Appraisal Scoop

Banks Sell 3X More Than Builders

Housing remains stuck in the doldrums even with extremely low mortgage rates and despite some improvement in private payroll employment.  Part of the reason for this disconnect is the slew of foreclosures and bank-owned properties which are still flooding the housing market. 

Defaults are expected to reach new record-highs this year which have buyers holding out for better deals and traditional home-sellers battling low-ball offers from banks.  The aggressive pricing on distressed properties is undercutting individual home sellers and new home builders alike, and wreaking havoc on local housing markets. 

According to data from Housing IntelligencePro, both new home activity and regular resale activity made up a smaller portion of total closing activity compared to the first three months of last year (and every quarter since). more...

Source: Hanley Wood Market Intelligence

ICAP Announces its 2011 Summer Seminar Schedule and On-Line Registration

The ICAP seminar committee is pleased to announce registration for the 2011 summer seminars is now available on-line at www.icapweb.org . The seminars have become a summer tradition of Illinois licensed and certified real estate appraisers. In the past ICAP has only offered one seminar at two locations. This year a third seminar will be offered in Southern Illinois and qualify for an additional seven hours of continuing education credits. The “Illinois Appraiser Update” seminars will be held in Springfield on July 19th and in Lisle on August 1st. The second seminar “Surviving the Changes – Appraising in Illinois” will be held in Godfrey on August 12th.  Download 2011 ICAP Seminar Press Release

“We are extremely excited about the seminars this year. The committee did an outstanding job of selecting speakers and topics. The people in attendance are really going to enjoy the day and will find the seminar to be pertinent to their daily work as real estate appraisers”, said Randy Neff, seminar chair. “We are particularly excited about the third seminar offering in Godfrey. Plus you can attend either Lisle or Springfield and get seven more hours by attending the Godfrey seminar”.

As is tradition of the seminars, Mr. Brian Weaver, IDFPR appraisal coordinator, will be the keynote speaker. The seminar will also feature

• Mr. Jed Smith, Managing Director of Quantitative Research for the National Association of Realtors. Mr. Smith will speak about the current economic and housing market conditions.
• Mr. Wayne Pugh will give a presentation on technological tools for real estate appraisers. Mr. Pugh is a software developer, real estate appraiser and writes a column in the Valuation Magazine titled “Cool Tools”.
• Mr. Charlie Franklin, an attorney who defend real estate appraisers in disciplinary and other litigation matters will give a presentation on “Limiting an Appraisers Liability – Do’s, Don’ts and Things in Between”.
• The Godfrey seminar will feature Mr. Larry Disney, Kentucky Real Estate Board Director and his presentation of Dodd-Frank & Truth in Lending, UAD & USPAP Compliance or sometimes referred to as “Looking for Love in all the Wrong Places.”
• Additional presentations will be made by Randy Neff on Interagency Guidelines, Brian Weaver on signing as a supervisor and the FBI, on mortgage fraud.

"ICAP seminars are not typical real estate appraiser CE seminars. We are fortunate to be able to offer the level of expertise and experience of these speakers. One of the most important benefits of an ICAP seminar is to hear from Brian Weaver and learn about the most current State of Illinois requirements. We hope all Illinois real estate appraisers will plan to attend” Neff said. A new component to the Lisle venue will be the addition of vendor booths. There will be approximately 10 vendors promoting various appraisal-related products.

You can register for the seminars at http://www.icapweb.com/education.php . For more information please e-mail Randy Neff at rneff@neffvaluation.com  or call 309.691.7223.   Download 2011 ICAP Seminar Press Release

Freddie Mac Single-Family Advisory - Bulletin 2011-10

 

As the housing market continues to change, we remain focused on providing you business opportunities that are grounded on responsible lending standards. At the same time, we are committed to improving data and loan quality in support of a strong home financing industry.

With Single-Family Seller/Servicer Guide (Guide) Bulletin 2011-10, we are making changes to our selling requirements to improve the quality of appraisal data and introduce additional borrower qualification sources.

Review today’s Guide Bulletin to get complete details on the Guide changes outlined below.

PROPERTY ELIGIBILITY AND APPRAISAL REQUIREMENTS

Property underwriting and appraisal review requirements

Effective for Mortgages with Settlement Dates on or after September 1, 2011, we are updating Chapter 44, Appraisals, Inspections and the Property Inspection Alternative, to align our requirements for reviewing the appraisal report and underwriting the property with current appraisal report forms. We are also revising Section 44.15(c ), Neighborhood Section, to reinforce Freddie Mac’s commitment to purchase eligible Mortgages in all neighborhoods and market areas, and in particular, to provide additional guidance on underwriting properties in rural locations.

In addition, we are updating Section 44.2, General Property Eligibility Requirements, to remind Sellers that they are responsible for placing as much emphasis on the adequacy of the property as collateral as on underwriting the Borrower’s creditworthiness.

Changes relating to implementation of the Uniform Appraisal Dataset

Effective for appraisals with effective dates on or after September 1, 2011, we are updating Chapter 44 to provide additional information related to properties with certain conditions or quality of construction issues. Specifically, we are revising Section 44.15(e), Property Description and Analysis, to specify that a Mortgage secured by a property with a UAD condition rating of C5 or C6, or a UAD quality rating of Q6, is eligible for delivery to Freddie Mac only if all issues that caused the property to be rated as such are cured prior to delivery of the Mortgage to Freddie Mac.

As a reminder, for appraisals with effective dates on or after September 1, 2011, Freddie Mac appraisal report Forms 70, 465, 466 and 2055 must be completed using the UAD when reporting results of an appraisal for a conventional Mortgage, as specified in Section 44.20, Appraisal Data and Delivery.

Effective for conventional Mortgages that require appraisal reports and have Delivery Dates on or after March 19, 2012, we are requiring all appraisal photographs to be in color and eliminating the acceptability of facsimile copies of appraisal reports. Sections 44.12, Required Exhibits and Addenda, and 44.21, Electronic Transmission of Appraisal and Inspection Reports, have been updated to reflect these changes.

Uniform Collateral Data Portal requirements – Effective for all Mortgages with appraisals submitted to the UCDP

As announced in a Single-Family Update e-mail on April 12, 2011, the UCDP will be available for use on June 27, 2011.

For all Mortgages with appraisals submitted to the UCDP:

• The submission of appraisal report forms to the UCDP does not relieve the Seller from compliance with Freddie Mac appraisal requirements and does not affect Seller representations and warranties regarding appraisals and the Mortgaged Premises
• The Seller’s ability to select a lender’s agent or other party such as an appraisal management company in connection with the use of the UCDP does not constitute Freddie Mac’s endorsement or approval of such party and does not relieve a Seller of any obligations pursuant to the Guide or the Seller’s other Purchase Documents, including the requirements in Section 2.24, Freddie Mac Exclusionary List, related to the Exclusionary List

Section 44.20 has been updated to reflect the language above. Note that this language is applicable to all appraisals submitted to the UCDP, including those that are submitted prior to the future effective date of the Guide section, March 19, 2012. Mortgages delivered to Freddie Mac

Download Freddie Mac Bulletin 2011-10

Fannie Mae "Using the Uniform Appraisal Dataset" Online Tutorial

Fannie Mae has posted their own tutorial on the Uniform Appraisal Dataset. You can find it at this website. On good authority Fannie Mae is having a Q & A session on May 19, 2011 about the tutorial. It appears you must take the tutorial to be allowed to participate in the Q & A session. Source: CCAP

 

Appraiser Law Blog - "FDIC undoubtedly continues to be the biggest source of appraisal-related liability claims"

Appraiser Law Blog: Source:

In December, we offered 11 predictions for AMC liability risks in 2011. Three of the predictions were:

#1 -- Several AMCs would be sued by the FDIC,

#5 -- Some AMCs would see their "reps and warrants" come back to bite them, and

#11 -- The FDIC would continue to be the single biggest source of appraisal-related claims.

See 11 Predictions for AMC Liability Risks in 2011. These came true in the last two weeks.

The lawsuits described below against CoreLogic and LSI Appraisal will likely also lead #3 to occur: a few AMCs will endure liability aftershocks relating to litigation by the purchasers of mortgage backed securities. Purchasers of WaMu packaged mortgage securities -- and likely MBS from other sources -- will almost certainly pursue their own claims against these AMCs. We may also see consumer class actions attempting to emulate the FDIC actions.

Click here for the complete article

NAR Releases Statement Regarding Appraiser Independence

Today, the National Association of Realtors (NAR) released a statement regarding appraisers and appraiser independence on their appraisal web page. In the statement, NAR expresses concerns about recent attempts to interfere with the appraisal process and the independence of the appraiser.

Over the last 18-36 months a host of rules, regulations, and laws have been announced to further protect appraiser independence yet appraisers continue to be pressured. NAR believes this pressure unnecessarily adds risk to the mortgage transaction for lenders and consumers. You can read the full statement here.

Source: Appraisal Insight Blog

Appraisal Institute Warns Appraisers About Liabilities When Working with Some AMCs

Nation’s Largest Organization of Real Estate Appraisers Says Consumers Could Suffer

CHICAGO (May 12, 2011) – The Appraisal Institute today cautioned real estate appraisers about signing agreements imposed by some appraisal management companies that seek to hold residential appraisers responsible for AMCs’ actions. Its president warned that consumers could be the ultimate losers.

“Appraisers should be very careful about signing any agreement, especially one that makes them responsible for another party’s actions,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “While there are some fine AMCs doing business today, many AMCs shift liability onto appraisers. For many professional appraisers, it’s simply not worth the risk.”

Magdziarz, as president of the nation’s largest professional organization of real estate appraisers, noted that the most qualified, most competent appraisers often refuse to sign such indemnification agreements. “That means that consumers ultimately suffer, because the valuation of their property isn’t likely to be conducted by an appraiser with the most training, education and experience,” he said. “And without a reliable, credible opinion of value, everyone involved in a home sale suffers.”

While lenders can manage appraisal operations with internal staff, some choose to outsource these functions to third-party management companies called AMCs. These firms act as “middlemen” between lenders and appraisers.

“To get an idea of how potentially dangerous this situation is for appraisers, one need only look to the FDIC’s recent action,” Magdziarz said in reference to the Federal Deposit Insurance Corp. complaint filed May 9 against Lender Processing Services and CoreLogic that seeks to recover roughly $283 million in losses allegedly tied to appraisals. “Regardless of the merit of the FDIC’s charges, it’s clear that appraisers who sign indemnification agreements expose themselves to unnecessary liability that can ruin their careers and destroy their businesses.”

Magdziarz also noted the potential effect on consumers, who often have to rely on valuation services from some of the least qualified and least competent appraisers hired by some AMCs. He warned that such agreements drive professional appraisers further from consumer mortgage lending valuation services.

“The Appraisal Institute’s best advice for consumers is to ensure their lender hires a qualified, competent appraiser, such as a Designated member of the Appraisal Institute,” Magdziarz said. “For appraisers, the Appraisal Institute advises that they know and understand any agreement they sign and that they not sign any agreement they feel is unreasonable or not in their best interests. For most AMCs, providing a certificate of insurance may be a good alternative to signing an indemnification agreement.”

FDIC files complaint against LSI, CoreLogic, f/k/a eAppraiselIT and others for negligence and breach of contract.

The Federal Deposit Insurance Corp. has filed a complaint against Lender Processing Services Inc. related to an alleged breach of contract with the now defunct Washington Mutual Bank to recover $154.5 million in losses, according to a Securities and Exchange Commission filing.

The FDIC filed the suit in its capacity as receiver for WAMU May 9 in the U.S. District Court for the Central District of California. The suit relates to 220 appraisal reviews performed between June 2006 and May 2008.

The suit states that the losses were caused by the alleged gross negligence of LPS with respect to certain services of its appraisal management subsidiary LSI Appraisal LLC. The FDIC claims that the services provided “failed to conform with federal and state law, regulatory guidelines and other industry standards, including specifically the provisions of the Uniform Standards of Professional Appraisal Practice,” according to the SEC filing.

In more than 75 percent of the 220 appraisals cited in the suit, LSI was contracted only to provide reviews of the appraisals, not to conduct the initial, full appraisals, the SEC filing stated.

LPS (NYSE: LPS), of Jacksonville, provides technology and services to the mortgage and real estate industries.

The SEC filing states that LPS believes there is no basis for the claim against LSI: “LPS believes that any loan losses are not because of appraisal issues, but are due to the quality of underwriting by WAMU, borrowers defaulting and the weakness of the economy after the loans were made, among other factors.”

WAMU, which was based in Henderson, Nev., became the largest bank in U.S. history to fail when it was closed by the FDIC in September 2008 and taken over by JPMorgan Chase Bank. WAMU, along with its subsidiary Washington Mutual FSB, had combined assets of $307 billion.

In an emailed response, LPS spokeswoman Michelle Kersch stated, “LPS intends to aggressively defend these allegations.”

Separately, the FDIC also, as receiver of WAMU, filed a complaint against CoreLogic Valuation Services LLC, f/k/a eAppraiselIT LLC and several of its current and former affiliates alleging gross negligence and breach of contract.

CoreLogic said in an SEC filing, “The company continues to believe the FDIC’s factual allegations, legal theories and damage calculations have many flaws, and the company intends to defend itself vigorously.”

SOURCE: Jacksonville Business Journal

http://www.bizjournals.com/jacksonville/news/2011/05/11/fdic-files-complaint-against-lps.html

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via www.bizjournals.com

What is at the end of a Hangman’s Noose? A giant loophole!!

GUEST POST: David Burns is a 43 year old State Certified Residential Appraiser. He has been appraising for almost 13 years in a family business with siblings that are also appraisers. David is passionate about fighting for the integrity and independence of the appraisal industry.

It appears as though the Federal Reserve is not going to offer any short term help in giving us our much sought after clarification on Customary and Reasonable (C & R) fees. The AMCs are spouting out word for word the "First Presumption of Compliance" when challenged on fees and appraisers are still being offered pathetic crumbs from the middle man.

My mother always told me to look for the silver lining in every dark cloud, and I think I have found it. The Loophole is our salvation!!! Both presumptions are not safe harbors and can be challenged.

"Both of the two presumptions of compliance are rebuttable. The presumption may be rebutted with evidence that the amount of compensation paid to a fee appraiser was not customary and reasonable for reasons that are unrelated to the conditions for the presumption. How this will be done remains to be seen. If a presumption relied upon is successfully rebutted, this means that the customariness and reasonableness of the compensation is determined based on all of the facts and circumstances (i.e., without a presumption of compliance or violation)" - Source

As written, Presumption One, with the loophole is the weaker of the two. Therefore, any AMC going with Presumption One is putting themselves in serious danger of significant fines. $10,000 a day per offense could wipe out the smaller AMCs very easily. The larger ones would either suffer massive multi-million dollar fines or step up and follow the laws the way they were intended.

Let’s work with the loophole and report every incident (every file) to the authorities. Do it now, do it today! 

• Report them to the Attorney General of the state in which they are located and the state they are operating in.
• Report them to the Federal Trade Commission.
• You can even file an online complaint with the Federal Reserve and they will forward your complaint to the appropriate agencies.
• Report them to the BBB.
• Report them, report them, and report them.

It is only my speculation, but I think The Federal Reserve expected the AMCs to continue behaving unscrupulously and decided to give them enough rope to hang themselves. The laws were written with $10,000 a day fines for AMCs for a reason. Now we as appraisers, at last have the power to report the AMCs, and leave them dangling from a loophole at the end of a hangman’s noose.

http://www.naag.org/current-attorneys-general.php

Federal Trade Commission Consumer Response Center Room H-240 600 Pennsylvania Avenue, N.W. Washington, D. C. 20580 Website: www.ftc.gov  (use the File a Complaint link)

Office of Thrift Supervision Consumer Response Center 1700 G Street, NW Washington, DC 20552 Email: consumer.complaint@ots.treas.gov  Website: www.ots.treas.gov

GUEST POST: David Burns is a 43 year old State Certified Residential Appraiser. He has been appraising for almost 13 years in a family business with siblings that are also appraisers. David is passionate about fighting for the integrity and independence of the appraisal industry.

TAVMA Responds to Fed Regarding Appraiser's On-Line C&R Fee Petition

 

 

 

 

 

 

 

Re: Interim Final Rule - Customary and Reasonable Fee Stipulation

Download TAVMA C&R Fee Stipulation

Dear Ms. Johnson:

The Title Appraisal Vendor Management Association("TAVMA") wishes to express its views about the misinformation being disseminated by appraisal organizations and publications about the Federal Reserve's Interim Final Rule and Appraisal Management Companies ("AMC's"). TAVMA is a national trade association of real estate settlement services providers including many leading appraisal management companies.

Some appraisers continue to attack AMC's by asserting that the DOD Frank Act, TILA and the Interim Final Rule prohibit consideration of fees negotiated in arms length transaction between AMC's and appraisers. The Appraiser News Online, Volume 12, Number 16, April 20, 2011, reports that "Federal Reserve officials indicated that AMC fees were not to be included in any assessment of recent fees paid to appraisers" under Presumption 1 of the Interim Rule.

TAVMA understands that this statement and the article in which it is contained misrepresent the statements of the Federal Reserve officials who were present at the San Antonio conference. Given the timing of the article, coming as it does with the roll-out by many lenders and AMC's of pricing consistent with Dodd Frank and the Interim Final Rule, such misstatements are causing confusion in the marketplace and are adding unnecessarily to the regulatory burden of those working to comply with the new requirements. TAVMA requests that the Federal Reserve Board and staff take the steps necessary to correct this distortion of its Interim Final Rule.

Similarly, a recent on-line petition directed to the Federal Reserve asserts incorrectly that the fees paid by AMC's to appraisers are not to be considered in the determination of a customary and reasonable fee ( http://www.petitionon line.com/CnR2011/petition.html ). TAVMA strongly disputes the substance of the on-line petition, which takes exception to the Federal Reserve Board's interpretation of TILA Section 129E(i) as allowing consideration of fees paid by AMC's to appraisers in the determination of the "customary and reasonable rate" of compensation for fee appraisers. The petitioners show contempt for others in their profession by declaring that the work of those appraisers who will work for less than the petitioners" is substandard.

The signers of the petition want the Federal Reserve Board to write an exclusion of consideration of fees paid to appraisers by AMC's into Presumption 1 of the Interim Rule; however, the requirement that determination of "customary and reasonable rates" take into account "recent rates paid for comparable appraisal services" would be unnaturally skewed if AMC's and lenders could not consider the fees that they have long been paying for appraisals.

In adopting the Interim Rule, the Federal Reserve Board observed that the customary and reasonable compensation provision that Congress adopted as part of TILA is identical to a requirement included in a 1997 HUD Mortgagee Letter obligating FHA lenders to ensure that appraisers are paid "at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.’” The emphasis is on the marketplace in which AMCs have long had an integral role.

The Dodd Frank Act and the Interim Rule identify a specific type of survey in which AMC fees are not to be considered but this does not hold in other circumstances. To exclude, as the petitioners seek, the fees charged by appraisers in the majority of transactions would deny marketplace realities to the detriment of consumers, lenders, and competition. Such an interpretation of TILA's "customary and reasonable" provision likely would be unconstitutional and violate anti-trust laws, and would not serve the best interests of consumers,lenders or competition.

TAVMA's members are working with lenders and appraisers to comply with the TILA and the Federal Reserve Board's Interim Rule. TAVMA strongly opposes the position taken in the recent petition. The customary and reasonable fee rule that was issued by the Fed has been effective for less than a month. The petitioners should allow a reasonable time for the new rule to be implemented.

On behalf of TAVMA, I appreciate your time and attention to our views.

Download TAVMA C&R Fee Stipulation