Appraisal Scoop

ASB March 2009 USPAP Q&A - Scope of Work & 1004MC Certification

The Appraisal Standards Board (ASB) has issued their March 2009 USPAP Q&A - 

Download March 2009 USPAP QA

• Assuming otherwise identical assignment elements and scope of work, will an appraiser’s value opinion for an assignment be the same regardless of the appraiser’s client?

 

• When I complete the new Market Conditions form (such as the Fannie Mae 1004MC) and include it within my report, does the certification contained in the URAR form apply to the Market Conditions form as well?

Click here for the answers:  Download March 2009 USPAP Q&A

Fannie's New Video Training - Learn How to Use the New Market Conditions Addendum

Gain an understanding of and recognize the sources of market information necessary to analyze market conditions. Our new recorded training is organized to address the Market Conditions Addendum (Form 1004MC), effective April 1, 2009, section by section. Also review the FAQs for additional information about the form and other appraisal topics.

• View Recorded Training
• FAQs (.pdf)

ABA Teleconference Announced - Appraisals of Real Property in Distressed Markets

Telebriefing "Appraising in a Distressed Market". Sponsored by The Appraisal Foundation and American Bankers Association. The Appraisal Foundation and the American Bankers Association have partnered for a national telephone briefing on property appraisals in distressed markets.

The two-hour telebriefing will be held on March 26, 2009 from 2:00 p.m. to 4:00 p.m. EDT. The briefing will present relevant information and provide guidance and valuable insights to appraisers, bankers and other users of appraisal services.

Points to be covered during the course of the telephone briefing will include:

• Appraising in markets where most or all of the comparables are distressed sales;
• Tips for lenders to ensure accurate appraisal orders, and to define adequate scope of work for engaging appraisal services in distressed markets;
• Understanding the "decision tree" used by regulators to determine whether a loan should be adjusted downward;
• Types and definitions of value used in appraisal assignments;
• Effective communication between banks and appraisers on the methodology being used in appraisal assignments.

For more information or to register, Please visit: http://www.aba.com/teleweb/tb032609  

Runt Rants - Highly Honed Powers of Observation and Analysis Make Us Different

I don’t really know where it started. Maybe born into a family of mental giants, where the only option for the runt is to observe and listen.

Maybe it’s a small town environment, lots of experience with outdoor life learning to observe, listen, drawn conclusions.

Maybe it was the years in correspondent banking traveling to those same small towns in six states, chatting with the grocer, the barber, the gas station attendant, picking up clues, signs along the way…so that when I walked into the bank president’s office I knew more about the commerce of the town than he thought I should, and because of that we could do business, help each other.

I do know that when I came late to the appraisal profession I took all the AI courses that were available in a five year span, all they offered really.

When I began those courses I was already trained to observe, to listen, to accumulate random facts and compose a picture…a hypothesis.

The AI courses built on that base and made me better at it. All appraisers taking the good courses in appraisal theory, learned those same skill and applied what they learned in the field to develop and hone those same skills.

It’s part of what sets appraisers apart, what makes them a professional, part of the skill set that brings value to business transactions. It’s part of what we are expected to provide, why we are paid.

I’ll bet you haven’t thought about that in weeks…maybe even months!

But it happens every day, even if you don’t consciously think about it. A typical sample of that in operation occurred with me the last couple of days.

The nation is in turmoil, many markets have been in recession for a couple of years. Houston hasn’t had that problem…not until recently. Houston is an oil town. It’s much less so than in years before, but still an oil town. West Texas Light at $150 last summer created a boom in the oil patch and in the oil service business. That same West Texas Light is now in the $40-50 range, and the oil services businesses are beginning to hurt.

Houston housing markets have been in balance for the last ten years…good solid value growth in the 3-5 percent range each year. But the clouds are building and it is not just what is being reported in the newspaper…that statistic that one in three Houston houses sold in January were distress sales. That’s certainly not good, but heck! It was 24 percent distress in January 2008.

I saw clouds building as I drove to an appointment recently. Established small strip centers one after the other, all with one or two suites vacant. Three closed bank branches…now vacant.

Yet big dirt is being moved…a 50 acre commercial site to the right in vacant land that I thought would stay vacant for another couple of years. To the left a 75-100,000 square foot shopping center with a large anchor…the anchor not yet announced. That’s another one I thought would be delayed another couple of years…but there it is…tilt wall already in place!

A highway overpass gave me bird’s eye views of two large businesses on either side. To the right was an equipment rental business with a yard full of equipment. To the left was an auction house with its yard also full of equipment. Good for the auction company…bad for the companies that could no longer afford that equipment. Bad for the equipment rental business…when the lot is full the equipment is not earning revenue.

Both those yard statuses mean the unemployment rate is going to tip up in a month or two…the yards are leading indicators.

Click here to continue reading . . .

Illinois Licensing Board Tackles Questions On - AMC "Agency", Disclosure of Fees, Out-of-state Reviews, and Report Delivery

Attached you will find a set of "Findings" adopted by the State of Illinois Appraisal Licensing Board.

Our board, like many others, does not have the authority to write rules.  The board does, however, have the authority to interpret USPAP and state law in the recommendation of disciplinary actions.

In issuing "findings" we are informing the appraisers in Illinois of what the board would likely find, if an individual were to be investigated for any of these specific issues.

Finding 1 - Deals with the issue of who is the client - an AMC or a lender. This issue was raised because many AMC's do not wish to be disclosed in an appraisal report. This finding is based upon our interpretation of USPAP.

Finding 2 - This finding deals with "agency." It has become an issue because the Federal Interagency Guidelines do not deal with the issue - leaving it to us. This finding is based upon our interpretation of USPAP.

Finding 3 - Disclosure of appraisal fees. This finding is based upon our interpretation of USPAP. We also find this need for disclosure to be a transparency issue and being in the public interest to disclose the actual fee.

Finding 4 - We have found many companies use "out of state" appraisers to "review" appraisals produced by certified Illinois appraisers. Couched in these "reviews" are often conclusions of value. This finding is based upon our interpretation of Illinois law.

Finding 5 - This finding is meant to deal with the issue of an appraiser being knowledgeable of an AMC altering a true copy of the appraisal report when delivering it to an intended user. This finding is based upon the Board's interpretation of USPAP.

Our goal in distributing these findings is that other state boards might find it useful to adopt similar "findings."

Click here for the complete findings - Download StateofIllinoisFindingsAppraisal

Robert Gorman, Chair
State of Illinois Licensing Board

Congress to consider the use of appraisals over BPO's and AVM's

From the New York Post article: "HOUSE CLEANING - FRANK TO RIP UP OBAMA MORTGAGE PLAN, GO FURTHER" -

In the run-up to creating the subprime nightmare, the unregulated assessment process used the Broker Price Opinions (BPO), which uses comparable sales but has built-in biases. Among those, appraisals tend to be high because brokers don't earn a commission if a mortgage is unfunded because of a low assessment.

Also, the Automated Value Model (AVM), which relies on comparable sales, uses a computer algorithm to come up with a final assessment.

"Appraisal independence is of great importance to all homebuyers and homeowners who own or want to own a home. I have therefore fought to improve appraisal independence for many years and I am continuing to do so. Next week, the Housing Subcommittee will hold a hearing to address mortgage modifications, and I expect that home valuations will be discussed," said Rep. Paul Kanjorski (D-PA), a ranking member on the Finance Committee.

According to mortgage industry sources, the Obama administration is planning to rely on these two models to rescue homeowners from foreclosure.

According to RealtyTrac, foreclosure filings in the US climbed 30 percent in February.

"Going forward, reforming the appraisal process to prevent inflated pricing will be critical to ensure we don't repeat the mistakes of the past," said Rep. Carolyn B. Maloney.

"These two models were instrumental in creating the housing bubble," says James Amorin, president of the Appraisal Institute.

Click here to read the complete article

Source Tip: http://www.ICAPweb.com

National Association of BPO Professionals? - It was only a matter of time!

According to the NABPOP website . . . .

"NABPOP is not a BPO Company in the sense that we distribute BPO orders. NABPOP will not compete for BPO orders and is not interested in distributing, tracking, and/or submitting BPO orders. NABPOP's interest is in training BPO Professionals (experienced and new) in the proper price evaluation techniques and procedures and promoting the higher level of competence. NABPOP is an Association of BPO Professionals"

Click here for their Code of Ethics and Professionalism.

The Appraisal Standards Board (ASB) has issued their February 2009 USPAP Q&A

The Appraisal Standards Board (ASB) has issued their February 2009 USPAP Q&A - 

Download February 2009 USPAP QA

• Appraising Without Knowing the Intended Use or User
• Probate Court Statute Basing the Appraisal Fee on the Appraised Value
• Must a Review Appraiser be licensed or certified in the state jurisdiction where the subject property is located?
• USPAP Applicability in Valuation for Financial Reporting

Click here for the answers:  Download February 2009 USPAP QA

Appraisers launch online petition against RELS AMC practices - Local Desktop Appraisal

Ron Stickelman, Jr. ([email protected] )sent the following email to approximately 20,000 appraisers throughout the United States . He's asked that appraisers review and support his effort and encourages them to forward it to fellow appraisers. 

"It is important that you provide all the information in the sign up request so that it complies with the security requirements we will outline to the receivers and for us to communicate back to you. The information requested on the support sign up is necessary for validation and security protocol and will not be given or sold to anyone for any purpose. This effort is being organized by a small group of fellow licensed and certified appraisers from Ohio and Kentucky who have contributed their time and cost for the good of our profession. This is truly a grassroots effort from fellow appraisers."

Fellow Appraiser:

It may have come to you attention that RELS has began a “phased” appraisal process that begins with a $45 desktop appraisal report

Appraisers on the RELS list are given the “opportunity” to participate in a program intended to save their customers time and money. Appraisers are asked to perform desktop appraisals to be used to evaluate a borrower’s equity position.

Please click on the link to view the email from RELS dated March 5, 2009 announcing this program, the RELS required appraisal report and our formal Letter for A Call to Action.

https://www.stickelman.com/si/si05.phtml

This program is dangerous on several levels:

1. It is comparable to the “comp checks’ our industry has fought so hard to eliminate.

2. It amounts to coercion and other possible ethical issues including determining a predetermined value based upon the outcome of the appraisal. The appraiser is told that if they participate in this program they will have a greater chance of being offered the assignment upon upgrade of the report.

3. Appraisers are enticed into providing discount fee products with the carrot of additional new work and higher appraisal order volumes.

4. The desktop appraisal opens appraisers to increased liability since their analysis and reporting are fully accountable with USPAP and any additional state code.

5. If RELS is so “concerned with what borrowers or clients are paying” for appraisal services and reports, they could reduce their current override of up to 75% over contract appraiser fees (The appraiser is paid a fee of $200 and RELS charges the borrower $350).

6. There is nothing to stop RELS customers from utilizing this summary appraisal report to underwrite a real estate loan.

Click here to continue reading . . .

Appraisers brace for industry change

From the Inside Bay Area.com article by David Morrill Staff Writer - Appraisers brace for industry change -

On May 1, a new code of conduct, the HVCC (Home Valuation Code of Conduct) is scheduled to be implemented with the intent that it will isolate the appraisal process of loans purchased by Fannie Mae and Freddie Mac from bias. Loan production personnel, including mortgage brokers, will no longer be able to order the appraisal or influence the choice of appraiser.

Ann O'Rourke, publisher of Appraisal Today, and an appraiser in Alameda, said that when you're an appraiser, there's always a sense of pressure. You learn to live with that.

The article continues -

Technically, loans not sold to Fannie Mae and Freddie Mac are not subject to HVCC. But it's possible that a lender might send all types through the same process to protect perception of fairness. This could cut mortgage brokers out of the loop even more.

On May 1 appraisal management companies (AMCs) will take many of the orders from lenders and find appraisals. The loan production staff will be unable to contact the appraisers. An AMC will use its own selection process that might be based on specific metrics or more random.

Click here for the complete article

Source: NAR Appraisal Insight Blog