Appraisers Disappointed at Federal Agencies

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Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

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Appraisers Disappointed at Federal Banking Agencies - Appraisers BlogsI’ve read a number of posts where appraisers are disappointed at federal banking agencies declining to hold public hearings on the topic of raising the appraisal minimum threshold for residential real estate transactions from $250,000 to $400,000.

The request for a public hearing on the issue was ‘worth a shot’ but was never a realistic expectation.

We knew that when we joined with others in signing the letter. Federal rulemaking agencies already have policies and procedures in place for mandatory public input. It’s unrealistic to expect them to make special exceptions. Especially when existing lobbyists that promoted the short-sighted policy changes in question so strongly oppose having their issues exposed to the light of day.

Far more important was the letter authored by John Russell of ASA that was signed by all the appraiser peer groups and state coalitions (including ASA, AI, AGA, as well as the other initials that respectfully, I can never remember, and at least 30 state coalitions). No slight intended. Every signatory is highly respected.

That eleven-page letter was sent to the appropriate federal banking agencies in a proper format specifically addressing each of the issues for which comments were requested. John did a brilliant job composing that letter. Everyone that helped him research the issues is also to be commended.

The American Guild of Appraisers was also pleased to see that the AFL-CIO representing financial interests of over twelve and a half million union members and their extended families as taxpayers and consumers also wrote an outstanding letter opposing the proposed increase in the de minimis limit.

The AFL-CIO was also signed by the Americans For Financial Reform Lobby which represents many famous national civil rights and diverse social and consumer interests’ groups representing millions more citizens and taxpayers. Look them up and see their letter below.

While we all like to believe it was ‘our’ voice that tips the scales (as collectively it truly is), I’ll be very amazed if regulators and bureaucrats are able to ignore the views of so many union members and American Citizen/taxpayer interests. The numbers involved in just these two groups are enough to sway national elections.

I’ll be watching this one closely.

For information on how to add your voice to that of other appraisers and millions of union members, contact JanBellas@appraisersguild.org

Excerpt from consumer, community and civil rights organizations’ letter

Yet, the banking agencies have proposed replacing professional-quality, federally-regulated appraisals with loosely-defined “evaluations.” The standards for evaluations are weak and vague. They may be conducted by bank employees11 and appear to allow reliance on AVMs so long as the evaluator also visits the property.12 Bank employees do not have the same specialized training as appraisers. AVMs are also unregulated and lack consistent reliability, especially in certain areas.13 The proposal would be a dangerous return to self-policing and would expose thousands more borrowers and investors to shoddy origination practices and increased risk of foreclosure…

According to your proposal, the plan would exempt 72% of regulated transactions from the appraisal requirement… Quality appraisals are too important to become optional. Indeed, several large banks held unsafe loans in their portfolio in the lead-up to the housing crisis.18 The banking agencies should not open the door to the possibility of inflated appraisals re-merging among segments of the market…

It has also been suggested that eliminating appraisals will benefit consumers by reducing the time and cost to close a loan. But neither of these alleged benefits outweighs the tremendous risk of purchasing a home without a proper appraisal. The average number of days to close a mortgage is 43, down from 48 in 2012.19 The banking agencies have provided no data showing that a switch from appraisals to evaluations would significantly reduce that average further. The agencies also lack data on the cost of appraisals, but using the range of appraisal fees currently authorized by the VA, the average appraisal costs $638. That is only 26 basis points of a mortgage under the current threshold of $250,000 and 16 basis points under the proposed threshold of $400,000. Given that borrowers may still be required to pay for an evaluation, they would still pay a portion of that amount to get a mortgage. But even if borrowers paid nothing for a valuation, the savings do not justify the increased risk of an inflated valuation. If regulators are concerned about reducing closing costs, there are far more effective methods of doing so…

 

Image credit flickr - Jonathan McIntosh
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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21 Responses

  1. Ross Grannan on Facebook Ross Grannan on Facebook says:

    There won’t be any savings to the consumer, the banks will pocket the difference and control the process, here we go again

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    • Baggins Baggins says:

      Now you’re getting it. The banks. Not to be confused with the politicians whom either by choice or by force, must answer to them.

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      • Ross Grannan on Facebook Ross Grannan on Facebook says:

        Now I’m getting it? The Banks control the process full on now, it was bad before, but now the Feds and the banks are blatant about their grifting. Thanks to the “swamp drainer” Maybe if you Baggins step away from the mirror and read what other people say you might have an opinion that could be taken seriously

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        • Baggins Baggins says:

          Fortunately, you are not in charge of anyone elses credibility. It is the message and the substance behind the messages that allows people to make up their own mind.

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  2. Wyatt Powell on Facebook Wyatt Powell on Facebook says:

    This administration promised to take advantage of the little guy and they are fulfilling their promise……

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  3. Avatar SB says:

    Last week, the Federal Deposit Insurance Corp. reported that U.S. banks earned a total of $237 billion in 2018. That’s the most in at least two decades.

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  4. Retired Appraiser Retired Appraiser says:

    Why bitch & moan about it? Maintain your dignity and walk away with your head & your middle finger held high. Believe it or not guys you are worth far more than you are being paid as an appraiser. It’s simply a matter of convincing yourselves. Escaping from the Appraiser’s Prison is a matter of reprogramming your brain and letting go of fear. Two books that I strongly recommend are: Think & Grow Rich by Napoleon Hill and The Millionaire’s Secrets by Mark Fisher.

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    • Baggins Baggins says:

      How much dignity would any of us have without private property rights? I don’t feel like I’m in an appraisers prison, this job afforded me more liberty and success than anything else I had tried before.

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    • Avatar marion says:

      And will you still own real estate, if you walk away? And will the GSEs dictate the value of your real estate, without any path for you to disagree with what they tell you? Are their databases filled with “inspection” data from people who may or may not be loosely trained by an AMC to take pictures? And they are going to limit what a buyer for your property can pay, if a mortgage is required?

      So, if I have this correct, the law that protects consumers with appraisals is within the Truth in Lending Act, (Title 12) but the appraisal section of the truth in lending act is only the law when agencies determine the law is appropriate? And there won’t be any public meeting about when the agencies decide if the law is appropriate?

      Funny because I did not find anything in the constitution that says that agencies get to decide if laws are applicable or not, and then write their own rules to replace laws, when they determined the law wasn’t applicable.

      Does the AFL-CIO have constitutional lawyers hanging about?

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      • Baggins Baggins says:

        The only rule that actually matters, is the rules consumers set for themselves when they participate.

        1. Debt is dangerous.

        2. The larger the debt, the more dangerous it becomes.

        3. If predatory lenders are held accountable, it will provide none or wholly inadequate relief to the individually injured homeowners.

        4. The regulatory mechanisms in government answer to the will of corporations far ahead of the well being of citizens these days. Nearly all regulatory bodies have fallen victim to regulatory takeover by major corporations.

        Rules to live by. Easy to teach.

        Did you know there are people whom pay cash for houses? Did you know you can get a rocket mortgage in only 5 minutes time with the press of a few buttons? Did you know lenders offer the ‘trust option’ where you don’t even need a non advocate or an agent and the lender will make it all happen for you with guaranteed results? Fools jump in first.

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  5. Amazing.

    For years I keep hearing over and over again “Why doesn’t somebody DO something?”

    Then when we try to show appraisers that people ARE trying to do something AND that appraisers have made far more impact than anyone suspected, y’all miss the point completely.

    OK, faults all mine. I failed to point out what I thought was the obvious significance of the content in this article. My apologies.

    Clearly, Retired Appraiser is correct and we should all turn in our licenses tomorrow and seek the high paying uber jobs that are so plentiful while waving a fond single digit farewell.

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    • Baggins Baggins says:

      Thank you Mr Ford. I felt that perhaps an appropriate action would be to yet again highlight how the fed is the central banking master, despite the illusion of accepting public input. Lenders constantly push the line, feeling where the response and resistance level would be. Over time and related to oftentimes coincidental political environments, blame can be redirected and very influential policy follows. Fed policy most certainly does not come down to whom one voted for in a single electoral cycle. I find your articles and contributions to be highly educational and do make efforts to read through the details. There are a long line of appraisers whom push the self interested response mode and agenda, dime a dozen. Ethical appraisers should care about the bigger picture and the opportunity a sound lending system represents for individuals. We judge them by their fruits. Each appraiser must ask themselves if they’re willing to help future generations to be fleeced by lenders, or if they will resist. They either take hybrids or they don’t. They take the time to read all of this, or they don’t. They are virtual advocates for big banks or they are not.

      I am honestly very surprised this many appraisers came together over this issue. They used their time and hands for more important efforts than just waving fingers around.

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  6. Avatar marion says:

    Thank you for your efforts, Mr. Ford, the AGA and the state collations, and other appraiser organizations.

    But something to consider, really, really, consider, is that, Appraiser Independence is limited to FRTs and regulated banks.

    All other lenders – and loan types – the mortgage broker can order.

    Soo, as deminimus goes up, there is even less need of AMCs.

    Oooooppppsss.

    Call your old mortgage broker buddies. Check it out.

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    • Partly correct Marion. It depends on your specific states implementing language for both FIRREA and Dodd Frank. Some states did it the right way and said “Gee this MINIMUM standards thingy sure sounds sensible, lets adopt it for ALL appraisals performed in [insert state here].”

      Other states became schizophrenic about it and can’t decide what their laws are anymore.

      Depends on the changing tides and winds.

      The biggest threat to appraisal integrity today are the Appraisal Management Systems (AMS) like Mercury and any others that allow banks to populate their own appraisal roster.

      All the evils of pre-HVCC coercion without any of the paper trails or smoking guns typical of a corrupt or incompetent AMC. Almost impossible to prove appraisal shopping or coercion took place unless the agent is stupid enough to come right out and send the appraiser an email to that effect [yes, it DOES happen that they are that stupid]. Yes, banks are dumb enough to cancel the order at the LO or agents request and reorder from a number hitter.

      AGA is just waiting for one such case to fund at the unsupported higher dollar amount before we file a complaint with states and fed on behalf of our member.

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      • Baggins Baggins says:

        Mike and Marion, both of my appraiser heros. The majority of what I have learned is because of you two and several other less consequential appraisers, arguing the merits, steeped in regulatory accuracy. I never thought of it that way, state by state, thank you for the logical illustration.

        For a long time I advocated for the IVPI proposal, linked again for posterity I suppose. Print it while you can it won’t be available online forever. Then I began to market away from amc’s and qualified the client better during the solicitation process, as they say. A true rotational clearinghouse approach would be beneficial for most but actually more dangerous for many whom are reluctant or unwilling to deal with the antics of advocates whom seek to circumvent basic ethic. Ooops, I said it, the far majority of separation actions are illusionary and I do have emails to prove it, somewhere in the 6 legal drawers most likely. You’ll never see them, I alone can not go against multi national billion dollar lenders. Reasons why the VA is not all it’s cracked up to be and why to this day the most effective solicitations are to the lender directly regardless of how they dole out the orders. Inconvenient truths of the appraisal industry.

        Actually no link, just search ‘workingre ivpi proposal’, you’ll find it. ALL new appraisers before 2008, a must read document.

        My latest solution; Thorough auditing of all amc’s and the actions of their employees nationally. Non licensed people can and should be held personally liable for the damaging actions they have engaged in. Non licensed panel managers and appraisal clerks think it’s an easy foot in the door job. Think again.

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        • Kind words Baggs, Thanks.

          TAF is really what IVPI should have been-or vice-versa. In the end, scoundrels adopt the language of the protectors. Not TAF – I think they failed, but I believe most of the volunteer board members believe in their work and the process. Think more of Congress.

          Rarely do they perform a swindle or deception of taxpayers without dressing it up in acceptable language first.

          I think we have to either go with full federal regulatory oversight of uspap; OR complete elimination of AMCs. We know AMS would replace them which has even greater potential for chicanery but if coupled with a minimum C&R FEE that MEANS something; a mandatory turn time range of 5 to 10 WORKING days using federal definitions of what a normal working day is, and a mandatory monthly publishing of average fees paid to appraisers by each lender.

          Alternatively, dump TRID and the ability of any lender to price fix before the appraiser is consulted on the specific property. Make a payment on or before the appointment, by the borrower mandatory. Lenders have already proved there is far more fee pressure and coercion from withheld payments than there ever was with COD.

          Sadly though, TAF has already destroyed the public trust in appraisals and now we are seen as no different than an AVM.

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        • Baggins Baggins says:

          When I started like 15 years ago or so, everyone had to have a fee schedule from panel applicants, it was a standard requirement. The proverbial standard fee came from the internal lender surveys of those fee schedules for all appraisers on panel, and they picked the lowest number that the majority of appraisers on panel would accept. Appraisers higher priced had the choice to compete or not, appraisers lower priced were more likely to be overlooked, not having a good sense of their self worth and likely to not provide as quality of work product as a result. All fees were uniform, easy or tough, and you took the good with the bad and far fewer people gamed the system. There was no ability for appraisers to underprice each other to gain the lions share of work assignments, and cost savings if present were returned to consumers with a direct billing process, cod’s were common.

          The inexperience and lack of industry qualification of amc management firms have been apparent since day 1 sometime in 2008. 2019; “If you don’t know what a standard fee is by now, we can not help you.” Back then lenders respected the rules and did not dip into the appraisal fee in any way what so ever. Things ran smoothly, appraiser populace flourished, and earnings were better aligned with commission based interests which provided better independence for appraisers. It’s apparent to me that all the layers of rules are implemented purposefully in a systematic effort to eliminate this important independent layer of checks and balances for appraisers. That and also illustrating the general incompetence and disregard for rules and ethic that nearly every single tech company of all sorts on this planet is steeped in.

          Big data, big joke. Sometimes the manual solution is the best solution.

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Appraisers Disappointed at Federal Agencies

by Michael Ford time to read: 3 min