Appraisal Scoop

VA Adopts Uniform Appraisal Dataset (UAD) - Effective Immediately!*

Veterans Benefits Administration Circular 26-11-14
 Department of Veterans Affairs September 26, 2011
 Washington, DC 20420

Download 26_11_14
 
UNIFORM APPRAISAL DATASET (UAD)
 
1. Purpose. The purpose of this circular is to announce the adoption of Uniform Appraisal  Dataset (UAD) compliant appraisal reports for Department of Veterans Affairs (VA) Loan Guaranty Program purposes.
 
2. Effective Date. * Effective immediately, VA fee appraisers may, as an option, use UAD compliant versions of the forms. Effective January 1, 2012, VA appraisal reports utilizing Fannie Mae Forms 1004, 1073, 1075 or 2055 must be UAD-compliant.
 
3. Background
 
a. To improve the quality and consistency of appraisal data on loans delivered to the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency (FHFA), have developed the UAD. The UAD defines all fields required for an appraisal submission for specific appraisal forms and standardizes definitions and response options for a key subset of data fields. The UAD will apply to the following most commonly used residential appraisal report forms (Fannie Mae / Freddie Mac form numbers listed below), which are also approved for VA appraisal use:
 
(1) Uniform Residential Appraisal Report – 1004/70
 (2) Individual Condominium Unit Appraisal Report – 1073/465
 (3) Exterior-Only Inspection Individual Condominium Appraisal Report – 1075/466
 (4) Exterior-Only Inspection Residential Appraisal Report – 2055/2055
 
b. Appraisal software vendors have incorporated the UAD requirements into their form software that is currently available on an industry-wide basis. Although only appraisal reports for conventional mortgage loans sold to Fannie Mae or Freddie Mac are required to be completed in compliance with the UAD at this time, it appears that UAD will become an industry standard, since UAD has been adopted by FHA.
 
c. To prepare for the adoption of UAD by VA, Fee Appraisers should become familiar with the modified appraisal forms, including the UAD field specific requirements detailed in Appendix D of the Uniform Mortgage Data Program, and which is posted on the web sites of Fannie Mae and Freddie Mac at https://www.efanniemae.com/sf/lqi/umdp/uad/index.jsp.
 
(LOCAL REPRODUCTION AUTHORIZED)
 
4. Details. VA is moving to require UAD-compliant appraisal reports to remain in step with changes in appraisal reporting, to support consistency in appraisal reports, and to ensure the acceptability of VA appraisal reports within the industry. Most aspects of this change to UAD require only clarification of existing policy or procedure; however, there are three actual changes to standing policy or procedures that must be noted. Reference Section 6 of this Circular for those changes to policy and procedure.
 
5. Points of clarification on VA appraisals in relation to UAD requirements
 
a. VA Fee Appraisers will continue to complete VA appraisal reports in accordance with the requirements of the VA Lender’s Handbook (VA Pamphlet 26-7, Revised) and instruction and guidelines from VA. Fee Appraisers are reminded that completion of the data fields of the appraisal report does not relieve them of the duty to provide adequate explanations in the addendum to provide clarity and justification.
 
b. Appraisal reports will continue to be quality-reviewed for compliance with VA requirements.
 
c. While the UAD may allow for the use of unsettled sales in the sales comparison grid, VA requires that only settled sales be used.
 
d. UAD requires appraisers to provide specific information regarding remodeling in the past 15 years; VA expects Fee Appraisers to recognize and describe remodeling or updating and to make appropriate adjustments. On VA appraisals, Fee Appraisers should also report UAD information concerning the remodeling if it is available in the “normal course of business” within VA timeliness requirements for completion of the appraisal.
 
6. Changes to VA policy and procedures for VA appraisals in relation to UAD requirements. To allow for acceptance of appraisal reports in compliance with UAD, VA policy regarding entries in appraisal report data fields which appear to conflict with UAD are changed as follows:
 
a. The requirement that only the “Department of Veterans Affairs” be entered in the Lender/Client field of the appraisal form is rescinded. Instead, the lender’s name will be entered in this field, as well as the “Department of Veterans Affairs” as the Client of this field.
 
b. The requirement that “Intended User: Any VA Approved Lender” be entered in the Address field for the lender is rescinded. Instead, the address of the lender will now be entered in this field.
 
c. The requirement that “Any Qualified Veteran” be entered in the Borrower field of the appraisal report is rescinded. The name of the Veteran purchaser will be entered as the borrower
 in this field.
 
7. Rescission: This circular is rescinded October 1, 2014. By Direction of the Under Secretary for Benefits
 
Michael J. Frueh
 Acting Director
 Loan Guaranty Service

Potential "nuclear" threat to AMC liability could expose AMCs to large-scale mortgage litigation

Update on FDIC v. CLGX (CoreLogic -- eAppraiseIT): FDIC Reiterates Threat that Appraisers Are the Legal Agents of AMCs in a Late-Filed Brief - By Peter Christensen

The FDIC is now contending that independent contractor appraisers are the legal agents of appraisal management companies (AMCs) in both of its cases against LSI Appraisal and CoreLogic.  Based on this contention, the FDIC asserts that the AMCs should be liable for all damages attributable to the alleged negligence of their panel appraisers. 

The FDIC first asserted this argument in a brief filed in its case against Lender Processing Services and its AMC LSI Appraisal (see the update on that case here). It is now making the same argument in its case against CoreLogic, parent of the AMC formerly known as eAppraiseIT. 

In sum, the FDIC's contention is that an AMC "is vicariously 'responsible and liable' for the torts committed by the individual appraisers it retain[s] as a matter of black letter principal/agency law." 

While this is just one of many claims by the FDIC against the AMCs, this issue would have the most wide-ranging impact on the appraisal industry, if the FDIC prevails on it.

The FDIC failed to make this claim in its original complaint filed against each AMC on May 9, 2011 and also failed to make the argument in its opposition brief to each company's motion to dismiss. While the FDIC's arguments are being raised for the first time in "sur-replies" which do not have to be considered by the Court, it is still apparent that the FDIC will try to pursue liability of the AMCs on the basis that appraisers are the legal agents of AMCs (among other theories). 

As mentioned earlier this week in the update regarding the LSI Appraisal case, this is a potential "nuclear" threat to AMC liability and, if accepted by the Court, could set a precedent exposing these and similar AMCs to other large-scale mortgage litigation.

The notion of "we're not the appraiser, so we're not liable for an individual appraiser's negligence" is one of the most common frameworks under which AMCs avoid liability in cases filed by lenders and borrowers.  If the FDIC succeeds with its aggressive agency position, AMCs will face exposure to potential liability in the same situations and to the same extent as their panel appraisers.  More troublesome for AMCs, however, is the fact that unlike individual appraisers, they deliver appraisals to the same lenders in bulk and, thus,  present easier targets for actions by investors in or holders of worthless mortgage loans.  That potential risk is highlighted by the FHFA's references to several large AMCs in some of the 17 separate lawsuits that it filed against mortgage securitizers on September 2, 2011.

Like LSI Appraisal, CoreLogic argued in its motion to dismiss the FDIC's complaint that the gross negligence claim relating to faulty appraisals delivered to WaMu should be dismissed because, among other things, its AMC eAppraiseIT did not have the same duties of care that appraisers have.  This is the expected and common argument that should be made by any AMC facing claims about allegedly faulty appraisal work by individual appraisers. CoreLogic specifically argued in its reply brief:

 
 
In its sur-reply, the FDIC now for the first time against CoreLogic raises its contention about appraisers being the alleged agents of AMCs:

 

At this time, I doubt that the present motion to dismiss in this case will be decided based on the FDIC's agency argument (or the FDIC's failure to plead it in the complaint) because there are many other matters at issue.  The FDIC's lawsuit against CoreLogic will likely withstand this first round motion for other reasons, and even if the Court grants part or all of this first motion to dismiss, the Court will likely permit the FDIC to amend its complaint.  Accordingly, we will likely see more from the FDIC about the principal/agent issue in this case.

Many parties -- not only AMCs but also appraisers and lenders -- need to follow this issue closely because if, as according to the FDIC, appraisers really are the legal agents of AMCs (who are themselves the agents of lenders), there will be significant new liability challenges and defense opportunities.

Also Reference:

• Yet Another New Liability Risk for AMCs

• Update on FDIC v. LPS (LSI Appraisal): LSI Argues that AMCs Owed No Legal Duties of Care to their Clients and Appraisal Users -- FDIC Argues that Appraisers Are the Legal Agents of AMCs

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

Will the new UAD appraisal standards result in lower mortgage rates?

According to Peter G. Miller's 9/6/2011 HSH Blog article, "New appraisal standards to impact mortgage rates", the answer is YES!

Mr. Miller says, "They may allow us to unearth faked, falsified and incompetent appraisals and thus prevent loan fraud, illegal flipping and bad mortgage investing. And such improvements in the valuation process might actually lead to lower mortgage rates by removing excess risk from the marketplace."

 

He feels that illegal flipping and "faked appraisals" were key factors in the mortage meltdown and that, "Tighter appraisal standards [will] make it easier to catch cheats and, also, to drive bad appraisers and lenders out of business."

He concludes that "the new appraisal standards will allow lenders and government officials to quickly review past appraisals to see if they conform to national standards. If yes, fine. If not, lenders are likely to provide less business (or no business) to the appraiser with the bad rep."

Fewer cheats ------> Reduced lender risk  -----> Lower mortage rates?

What do YOU think? 

• Do you think that appraisers and flipping were the cause of the mess that we're in? 
• Will the UAD actually prevent bad mortgage investing? 
• Will improvements in the valuation process really lower mortgage rate?  

Source:  http://www.blog.hsh.com - article   [Thanks to Bill Cobb for posting this article to his FB page Real Estate Appraiser Tips]

PR: DartAppraisal.com Offers Checklist for Uniform Appraisal Dataset (UAD) Compliance

PR: TROY, MI--(Marketwire - Sep 7, 2011) - Residential appraisers seeking to fulfill requirements of the new Uniform Appraisal Dataset (UAD) will find the new UAD checklist available from DartAppraisal.com to be a helpful tool in compliance.

Download Dart UAD Appraiser Checklist

 

The UAD checklist, also available at www.dartappraisal.com/media/appraiser_checklist.pdf, contains a quick reference of information required for UAD-complaint appraisals, including 38 specific line instructions and nearly 50 common abbreviations. Checklist categories include Timeframes, Location Factors, View Factors, Sale Type, Financing Type and more.

DartAppraisal.com recently announced its full coordination of efforts in compliance of the UAD to properly manage appraisals (1004 URAR, 1073 Condo, 2055, and 1075 reports with an effective date of 9/1/11 or later). Comprehensive infrastructure updates were required, and specific enhancements made to DartAppraisal.com's exclusive technology and data structure guarantee that appraisal reports adhere to UAD regulations.

DartAppraisal.com is a leading independent provider of nationwide residential real estate valuations. The Troy, Michigan-based company provides appraisal management services, automated valuation models (AVM's), and other custom valuation solutions for hundreds of clients. www.DartAppraisal.com.

Carnac The Magnificent (with envelope to forehead) Reveals the Answer: 319 a month!

Then, blowing into the torn envelope, Carnac reads the question:

How many appraisers are leaving the industry every month?!

According to the Appraisal Subcommittee, the # of appraisers reached its peak in 2007 with 121,407 active appraisers nationwide. From 12/31/07 to 12/31/08 there was a small decline of 856 appraisers. From 12/31/08 to 12/31/09 there was a decline of 3,760 appraisers. From 12/31/09 to 12/31/2010 there was a decline of 6,879 appraisers. From 12/31/2010 to present (9/11) we have a decline of 2,697 appraisers.

Download 1992-2010 Appraiser Statistics

That is 14,192 appraisers that have left the business since December 31 2007. 319 appraisers every month are being driven out of business by the AMCs. When will this insanity stop?

We have 107,215 active as of today. At the current rate of decline we will be at 2005 levels within 120 days. So much for growth in the industry.

Ironically the Appraisal Management Business is booming.  Streetlinks is opening new offices in new states, Corelogic is hiring staff appraisers nationwide, LPS is hiring on such a massive scale, that I have never seen in 13 years of appraising. 

A hiring rep for LPS recently told an applicant that: "This is the new business model for the industry. If you want to make a living appraising today, you need to be an employee of an AMC. Independent appraisers will no longer exist".

I have also learned that some AMCs are intentionally capping the # of reports an appraiser can receive in a months time. Intentionally keeping the appraisers income low enough to keep him or her desperate. A starving appraiser will be more easily pressured or manipulated.

Today we have reduced fees, scope creep, no loyalty from AMCs to the appraiser, increased costs, increased liability, reduced turn times, new regulations, new formats, increased demands from AMCs for content, no trainees allowed, waiting 60 days or more to be payed.

Perhaps the 14,192 that have already left were right?

GUEST POST: ANONYMOUS -  Article Submission - Name witheld by request

New GSE Appraisal Database to Tighten Scrutiny on Mortgage Lenders (Appraisers)

According to the source post: HousingWire.com "New GSE appraisal database to tighten scrutiny on mortgage lenders" -

Appraisers began submitting electronic property data for mortgages sold to Fannie Mae and Freddie Mac under new guidelines that took effect Thursday (9/1/11).

As a result, the government-sponsored enterprises will be building a massive database of every appraisal backing every mortgage sold to them. But the firms, which — combined with the Federal Housing Administration — guarantee or insure 95% of the entire mortgage market, have been silent on what they plan to do with the data.

This Uniform Appraisal Dataset defines the new ways appraisals will be submitted. The GSEs are also developing a Uniform Collateral Data Portal, where the appraisers can make the submission. The UCDP went into voluntary effect June 27 and the use of it will be a requirement starting March 19, 2012.

Rich Andreano, a partner at the financial law firm Patton Boggs told HousingWire those in the industry are wary of this new vault of appraisal information.

"Once you standardize it and automate it, it makes it easier to study a group of loans. Someone can conduct the analysis and say, 'Hey, you know we took a look at all the data and we noticed a trend that is troubling," Andreano said. "They can look at where appraisals are coming, if they're coming from certain areas, which appraisers are getting work, and they can raise questions that suggest further due diligence is needed."

Lenders know that with access to this kind of data, the GSEs will have an easier time enforcing repurchase and warranty claims. The lender can be made aware of a possible appraisal problem before the loan is even closed. If the lender goes ahead and sells the mortgage to Fannie or Freddie anyway, the risk of having to repurchase that mortgage if it slips into nonperforming status skyrockets.

Click here to read the complete article by Jon Prior.  Follow him on Twitter @JonPrior

Video: Field by Field Video Tutorial - Uniform Appraisal Dataset (UAD) in a URAR Residential Appraisal

Have you waited until the last minute to get up to speed on the Uniform Appraisal Dataset requirements that go into effect today (9/1/2011)?   This video will help you get from 0-60 in about 42 minutes!

This video walks you through ALL of the UAD-impacted fields of the URAR.

All of the appraisal software developers have done there best to implement the new UAD requirments, but there are still confusing parts of the GSE rules. In fact, according to Joel Baker of a la mode, inc. "Most of the questions we get have little, if anything, to do with the software." This video helps bring clarity to those confusing parts.