Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (May 2019)
101 slides from Enact's investor presentation, May 2019
Slide 1: Appraisal Underwriting
Appraisal Underwriting Part I - The Basics and Part II - The Sales Comparison May 2019 Genworth Mortgage Insurance Corporation ©2019 Genworth Financial, Inc. All rights reserved.
Slide 2: Session Overview
Session Overview Participants will learn about analyzing the Uniform Residential Appraisal Report – URAR – Fannie Mae Form 1004 – Freddie Mac Form 70 Resources available The roles of the appraisal, the appraiser and the underwriter/reviewer Appraisal exhibits Each section and dat
Slide 3: Additional Genworth Appraisal Training
Additional Genworth Appraisal Training Genworth MI offers training on other specific appraisal topics: – Manufactured Housing – Rural Properties Visit Our Website For Additional Information mi.genworth.com Appraisal Underwriting Part I & II 3
Slide 4: Genworth Appraisal Review Checklist
Genworth Appraisal Review Checklist Page 3 Appraisal Underwriting Part I & II 4
Slide 5: Appraisal Basics
Appraisal Basics URAR Overview, Market Value, Appraiser and Reviewer Responsibilities Appraisal Underwriting Part I & II 5
Slide 6: Appraisal Basics
Appraisal Basics The appraisal report provides: – Detailed description of the property – Condition and marketability information – Market value • Appraiser’s opinion • Supporting detail on how the appraiser arrived at the opinion – Additional property issues/information Page 4 Appraisal Underwri
Slide 7: Appraisal Basics: Market Value
Appraisal Basics Market Value – The buyer and seller are typically motivated – Both parties are well informed/advised, each acting in what he/she considers his/her own best interest – A reasonable amount of time is allowed for exposure in the open market – Payment is made in terms of US dollars
Slide 8: Appraisal Basics: Seller/Lender Responsibilities
Appraisal Basics Seller/Lender Responsibilities – Providing Appraiser With • Sales Contract (See Fannie Mae updates on next slide) • Other Available Information – Selecting the Appraiser and General Appraisal Requirements – Underwriting the Appraisal – Disclosing Required Information – Ensuring
Slide 9: Appraisal Basics: Appraiser Responsibilities
Appraisal Basics Appraiser Responsibilities – An accurate, adequately supported opinion of market value – An objective analysis of quantifiable data to support housing trends – All relevant information that supports the conclusions about market conditions, including: • Sales/financing concession
Slide 10: Appraisal Basics: Reviewer/Underwriter Responsibilities
Appraisal Basics Reviewer/Underwriter Responsibilities – Completeness – Appropriate Form – Opinion of market value supported – Consistency – Market issues noted – All attachments/addenda provided – Ensure UAD requirements are met – The appraisal meets the applicable lending standards Page 9 Appr
Slide 11: Appraisal Basics
Appraisal Basics If there is inconsistent data: – Appraiser explanation is necessary – Investors may be apprehensive to purchase the loan Page 9 Appraisal Underwriting Part I & II 11
Slide 12: Appraisal Basics
Appraisal Basics Loans being sold to a GSE must include at least the following: – Clear pictures of the subject property that support the information on the appraisal: • Front View • Rear View • Street Scene • Kitchen • Bathrooms • Main Living Area • Outbuildings – Building Sketch – Additional p
Slide 13: Section-by-Section Review
Section-by-Section Review URAR Page 1: Subject, Contract, Neighborhood, Site and Improvements Sections Appraisal Underwriting Part I & II 13
Slide 14: Subject Section
Subject Section Page 11-15 Appraisal Underwriting Part I & II 14
Slide 15: Subject Section
Subject Section Page 15 Fannie Mae Requires Properties That Are Listed For Sale As Of Application Date For a Cash Out Refinance Be Taken Off The Market On Or Before The Disbursement Date Of The New Mortgage Appraisal Underwriting Part I & II 15
Slide 16: Contract Section - Fannie Mae
Contract Section - Fannie Mae Appraisal Underwriting Part I & II 16
Slide 17: Contract Section - Freddie Mac
Contract Section - Freddie Mac Appraisal Underwriting Part I & II 17
Slide 18: Contract Section
Contract Section Page 16-18 Appraisal Underwriting Part I & II 18
Slide 19: Neighborhood Section
Neighborhood Section Page 19-22 Appraisal Underwriting Part I & II 19
Slide 20: Neighborhood Section Condominiums
Neighborhood Section Condominiums Not In book Appraisal Underwriting Part I & II 20
Slide 21: Site Section
Site Section Page 23-26 Appraisal Underwriting Part I & II 21
Slide 22: Improvements Section
Improvements Section Page 27-32 Appraisal Underwriting Part I & II 22
Slide 23: Accessory Units
Accessory Units Appraisal Underwriting Part I & II 23
Slide 24: Accessory Units
Accessory Units Appraisal Underwriting Part I & II 24
Slide 25: Improvements Section
Improvements Section Page 27-32 Appraisal Underwriting Part I & II 25
Slide 26: 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
Slide 27: Project Information Condominiums
Project Information Condominiums Project Description General Description Subject Phase Is Project Complete or Incomplete Page 33 Appraisal Underwriting Part I & II 27 27
Slide 28: Project Information Condominiums
Project Information Condominiums Primary Occupancy-General Guidelines Check Specific Investor Project Requirements As They Vary And Can Change Management Group- Who is in control? Generally, GSEs do not allow for more than 15% of homeowners association dues or assessments are delinquent more than
Slide 29: Project Information Condominiums
Project Information Condominiums Is the Project a Conversion Soundness and condition-For a conversion that was legally created in the most recent three years, either: 1.The architect's/engineer's report or a functional equivalent originally obtained for the conversion must comment favorably on the
Slide 30: Project Information Condominiums
Project Information Condominiums Condition & Quality of Construction Common Elements & Recreational Facilities Common Elements such as parking and recreational facilities must be consistent with the nature of the project and be competitive in the market. 1.The unit owners must be the sole owners o
Slide 31: Project Analysis Condominiums
Project Analysis Condominiums Analysis of the Budget The budget must be consistent with the nature of the project. Review specific investor requirements. Additional Fees Special or Unusual Characteristics Page 36 Appraisal Underwriting Part I & II 31 31
Slide 32: Unit Description Condominiums
Unit Description Condominiums $ Per Square feet of GLA General Description Car Storage Page 37 Appraisal Underwriting Part I & II 32 32
Slide 33: Project Questionnaire
Project Questionnaire Condo Reminders – The project itself must be approved for Fannie Mae and Freddie Mac, otherwise it is an “Unwarrantable Project” that you portfolio or sell to a private investor – Guidelines change often, so always check the guidelines for compliance – Condo project status can
Slide 34: Fannie Mae Condo Questions?
Fannie Mae Condo Questions? https://www.fanniemae.com/singlefamily/project-eligibility Appraisal Underwriting Part I & II 34
Slide 35: Freddie Mac Project Reviews
Freddie Mac Project Reviews http://www.freddiemac.com/singlefamily/factsheets/sell/condo_projects.html Appraisal Underwriting Part I & II 35
Slide 36: Genworth Appraisal Review Checklist
Genworth Appraisal Review Checklist https://new.mi.genworth.com/underwriting-tips-and-credit-policy Appraisal Underwriting Part I & II 36
Slide 37: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Appraisal Underwriting Part I & II 37
Slide 38: Genworth Rate Express
Genworth Rate Express® Appraisal Underwriting Part I & II 38
Slide 39: LOS Connections
LOS Connections Appraisal Underwriting Part I & II 39
Slide 40: Training Tools and Information
Training Tools and Information Appraisal Underwriting Part I & II 40
Slide 41: Training Tools and Information
Training Tools and Information Appraisal Underwriting Part I & II 41
Slide 42: Additional MI Site Information
Additional MI Site Information Appraisal Underwriting Part I & II 42
Slide 43: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Appraisal Underwriting Part I & II 43
Slide 44: 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
Slide 45: Appraisal Underwriting Part II The Sales Comparison
Appraisal Underwriting Part II The Sales Comparison May 2019 Genworth Mortgage Insurance Corporation ©2019 Genworth Financial, Inc. All rights reserved.
Slide 46: Sales Comparison
Sales Comparison Analyzing Comp Selection, Reading the Sales Comparison Grid, Previous Sales and Transfers Appraisal Underwriting Part I & II 46
Slide 47: 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 48: 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 49: 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 50: 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 51: 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 52: 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 53: 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 54: 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 55: 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 56: Comparable Sales
Analyzing Comparable Sales Gross Living Area (GLA) Square Footage and Bedroom Count Appraisal Underwriting Part I & II 56
Slide 57: 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 58: 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 59: Comparable Properties
Analyzing Comparable Properties Do the subject and comparables appear to be similar? Appraisal Underwriting Part I & II 59
Slide 60: 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 P
Slide 61: 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 62: 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 Part I & II 62
Slide 63: 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 Part I & II 63
Slide 64: 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 Part I & II 64
Slide 65: 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 Part I & II 65
Slide 66: 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 67: 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 68: 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 69: 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 70: 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 Part I & II 70
Slide 71: 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 72: 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 73: 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 74: 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 75: 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 76: 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 77: 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 Part I & II 77
Slide 78: 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 79: 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 80: Sales Comparison Grid
Analyzing Sales Comparison Grid Previous Sale or Transfer History Page 56 Appraisal Underwriting Part I & II 80
Slide 81: Sales Comparison Grid
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 Part I & II 81
Slide 82: 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 83: 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 84: Comments
Comments Read Comments Section Carefully – Look for anything impacting: • Value • Structural Integrity • Marketability Page 58 Appraisal Underwriting Part I & II 84
Slide 85: 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 86: 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 87: Did You Know
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 88: Did You Know
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 89: 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://www.fanniemae.com/singlefamily/uniform-appraisal-dataset Appraisal Underwriting Part I
Slide 90: Additional Training
Additional Training Fannie Mae Offers Additional Appraisal Training and FAQs – See also Condominium training offerings as well https://www.fanniemae.com/singlefamily/originating-underwriting-training Appraisal Underwriting Part I & II 90
Slide 91: Additional Training
Additional Training Freddie Mac Offers Additional Appraisal Training https://learn.freddiemaclearning.com/Saba/Web_spf/NA3P1PRD0123/guest/guestlearningcatalog Appraisal Underwriting Part I & II 91
Slide 92: Additional Training
Additional Training Freddie Mac Offers Additional Appraisal Training https://learn.freddiemaclearning.com/Saba/Web_spf/NA3P1PRD0123/guest/guestlearningcatalog Appraisal Underwriting Part I & II 92
Slide 93: 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://new.mi.genworth.com/guidelines, • Under the “Rates and Guidelines” tab – “Value Not Supported by Comparables” is often ci
Slide 94: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Appraisal Underwriting Part I & II 94
Slide 95: Genworth Rate Express
Genworth Rate Express® Appraisal Underwriting Part I & II 95
Slide 96: LOS Connections
LOS Connections Appraisal Underwriting Part I & II 96
Slide 97: Training Tools and Information
Training Tools and Information Appraisal Underwriting Part I & II 97
Slide 98: Training Tools and Information
Training Tools and Information Appraisal Underwriting Part I & II 98
Slide 99: Additional MI Site Information
Additional MI Site Information Appraisal Underwriting Part I & II 99
Slide 100: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Appraisal Underwriting Part I & II 100
Slide 101: 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