Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (March 2020)
62 slides from Enact's investor presentation, March 2020
Slide 1: Appraisal Underwriting: Part II – Sales Comparison
Appraisal Underwriting: Part II– Sales Comparison March 2020 ©2020 Genworth Financial, Inc. All rights reserved.
Slide 2: COVID Updates
COVID Updates!! Fannie Mae and Freddie Mac released appraisal policy changes march 23, 2020 https://singlefamily.fanniemae.com/media/22321/display https://guide.freddiemac.com/app/guide/content/a_id/1003723 Appraisal Underwriting 1
Slide 3: COVID Updates
COVID Updates!! Fannie Mae & Freddie Mac Appraisal policies are effective immediately and remain in place for applications taken on or before May 17, 2020; Updates include: – Temporary appraisal requirement flexibilities: Allowing exterior-only inspection appraisal or desktop appraisals for cert
Slide 4: COVID Updates
COVID Updates!! Fannie Mae & Freddie Mac Appraisal policies are effective immediately and remain in place for applications taken on or before May 17, 2020; Updates include: – Appraisal waivers: encouraging lenders to accept waiver offers when eligible – No changes to delivery at this time for ei
Slide 5: Sales Comparison
Sales Comparison Analyzing Comp Selection, Reading the Sales Comparison Grid, Previous Sales and Transfers Appraisal Underwriting 4
Slide 6: 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 Comparable’s Closing Date (Age) – Check applicable guidelines – Should have closed within the previous year •
Slide 7: 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 8: 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 9: 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 10: Analyzing Comparable Properties
Analyzing Comparable Properties Requirements Include: – Same or Competing Market/Neighborhood – Similar Factors Impacting Value • Marketability issues (Adjacent to dump) • Functional obsolescence (Only bathroom located through kitchen) • Location issues (Busy street) • Unique features (Swimming pool
Slide 11: 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 • Munici
Slide 12: Analyzing Comparable Properties
Analyzing Comparable Properties How far (distance) can the appraiser go to find comparables? – NO set distance rules – Distances must make sense – Urban location: • Highly densely populated, should be close, within one mile – Suburban location: • No set distance rule • Case by case • Sometimes more
Slide 13: Analyzing Comparable Properties
Analyzing Comparable Properties Subject located in a subdivision, condominium or PUD project – Established (Resale Market) • All comparables should be from within the project • Institutional or investor sellers/buyers may require outside comparables as well – New (Builder/Developer still selling
Slide 14: 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 practic
Slide 15: Analyzing Comparable Sales
Analyzing Comparable Sales Gross Living Area (GLA) Square Footage and Bedroom Count Appraisal Underwriting 14
Slide 16: Analyzing Comparable Properties
Analyzing Comparable Properties Gross Living Area (GLA) Square Footage – Subject and comps should be similar size – Differences < 100 square feet are not usually adjusted • Common exception: small homes (<1,500 sq ft) Bedroom Count – Similar bedroom count is best – Two bedroom subjects must have at
Slide 17: Analyzing Comparable Properties
Analyzing Comparable Properties Declining Markets – Check applicable guidelines carefully – Typical guideline requirements: • At least two comparables closed within the past three months • A minimum of one, preferably two, listing(s) and/or pending sales – Downward time adjustments may be warranted
Slide 18: Analyzing Comparable Properties
Analyzing Comparable Properties Do the subject and comparables appear to be similar? Appraisal Underwriting 17
Slide 19: Analyzing Comparable Properties
Analyzing Comparable Properties Resources – http://www.realtor.com • Recent home sales and listings – http://www.city-data.com • Neighborhood characteristics information – Local real estate tax records, local school district sites, free online AVMs (use with caution) Page 43 Appraisal Underwriting 1
Slide 20: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Start: Comp’s Actual Sales Price Compare: To make the comp more like the subject, one must add/remove a ______. Consider: Does ______ bring value to property? If not, no adjustment warranted. If yes, how much? Example: To make this comp more like the subject, add a fu
Slide 21: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Value Adjustment Basics – Adjustment based on value feature contributes to property – Not based on building cost – Differ by market area – Must be supported, justified and explained – Should make sense Page 45 Appraisal Underwriting 20
Slide 22: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Field Types – Non-Value Adjustment Fields – Value Adjustment Fields • Basic Information • Guidelines and Best Practices Page 46 Appraisal Underwriting 21
Slide 23: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid – Address • Verify at http://www.usps.com – Proximity • Distance – In miles, to two decimal points – As the crow flies • Direction – From the subject, to the comp Page 46 – Sales Price • Actual sales price Appraisal Underwriting 22
Slide 24: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Sale Price/Gross Living Area – AKA Price per Square Foot – Sales Price divided by Gross Living Area square footage – Can indicate whether the subject and comparables are similar Page 46 Appraisal Underwriting 23
Slide 25: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Data and Verification Sources – Specific Data Source used for each comparable shown • Specific MLS and MLS#, when applicable • Other sources explained in the “Comments” section • Days on Market (DOM), to four digits, must be included – Verification Source required – D
Slide 26: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Across the Board Adjustments – Subject feature • No similarly featured comparable • Adjustments to each comp in the same direction for any single item of comparison • Common Examples: Swimming Pool, Shed, Barn, Greenhouse or Workshop – Questionable market acceptance –
Slide 27: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Sale or Financing Concessions – First Line • Type of sale – Second Line • Financing type • Concession Amount – See Fannie Mae and Freddie Mac Uniform Appraisal Dataset Specification, Field-Specific Standardization Requirements (Appendix D) for abbreviations Page 4
Slide 28: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Financing Concessions – Adjustment required? – Narrative included? – Is sales price inflated by concession’s inclusion? Sales Concessions – Non-real property items in contract? – Non-real property items deducted from sales price? – Appraisers may use dollar fo
Slide 29: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Date of Sale/Time – Sale date and contract date – Market condition adjustments: • Sometimes warranted for significant market changes • Explanation required • Measured from date of contract, not sale Page 50 Appraisal Underwriting 28
Slide 30: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Location – Look for similar ratings and factors – Impact on value rating • Neutral (N) • Beneficial (B) • Adverse (A) – Factor(s) • One or Two • Explain what impacts the value rating – Value adjustment may be warranted: • Otherwise similar properties • Appraiser e
Slide 31: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Site – Lot size • Not description (i.e. Average) – Entire site – Less than one acre: • Whole numbers, square footage – One acre or more: • Acreage to two decimal points – Similarly sized lots – Adjustments • Consistent with lot value in cost approach • Supported w
Slide 32: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid View – Look for similar ratings and factors – Impact on value rating: • Neutral (N) • Beneficial (B) • Adverse (A) – Factor(s): • One or Two • Explain what impacts the value rating – Value adjustment may be warranted: • Otherwise similar properties • Appraiser exp
Slide 33: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Design – Attachment Type • Attached (AT) • Detached (DT) • Semi-detached (SD) – Number of Stories – Description of Architectural Design/Style – Narrative • i.e. Mid-Century Modern, Colonial, Craftsman, Ranch • Non-Architectural descriptions unacceptable – Average
Slide 34: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Quality of Construction – UAD Quality Rankings: Q1-Q6 • See Appendix D for specific ratings definitions – Q1: Unique – Q2: Custom Design – Q3: Higher Quality – Q4: Meet or Exceed Applicable Codes – Q5: Economy Construction – Q6: Basic, Lower Cost – Similar ranking
Slide 35: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Condition – UAD Condition Rankings: C1-C6 • See Appendix D for specific ratings definitions – C1: New – C2: No deferred maintenance – C3: Well maintained – C4: Minor deferred maintenance – C5: In need of significant repairs – C6: Substantial damage – Subject’s con
Slide 36: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Bedrooms – Appraiser explanations for adjustments – Particular markets Bathrooms – Full and half baths reported Square Footage – Similar adjustments Page 53 Appraisal Underwriting 35
Slide 37: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Basement – First Line • Square footage • Finished square footage • Basement access: – Walk-out (wo), walk-up (wu) or interior only (in) – Second Line • Number of rooms • Type of finished rooms: – Rec room (rr), bedroom (br), bath (ba) or other (o) – Baths reported
Slide 38: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid Functional Utility – If adjusted, explained in comments Heating/Cooling, Energy Efficient Items, Garage/Carport, Porch/Patio/Deck, Fireplace – Adjustments need to make sense Other – In blank spaces appraisers can indicate additional features Page 55 Apprai
Slide 39: Previous Sale or Transfer History
Analyzing Sales Comparison Grid Previous Sale or Transfer History Page 56 Appraisal Underwriting 38
Slide 40: True or False?
Analyzing Sales Comparison Grid True or False? – The subject’s appraised value is the average of the indicated values of all the comparable properties ( $153,000 + $157,800 + $163,800 ) / 3 = $158,200 Appraisal Underwriting 39
Slide 41: Analyzing Sales Comparison Grid
Analyzing Sales Comparison Grid The appraiser discusses how he/she weighted each comparable and arrived at the indicated value. – The arrived at conclusion should be: • Consistent with the data provided in the report • All comments provided by the appraiser • All data sources used to verify the
Slide 42: Reconciliation
Reconciliation The Appraisal is Made “As Is” – If any other box is checked, the appraiser or a subject matter expert will review the report provided by the inspector after work is completed Last Line – Appraised Value – Appraisal Date • Inspection Date • Good for twelve months • If more than
Slide 43: Comments
Comments Read Comments Section Carefully – Look for anything impacting: • Value • Structural Integrity • Marketability Page 58 Appraisal Underwriting 42
Slide 44: Common Red Flags
Common Red Flags Common Red Flags Include – Choosing dated comps, in the absence of sufficient explanation, particularly when there are more recent comps available – Not relying upon the indicated value from the most similar comparable property • Closest • Most recent sale • Most similar propert
Slide 45: Common Red Flags
Common Red Flags Common Red Flags Include – Not identifying an area as declining when credible evidence suggests a decline – Lack of bracketing for price, age and/or square footage – Lack of comments from the appraiser relating to the property, comps, market or trends in the area – Boilerplate a
Slide 46: Did You Know: Fannie Mae
Did You Know Fannie Mae – If a lender obtains a second appraisal due to deficiencies found in the original appraisal, lenders must select the most reliable appraisal rather than always using the second appraisal or the one with the highest value (SEL 2018-01) – Detached condos no longer require
Slide 47: Did You Know: Freddie Mac
Did You Know Freddie Mac – Permits the use of pending sales from the subject’s subdivision or project when there are no closed or settled sales available from within the news subject’s subdivision or new project to establish marketability. (Bulletin 2017-3) – Allows required comparable sales fro
Slide 48: Did You Know: Freddie Mac
Did You Know Freddie Mac – Sellers must disclose to the Borrower any information that the Seller is aware of that may adversely affect the market value, condition or marketability of the property. Guide Section 5601.3 (Bulletin 2019-09) – Appraisal updates are not required unless the effective d
Slide 49: UAD Uniform Appraisal Dataset
UAD Uniform Appraisal Dataset https://www.fanniemae.com/singlefamily/uniform-appraisal-dataset Appraisal Underwriting 48
Slide 50: UAD Uniform Appraisal Dataset
UAD Uniform Appraisal Dataset UAD and Forms Redesign initiative – Collection of data from the industry starting back in 2018 to update the UAD and appraisal forms; See the initiative on the UAD website https://singlefamily.fanniemae.com/media/8566/display Appraisal Underwriting 49
Slide 51: Fannie Mae Job Aids/FAQs/Online Learning
Fannie Mae Job Aids/FAQs/Online Learning https://singlefamily.fanniemae.com/learning-center/originating-and-underwriting Avoiding Common Calculating IncomeUnderwriting Errors 50
Slide 52: Fannie Mae Top Trending Questions
Fannie Mae Top Trending Questions https://singlefamily.fanniemae.com/faq-top-trending Avoiding Common Calculating IncomeUnderwriting Errors 51
Slide 53: Additional Training
Additional Training Freddie Mac Offers Additional Appraisal Training https://learn.freddiemaclearning.com/Saba/Web_spf/NA3P1PRD0123/guest/categorydetail/ categ000000000003045/true/xxemptyxx/ Appraisal Underwriting 52
Slide 54: Genworth MI Coverage and Appraisals
Genworth MI Coverage and Appraisals Sales Comparison Considerations: Underwriting Loans for Genworth MI Coverage – Genworth Appraisal Guidelines can be found online • https://mi.genworth.com/guidelines, • Under the “Rates and Guidelines” tab – “Value Not Supported by Comparables” is often cited
Slide 55: Genworth Rate Express
Genworth Rate Express® mi.genworth.com 54
Slide 56: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines mi.genworth.com Appraisal Underwriting 55
Slide 57: LOS Connections
LOS Connections mi.genworth.com Appraisal Underwriting 56
Slide 58: Training Tools and Information
Training Tools and Information mi.genworth.com Appraisal Underwriting 57
Slide 59: Training Tools and Information
Training Tools and Information mi.genworth.com Appraisal Underwriting 58
Slide 60: Additional MI Site Information
Additional MI Site Information mi.genworth.com Appraisal Underwriting 59
Slide 61: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Appraisal Underwriting 60
Slide 62: 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