AMC 1004D Update Shenanigans

Dave Towne

Dave Towne

Certified Residential RE Appraiser at Towne Appraisals
AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com
Dave Towne

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1004D Update Shenanigans... Potential Games Played by Some AMCsWhy wasn’t the original appraiser asked to do the 1004D Update?

Here it is the new year, and the potential games played by some AMC’s have already started.

On January 3, 2018, I received word from an appraiser that this “substitute” appraiser was asked by an AMC to do a 1004D Update on a report another appraiser had done in September 2017. The AMC provided the original appraisal with the assignment request.

I see mentions of this kind of assignment on various forums I read, and the posters always question these requests.

On the surface, it was not a highly unusual request, until a little more assignment and report analysis was done by the “substitute” appraiser before accepting (which ultimately it was not accepted but declined).

  • Why wasn’t the original appraiser asked to do the ‘Update’, i.e. “has the property value declined since original appraisal”?
  • Could it be that the AMC/Lender were just trying to ‘hide’ the semi-review of the prior report from the original appraiser?
  • Is it possible that the AMC/Lender knew there were report issues and did not want to pay for a legitimate desk or field review, but instead tried to sneak the 1004D Update under the nose of a “substitute”  appraiser at a much lower fee.
  • Remember, to do a 1004D Update, you have to do the same comp research necessary as would be done for a review or a new report.
  • Yes, doing a 1004D Update on a prior report is valid. The 1004D ’Update’ can be done when an appraisal is 4 months or older, but the original appraisal must have been done within 12 months of the original Date of Mortgage and Note (FNMA Selling Guide B4-1.2-02).

The “substitute” appraiser took time to observe the original report.  Negative issues were found with various reporting aspects and the stated value was questioned due to those issues.

That’s when it became apparent to the “substitute” appraiser that there was more going on with the report and assignment than just doing a relatively simple 1004D Update on the original appraiser’s report. The appraiser told the AMC that either a formal review, or a brand new assignment, would need to be done. The AMC declined to upgrade the assignment. The “substitute” appraiser then declined the 1004D Update assignment request.

The kicker in this kind of assignment is what FNMA expects when a “substitute” appraiser completes the 1004D Update, per the Selling Guide:

The original appraiser should complete the appraisal update; however, lenders may use substitute appraisers. When updates are completed by substitute appraisers, the substitute appraiser must review the original appraisal and express an opinion about whether the original appraiser’s opinion of market value was reasonable on the date of the original appraisal report. The lender must note in the file why the original appraiser was not used.

Thus, FNMA expects the “substitute” appraiser to do a technical review of the original report when completing a 1004D Update. This technical review is a NEW ASSIGNMENT, and the appraiser should be properly compensated.

The point of this is to recommend that you watch out for hidden shenanigans clients try to slide under your nose. You have NO obligation to accept every assignment that comes your way.

Image credit flickr - Edna Winti
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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23 Responses

  1. Mark Freitag says:

    Not only is it a new assignment, more importantly it is an appraisal!

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  2. EJ Brown says:

    I’ve received similar request & have always declined. Several, if not more, of these were done by low ball appraisers, that I am aware of, that come into the market from 50 – 100 miles out. I’m assuming that they don’t want to come back for a low 1004D fee. Same goes with construction draws. idiots !

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  3. rvahomes says:

    I often receive request by a Lender to do final inspections, not updates, for new construction appraisals done by other appraisers who are on vacation or could not be found (Holidays) to complete the inspection. In doing my final I do review the reports and typically have no problems with value. But the other crap I see is atrocious. I have two now where the appraisers state the cost approach is not applicable. These are appraisals in new developments with 30-50 sales in 2017. And the cost approach is not relevant they say. One even went as far as to say there were no new homes sale available yet he has 6 new home closed sales as comps!!! And underwriters accept this too!

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    • RVA are you doing appraisal reviews or final inspection progress reports? Two different things. I would not allow myself to be put in the position of being a reviewer in a 1004D.

      As for quality, no doubt about it. A lot of our compatriots really do have to up their game a bit. (OK, in some instances a lot!)

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  4. Fritz Vogel says:

    In my HO, after 2+ decades of attempting to deal with the “Games” they play A: they might have yet to PAY for the original repot + B: Are such a pain in the A** to work with, the OA made a prudent Biz decision to just say “NO”! I have yet to meet a totally honest AMC employee and have yet to know one that really cares about the work product at all, its all time and money. Lenders don’t care, they are now far removed from the report, It was the Appraisers fault/problem and now it’s the AMC’s fault/problem. Twice removed from any wrong doing but they created it in the first place.

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    • LeAnn says:

      I worked for an appraisal office for 10 years, now at an AMC for the last 8 years, I have seen it ALL! I was once the person “getting” the AMC calls and slamming the phone down afterwards with the off the wall revisions, to now PLACING the calls. Please understand the questions we bring to appraiser’s are pushed on us from the lenders. Do also know, there are a lot of ridiculous stuff we do not like to ask appraiser’s to do but are made to. It is hard for us all! Bottom line, I feel like all training needs to go to LOAN OFFICERS! Now please don’t get me wrong, not everyone at AMC’s know the ins and outs but appraiser’s have really made AMC’s hated ?

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      • Baggins - your pay to play advisor Baggins - your pay to play advisor says:

        If distributor persons had appraisers licenses, lenders would not be allowed to push them around, or compel them to pass that pressure down the line to appraisers. Individual appraisers licensing for ALL distribution personnel. This will provide the ethical corrections necessary so we can all finally begin to relate on a more professional basis, permanently. It is always solely the responsibility of the appraiser to comply with ethics, and nobody elses responsibility. The appraiser confirms scope and engagement, nobody else. No amount of loan officer education will get the middle management people whom are not licensed up to speed in this regard. Licensing the individual distributor persons to force them to comply with existing ethical standards for appraisers would have a far greater further reaching effect on every day process corrections. They made me do it only flies or non licensed personal, that will not fly in civil court or in the case of board investigations for licensed appraisers. Pop quiz time, what is the voluntary disciplinary action matrix and how does working with non licensed individuals create engagement concerns for appraisers?

        Complete Voluntary Disciplinary Sanction Matrix 2018-19 USPAP 10.5.17

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      • Caterina says:

        Hi LeAnn,

        The largest part of the breakdown we all see is that NO ONE in the process seems to understand the product they are ‘managing’.

        The volume going through the AMC is such that no one apparently has the time to read the reports for much if any comprehension level.  ‘Reviews’ and QC is often done through clerks using word searches only and if their search comes back with no hits, a revision request is fired off immediately.

        I work rural markets and often have fairly complex reports. Nothing irks me more than painstakingly putting 8-10 hours to piece together a coherent report on a rather complex situation, only to have a ‘QC’ person spend more time responding with their revision demands than they did reading my report. Seriously. Ship the report, and in a matter of 20 minutes, you get a laundry list of nonsense ‘requirements’ that have largely already been addressed in the original report submission.

        Another HUGE issue is unprofessional business communications across the board. I’m probably old school. I come from a time when we were taught to pose questions politely and take care in considering the tone of our communications. Now, granted, some appraisers can be surly jackasses even when you are being as nice and unassuming as you can muster. However, every day I am hit with demanding, condescending ‘revisions’ that automatically assume the appraiser is in the wrong. It is so very taxing and negative. It doesn’t have to be done this way. It is demeaning to be on the receiving end of these, not to mention being incredibly time wasting. It makes the nicest person who normally approaches things with a positive attitude into a defensive grouch in 1/2 a second.

        I understand that all appraisers aren’t the professionals they should be. I know the AMCs have to deal with a wide range of, err, capability levels we’ll say. I just wish they could value those of us that are worth our salt more often than they do.

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        • You are right Cat. We all probably have some room for improvement. When we treat each other as professionals there is a good chance we learn from each other. When we are treated poorly it pretty much guarantees a defensive or even aggressive response results.

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        • LeAnn says:

          I completely understand what you are saying!!! I just wish there was a way we could all work together and learn off each other to make it make more sense.

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      • EJ Brown says:

        Your supposed to be the go between between lenders & the appraiser. Don’t let them push you around ! That’s what amc’s are for.

        Say NO

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        • Baggins Baggins says:

          The lenders would not be so bold in their requests if they had to make those requests directly to appraisers.  Separation from loan production has run it’s course, it has obviously created vastly more pressure than we ever experienced dealing with mb’s directly.  It used to be if an mb acted up we’d call their manager and get them set straight, or lecture them on their unprofessional approaches with informed licensing and education to make appropriate rebuttals.  The appraisers used to provide the ‘education’, and we did that daily.  After conflict we’d call the mb in the cubicle next to the old one and never miss a beat with the lending client, but now we routinely lose the entire client base on the whim of single unlicensed individuals.  We were in complete control of our ethic and our engagement practices until middle management restricted our access to the free market.  The process of distributing orders was literally free and no cost when mb’s and underwriters did that themselves.

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      • Yes, L.O.s need training BUT as an AMC reviewer you still have the right (obligation?) to tell your clients of their L.O.s when they are out of line.

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        • LeAnn says:

          Yes and believe it or not we do a lot of the time. It gets very frustrating.

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          • LeAnn, the mortgage side and AMC management side have had it their way so long its hard for them to change.

            There s nothing inherently wrong in the AMC concept EXCEPT that it has never been operated as an ethical, long term business to replace outdated banking staff concepts.

            I worked in the (founded it) appraisal arm of a title insurance company decades ago. Our parent corporation was ONLY interested in very quick profitability and ‘making our banking clients’ happy. Everything else including standards and ethics were secondary to our Chairman and CEO.

            Most of the issues between LOs/AMCs and appraisers are easily fixed IF the parties in control really wanted them fixed. Instead, the AMCs create false organizations to tell us the peeing on our leg is really rainfall.The FTC V. LREAB is a perfect example of why the AMC model will die a painful death increasingly soon.

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  5. EJ Brown says:

    shoot me now ! Luckly I’m 66 yrs old. Go ahead & take my license, I dont give a s* h * I * t. 30 yrs is enough. This is just supplemental income. I pitty younger appraisers.

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    • EJ neither of us wants to ‘gout out that way.’. If either of us choose to slow down its by choice not because some know nothing pissant somewhere files bogus charges. I’d like to do this til my mid 70’s. I actually enjoy real appraisal. Where challenges are the condition of property ownership; physical issues, and legal issues. Not, whether or not I used 4 comparables plus a listing; or based my GLA adjustments on BS regression results instead of depreciated replacement costs..

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    • Baggins Baggins says:

      “You’ve done a great job. We’ll take it from here.”

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  6. Please David, take the Ai’s review theory class or McKissock’s review CE course to understand that there is no such thing as a technical, administrative or compliance review if the appraiser is licensed or certified, and that you’re continually misusing the term “observation“ instead of the term “review”. You continue to mislead and poorly communicate your opinions and assignment results. If you’re gonna put yourself in the position of an educator, please get educated yourself. As the main point of your post, it’s been going on for years. Lenders and AMC is will continue to push the envelope for the sake of saving a few pennies and what appraiser worth their salt doesn’t know that they’re being compromised if they comply with that kind a request?

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    • Excellent points Joyce.

      Interesting aside, even state regulators use those terms; but you are 100% correct.  Another of my pet peeves is current appraisals ‘estimating value’. Didn’t we stop doing that (estimating) and go back to developing credibility supported opinions of (defined) value?

      Well done TAF! 27 years into FIRREA and we don’t even know what we actually do anymore. Estimate or opine? I’m guessing in a review I’d opine that someone else’s estimate is wrong?

      I have to confess I personally don’t try to keep up with TAF’s unnecessary word-smithing anymore. Remember when Extraction and Abstraction both had separate meanings? Then the meanings were reversed ; and now the distinction is gone completely (or at least per AI dictionary it is).

      Hell, I even remember way back when real estate appraisers were real estate appraisers and not ‘valuators’ [which was traditionally reserved for the business valuation disciplines]. Seems like centuries ago…oh WAIT! I think it was 2009 or so!

      I may have to change my qualifications statement to “1986-2009 real estate appraiser; 2009-? valuator.” Sounds a lot like a toy that morphs or transforms from one thing to another.

      Maybe next year TAF can rename us to something even more descriptive…my vote is for State Certified Decepticons (deceptigons?)

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  7. Scott R. says:

    I started reading this from the beginning to the end. By the time I got to the end…I had forgotten what the original question and/or topic was. Yes…..all AMC’s need to just go away? 

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    • Baggins - Profiteer Destroyer Baggins - Profiteer Destroyer says:

      One primary purpose of the blog is to illustrate the continued abuses of what is supposed to be ethical practice. In the absence of all these pro lender unlicensed unaccountable advocates in order assignment, there would be a much stronger ethic in this industry. Amc or not does not matter, it is the action of having to appease unaccountable unlicensed distribution people which is the problem. They often serve as a one way conduit for lender presser to be delivered to appraisers, then censor any appraisers objection so the lender will not have to be bothered. How’s that for using separation from loan production to pretend there is now a higher ethic in appraisal process management when clearly the opposite is true. A good deal of activity appraisal order distribution personnel engages in would be illegal activity for licensed persons. Individual appraisers licensing for all distribution personnel would clean that up, and go a long way to solving ‘appraiser shortage’ issues these people have created in the first place. The distribution personnel often uses industry lingo in out of context or improperly applied fashion. The guys and gals who could not pass an appraisal test are making and breaking appraisers careers left and right. That’s progress to the profiteers whom have hijacked this industry. Threads may appear to go off topic and sometimes they do. Other times the complex relationship requires further detail. They don’t have a clue what certifications mean, yet continue to press new engagement trends with pro lender advocacy. What a clever way to save money on a final, that’s why I refuse to follow up a final for someone else’s engagement. An engaged appraiser is not just another employee in the mix, substitutable. The distribution persons most of us deal with for mortgage lending work are simply not qualified and articles like this provide an apparently infinite stream of examples why. Next up; another tale from the crypt, fakery deception fraud and high employee turnover are everyday occurrences in appraisal management. Amc or not has less to do with it these days, every day another new person abusing distribution process and pushing appraisers around regardless if amc or not. Individual licensing for all appraisal order distribution and review personnel.

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AMC 1004D Update Shenanigans

by Dave Towne time to read: 2 min