Appraisal Scoop

AMCs vs. Direct Contact Roughly 50/50 Post-HVCC

Nearly six weeks after the Home Valuation Code of Conduct went into effect, technology vendor Global DMS found that the number of lenders ordering appraisals through appraisal management companies was roughly the same percentage as those lenders who ordered appraisals directly from the appraiser.

While Global DMS – which owns and operates Oasis software and e-Trac – reported that there has been a surge in lending institutions ordering valuation services through AMCs, there also have been suggestions that customers of AMC services have been dissatisfied with the results; especially when those results have led to increased fees to the borrower and declining fees to the appraiser.

Click here to read the full article from the Appraisal Institute

Open Letter from a la mode Chairman: Reversing the damage done by the HVCC

To: Our colleagues in the real estate industry

From: David Biggers, Chairman, a la mode, inc.

RE: Reversing the damage done by the HVCC

As many of you are aware, we’ve always been at the forefront of lobbying for and protecting the interests of the profession. That’s why, a little over a year ago, we began the complex and expensive process of trying to educate everyone we could about the little-known dangers of the proposed “HVCC”, or Home Valuation Code of Conduct.

"Unfortunately, as the economic meltdown and our presidential election garnered all the attention in Washington this past year, the HVCC transitioned quietly from a mere proposal into concrete national policy altering the core aspects of virtually all real estate transactions, with devastating effects."

Today, the complications of the HVCC are killing real estate deals in every corner of the country, forcing buyers to pay more in closing costs while receiving less service, eliminating the positive aspects of the business relationships that REALTORS®, mortgage brokers, and appraisers have nurtured for decades, and shifting market value decisions to unfettered and often clueless appraisal management companies located thousands of miles away. Worse, your transactions, in your town, are many times being derailed by night shift hourly workers parading as “appraisal reviewers” in call centers half a world away. That’s not appraisal independence – that’s appraisal insanity, and it’s hurting every one of us.

Our friends at NAMB, the National Association of Mortgage Brokers, are seemingly more aware of that than anyone. They agreed with us from the beginning that the HVCC is not just an appraisal issue and indeed is a threat to the livelihood of thousands of independent small businesses run by their members.

That’s why we’re happy to pass on this Call To Action from NAMB and to encourage you to follow through with the phone calls, e-mails, letters, and visits to everyone you can reach. Getting the reversal of the HVCC back into the national spotlight is achievable if we each take the time to make a difference.

A few minutes is all that’s required, but it could literally save the entire real estate industry from the specter of ill-conceived national policy interfering with inherently local real estate practices and relationships. None of us can afford to let that take root. Please read NAMB’s call to action [click here], and help us all save our industry from this dangerous federal bureaucratic meddling.

NAMB - HVCC Call To Action

To: All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers

From: Marc Savitt, President- National Association of Mortgage Brokers

After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, Director of FHFA (GSE Regulator) James Lockhart, and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.

In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing everyday, until advised to stop by NAMB. This will NOT be a one day action!

We have received hundreds of e-mails through the hvcc@namb.org  e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.

Who will you be contacting?

• NY Attorney General Andrew Cuomo’s Office: (212) 416-8000, Internet Complaint
• Federal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
• Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
• Freddie Mac: (703) 903-2000, Internet Complaint
• Senators, Representatives and Governors: Click here for contact information.

Also, please contact your local TV and Newspaper outlets. Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties.

For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

Talking Points:

1) NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.

2) Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.

3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.

4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

5) No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

Click here to continue reading . . . .

New Appraisal System (HVCC) Impacts Consumers

[The other day Appraisal Scoop posted I'm just an Appraiser. How can I do anything to impact the HVCC? , with permission from Truett D. Neathery, who suggested getting LOCALwith your activism.  I belive the following article provides a good basis for your "Letter to the Editor" or elected official.]

The HVCC or Home Valuation Code of Conduct was recently implemented by Fannie Mae and Freddie Mac as a new system of appraisals in the U.S. Under the rules, many of the appraisals are handled by management companies (some of which are also owned by the lenders themselves). The system is designed to reduce fraud and lower costs with an improved appraisal.

This new system has numerous flaws and has been widely criticized from both the Appraisal Institute (which represents over 20,000 appraisers nationwide), and the National Association of Realtors.

Some of the major criticisms include:

Homeowners don't choose who they want to complete the appraisal of their home or how they calculate the value. The appraisal management companies are actually unregulated and the quality of their appraisals may be inferior to those of an established professional appraiser.

The costs are actually increased since the appraisal management companies charge extra for their role. Typically, an appraiser charges approximately $325, but when consigned by the management company they only receive about $200. The customer is charged $400 and must pay up front for the appraisal instead of during closing. If the deal doesn't go through, the consumer absorbs the cost and the management company still pockets the extra charge.

There doesn't seem to be any fee management and the costs for appraisals have increased dramatically. As reported by the National Association of Mortgage Brokers, one lender, EverBank, advertised its fees as follows: $465 for GHA appraisals and $390 for standard single family appraisals. Flat fees in Hawaii are a hefty $700.

The new system is being extended to FHA mortgages, even though they are not included under the new code of rules.

This new regulation increases the overall closing time and the waiting time before the customer can receive funds.

Appraisal portability is also decreased since each lender will require a new appraisal.

Small business appraisers will be squeezed out even though they may have a better knowledge of the area and may be considerably more qualified than the employees of the designated unregulated appraisal management company. This removes competition and equitable pricing guidelines for the consumer. The larger management companies will distribute orders through a central area which may be located hundreds of miles from the property being appraised. The chances of the consumer of receiving a below standard appraisal by employees who are not familiar with the area are increased.

The HVCC was never required to pass through the Administrative Procedures Act, the regulatory Flexibility Act or any other procedural filter generally required by a federal agency. There are some that consider the HVCC code invalid and unenforceable due to its failure to comply to the Administrative Procedures Act.

The Real Estate Settlement Procedures Act (RESPA) regulates the the way lenders and mortgage brokers close a sale and do business. The HVCC is in violation of rules against up-charging and fee-splitting. Every lender could leave themselves open to a possible HUD lawsuit on each loan they issue.

                                                      ####

Author Resource:  Work with a qualified, dedicated agent for your next Foxhall DC condo purchase. Justin Lee will help you find the perfect home in Washington D.C.

Article From Real Estate Pro Articles

Speak Up! Home Valuation Code of Conduct's Unintended Consequences

Today I'm starting a new category on Appraisal Scoop called - Speak Up!  I'll use this category to re-blog (with permission) the best of comments, forum posts, and "Letters To The Editor" that I find.  If you come across (or have written) a particularly newsworthy story, please drop me a note at bjdavis@OurAppraisal.com

The first post in this series is by Linda Morgenroth or Alliance Appraisals on Ken Harney's LA Times article Fannie Mae and Freddie Mac's new rules are raising appraisal costs, critics say on 5/17/09

I enjoyed Mr. Harney's well-written article. I only wish he had an appraiser respond to Mr. Kuegler's comment that the appraiser can make up the AMC fee cut through "a steady stream of work, training and support."

"As to appraisers' complaints about fees, Kuegler said, his firm offers them "the ability to have a steady stream of work, training and support." In other words, appraisers can expect to make up in overall volume what they're sacrificing per assignment. "

My response would be:

A) What if you already had all of the volume you could possibly handle at full fees prior to the HVCC? How then does the appraiser benefit from the fee cut?

B) Exactly what kind of training do they purport to provide, given the myriad of classes, CE, exams and supervision already mandated? Does it actually have value to the appraiser in the marketplace or is it self-serving to benefit the AMC? Or perhaps he means their appraisers require training because the appraisers they can attract with the typical AMC fee schedule are completely inexperienced?

C) I would like Mr. Kuegler to elaborate on the "support" his company provides. I suspect their definition of support actually has more to do with emailing the appraiser twice a day asking: "Has it been inspected? We need the report asap. It's been 48 hours since we ordered it. Tardy reports will result in termination of your services." Or perhaps they offer helpful suggestions about how you can greatly increase the volume of work they will send you if you will lower your fees down to $175 or $200. That is akin to suggesting to GM that they could solve their financial woes if only they cut the price of each automobile by 50%.

I don't know the actual answers to these questions as I am not willing to contract with a low-paying AMC to find out. I didn't spend four years at Northwestern University and many more building a successful, ethical appraisal practice to be suddenly become the de facto employee of an AMC. I have chosen instead to tailor my business plan to clients not affected by the HVCC. Additionally, I work with lenders who have chosen to create HVCC-compliant departments to coordinate their appraisals. These lenders have created a carefully selected panel of appraisers assigned by a department not compensated for loan production. They generally ask for reasonable turn times of 5-7 days and pay the appraisers standard full fees.

As referenced in your excellent article, the most qualified, best-educated, most experienced appraisers will not be the ones willing to accept the cut-rate fees, 48-hour turn-around times and net 30 payment terms offered by the as-yet unregulated AMCs. More likely than not, it will spawn appraiser "trainee mills" run by unscrupulous appraisers. They send trainee appraisers out to inspect the property and write the report (passing themselves off as the licensed appraiser, even sometimes wearing the appraiser's name tag). The licensed appraiser then reviews and signs the report, fraudulently asserting that they personally inspected the property. This type of fraud was rampant during the last boom and will very likely become common again in this AMC scenario.

Appraiser independence is crucial. However, how can we expect to achieve this by handing the power over to AMC's often wholly-owned by the banks who will benefit financially by the loan closing successfully. Aren't we just creating a new source of pressure on appraisers? Doesn't this sound more than vaguely similar to the Wamu-EAppraiseIt scandal that prompted Mr. Cuomo's initial investigation?

The increased hit to the consumer's wallet, the decrease in quality of mortgage appraisals and the delayed recovery of the real estate industry are the three biggest unintended casualties of this ill-advised plan. The harm caused to tens of thousands of small appraisal firms is additional collateral damage that remains unaddressed.

Best regards,

Linda Morgenroth, Alliance Appraisals

Linda@AllianceAppraisalsOnline.com

Bank / AMC Appraisal Conflicts Could Continue Under New HVCC Rules

There's a MUST READ article on "The Mortgage Lender" Implode-O-Meter blog by Teri Buhl that sheds some light on

• What the GSE's knew (and when),
• What changes lenders and AMCs have made (if any) in their appraisal ordering practices
• Secret Blacklists and Whistleblower Traps
• Cuomo's "Chinese Wall"

Teri Buhl is an investigative journalist covering Wall Street who has written for the New York Post Sunday Business, HousingWire and Trader Monthly. Contact her at teribuhl@yahoo.com.

Assuring Accurate Appraisals, Part I: Perennial Pressure Continues

Appraisals have become yet another sticking point on the already viscous road to home ownership because perennial pressure on appraisers is proving bad for business, housing and consumers.

According to Broderick Perkins article Assuring Accurate Appraisals -

"During the height of the housing boom, appraisers were pressured to up the value of homes. Now, during the housing downturn, appraisers are being pressured to lower the value of homes."

Click Here for the full Realty Times article by Broderick Perkins

Next Week: What's a consumer to do? How consumers can play a leading role in the appraisal process.

Shareholders File Class Action Suit Against eAppraiserIT / WaMU For "Requesting" Artificially Inflated Appraisals

SANTA ANA, Calif. (CN) - First American Corp. provided 260,000 false and inflated appraisals to Washington Mutual in the past 2 years, inflating its own share price through false and misleading statements, according to a shareholder derivative class action. The class claims First American did this through its subsidiary, eAppriaseIT.

The class claims WaMu was eAppraiseIT's largest customer. Plaintiffs claim that Santa Ana-based

"eAppriaseIT, at Washington Mutual's urging, provided materially false and inflated appraisals for properties where Washington Mutual sought to originate a mortgage. This enabled Washington Mutual to engage in real estate mortgage transactions that would otherwise have been untenable had the property at issue been correctly appraised.

Senior executives at First American were aware of and willing to accommodate the request to falsify appraisals. Washington Mutual's competitive place in the market and profit were driven in large part by the number of mortgages it issued based upon artificially inflated appraisals issued by eAppriaseIT."

The complaint adds: "On Nov. 1, 2007, the New York Attorney General filed a complaint alleging that beginning in Summer 2006, Washington Mutual put pressure on eAppriaseIT to increase the appraised value of homes. ...

Defendants' improper appraisal practices during the relevant period [April 26, 2007 to the present]:

1.  rendered the company's statements about its compliance with ethical and legal guidelines materially false and misleading;

2.  rendered defendants' statements about the adequacy of the company's internal controls materially false and misleading;

3.  caused certain of the company's reported financial information, including revenues associated with home appraisals, to be materially overstated throughout the relevant period;

4.  caused the company's loan loss reserves, provisions for doubtful account and contingent liabilities to be materially understated during the relevant period; and

5.  caused defendants to report financial results that were in violation of GAAP."

 Plaintiffs are represented by lead counsel Glancy, Binkow & Goldberg of Los Angeles.

Source Document - Click here

Article Source:  Courthouse New Service

Class Action Suit Says Wells Fargo, "Rels Valuation" Illegally Strong-arm Appraisers

First appraiser suit against Wells Fargo and Rels claims companies blacklist appraisers.

SEATTLE – Today two real-estate appraisers filed a proposed class-action lawsuit against Wells Fargo (NYSE: WFC) and Rels Valuation, an appraisal management service, claiming the two organizations pressured and intimidated appraisers to deliver artificially inflated home appraisal values to help close loans and increase profits.

The suit, filed in U.S. District Court in San Francisco under the Racketeering Influenced and Corrupt Practices Act (RICO), claims that beginning in 2004 Wells Fargo and Rels colluded to punish appraisers who refused to inflate appraisals by denying them future appraisal work.

Rels is one of the largest appraisal management companies in the country, acting as an intermediary between banks and appraisers. Appraisers, by law, are intended to be independent and autonomous from the influences of others, but according to the complaint are compelled to do the bidding of Rels, and through them Wells Fargo.

“We plan to show Rels effectively tells the appraisers what they want to see in the valuation, and if they don’t deliver, they are locked out of future work,” said Steve Berman, the attorney representing the plaintiffs and managing partner of Hagens Berman Sobol Shapiro.

According to Berman, Rels provides the appraiser with a predetermined figure called the ‘Borrower Estimated Value’ and expects the appraisers to deliver reports with values exceeding the Rels-supplied figures.

“We heard from appraisers who say that after providing bona-fide appraisals that come in below what Rels wants, the company contacts them and strongly suggests they reevaluate the property,” Berman noted. “If an appraiser refuses, we contend Rels simply refuses to use them again.”

Don Pearsall and Timothy Savage both claim Wells Fargo tried to strong-arm each of them into inflating appraisal values, violating the laws and regulations of the Uniform Standards of Professional Appraisal Practice (USPAP). The USPAP rules clearly state an appraiser must not accept an assignment that includes the reporting of predetermined opinions and conclusions - something the lawsuit claims Rels does on a regular basis.

According to the compliant, Rels and Wells Fargo have given appraisers predetermined comparable properties to base appraisals, further compromising the appraisers’ independence.

Plaintiff Pearsall, a long-time appraiser, completed an appraisal for Wells Fargo and Rels in 2007. After submitting his report, Rels asked that he alter the report to reflect the company’s desired views on the property.

After refusing, the suit claims Rels blacklisted Pearsall, stripping him of a large portion of his income.

Timothy Savage, an appraiser in Vail, Colorado, also submitted two appraisals to Rels in 2009, which the company rejected, asking him to increase the appraisal values. After refusing, Savage received a letter from Rels informing him that he is no longer included on the approved panel of appraisers, the suit claims.

“We’ve heard from appraisers across the country sharing similar stories - bullied into inflating prices and blacklisted when refusing,” Berman added. “Apparently the treatment that both Tim and Don experienced is the same for hundreds, if not thousands of appraisers.”

The lawsuit seeks to represent all state-licensed or state-approved appraisers nationwide who’ve been removed as an approved appraiser by Wells Fargo or Rels Valuation. The suit asks for treble damages and is the first lawsuit filed on behalf of appraisers against Wells Fargo and Rels.

You can learn more about this case by visiting www.hbsslaw.com/appraisers . If you’ve performed appraisals for Wells Fargo or Rels Valuation and been blacklisted, you can also contact attorneys at wfc@hbsslaw.com.

Click here for the filed suit.

About Hagens Berman Sobol Shapiro

Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Boston, Los Angeles, Phoenix, San Francisco and New York. Since the firm’s founding in 1993, it has developed a nationally recognized practice in class action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit www.hbsslaw.com .

Article - HVCC Appraisal Process Agreement Sparks Debate in Industry

The April 2 article by Tim Grant of the Pttsburgh Post-Gazette starts . . . "Some say agreement [Home Valuation Code of Conduct] governing appraisal process will do little to improve the system."

Appraisers who work on behalf of appraisal management companies complain that many such companies hire appraisers based on who will work for the lowest fee and provide the fastest turnaround rather than the quality of work, experience of the appraiser or complexity of the assignment.

A new agreement by government-backed mortgage finance companies Fannie Mae and Freddie Mac that takes effect May 1 will shake up the home appraisal industry by giving appraisal management companies a stronghold on the appraisal process.

Click here to read the complete article