal State 9 was burdened by nearly $68 million in real estate loans that were delinquent by more than one month, according to a regular quarterly report the credit union files.

The National Credit Union Administration said it believes a transaction could be completed by early this summer.

Discussions have begun with credit unions that could undertake a deal, said John McKechnie III, public and congressional affairs director with the credit union administration. The group's officials did not identify the possible candidates.

"These situations are rare," McKechnie said. "The National Credit Union Administration would manage whatever assets and whatever liabilities would remain" once the deal was concluded.

The nature and amount of the residual assets or liabilities would vary on a case-by-case basis.

"Our agency's first interest is to preserve all of the assets of the members," McKechnie said.

Credit unions pay a deposit and insurance assessment into the National Credit Union Share Insurance Fund, which is like the FDIC fund to insure bank and thrift deposits. That fund provides the financial support to allow the credit union administration to handle assets and liabilities as necessary.

Cal State 9 is the second East Bay credit union in recent months to stumble into a quagmire of housing-related mortgage failures and red ink.

Pleasanton-based Sterlent Credit Union is attempting to combat a loss of $4.8 million during 2007 and millions of dollars in delinquent mortgages. That company continues to operate as usual and is protecting its members' assets while it attempts to stabilize its operations.

That same message of assurance is being delivered to Cal State 9 customers.

"We want Cal State 9 members to know that their funds are insured, the doors are open and come on in," McKechnie said.