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Foul play: fraud study shows importance of competence and ethics.

A NEW STUDY INDICATING THAT REPORTS OF MORTGAGE FRAUD in the United States increased 7 percent from 2008 to 2009 shows why lenders need to hire competent, ethical appraisers, Appraisal Institute President Leslie Sellers, MAI, SRA, said.

"These results are further evidence that lenders need to reconsider who they engage to perform appraisal assignments," Sellers said. "The best way to mitigate real estate valuation fraud is to hire a competent, ethical appraiser."

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Sellers was reacting to the 12th Periodic Mortgage Fraud Case Report by Mortgage Asset Research Institute, a LexisNexis[R] service, issued April 26 at the Mortgage Bankers Association's annual National Fraud Issues Conference in Chicago.

The Appraisal Institute's own research has found that disciplinary actions against appraisers, as reported by the Appraisal Subcommittee, have increased each year since 2005. There were 2.6 times as many disciplinary actions from Jan. 1, 2005, to April 1, 2010, as in the previous five-year period.

The Appraisal Institute's research is based on an analysis of data found in the Appraisal Subcommittee National Appraiser Registry.
DISCIPLINARY ACTIONS AGAINST APPRAISERS

2005 162

2006 198

2007 280

2008 337

2009 413

Korpacz National Market Indicators
First Quarter 2010

 REGIONAL MALL CBD OFFICE

 1Q 2010 4Q 2009 1Q 2010 4Q 2009

Discount Rate (IRR) a

Range 7.00% - 17.00% 7.00% - 17.00% 6.75% - 13.50% 6.75% - 14.00%

Average 10.70% 10.63% 9.58% 9.39%

Change + 7 + 19
(b.p.)

Overall Cap Rate (OAR) a

Range 5.00% - 12.00% 5.00% - 11.00% 6.00% - 10.50% 5.60% - 11.00%

Average 8.34% 8.06% 8.35% 8.24%

Change + 28 + 11
(b.p.)

Residual Cap Rate

Range 6.25% - 12.00% 6.25% - 12.00% 6.50% - 10.50% 6.50% - 11.00%

Average 8.91% 8.84% 8.51% 8.44%

Change + 7 + 7
(b.p.)

 WAREHOUSE APARTMENT

 1Q 2010 4Q 2009 1Q 2010 4Q 2009

Discount Rate (IRR) a

Range 7.50% - 12.50% 7.50% - 12.50% 6.50% - 14.00% 6.50% - 14.00%

Average 9.64% 9.74% 10.18% 10.17%

Change - 10 + 1
(b.p.)

Overall Cap Rate (OAR) a

Range 7.00% - 12.00% 6.50% - 12.00% 5.00% - 11.00% 5.75% - 11.00%

Average 8.73% 8.80% 7.85% 8.03%

Change - 7 - 18
(b.p.)

Residual Cap Rate

Range 7.50% - 12.00% 6.50% - 12.00% 5.00% - 11.00% 5.75% - 10.75%

Average 8.79% 8.73% 8.01% 8.19%

Change + 6 - 18
(b.p.)

a. Rate on unleveraged, all-cash transactions Definitions: b.p. basis
points Discount Rate (IRR). Internal rate of return in an all-cash
transaction, based on annual year-end compounding Overall Cap Rate
(OAR). Initial rate of return in an all-cash transaction Residual Cap
Rate. Overall capitalization rate used in calculation of residual
price; typically applied to the NOI in the year following the forecast
Source: KORPACZ REAL ESTATE INVESTOR SURVEY. Personal survey of a cross
section of major institutional equity real estate market participants
conducted during January 2010 by PricewaterhouseCoopers LLP. For
complete information on results of these and other markets covered in
the Survey, please call 1-800-654-3387.

Market rates

Reserve Bank Prime Rate, monthly Federal Funds Libor 3-month rate
Discount Rate average Rate

 6.25 2.25 5.26 5.34
 3.04 5.66 2.61 2.86
 2.25 5.00 1.81 3.95
 0.50 3.25 0.18 1.63
 0.50 3.25 0.15 0.52
 0.75 3.25 0.16 0.40

Notes: Table made from line graph.


Conventional Home Mortgage Rates by Metropolitan Area

Conventional mortgage rates decreased in each of the major U.S. metropolitan areas between the first quarter 2007 and the first quarter 2010. The larger the green dot, the larger the decrease.
 1Q 2010 1Q 2009 1Q 2008 1Q 2007

Seattle/Tacoma/Bremerton 4.97 5.04 5.89 6.37
Portland/Salem * 4.93 5.08 5.90 6.29
San Francisco/Oakland/San Jose * 4.99 5.15 5.98 6.24
San Diego 5.23 5.11 5.66 6.23
Los Angeles/Riverside * 5.13 5.13 6.03 6.43
Phoenix/Mesa 5.17 5.31 6.05 6.46
Minneapolis/St. Paul/WI 5.07 5.04 5.95 6.37
Denver/Boulder/Greely * 5.16 5.14 6.00 6.42
Chicago/Gary/IN/WI * 5.12 5.24 6.00 6.58
Kansas City 5.00 5.14 5.84 6.18
Dallas/Ft. Worth * 4.95 5.07 6.09 6.46
Houston/Galveston/Brazoria * 5.01 5.19 6.07 6.51
St. Louis 5.04 5.07 6.04 6.48
Indianapolis 4.98 5.26 6.19 6.76
Atlanta 5.07 5.10 6.10 6.29
Tampa/St. Petersburg/Clearwater 5.15 5.14 6.16 6.52
Miami/Fort Lauderdale * 5.15 5.21 6.27 6.67
Milwaukee/Racine * 5.17 5.14 5.98 6.54
Detroit/Ann Arbor/Flint * 5.41 5.75 6.04 6.58
Pittsburgh 5.06 5.18 5.83 5.81
Cleveland/Akron * 5.11 5.30 6.15 6.12
Boston/Lawrence/NH/ME/CT * 4.83 4.98 6.12 6.19
New York/Long Island/NJ/CT * 5.01 5.14 6.00 6.31
Philadelphia/Wilmington/NJ 5.14 5.16 6.04 6.40
Washington, D.C./Baltimore/VA * 5.06 5.04 6.09 6.45

Notes: Table made from bar graph.

* Consolidated Metropolitan Statistical area

Market Rates and Bond Yields

3-Month CDs 6-Month Treasury Bills 3-Month Treasury Bills

 5.30 4.94 4.89
 2.79 1.48 1.26
 3.59 1.61 1.13
 1.07 0.42 0.21
 0.25 0.21 0.12
 0.23 0.22 0.15

U.S. 30-Year Bond U.S. 10-Year Bond U.S. 5-Year Bond

 4.72 4.56 4.48
 4.39 3.51 2.48
 4.27 3.69 2.88
 3.64 2.82 1.82
 4.19 3.40 2.37
 4.64 3.73 2.43

Municipal Tax Exempts (A) [dagger] Municipal Tax Exempts (Aaa)
 [dagger]

 4.16 3.88
 5.02 4.63
 5.19 4.61
 5.67 4.74
 4.71 3.81
 4.66 3.91

Corporate Bonds (Baa) Corporate Bonds (A) Corporate Bonds (Aaa)
 [dagger] [dagger] [dagger]

 6.27 5.84 5.30
 6.89 6.24 5.51
 7.31 6.55 5.65
 8.42 6.66 5.50
 6.31 5.56 5.13
 6.27 5.27 5.00

Notes: Table made from line graph.

[dagger] Source: Moody's Bond Record.

Conventional Home Mortgage Terms

 Average U.S. Average U.S. Average U.S.
 interest rate term (years) loan ratio

 New homes Existing New homes Existing New homes Existing
 homes homes homes

3/07 6.22% 6.38% 29.3 29.5 75.3% 79.4%
3/08 5.92% 6.10% 28.8 28.0 77.9% 77.5%
9/08 6.09% 6.25% 28.6 28.5 73.9% 76.9%
3/09 5.10% 5.14% 29.0 28.1 75.2% 74.7%
9/09 5.26% 5.24% 28.5 27.9 73.8% 74.6%
3/10 5.09% 5.07% 28.5 27.4 72.9% 74.4%

Other Benchmarks

 Prices see modest Yields dip further Unemployment levels
 gain off

 The consumer price Dividend yields for After a monthslong
 index increased the S&P 500's rise, the
 slightly from last common stocks unemployment rate
 September, as urban dropped again in seems to have
 consumers are March. finally tapered off
 increasingly returning in the first quarter
 to old spending of 2010.
 habits

3/07 205.4 1.89% 4.4%
3/08 213.5 2.17% 5.1%
9/08 218.8 2.36% 6.1%
3/09 212.7 2.92% 8.5%
9/09 216.0 2.06% 9.8%
3/10 217.6 1.90% 9.7%

Monetary Aggregates, daily avg., $-billions, seasonally adjusted

 3/10 9/09 3/09

M1 1,712.3 [dagger] 1,660.9 [dagger] 1,564.2 [dagger]

M2 8,512.5 [dagger] 8,455.3 [dagger] 8,390.4 [dagger]

Industrial 101.6 98.7 97.4
Production
Index *

 9/08 3/08 3/07

M1 1,459.5 [dagger] 1,372.0 1,366.9

M2 7,892.0 [dagger] 7,661.5 7,170.5

Industrial Production Index * 104.8 111.6 110.6

Per Capita Personal Disposable Income [dagger]

Income holds steady while savings dip.

 Savings Rate

1Q 2007 $34,055 2.0%
4Q 2007 $34,893 1.5%
1Q 2008 $34,925 1.2%
4Q 2008 $35,304 3.8%
1Q 2009 $35,142 3.7%
4Q 2009 $35,747 3.9%
1Q 2010 $35,813 3.1%

Price of the average U.S. mortgage loan

Each house represents $20,000

 New home Existing home

3/07 $369,000 $290,300
3/08 $329,800 $293,800
9/08 $353,500 $294,800
3/09 $336,500 $296,400
9/09 $329,600 $293,100
3/10 $317,600 $294,600

On November 7, 2005, the Federal Reserve Board advanced to 2002 the
base year for the indexes of industrial production, capacity and
electric power use. This follows the December 5, 2002, change to a 1997
baseline, from the previous 1992 baseline. Historical data has also
been updated. [dagger] Revised figures used


For the full fraud case report, visit www.lexisnexis.com/risk/downloads/literature/MortgageFraudReport-12thEdition.pdf.

For continuously updated economic indicators, visit www.appraisalinstitute.org/ano/econ_indicatory/indicators.aspx.

Economic and market data
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Title Annotation:the NEWS in NUMBER5
Publication:Valuation Insights & Perspectives
Article Type:Report
Date:Mar 22, 2010
Words:1634
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