Appraisal Scoop

AMC Declares Bankruptcy: What Appraisers Need To Know

GUEST AUTHOR: Ramir Rodriguez is a business development officer for Treasure Valley Factors.  He helps real estate appraisers understand what factoring is and how it can help grow their business.  He has a B.S. in Business Administration with an emphasis in Management from Eastern Oregon University. For more questions about factoring accounts receivables, please email him at [email protected] or visit our blog www.factoringhelps.wordpress.com or our website www.treasurevalleyfactors.com

 

You received a letter in the mail informing you that your client has filed for bankruptcy.  It is this moment you realize that this bad news just became your problem.

Many of us are familiar with the recent bankruptcy filings of Evaluation Solutions and its subsidiary ES Appraisal Services.  Peter Christensen, attorney and general counsel to LIA Administrators & Insurance Services, shared in his blog that the total unpaid fees to appraisers, agents, and brokers as listed in bankruptcy documents is $11,048,411.97!  This is a remarkable amount.  Evaluation Solutions’ bankruptcy documents accounted for $9,349,612.97 of the total amount and a separate filing of its
subsidiary was for $1,698,799.

I Received A Notice… Now What?

If you received a notice regarding Evaluation Solutions/ES Appraisal Services’ (I will refer to them as ES) bankruptcy you may be wondering what the next step is to try and recover money owed to you.  Yes, a client’s bankruptcy can be costly for you, but most importantly, not adhering to the rules of the bankruptcy process can cost you significantly more.

Knowing the types of bankruptcy, how to play by the rules, and what you can (or can’t do) will help you understand the scope of your problem and ensure you don’t get in trouble. 

Types of Bankruptcy

There are lots of information you can gather from the bankruptcy notice from ES to help you understand the nature of this problem.  But first you must recognize the type of bankruptcy ES is filing.

Chapter 7 – This type of bankruptcy is the liquidation of remaining assets to distribute among its creditors.

Chapter 11 – This a financial reorganization of a business, which allows your client to function while they follow court ordered debt repayment plans.

Chapter 13 – Similar to Chapter 11, but rather than a business filing bankruptcy it is the individual reorganizing and following a debt repayment plan.

Ideally, it’s more favorable on your end if your client files for either Chapter 11 or 13.  These types of bankruptcy give your client a breather until they figure out how to repay.

If your client however files for Chapter 7, which is what ES filed, not only will your chances of getting
paid be reduced, but also you may be waiting a long time (even years) for this type of case to be completed.

Take A Number

At this point you are probably frustrated and would like to call someone to attempt to collect your money.  Stop right there!  Your actions can get you in deep waters.  If you attempt to make phone calls to ES’s accounting department, send nasty letters, or try to file a lien (which some appraisers have done in other instances and is not recommended), you will face penalties.

Assuming you do get some money owed to you, you will have to wait in line.  This is the second item you must understand.  Here’s the payment order:

1. Lawyers, administrative expenses, and other professional services that are involved with the work of filing the bankruptcy.
2. Secured claims, including mortgage holders.
3. Priority claims, including wages and taxes.
4. Unsecured claims, which is where you as an appraiser may be categorized.
5. Equity claims, including stockholders.

So curb your frustration because all you can do at this point is wait.

What Can You Do While You Wait

Sure you have to wait for ES’s bankruptcy process to take its course, but there are some things you can do in the interim.  Since this case can drag for a long period of time, you can do the following:

 

1. Consultwith your CPA about taking a deduction on your taxes for the bad debt.  If you manage to receive some money owed toyou after the bankruptcy case is settled you can claim it as income at thattime.  See your accountant for moredetails.
2. It doesnot apply in this case, but if you have a future instance where your client files for Chapter 11 or 13 and wants to continue a working relationship, it may be to your advantage.  Of course your immediate reaction is to quickly say “no way!”, but understand that Chapter 11 and 13 require debtors to stay current on all accounts moving forward.  This means you can add a fee to your appraisal fees to recover what was lost, stricter payment time frames, and
   maybe exclusivity as other appraisers may not take another chance.  Keep in mind that the best way to reduce or eliminate risks is to get paid up front.

Improve And Move On

Now that you’re somewhat familiar with the types of bankruptcy, payment pecking order, and what you may be able to do as the bankruptcy takes its course, it is important prepare for the future.  This means assessing your appraisal business and how to prevent this problem from happening again.

First, create a process on how to screen new clients by knowing their payment history.  There are many tools and resources you can use online that are free or for a small fee.  Second, improve your accounts receivable aging management procedures.  Just because they are still “current” doesn’t mean it does not require all of your attention.  Current receivables can quickly turn into problems if you don’t pay attention.  Last but not least, be persistent and tough but professional with your collections.

If you have an AMC bill in your state, read it and educate yourself on how it can help your appraisal
business.  There are sections in most AMC bills that require AMCs to pay by a certain time frame.  For example, Texas AMC bill requires AMCs to pay appraisers within 60 days.

Also consider resources available to you such as factoring your receivables where the risk of non-payment is transferred to the factoring company.  In this case, you can get paid quickly without the responsibility of collecting and liability of non-payments.

No small business is immune to the unexpected, but you can certainly minimize you risks as work towards a successful 2013.

GUEST AUTHOR: Ramir Rodriguez is a business development officer for Treasure Valley Factors.  He helps real estate appraisers understand what factoring is and how it can help grow their business.  He has a B.S. in Business Administration with an emphasis in Management from Eastern Oregon University. For more questions about factoring accounts receivables, please email him at [email protected] or visit our blog www.factoringhelps.wordpress.com or our website www.treasurevalleyfactors.com

 

 

A National Blind Order System - Has Its Time Come?

GUEST AUTHOR: Joseph Foster is a Certified Appraiser in Washington State. Joe spent eighteen years in heavy construction and cost estimating, on some of the world’s largest construction projects. A Journeyman member of the Carpenters and Joiners of America, Joseph was a delegate to the AFL-CIO National Conventions, and organizer within the Northwest District Council. His experience in the construction field, pointed the way to a private consulting practice, within six Northwest counties. Contact: [email protected] .   Blind Order PADS website

 

I started appraising in the early nineties. At that point I was told the local appraisal market hadn’t seen a fee increase in twenty years. The appraisal fee of $400 appeared to be stagnant, smothered with statements proclaiming, we need to keep the fees down, for the consumer.

The banking industry placed appraisal fees into a hard-cost category, in continued attempt to control the industry. The initial action of defining a hard-cost may not have been the original intent – however the
industry manipulated the point, resulting in “fee malaise.”

Through the decades I found it interesting that a loan officer can’t wait to lower an appraisal fee, however at the same time is making a point and a quarter, along with a rebate through the back-end of a
loan. Why isn’t the consumer crying? Because the thousands of dollars paid to the loan officer, is financed into the loan. The consumer never really feels the pain.

Oh yes, thousands of dollars are paid to loan officers, and real estate agents, while the lowly appraiser is tossed $400, and is expected to carry the full weight of liability.

I’ve practiced about twenty years in this configuration of generosity, and the appraiser that originally gave me an opportunity stated, “It’s been that way twenty years before you showed up.” I think the math equates to about forty years of flat appraisal fees.

If the real estate agent is paid 7%, and the price of real estate moves higher through the years, it’s not hard to realize monetary gain. All the creative loan products, and complex rebate opportunity, have greatly increased the wealth and riches of loan officers. The appraisal fee remained at $400 through all of this.

Stagnant appraisal fees can be directly linked to banks, and their ability to control the industry.

Dynamic growth in the 90’s, and increased volume from 2002-2008 – allowed the two largest title companies in the U.S. to amass large piles of cash. With economic riches, the title companies developed a plan to have their hands in every real estate transaction in America.

They link to the real estate agents, complete the title documents, work with the lender and control the appraisal. It’s a monopoly.

The title companies couldn’t be happy selling title insurance, and they spotted an opportunity to move in on appraisal fees. Their plan started slow, and today, they manage to monopolize the industry. In my
area, you don’t work, if you don’t work for an AMC.

Millions of dollars were sprinkled in Washington DC, changing and creating rules that work against any notion of an appraiser having a chance to expand his or her appraisal practice.

An appraisal isn’t a commodity, to be bargained for with discounted dollars. If it were a commodity, my business would be allowed to compete in an open market, where commodity abounds.

Appraisers were taken advantage of, plain and simple. Title companies, through there heavily layered partnerships with AMC’s generated billions of dollars, on the backs of appraisers.

An AMC creates no value, and devours half the fee of an appraiser. Does an attorney have an AMC taking half? Does an accountant have an AMC taking half? Your signature feeds the families of an AMC. They have insurance, vacation, and receive bonus checks for dogging you.

My state has 156 registered appraisal management companies.  At no point does one appraisal management company have full coverage. They scramble trying to get anyone to complete an appraisal. I’ve had calls to do appraisals 300 miles away from my location.

The latest trend is the AMC going broke, writing bad checks, playing games with appraisers, and generally acting like collection agencies Are You Done Yet – Are You Done Yet. Do you have an ETA? They go as far as to ask you -- ”when can we expect the appraisal” before you receive the assignment. These are people that don’t have a clue about what it takes to operate within this profession.

Appraisers face heavy pressure.  Yes, pressure can come in many forms. If you can’t turn the appraisal out in record time, you don’t get the work. And oh-by-the-way, the before mentioned fee of $400 is now $200.  They stripped the profit portion of a fee, that hadn’t seen an increase in forty years, that’s the dirty little secret. There was never room in the fee structure for their business model, but that never stopped the two largest title companies from exploiting appraisers.

The AMC model has failed and it’s time for change. It failed the consumer, and failed the real estate appraiser. They knew it would fail the appraiser, and they didn’t give a damn. The AMC business model projects maximum profit, while oppressing the real estate appraiser. That’s the only way it can function. They must keep the appraiser isolated, in order to control the deal.

Title companies have no business in the valuation business.

I’ve started a grass-roots effort to change this dysfunctional relationship, and I’m introducing the National Blind Order System. The Professional Appraisal Delivery System (PADS) will move the appraisal industry forward, from the dark ages – into an area where the brotherhood of appraisers is paramount.

It’s not a union, and it’s not an AMC. It’s something much better than either of those models could possibly hope to achieve .  If appraisers don’t act now, the AMC’s will move into the area of regulation, and from that point their business model will create value.

Its 9:00AM, and across your portal screen comes the appraisal assignments available in your zone. Other appraisers in the same zone see a similar and filtered screen, and from within the system, you pick the appraisal, or appraisals you want to complete.

There is no need to undercut other appraisers, because the fee is generated from a master list of appraisal fees for that assignment, and for your appraisal zone.

Your portal remains open all day, and you can communicate with regional, and national system operators, who by-the-way are appraisers working directly for the PADS. Market statistics will be passed on to you, and you the appraiser will not be in the dark. You’re going to know the foreclosure rate, along with a host of generated statistical patterns for a specific zone.

The ordering system links directly with the Appraisal Foundation and ASC. The ordering system completes a circle between the Appraisal Foundation and ASC. The Foundation already has approval from Congress, and the ordering system will be funded, through the Foundation, from a vehicle currently in place.

Oh Yes, the budget will be moving up, from what is currently in place at the Foundation

If the Appraisal Foundation would consider this plan of action, they would find the missing link between the varied entities, is the ordering system. The PADS fully completes the chain. We take the regulatory, and put it to use within the ordering system. That is something an AMC can’t do, and it drives them crazy.

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Virginia Is For Lovers: All But AMCs

GUEST AUTHOR: Woody Fincham - Woody is a Deputy Assessor with the City of Suffolk Real Estate Department, Suffolk, VA.  Woody is a State Certified Appraiser in Virginia and SRA designated member of the Appraisal Institute.  Contact: [email protected]

With the recent press release from CoesterVMS, a growing Maryland based Appraisal Management Company, which has appeared all over the webs the last several days my email and telephone have been busy with other appraisers expressing contempt about it. 

“We’re serious about transforming the appraisal industry from ‘the way it’s always been’ to ‘the way it should be,’” said Coester. “Value is comprised of quality, customer care and price. This is taken from a press release published January 7, 2013 by CoesterVMS, a Maryland based appraisal management company.

Some Background

In the period prior to the Dodd/Frank bill, appraisers often worked directly with the lenders. There were many ethical, symbiotic relationships, but there were some very shady associations as well. Like most things that attract the attention of congress, a quickly thought out solution was put into place, and it was one that would ultimately benefit the lender with little consideration for the appraiser. Congress’ solution favored large business, and with it we entered into the AMC era of residential appraisal.

Lenders love appraisal management companies (AMCs); they work with one large company that manages a fleet of small business real estate appraisers. It makes sense logistically, as it streamlines the lender’s involvement with the appraiser. There were already several large AMCs, and I knew few appraisers that coveted a relationship with any of them. They were and are mostly all difficult to deal with from the appraiser’s perspective. 

On paper it looks like a system that works, in reality, well that’s another story. Dealing with appraisers is difficult, I am an appraiser and I freely admit it. We are difficult to deal with due to the nature of the work product. Each property that is appraised requires a property specific analysis: not every property in a given neighborhood can be appraised the same way. Lenders have always viewed the appraisal as a hoop to jump through and it just needs to be done. To them the appraisal report should be a commodity; a streamlined service that requires nothing but a “three comps and done” approach. They have not and continue to not value any thorough analysis. If it loosely meets the minimum standards, and I mean if it looks like an appraisal report then surely it is an appraisal report, they stamp it as just another part of the loan file and move on. Therein lies the problem, the client wanted and continue to want something that cannot be ethically done. They have almost zero interest in vetting the collateral; they just want to make the loan.

AMCs, and by extension, lenders prefer to deal with appraisers by treating them all like product providers rather than service providers. Appraisal reports are not commodities; they cannot be replicated en mass. While it may be possible to establish a minimum report fee that an appraiser can do a simple property for, as the complexity of the assignment ratchets up, so does the appraiser’s time which means the price should go up accordingly. By establishing a flat rate, this means that AMCs will continue to put pressure on fees when retaining appraisers. It means that the AMCs benefit from hiring the appraisers that charge the lowest fees.

Wait a minute! We are starting to talk about fees. One may ask “if the appraiser agrees to take a low fee, then what’s wrong with that?” 

That is a great question, and I am glad you asked it. Every appraiser has a pricing structure that works best for that appraiser. While it can be argued that setting a market price is each business owner’s prerogative, and I would agree with you, there is a threshold that just cannot be crossed without sacrificing something in the process. Even if the appraiser is working out of a bedroom in his or her apartment there are fixed expenses that must be accounted for. Typically, what the lower price appraisers do is make up for the fee with volume. They speed up the appraisal process, and in doing so delete or skip what should be done to develop a proper analysis of their data. This practice, combined with the ridiculous turn time requested by the AMC equals shoddily done work. For context, I mean a less than 72 hour turn time.  

The added chagrin to the AMC is any appraiser that takes the proper steps to think an analysis through. When dealing with properties that are not in a homogenous-market area, an example in my market are ocean front homes, time has to be taken to analyze the data in a meaningful way. Many AMCs send out blast emails soliciting for a set low fee and short turn time. Any appraiser that accepts the assignment on those conditions gets the assignment. 

This means that most appraisers doing steady work do not even take the time to see what they are trying to be engaged to do. In most cases this ignores the competency requirement in USPAP. In the cases where I am slow in work and will actually read the blast emails that I get, by the time I have looked up the property details and established whether or not I want to and can do the assignment, someone has already taken the order. This leads me to believe that they accept the orders without evening vetting their ability to perform the work in a competent manner.

AMCs as a whole focus on two items: turn time and fee. They will speak about quality, and preach that they exhibit the highest quality in the business. How is that possible? How can you expect short turn times, low fees and high quality? You really can’t, but AMCs act as a buffer to the lender. They are now the equivalent of the enforcer on a hockey team.

All that has happened in the new AMC-era is that they kicked the can down the road, rather than fix the problem. What we had before with questionable appraisers being selected by lenders trolling for high values, has now been replaced with AMCs that hire less than quality appraisers willing to underprice the completion by doing incompetent work. 

So What Does All This Have to Do with CoesterVMS?

Brian Coester (CEO of CoesterVMS) who was at one time an appraiser in Virginia should know better than anyone that every appraisal is a custom job. An appraiser cannot simply place a flat fee on every report that is done. Yet, that’s the model that he uses when his company “manages” appraisers.  

It should be noted that Coester allowed his license in Virginia to lapse after he was party to a report that he assisted in inspecting and preparing that was found to be poorly prepared by the state board in Virginia. His father was the one sanctioned as he was the supervising appraiser. The supervising appraising, his father, was sanctioned by the board and fined. Virginia does not sanction assistants. Alex Uminski, SRA, a well-respected Richmond area appraiser, was asked by Fannie Mae to do a review of the property appraisal report that was ultimately the issue for the complaint. Once, Uminski had finished the review and discovered that the report was inflated and that the Coesters were not from the local market area, he turned them in to the State Board. It should be noted that the property subsequently sold for much less than it was appraised for, after the inflated property value supported loan defaulted. Uminski added that the low sale price was after the foreclosure transactions and a rehab, for an arms-length sale.

The Coesters traveled from the Gaithersburg, MD area to Richmond, VA to appraise the property. This is a distance of approximately two hours without traffic. Sometime thereafter he decided it was a better deal to run an AMC. This should be a concern for anyone engaging this company to manage appraisers. If professional ethics have been worked around as an actual appraiser, how then does this same person start “managing” appraisers? 

Feedback from Peers

Shawn Kennedy, an appraiser in the Hampton Roads area of Virginia, was engaged to do a report for Coester in the fall of 2012. He completed the report, or was very close to finishing it when CoesterVMS called to cancel the report. Kennedy made them aware that since he had finished the report he would be charging for it. Kennedy has yet to see one dime of the fee for the work. 

Pat Turner, SRPA, another well-known Richmond area appraiser and former state board member shared some things with me as well. Apparently Turner was doing business with a long time mortgage client that Coester came in as an AMC client to handle the appraisal roster for the company. Turner was getting a steady fee of $450, but accepted a decrease to $400 to continue receiving work. A while later, Coester started asking Turner to complete reports for $350. Turner refused, and found out later that his company was blacklisted due to the refusal to decrease the fee further.   

Turner followed with a phone call to Mr. Coester asking why his company had been blacklisted. Coester said that was not the case. Turner, who had downloaded and printed the information from Coester’s website portal, informed Coester that he had a copy of it in his hand. This led Turner to state to me that this is apparently how shoddily CoesterVMS is run.

So let’s return to the quote at the beginning of this article: “We’re serious about transforming the appraisal industry from ‘the way it’s always been’ to ‘the way it should be,’” said Coester. “Value is comprised of quality, customer care and price. “

 Many appraisers are seeing how the AMC model is changing a needed profession, but not for the good of the public or for the good of the lender. Virginia certainly doesn’t need this kind of haphazard burden placed on the professionals that value their real estate. I am sure some colleagues from other states would agree. 

Disclosure I have to give disclosure here; I am on Coester’s fee-panel. How many assignments have I done? None. Zero. Zilch. They solicited me to join, so I did. I figured, why not, it never hurts to be on a list. I get the occasional blast email to accept an order, always below $275. With that being said, I have no agenda here other than to expose the readers to a fuller understanding of the inherent problems with the AMC model and working directly with a company that so many of my local peers seem to constantly have chagrin with.

 

GUEST AUTHOR: Woody Fincham - Woody is a Deputy Assessor with the City of Suffolk Real Estate Department, Suffolk, VA.  Woody is a State Certified Appraiser in Virginia and SRA designated member of the Appraisal Institute.  Contact: [email protected] 

PR: CoesterVMS Implements Appraisal Industry’s First Flat-Fee Structure

Groundbreaking new fee model helps lenders better ensure RESPA compliance

January 7, 2013 – Rockville, MD – CoesterVMS, a nationwide appraisal management company, has implemented the appraisal industry’s first-ever flat fee model for residential appraisals. Under the flat fee model, which took effect on January 1, 2013, all conventional appraisals are priced at $450 while FHA appraisals are $475.

Customarily, appraisal management companies utilize a tiered fee structure, whereby prices are determined based on the property type or the state in which the property is located. CoesterVMS is the first appraisal management company to implement a 100% flat fee structure, regardless of the type or location of a property. In addition to providing the convenience of a consistent, reliable pricing structure, the company’s flat fee model enables lenders to better comply with guidelines under the Real Estate Settlement Procedures Act (RESPA) concerning how loan costs are disclosed to borrowers.

“RESPA guidelines mandate new disclosures to be sent to borrowers when the difference between quoted fees and actual fees is 10 percent or more,” said Brian Coester, CEO of CoesterVMS. “With tiered appraisal fee structures, there tends to be a lot of add-on fees, which can easily put the lender at risk of a RESPA violation. On the other hand, there’s nothing safer than a fixed fee.”

CoesterVMS implemented its flat fee structure after several months of successful testing. Previously, clients would be required to submit a certain number of orders to qualify for the flat fee. As of January 1, the flat fee became available to all CoesterVMS clients regardless of order volume. The change does not affect current CoesterVMS clients with negotiated contractual arrangements.

All CoesterVMS appraisals are subject to the industry’s most sophisticated quality control processes. These processes include cData, CoesterVMS’ proprietary searchable appraisal database; an appraisal scorecard that provides findings of CoesterVMS’ qualitative analysis; and an automated valuation model (AVM).

“We’re serious about transforming the appraisal industry from ‘the way it’s always been’ to ‘the way it should be,’” said Coester. “Value is comprised of quality, customer care and price. We already provide the best quality control, the most advanced appraisal management technology and praise-inducing customer service. Now, with our flat-fee model, we provide very best pricing, bar none.”

About CoesterVMS

CoesterVMS is a nationwide appraisal management company that specializes in providing comprehensive management of appraisal operations for mortgage lenders.  Headquartered in Rockville, Maryland, CoesterVMS was founded in 1970 as a local appraisal company and has since grown to a formidable nationwide force in the appraisal management segment. For more information please visit CoesterVMS online at www.CoesterVMS.com.

PR: Solidifi and Kirchmeyer complete deal positioning Solidifi as 3rd largest independent provider of residential real estate appraisals

BUFFALO, N.Y., Jan. 7, 2013 /PRNewswire/ -- Solidifi and Kirchmeyer, two leading independent real estate appraisal management companies, have joined forces in a deal that will see Solidifi become the third largest independent provider of residential real estate appraisals in the country. The company is a trusted, well-capitalized alternative to traditional appraisal management companies servicing more than 50% of the nation's top lenders.

"Following a $22 million financing in 2012, Solidifi is in growth mode and Kirchmeyer is an important part of our overall growth strategy. It is the ideal fit for Solidifi," says Jason Smith , Solidifi's President and CEO.

An industry thought leader, Solidifi is helping evolve the appraisal management business through its technology and analytics platform. In effect, it is using technology to build efficiency throughout the appraisal process, increase quality, drive costs out and improve the client experience. Solidifi's technology identifies the right appraiser for each assignment who will deliver high-quality comprehensive appraisals to the lender.

"Solidifi's technology and broad appraiser network will complement our own network and I and my team are excited to continue to service our current and future customers with these extended capabilities," says James Kirchmeyer , CEO of Kirchmeyer & Associates.

It's a winning value proposition all around: the appraisers are top of their field and are highly compensated for their efforts. The lender receives the right information the first time with no additional costs because the system is streamlined and designed to drive performance. The lender also benefits from Solidifi's and Kirchmeyer's 100% focus on being the best provider of real estate appraisals in the market. Both companies exclusively provide real estate valuations. This approach has allowed the companies to direct all their management and technology resources to outperforming competitors and exceeding their customers' expectations.

"I have worked with both firms and know firsthand that Solidifi and Kirchmeyer value high-quality appraisers," says Kevin Wang from AccuFast Appraisal Services. "The platform and model works. It helps make me successful as an appraiser and ensures the lenders get what they need when they need it."

Solidifi and Kirchmeyer are a cultural match. Both firms value quality, strong appraiser partnerships and exceptional customer service. Existing and new clients will benefit from a stronger, larger team of mortgage industry specialists known for outstanding relationships with lenders and appraisers.

"With our shared philosophy of assigning every order to the most competent appraiser to ensure delivery of a top quality report, the combined companies will continue to raise the bar in terms of service, quality and professionalism," says Andrew Bough , Solidifi's Chief Valuations Officer. Solidifi's elite network of appraisers in every county nationwide will complement the Kirchmeyer panel.

Solidifi has invested more than $25 million to date in its industry-leading technology platform which will further enhance appraisal performance for Kirchmeyer customers. The Solidifi cloud-based technology provides customers with a flexible and scalable appraisal management solution with the highest standards in data security and reliability including redundant servers in SAE16 certified data centers in Dallas, TX and Washington, DC.

Moving forward the combined entity will operate under the Solidifi name.

About Solidifi
Solidifi is a leading next generation provider of appraisal management solutions to the North American financial services industry. The organization offers a flexible technology platform for procuring collateral valuations from an elite network of high quality appraisers who openly compete for business based on quality, speed and price. Solidifi's parent company Real Matters is ranked 21st on Deloitte's Technology Fast 500. Solidifi is located in Buffalo, NY. Additional information about Solidifi is available at www.solidifi.com.

About Kirchmeyer & Associates
Since 1994, Kirchmeyer & Associates has a steadfast heritage of helping lenders nationwide manage appraisal compliance regulations. As a national appraisal and valuation company with licensed appraisers from coast to coast, Kirchmeyer & Associates provides lenders with fast turnaround times on reports focusing on quality and accuracy resulting in reduced risk and lender savings.

SOURCE  Solidifi

 RELATED LINKS
http://www.solidifi.com

PR Newswire (http://s.tt/1y3Ag)

E&O Alert: Have you been called to testify for FDIC litigation against AMCs?

Important Alert for FREA Appraiser Members

If you receive a call from someone involved with the AMC litigation between the FDIC and LSI or CoreLogic, and they ask you to agree to be a witness in either case, you must call FREA, as your E&O provider, immediately. If you don't and you offer any testimony by making a written statement, by sitting for a deposition, or simply by agreeing to a telephone interview, you could end up getting sued.

It's too complicated to explain the how and why here, but rest assured you are taking on risk you cannot see.

There are ways to cooperate, including getting qualified and paid as an expert witness instead of testifying for free, but before you agree to "help", you must get a signed release so anything you say cannot end up being used against you later in a civil lawsuit.

As a FREA member, you benefit with the guidance of FREA counsel. If you receive one of these calls, contact FREA immediately at 800.882.4410 and receive instructions on how to proceed.

If your E&O carrier isn't alerting you to issues like this on a regular basis, maybe you need to join FREA where we work for you and your profession all of the time and not just when there is a commission to be earned. After all, we all know in the end you usually end up getting exactly what you pay for... and sometimes that isn't much.

At FREA, we've got your back.


Best regards,

The FREA Team

800.882.4410

[email protected]

AMCs: Prepare for Appraisal System to Change, Fees to Rise

GUEST POST: Reposted with permission of Elizabeth Ecker of Reverse Mortgage Daily  http://reversemortgagedaily.com/ .  Click here for the original article.

Changes across the appraisal industry including a declining supply of appraisers in the market stand to put pressure on this segment of the mortgage process. Those in the industry say something has to give.

Barring change that could include an increase in fees paid to appraisers, turn times could rise substantially, making for an even longer process—application to closing, they say.

Both mortgage professionals as well as consumers need to prepare for these potential changes, says Erik Richard, CEO of reverse mortgage appraisal management company (AMC) Landmark Network.

“Supply of appraisers is low and demand is high and it will only get worse,” Richard says. “We already see a significant number of our orders get hit with fee increase requests from the field. Building this cost in upfront will speed up the appraisal process.”

The AMC fee has not increased of yet, Richard says, but others in the appraisal business agree that a rise in the cost to consumers is one very realistic outcome.

“Fees are going to go up, and we are actually switching to a flat fee model as there’s just too much going on for things to remain the same,” says Brian Coester, CEO of Coester VMS. “Appraisal fees are going up not just because of regulatory cost but the requirements that lenders have on appraisers.”

The pressure is twofold: There are not only fewer appraisers than there once were due to an aging work force, but heightened regulation is also putting some additional pressure on AMCs and individual appraisers.

Through Dodd-Frank’s implementation, states have new rules and regulations regarding appraisals, and no longer can trainees conduct appraiser work, and thus there are fewer trainees at the same time many longtime appraisers are retiring.

“If we can increase appraiser happiness with higher fees, we can start to change the narrative and squelch the appraiser complaints,” Richard says. “Higher fees also make it more likely appraisers will see [an upside] in the job and will allow current appraisers the margin to bring on trainees.”

The actual cost may remain in question, but the increase looks to be inevitable, says David Stroop, regional vice president for Mortgage Information Services.

“Prices will probably continue to rise,” he says. “There are a lot of factors for this, including new regulations and less appraisers, but there are others out there as well.”

The model is broken, Richard says, and needs a solution to prevent long-term effects.

“As an industry I think we should fix the pricing model,” he says. “It’s currently flawed and without a drastic fix we are certain to experience short term frustrations but the long view is far worse.”

Written by Elizabeth Ecker 

 

GUEST POST: Reposted with permission of Elizabeth Ecker of Reverse Mortgage Daily  http://reversemortgagedaily.com/ .  Click here for the original article.

Arizona judge fines AppraiserLoft $850,000

The San Diego Union Tribune reports on the latest development with the now-defunct appraisal management company, AppraiserLoft.

A Phoenix judge recently concluded the AMC failed to pay appraisers in Arizona at least 171 times within the past 18 months.

In a June 6 order, administrative law judge Diane Mihalsky, recommended that the Arizona Board of Appraisal fine AppraiserLoft $5,000 for each of the 171 violations, totaling $850,000, and revoke the company's license as an appraisal management company.

AppraiserLoft, however, shut its doors in October 2011. Owners Aman and Harpreet Makkar missed the hearing.

SOURCE: Hoursingwire -   [email protected]

 

Why AMC’s May Be Built on a Faulty Business Model

GUEST AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc.  Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets.

It’s hard to believe but it has been over three years since the appraisal profession was turned upside down by the Home Valuation Code of Conduct (HVCC).  While HVCC has been relegated to the ash heap of history, its primary intent is alive and well thanks to the adopted language within the Dodd Frank Act and subsequent regulation that it continues to produce.

Now that some time has elapsed, appraisers are becoming more accustomed to the realities of a post-HVCC world and can hopefully speak more rationally about the impact it has had. It is clear however that new dynamics are in play.

The use of Appraisal Management Companies (AMCs) was not directly mandated but their proliferation was the natural result of a system that redefined who appraisal clients were supposed to be.  Appraisers did not have much say in this outcome and were left struggling to find an identity and more importantly, a business model that was profitable. As appraisers strive to adapt to ever changing processes, it is unlikely to alter the fundamental flaws that remain with the AMC-based model.

An Ever-Expanding Role

AMCs may offer a perfectly viable service for outsourcing appraisal ordering and processing functions to investors, however their role could be growing far beyond that.  Lenders appear to have accepted the AMC as a kind of underwriting function.  After all, if an appraisal has two comparables under 90 days, two listings, all lines are bracketed, and it has all the required canned comments, then it must be a quality report; right? Well, as any practicing appraiser knows, every assignment may not look the same yet this is what AMCs are promising their clients.  Quality control departments routinely generate stipulations that have little to do with quality and more to with demonstrating that their place in the process is justified and beneficial. This will ultimately lead to lenders having a false sense of
security regarding collateral valuations.

The AMC Role Wrongly Defined

Generally speaking, AMCs are not really appraisal providers in the sense that independent fee appraisers are. They would more accurately be defined as appraisal facilitators. That is, a secondary party that locates and handles ordering and delivery. The local appraiser is the one who provides the market expertise, has the required tools to produce a report, has the credentials to complete assignments, pays the costs of all required expenditures, and most importantly has the liability that lenders desire. The AMC serves primarily as a transit system and yet they collect a high percentage of what borrowers think is the appraiser’s fee. This of course is easy to disguise since appraisal
invoices are often submitted separately to the AMC.  Fees to the consumer have clearly increased as
appraisers have been relegated to the wholesale end and the AMC has become a retailer.

Lack of Transparency

The HUD-1 settlement statement has historically only disclosed a singular appraisal fee but recent regulatory actions are changing this. The Consumer Financial Protection Bureau is proposing adding a line for appraisal management fees which does offer a bit more transparency but will likely not change what AMCs are paying independent appraisers. AMCs state that the fees they collect are customary and reasonable however C&R actually has nothing to do with them. The reason why the concept of customary and reasonable was fought for in the Dodd Frank Act was due to appraiser outrage over slashed fees. When these changes are finalized in the HUD-1, will AMCs charge a separate fee and support appraisers receiving the full fee that has been paid over the past few years on the settlement statement?    

Scope Creep, Slashed Fees, and Unreasonable Turn Times

The AMC model has also allowed a tremendous amount of scope creep to occur without fee increases to offset the additional work. This adds further stress to an industry that has already seen significant fee reductions from pre-HVCC rates. In order to streamline their processes, when a lender client demands a
particular requirement for an appraisal, AMCs often make it standard for all reports which increases workload across the board. This results in more hours of work to produce the same pay and the net loss of revenue gives birth to other problems.

Disgruntled Appraisers

By reading any appraisal forum, trade publication or blog post, it’s not hard to see that the vast majority of appraisers are not big fans of AMCs. Many feel they are taken advantage of or taken for granted. This is the natural outcome of a system that typically does not foster a communicative business relationship. If you are just another reference in a large national database, then you will likely be treated that way. If AMCs are to be the standard for years to come, then it is in their best long-term interest to address this
concern. Treating appraisers equitably should be their goal as well as to reduce the “fast and cheap” mentality that permeates many AMCs.

A Future Generation of Appraisers

There is a lot of talk about the difficulties of getting into the appraisal business. Since the financial collapse, HVCC and Dodd-Frank, the number of licensed/certified appraisers has dropped off dramatically. These estimates also do not take into consideration the additional numbers who might be keeping their license active yet do not actually work in the business any longer.  With the average age of an appraiserapproaching 60, AMCs and lenders will likely be a catalyst in how we address this concern.

While reduced volume, slashed fees and expanded scope of work may have contributed to a decline in the number of active appraisers, oneissue does not get discussed often. That is the difficulty in hiring and training new appraisers by local appraisal firms. Once licensed, fewer appraisers are willing to work in a fee split arrangement for a local firm when they can simply sign up for AMC work and have enough work to keep busy. This results in local firms having less flexibility to develop new services and
efficiencies.  AMCs probably benefit most from working with one-person operations that have a small pool of clients andlittle flexibility to turn their work away.

Firewall Fallacy

During the buildup to the sweeping changes, there was a lot of talk about needing a barrier between loan origination and appraisers. Regardless of the merits or pitfalls of this theory, the AMC in no way serves as a firewall. If a conflict of interest existed before, how does placing a for-profit entity in
the middle solve anything? If origination could pressure the appraiser, then surely they can pressure the AMC by threat of taking business elsewhere. If the AMC’s profit becomes at risk, then the possibility certainly exists for pressure to filter down to their appraiser contractors.

Volume Will Hurt AMCs

Refinance activity has picked up in recent months and AMCs are seeing a significant increase in the number of orders that are being declined. If the economy and housing begin to rebound, increased volume will work against AMCs. If an appraiser has so much work that affords them the luxury of choosing clients to work for, the AMC will likely be on the bottom of the list of preferred clients. The positive in this is that fees could rise and turn-time expectations might soften.

Inevitable Outcomes

With AMC legislation enacted in many States and pending in many more, AMCs are also in an ever-changing landscape. Hopefully they will realize that their survival is dependent on the health of the independent local appraiser. The concept of local appraisers doesn’t always mesh with the global view of large scale appraisal users but nonetheless is essential to a sound appraisal process.  AMCs are clearly in the driver’s seat if their relationship with appraisers is to improve. It’s really very simple; AMCs don’t even have a business without local appraisers. They must come to grips that some of these outcomes are inevitable unless they alter their business model to some degree.

AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc.  Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets. He served as a staff appraiser at several local firms before forming AM Appraisals, Inc. with business partner J.M. Massey.

e-mail:[email protected] web address: www.amappraisals.com

 

How are new surety bonds requirements impacting AMCs?

GUEST AUTHOR: Danielle Rodabaugh is the editor of the Surety Bonds Insider, an online publication that takes a critical look at developments within the surety industry. As a part of the publication's educational outreach program, Danielle has recently taken an interest in writing about appraisal management bonds since they are new to both the surety and real estate industries.

Since the inception of appraisal management companies, real estate appraisers and their consumers have complained of flaws they believe the business structure to have. As a result, government agencies in 10 states have established surety bond requirements as a way to ensure these companies fulfill their duties according to law.

But what are surety bonds, and how do they affect AMCs? (http://www.suretybonds.com/appraisal-management-bond.html)

1) Surety bonds are legally binding contracts.

When an AMC purchases a surety bond, it's being bound to a legally enforceable contract among three parties.

• The AMC acts as the bond's principal, which buys the bond as a financial guarantee of its ability to follow industry regulations.
• A government agency acts as the bond's obligee, which requires the bond as a way to regulate the industry and protect consumer interests.
• An insurance company acts as the bond's surety, which issues the bond as a financial guarantee of the principal's ability to fulfill professional obligations according to law.

The legal stipulations that an AMC agrees to depend on the exact language used on the bond form. Depending on the state, the legal language will require compliance with certain laws that the appraisal management bond form will refer to. Although the surety bond form itself is usually only one or two pages, the contractual obligations the AMC agrees to are actually much more extensive. As such, AMCs should fully understand not only industry regulations but also the contractual language found on the bond.

2) Appraisal management bonds aim to eliminate fraud.

The surging increase in mortgage fraud during the past decade has inspired government agencies to take any means necessary to reduce instances of fraud among AMCs. If an AMC should commit fraud during the appraisal process, whether it be negligence or misleading the consumer, the bond could be used to reimburse any harmed person. By issuing an appraisal management bond, the surety guarantees it will pay claims an AMC might owe if it fails to fulfill obligations under state law. Surety bonds are not insurance, however, so the surety would then seek reimbursement from the AMC rather than assume the losses.

3) Appraisal management bonds protect industry professionals and consumers.

The idea behind appraisal management bonds is to keep companies from misusing their power. Generally speaking, an appraisal management bond guarantees the faithful performance of a company by requiring them to provide proof of financial responsibility. However, the bond amount can be used to benefit claims against the company if necessary. Real estate appraisers who have a problem with an appraisal management company's tactics can make a claim on the bond, though the bond's legal language typically states that consumer claims are given priority in recovering the bond's funds. To date, the following states enforce surety bond requirements for appraisal management companies.

• Arkansas
• Arizona
• Georgia
• Kentucky
• Missouri
• Nebraska
• New Mexico
• Oregon
• Tennessee
• Washington

Real estate appraisers and consumers working in these states should contact the appraisal management company's surety provider if they believe their appraisal management company failed to follow industry protocol.

4) The effect of AMC surety bond requirements remains to be seen.

So far there's not much claims experience in regard to AMC bonds. Of course the goal of these new surety bond requirements is to curb problems with AMCs. Conclusions will not be able to be drawn until claims have been made on bonds, these claims are upheld in court and surety providers pay those harmed by unethical AMCs. The fact that claims have yet to be made on appraisal management bonds works in favor of AMCs that need to be bonded, as their premiums are currently calculated at the same low rates used for other generic license and permit bonds. The real estate industry will have to wait a few years to determine just how effective the new regulations are.

GUEST AUTHOR: Danielle Rodabaugh is the editor of the Surety Bonds Insider, an online publication that takes a critical look at developments within the surety industry. As a part of the publication's educational outreach program, Danielle has recently taken an interest in writing about appraisal management bonds since they are new to both the surety and real estate industries.