Appraisal Scoop

Runt Rants - Joint Appraisal Organization Letter on Subprime Mortgage Lending Misses The Mark

I just read Friday's Appraisal Scoop article Subprime Mortgage Lending Regs Need to Stress Appraisals.  I just love the way Brian edits his blog!  All these fancy links to get to things.

I've downloaded and read both the inter-agency proposed underwriting guidelines directed to the sub prime market and the joint appraisal organizations letter of response.

The Inter-agency guideline letter is right on target in my opinion. Well done. I don't see anything to change. I probably won't even comment...who needs to read "I agree!" comments...

The joint appraisal organization letter is another matter.Download Here(247.0K)  I don't agree. They want to insert an emphasis on the importance of the appraiser in the sub prime market. The letter brings up fraud, and undue pressure on appraisers.  HUMBUG!

I've commented before...I've been watching the sub prime melt down crescendo.  Not one agency, or the congress, is trying to blame it on appraisers. Not one!

Geeze Guys!!!!  Can't you leave well enough alone?!  We ain't to blame here. But you "Appraisal Organization" guys keep bringing this up, trying to push your pet positions, trying to pin the tail on some part of the donkey's anatomy.

In pushing your agenda (appraiser pressure....which I don't agree with, by the way) in order to argue for proposing that lenders only use designated members to supply their needed appraisals, you risk bringing all us innocent appraisers (designated and non) into the blame game for sub prime...a game in which we are not even a participant! Get outta there!!!

Click below to continue reading . . .

Subprime Mortgage Lending Regs Need to Stress Appraisals

The four largest professional appraisal organizations have called for requirements to stress the need for an independent appraisal process in the mortgage lending process.

 

In an April 11 letter to the federal bank regulators the appraisal groups commented on the proposed guidance on subprime mortgage lending. Download Here (247.0K)

In their effort to safeguard consumers from shoddy subprime mortgages the agencies have overlooked the importance of selecting ethical, professional and independent appraisers,” said Don Kelly, Chief External Relations Officer for the Appraisal Institute.

“Specific guidance on appraisal management and appraiser independence cannot be emphasized enough, particularly when fraud in residential mortgage lending has grown to new heights. The agencies need to revise their statement to stress this point,” Kelly stated.

The letter came in response to a proposed “Statement on Subprime Mortgage Lending”, issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration. The proposed statement was sent to industry leaders in the lending, mortgage and real estate fields.

We can’t stand by while those with a vested interest in a transaction try to use appraisers as a rubber stamp,” noted Kelly. “Additionally, to address this debilitating problem for lenders and consumers, we need help from the entire real estate community to develop and accept an industry-wide statement of ‘best practices’ on real estate appraisal and mortgage lending. With that we start to educate and commit all parties to the importance of an independent appraisal process.”

• The full letter is available:Download Here(247.0K)
• Appraisal Institute - Click here.
• See Ken Harvey's Article: Appraisers seek curbs on lender pressure - click here
• The proposed guidance is available at : www.federalreserve.gov/BoardDocs/press/bcreg/2007/20070302/attachment.pdf

AZ Reconsiders Legislation To Exempt Zillow From Appraisal Licensing AGAIN!

Legislation proposed in Arizona, which contains an amendment that would clearly exempt Zillow.com and other home-value-estimation Web sites from appraisal licensing requirements in the state, has been revived after a failed vote Tuesday.

Senate Bill 1291, which has already passed the Senate, is appraisal-related legislation that requires a two-thirds majority to pass because language in the bill relates to a change in fees. The bill failed in a 32-22 vote this week, but state Rep. Bob Stump, R-Peoria, passed a motion to reconsider the legislation on Monday, April 30.

Click here for the complete Inman News Article.

"Do Not Use" Appraiser Blacklisting - Another Viewpoint

Author: Ted Faravelli, Jr., is a real estate case consultant and state-certified appraiser specializing in forensic valuation services, litigation support and expert witness testimony. With more than twenty-three years of experience, he has consulted in over 100 cases and has been designated as an expert witness to the California Superior Courts of Sacramento, Marin, San Francisco, San Mateo, Alameda, Contra Costa, Santa Clara, Orange and Los Angeles Counties.

The "Blacklisting" topic posted on Appraisal Scoop (click here) hits a raw nerve and makes most quite uncomfortable discussing the issue.

Why? We must examine the motivations of the participants in the equation. First, you have the borrower/consumer. Their motivation is to buy or refinance their dwelling. Second, you have the loan originator who stands to profit from the transaction; provided it gets closed. Last and least, you have the valuation process; which at the very best does nothing to impede this and is the weak link in the process.

Theoretically, an appraiser must be impartial, objective and independent; and cannot be an advocate for a clients cause. A neutral third party if you will. Reality is quite different however. All parties to the transaction, with the sole exception of the appraiser, are advocates for their cause and are willing to do what it takes to consummate the deal.

After all, it would appear no one gets hurt and all parties benefit; a venerable win-win-win situation. The borrower gets their home or money, the loan originator gets their commission and the appraiser get the promise of additional assignments; provided they are a "team player" and do not impinge upon the process.

A dark and disturbing consequence of this is that borrowers are being stretched to the limit financially as appraisers who continually push values are artificially establishing phantom values of the properties they appraise. The sales then became comparable sales that are used by other appraisers performing either purchase of refinance appraisals.

But wait, values are set by the market aren't they? Click below to continue reading . . . .

Runt Rants - Business Lessons I've Learned By Watching "The Web"

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

I've been busy on personal things this past week....continuing education with AI for three days, then nursing a bug that my wife brought home from her Astros season ticket group. It's also raining at my corporate headquarters office.

1. When I attend continuing education I get philosophical.
2. When I nurse bugs I get philosophical.
3. When it rains I get philosophical.

Most people dislike what comes out of my fingers during these times. I don't blame them. But I'm sorry; it's a triple witching event. I can't help it. I love it.

Spring has sprung here in Houston, Texas. Lots of good things to enjoy at the turn of a season. I sit on my patio each morning before dawn twilight begins and read the paper. I enjoy watching the sun rise, watching wildlife awaken to a new day. With Spring comes the insect life. In this case gnats. Little mosquito like insects that don't bite, just flutter around getting into my coffee. A protein source, I've always thought. I begin my reading with an overhead light on...too dark to read otherwise. The light fixture is on an outdoor ceiling fan. The fixture has two drop chains on each side of the light, one for the light, one for the fan. I use neither...a remote sits by my rocker. A local spider has noted that arrangement.

Turning the light on triggers an onset of gnats. They are attracted to the light fixture. My friend Spidey knows that, and has set up housekeeping on that light fixture, weaving the web between the two drop chains. The light goes on and Spidey starts working. He repairs damage to the web, getting it ready to receive breakfast. 

Ever watch a spider construct a web? Very enlightening. Reminds me of someone knitting. A logical, consistent pattern, with very even spacing between the individual strands. An engineering masterpiece. 

Once the web is repaired, Spidey retreats to the very center of the web and waits, his eight appendages touching the various anchor strands that emanate out from the center. Located that way, Spidey can tell by the vibrations exactly where the gnat has been caught in the web and immediately proceeds to that location. A natural feedback mechanism.

I see lessons taught by Spidey to apply in my appraisal business. I first need to decide where to position my business for maximum effect, both physically and by the type of business I plan to build. Spidey chose the light fixture and a steady diet of gnats. I chose a major metropolitan market and a generic product arsenal for maximum community effect and maximum profit. 

Click below to continue reading . . .

Last Minute Amendments To AZ Appraisal Bill Fail To Exempt Zillow

Proposed legislation in Arizona that would have formally legalized Zestimates -- the home-value estimates generated at Zillow.com -- failed in the state House of Representatives today according to Inman News sources - click here.

Senate Bill 1291 had already passed the state Senate, and a House amendment sought to exclude Zillow and other automated home-valuation sites from the need to have an appraisal license to offer value estimates in the state.

Arizona state Rep. Michele Reagan, R-Scottsdale, proposed the amendment to the legislation that would have clarified what constitutes an appraisal and exempt Web sites like Zillow from securing an appraiser's license to offer home-value estimates in that state.

A spokesman for state House Republicans said that the amendment may be added to another appraisal-related bill.

The Bloodhound blog had earlier report the bill and the proposed amendments: one, two and three. For comparison: The proposed legislation prior to these amendments.

Brokers & Realtors "Surprised" To Hear Appraisers Are Being Pressured

"The pressure on appraisers to "make loans work" -- the industry parlance for hitting the number that a lender wants on a closing contract -- has been ratcheted up as U.S. home sales and mortgage refinancing have tumbled. By law, appraisers are required to render impartial judgments."

"Federal and state authorities are now pushing for tighter regulation, licensing standards and criminal penalties to keep all players in the real-estate transaction process on the level", according to the recent article by Chris Pummer of MarketWatch .

Even in the face of this mounting evidence of appraiser pressure, two of the largest real estate trade organization representatives appear unaware of this growing problem.

George Hanzimanolis, president-elect of the National Association of Mortgage Brokers, says: " . .. some of the perceived intimidation may just be brokers challenging appraisers' findings in a market where setting values is made tougher by fewer and more erratically priced sales."

Pat V. Combs, president of the 1.3-million-member National Association of Realtors, was "surprised to hear appraisers reporting undue pressure from real-estate brokers. Realtors routinely provide appraisers information to support the list price they assigned to a pending-sale property, including comps they used, and would be violating NAR's code of ethics if they pushed for a value to support the offer price", Combs says.

Click here to read the complete article.

Identity Theft Is A Crime - New FDIC Web Site

Appraisal Scoop.com has reported many times on the problems that appraisers and consumers face with identity theft.   Today, the Federal Deposit Insurance Corporation (FDIC), a participant in the government-wide Identity Theft Task Force, announced that it will provide a direct link to the new, centralized government Web site on identity theft.

The new site, www.idtheft.gov, was launched today.  The ID Theft Task Force's Strategic Plan, which represents the input of 17 Federal agencies, including the FDIC, sets out recommendations to prevent identity theft, to assist identity theft victims in recovering from those crimes, and to prosecute and punish identity theft-related criminals. The taskforce was created on May 10, 2006, by Executive Order to strengthen Federal efforts to protect against identity theft.

For more information on the site, you can visit either www.idtheft.gov or www.fdic.gov

Web cast: April 23, 2007 - The President's Identity Theft Task Force Press Conference

Appraiser Training: New Blog Follows Appraiser Trainee's Path To Riches!

In an earlier post I published "Becoming A Licensed Appraiser" by Coleen C. Morrison, IFA, GAA. Much of Coleen's article dealt with finding a certified appraiser to supervise and mentor the newly licensed appraiser.   Later I posted  Appraiser Supervisor or Mentor - What's The Difference? that outlines the difference between being a supervisor and being a mentor?  Today I stumbled across a rather unique blog by an aspiring appraiser trainee. 

For anyone that wants to be a fly-on-the-wall, as a San Diego, CA twenty-six year old begins his appraiser "training", here's your opportunity!  Check out $100k Journey: My path to $100,000.

Here's Neil's most recent Blog post . . .

"Started Appraisal School: I started the online appraisal school 2 days ago. I have to complete 90 hours before I can take the state exam and then I have to work 2000 hours as a trainee. Trying to finish everything asap. Back to the online course!"

Four weeks earlier . . .

Mentoring Week at Work: Training is officially over and now I start my mentor week. I basically spend the week watching a mentor work and get hands on experience. My first day was Thursday where my mentor let me do all the calling and computer work. On Friday I was just shadowing a co-worker and watched what a typical day at work would be like. Towards the end of the day, they setup my desk and they let me get to work on my own.

So far the job is pretty cool and I shouldn't have problems. I'm basically customer service for an appraisal company. I make sure appraisers do their jobs and make sure the lenders get their report on time. I'll also get a better understanding of the real estate world which is my main focus. I'm trying to absorb as much as I can..."

On-line training classes and a Mentor Week!!!???  WOW!  That's a heck of a way to start a career in real estate appraising.  I've got to wonder just how pervasive this sort of training process is across America? 

I feel on-line training is good for continuing education, but I question its value as the educational foundation of a career.  Does anyone else wonder what will happen to Neil after the "Mentor Week"?

Is Neil being "Mentored" or just "Supervised"?

A supervisor, by definition is a person who manages, or directs. A mentor however is defined more aptly as an advisor. An advisor, by title, implies that the giver of the advice has knowledge or experience. It is the knowledge and the experience that is the invaluable aspect of the training/ experience gathering process towards licensure. If a trainee is simply being “supervised”, then there could be cause for concern when actual demonstration of competency for credit of the experience is requested.

Find out what a Mentor can bring to the table - click here!

Source Blog: http://100kjourney.blogspot.com/index.html

Fannie & Freddie Bolster Sub-Prime Market with $1.3 TRILLION Loan Package

Freddie Mac and Fannie Mae said they expect to buy tens of billions of dollars of newly created subprime mortgage loans over the next few years to help prop up the roughly $1.3 trillion subprime market as lenders tighten their credit standards or flee altogether.

The move shows how the two government-sponsored companies are redeeming themselves on Capitol Hill by depicting themselves as part of the solution to surging defaults on subprime mortgages, those for borrowers with weak credit records or high debt in relation to income.

The promises to help such borrowers are bolstering their support in Congress just as lawmakers debate legislation to tighten regulation of Fannie and Freddie, both emerging from accounting scandals.

That makes it less likely that Congress will back longstanding calls from the Federal Reserve and others for tight constraints on the amounts of mortgages they can retain as investments, currently around $1.4 trillion, or 14% of U.S. home loans outstanding.

Click here for the full WSJ.com story: Fannie and Freddie Polish Image With Subprime-Loan Purchases