Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (January 2020)
91 slides from Enact's investor presentation, January 2020
Slide 1: Appraisal Insights
Appraisal Insights January 2020 ©2020 Genworth Financial, Inc. All rights reserved. 0
Slide 2: Introduction
Introduction Points to keep in mind in conjunction with the material presented in this session: – The material presented is designed to provide guidance on common challenges surrounding appraisals from the perspective of an underwriter – There are no specific words or information that can be include
Slide 3: Session Overview
Session Overview Objectives: 1. Increased awareness of requirements 2. Increased success in working with appraisers 3. Increased knowledge of property valuation on complex properties Topic Introduction Communicating with the Appraiser Valuation, Guidelines, Underwriting and Comps Examples Appraisal
Slide 4: Real Estate or Personal Property?
Real Estate or Personal Property? Appraisal Insights 3
Slide 5: Real Estate or Personal Property?
Real Estate or Personal Property? Appraisal Insights 4
Slide 6: Real Estate or Personal Property?
Real Estate or Personal Property? Appraisal Insights 5
Slide 7: Communicating with the Appraiser
Communicating with the Appraiser Appraisal Insights 6
Slide 8: Improper Communications
Improper Communications FHFA, FRB, CFPB jointly issued the interim final rules on October 28, 2010. Amongst other things, the rules address appraiser independence: – Covered persons (e.g. creditors, mortgage brokers, appraisers, appraisal management companies, real estate agents, title insurance com
Slide 9: Proper Communications
Proper Communications Appraiser independence rules do not prohibit a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, consumer or another other person with an interest in a real estate transaction from asking an appraiser to: – Consider additional,
Slide 10: The Appraiser's Obligation
The Appraiser’s Obligation *A partial list - for more information please consult the Uniform Standards of Professional Appraisal Practice, www.appraisalfoundation.org • Must perform assignments with impartiality, objectivity, and independence • Must not advocate the cause or interest of any party or
Slide 11: Automated Appraisal Review Systems
Automated Appraisal Review Systems 1. Automated appraisal review systems have been in place >15 years 2. Early systems were designed to aid the manual underwrite process 3. Fannie Mae & Freddie Mac a. UAD - Standardization of Data (structured data) – Common Lexicon b. Fannie Mae Collateral Underwrit
Slide 12: Collateral Underwriter or CU
Collateral Underwriter or CU Fannie Mae’s Collateral Underwriter https://www.fanniemae.com/singlefamily/collateral-underwriter Appraisal Insights 11
Slide 13: Collateral Underwriter or CU
Collateral Underwriter or CU https://www.fanniemae.com/content/fact_sheet/collateral-underwriter-fact-sheet.pdf Appraisal Insights 12
Slide 14: Collateral Underwriter or CU
Collateral Underwriter or CU What Does CU Provide? – CU provides a Risk Score (1-5) • 1 means lowest risk to 5 highest risk • Score of “999” indicates a score could not be generated – Risk Flag Messages fall into one of three categories • Property Eligibility/Compliance Messages • Overvaluation Risk
Slide 15: Best Practices With CU Messages
Best Practices With CU Messages Remember to review the CU Score if it appears on the DU Findings – 4 or 5 require a more detailed review – Appraisal Quality Messages Fall Into one of Four Categories • Data Integrity • Comp Selection • Adjustments • Reconciliation – None need to be technically “clear
Slide 16: Loan Collateral Advisor or LCA
Loan Collateral Advisor® or LCA Freddie Mac’s Loan Collateral Advisor https://sf.freddiemac.com/tools-learning/loan-advisor/our-solutions/loan-collateral-advisor Appraisal Insights 15
Slide 17: Freddie Mac's Loan Collateral Advisor
Freddie Mac’s Loan Collateral Advisor Appraisal Insights 16
Slide 18: Freddie Mac's Loan Collateral Advisor
Freddie Mac’s Loan Collateral Advisor What Does Loan Collateral Advisor Provide? – LCA provides a Risk Score (1-5) • 1 means lowest risk to 5 highest risk • Score of “99” indicates a score could not be generated – Risk Flag Messages fall into six categories • Risk Level (4000) • Valuation (4100) • C
Slide 19: Loan Collateral Advisor
Loan Collateral Advisor® http://www.freddiemac.com/loanadvisorsuite/faq/loancollateraladvisor.html Appraisal Insights 18
Slide 20: The Appraiser has been hired…now what?
The Appraiser has been hired…now what? Appraisal Insights 19
Slide 21: Market Alternatives Principle of Substitution
If I put a for sale sign in front of it… Forces that Create Value Who would buy it… What else would they buy… What are those properties selling for? Market Alternatives Principle of Substitution Appraisal Insights 20
Slide 22: What Creates Value?
What Creates Value? Forces that Create Value Forces that Affect Value Utility Social Desire Economic Governmental Scarcity Environmental Effective Purchasing Power Appraisal Insights 21
Slide 23: Market Value - What is Market Value?
Market Value - What is “Market Value”? Market Value defined: – The most probable price a property should bring in a competitive, open market. – Buyer and seller are typically motivated. – Both parties are well informed or well advised and each acting in what he considers his own best interest. – A r
Slide 24: Appraisal Process Overview
Appraisal Process Overview Engagement Scope of Work Information Analysis Write Report Communicate Gathering Results • Mortgage • Appraiser • Appraiser • Appraiser • Appraiser • Appraiser Lender determines gathers the utilizes prepares the sends the sends the data recognized written written appraisal
Slide 25: Information Gathering
Information Gathering Appraisal Insights 24
Slide 26: Appraisal Insights
Appraisal Insights 25
Slide 27: Appraisal Insights
Appraisal Insights 26
Slide 28: Information Gathering Sources
Information Gathering Sources Review of Public Record Information (subject, Property Rights sales, listings) Taxes, Special Assessments Review of MLS information School District Interview occupant of subject property Interviews (e.g. real estate agents, builders, Market Data (e.g. Inventory, Sales V
Slide 29: Inspecting the Subject
Inspecting the Subject What do you think the appraiser looks for when inspecting the subject? Appraisal Insights 28
Slide 30: Appraisal Insights
Appraisal Insights 29
Slide 31: Inspecting the Subject
Inspecting the Subject Physical Characteristics 1. Gross Living Area 2. Quality of construction 3. Condition of Improvements 4. Layout 5. Features/Amenities 6. Design/Appeal 7. Landscape 8. View 9. Site characteristics (e.g. topography, access, improvements) External Characteristics (land uses, neig
Slide 32: Inspecting Comparable Sales/Listings
Inspecting Comparable Sales/Listings What do you think the appraiser looks for when inspecting Comps? Appraisal Insights 31
Slide 33: Inspecting Comparables
Inspecting Comparables Physical Characteristics 1. Quality of construction (exterior view) 2. Condition of Improvements (exterior view) 3. Features/Amenities 4. Design/Appeal 5. Landscape 6. View 7. Site characteristics (e.g. topography, access, improvements) External Characteristics (land uses, nei
Slide 34: Appraisal Review Techniques
Appraisal Review Techniques Appraisal Insights 33
Slide 35: Roles in Collateral Assessment
Roles in Collateral Assessment The Field Appraiser Does the Following: - Identify (the problem & the relevant data to solve the problem) - Report (the relevant information that was gathered) - Analyze (the relevant data to solve the problem) - Report (the results of the analysis) The Underwriter Exa
Slide 36: Guidelines vs Benchmarks
Guidelines vs Benchmarks Investor/External Guidelines vs. Internal Guidelines Guidelines come and go…. • 15% Net Adjustment • 25% Gross Adjustment • 1 Mile Comp Distance • Comps No Older Than 12 Months • 30% Land to Value Ratio • 10% Line Item Adjustment No More Rule Book For These; Do We Want “Wild
Slide 37: Appraisal Insights
NA Appraisal Insights 36 Genworth Ayre
Slide 38: Fannie Mae Property Condition
Fannie Mae Property Condition Existing Construction Requirements when there are INCOMPLETE ITEMS or CONDITIONS AFFECTING SSS 1. Must be appraised SUBJECT-TO completion or repair 2. Includes the following examples that COULD affect SSS: a. Partially completed addition b. Partially completed renovatio
Slide 39: Freddie Mac Property Condition
Freddie Mac Property Condition 5601.12: Property description and analysis (10/17/18) General Requirements 1. Similar to Fannie Mae (except for inclusion of C5 below) 2. Properties in C5 or C6 condition are ineligible for sale to Freddie Mac unless the repairs are completed in advance of the purchase
Slide 40: Examples For Review
Examples For Review Appraisal Insights 39
Slide 41: Sample Statements…What Would You Do?
Sample Statements…What Would You Do? 1. 1. Mold was noted. The appraiser is not a home inspector and cannot determine if the mold is hazardous. The appraiser assumes it is not. 2. Sanitary septic system showed evidence of failure? Appraisal Insights 40
Slide 42: Additional Improvement Considerations
Additional Improvement Considerations A Few Other Property Concerns: – Additions without Permits: If the appraiser identifies an addition(s) that does not have the required permit, the appraiser must comment on the quality and appearance of the work and its impact, if any, on the market value of the
Slide 43: Is the above captioned description adequate?
1. Is the above captioned description adequate? 2. Do you feel that the appraiser has addressed the pertinent questions? 3. If not, what additional items or description would you like to see? Have You Ever Seen An Appraisal With Comments Like The Above? Appraisal Insights 42
Slide 44: Barns and other outbuildings…
Barns and other outbuildings… 1. Describe (size, age, condition, utility, commonality) 2. Analyze (cost vs. contributory value, special purpose-what is it being used for?) 3. Value 4. Support with market data (comps that also have a horse barn and outbuildings?) - An appraiser must not “Guess” at th
Slide 45: Is the above captioned site description adequate?
1. Is the above captioned site description adequate? 2. Do you feel that the appraiser has addressed the pertinent questions? 3. If not, what additional items or description would you like to see? Appraisal Insights 44
Slide 46: Unique Sanitary Sewer…would want a bit more on acceptance
Unique “Sanitary Sewer”…would want a bit more on acceptance Where is it located? Which parcel. Same for well, is it working or appear to be functioning properly? Two parcels? Abutting or across street? What is the size of each parcel and is this typical? Are there any other items that you would requ
Slide 47: Approaches to Value
Approaches to Value We Will Cover Sales Comparison Only Appraisal Insights 46
Slide 48: Sales Comparison Approach
Sales Comparison Approach Appraisal Insights 47
Slide 49: Sales Comparison
Sales Comparison • Emulates the process of comparison shopping used by prospective purchasers of real estate. • Adjust comp to the subject. • Adjustments must be based on market reaction – market driven/data • Requires the appraiser to have relevant logic and support • Support must be in the report
Slide 50: How will an appraiser find comps with declining sales activity?
Q. With continued declines in the amount of sales activity, how will an appraiser find comps? Answer: The principles of comp selection remain the same regardless of the • degree of sales activity ➢ Market alternatives ➢ Substitution ➢ Which properties compete with the subject? ➢ Expanded search crit
Slide 51: Sample Adjustment Flow (partial list)
Sample Adjustment Flow (partial list) First Level Adjustments Expenditures Made Real Property Rights Financing Terms Conditions of Sale Immediately After Sale Second Level Adjustments Market Site Value View Location Age Condition GLA Room Count Conditions Third Level Adjustments Basement/Finish/Foun
Slide 52: Common categories of Sales Comparable misrepresentation
Q. What are some of the most common categories of Sales Comparable misrepresentation? Answer: ➢ Misrepresented market conditions ➢ Omitting and/or failing to properly analyze externalities ➢ Misrepresenting comp characteristics ➢ Adjustments that do not reasonably approximate market reaction ➢ Impro
Slide 53: Approaches to Value - Sales Comparison
Approaches to Value - Sales Comparison • Adjustments are derived from the market • Approximate market reaction to material differences between the comp and the subject • Quantitative • Qualitative Appraisal Insights 52
Slide 54: Analyzing Comparable Properties
Analyzing Comparable Properties At Least Three Closed Sales – More can be provided – Pending sales or listings: • Can be used when appropriate • Might provide additional supporting data Comparables Closing Date (Age) – Check applicable guidelines – Should have closed within the previous year • Must
Slide 55: Analyzing Comparable Properties
Analyzing Comparable Properties Shortage of Comparable Properties – Possible Reasons: • Nature of property improvements • Relatively low number of sale transactions in the neighborhood – Comparables may have to be: • Older than a year • From a nearby, competing neighborhood – Appraiser Explanation a
Slide 56: Analyzing Comparable Properties
Analyzing Comparable Properties When there is a shortage of comps, the appraiser should explain: – Effort made to find better comps? – Why the shortage of recent sales? – What does the shortage indicate? • Stable market? • Marketability issue? – Shared unique characteristics? – Why a potential comp
Slide 57: Analyzing Comparable Properties
Analyzing Comparable Properties Unacceptable Comparison Selection Practices – Misrepresentation – Inappropriate Comps • Unacceptable Locationally • Not Physically Similar – Uninspected Properties • No Appraiser Drive-By – See Fannie Selling Guide §B4-1.1-04 – See Freddie Mac Single-Family Seller/Ser
Slide 58: Analyzing Comparable Sales
Analyzing Comparable Sales Bracketing – At least one comparable superior and one inferior to the subject – As many bracketed items as possible: • Unadjusted Sale Price • Gross Living Area (GLA) • Lot Size • Adjusted Sale Price • Other Major Physical Characteristics – Bracketing is a best practice •
Slide 59: Analyzing Comparable Sales
Analyzing Comparable Sales Sales Price and Gross Living Area (GLA) Appraisal Insights 58
Slide 60: Analyzing Comparable Properties
Analyzing Comparable Properties Review Appraisal Map – Review Carefully – Does the map support the Appraiser’s Conclusions? • Distances make sense? • Natural boundaries honored? – i.e. Waterways, Highways, Large Parks – Compare with other maps • Google Maps, MapQuest, etc. • School maps • Municipali
Slide 61: Analyzing Comparable Properties
Analyzing Comparable Properties Do the subject and comparables appear to be similar? Appraisal Insights 60
Slide 62: Cost vs. Value
Cost vs. Value Sales comparison adjustments are based on the contributory value an item brings to the property. – This is not necessarily the cost of constructing the item. – Land is said to have value; Improvements are said to contribute to value. – The appraiser must measure the contributory value
Slide 63: Potential Red Flags in Appraisal Report
Potential Red Flags in Appraisal Report 1. Across the board adjustments in the same direction to all the comps for a particular item 2. Neglecting to disclose external considerations (main road, contiguous non- residential land uses, park, freeway, views, etc.) 3. Neglecting to sufficiently describe
Slide 64: Outbuilding, Currently Used For Storage
Outbuilding, Currently Used For Storage…But How Easy Would It Be To Convert Back to It’s Original Use? Appraisal Insights 63
Slide 65: Other Common Red Flags
Other Common Red Flags Common Red Flags Include – Choosing dated comps, in the absence of sufficient explanation, particularly when there are more recent comps available – Lack of comments from the appraiser relating to the property, comps, market or trends in the area – Not relying upon the indicat
Slide 66: Read ALL Comments
Read ALL Comments Read Comments Section Carefully – Look for anything impacting: • Value • Structural Integrity • Marketability – Are the comments consistent with data provided within the appraisal and all data gathered outside the appraisal? Appraisal Insights 65
Slide 67: Compare Sales Grid to First Page
Compare Sales Grid to First Page Do The Comparables Selected Make Sense, Based On The Market Data; Do The Neighborhood Housing Trends Make Sense, Based On The Data You See Here? Appraisal Insights 66
Slide 68: 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? Where did vacant sales come from? How old and from same area?
Slide 69: Sales Comparison - Site Value Consistency
Sales Comparison - Site Value Consistency 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? Appraisal Insights 68
Slide 70: A Few Final Examples
A Few Final Examples Appraisal Insights 69
Slide 71: Appraisal Insights
Utilities Public Other (describe) Public Other (describe) Off-site Improvements - Type Public Private M electricity [| Water bh Street_ Asphalt X im 7 Gas DX LJ Sanitary Sewer [><] LJ Alley None im im FEMA Special Flood Hazard Area__|_| Yes _[<) No_FEMA Flood Zone X FEMA Map # FEMA Map Date_ 11/16/2
Slide 72: ©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp
©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp Appraisal Insights 71
Slide 73: ©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp
©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp Appraisal Insights 72
Slide 74: ©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp
©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp Appraisal Insights 73
Slide 75: Address Sale Price
Address Sale Price Recording Date 418 Candlewood Trail $208,000 5/10/2002 7 Candlewood Ct $238,000 5/16/2005 260 Thomas St $225,000 9/29/2008 266 Thomas St $260,000 12/8/2009 300 High Rd $177,000 8/30/2010 354 Poplar St $207,500 5/1/2006 370 Poplar St $270,000 9/28/2005 4304 Peacock Ln $375,000 6/15
Slide 76: ©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp
©AND ©NAVTEQ ©2011 Microsoft Corporation Pictometry Bird’s Eye ©Pictometry International Corp Appraisal Insights 75
Slide 77: What Would You Expect To See In The Photo???
What Would You Expect To See In The Photo??? Appraisal Insights 76
Slide 78: Appraisal Insights
jae ye ODIIONOA Geospatial Services Inc Appraisal Insights Genworth
Slide 79: Appraisal Insights
Appraisal Insights 78
Slide 80: Appraisal Insights
Appraisal Insights 7 Genworth
Slide 81: Agency Appraisal Resources
Agency Appraisal Resources http://www.freddiemac.com/singlefamily/appraiser_in https://www.fanniemae.com/singlefamily/originating- dependence_faq.html underwriting-training Appraisal Insights 80
Slide 82: Underwriting & Guides
Underwriting & Guides mi.genworth.com Appraisal Insights 81
Slide 83: Genworth Appraisal Review Checklist
Genworth Appraisal Review Checklist Appraisal Insights 82
Slide 84: Genworth Rate Express
Genworth Rate Express® mi.genworth.com Appraisal Insights 83
Slide 85: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines mi.genworth.com Appraisal Insights 84
Slide 86: LOS Connections
LOS Connections mi.genworth.com Appraisal Insights 85
Slide 87: Training Tools and Information
Training Tools and Information mi.genworth.com Appraisal Insights 86
Slide 88: Training Tools and Information
Training Tools and Information mi.genworth.com Appraisal Insights 87
Slide 89: Additional MI Site Information
Additional MI Site Information mi.genworth.com Appraisal Insights 88
Slide 90: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Appraisal Insights 89
Slide 91: 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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