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First county-funded conservation easement paves way for more open land
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| By Rod Daniel |
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On the heels of its first completed conservation easement, the Ravalli County Open Lands Board is poised for more.
Almost three years after voters soundly approved a $10 million Open Lands bond, Ravalli County cut the first check in what most advocates believe will be a growing number of county-supported conservation easements. In September, Laurie Wood-Gundlach and Janet Wood Farley received a one-time payment of $265,440 in exchange for giving up development rights on their family’s 265 acre ranch northeast of Corvallis.
The Wood family easement was made possible by taxpayers, and its completion paves the way for more landowners to seek help from the county to help them preserve their land for future generations.
“I believe we’re at the tip of the ice burg,” said Open Lands Board Chair Dan Walker. “We’ve figured out how the process works, showed the landowner that the direct public process can work, and we have a proven partnership with the county, the landowner and the land trusts. Now it’s up to the landowners.”
Appointed to the Open Land Board after county voters approved the bond by a 58-to-42 percent margin in November 2006, Walker said the two-year process leading up to the county’s first easement was an exercise in patience.
“It’s been a slow, deliberate and measured process,” Walker said. “We wanted a firm foundation (for evaluating potential conservation easements), based on criteria that citizens could support.”
The criteria the board came up with for evaluating potential projects, he said, is in the form of a scorecard based on the actual ballot language of the bond. Preserving and protecting working farms and ranches, wildlife habitat and/or water resources is the ultimate goal in evaluating each project.
“We had the advantage of being able to look at what was done previously in Gallatin and Missoula counties,” Walker said. “We pulled advisors with a wide variety of expertise, borrowed a little from other programs and created criteria tailor made for Ravalli County. The projects are scored objectively based on those criteria.”
The Wood family conservation easement was a good project, he said, because it took an existing agriculture operation that had been in the same family for generations and allowed the people leasing the land to continue farming it with more certainty.
Other conservation easements being considered, Walker said, focus more on critical wildlife habitat and water resources.
In evaluating potential projects, he sad, the Open Lands Board serves in an advisory role and makes recommendations to county commissioners, who ultimately decide whether to approve funding.
“We are merely advisors within the process,” Walker said. “The land trusts are the driving force.”
At Bitter Root Land Trust, Executive Director Gavin Ricklefs shares Walker’s optimism regarding new conservation easements in the valley. He said the completion of Wood’s easement – and the payment made by the county – have helped create a template for more successful projects.
And the several years it took to iron out the details of the Wood’s easement, he said, is not at all unusual.
“Most projects take years,” he said. “We have one that’s 10 years in the making.”
The often painstaking process, he said, is necessary because of the permanency of a conservation easement. Every detail, from current and future land use to the amount the land is devalued by taking it out of development, must be considered and discussed. On the Wood property, drawing on the land-use expertise of the people who’ve been farming the land, Reed and Kari Trexler, was critical for the success of the project.
“Once we got to the point where both the Land Trust and the Woods were ready to proceed, we went to the Trexlers and made sure the terms were something they could work with,” Ricklefs said. “You can never really be sure the land will stay in ag, but we’ve learned from past projects that involving the lessee in the process is essential for its success.”
Although Bitter Root Land Trust was the first land trust to facilitate a bond-supported conservation easement in Ravalli County, it is by no means the only land trust available to area land owners. Five Valley Land Trust, Rocky Mountain Elk Foundation and Montana Land Reliance – all based out of Missoula – are each capable of shepherding landowners through the conservation easement process.
Bitter Root Land Trust does, however, have three more projects that have either received approval or are in the process of being approved for funding in Ravalli County. Marvin and Agnes Bell will soon have a conservation easement on 100 acres just south of Hamilton that includes Skalkaho Creek’s confluence with the Bitterroot River; owners of the Sawtooth Ranch southwest of Hamilton plan to place 840 acres of prime elk habitat into a conservation easement; and Stan and Sherry Swartz are in the process of placing 410 of their 430 acres up Lost Horse in an easement.
These projects would have been less likely to have made it this far without the lure of Open Lands Bond money, Ricklefs said. The bond, he said, has helped Bitter Root Land Trust clarify its role in facilitating conservation easements in the valley.
“Our mission hasn’t changed,” he said. “But by having resources available (from the bond) it allows us to move forward with more substantial projects and engage landowners that we would not have engaged before.”
The bond was definitely a catalyst for Stan and Sherry Swartz to realize their dream of protecting Sherry’s picturesque ranch up Lost Horse. And since the 430-acre spread had already been carved into 42 parcels, excluding development from its future will significantly reduce the property’s value.
“There’s a significant ‘take down’ in the value of the land,” Stan Swartz said, referring to the difference in value of 42 separate parcels with one contiguous parcel. “And that’s money that we will never recover from the Open Land Bond. Our objective is to prevent the land from future development, and in the short term it will devalue the land.”
The one-time payment the Swartzes will receive from the Open Lands Bond will cover the fees involved in creating a conservation easement and will compensate them for a small portion of their loss on the value of their land.
As Stan Swartz describes the property it’s clear where its value lies in his view.
“The land is incredibly beautiful,” he said. “It’s not unusual to see cars stop while people take pictures of our hay field with Como Peak in the background. There’s incredible riparian habitat with two miles of Lost Horse Creek on the property. It’s valuable for wildlife, we graze horses in the open meadows and we have an irrigated hay field. I’ve been on a lot of ranches and this 420 acre ranch has a lot more than many ranches twice its size.”
When members of the Open Lands Board first came out to look at the property, Swartz said, they were all business.
“They asked a lot of really good questions,” he said. “I was impressed. It was clear they were concerned about to best spend taxpayers’ money.”
As for the future of conservation easements, Swartz agrees with Walker and Ricklefs, believing they will become more frequent as people learn about the Open Lands Bond.
“Now the landowner has financial help,” he said. “There are a lot of old-time ranchers in the valley that have been doing this their whole lives. The ranch is their retirement, so they’re possibly thinking about selling. But with this bond money in place, they may consider (putting the land in a conservation easement). That way they will know it will remain a ranch for future generations.”
As completion of their conservation easement draws near, the Swartzes are thrilled to know their ranch will not be carved up and sold, Stan said.
“When we’re working on the property, we often stop and say how happy we are that it won’t be developed,” he said. “It’s almost like a sign of relief to both of us.”
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HISTORY: The Vigilante Lynching of Walter Jackson
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By Wm. W. Whitfield
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| Vigilante justice is something we usually associate with the lawless days of the gold rush era... |
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Vigilante justice is something we usually associate with the lawless days of the gold rush era, but here in the Bitter Root, the last case of this rather unsavory form of citizen-based revenge occurred just over a century ago. The hideous crime that spurred so much public outrage was one of the most repulsive sorts, and left the good citizens of Stevensville fuming with rage and hungering for instant vengeance. On the evening of August 13th 1903, little ‘Fonnie’ Buck had been lured out of town by a depraved maniac who wantonly exercised his unspeakable acts upon the timid six year old, and then left him cold and lifeless in a swamp less than a mile southwest of town. The crime had been committed on a Thursday, and yet the body wasn’t discovered until mid-day on Sunday. Even though the search for the missing youth was extensive, the perpetrator had concealed the evidence of his crime so well that it was only through constant diligence that the weary searchers finally discovered the corpse.
Fortunately, a couple of reliable witnesses had reportedly seen Walter Jackson leaving town with the young victim, and it was later learned that Jackson had already been previously charged with sexually assaulting a pair of minors in Spokane not more than a year earlier. An article in the Spokane Spokesman-Review after Jackson’s arrest in Ravalli County stated that “the alleged assaulter and murderer of Fonnie Buck was twice arrested in Spokane within the last 10 months on the charge of the same vile assault that he is accused of making upon the Buck boy before killing him. In one case Jackson was sentenced for intoxication, and the second time he was up, he was given six months in jail.” The Spokane detectives who arrested Jackson on both occasions, reportedly said that he was “a moral degenerate who was incapable of knowing the heinous nature of the crimes he had committed.”
Upon the grim discovery of little Fonnie Buck’s body, there was an understandable sense of outrage, and a number of people were prepared to hang the accused man right then and there. Luckily for Jackson the arresting officer managed to convince the frenzied crowd that he should be tried in a court of law, and the evidence was such that he would surely hang for his hideous crime. Jackson was placed in the city jail at Stevensville under a heavy guard, while a small crowd gathered just outside, demanding instant justice. Had the citizens known the full details of Jackson’s involvement at the time, it’s likely they would have forcibly removed him from the jail and hanged him that night. Having managed to calmly disperse the angry crowd, the officer hauled his prisoner to the county jail in Hamilton the next day without further incident. Once there, Jackson was arraigned for murder and entered a plea of not guilty. A trial date was set for September 8th with Robert O’Hara appointed as defense attorney. O’Hara had studied law at Notre Dame, and had come to the valley in 1890 to work for Marcus Daly’s Bitter Root Development Company. When the town of Hamilton was incorporated in 1894, O’Hara was chosen as the city’s first Mayor.
On the day of the trial the courtroom was packed with onlookers, a large percentage of them coming up from Stevensville to watch the proceedings. The States two star witnesses were 16 year old Vivian Warner, and S. B. McNett, who both testified that they had seen Walter Jackson walking toward the river with his unknowing victim on the night in question. Miss Warner was very positive in her identification, stating that she had witnessed his unfavorable demeanor at a store earlier that same day. Between 8 and 9 o’clock that evening she had again seen Jackson, this time with a boy answering the description of little Fonnie Buck. Jackson claimed that he had gone to bed at 7:30 on the night of the murder, and could not have committed the crime, but a couple of boys returning from Fort Owen met him on the road around 9:30 that evening and their statements suddenly left him without an alibi. Just two days later the jury brought in a guilty verdict, and Walter Jackson was sentenced to hang. Throughout the entire trial Jackson sat with a complete look of indifference on his face, and even a guilty verdict failed to stir any sign of emotion in the prisoner. One reporter noted that Jackson was “without apparent knowledge of right or wrong, and his intellect is too dull to fully realize the punishment which awaits him.”
The 13th day of the month seemed to have affixed itself permanently on Jackson’s list of fateful events. He was born on the 13th of June. Fonnie Buck was murdered on the 13th of August, and now Jackson was to be hung on the 13th of October. The date for the first legal hanging in Ravalli County had been determined, and Jackson was placed in handcuffs and led out of the courtroom. His jail cell was carefully inspected to insure that there were no means by which he might cheat the gallows by taking his own life. The prisoner was kept on a deathwatch until his lawyer filed an appeal with the Montana Supreme Court. When a stay of execution was finally granted, Jackson was removed from the suicide watch, and promptly attempted to hang himself! When the jailer found him strung up and seemingly lifeless, he quickly cut him down and revived him with water from the tap. A search of the cell revealed some shards of glass, which the culprit had used to cut the edge of his canvas hammock, securing a rope used to strengthen the binding of the cot.
When the citizens of Stevensville learned of Jackson’s last minute stay of execution, their reaction was swift and fatal. Special invitations had already been distributed for witnessing the execution in the jail-yard behind the courthouse, and the gallows, which was on loan from Deer Lodge, had also arrived. Reportedly, the courthouse custodian refused to go into the basement where the portable gallows was stored, without his lucky rabbit’s foot! Suddenly, on the night of October 13th more than a hundred masked men assembled outside the jailhouse and demanded that the jailer turn over his prisoner. The jailer hesitated to give up his inmate, but he soon reconsidered when a number of revolvers were raised up towards him. Realizing the uselessness of the situation, he reluctantly admitted the vigilantes, who found the key to Jackson’s cell, and forcibly removed him after a vigorous struggle.
Jackson weighed over two hundred pounds, and even though he put up a good fight, the crowd eventually overpowered him. A noose was instantly placed around his neck and he was led out the front door clad only in his undergarments. As the prisoner reached the top of the stairs leading out of the jail, he was jerked from his feet, down the steps of the jailhouse, and onto the ground. The lynch mob then formed a tight circle around their prisoner and led him around the west side of the courthouse, which is now the home of the Ravalli County Museum. Jackson was taken to a light-pole on the corner of 2nd Street and Bedford, where one of the leaders of the masked men threw a loosely coiled rope over the arm of the lamppost. Jackson’s hands were then tied behind his back, and the condemned man was asked if there was anything he wished to say before he departed this mortal world. In a low voice Jackson reportedly said, “Nothing, only I’m not guilty.” When asked a second time, he replied, “I guess that’s all.”
Seizing the rope firmly, a dozen willing hands quickly hauled him up about six feet above the ground and tied the end of the rope to a fence. A reporter who witnessed the execution said “The body swung limply in the air for about a minute without apparent agony. The dying man’s arms then began to strain at the ropes and a few seconds later a tremor ran through his legs and feet, leaving his feet distorted. After swinging idly in the breeze for several minutes and bumping against the pole, the body became almost stationary, with the slightly distorted face in full glare of the electric light. Several members of the lynchers sat on the fence guarding the rope for about ten minutes to prevent anyone cutting the victim down. At a signal given by one of the masked men, the crowd quietly left the city, going in the direction of the railway yards. After the lynching, it was found that the vigilantes had first gathered at a point where the public road crosses the railroad track on the northern edge of Hamilton. The party then followed the railroad tracks to a side street leading to the jail, and no one on Main Street was aware of the mob until it reached the jail.”
Jackson’s body was cut down at 2:07 on the morning of October 14th 1903, approximately 48 minutes after vigilantes had hanged him. A coroners inquest later that day determined that Jackson came to his death by strangulation, inflicted by “persons unknown”! Walter Jackson was quietly buried at the potter’s field in Hamilton, and by all accounts there were no mourners present at the funeral. His court appointed attorney, the honorable Robert O’Hara, rarely spoke of the case afterwards, but when he was pressed on the issue, he continued to stick to his belief that Jackson was “an innocent half-wit, who died for someone else’s crime.”
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New Florence Local Living Family Center
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| Created to ignite potential, inspire and create a true sense of community. |
| By Shannon Selway |
As of September 1st, in Florence, Montana, the new facility, Local Living Family Center, opened its doors. The community-based center is a program created in conjunction with the Women’s Opportunity Resource Development (WORD) Center, and is funded in part by the Montana Children’s Trust Fund.
The Center has been created to strengthen resiliency in parents and their children, provide information and resource referral, engage families in lifelong activities, and provide encouragement of leadership and civic engagement with training and tools. In a nutshell, the Center is there for the community by providing a place to access services and befriend neighbors - bringing all ages, skills and abilities together.
“Florence doesn’t have a bowling alley or a movie theatre. We created a place for community closeness to happen,” said Allison Dunne-Kinney, the center’s WORD Program Coordinator.
“This Center means having a special place in the community where everyone can meet, learn and work together, and change the role of parents and community members from observers to participants. WORD’s intention in opening and staffing the Center is to say, ‘This is your home, and your community.’ We offer support to make that happen. Growth [of a community] needs to happen within.” Allison added.
The Center serves the Lone Rock, Stevensville and Florence communities. Having the Center’s location in Florence was intentional. It was a great venue considering Florence’s proximity to Missoula and Hamilton – previously the closest places to offer such services to the community.
The Center will have many resources available, such as a lending library featuring books, DVDs and games covering a wide variety of subjects pertaining to teenager behavior, communications, and so on. It will be the site of many workshops as well as community access to a computer and telephone. There is an area dedicated for tots complete with toys and books; there is an area with posted community news, events, and brochures. There is a kitchen, complete with stove and all the necessities to plan a gathering of any kind. And plans are in the making to have a public photocopier machine.
As has been successful in other family centers, this Center is looking into creating a clothing closet, a program where families can swap clothing for those fast-growing kids.
One of the visions of the Center is to have everyone use it. They encourage making it a meeting place. It’s a place for seniors to come and have a cup of coffee and socialize; it’s a forum to exchange ideas; and it’s a place to access school, social services, and health care systems. It is staffed with trained professionals that can assist in every aspect.
The Center is already packed with activities for October, featuring a five-week series every Thursday, Parenting from the Heart.
October 1st is “The Mind,” focusing on how many ways are you smart? They will introduce Gardner’s model of Multiple Intelligence and the difference between IQ and EQ. Parents will discuss what it means to be smart, intelligent, or challenged in the learning environment. It should prove to be a great tool to find out the many ways you are smart and strategies for identifying and supporting your children’s natural strengths and abilities.
October 8th is “The Heart and Intention,” where participants learn to manage stress by exploring stressors and how to handle them.
October 15th is “Listening,” where one can learn the powerful skills of learning to listen from the inside out.
October 22nd is “The Voice,” where the art of negotiation begins without being defensive, but constructive.
October 29th is “The Last Class in the series,” where the topic is chosen by the participants.
With space being limited to 12, it is advised to secure your spot.
There’s a Family Fun Night scheduled October 9th from 7 – 9 pm. It’s a stress-free fun night featuring family activities such as “decorate your pumpkin like a family member,” and a free family feast.
In the future is an event that has proven fun and education for other centers. It’s the Conversation Café, a program that brings two diverse groups together kids and seniors. Both groups learn about amazing aspects of the other. A child might learn that a senior fought in a war, ran a business, and many other adventures of life; a senior gets to learn about the child of today, and how much technological wisdom they hold, what today’s social life if like, or what’s being taught in school.
The Center is being funded in part by the Montana Children’s Fund, The Montana PIRC and Women’s Opportunity and Resource Development – all under the umbrella of government funding by the National Community Service Act of 1990.
Volunteerism is called for in connection with many of the programs funded under the Act, and the Center is fortunate to have such a volunteer, Jacq Kakos, who serves as the assistant coordinator.
Jacq has committed herself to 1,700 hours of community service with the Center. Her compensation is personal development (and satisfaction), with a post secondary educational award. She does get a cost-of-volunteering stipend to get by as she pours her heart into her service.
“I love humanitarian efforts. I was once a lab rat and did tedious work. It wasn’t what I wanted to do and I always wanted to go back to school, and wanted to join the Peace Corps. But I have a daughter and that (Peace Corps) wouldn’t work. I found this Center and the vision of it really resonated. It’s a lot of work, but it’s really, really rewarding.” Jacq said.
Check out the Local Living Family Center at 5501 N. 93, Suite 3, Florence, Montana (just a smidge behind the huge Conoco sign). For questions or to register, call: Allison Dunne or Jacq Kakos at (406) 273-0142, or email adunne@wordinc.org.
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| BUSINESS: Locally owned Bitter Root Brewing |
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| By Shannon Selway |
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It takes a few basic ingredients to make a business work: talent, knowhow, hard work – and, of course, a product or service that folks want. Bitter Root Brewing possesses all that it takes for success - and then some - and has been gracing the Valley with 11 years of tasty beer products.
Owner, Tim Bozik and his daughter, Nicol, have proven to be a dynamic team. But add the talents and compatibility of the pub’s manager, Jason Goeltz, and the brewer, Paul Thomas, and you’ll find that there’s a big chunk of the “ingredients” that makes it all mesh.
Tim was foreign to the concept of beer making at one time, and it was probably never a thought in his mind that he’d become an owner of a brewery. He was a self-employed high-end furniture manufacturer for nearly 30 years in Arizona. It was fulfilling, but Tim was seeking relief from the heat and a change of venue. That desire was to be unexpectedly fulfilled by a trip that his wife took to visit her Hamilton friend. One thing led to another, he sold the business, and found himself as a happy new resident of the Bitterroot.
His wife, Claresa, Opened Evergreen Montessori School in the fall of 1996, securing her employment, but Tim was undecided on his next venture.
“I’ve always liked a good beer,” Tim said. “I found that there was no brewery here.”
Hence, Tim found work by creating the Bitter Root Brewery in 1998. He secured the necessary arrangements for equipment, a place and a brewer. Since it’s opening, it has grown to be the “local place” for folks to congregate over a frothy one and a great meal.
This successful business resided nearby its current location until 2004. Expansion became imminent as the brewery needed a larger premises to accommodate its growing business.
Bitter Root Brewery’s new location holds some history that Bitterrooters embrace: it was not only once an old storage warehouse for apples during the apple-producing heyday of the area, but it also resides on a part of what once was Marcus Daly’s old racetrack site.
“It was nothing more than a tin shed,” Tim said.
That “tin shed” was transformed with extensive renovations that achieved an aesthetically pleasing rustic décor, complete with an airy and inviting feel.
Tim used to have tailgate parties and pig roasts at his previous location. It occurred to him that people enjoy a meal with their beer. The brewery’s new location afforded not only extra space for live music, dancing, dining tables and – of course- the brewery, but also a kitchen, the Brewer’s Grill.
You can find savory appetizers and chow at the brewery that perfectly complement your brew. Many folks dine on delicious burgers, tacos, chicken, and more. Their all-time best-seller appetizer has to be the nachos, a giant pile of fresh Brewer’s chips topped with all the goodies. It’s popular because of the quality and the colossal proportions patrons get. Adding to the quality of the food are ingredients bought locally (the brewery buys locally whenever possible).
Naturally, the brewery’s core product – beer- has to be special and consistent (and it is). Bitter Root Brewing is one of 27 breweries in Montana serving up terrific barley pop. But the place offers more than an awesome cold one: it has award-winning brews for its patrons to imbibe in! These award-winning brews all have one thing in common: they were made with Montana grown and malted barley, which is the case for every brew created there.
Paul Thomas, who has been the brewery’s master brewer for the last eight years, is the mastermind behind these awards. This year, his expertise has earned Bitter Root Brewing the coveted gold (for Porter) and two silvers (for Winter Ale and Saison- a French/ Belgian farmhouse unfiltered beer) at the National North American Brewer Association Beer Awards! That’s quite an accomplishment - especially when considering that over 1,500 beers are entered. All in all, the brewery has won many national awards since it opened its doors.
In addition to Porter, Winter Ale, and Saison, the brewery offers Sawtooth (their lightest ale); Pale Ale (a copper-colored classic English); India Pale Ale (light copper-colored classic that is also their best seller); Nut Brown Ale (a light toffee flavored brown ale); American Amber Ale (a bittersweet red ale); along with other “Whims and Seasonals” (what it implies).
Available now is the seasonal Oktoberfest. In October and November the new Baltic Porter (a brew aged 69 days in bourbon barrels) will be on tap and the always beloved, Winter Ale will be back.
Part of the makeup of Paul Thomas’ success and consistency is calculating the variables of grains and hops. That process used to take hours, but now a computer program helps get that done more quickly. Still, Paul looks to others for input, and is likewise eager to share his ideas.
“This industry is unlike a lot of others. Ours is of camaraderie among brewers. We exchange successes and failures and ideas, and are quick to cooperate with each other. It’s a great industry, with great folks!” Tim commented.
On any given night something fun is happening at the pub. Winter Mondays feature a dart league where players compete in the open and airy upstairs. The card club begins to gather when the cold hits on Tuesdays. Wednesdays feature a gathering of those into fly-tying where they share their craft with anyone interested. You just need to bring your fly-tying equipment. Nicol makes sure there is live music on Thursdays and Saturdays. As for Friday – well, Tim just lets Friday be Friday! Although something’s happening every day/night there, it’s what Sunday represents that should make Bitterrooters extra proud to have the brewery’s presence in town.
Sunday is available as a fundraising day. Tim, Nicol and Jason get excited about this special day as they have seen many organizations raise substantial funds.
“We have the facility, music, food, good beer…We really enjoy doing it [fundraising assistance]” Tim said.
The brewery has already hosted many successful fundraising events, such as the Bitterroot Land Trust, Keystone to Discovery, MAPS and many more. Local non-profit organizations are invited to approach Jason or Nicol to arrange fundraising (contact information below).
Jason has brought his share of experience into the mix of business.
“I am from a family that owned Jackson Hot Springs. I like the similar atmosphere here – the clientele. I love working with Tim as we are like-minded. We like to provide to the community, and we find that that is reciprocated.” Jason said.
In addition to the brewery’s generosity with the community, it regards its 20 some employees as family. These are well-treated folks who enjoy a great job and great working environment. Full time employees are also offered health care and other benefits.
As a Montana brewery, the Bitter Root Brewery must adhere to rigid restrictions. Brewery customers are allowed 48 ounces of beer per day and may be served until 8 p.m. with no beer on the tables allowed past 9. Breaching the time rule of serving after 8 - even by 1 minute - could jeopardize the brewery’s licensing rights. So, make sure you allow adequate time for your visit to enjoy a beer or two.
Bitter Root Brewery is located smack in the middle of Hamilton at 101 Marcus Street, featuring a highly visible sign. They are open to serve you food and beverages 7 days a week. Their phone number is 406/363-PINT (7468). And make sure and check out their website at www.bitterrootbrewing.com for upcoming bands and events, food menus and specials, and more about BEER!
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| REAL ESTATE: Mortgage Reform
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| By Darwin Ernst |
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I traveled to Washington, DC this spring to lobby the United States legislators regarding mortgage reform. It was an educational experience that left me hungry for more understanding. How can we, as a nation, overcome the current real estate market issues and how might I be able to be a part of the solution at the local and national level? What follows is my attempt to summarize various components of the national housing market and which new lending requirements are affecting local mortgage loans.
The “housing bubble” is a term used to describe a situation affecting many parts of the United States Housing market. I relate the housing bubble to the two-dimensional view of the graph with time as the dependant variable (x-axis) and housing prices on the (y-axis). The idea is that housing prices are expected to rise and fall over time, but if they rise too fast, the normal curve in the graph (that would normally look like a small bubble) may become accentuated and burst, leaving a huge hole where the top of the market bubble should have been. The nation’s housing prices peaked in the first half of 2005, started to decline in 2006, and now are near the bottom. Increased foreclosure rates in 2006–2007 led to a crisis in the mortgage markets. The U.S. Secretary of the Treasury described this crisis as “the most significant risk to our economy.”
In 2008 the United States government allocated over $900 billion in their attempt to minimize the effects of the bursting housing bubble. Over 50% of these monies went to the government sponsored entities (GSE’s) of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Housing Administration (FHA). Fannie Mae & Freddie Mac buy mortgages on the secondary market from lenders, pool them, and sell them as mortgage-backed securities (MBS) to investors on the open market. This secondary mortgage market increases the supply of money available for lenders to provide more mortgage loans. Fannie Mae and Freddie Mac had over 80% of the market share of new mortgages in 2008, as well as $5.4 trillion of guaranteed mortgage backed securities (MSB) and debt outstanding (which is equal to the publically held debt of the United States). The FHA provides governmental insurance to approved private lenders, so the lenders can provide loans to individuals who do not qualify for typical conventional loans.
To complete the acronym soup, we must also include Ginnie Mae (GNMA), which is a government corporation in the residential housing and mortgage markets; however, unlike Fannie Mae and Freddie Mac, Ginnie Mae pools and sells mortgage-backed securities from FHA and Veteran Affairs (VA). Unlike the GSE’s, Ginnie Mae is not a publicly traded company and it provides lenders and investors with a guarantee that the U.S. Government will continue to pay the interest and principal earned on their purchase of mortgage-backed securities. Federally insured banks have recently purchased more of the Ginnie Mae securities, because it reduces the bank’s risk, which in turn provides the banks with more lending capital.
The Home Valuation Code of Conduct (HVCC) is a lending policy that originated from the recognition of inappropriate lending practices specific to loans purchased by government sponsored entities and later sold as mortgage-backed securities. The HVCC went into effect in May of 2009 and was intended to promote independence in the appraisal process as part of sound underwriting practices for lenders who chose to sell their loans to Fannie Mae or Freddie Mac.
The FHA, which now insures 25% of the mortgage market share (because of its expansion since 2008) has just announced that it will also require all FHA-approved lenders to follow some of the same safe lending practices as those contained within the HVCC for Fannie Mae and Freddie Mac. However, before these new policies take effect, FHA’s reserves will fall below 2%, which is the minimum required by congress.
Both the HVCC and the new lending requirements of the FHA will affect all the lenders who want to sell the mortgage loans to Fannie Mae or Freddie Mac, and those lenders that want to make loans insured by the FHA. Mortgage brokers, real estate agents, and other real estate market participants that may benefit from closing a specific transaction are now prohibited from selecting which real estate appraiser is selected. Many local banks have turned to Appraisal Management Companies (AMC’s) in their effort to demonstrate appraisal independence. These AMC’s are rapidly appearing nationally, as many banks have the misconception that they are required to use AMC’s to comply with the new secondary market policies requiring appraisal independence.
Unfortunately, this is not true, and the AMC’s remain unregulated. In their efforts to increase profits, they often search market areas to select appraisers who are willing to produce appraisal reports at the lowest fee and with the fastest turn-around time. This promotes the use of unethical appraisers who are willing to compromise the quality of their appraisal reports for monetary return, which is very reminicent of the appraisers in colusion with mortgage brokers, real estate agents, and lenders who benefitted from inflated property valuations and/or fraudulent appraisal reports that minimized or omitted functional, physical, and/or external depreciation.
As a member of the Montana Board of Real Estate Appraisers and an Associate Residential Member of the Appraisal Institute, I am involved in originating draft legislation for AMC state licensing requirements and lobbying the United States congress to promote appropriate mortgage reform. I also remain supportive of those appraisers, real estate lenders, real estate agents, and others involved in the housing market who are ethical and continue to promote the public’s well being.
Darwin Ernst is a Montana Residential Certified Appraiser, Montana Real Estate Appraiser Board Member, Licensed Real Estate Agent, Appraisal Institute Associate Residential Member, & President of Independent Valuation Solutions, LLC.
You can contact Darwin at the following e-mail address: darwin@tekboys.com
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