Runt Rants - Lender Do Not Use Lists - Appraiser BlackListing Series - Part 5 - Conclusions and Recommendations

The first 4 parts of the Blacklisting series (Click here) defined the issues and provided Real World examples of appraiser blacklisting.

Now, let’s deal with the solutions!

In this final article, Ken Verrett provides steps you and your appraisal organization can use to fight back against, and prevent, appraiser blacklisting!

• Legal action,
• Education, and
• Persuasion

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

We've been running this series for five weeks now. We've described Do Not Use Lists and Black Lists. We've defined both types.

We've voiced our support for Do Not Use Lists, as we've defined them to include notification and recourse. We've voiced our objection to Black Lists, as we've defined them because they do not notify the appraiser of their inclusion, and do not provide recourse for the appraiser to plead his case if he feels the infraction was not fair or proper.

I provided examples in my own company of both types in the first of the series: a Do Not Use List inclusion many years ago because I didn't provide the proper recently adopted USPAP changes. Harsh, but I agree. It was my responsibility, I didn't live up to it, and I accept that decision.

I also provided an example in my own company of a Black List addition that was absolutely unfair. Our appraiser did an exemplary job of customer service, one I was proud of him accomplishing. I even used it in my Internet writings of the proper way to service a customer. Yet this fellow ended up on a Black List. We were never notified. We only learned of it two years later when we called to inquire why this fine gentleman wasn't receiving orders. They never told us. When we called they referred to that incidence two years earlier where the customer called to compliment our appraiser's actions, and which I had cited as a shinning example of good customer service, good decisions in the field. For that fine service, he was Black Listed.

ACTUAL CASES CITED

Over the next two columns I cited case after case of Black Listing...Twenty six in all. See here and here. The stories, if you read them reveal the frustration of good appraisers doing the right thing in their profession, who have been unfairly treated. It's just not fair. It's Un-American! It goes against the foundations of our country, the principal of innocence until proven guilty. It goes against due process. It goes against fair play. It those core beliefs don't appeal to your senses, you can stop reading at this point...you are wasting your time and bandwidth.

However, if you are still with me here, welcome! We share a common bond. A belief in the founding principles of our country, and a desire to value those and see them for what they are...the strength of our country, our society, our nation.

Click below to continue reading . . . .

BLACK LISTING HAS HAPPENED BEFORE

One experienced former Chief Appraiser of a large national bank commented to me;

" Our country prides itself on the concept of due process of law. Certainly any lender has the right to determine who is and is not qualified to provide services. What is wrong about "Do not Use Lists" (this type is what I defined as Black Lists) is that under our society’s concept of law and due process, there should be a formal process for notification, appeal, right to counsel, and a day in court. Most lenders don’t want to take the time to put in those processes. When I was a Chief Appraiser for XXX (a large national bank ) in the 1980’s black lists had been popular before my arrival, but then quite a few lenders were getting sued for violating due process, and for many years the do not use lists were abandoned, only to gain in popularity over the past 10 years. A "Do not use" list is a negative action that has the potential to violate due process. A better, more constructive, and positive approach is to have an approved appraisers list, with objective criteria needed to be placed on the approved appraiser list. "

BOTH GOOD LENDERS AND GOOD APPRAISERS HAVE RIGHTS THAT SHOULD BE RESPECTED

I agree that approved appraiser lists, with objective criteria to determine who should be included is a sound practice and within the right of any lender. That's good for lenders, good for appraisers.

Remember years ago when we used to regularly submit three sample appraisals, with all confidential information redacted, and those appraisals where reviewed and approved before our being accepted and added to the approved list? I used to have a batch of each of type of report copied and kept in a filing cabinet so that they could be put together and delivered by mail whenever the prospective client requested them....haven't had such a request in years!

But I think it is also reasonable to assume that the lenders will inevitably have a bad experience with an appraiser, and it seems only good business procedure to alert the rest of the organization to not use the bad appraiser. Hence, it seems to me that Do Not Use Lists have a place in the good lender's business. It's also in the interests of good appraisers to have the bad appraisers marginalized and eventually rehabilitated or removed from the industry.

Do Not Use Lists are legitimate and necessary for Good Lenders to properly manage their business. It's the same for Good Appraisers, who should have a Do Not Serve List of former clients...

I certainly have a Do Not Serve List in Acorn...former clients who we've chosen not to serve for one reason or another....fee's too low for the service they require, sloppy ordering processes with too many cancellations or changes to orders, value pressures, etc. Talking with other appraisers, I conclude that most if not all of them also have Do Not Serve Lists. It's just good business practice.

WHAT TO DO, WHAT TO DO?!

So it seems to me that both the Good Lenders and the Good Appraisers have a common interest. The question then becomes, how can these legitimate needs be met and the relationship between the Good Lenders and the Good Appraisers improved?

The answer my friends, is frustratingly simple: return notification and due process back into the process!

When a problem arises, the Good Lender should notify the appraiser of the problem and give the appraiser the opportunity to respond. The Good Lender should have a single individual or a section....ideally someone experienced in the appraisal review process to be the arbiter of such disputes. Let both the complainant and the appraiser present their case. The arbitrator can review both and decide which side is correct, keeping in mind that the long run interests of the Good Lender is a properly documented, quality loan portfolio.

Yeah, you say. But how is THAT going to happen? Another good question. How can that be made to happen? Well, let's discuss the alternatives.

LEGAL ACTION -- IT CAN BE TAKEN

Remember the quote at the beginning of this column from the experienced Chief Appraiser, how Black Lists were prevalent in the 1980's, only to be abandoned when the threat of suits began to mount? Well, that's clearly one way to affect this change.

Black Lists violate due process, they clearly fall under the legal definition of Tortuous Interference with Prospective Advantage, and a suit by individuals or by class action could be filed against the lenders who use Black Lists to violate due process, who engage in "Tortuous Interference with Prospective Advantage".

Goodness, the cases I've listed in this series are clear examples, including my own unfairly treated appraiser. And it's so easy to document the harm: what's the dollar amount of business for the preceding six months before Black Listing, and compare that to no volume afterward! You'd think even a relatively green attorney could win that case.

So one clear way to resolve this issue is for those appraisers unfairly black listed to bring suit either individually or as a group. Need a lawyer? I personally know a successful class action attorney (remember the Ford SUV rollover cases?). His firm is awash in profits and might be persuaded to take on a slam dunk, using junior members of the firm to do the heavy lifting. Or pick your own attack dog lawyer....your choice.

Pick one offending Bank (one in particular was mentioned several times in the cases I've accumulated, several others were mentioned more than once) and file suit. Win that one, go after the next. Win that one, go after the next. Soon, probably after the first win, Black Lists will once again disappear.

However, the process would take months, perhaps years, if the targeted banks want to use the judicial process to drag it out. Also, the appraisers bringing the suit could possibly find the victory hollow, as their Client relationships just dried up over time as a subtle form of retribution.

EDUCATION AND PERSUASION

Another alternative is to bring industry focus on the issue making the case that Black Lists harm the Good Lending Industry and the Good Appraiser Profession by allowing abusive loan officers to eliminate appraiser independence.

The abusive loan officer can force good appraisers off the Lender's Approved list solely because they won't join the loan officer in helping to book marginal loans. Black Lists ultimately reduce the quality of the appraisals the Lender receives, and ultimately threaten the quality of the loan portfolio they either keep or sell. The long run interests and profits of the Lender are at stake.

How can the elimination of Black Lists be accomplished? By putting the discussion of Black Listing on the agendas of major national meetings of Lenders and Appraisers. There are four such conferences scheduled in the next year that Acorn is involved in; The National Appraiser Conference sponsored by October Research and others in Washington D. C. this November; Valuation 2007 in Las Vegas also in November; The Zaio National Conference in Las Vegas also in November, the Appraisal Institutes LADC in Washington DC next spring.  There are other annual conferences of chief appraisers of national lenders mortgage brokers held regularly.

Request this issue be added to their agenda. Offer to have someone make a presentation, someone who is an attendee at the meeting and possibly is known to that group. Prepare a power point presentation that highlights the problem, and suggests the solution, perhaps closing the presentation with the alternative solution....the risk of civil suits if the problem is not addressed.

Sound complicated? Not to me. Shucks, this series of columns could be the basis of the Power Point presentation, including the case studies as long as the individuals give their consent. The Power Point could be delivered to each person who is going to give the presentation at the specific convention. All that would be needed is a person who was attending the convention, who has experience in presentations in front of groups, and who believed in the issue.

That same Power Point could be made available to local appraisers who would make the same presentation to their local chapters of their appraiser organizations. A grass roots effort that costs nothing, and the presentation outline would ensure that a consistent message is being delivered.

Even my Heartless Editor on this Great Appraisal Blog Appraisal Scoop could likely find a creative way to have such a Power Point Presentation run on his blog....and he could encourage other blogs to link to the presentation. I'm guessing that such a presentation could be made a semi permanent feature on the blog site...a flashing box on the right or the left, saying "Click here to view the Black Listing Presentation".

There are so many ways that the new technologies available to us could be utilized to accomplish the spot lighting of the issue, and the mere focusing of attention could potentially affect change.

All that would be needed would be a group of appraisers getting behind the issue and encouraging the various meetings to add the presentation to their agendas. The logistics are basic and simple compared to other projects that I have going on, and probably a piece of cake to most appraisers.

Traditionally, getting appraisers to agree on an issue and work toward it's solution doesn't have a history of success. Ever try herding cats? Even one cat? That's the image that comes to my mind. [click here for the video] We are often our own worse enemy.

In this case discipline would be required to focus on this one simple issue and the objective: a common procedure that would allow Good Lenders and Good Appraisers to benefit.

The suit approach would be limited to those appraisers who have been black listed, either individually or as a group action. I'd be happy to introduce them and additional others who might care to send me their stories. If they don't have a class action lawyer in mind, I'd be happy to explore the potential with the one I mentioned. It could be done. It would be done if they chose to do it. It's in their hands.

The focusing of the issue, from a grass roots general appraiser population, is certainly achievable. The heavy lifting of building the presentation could be taken on by one individual or another, even using this series of columns as the basis of the show. I could do it. Others are probably better qualified and more fit. They could do it.

Contacting the various national conferences for an agenda spot could be done by individuals who have leverage with each of them. Acorn has some leverage just now with four such conferences. Others have similar leverage. Most efforts would likely be successful.

Contacting the local chapters of the various appraisal organizations could easily be done by one person in each chapter. I know that such chapter meetings are most receptive to having presenters at their monthly luncheons....

This is really a simple process, all it involves is herding a group of cats. Wanna do it? Just let us know in the comments section below.  It's in your hands.

What could be simpler?

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