Appraisal Scoop

Pressure Comes In Many Forms - HVCC, Rotation Lists, Appraisal Regulation

An associate and I were reminiscing the other day about the good ole days when work was plentiful and we were afforded the luxury of turning down certain clients in favor of more desirable ones. The only thing missing from the nostalgic moment was a porch swing and a cold glass of sweet tea.

Times certainly have changed indeed as it seems like no one in the industry, including the leading trade organizations seem to know where we are headed. Blog posts read like bickering matches and opinions become further estranged from one another with less and less meaningful discussion. Appraisers obviously come from varied backgrounds and experience levels but unification increasingly appears unlikely.

Through the years, I have noticed that the common thread of industry talking points has always centered around the so called “pressure on appraisers”. This has uniformly been defined as a mortgage originator’s communicating a desired value to a selected appraiser in order to close a loan. The concept relies on the assumption that appraisers may have completed erroneous reports for fear of reprisal or loss of clients which would then lead to a loss of income. It may be a clear realty that this did occur but the deeper question is to what extent?

Recent months of retrospect have caused me to ask; was it really so prevalent that it actually falsely moved the nationwide real estate market upward which eventually lead to a foreclosure fed collapse?  If this is the case, then how many of us are confident we were doing our jobs correctly. If the majority of appraisers are clamoring about coercion to inflate values, then is it fair to assume they gave in to the pressure and then pointed their finger at everyone else?

I have contended in past articles that moral integrity aside; lender approval, keeping a license, avoiding lawsuits and maintaining a good reputation was more than enough to keep me on the straight and narrow in regards to how my firm and myself completed appraisals. After all, how can an appraisal company continue to exist, if they have been driven out by any number of checks in the system? Were these motivations not enough for most in our profession?

The expression “be careful what you wish for” has come to mind many times recently and our wish may be coming true. I fear that our years of beating the appraiser pressure drum have brought forth changes we were not prepared for. The HVCC, rotation lists and expansive lender control are only some of the recent behemoths of regulation that are touted by their originators as an answer to the problem of pressure on appraisers. The ironic thing about these proposed solutions is that they all have loopholes where abuse can and most likely will still occur.

Click here to continue readling . . . .

Software Review: Automate your 1004MC data research with Total Solution© 1004MC

The following excerpts are reprinted with the permission of Ann O'Rourke, MAI (Appraisal Today) and the author Douglas G. Smith.  - Download Total Solution 1004MC Software Review - Doug Smith

Appraisal Today [April 2009] - Editor's note: Before writing this article, Doug Smith researched the available MC form software. He decided that David Braun's software was the best. This review also includes comments on the two appraisal "camps" on market conditions analysis and other topics. The MC form does not require historical listing data analysis, but Smith reviewed this as it is an option.

"The purpose of this addendum is to provide the lender/client with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. This is a required addendum for all appraisal reports with an effective date on or after April 1, 2009."Fannie Mae 1004MC/Freddie Mac 71 March 2009

Although announced to the appraisal/lender world in November 2008, appraisers are only now scrambling to take steps to fully understand the new 1004 Market Conditions Addendum and devise a strategy to complete the form. Most agree completion of the Addendum will add to the work of preparing reports. Some lenders, in anticipation of the deadline, have asked that appraisers submit the completed form prior to the April 1, 2009 date.

While some lenders have stepped forward assuring appraisers they will be compensated for preparing the new Addendum; others have taken the stance that the Addendum only formalizes data that should already been gathered and analyzed and no increased fee should be expected.

 

That the information on the Market Condition Addendum is segregated into three distinct time periods refutes the contention that appraisers already gather the data required by the form in a similar fashion.

Whether an appraiser gathers and analyzes data on an annual basis or month-by-month, the current separation into one six month period and two three month periods requires re-working of any past methods of reporting trends.

It is clearly evident that preparation of the new MC Addendum will take more time. For appraisers, the challenge is two-fold.

First the appraiser must meet the competency standards of the scope of work necessary to complete the form and secondly the appraiser must consider the preparation time and productivity issues of meeting these requirements. To address both of these challenges,

David Braun MAI,SRA from Automated Valuation Technologies, Inc has developed Total Solutions©, a software program to assist appraisers with the process of preparing the 1004MC form. Total Solution© is both an elegant and practical time-savings means to competently fulfill the entire range of requirements of the new 1004MC Form.

Priced at $149.00, it is available at http://www.scoopgear.com and is available in two versions, one running on Excel 2007 and another geared for Excel 2003.  David's AVT Users Group is located on The Appraiser's Water Cooler social networking site.

Download Total Solution 1004MC Software Review - Doug Smith

Click here to continue reading . . . .

Stopping In the Middle Of An Appraisal Assignment . . . Unethical?

As Appraisers, the disgust for the behavior within our own industry is reaching all time highs. You can see it in related blogs, forums and the news. Everyone is in an uproar over those who commit act's of selfish greed or practice every day production of unethical  incompetence. If you look deeply enough, I think that most would agree that a majority of the Appraisal industry problems stem from Ethics.

Foremost, we have an obligation to USPAP. Things can be quite simple sometimes when viewed from a different perspective, so as an example here is something to think about. (The following situations are only stated as fiction).

Situation 1:  If I accepted an assignment, but halfway through (in the process of discovery) I run into an appraisal problem that makes me incompetent to finish and I decide that I need to call the client to issue a refund (full or partial) and turn down the assignment. Ethical?

Situation 2:  If I accepted an assignment, but halfway through I realize that the Appraisal is not going to meet the bench-mark for the value that is needed for the refinance. I call the Mortgage Broker and cancel the appraisal because I do not want to waist the borrowers money. I then issue a partial refund to the borrower, because after all I did "partially" complete the assignment. If this were to happen, who did I just consider? USPAP or the borrowers money?

If you think about the two scenarios, there is a distinct difference in reasons why I canceled the assignments. One was canceled because I was obligated by USPAP to cancel the assignment, or to inform the client (and of course with permission, I could get competent with extra help) and continue.

In the second scenario, the appraisal was canceled with the consideration of the ethical consequences of waisting the borrowers money (knowing that the loan would NOT be attained), but the borrower is not USPAP or the client.

USPAP clearly states that the amount of pay should not be based on the outcome of the Appraisal. But, isn't that just what happened in situation 2?

Appraiser's fool themselves by thinking they are being ethical by saving borrowers money and that they are good people by doing so. In fact, the client's and the borrower's in these situations might think so too. But are they really being "good", ethical people by breaking their oath to the state that licensed them to appraise (not to mention an oath that's required by signature, before licenses are even issued) that they would in fact abide by USPAP?

It is my hope that Appraiser's will read this and start to realize that being ethical is abiding by USPAP first, not second. Because, in the end; breaking an oath is not being ethical, no matter how different something is phrased over the phone or what things are added to an addendum.

Author: Aaron O. Thomas, Certified Residential Appraiser. Aaron is owner of San Diego Appraisers, a real estate appraisal service provider specializing in residential properties located in the greater San Diego County area. San Diego Appraisers service mortgage brokers, CPAs, lawyers, businesses and homeowners.

Pending Mortgage Reform Bill H.R. 1728 Contains "Property Appraisal Requirement" Provisions

"The Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728) was introduced March 26 by coauthors Rep. Brad Miller (D-N.C.), Rep. Melvin Watt (D-N.C.) and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. It is expected to move quickly through the House this month and go to the Senate by May. The odds of passage in some form are high, according to banking and housing industry lobbyists." (Kenneth Harvey - LA Times )

The bill is intended to:

To amend the Truth in Lending Act to reform consumer mortgage practices and provide accountability for such practices, to provide certain minimum standards for consumer mortgage loans, and for other purposes.

Click here for the GovTrack Text H.R. 1728

The bill does contain some provisions that will effect real estate appraisers:

   

Minimizing Risk on the Fannie Mae Form 1004MC Market Conditions Addendum

Minimizing Risk on the Fannie Mae Form 1004MC Market Conditions Addendum By Peter Christensen

Effective today [4/1/2009], Fannie Mae is requiring the completion of its new Form 1004MC Market Conditions Addendum in connection with all one to four-unit appraisals. Many appraisers have stated serious concerns with respect to the conflicting directions given by Fannie Mae regarding the addendum and the additional strain of the research and analysis -- all in an AMC-dominated environment paying lower fees to appraisers.

In our position of defending legal claims against appraisers, we are most worried about the potential legal risk to appraisers.

To minimize such risk, we are suggesting that our insured appraisers first be careful to address any specific concerns they have concerning the market analysis in the bottom explanation section of the addendum. It is always the best practice to accurately communicate specific concerns about data reliability or other matters in the relevant part of the subject report.

Beyond that basic prudence, we are suggesting that appraisers consider adding the following language or similar language they deem appropriate in the same explanation section:

Appraiser’s "Inventory Analysis," "Median Sale & List Price, DOM" and other observations in this addendum are based on the data source identified above, which appraiser generally believes to be an acceptable source of market data. However, the appraiser cannot verify all of the information in that data source and cannot guarantee the accuracy of such data or conclusions based thereon. The appraiser also cannot guarantee future market conditions affecting the subject property.

Because of the recent implementation of this form, we do not know whether lenders will push back or react negatively to including this language in appraisal reports.

We look forward to feedback from appraisers on this issue.

Source: Appraisal Legal Defense and Insurance Blog by Peter Christensen and Robert Wiley - Legal issues and insurance matters affecting residential and commercial real estate appraisers

Article - HVCC Appraisal Process Agreement Sparks Debate in Industry

The April 2 article by Tim Grant of the Pttsburgh Post-Gazette starts . . . "Some say agreement [Home Valuation Code of Conduct] governing appraisal process will do little to improve the system."

Appraisers who work on behalf of appraisal management companies complain that many such companies hire appraisers based on who will work for the lowest fee and provide the fastest turnaround rather than the quality of work, experience of the appraiser or complexity of the assignment.

A new agreement by government-backed mortgage finance companies Fannie Mae and Freddie Mac that takes effect May 1 will shake up the home appraisal industry by giving appraisal management companies a stronghold on the appraisal process.

Click here to read the complete article

NEW Video - Fannie Mae's Home Valuation Code of Conduct Recorded Web Seminar

Fannie Mae's newest pdf and video provide guidance to lenders and appraisers to supplement the policy requirements in the Fannie Mae Selling Guide for performing and underwriting the property appraisal securing mortgages delivered to Fannie Mae.

Guidance for Lenders and Appraisers - (.pdf, 130K, 26 pages)

Click the graphic below to start the online training video . . .  

NAMB's Strategic Withdrawal of Legal Action Against FHFA

McLean, Virginia, April 2, 2009 – In February 2009, the National Association of Mortgage Brokers (NAMB) filed suit against the Federal Housing Finance Administration (FHFA) to block implementation of the Home Valuation Code of Conduct (HVCC), which will inhibit competition among mortgage originators and increase the cost of mortgages to consumers.

NAMB’s suit asserted that the HVCC constituted a "de facto" rulemaking that did not comply with the requirements of the Administrative Procedures Act (APA), which sets out the procedures a federal agency must follow when issuing a regulation.

Today, NAMB has withdrawn its lawsuit against the FHFA. NAMB invoked this strategic maneuver to assess means by which we can refute the FHFA’s claim that no court may review their decisions while the GSE's are in conservatorship. NAMB believes the FHFA's claim that there are no legal limits on the arbitrary and unilateral use of their conservatorship power is unprecedented and will prove detrimental to consumers. Read on

Freddie Mac says NO to BPO's - Bulletin 2009-7 - March 31, 2009

Freddie Mac (Bulletin 2009-7)  is updating their Single-Family Seller/Servicer Guide ("Guide") to reflect the requirements announced in Bulletin 2009-1, including revisions that require any third party specifically authorized to perform certain actions on behalf of the Seller be in compliance with the HVCC Code ("Code") requirements.

Of particular note was the change to section 44.7:

44.7: Overview of appraisal and inspection reports and the Property Inspection Alternative (PIA) (03/31/09)

To evidence that the Mortgaged Premises is acceptable for the transaction, each Mortgage file must contain one of the following reports:

• A written appraisal report • A written inspection report
• A print-out of the Last Feedback Certificate with the Minimum Assessment Feedback of Form 2070 or PIA Whether the Seller should use an appraisal, an inspection or PIA depends on:
• The characteristics of the transaction
• The type of property securing the Mortgage, and
• Whether the Mortgage is a Loan Prospector® Mortgage or a Non-Loan Prospector Mortgage

The Seller may not use tax-assessed valuations or Broker Price Opinions (BPOs) to determine value.

Source: AllRegs Seller/Servicer Guide

Fannie, Freddie Release Updated FAQs on HVCC

On March 31, Fannie Mae and Freddie Mac released an updated Frequently Asked Questions regarding the Home Valuation Code of Conduct that is set to take effect May 1, 2009. Highlights of the FAQ include sections regarding mortgage broker initiation of the appraisal process, quality control, and loan production staff training.

Appraisal Institute members are encouraged to read the FAQs in their entirety and to submit any questions to insidethebeltway@appraisalinstitute.org.

To access the full FAQs as well as a variety of other HVCC-related information, visit www.freddiemac.com/singlefamily/hvcc_faq.html  and www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/ .

Source: Appraisal Institute