AUTHOR: Ken Verrett is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA
As previously noted on Appraisal Scoop: George W. Dodd and his committee (Download DC_IVPI_Members.pdf) have developed an Independent Valuation Protection Institute (IVPI) proposal that outlines and offers an alternative to the IVPI agreed to by Cuomo and the GSEs - Fannie Mae and Freddie Mac: The Dodd/Crowley IVPI proposal dated March 17,2008 - (Download IVPI_Proposal.pdf )
This is difficult for me. I'm an entrepreneur. I'm for innovation. I'm for folks thinking about the future and attempting to make things better. I am for free speech and the discussion of new ideas. So I want to support the George Dodd and Pamela Crowley's committee efforts in creating the Dodd/Crowley IVPI Proposal. I think the effort is worthy. I support the effort, I support the discussion among appraisers it has generated. I can't support the proposal.
Fred W. Holtsberry, Mid-Ohio Appraisal Services has a successful appraisal business and speaks his mind on appraisal business related issues. I've come to value his views. He has given me permission to publish for the readers a review and analysis of the D/C IVPI Proposal from his perspective. ( Click Here To: Download freds_ivpi_review.doc)
There is no need for me to be redundant. Fred makes good points, better than I could.
"There are parts of the IVPI proposal that are useful, and I'm certainly impressed with the thought and writing that went into that effort. In the end in my view, it simply proposes another new regulatory body (that is not a regulatory body, not subject to the checks and balances of regulatory bodies) controlled by folks with little experience in this complex arena. It also offers little that is not already incorporated into the "Institute" which HVCC incorporates."
The proposal also strikes me as a bit naive;
- Build from scratch a watch dog non profit which would effectively control the transactions of a major foundation of our country's economy, indeed, the global economy.
- Within twenty four months to have such a system running effectively.
- Dictate the return of appraisal product back to the 1004 days as being the sole acceptable product for lenders to use to make their lending decisions, in effect assuming responsibility for the risk evaluation function performed by national lenders.
- Create a massive appraiser approved list and reviewer approved list with IVPI and only IVPI as the gate keeper.
- Create a massive approved reviewer panel selected by IVPI with the charge to review current appraisal, and all loans which end up in default.
- Create a disciplinary court to determine individual appraisers transgressions, with the power to remove them from the "approved list", the reviewer to be the key enforcer...
That is a proposed takeover of a major foundation of our national and global financial infrastructure by a few small business entrepreneurs!
The IVPI document expects acceptance from:
- Appraisers and Appraisal Organizations who have been publicly accused of violating law and ethics;
- Lenders who have been openly accused of fraud and predatory practices from a bully pulpit outside the country's legal system;
- AMCs who have developed into a major delivery mechanism of appraisal services over the last twenty years and which have been as a group publicly accused of serious ethical and legal transgressions, again, not in a court of law, but from a bully pulpit ;
- GSEs, an effective player in the development to meet the needs of a more flexible and frictionless national and global economy;
- OFHEO, an important government department
All of these groups are current participants in the first and second mortgage market, a market which is not broken, which has operated and continues to operate in an open and competitive environment (with flaws and abuses surely, but with flaws and abuses which are currently being addressed)
All of these key players are expected to turn their future over to this new committee, this new non profit, this new bureaucracy, without checks and balances normally provided in our country's regulatory departments.
A new bureaucracy founded and controlled by no doubt well meaning individuals (the committee) but who have no experience in dealing with such massive and complex organizations and market participants. It is the height of naivety to assume thinking individuals, entrepreneurs, corporations, GSEs, Regulatory Bodies, and the elected representatives of each of us, would consider this a reasonable alternative.
There are indeed good points in IVPI. Those points are already in HVCC.
There is however, the releasing of a flood (assumed flood; I hope flood) of comments form those appraisers who have felt the personal inequities of the recent past abuses....and who are using this proposal as their motivation to express their valid concerns to Cuomo and the GSEs. I hope those comments continue, and the readers are motivated to express their concern to the Cuomo Agreements and the GSEs and the OFHEO through the various channels that have been opened.
Those concerns are many and significant in my view.
They include:
- Unfair Black Listing by Lenders and AMCs
- Value pressure by mortgage brokers and direct lenders
- Shifting of the cost burden of the appraisal ordering, quality control, appraisal, and appraisal delivery to the field appraiser in the form of lower fees at the field appraiser, the sector of the market that is truly a perfectly competitive market and unprotected from the pressures of the oligopolies which they serve
- Shifting of the pressures of the time element in the appraisal process to the field appraiser, the one area that is most labor intensive, with the most difficult scheduling tasks to complete
If the IVPI proposal does nothing but increase the awareness and volume of comments from appraisers to the Cuomo Agreements, the GSEs, and the OFHEO regarding these issues, it will have accomplished a good thing.
But to give serious consideration to what it proposes to assume control over and who it proposes to give that power and control? Not in my view.
AUTHOR: Ken Verrett is the owner of Acorn Appraisal Associates, a 22 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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