SPECIAL WELCOME to Appraisal Scoop's Newest Author- David Towne of http://www.towneappraisals.com/
This is one of those ‘don’t shoot the messenger’ type articles. It contains true information that most appraisers may not know, or think they know, incorrectly. But if you ‘say’ you write reports with USPAP compliance, you may want to read and heed this information. There is commentary included below that you may want to include in your reports to prove USPAP compliance on this topic.
The issue is this: “Does the NAME of a Client have to be shown in an appraisal report?”
This is a trick question, and may not be as obvious as you think. Some appraisers may know the answer, but my suspicion is many don’t. I spent a good part of a day discussing this with a ‘Client’, with Ralph Birkedahl at the WA State Appraiser Section, and reading my copy of USPAP. It’s been a learning experience for me.
So this is shared as a teaching experience. Class is now beginning………
This topic has relevance, due to the proliferation of AMC’s we deal with. Some of them do not want their name shown on the Lender/Client line, or anywhere else in the report. Often, you don’t find that out until you have already submitted the report, and they send back a ‘correction notice’ demanding that their name be taken out.
First, who is a client?A Client is defined in USPAP as ‘the party or parties who engage the appraiser for the assignment.’ That is often the AMC, but can be the Lender.
- Is an AMC your Client, if they place the order directly with you? YES.
- Does the NAME of the Client have to be revealed in the report? NO!
- Can the Client also be the Lender? YES.
- Does the type of Client have to be revealed in the report? YES.
Well then, what type of Client is the AMC?In my, and many other appraiser opinions, the AMC is an “Agent” of the Lender, because they are acting as the go-between from Lender to Appraiser. A ‘senior appraiser’ at one AMC also uses the word ‘agent’ to describe their relationship with the Lender who uses them for appraisal order placement and report review service.
USPAP is a sneaky document. It can be challenging to comprehend at times. And USPAP Advisory Opinions and the FAQ section are NOT legally part of USPAP, even though most people think they are. (No, they’re not! It says so in the USPAP book – Pgs. A-i and F-i.)
The ‘legal’ parts of USPAP are the Definitions, Preamble, Rules, Standards and Standards Rules, and Statements on Appraisal Standards. (It says so in the USPAP book – Pg U-i) Again, the AO’s and FAQ’s are stated as being ‘not part of USPAP.’ They are merely ‘opinions’ that help explain certain aspects of USPAP. Yes, they are ‘in the book’ but there is a legal difference. This is important to understand. (If you’re in court, YOUR defense attorney better know the difference!)
When completing a Summary Report (our most common form report), Std 2-2 (b) (i) says “state the identity of the Client and any intended users, by name or type;” USPAP Record Keeping section of the Ethics Rule (Pg U-9) and the Scope of Work Rule also require the appraiser to identify the lender and any Client who actually orders the appraisal, again by name or type.
So….when we ‘nicely’ say to the AMC “sorry, but I can’t take your NAME out of the report” they fire back with FAQ #71 which says they don’t have to be named. (They actually are using the ‘wrong’ portion of the USPAP book, but I’m not going to tell them! Unless they read this.)
So, what are we to do??? Keep reading…USPAP, and here!
This is where it gets interesting. Statement #9 (Pg U-92, lines 2822 > 2823; Pg U-93, lines 2844 > 2857) of USPAP allows the identity (meaning the NAME) to be omitted, but we must so state that fact in the report. It is my opinion that since their name can be omitted, we still must identify them by type, because ‘or’ is used when ever this is written.
For the history buffs among you, Statement #9 was added to USPAP in 1997, after the public exposure process started in 1995. It is my contention, from the way it’s written, that this was added to protect some commercial clients. But Statement #9 also applies to residential assignments since it is a legal part of USPAP. And in 1995-1996, the AMC’s were few, so they were not even on the radar screen for this addition to USPAP.
So, here’s what I have decided to do – and you may use this in your reports if you like– in fact I strongly suggest you do so to be USPAP compliant. The following 4 paragraph statement has been added to page 1 of my Addendum, at the top. The check boxes are used to identify the Client name status and type is worked in also (Agent for the Lender). I have written this to try to cover all instances, but if someone notices that something should be included, let me know. You can re-write these to suit a very specific assignment, as necessary.
IDENTIFICATION OF THE 'CLIENT' , 'HUD/FHA' AND INTENDED USERS IN THE REPORT:
The appraiser is required by USPAP to identify the Client and any intended users, by name or type. Per USPAP Statement #9, the actual name of the Client may be withheld, but the withholding must be revealed. A Client is defined in USPAP as the party or parties who engage the appraiser for the assignment. The Client may be different from the Lender. If checked below, the following information applies to this report:
[ ] The Client by Name is identified on the Lender/Client lines in the Report Form, along with the Lender Name. No instruction was received on the appraisal assignment order or via other written communication at the time of engagement that prevents the naming of the Client. It is understood that the Client is acting as an agent for the Lender for the placement of the appraisal assignment with the appraiser. The Client and the Lender may be the same entity. In that case, only one name will be shown. Both the Client and Lender are Intended Users of this report.
[ ] The Client is not named in the report, at the instruction of the Client, on the appraisal order or other written communication. The Lender name is shown. However, at the time of engagement, the appraiser understood that the Client was acting as an agent on behalf of the Lender for the placement of the appraisal assignment with the appraiser. The appraisal order with the name of the Client is retained in the appraiser's work file. Both the Client and Lender are Intended Users of this report.
[ ] This assignment is for a FHA insured mortgage. The FHA case number is identified on the report form pages. HUD/FHA is an Intended User of this report, but is not the Lender or Client. The actual assignment order was issued to the appraiser via either the Client or Lender, and their identification status is as checked above.
Some may opine that the AMC is not really an ‘intended user.’I take a hard line approach to this. If a Lender abdicates a portion of the mortgage loan processing function to an AMC, and that function includes the recruitment of appraisers, placement of reports with appraisers, and review of appraisal reports prior to submittal to the Lender, then by golly – yes - they are an intended user. In reviewing our reports, they are using them to gauge compliance with certain guidelines. They are performing a function that the Lenders used to do themselves.
Here’s another key point to this game: if your original report has the Client named when submitted, and later they tell you they want their name removed from the report, you can change the report. BUT…AND THIS IS CRITICAL……do not ‘just change the report and resubmit it under the original file number.’ You do not want two reports with the same file number out in cyberspace that look exactly the same except under close scrutiny, with the same signing date. Which one is the ‘real’ one??
To comply with the Ethics rule so as not to be misleading, you must identify any change made to the original report. I suggest you do that with a dated and signed additional Addendum, or put the info on a page where there’s room to add it. Remember, a Fannie/Freddie Form, used for mortgage lending via the GSE’s is a Federal Legal Document. Do not change an original report – for any reason – unless you say why, when and what was done. Use a different (later) signing date whenever possible.
Hope this has been helpful. Class dismissed!
AUTHOR: Dave Towne Certified Residential RE Appraiser WA State dtowne@fidalgo.net - http://www.towneappraisals.com/
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