Appraisal Scoop reported previously (click here) on the May 22, 2008 Virginia State Board for Real Estate Appraiser's (VREAB) meeting to discuss among other things, a petition submitted by George Dodd, SRA. Click Here to: Download Virginia_Appraisal_Board_Petition_052208.pdf
The petition was written to prevent online sites, or web-portals from changing or otherwise altering reports that appraisers prepare. Web-portals would include such companies as: AppraisalPort, RELS, and other AI ready required companies. It also seeks to limit the illegal PDF stripping down, and programs that erroneously copy information from reports such as Lighthouse.
July 23, 2008 - Richmond, Virginia
Mr. Olson, Chief Legal Officer for FNC, did in fact take several minutes to discuss some points, many of which are similar to the comments he had made at previous meetings. Download Neil_Olson_FNC_Response.pdf He did not prepare or use a power point presentation this time. He chose to sit at the Board’s table and comment and answer questions as they were asked.
Much of what was said can be summed up in a few sentences.
“The ENV file that is submitted is the true copy. Many recent improvements to the AI Ready format were made that allow for inclusion of more images. The limitations of the presentation and formatting of the reports in the ENV are done so because that is the clients’ wish for the reports to be presented in such a way. He did also say that the security given by the system is the biggest advantage of Appraisal Port.”
Personally, I must say that I respect Neil Olson, any one that is willing to travel this many times and essentially defend his company the way he has done, gets a pat on the back. The lack of interest, or perhaps the lack of presence by the other companies that convert reports, and the lenders that are allowing or requesting it, leaves Mr. Olson there to defend the concept all by himself.
The point he made regarding the lender/client’s wish to have the reports in such a format, I do think this needs to be examined closer. I think a more accurate statement would be that this is the system that Appraisal Port sells to lenders on the merits of rule set reviewing and quality control. The system essentially reads the file and if any of the data in the fields is outside of an established tolerance (example: greater than 10% line adjustment) it is flagged. What I assume happens from there is that a reviewer or otherwise trained person looks over the report and decides if further appraisal review is needed, or if the report properly explains the variance.
One can surmise from the absence of the lender/clients and the fact that the programs are so limited to exclude the appraiser’s intended forms and presentation; it may not really be the lender/client that wants the reports in such a manner.
It is likely that the lender/client was solicited on the benefits of the rule sets and review features. They are not here defending the right to do so, they are leaving that to FNC. I believe this is a reasonable assumption to make regarding Lighthouse and AI Ready. This means that it is likely that the lenders using these types of services may not realize that the reports they are receiving are in many cases, limited in what they can contain. If the lender/client is aware it can be assumed that no consideration is given to the appraisal process when a business decision like this is made.
This may also explain why there has been resistance from Mr. Olson when asked about allowing the lender to receive a PDF, then converting the PDF into an ENV. This would certainly prompt a lender to ask, “Why do WE need to do this?”, and I am sure the credibility of the converted report would then be at question.
There is a loop hole here that is being used to force appraisers to convert formats and then the appraiser be held accountable for what is essentially two different versions of a report. Most appraisers do not understand that the reports are limited, and from many I have spoken to, they do not read the converted report and compare it to the report in their forms package.
Is This What the Lenders Really Want? Click here to continue reading . . .
One must not forget that appraisers are taxpaying citizens that should ask questions from time to time, especially when it seems the tax base must bail out bloated and inept GSE’s.
We should probably all ask the lenders the lenders that are using the conversion requirements,:
- If you are aware of the limitations and the exclusionary nature of these conversions, why is this a preferred way to have your collateral valued?
- If they are not aware of it, then why is it not OK to just receive the files in a format that is designed for a person to read it, and then convert the PDF or other type file into something that is compatible with whatever system desired?
- Should appraisers have the ability and room to perform an honest and ethically supported report without additional and un-needed limitations?
I am going to make one more assumption here regarding possible answers regarding two of these questions.
In regards to question one: the only reason they would want this and understand the complete picture would be because the lender’s care more about the data and verifiable information in the report, than the opinions and analysis done by the appraiser. I am not saying anything about data mining, or reusing the information for computer appraisals, or anything of the nature. Either they prefer to allow the review process to give them a cursory review, or they just want a report that meets minimal standards so they can close the loan. With the absence of any lenders at the meetings, one is left to wonder the position of these lenders.
In regards to question two, I see one possibility. They may reconsider the use of systems that limit the appraiser’s reporting options. This would mean that companies like Appraisal Port and Lighthouse would need to have converters that work with all reports, or that they can convert PDF’s into their respective formats. I know from personal use that Lighthouse can convert a PDF into the PDS files that they use. The extra and unsupported forms are not converted, but at least the lenders can still use the true copy in the PDF to reference questions raised in the automated rule set and automated review functions. Essentially, what they want is the data in the form blanks to analyze. The PDF on the client’s end accomplishes that efficiently.
Question three is certainly related to this topic, as it has been the inability of the lending industry to properly train staff to read an appraisal report. The opportunity to employ this type of technology arose from hourly employees who were given a paper checklist to review and read a report that was not within their ability to understand. Adding in the pressure given by deadlines, branch sales volume and commissioned originators pressuring processors and underwriters it does not seem that far-fetched there is a mortgage problem. This technology does help with these types of problems, but why pile the limitations of the requirement on the one industry that is there to make sure the collateral is worth the loan?
There was an interesting buzz going regarding Appraisal Port early this week in that they have created a new User Agreement to take effect on September 13, 2008. I have attached a link to the agreement and a link from my E & O provider regarding agreements like this. I find it curious that in the last couple of months this agreement has shown up, and Appraisal Port now allows appraisers to use an ENV viewer via a webpage. Many years have passed since the ENV format went into use, but within a month of the first VA REAB meeting, now they decide to allow appraisers to use it.
- http://www.appraisalport.com/misc/user_agreement_20080913.aspx
- http://www.liability.com/employment_agreement.html
I am not a lawyer and I certainly am not saying what FNC is doing is wrong. Appraisers should take careful looks and consider what is best for his/her situation. I hope that Appraisal Port stays in business. The concept is sound as a delivery system, just not at the expense of allowing a licensed professional to determine what is best for a report. The same is true of Lighthouse: the concept works fine just not the execution.
Technology is wonderful but needs to work for the appraiser and the lender, not against either one. Appraisers are being required to sacrifice their quality and diligence so that lenders can carry on a separate function. There is plenty of room for lenders to utilize review tools, and for appraisers to have the ability to report their analysis, opinions, and conclusions without situational limitations. Showing that the lenders want to support the appraisal process can only help the public’s view of the lending industry.
This has been a fun series for me to write and I hope that after the august 19th meeting Brian will let me post a follow up article. I hope to get the chance to write on more topics as well.
Author: Woody Fincham - http://www.fmava.com/ - Woody is one of the founders and managing appraiser for FM & Associates. He has recently become an instructor with a local real estate school, teaching broker pre-licensing and real estate agent pre-licensing. Woody is a Certified Residential Appraiser in Virginia, as well as North Carolina. Woody is also a Member of the a la mode labs project
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