Appraisal Scoop

Comp Checks: Shifting Liability to Appraisers?

Why all the comp check requests? In case you are not aware, a loan can be funded with a list of sales under desktop underwriting guidelines.

1. The lowest equity and worst credit borrowers get a URAR appraisal.
2. The ones with more equity and better credit get the drive-bye appraisal and the ones with even better equity and credit get an AVM.
3. Next is the list of sales.
4. Last but not least is the “golden borrower” who is completely liquid and can obtain a loan with as little as a list of assessed values from the area.

So why do appraisers get stiffed on comp checks? Because they don’t know any better. The lending world must be laughing all the way to the bank.

Here’s why: a loan can be funded and points and fees collected with a comp check (or less) and no appraisal order.

The borrower may be charged for an appraisal but no appraisal fee is paid. So, who gets the money? It is split between the loan agent and their company. Loan agents are often paid up to half of all the extra fees they can pack into a deal, plus half of the overage that they get on the points. This is what RESPA is all about. Regulated lenders have paid out millions of dollars in fines for RESPA violations. Loan brokers are not regulated.)

Appraisers are so easily hood-winked into inflating values and enabling everything from property flips to predatory loans because they lack knowledge and understanding about the real estate and lending markets and the multiple levels of players in them.

We have no problem with comp checks. For $50, we will respond and do a residential search to the selection criteria the client provides and give them the results. This can be done by a clerk with no appraisal skill required. The trouble with most appraisers is that they do the search and select the criteria to be used. Now they are required to be in compliance with USPAP, which of course, they are not. So if a complaint is filed, these appraisers are in trouble.

Shifting Liability - Why do lenders even bother with a comp check or other appraiser input if they don’t need it to close the loan? I believe it is for reasons of liability. They want the appraiser to do the filtering and actually look for the sales that will make the deal work.

They certainly could call a title company and get a list of sales any time they want. So why call an appraiser, unless they want and need your special skills to help them out?

AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training  909-798-8855, fax: 909-798-0139

eAppraiseIT v Pam Crowley: Judge refuses to close appraiser's Web site

According to a FloridaToday.com story today by Keyonna Summer and Wayne T. Price:

"A Brevard County judge on Thursday refused to shut down a Palm Bay appraiser's Web site that contained comments critical of the California-based appraisal management company First American eAppraiseIT."

"The company was seeking a temporary injunction to prevent appraiser Pamela Crowley from making any comments, or posting comments from others, about it on her Web site, www.mortgagefraudwatchlist.org."

Crowley's attorney, Eric Lanigan, called the company's efforts to muzzle Crowley "pretty far out there."

"They want to put duct tape on her mouth," he said.

After Moxley's decision, about a half-dozen Crowley's supporters -- all area real estate appraisers -- rallied around her with hugs and words of encouragement.

"Yes!" Crowley shouted, when she heard the ruling, her fists raised and tears in her eyes. "This is just the beginning. This was just an emergency hearing to shut me up, but the. . . suit is still there."

Circuit Court Judge John Dean Moxley Jr. dismissed eAppraiseIT's request, because the company had not proved defamation or any financial harm based on the postings.

"If it's not defamation at this point, there's no need for an injunction," Moxley said. "What you asked for is not permissible under the law in the state. Therefore, I deny it."

The case revolves around Crowley's disclosure about eAppraiseIt's former practice -- the company says it stopped doing it in April -- of opening electronic reports compiled by appraisers for lenders.

Crowley and others contend that, when those secure files are open, there is an opportunity to manipulate data -- typically to the benefit of the lender -- and for a property owner's private information to be released to unauthorized parties.

• Click here for the complete FloridaToday.com story 6/29/07.
• Company wants appraiser's site silenced - FloridaToday.com 6/28/07.
• NCRC Senate testimony - Appraisal Scoop
• eAppraiseIT v. Pamela Crowley: Founder of the Mortgage Fraud Watch List sued by AMC

Free Pamela Crowley "Defense Fund" Apparel

Have you been following the eAppraiseIT v Pamela Crowley story on the Appraisal Scoop blog and elsewhere on the Internet? 

Apparently someone at CafePress.com has heard of Pam's story and is looking for a way to help her defray some of her legal costs!  They've put together an entire line of men's, women's, and pet clothing with a variety of logos and colors.

According to their web site:

All profits go towards Pamela Crowley's defense fund.  Please advertise via email, phone, word of mouth, letter, etc. only.  Do NOT post it at Wayne's place.  Thanx.  Enjoy.

Click here for more information: http://www.cafepress.com/appraiserpress 

Mortgage Fraud: Con artists try to get foot in the door

Below is an article from a central valley town in CA. The county has a Real Estate Fraud Unit in the District Attorney's office.

How do appraisers figure into the equation? They are used to help inflate values.

Are they Active or Passive participants and is there a difference when it comes to sentencing?  Mostly passive, very few have been smart enough to ask for a kickback or bribe, just their $300. 

How many cities is this happening in across America AND Canada? Well, Modesto is a city of 209,174 and RE Frauds have been discovered in much smaller towns, like Barstow with 23,943; so, there must be thousands of cities from small to large where it occurs. Maybe tens of thousands even.

Ever felt used by a lender client? Maybe that is why the DA's and the Justice Dept. and the Inspector Generals are taking action, it is happening on a wide spread basis.

It's happening with the help of the licensed appraisers shooting for predetermined values. Inflating values cannot be done to any large extent with an AVM, it requires that data be cherry picked to work, which is at the heart of the apprasial fraud issue and criminal liability and in opposition to the USPAP certifications, and good appraisal procedures.

Read the article, it might bring a whole new paradigm to doing lender appraisals for a living

Why were we licensed? To protect whom from what?

Mortgage Fraud Watch List site included in NCRC testimony to Senate Committe on Banking

On Monday, Appraisal Scoop's article eAppraiseIT v. Pamela Crowley: Founder of the Mortgage Fraud Watch List sued by AMC reported on a claim by Pamela Crowley that eAppraiseIT is unlocking and changing security settings in appraisal reports that pass through them to lender clients. 

The following are excerpts from the National Community Reinvestment Coalition (NCRC) testimony by David Berenbaum, Executive Vice President, before the Senate Committee on Banking, Sub-Committee on Housing, Transportation and Community Development . Thanks to Taylor Driscoll of Charlotte, NC for the source link!

EXCERPTS from: Ending Mortgage Abuse: Safeguarding Homebuyers

Tuesday, June 26, 2007

“The lending industry has created a system in which no one is accountable when the tsunami hits borrowers. Brokers and lenders quickly sell loans into the secondary market. The secondary market has precisely diversified risk to the point where no one investor loses significant amounts, even when foreclosures spike. Too many servicers, appraisers, and foreclosure legal specialists have also figured out how to profit from abuses in the dangerous game of mortgage monopoly.”

Appraisal Fraud (Pg. 10)

“Predatory loans include several features such as steering that increase costs beyond the point at which borrowers can afford their loans. Another factor that drives up loan costs is appraisal fraud. Appraisal fraud is commonplace in the housing market and is the result of collusion among abusive lenders and appraisers.”

“Originator sanctioned appraisal inflation is the dirty little secret of the lending industry.  We welcome this hearing and commend you Chairman Schumer, for looking into a problem that nobody likes to talk about but, in many ways, has triggered the sub-prime time bomb.”

1. Why is it that brokers are allowed to self select valuation professionals? 
2. Why is it that is lenders are forced to rely on AVM’s – which are highly inaccurate themselves – due to widespread mortgage fraud in the marketplace?
3. Why is it that, despite the protections of FIRREA and the requirements of USPAP, appraisal companies are beginning to sanction the “unlocking” of appraisal reports performed by valuation professionals and changing their content – a clear violation of the law? 

Their response, when licensed appraisers began to question the legality and impact of this activity – is to threaten or hit the whistle blowers with slap suits.”

Just ask Pamela Crowley, a Florida appraiser and a signatory member of NCRC’s Center for Responsible Appraisal & valuations who created http://www.mortgagefraudwatchlist.org/ to expose lender pressure and valuation fraud, She is being wrongfully sued by an appraisal management company for having the integrity to expose this issue.”

“Senator Schumer, your focus on valuation issues is right on point.  When the bottom falls out, borrowers are left in upside down mortgages where they owe more than the home is worth. Many sub-prime and prime borrowers are finding themselves in just this situation. We must work to stop lenders, mortgage brokers, real estate agents and title companies from pressuring appraisers to inflate home prices.”

The excerpts above are from NCRC: Ending Mortgage Abuse: Safeguarding Homebuyers

Additional Resources:

• Hearing Detail - Witness testimony links
• Appraisers push for real estate fraud rules - CNN Money.com
• Download eAppraiseIT v PCrowley Complaint (709.8K)
• Download Emergency Hearing Notice Request (344.0K)
• Download eAppraiseITvPamelaCrowley.pdf (18.1K)
• Reporting and Stopping Mortgage Fraud - Working RE Magazine

Appraisals and a Tale of Two States

Ohio and Arizona are both attempting to improve the appraisal process, each with a significantly different approach and each with national implications. Columnist Peter G. Miller comments.
Full Story: http://realtytimes.com/rtcpages/20070626_appraistate.htm

Mortgage brokers balk at regulatory plan

A battle is brewing over a plan to create a national registry that would license mortgage brokers and suspend those found guilty of predatory tactics and other wrongdoing.

On one side is the Conference of State Bank Supervisors (CSBS), which is working with state mortgage regulators to develop a uniform licensing application for use by all states starting in January. Eventually, the nationwide system would prevent miscreants from moving from place to place.

On the other side is the National Association of Mortgage Brokers (NAMB), which says the CSBS model is defective because it singles out loan brokers who originate loans but who don't actually fund them.

Since there can be rotten apples in every origination channel, the NAMB is backing the creation of a federal registry, one run by the Federal Trade Commission, the Federal Reserve or some other agency that would flag the con artists wherever they are so they can never work in the mortgage business again.

Click here for the complete AP story by Lew Sichelman: Mortgage brokers balk at regulatory plan

Runt Rants - Lender Do Not Use Lists - Appraiser Blacklisting Series: Part 1

The author is the owner of Acorn Appraisal Associates, a 21 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA

The subject today is Lender Do Not Use Lists

Many if not all lenders maintain a list of appraisers from who they will not accept appraisals. The reasons for being placed on such lists range from the most obvious;

1. the appraisers quality standards do not rise to the level required by the lender
2. customer service problems...the appraiser does not represent the lender in a professional manner to the borrower
3. loan officers' dissatisfaction with the appraiser's performance on a specific assignment

The lists exist. The reasons for them are valid. It's good businesses protecting their good businesses. The majority of appraisers, including myself, support the lenders who have the lists. It's one more quality control feature for the Lending Industry and one more quality control point for the Appraisal Profession to help identify and isolate those who do not meet our mutual standards.

Click here to send me your valid, first person, Black List examples!

The Problem

Many Do Not Use Lists are created solely from input internally within the lending organization from the accuser, perhaps, hopefully, with some second opinion to verify that the reason rises to the level of seriousness required to justify inclusion on the list.

The appraiser is often not notified of the action, evidently for liability concerns on the part of the lender. The lists are typically not made available to appraisers, also evidently for liability concerns. One such list is accessible via the internet, but before access is granted, a hold harmless agreement must be accepted, evidently to address the liability concerns the list might actually create.

There is evidence that Do Not Use Lists are shared between lenders, presumably for the purpose of adding one lenders experiences to another. Such lists therefore have an exponential potential to shut out the offending appraiser from the market.

The concept is good for both the Lending Industry and the Appraisal Profession. Yet there is a dark side that needs to be brought to the forefront, discussed, and hopefully changed.

Additions to the list are decided solely on the basis of internal input. For example; a reviewer who determines a report is below standard, or a loan officer who has a deal blow up due to actions of the appraiser. Since the appraiser is not notified of their inclusion, there is no opportunity for them to tell their side of the story, a side that just might have some relevance to the decision, a decision that could have significant repercussions to the appraiser.

Furthermore, an appraiser typically becomes aware of the inclusion long after the event (if ever), typically as a result of a lender loan officer, who knows the appraiser's work quality, is surprised to find him on the list, and sends him a private, confidential email. When the appraiser, surprised at being included on a Do Not Use List, contacts the lender to find out why and to attempt to address the issue, he is typically stonewalled.

"Yes, you are on our Do Not Use List. No, we won't tell you why. No, we can't discuss it. No, there is no recourse." Appeals up and down the corporate chain of command meet the same response.

Does this seem unfair? Does this seem Un-American? Does this remind you of the McCarthy Era of the early 1950's? It should, because it is all those things.

Click below to continue reading . . .

How much are you worth? by David Braun

Author: David A. Braun, MAI, SRA (President, Braun & Associates, Inc.) I have been actively engaged in real estate appraisal, review, and consulting since 1976. In this period, assignments have been performed throughout East Tennessee for numerous clients. The properties have ranged from vacant land, single family, condominiums, multi-family, developmental, and commercial.

In the following discussion I will address how to develop your personal hourly billing rate; how technology can improve your earnings; and how to properly price “odd” jobs. A program written in MS Excel is provided to help you develop your hourly billing rate. - David Braun

Three criteria for evaluating the importance of any new appraisal technology were listed in the open letter found on the a la mode labs website home page. They were:

1. It will improve the quality of the appraisal and/or the report;
2. It will enable shorter delivery times; and/or,
3. It will result in the appraiser being able to gross more money per hour.

Numbers 1 and 2 above basically address the effectiveness of our service in relation to our customers’ (clients’ and intended users’) needs. The long-term future of the appraisal profession will depend on appraisers successfully meeting these challenges. Appraisers must provide valuation products that are cost effective for our customers. This is the big deal about the appraiser being able to vary the scope of work based on the dynamics of the assignment, the most important of which is the client’s problem.

In my 30-plus year career as an appraiser I have devoted a lot of time to Numbers 1 and 2. I have published short articles, developed the first seminar on scope of work, written a book on scope of work, and developed software to help appraisers better document their appraisal reports. Today, I am really fired up about Number 3: the appraiser’s gross earnings per hour.

I have developed a really bad attitude concerning the financial rewards associated with a good residential appraisal practice. I know that there are many residential appraisers out there who are exceptions to the rule and make more money than is typical. I will go on record here by saying that about 50 percent of those appraisers are not doing a very good job of meeting Number 1 above. These appraisers are like a virus that has infected the appraisal profession.

This discussion is not for those appraisers as they believe the best way to achieve a higher gross income is by taking the “let’s not but say we did.” philosophy in appraising. What is a fair charge for the appraisers who complete each task with the diligence necessary to contributing to the solution of the intended user’s needs? Antitrust laws prevent me from discussing the amount appraisers should charge for a specific job, or from setting a standard hourly rate for appraisers. This is alright, because there is no one hourly rate that is right for each appraiser and no one fee that is right for each type of assignment. While I think that the residential appraiser is having a much harder time in terms of earnings than the commercial appraiser, this discussion applies to both.

There are a couple of things appraisers must understand:

1. It doesn’t matter how much money you gross, only how much money you get to spend.
2. Clients do not care what you earn on an hourly or yearly basis; they only care how much you are going to charge to complete the next assignment.

Click below to continue reading . . .

UPDATE: eAppraiseIT v. Pamela Crowley: Founder of the Mortgage Fraud Watch List sued by AMC

According to Pamela Crowley's Mortgage Fraud Watch List

"MFWL is a database of addresses, submitted by real estate professionals from all 50 states, where a sale or refinance transaction has suspicious activity. Mortgage transactions involving these addresses should be scrutinized to insure the accuracy and honesty of all data submitted as part of the loan process. MFWL will direct all potential fraud reports from our members and non members to proper authorities for investigation."

Pamela sent an "Open Letter To All Appraisers" today to alert them of her pending lawsuit with eAppraiseIT and to request their financial assistance. Download eAppraiseITvPamelaCrowley.pdf (18.1K)  I've included the contents of her letter in the second half of this blog post.

UPDATE: Download public documents

Download eAppraiseIT v PCrowley Complaint (709.8K)

Download Emergency Hearing Notice Request (344.0K)

Mortgage Fraud Watch List site included in NCRC testimony to Senate Committe on Banking

NCPAC (Pg 9) - Members report AMCs Unlocking Appraisal Reports

I've watched a bit of her issue with eAppraiseIT unfold on appraiser forums.  It appears that the controversy centers around a claim by Pamela that eAppraiseIT is unlocking and changing security settings in appraisal reports that pass through them to lender clients. 

In response, Pamela Crowley provided this email quote from an exchange with eAppraiseIT:

Quote: "In response to Ms. Crowley's statement regarding unlocking the PDF file, I can state that we do add the eAppraiseIT watermark at the bottom of every page indicating that it was prepared on behalf of EA. This was a business and anti-fraud, risk avoidance decision made several years ago.

We discovered certain unethical appraisers, who were not on our panel, completing work for a few of our clients independently and without our supervision or approval and at the loan officer's request, stipulating it was an "eAppraiseit approved file". This created claims and liability issues for both the lender and
eAppraiseit.

All of our clients, who are national lenders much like WAMU, know that if the watermark is not present it is not an eAppraiseit managed appraisal. They take great comfort in that. We do unlock the file to add the watermark. We do not edit the file's content.

Anthony R. Merlo, Jr.
President
eAppraiseIT, LLC.
12395 First American Way
Poway, CA. 92460"
End Quote

To continue reading and see Pam Crowley's letter click below . .