Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (November 2020)
65 slides from Enact's investor presentation, November 2020
Slide 1: Appraisal Review Guidance for Rural Properties
Appraisal Review Guidance for Rural Properties November 2020 Customer Education Brought to you by: Genworth Customer Development and Process Consulting Rural Appraisal Information 0
Slide 2: Present Trends: Rural Appraisals
Present Trends: Rural Appraisals Today’s Discussion: – Agency Updates – General Rural Appraisal Issues – Identifying Properties as Rural – Review of Appraisal Form for Rural Property Concerns Describe, Describe, Describe. Rural Appraisal Information 1
Slide 3: Quiz Questions
QUIZ QUESTIONS Rural Appraisal Information 2
Slide 4: What Does "Urban Projection" Mean?
What Does “Urban Projection” Mean? “A term used to describe an underwriting mindset that enforces urban norms on rural markets-” -Adam Johnston-Insurance Director of Operations and Chief Appraiser, Genworth Mortgage Insurance – Rural markets are often the opposite of suburban markets and without pro
Slide 5: Why do rural appraisals take so long to obtain?
Why do rural appraisal take so long to obtain? ⎕ Lack of comps so take appraiser longer ⎕ Lack of appraisers ⎕ Rural location so takes longer to get to property and comps ⎕ Rural appraisals don’t take longer Rural Appraisal Information 4
Slide 6: Why do rural appraisals take so long to obtain?
Why do rural appraisal take so long to obtain? ⎕ Lack of comps so takes appraiser longer to complete assignment ⎕ Lack of appraisers ⎕ Rural location so takes longer to get to property and comps ⎕ Rural appraisals don’t take longer Delays In Rural Areas Are Frequently The Result Of Appraiser Availab
Slide 7: Agency Updates
AGENCY UPDATES Rural Appraisal Information 6
Slide 8: Freddie Mac Bulletin 2014-5
Freddie Mac Bulletin 2014-5 Rural Appraisal Information 7
Slide 9: Freddie Mac's Selling Guide
Freddie Mac’s Selling Guide Freddie Mac will purchase eligible Mortgages secured by residential properties in urban, suburban and rural market areas as long as the Mortgaged Premises is adequate collateral for the Mortgage transaction based on the value, condition and marketability of the property.
Slide 10: Fannie Mae
Fannie Mae https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/ Rural Appraisal Information 9
Slide 11: Fannie Mae LL 2014-02
Fannie Mae LL 2014-02 Rural Appraisal Information 10
Slide 12: SEL 2014-16
SEL 2014-16 Rural Appraisal Information 11
Slide 13: Question
QUESTION Rural Appraisal Information 12
Slide 14: Are Either of These Outbuildings Acceptable?
Are Either of These Outbuildings Acceptable? Rural Appraisal Information 13
Slide 15: Overview: Rural Property Challenges
Characteristics indicating property is rural and residential OVERVIEW: RURAL PROPERTY CHALLENGES Rural Appraisal Information 14
Slide 16: Challenges
Challenges Rural Property Appraisal Challenges – Does the Appraiser have the expertise to form an acceptable opinion of value? – Residential Usage – Comparable properties – Value adjustments in sales – Need for complete, detailed explanations Rural Appraisal Information 15
Slide 17: General Considerations: Appraiser Selection
General Considerations Appraiser Selection Rural Appraisal Information 16
Slide 18: General Considerations
General Considerations Ensuring Residential Usage – Characteristics of the subject property – Zoning – Present land use • Land uses that are generally not allowed: – Agricultural properties such as • Farms • Orchards – Ranches – Undeveloped land – Properties not readily accessible by roads that meet
Slide 19: General Considerations
General Considerations “Agricultural” – Definition • Cultivating land • Raising crops • Feeding, breeding, or raising livestock • Farming • Producing crops, livestock, or poultry – Highest and best use is ? – No indication of farming activity Rural Appraisal Information 18
Slide 20: Neighborhood Section
Rural Property Considerations in the Neighborhood Section Fields NEIGHBORHOOD SECTION Rural Appraisal Information 19
Slide 21: Describing Location
Describing Location Urban, Suburban or Rural Rural Appraisal Information 20
Slide 22: Neighborhood Section
Neighborhood Section Rural Property Indicators – Rural location box indicated – Urban/Suburban location ratings in areas that seem rural to the underwriter – Under 25% built-up – Slow growth – Stable values – Over six month marketing time – Wide range of housing prices and age ranges – Wide variatio
Slide 23: Describing the Neighborhood
Describing the Neighborhood Robust Neighborhood Description – Distance to major/primary employment center – Distance to local shopping/retail/commercial – Government services available – Shared school districts – Competing/Market alternative communities or neighborhoods – Housing density and/or popu
Slide 24: Describing the Neighborhood
Describing the Neighborhood Robust Neighborhood Description – Primary employment – Typical residential lot sizes – Land uses – Sales and listing activity specifics – Property and housing characteristics Second of Two Slides Rural Appraisal Information 23
Slide 25: Neighborhood Section Exercise
Neighborhood Section Exercise 1. Are the above captioned Neighborhood Description and Neighborhood Boundaries adequate? 2. Do you feel that the appraiser has provided a sufficient picture of the neighborhood? 3. If not, what additional items or description would you like to see? Rural Appraisal Info
Slide 26: Neighborhood Section Exercise
Neighborhood Section Exercise In regard to the distance of comparable sales in the subject’s rural location, Fannie Mae only requires that distant sales represent the best indicators of value and that the appraiser explain why the specific sales were selected. This appraiser states “these are consid
Slide 27: Neighborhood Section Exercise
Neighborhood Section Exercise … the sales selected were not within the 10 mile radius around the subject that the appraiser defined as the neighborhood. It seems contradictory to then state that “all comparables are located in the same neighborhood as the subject property”. Further explanation of lo
Slide 28: Site Section
Rural Property Considerations in the Site Section Fields SITE SECTION Rural Appraisal Information 27
Slide 29: Site Challenges
Site Challenges Maximum Acreage Guidelines – No maximum • Fannie Mae® • Freddie Mac® – Maximum acreage • Many lenders – check guidelines • Genworth – Simply UnderwriteSM no restriction – Genworth Standard guidelines: over 40 acres, submit file for Genworth review Rural Appraisal Information 28
Slide 30: Site Challenges
Site Challenges Zoning and Land Use • Subject Property Zoning • Zoning Class Reported with a statement of what is permitted • One-unit • Two-unit • If noted R1 or R2 – Legal – Legal nonconforming use – Illegal to zoning – No zoning • Permissible Use of Land • Highest and Best Use Fannie Mae® Single
Slide 31: Residential or Agricultural?
Residential or Agricultural? Highest and best use must be legally permitted, financially feasible, and physically possible and must provide more profit than any other use of the site would generate https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B4- Underwriting-Pr
Slide 32: Site Challenges
Site Challenges Well and Septic Systems – Meet Community Standards – Be adequate – Be in service – Acceptable to area residents – Public or private road – Generally, on the subject site • Legally binding agreement for access and maintenance for off-site private facilities – Explanation of hazards im
Slide 33: Public Or Private Road?
Public Or Private Road? Look at your photos or the street https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Community-Owned.20or.20Privately.20Maintained.20Streets Rural Appraisal Information 32
Slide 34: Improvements Section
Rural Property Considerations in Describing the Improvements IMPROVEMENTS SECTION Rural Appraisal Information 36
Slide 35: Improvements Section Exercise
Improvements Section Exercise Would you like to see a more detailed description of the outbuildings? Rural Appraisal Information 37
Slide 36: Improvements Section
Improvements Section Barns and other outbuildings… 1. Describe (size, age, condition, utility, commonality) 2. Analyze (cost vs. contributory value, special purpose) 3. Value 4. Support with Market Data An appraiser must not “Guess” at the contributory value of an outbuilding • Devaluing outbuilding
Slide 37: Unconventional Improvements
Unconventional Improvements Unconventional improvements require comprehensive descriptions and explanations. – Examples of unconventional improvements: • Log homes • Earth homes • Geodesic homes • Converted barns – Market data to support: • Value • Marketability • Market reaction Rural Appraisal Inf
Slide 38: Sales Comparison Section
Choosing Comparable Properties and Making Sales Comparison Adjustments SALES COMPARISON SECTION Rural Appraisal Information 40
Slide 39: Rural Property Challenges
Rural Property Challenges Establishing value through sales comparison for rural properties presents several challenges, including issues surrounding: – Insensitivity of the typical buyer to variances in property characteristics • The lack of available market alternatives often compels rural homebuye
Slide 40: Fannie Mae
Fannie Mae https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Selection.20of.20Comparable.20Sales\ B4-1.3-08, Comparable Sales (10/02/2018) Rural Appraisal Information 42
Slide 41: Selecting Comparable Properties
Selecting Comparable Properties Distance Between Subject and Comparables – Fannie Mae® • No maximum distance https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Rural.20Properties Fannie Mae Selling Guide B4-1.3-08: Comparable Sales Rural Appraisal Information 43
Slide 42: Selecting Comparable Properties
Selecting Comparable Properties Distance Between Subject and Comparables – Freddie Mac® • No maximum distance https://guide.freddiemac.com/app/guide/section/5601.12 Rural Appraisal Information 44
Slide 43: Selecting Comparable Properties
Selecting Comparable Properties Additional Considerations – Reliance on older comps • Best comparables available • Written explanation – Additional comparables • Sufficient market support • Appropriate bracketing – Outside sources for confirmation • Realtors • Public records • Other appraisers • Tit
Slide 44: Sales Comparison
Sales Comparison When there are outbuildings: – Minimal outbuildings • Typical in the subject area • Comparables with similar outbuildings – Significant outbuildings • Residential vs. Agricultural • Avoiding across-the-board adjustments due to lack of comps? • What could they be used for? • Finding
Slide 45: Fannie Mae Selling Guide
Fannie Mae Selling Guide https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Properties.20with.20Outbuildings B4-1.3-05, Improvements Section of the Appraisal Report (09/02/2020) Rural Appraisal Information 47
Slide 46: Freddie Mac Guide
Freddie Mac Guide https://guide.freddiemac.com/app/guide/section/5601.12 Rural Appraisal Information 48
Slide 47: Outbuilding Currently Used For Storage
Outbuilding, Currently Used For Storage…But How Easy Would It Be To Convert Back to It’s Original Use? Rural Appraisal Information 49
Slide 48: Sales Comparison Adjustments
Sales Comparison Adjustments Bracketing - For rural properties “site” is an important feature to bracket Rural Appraisal Information 50
Slide 49: Sales Comparison Adjustments
Sales Comparison Adjustments B4-1.3-09, Adjustments to Comparable Sales (01/31/2017) https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Selection.20of.20Comparable.20Sales Rural Appraisal Information 51
Slide 50: Sales Comparison Adjustments
Sales Comparison Adjustments https://guide.freddiemac.com/app/guide/section/5601.12 Rural Appraisal Information 52
Slide 51: Sales Comparison Adjustments
Sales Comparison Adjustments Fannie Mae Does Not Have Specific Limitations Or Guidelines Associated With Net Or Gross Adjustments. The Number And/Or Amount Of The Dollar Adjustments Must Not Be The Sole Determinant In The Acceptability Of A Comparable. Rural Appraisal Information 53
Slide 52: Sales Comparison Adjustments
Sales Comparison Adjustments Across the line/board adjustments – Avoidance – Explanation, why unavoidable Example: Subject Has a Swimming Pool The appraiser should provide a comp property with a swimming pool. It can be a fourth comp, or slightly older or farther away if necessary. If a comp cannot
Slide 53: Cost vs. Value
Cost vs. Value Contributory Value – Not construction cost • Land has value. • Improvements contribute to value. Example: Property A has a barn, Property B does not. Otherwise, these are almost identical homes next door to each other that each sold in the past month. • The barn cost $20,000 to constr
Slide 54: Sales Comparison – Acreage
Sales Comparison – Acreage Acreage Issues – Competing acreage – Bracketing (discussed earlier) – Site size versus utility Rural Appraisal Information 56
Slide 55: Sales Comparison — Site Value Consistency
Sales Comparison — Site Value Consistency 1. Is the above captioned site valuation adequate? 2. Do you feel that the appraiser has supported the opinion of site value? 3. If not, what additional items or description would you like to see? Rural Appraisal Information 57
Slide 56: Site Comparison Challenges
Site Comparison Challenges As indicated in the cost approach, the subject’s site value is $18,000. 1. How do you feel about the site value adjustments to comps 2 and 3? Rural Appraisal Information 58
Slide 57: Comments Areas and Sections
Comments Areas and Sections Rural Appraisal Information 59
Slide 58: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines 60 Rural Appraisal Information
Slide 59: Genworth Rate Express
Genworth Rate Express® 61 Rural Appraisal Information
Slide 60: LOS Connections
LOS Connections Rural Appraisal Information 62
Slide 61: Training Tools and Information
Training Tools and Information Rural Appraisal Information 63
Slide 62: Training Tools and Information
Training Tools and Information Rural Appraisal Information 64 64
Slide 63: Additional MI Site Information
Additional MI Site Information Rural Appraisal Information 65
Slide 64: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Rural Appraisal Information 66
Slide 65: Legal Disclaimer
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our train
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