Time is measured, for the most part, around significant points in history. For example, our current reference time is centered around one person’s life time. History has been segmented before and after the birth of Jesus Christ. When historians study the past they will label blocks of time such as “Post-Reconstruction” or “The Industrial Revolution”. In the appraisal business we often refer to “Before Licensing” and “After Licensing”. Hopefully, we will now get to add another period of time: “Before AMC’s” and “After AMC’S”.
The State Board Web Portal Committee meeting occurred this past Monday, November 17. It was the most interesting meeting yet, and in all, it was the most important. We had several presenters that day:
Michael Watson Security Management Incident Director Virginia IT Agency (VITA)
George Dodd Certified Appraiser Petitioner
Stephen Nation E. Vice President Biometric Management Systems, Inc
Dave Biggers Chairman A la mode, Inc
George Dodd went first, and gave a very brief and informal presentation. Mr. Dodd was the original petitioner to the REAB, and as such was granted up to ten minutes to do so. Some highlights included:
• True Copy definition
• Data file reviews were fine for the backroom review processes done by mortgage companies or their third parties
• He underlined the importance of receiving an appraisal report as it was prepared in the intended format.
• He basically said the only true copy of a report could be the PDF as created by the appraiser or a paper copy that included all of the report prepared by the appraiser.
• Mr. Dodd also requested, once again, to allow a permanent special work group to be created for Technology
Immediately after Mr. Dodd, Pat Turner (a member of the REAB), asked for Carl Schneider, SRA to share with the board some documents that Mr. Schneider brought with him. Mr. Schneider is a CREA from Tulsa, OK and had in his possession several copies of reports that were in PDF form and in the AI Ready format. There were noticeable differences between what the appraiser had prepared and what was in the converted copy. One big difference was the depreciation in the cost approach was completely removed.
Mr. Schneider brought a few different versions of his reports, and one from another appraiser who will remain nameless to protect the appraiser’s wishes to remain private. This was a landmark example for the case of the appraiser’s as the appraiser sent a PDF of the file to the lender. What the lender ended up putting front of the underwriter to review was an AI Ready converted file. Understand this one point about this example: the appraiser did not convert the report. The appraiser had sent the report as it was prepared in the forms software in PDF format only.
In this case, the underwriter had called to ask for clarification on some issues I the report. In the course of the conversation the appraiser realized that some pages must be out of order or something of the nature. The appraiser asked for a copy of what the underwriter had and received the AI Ready version of the report. The mortgage company had an AI Ready format conversion done on the report.
Here is a list of things that were missing:
The above items could render a report misleading, There is no editorial spin in saying that moving around and rearranging information will result in the whether or not a document is changed in so far as the meaning and intent. We will touch back on that later in this article.
Michael Watson spoke next and did a very good job explaining digital security and cryptology. He kept the topic as light and easy as possible, which was good for the audience and board members. He essentially explained that digital signatures can be very secure when done correctly on both the sender and receiver sides. I have attached his power point slides to show you the brief presentation. Download DPOR - Assessment Group - PK Encryption
Stephen Nations was up after Mr. Watson, and showed the audience what his company does with biometric technology. Essentially what it does it take a document such as a PDF or Word Doc, seals it up in secure technology and authenticates the signer/creator using fingerprints with a biometric scanner. It really is more complicated than that but I am sure Mr. Nations would be happy to speak with anyone that is interested in the technology. He was both light and very friendly in his presentation. (On a side note: I can’t help but think of the movie The Minority Report regarding the use of biometric scanners.)
The next presenter, and really the most talked about over the course of the next two days, was Dave Biggers. Mr. Biggers had some astute points. The bullet points of his presentation are attached to this article. I would prefer to allow his points to speak for his own point of view.
The one point in Mr. Biggers’ presentation that was very notable revolves around the usage of a phrase “Chain of Custody”. Essentially what he recommended was that the Board require all appraisers to add an addendum to the report that requires the signed “Chain of Custody Due Diligence” be endorsed by all the intended users. This would include known end users such as the mortgage company, third party companies acting on behalf the mortgage client, to endorse it stating they will not change, alter, edit or otherwise change the report.
Mr. Biggers took a very complicated, multi-tiered problem and summed it up with a very easy to understand example. What report alteration is broken down to in the digital age, is the same as in the paper age. If a family closes on a house and signs the documents at closing, it is wrong to go behind their backs later on and decides to make changes to the documents. One example he used related to signing the documents on legal size paper, then because of the mortgage companies change in policy to only use letter size, going in later to either cut off the extra paper, or even rearranging the documents in such a way as to allow the size difference.
He also brought up legal contracts that lawyers prepare, since format has been a huge topic of debate. Within the example he gave, lawyers often draw up a contract and may make some sentences bold or underlined to give emphasis. This is done to make sure the language that is emphasized is noticed as being very important. If the lawyer had endorsed the contract as it was prepared and later on saw the emphasis was removed due to reformatting of the document by whatever means that used, you could best bet the lawyer would not just make a fuss over it, but would most likely sue the entity that made the changes.
Mr. Biggers did a wonderful job and did manage to keep it very light. He even bent over backwards to make sure everyone understood that FNC and their Appraisal Port brand name were not the only bad guys here to appraisers. I have included Mr. Biggers points from his presentation as well as Danny Wiley’s letter to the REAB in Virginia. This was done to show opposite opinions on the issue from two widely known people.
Download VABoard_WileyLetter Signed
He did not mention ACI but it is a fact that most of the problems non-ACI appraisers run into revolves around ACI’s Lighthouse PDS format. This platform is just as antiquated as the AI Ready format. It is very limited in what it can accurately convert from my native form software. It is required my several lenders and AMCs, and they all know how easy it is to go into these files and change them. One of the appraisers that attended the State Board meeting on Tuesday that I have known for many years is a career long ACI user. He mentioned to me that he knew how to go in through the back door in ACI and make changes without ever removing the signature from the form.
The state Board Meeting on Tuesday November 18, 2008 was a long drawn out affair. The board had the slate completely full with 20 discipline cases, the web portal issue, and also the issue revolving around BPO’s being used in place of appraisals in the state. We started at 10:00 am and we all left at just a few minutes short of 4:00pm.
The summation of what was decided by the board, and what in turn must be put into draft format then approved by the Attorney General’s office is what follows:
• Any altered or converted files will not be recognized as true copies by the State Appraisal Board
• True copy: an unadulterated, exact copy of a document
[I don’t have an exact copy of the language but will update this as soon as the board’s administrator can forward a copy to me.]
I am going to throw out some musings and questions I have been simmering the last two days.
1. I am curious to see what Peter Christensen from LIA has to comment on appraisers possibly doing work that the State Board will not recognize as a true report.
2. If there can be no E&O insurance to cover possible liability then what does that do to the appraisers, and more importantly the lenders that require insurance?
3. Since it is very possible and more than affordable for all the major web portals and conversion software companies to get the data out of the reports to do their back room analysis, why won’t they just accept a PDF copy.
4. PDF copies can be very easily secured by the appraiser so that the text within the report can be copied and used for analysis without the report needing to be in a special format, or data set.
My last couple of paragraphs I wanted to use to share some basic examples of the big difference between what is true and what is not in this debate. If you take away all the appraisal jargon, all the animosity from either side you really get to the point of the whole debate. This fight is not over anything but the attempt to control the presentation of documents.
AI Ready, Lighthouse and various other XML systems require the reports to no longer be a document. If you can imagine a cup with all the words, pictures, signatures and other items we put in reports filling it, you have the basic concept of what these formats are. They are a container of data. There is no intent within these formats to actually get a document. The appraiser has always intended for the reports to be used as a document.
The intent of a document is to simply allow the author to prepare information, facts, images and opinions in an orderly manner so as to convey an idea. Since the law looks so very closely at intent, then why is it ok to try and alter the fundamentals what the document was intended to be used as? My intent when I prepare a report is that the reader actually read the report. I have no issue with someone, when given permission by the client to read my document, to research it and use the information within it. I don’t give them permission to take any of my intellectual property from my report (sketches, pictures, narrative comments, etc.) and use it for commercial means that results in them making profit.
It will be very interesting to see how this ends up. I am very proud that my state has once again taken the lead position in our industry. It is even better that when there has been ample opportunity for several trade related and professional organizations to do right by residential appraisers and didn’t, we do at least have State Boards like Virginia. I know there are more out there, and that this is just the first step in a long process.
I look forward to your questions and comments.
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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