Before we can suggest changes to the Home Valuation Code of Conduct (HVCC), I think we have to step back, identify and examine the issues and problems surrounding the appraisal profession and lending industry to consider solutions that would be effective and in the end, resolve more issues than they cause.
With that in mind, what are the key issues? Taking a lead from Late Night's David Letterman, let's name the "Top Ten" and if we can, get a consensus and go from there to figure out the solutions.
1 - Pressure, value shopping and comp checks
"What's it worth without my client having to pay for your opinion?" From the lender's perspective, they do not want to pay for an appraisal if they cannot make the loan. From the appraiser's perspective, we do not know the answer until we have done the work.
Clients need answers and we need to be paid for our time and efforts. What can be done (changes in USPAP, limited scope assignments, staged assignments, etc.) to provide the client with some idea of home prices in the area, without compromising the appraiser's objectivity?
Lenders don't know (in advance) the answers regarding credit scores, title issues, etc. either and they have to pay for those services. Perhaps a staged assignment resolves the issue. What are your thoughts for providing some level of service to resolve this problem?
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2 - Low fees, turn times and pressure from clients and AMC's
I don't think appraisers would dislike the AMC's so much, if we were paid appropriately for the assignment, didn't get the daily e-mails or calls for updates and the AMC was staffed with competent professionals. If those issues were resolved and if AMC's were licensed and regulated, would you have a problem with AMC's?
The ability of clients to place an appraiser on a "do not use" list without notification, justification or recourse has been an issue for many years. The HVCC addresses this however it also provides for complaints to made against the appraiser (and an investigation started) without basis or justification.
Not only can a complaint be made, but also the complaint is forwarded to state and national agencies. This area needs to be amended to insure that only complaints with merit are forwarded to any agency for investigation. Should there be "appraisal review committees" at the state level (made up of volunteer appraisers) to review complaints and establish validity prior to further action being taken?
4 - Appraiser Independence
Independence is typically an issue associated with items 1, 2 and 3 above. Most of the independence problems would go away if those issues were resolved.
5 - Loss of clients and established relationships
Appraisers have spent time and effort to find clients and develop good business relationships. The HVCC would appear to favor "blind ordering" via AMC's or lender staff appraisers, which would affect those relationships. What changes should be made to the HVCC to insure objectivity without affecting existing relationships?
6 - Unlicensed Mortgage Brokers and limited recourse for unethical practices.
In many areas, mortgage brokers are not licensed and or there are no provisions (similar to real estate agents, appraisers or title representatives) for recourse against unethical tactics or business practices.
Many states are licensing mortgage brokers, however there isn't a central repository for complaints or investigations nor do mortgage brokers have a national standard (similar to USPAP) that binds them to a certification that has both financial and civil liability. Should mortgage brokers be required to sign a certification with each loan that holds them liable for unethical actions and would this resolve the appraisal ordering issue cited in the HVCC?
7 - National and state appraisal licensing agencies are under-funded to investigate problem appraisers.
While the HVCC provides for reporting of problem appraisers, it falls short of providing additional funds for investigations of those identified. We have appraisal regulations in place, however many state agencies lack sufficient funding to enforce those regulations in a timely manner.
Transitioning to the system proposed by the HVCC (The Independent Valuation Protection Institute) is neither necessary and in most cases would be redundant to the Appraisal Foundation and state level agencies already in place. Instead of creating a new agency (IVPI), would the funding from FNMA and FHLMC be better used to support enforcement actions with existing agencies?
8 - Geographic Competency
This is an ongoing issue and one that was addressed by the HVCC. What should the geographic limitations of appraisers be and why?
9 - AMC's not licensed and therefore not regulated
If AMC's were licensed, regulated and subject to standards similar to those of other real estate and lending related professionals or businesses, would many of the issues be resolved?
10 - Poorly trained appraisers, lenders, brokers, etc.
Regulating and licensing professionals is one-step in the right direction, however to be more effective, those professionals must also be trained and have a better understanding of the issues, problems and solutions related to appraisals and mortgage fraud. Should additional specific appraisal and fraud training be mandatory for all individuals involved in the lending process?
In the interest of change, what issues are clients and appraisers faced with that should be addressed in any response we formulate. What are the best ways to resolve these issues? We cannot simply suggest changes that favor our cause without considering the impact of our recommendations to our clients and users of appraisal services.
Brian Davis posted a link on Appraisal Scoop to the 90-Day Comment petition to give you a place to voice your opinions, concerns and suggestions regarding the HVCC. Over the coming weeks, we will be taking your feedback and developing a response to the HVCC to present those concerns and to suggest workable solutions to the issues identified.
As I stated last week ... the 90-day clock is ticking. Make your voices heard and your comments count.
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. He can be reached at lvreqa@cox.net Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!
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