July 25, 2014, the immunity clause and HB2339 will go into effect. Already there have been serious results that will impact appraisers in the future.
To bring you up to date:
House Bill 2339 was proposed by the Arizona Board of Appraisal and contained changes to the State Statutes. These changes included:
1. Immunity for Board members who are appraisers and staff members who are appraisers from any complaints filed against them for any of the USPAP rules except the Ethics Rule. In other words, they could be incompetent or negligent and get away with it. They could make statements in meetings about value but could not be held accountable under the Scope of Work Rule or the Record Keeping Rule. The immunity clause is a Jurisdictional Exception under USPAP. Have you ever met an appraiser who was incompetent but ethical? (more…)
Legislation that would clarify several aspects of an Illinois law governing broker price opinions and comparative market analysis has passed the state legislature and currently is under consideration by Gov. Pat Quinn, the Appraisal Institute reported July 23.
SB 3044 adds definitions of both BPOs and CMAs to the state’s Real Estate Appraiser Licensing Act and its Real Estate Licensing Act, and clarifies when and how BPOs and CMAs may be performed by brokers and managing brokers.
The bill was sent to Quinn June 27, and he has 60 days to take action.
According to the Illinois Coalition of Appraisal Professionals, “Defining and regulating these products will protect the public’s trust and reduce consumer confusion.” The bill was supported by ICAP after (more…)
Citigroup will pay $7 billion to resolve claims it misled investors who purchased shoddy mortgage-backed securities that helped lead to the financial crisis six years ago, Reuters reported July 14. The deal includes the largest civil fraud penalty ever levied by the U.S. Department of Justice. The multibillion-dollar settlement is more than twice what many analysts expected but less than the $12 billion the government sought in negotiations with Citigroup.
All those who argue about the causes of the real estate crisis cannot discount yet another billion dollar settlement. Over and over again we see large settlements for mortgage securities fraud, where the problem was not with the appraisals, but (more…)
Very recently, I was presented with an appraisal report that was actually a fourth revision. The appraiser had accurately completed a report and submitted the report for consideration to the lender, then over the next six weeks apparently, was barraged with a continual flow of reconsideration requests and alternative comparables, until the report appraiser finally felt pressured enough not only to re-grid alternative comparables, but also to change the opinion of value by almost 20%. I was involved in a quality assurance review and, fortunately for the appraiser, was able to reject the revision that could have ultimately placed the lender in a very bad position and placed the appraiser in jail for a report that was very misleading.
What led to this place of dark descent? (more…)
At least one appraisal management company (AMC) put a new accent on appraising by having the point of contact be in another country—specifically, a call-center in India. According appraiser Bill Streep, this is how the conversation went:
Bill Streep: “Hi, this is Bill.”
AMC Staff: “HELLO! Bill. Could I please speak to Villiam?”
Bill Streep: “This is Bill.”
AMC Staff: “Yes, Bill. I need to speak to Villiam.”
Bill Streep: “My name is Bill, it’s short for William.”
AMC Staff: “Yes… (insert long pause) Could I please speak to Villiam?”
Bill Streep: “This IS William.”
AMC Staff: “No, this is Bill. I need to speak to Villiam.”
Bill Streep: “Hang on…” I set the phone down and shuffle some papers around.
Bill Streep: “Hello, this is William.”
AMC Staff: “VILLIAM! HELLO!”
Bill Streep: CLICK.
While the above story is funny, wasting time and money are not. Ever since AMCs gained prominence, appraisers have lamented having to deal with inexperienced AMC staff who have little or no (more…)
As I write this, I am watching my two youngest children as they participate in gymnastics. It is a Friday afternoon and most of my peers are sitting in a cubical somewhere. We have had a very busy week, but all has gone smoothly and my assistants are just wrapping up a few loose ends before the weekend. Sometimes I have to step back, shake my head, and say, “Wow, I am very blessed!”
As I lurk the various online appraisal forums, I see a whole lot of discouragement. Rightfully so. We as appraisers have experienced a lot of change over the past few years. Many of us built up a business empire only to have it washed away practically overnight with HVCC and Dodd-Frank. Some of us have restructured and have been able to see a resurgence, but not everyone. “Requirements are up and fees are down (more…)
One of the requirements of your job as an appraiser is getting to the property to appraise it. Unless you are appraising a property within a few blocks of your own house or office, chances are that you will be driving there. Today, the costs of driving — higher gas prices, higher insurance premiums and higher maintenance costs — have gone through the roof.
This got me thinking: the cost of almost everything that we, as appraisers, need to do to successfully perform our job has increased substantially. Higher insurance premiums, higher costs for the tools required by USPAP guidelines, higher vehicle costs, and higher costs associated with working for an AMC means we forfeit a large portion of our fee. What we’re left with does not give us much purchasing power.
Let’s rewind 20 years
Two decades ago, gas cost about a dollar per gallon. Let’s face it – almost everything (milk, eggs, etc.) was cheaper, including obtaining and maintaining your appraisal license (more…)
The practice of real estate appraisal began about 3,200 years ago. We learn this from the Book of Numbers, Chapters Thirteen and Fourteen.
God commanded Moses to commission one person from each of the twelve tribes, “to make a reconnaissance” of the Land of Canaan, now Israel.
Each person chosen was a leader within his tribe. His selection was based on sincerity of purpose, integrity, honesty, wisdom, judgment, and knowledge. Each leader was capable of guiding the course of this important assignment. A Leader is “one who goes first.” These appraiser were to “scout” and then to make a report.
The objective for this appraisal was to determine the highest and best used of the subject property, the Land of Canaan. It required that these twelve leaders, whom we will now call appraisers, go and inspect this land. They also had to meet the people who lived on the land and to provide demographic data. The appraisal report was to be delivered to Moses.
In order to carry out their instructions, the appraisers travelled (more…)
Freddie Mac will host a webinar June 26 that will highlight upcoming changes to its multifamily appraisal requirements.
Freddie’s new requirements, which take effect July 1, will address tying together an appraiser’s multifamily data with their conclusions. Examples include:
- Tighter guidelines around the use of property condition assessments and environmental report drafts;
- Discussions around local market data in the capitalization rate analysis;
- Elimination of net income multipliers or adjustments to net operating income in the Sales Comparison Approach;
- Supplemental discussion of the risk of reassessment of property taxes including a quantifiable chance of a reassessment; and
- Documentation of the number and type of units the appraiser must inspect.
The webinar will take place at (more…)
Many Appraisal Management Companies are now demanding that appraisers change the square footage details listed within their reports. Why? Because they saw a different number on Zillow® or in public records. How have we gone this far wrong?
Appraisers generally turn first to their own files for square footage details. Next, they turn to the MLS, which is touted as “the most trusted source of real estate information in the world.” Then, if there are no other options (like in the many areas where the MLS does not report any square footage details), appraisers are forced to turn to local tax departments to get their square footage details. And often, those details change home values, dramatically. In many states the governing real estate authority clearly states that agents should NOT rely on the information in tax records. Anyone who has ever worked around the real estate industry knows just how unreliable tax numbers can be. Those square footage numbers were created by and for the tax department, NOT to be used in the real estate industry.
Companies like Zillow® and Trulia®, etc, most often get their square footage details from those same public records, that everybody else seems to know are unreliable. Then, along comes these appraisal management companies (more…)
You Are Being Robbed Blind (24 Hour Membership Deadline)
AMCs are concealing their profits within YOUR appraisal fee, and using coercion to drive down YOUR income as far as they can. This government-permitted process allows them to rob you blind while building their appraiser-squeezing power even stronger.
NOW is the time to take a stand to fix this broken industry and the career you have spent a lifetime building. The Appraiser Prosperity Coalition was formed to fight for the legislative and regulatory changes needed to save this devastated industry. If you are willing to join us today, we can defeat the bullies and reclaim your career! (www.AppraiserProsperity.com)
Attention! Our funding deadline is 24 hours away. We need your help to save the profession, and we need it fast. Please read the rest of this email, review our web site, and strongly consider confidentially joining this noble cause today! (more…)
ASA, NAIFA Tell Banking Agencies that Proposed AMC Rules Fall Short on Guidance, are Inconsistent with Congressional Intent2
In comments filed June 6 with several federal banking agencies, the American Society of Appraisers (ASA) and the National Association of Independent Fee Appraisers expressed our concerns that rules proposed to regulate appraisal management company (AMC) conduct lack sufficient detail to allow for effective implementation. Additionally, the organizations expressed concern that some provisions of the proposed rule depart from Congress’s intent when the enabling law was included in the Dodd-Frank Act, and could negatively affect the overall public policy goals.
In the comment letter, ASA and NAIFA cover numerous concerns with the proposed rule, including:
- The lack of detail regarding the treatment of appraisers by AMCs is insufficient to allow for consistent application by the numerous federal and state agencies who will be required to enforce these rules;
- The absence of a specific, enumerated process in the rule under which appraisers and others can level complaints against AMCs who fall short of their responsibilities under both these rules and the existing Appraisal Independence rules;
- The letter strongly objects to the decision to (more…)
On May 23, 2014, the Court of Appeal for the Fourth Appellate District, Division One, State of California, issued a very interesting decision on whether a plaintiff can successfully plead and argue fraud based on comments made about the concluded value of real estate that was appraised. The case is Graham V. Bank of America, N.A., et al. Although this ruling is unquestionably useful for an appraiser being accused of appraisal fraud, it probably is not the magic elixir many will proclaim it to be. This is because the appraiser involved in the lending transaction, which was the subject of the lawsuit, was not named as a party to the lawsuit. Nonetheless, much of what the Court of Appeal said about appraisals and fraud is worth examining and understanding because it may provide a road map for the defense of an appraiser who is sued and must respond to allegations of fraudulent conduct.
The essential facts in Graham are as follows: In 2004, Graham borrowed a total of $489,000 to purchase a home in Vista, CA. The amount borrowed equaled the purchase price of the home (100% LTC) and Graham borrowed $391,200 under a first trust deed and the balance of $97,800 under a second trust deed. At the time, the lender involved had an appraisal report done and the appraiser concluded the value of the home was $525,000. Graham alleged there was some discussion about the appraisal (more…)
For the past two months, VaCAP has participated in a networked council consisting of 13 professional state appraisal organizations in responding to the Agencies request for comments of the Proposed Rules on Minimum Requirements for Appraisal Management Companies:
This letter is in response to the Agencies’ request for comments on the Proposed Rules on Minimum Requirements for Appraisal Management Companies. The undersigned represent a networked council of professional state appraisal organizations. We appreciate this opportunity to comment and thank the Agencies for their work and interest in creating and implementing appraisal management company (AMC) regulation.
The proliferation of AMCs is a relatively recent phenomenon, resulting from the May 2009 Fannie Mae implementation of the Home Valuation Code of Conduct (HVCC)/Appraiser Independence guidelines.
By their design, AMCs’ operations cover an extremely large amount of geographic and lending territory. As a result, they handle a tremendous amount of monies and interests associated with the various services they attempt to offer to lenders and consumers. Many AMCs not only supply appraisal services, but also title and other real estate related services. The potential for a single AMC to affect an enormous number of transactions should not be underestimated. Our members have already witnessed several large AMCs closing their doors without notice and filing for bankruptcy.
The professional appraiser’s business, as well as the appraisal profession, have been decimated by the increasing market dominance of AMCs. Trust and credibility (more…)
Does anybody miss the good old days of having to deal with the mortgage broker? After spending about 53 minutes on the phone with an appraisal management company, who will remain nameless, I am almost missing the good old days myself.
I originally called, because the appraisal management company called to see if I would take a forensic retrospective review for a new client they just acquired. This of course is a Fannie Mae client, and any of us who have dealt with Fannie we know there is a specific format, guideline and style in which they want their reviews worded.
Despite my better judgment I agreed to take the assignment. Having working in the fraud investigation department for Fannie Mae for the better part of eighteen months, and having had more than twenty years in experience in residential review I felt adequately up to the challenge.
The problem I encountered was that the property was a hypothetical appraisal. That is to say the report was conducted on 5 acres (more…)