Appraisal Scoop

Webinar: Appraisal Institute's Virtual Presentation on the Independent Valuation Protection Institute is LIVE!

Dear Colleague:

The Appraisal Institute would like to thank all members who have sent in their comments regarding the recent agreement announced between the New York Attorney General's Office, Fannie Mae, Freddie Mac and the Office of Federal Housing Enterprise Oversight (OFHEO).

The comments received have been very thoughtful and informative, and they will help form the basis for the Appraisal Institute's response during the official comment period, which ends April 30.

To help further member understanding of the agreement, the Appraisal Institute has developed a "virtual" presentation that provides information on the agreement's terms, the establishment of the Independent Valuation Protection Institute, and the specifics of the Home Valuation Code of Conduct.

To access the presentation, please enter your name and recording ID number P9FP4P-1 on this page (recording key is NOT required): Click Here - https://www.livemeeting.com/cc/appraisal/view**

All members are strongly encouraged to review this presentation and provide your feedback to the Appraisal Institute at appraisalcomments@appraisalinstitute.org.

To assist us in providing timely comments to the parties of the agreement, please submit your comments to the Appraisal Institute by March 31.

Thank you, again, for your attention to this extremely important issue.

Sincerely, R. Wayne Pugh

Audio: NPR Interview - Feds Ramp Up Efforts to Combat Appraisal Fraud

James Lockhart, director of the Office of Federal Housing Enterprise Oversight (OFHEO), talks to Liane Hansen about the agency's efforts to strengthen the independence of the appraisal process.

Click here to listen!

The OFHEO is working with New York State Attorney Andrew Cuomo, as well as Fannie Mae and Freddie Mac on the Home Valuation Code of Conduct, announced on March 3rd.  Peter Barash, a lobbyist for the American Society of Appraisers, also discusses the issue. 

"Accurate, independent appraisals are very important to ensuring the safety and soundness of Fannie Mae, Freddie Mac and the mortgage market," said Director Lockhart. "These agreements build upon existing federal and state laws and regulations to further strengthen the single-family home appraisal process."

"The agreements should help restore confidence in the mortgage market by enhancing underwriting practices, reducing mortgage fraud and making home valuations more reliable. I thank the Attorney General, Fannie Mae and Freddie Mac for their strong roles in this important effort."

Related NPR Story:   RENEE MONTAGNE, host: "Government-backed lenders Fannie Mae and Freddie Mac have agreed to new rules for home appraisals. State prosecutors suspect that inflated appraisals may have fueled the housing crisis, as NPR’s Chris Arnold reports" -  Fannie Mae, Freddie Mac Uphold New Loan Code

Geek's Corner: Use Microsoft's SharedView to put your heads together and collaborate!

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Using SharedView, you (or anyone else in the session) can share your Desktop or an application.

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IVPI Organization Committee announces its Proposal to Attorney General Cuomo’s office; Fannie Mae, Freddie Mac, and OFHEO on March 19, 2008

According to George W. Dodd, SRA, he and his committee have developed an Independent Valuation Protection Institute (IVPI) proposal that outlines and offers an alternative to the current failed system.   Download IVPI_Proposal.pdf 

1. The Proposal provides significant improvements over the current ordering, processing, and review of appraisals. 
2. It establishes the “Vault” which will provide the ability to maintain the appraisal reports in an environment that is free from fraud and abuse.
3. And it will provide a central location that Investors can access to verify authenticity an appraisal.

Mr. George W. Dodd, SRA and a spokesperson for the IVPI Proposal stated:

“The Federal mandate, born of the calamity, was never realized in an independent committee of broad jurisdictional authority. The American taxpayer was, and may well be again, called upon to pay for the errors of the regulatory environment. Both the 1989 problem, and the current crisis, would have never occurred if the Users of appraisal services demanded the collateral be accurately represented."

The solution to the current crisis is to “reset” the appraisal processing system. Trying to resolve these fundamental issues in bits and pieces will allow too many loopholes to remain for unethical participants to exploit the system. We must work together to restore American Consumer and Investor Confidence that appraisals for the underlying collateral are creditable.

This endeavor will not be easy. There are many groups firmly entrenched in the current system who may be hesitant to accept change. Participants have their own agenda, which is understandable. But now is the time to put aside individual interests and focus on regaining the confidence of the American Consumer and Investor.

To contribute to, and support, the original intent of FIRREA, there needs to be changes to the process, and we need to focus on that.

"The proposal we offer today is unique in its approach.  Implementation will change the appraisal and ordering process to a system that promotes honesty, impartiality, and professional competency, restoring confidence in the Industry.”

Download IVPI_Proposal.pdf

Mr. Dodd can be reached by email at:  GeorgeDodd@comcast.net or by phone at          (804) 746-2270       .

The Home Valuation Code of Conduct - A Section-By-Section Look! (Sections I through III)

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!

Fannie Mae and Freddie Mac responded to appraisal problems identified by the New York Attorney General's Office with the jointly developed Home Valuations Code of Conduct or HVCC. While most of us would applaud any action to improve the situation, there has been a lot of feedback and concern with implementing the HVCC in its present form.

In the words of Leland Hill, "the Devil is in the details" and at this point (not knowing what those details are) we have far more questions than answers. The stated goals are admirable, yet there is still a great deal of refinement needed to integrate the HVCC and current business practice.

Since the clock is running and we now only have 45 days to respond, perhaps a "section by section" look at the HVCC will help us focus on the issues, consider the impact, develop solutions and recommendations for change that would be practical and effective.

Section I - Influence

The first part intends to remove pressure on appraisers by anyone associated with the appraisal process, including lenders, mortgage brokers and AMC's. Some of the terms of this section are not clear.

For example, if required turn times are too short to allow for verifications or proper analysis and the appraiser must meet these times to maintain status with a lender or AMC, is this undue influence?

Promises of future business and increased volume in favor of quick turn-around and low fees seem to be contrary to the intent of Section I, yet these are the staples of many AMC's.

Should there be provisions added to prevent harassing calls for updates or status checks prior to the due date of the assignment?  How far should the HVCC go towards allowing the professional appraiser to determine what is neccessary and appropriate for the assignment without any interference or pressure from the lender or related parties?

Click here to continue reading . . .

Press Release: Veros Chooses Zaio as Preferred Appraiser

Press Release: DALLAS--(BUSINESS WIRE)--Scottsdale, Ariz.-based Zaio Inc., a real estate database and technology provider announced it has reached an agreement with Veros Real Estate Solutions through a strategic partnership to offer Zaio’s services nationwide. Under the partnership,

Veros will offer Zaio’s appraisal services to its customers, allowing access to valuation information of properties around the country through Zaio’s secure database. Veros’ rules based platform, VeroSELECT will also offer upgrades to appraisal products from Zaio.

As a Veros preferred appraiser, Zaio will develop an interface to Veros’ VeroSELECT, a collateral risk management platform. The system gives lenders control of collateral risk strategies with the secure selection, acceptance and management of services, vendors, users and their own business processes. The decision management platform provides access to a full range of collateral risk solutions, including AVM products, broker price opinions, and now appraisal solutions with Zaio, collateral fraud tools and hybrid products and services. Veros also provides users access to Zaio’s AVM, i-Val Report™.

“Being able to provide access to appraisal products will give our lender and investor customers the edge they need in this critical and challenging market,” said Darius Bozorgi, president and CEO of Veros. “Zaio’s services will go a long way in giving the industry what it needs to make more informed decisions with a full spectrum of valuation products.”

Click here to continue reading . . .

Formation of the Independent Valuation Protection Institute: Part 1

Up to this point, much has been written and discussed about the proposed Home Valuation Code of Conduct . . . but little has been written about the the second part of the agreements . . .the Independent Valuation Protection Institute!

The agreements among Fannie Mae, Freddie Mac, the Office of Federal Housing Enterprise Oversight and New York Attorney General Andrew Cuomo also call for the creation of an independent organization to implement and monitor the new appraisal standards.

Fannie Mae and Freddie Mac are to provide $24 million to fund that new entity which will implement and monitor the code, called the Independent Valuation Protection Institute. 

Here's what the agreement says:

FORMATION OF THE INDEPENDENT VALUATION PROTECTION INSTITUTE

2. The parties hereto acknowledge that the integrity of the valuation processes involve federal and state laws and regulations as well as market practices and standards. This complex area requires a high level of expertise and coordination to ensure truly sound, accurate, independent and reliable appraisals.

3. To that end, the parties agree that an independent entity, the Independent Valuation Protection Institute (the “Institute”), will be established to monitor and study this area. The Institute may, from time to time, propose amendments to the Code which the parties to this Agreement will review and consider.

4. The Institute will establish a complaint hotline for consumers nationwide to contact if they believe the appraisal process has been tainted or if they have been harmed by appraisal fraud.

5. Appraisers themselves will be able to contact the Institute if they believe their independence has been threatened in any way, including by undue pressure. Appraiser complaints will be handled in confidence to protect the appraisers from possible retaliation.

• The Institute, in its judgment, will mediate complaints or forward complaints to federal or state regulators.
• The Institute, in its judgment, may also forward complaints to state or federal law enforcement agencies for possible investigation or prosecution.

Click here to continue reading . . .

Center For Responsible Lending Says - Solution to Housing Crisis Requires Adjusting Loans to Fair Market Value through Court-Supervised Modifications

According to the Center for Responsible Lending: "No matter where you live, the subprime crisis is causing unnecessary foreclosures and draining resources in your community.  By lifting the ban on court-supervised loan modifications for qualified homeowners, Congress can help nearly 600,000 families nationwide keep their homes and help communities retain an estimated $89 million in tax revenues.   To find out the impact Senate bill S. 2636 could have on a particular state, click here.

Download court_supervised_modifications_would_make_large_scale_foreclosure_prevention_possible.pdf

Why aren’t more mortgages modified?

The fact that most loans are “securitized” – i.e., packaged as investments – has resulted in conflicting financial interests among the different players involved:

• Loan servicers frequently fear that modifications will trigger lawsuits by particular tranches, or classes, of investors;
• Loan servicers often have stronger financial incentives to foreclose than to work with the loan. (Servicers are reimbursed for foreclosing, but must generally cover the cost of loan modification, on average $750-1,000 per loan, out of their own pockets.);
• The common presence of “piggy back second mortgages” often precludes the modification of both mortgages because the second mortgage holder has no incentive to cooperate.

Click here to continue reading . . . .

OFHEO Shortens Comment Period For "Home Valuation Code of Conduct" to 45-Days!?

According to the OFHEO's website: Comments on the Home Valuation Code of Conduct, announced on March 3rd, may now be made directly to Fannie Mae and Freddie Mac.

The comment period established by the Enterprises is for 45 days, ending on April 30th. OFHEO will be reviewing comments provided to the Enterprises. Comments may be sent as provided below:

For Freddie Mac:

Comments should be submitted through the online form on the Enterprise’s website at: http://www.freddiemac.com/singlefamily/home_valuation.html.

Hard copy, written comments may also be submitted by regular mail or express delivery to the following address:

Home Valuation Code of Conduct Response Attn: Senior Vice President, Credit Risk Oversight Freddie Mac 1551 Park Run Drive, Mail Stop D2Z McLean, VA 22102-3110

For Fannie Mae:

Comments should be submitted through the online comment form at https://www.efanniemae.com/go/appraisalcomment.jsp or for additional information and the comment form, use https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/index.jsp.

Click here for more . . .

Fannie Mae's "Home Valuation Code of Conduct" Comments Page is "Open For Business"!

FannieMae is the latest to open their 90-Day "Home Valuation Code of Conduct" Comment page for appraiser comments - Click Here.

To help enhance the integrity of the home appraisal process in the mortgage finance industry, Fannie Mae has entered into an agreement with their regulator — the Office of Federal Housing Enterprise Oversight (OFHEO) — and the New York Attorney General's office, to adopt a Home Valuation Protection Code.

The Code will be effective for single-family mortgage loans (except government-insured loans) that are originated on or after January 1, 2009, and delivered to Fannie Mae.  Here's FannieMae's March 14th Lender Letter: Download FannieMae_Lender_Letter_01_08_HVCC_Comment_Period.pdf

Also, along with Freddie Mac and other industry players, Fannie Mae will contribute funding to support establishment of an Independent Valuation Protection Institute.

Comment Period Open through April 30, 2008

From the Fannie Mae web site: (click here)

As specified in the agreement, we are providing the opportunity for our customers and other market participants to comment on our implementation and deployment of the Code. As stated in the agreement, the parties to the agreement will review comments received during this period and will consider any amendments to the Code necessary to avoid unforeseen consequences.

All comments provided to Fannie Mae will be shared with OFHEO and the New York Attorney General's office for consideration. The comment period will remain open through April 30, 2008.

• View the Agreement among Fannie Mae, OFHEO, and the NY AG
  (.pdf, 26K, 8 pages)
• View the Home Valuation Protection Code
  (.pdf, 24K, 4 pages)
• Submit comments on implementation of the Code

Click here to continue reading . . .