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;
- the appraisers quality standards do not rise to the level required by the lender
- customer service problems...the appraiser does not represent the lender in a professional manner to the borrower
- 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.
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It is also bad business practice. It's bad business practice for both the Lending Industry and the Appraisal Profession.
We both want to identify and isolate the poor quality, the unprofessional, the fraudulent. But we both also want to be left with the best.
In the present system, some of the best are being unjustly accused and convicted without representation and without recourse. That's bad business for both the Lending Industry and the Appraisal Profession.
It seems to me that Do Not Use Lists are a yin/yang proposition. On the one hand both good lenders and good appraisers agree with their existence. On the other hand, because of certain weaknesses in the system, those lists can actually defeat the objectives of both good lenders and good appraisers.
Accordingly, I think it appropriate to differentiate these lists by two labels: Do Not Use Lists, and Black Lists. Do Not Use Lists, properly maintained, properly screened, with notification and recourse are good. Black Lists are not properly screened, have no notification or recourse procedures, and are bad.
Let me share with you two personal, painful examples of each type.
A Do Not Use List
Many years ago I did a commercial appraisal for a long time bank client. It was a proposed shopping center. The assignment was done in the fall of the year, shortly after USPAP announced in the preceding summer changes regarding the way proposed developments were to be presented in written appraisal reports. My report did not incorporate those changes as documented in the USPAP revisions.
Shortly after I delivered the report, the Bank Client loan officer called me and said that the internal review found fault with my report, not for value reasons...I had always provided as is value (the land) and as proposed value (the proposed improvements, subject to construction) but because the report presentation did not conform to the new USPAP. I was horrified. The reviewer was correct, and I said so. The Bank was forced to obtain a second appraisal of the property, which confirmed my value conclusions, but which also met the proper reporting format.
Despite many years of doing work for that Bank, I was placed on their Do Not Use List. I was so notified by the loan officer. That Bank represented twenty percent of my commercial business at that time, but I had no objection to their actions. I did not fulfill my responsibility to my Client, and I felt the punishment was just. I have never done business with that Bank since then, and I likely never will.
That's hard, but fair. That's a proper Do Not Use List.
A Black List
Two years ago one of our Bright Horses was doing an inspection for an AMC. The house was a sale, the lady of the house was in the midst of packing/unpacking. A bedroom door was closed. The appraiser requested permission to inspect the room. It was granted. The appraiser opened the door. A lamp had been leaned against the other side and tipped over, damaging the lamp. The lady of the house became upset, calling the lamp a family heirloom.
The appraiser looked at the lamp, it appeared to be an ordinary lamp. He immediately apologized and told the lady that Acorn would pay for the damage, all she need do was tell us the amount that she thought fair. The amount quoted seemed quite high to the appraiser, but he simply said that someone would be calling her to deliver the check.
Once in his car, the appraiser first called our contact with the client and alerted them to the situation. He then called me. I immediately called the lady, identified myself, apologized again, confirmed the amount of the check to be sent and the address to which it should be delivered. The check was in the mail that day.
Subsequently the lady called her loan officer, complimented the appraiser for his handling of the situation, and we thought the issue settled. I even used that situation as an example of good client service to our staff, and in posts on various forums.
Fast forward two years. We noticed this same appraiser was not receiving a typical number of appraisals from this particular client. We called to see it he had been accidentally dropped from their list of approved appraisers. Nope came the reply....he was on a do not use list as a result of that incident two years before. We explained the situation had been resolved to the borrower's satisfaction, even to the point of the borrower apologizing for her behavior.
All to no avail. The appraiser was blacklisted, and could not be removed. He remains so to this day.
We were not aware of his being blacklisted, only learning of it two years later when we inquired. Despite the problem being resolved and having nothing whatsoever to do with quality of the appraisal, nothing can be done according to the client.
That's hard. That's unfair. That's a Black List.
My examples are not isolated instances! A couple of weeks ago an appraiser friend related a Black List example to me, and asked what he could do. I can't help him. I tried. I can't. I then committed to try and shed light on the issue by using this modest bully pulpit I am blessed to have here.
I put the word out on several forums that I was writing this series and asked for folks to take the time to write me with examples of Black Listing. I asked for the names of the appraisers and the names of the lenders for my "work file", but I promised to keep both confidential in the coming airing of each case. I'll keep that promise. So far I've received a score of examples.
If any of you reading this have had a similar Black List experience, or you know of someone else who has, please take the time to send me an email at [email protected]. I'll add that example to the list.
The next column of this series will cite those examples of such Black List cases, all from real live appraisers dealing with real live lenders. All will meet the definition of an unfair Black List case.
What's Next
I'm not looking for sympathy here. Clearly all can see that. Nor are the Black Listed appraisers seeking sympathy. What we are seeking is fairness. Fairness for the good of the Lending Industry and for the good of the Appraisal Profession. We all agree that Do Not Use Lists are good for both sides. We also think that Black Lists are bad for both sides.
In the final column of this series I will offer some reasonable suggestions as changes to the procedures that will help both the Lending Industry and the Appraisal Profession achieve the objectives of Do Not Use Lists, while ensuring that Black Lists cease to exist. I'll also suggest certain venues which are coming up later in 2007 where it would seem appropriate to add this topic to their agendas.
[Editor's Note: In Part 2, Ken began showing real world cases of blacklisting. Part 3 is a continuation of those case studies]
Click here to send me your valid, first person, Black List examples!
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
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