Appraisal Scoop

20 Benefits of the Full-Fee Appraisal Management Company (AMC) Model

AUTHOR: Jeff Schurman is the executive director of Leading Causes LLC ( www.leadingcauses.com ), a leadership and business development advisory firm that helps mortgage lenders and third-party service providers to assess strategic, operations, reputation, reporting, and compliance risks that accompany sourcing of real estate mortgage settlement services. He is the editor of the Mortgage Third Party Risk Blog (www.mortgagethirdpartyriskblog.com ), and the former executive director of the Title Appraisal Vendor Management Association.

From Jeff Schurman's white paper:  Download The AMC Full-Fee Hypothesis - Jeff Schurman

"In this section, we propose that there are at least 20 self-serving benefits to the AMC industry by paying appraisers their full-retail fees. We rely extensively on research we and others have conducted, our extensive combined interactions with appraisers and AMC industry leaders, and basic economic principles, chief among them supply and demand. Most of our observations are grounded in free market behaviors among buyers and sellers of settlement services. Significantly, much of the rationale is grounded in the discipline generally known as systems thinking."

Paying appraisers their full (or retail) fees…

1. Removes the single-largest barrier to acceptance of AMC as legitimate business partners.

2. Increases the supply of appraisers willing to work with AMCs.

3. Encourages new appraisers to enter the appraisal profession.

4. Leads to better control of appraisal quality.

5. Lowers costs for recruiting, quality control, and rework.

6. Enables AMCs to gain market share.

7. Provides AMCs rationale to charge lenders for the actual value the AMC brings to the transaction.

8. Enables AMCs to provide clients quantifiable means with which to compare AMC alternatives.

9. Reduces third-party risks described in numerous FFIEC Financial Institution Letters and agency guidelines.

10. Promotes less contentious treatment of AMCs.

11. Takes the subjective “customary and reasonable” fee requirement in the Dodd-Frank bill off the table.

12. Paves the way for nationalizing AMC regulation.

13. Provides clients better overall service quality.

14. Preempts external efforts of factions to force AMCs to pay up.

15. Is the most ethical thing to do in a fair and equitable society.

16. Allows for significantly improved vendor relations between the AMC and the appraiser.

17. Reduces the risk that disgruntled appraisers will draw the attention of federal regulators.

18. Provides joint marketing opportunities because appraisers will see the AMC as worth promoting.

19. Opens the door to a better borrower experience because the appraiser doesn’t enter the home angry.

20. Opens the door for joint publicity efforts because appraisers will feel like partners.

 

 Download The AMC Full-Fee Hypothesis - Jeff Schurman

Viability of the Appraisal Profession - Guest Post by David Towne

GUEST AUTHOR: Dave Towne, Certified Real Estate Appraiser - Towne Appraisals. 16422 Britt Rd., Mount Vernon, WA Phone: 360.708.1196 eMail: [email protected] Web: http://www.TowneAppraisals.com

Appraisers……

Those of you who desire to ‘read the minds’ of those players with direct bearing on appraisers will want to read the latest TAVMA newsletter. TAVMA is the Title/Appraisal Vendor Management Association – a trade organization now with diminished membership (only 27 + 5 affiliates) from its heyday in the mid-2000’s.

http://www.tavma.org/Articles_NEW/TAV_NL_Spring12.pdf

The lead article is written by Jeff Schurman who use to be the Executive Director of TAVMA. While in that position, he often wrote articles not very complimentary to appraisers or to the plight we have in being paid fairly. At the time, he advocated the AMC ‘wholesale price’ model in paying appraisers, and lobbied against AMC regulation at the state level.

Now, he’s beginning to question that model and the viability of the appraisal profession.

Mr. Schurman has his own consulting business (associated with TAVMA), and has a Blog in which he writes about mortgage lending issues. http://www.mortgagethirdpartyriskblog.com/

In an entry on April 10, 2012 he states this:

“The current environment is not conducive to attracting large numbers of young professionals into the appraisal business. I doubt anyone would seriously dispute this claim. So if the appraiser population continues to decline it will one day dip below the relevancy quotient.”

That brings me to the AQB. While many appraisers were sleeping, or sitting on their thumbs, the AQB instituted new ‘requirements’ for a person to qualify to become a Certified Real Estate Appraiser – either Residential or General (Commercial). Existing state certified (licensed) appraisers will be grandfathered, but effective Jan. 2015, an applicant for Certification will have to have a 4 year college degree.

In practical application, due to time-in-grade requirements as a trainee, an applicant will have to have a 4 year degree by December 2013, otherwise will not qualify to become a certified appraiser.

The ‘licensed’ category does not have such stringent requirements, but FHA and many lenders WILL NOT USE a ‘licensed’ appraiser. Some states are moving away from, or have eliminated, the ‘licensed’ category.

Are there those among you who really believe a 4 year college degree is absolutely necessary to appraise a residential property? The fallacy of that argument is that somehow a sheepskin equates to quality work. That’s absolutely wrong. Quality work comes from within the person in terms of their own attitude, ethics and willingness to learn, and has nothing to do with a 4 year degree.

The result of the AQB action, and the AMC model paying lower than ‘real’ fees parallels the concern Mr. Schurman expresses.

These are the real threats to the appraisal profession viability long term, not the UAD process instituted by Fannie/Freddie or report data acquisition that I see so often expressed.

 

GUEST AUTHOR: Dave Towne, Certified Real Estate Appraiser - Towne Appraisals. 16422 Britt Rd., Mount Vernon, WA Phone: 360.708.1196 eMail: [email protected] Web: http://www.TowneAppraisals.com

UAD Reporting Consistency - Clarification by FNMA and Steetlinks

The following StreetLinks document is re-posted from the WinTOTAL Users Group

On April 10th, Fannie Mae and Freddie Mac announced the publication of a new UAD Update document and an Updated UAD Specification Appendix D, which details the Field-Specific Standardization Requirements for compliance with UAD appraisal reporting. Additionally, StreetLinks' Executive Management Team has been in recent discussions with UAD experts from Fannie Mae regarding their early stage analysis of appraisals that have been delivered via the Uniform Collateral Data Portal (UCDP). As a result of our discussions, we have a few clarifications, which are also included in the Updated UAD documents, that Fannie Mae asked us to emphasize with our appraisal partners.

Fannie Mae is now able to pinpoint significant differences between reported data for a single comparable property or subject property that has been used across multiple appraisal reports.

In particular, they are concerned about information that changes from report to report when the same subject or comparable transaction is utilized by the same appraiser in two (or more) independent analyses.

For example, instances have been identified where a comparable property has been described in one report to have an Adverse View, while in a later report, completed by the same appraiser, the same comparable property transaction is described to have a Neutral View or Beneficial View. Similarly, Fannie has found that Quality Ratings or Condition Ratings assigned by the appraiser have changed for the same comparable property transaction from report to report. Finally, Fannie Mae has identified comparable property characteristics such as GLA, room count and other basic features that have changed significantly from report to report.

With the understanding that this information is now being closely monitored, it is important for appraisers to be very consistent in their reporting of property information or explicitly document the reason for changes to reported data when the same subject or comparable transaction is used in multiple analyses. Since the property characteristics for the subject should be described and rated as they existed on the appraisal's effective date, (or for a "subject to" report, as if the improvements/repairs had already been completed on the appraisal's effective date), and property characteristics for a comparable property should be described and rated as they existed at their time of sale; there are very few instances where the data should actually change from report to report. Only if the appraiser has discovered new information about the property as it existed on the relevant date, or if the property has been involved in a subsequent transaction would a change to how the property characteristics are reported be appropriate. In these rare situations, the appraiser should clearly document the new information which led to the reporting change.

As it relates to this issue, the UAD Update April 2012 document includes the following additional instructions:

Appraiser Selection of Condition and Quality Ratings In other documentation, the GSEs have previously communicated that the appraiser's selection of the Condition and Quality ratings must be based on a holistic view of the property and any improvements.

When selecting the Condition and Quality ratings, an appraiser must:

• Consider all improvements to determine an overall Condition and Quality rating. The appraiser should then select the rating that best reflects the property as a whole and in its entirety.
• Describe the subject property as of the effective date of the appraisal on an absolute basis, meaning the property must be rated on its own merits. This requirement also applies to any other rating or description, including the View and Location. The rating should not be selected on a relative basis, meaning it is not selected on how the property relates or compares to other properties in the neighborhood. Additionally, the Condition and Quality ratings for comparable properties must also be made on an absolute basis (again, each comparative property on its own merits), not on a relative basis, and reflect the property as of the date of sale of that comparable property.

When an appraiser selects a rating and/or description of the subject property for a sales transaction, the selected rating and/or description must:

• Remain the same when reflecting that specific transaction. For example, if a C4 rating is selected for the sale of the subject property, then that property remains a C4 when using that specific sale as a comparable in future reports. The same expectation holds true for ratings and descriptions of comparable sales; when a comparable is used in a subsequent appraisal, the ratings and descriptions of that property should not change from one appraisal to the next when it reflects the same sale transaction.

It is also important to note, however, that properties can have the same rating or description and still require an adjustment. For example, all water views may not be equal. In this instance, an adjustment should be made and explained in the comments section of the form or an addendum.

StreetLinks recognizes that there may still be some subjectivity in assigning quality and condition ratings, particularly when the appraiser believes that a property shares characteristics of more than one rating standard. However, as clarified by these updated Fannie Mae documents, there should always be consistency when the same appraiser is assigning the rating for a particular comparable transaction according to their own interpretation of the criteria involved.

StreetLinks would recommend utilizing the Comparable Database or Comparable Archiving function available in most appraisal forms software packages in order to keep a catalogue of all of the comparable properties that the appraiser has analyzed (along with their assigned ratings), so that they can reasonably verify that the property is being reported consistently between appraisal reports. This is particularly helpful for those situations when a comparable property may exhibit characteristics of more than one rating standard resulting in a "judgment call" on the part of the appraiser.

The UAD Update can be found at the UAD page on Fannie Mae's website at www.efanniemae.com/sf/lqi/umdp/uad/index.jsp by clicking on the UAD Update April 2012 (.pdf) link.

In order to strengthen your quality metrics with StreetLinks, please incorporate these clarifications within your UAD compliant appraisal reports on an immediate basis.

Source: StreetLinks