Big Battles Ahead for Appraisers

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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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Automated Loan Processing to End Appraisers... 2019 Big Battles Ahead

…complete elimination of appraisal as part of their fully automated loan processing objectives…

Our work as appraisers & appraisal issue advocates is certainly cut out for us all in 2019.

I think appraisal unity is going to be needed if we are all to take on the adverse issues affecting us. That includes AI. They still have a large number of honest, & competent members. I think the rest of us will have to let AI take care of AI issues. I’m not averse to butting heads with them on specific issues when necessary but alienating them rather than seeking to expand cooperative areas may not be the best approach for 2019. We had many MAIs and SRAs at Appraiserfest. Hands of friendship were extended on both sides.

Lenders and regulators ignoring the risks of so-called alternative SUBSTANDARD methods and approaches are certainly influenced by the false claims of accuracy and presumed expertise of CoreLogic in the analysis of data, but CoreLogic is not the worst of the culprits. Merely one of the most prolific. Like a hydra of mythology. Powerful, but not particularly bright.

MISMO is our biggest threat. Following that, TAF‘s willingness to adopt rules, language and interpretations for eMISMO Members benefit is. Next comes AARO – an organization that has no legitimate business to exist but which undermines USPAP by backroom unofficial regulatory policy setting, circumventing states legislations. Appraisers need to focus their attention there. MISMO has published their goal of fully automated loan processing (including appraisals) in their collaborative talking points memo which I have previously published in several forums including here.

They have published a desire to first END hybrids (presumably after they have served their purpose of numbing appraisers; the public and regulators to the degradation of appraisal integrity and requirements for credibility). Next, they have stated they first need commercial appraisals graphs and charts eliminated (because data mining them is not practical yet) so that they too can be replaced by automation. Lastly, they have cited the ultimate goals of complete elimination of appraisal as part of their fully automated loan processing objectives.

What started as a worthy objective to assure better communication throughout the loan process has morphed into a monster that seeks to eliminate all the necessary and long accepted checks and balances to assure mortgage market stability.

I am also willing to bet a lot of taxpayers and consumers are unaware that their tax protection laws and regulations have been eroded. Where in rare instances previously, a borrower might be asked for a copy of their tax return, most loan applications today include signing an authorization for release of electronic tax return data direct from IRS to the lender for income verification. Previously, third-party disclosures by IRS for any purpose required written notification to the taxpayer that had happened. It is still a pretty big deal among IRS agents and their superiors today. It makes me wonder how MISMO managed to circumvent this. Probably tied to the politically driven financial legislative changes being sought to strip away consumer protection and financial regulatory safeguards.

Serious privacy issues aside, such direct electronic reporting of return summaries only report adjusted taxable net income rather than actual net income. They are not the same. Asset depreciation and other deductions reduce tax obligations without necessarily reducing actual net income. Consumers have surrendered rights to privacy though regulatory agencies have finally latched on to a method of preventing one form of falsified borrower financial reporting by mortgage “loan officers” and brokers.

In fact, one has to wonder what the purpose of a correspondent loan officer or loan broker will be going into the future. If not to ‘package’ or sanitize borrower profiles, what purpose will they serve in the future? Mortgage opportunity outreach and advertising? That actually can be done more efficiently online by computerized lending.

There is a certain irony between MISMO’s intended goal to eliminate appraisers and their actually accomplished achievement of eliminating the benefits of brokered loans, and loan brokers.

In any case, our work as appraisers & appraisal issue advocates is certainly cut out for us all in 2019.

Image credit flickr - Russ Sanderlin
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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18 Responses

  1. Avatar Jack Of All Trades says:

    “Cry havoc and let slip the dogs of war“ 

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  2. Kari Jacobson on Facebook Kari Jacobson on Facebook says:

    Kai Erickson

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  3. Avatar chris says:

    After the last 10 years, they learned about how much money is made with foreclosures, how much money they get to write off of there books…and the % of people will to pay their under water mortgages on 2nd mortgages.

    Let the foreclosure work begin !!!

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  4. Avatar JW says:

    I think if the issue really is a shortage of appraisers and timeliness why don’t we look at allowing appraisal companies train and hire employees themselves instead of tying our hands and allowing the AMC model create new types of services. Fannie Mae needs to get on board as well as USPAP. Let the appraiser create more efficient ways of completing assignments. Take out the redundant reporting and computer driven from filling that is bogging down the appraiser. Otherwise appraisers just need to ride this out because if AMC’s think they are going to save time and money by hiring realtors to complete inspections for appraisers I can tell you this will be a huge flop. Pricing will go up even more and turn times will increase

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  5. “Power tends to corrupt and absolute power corrupts absolutely.”–Lord Acton

    Until sensible containment of the lending industry is in place and there is serious accountability, the desire will be to ascend towards the lending equivalent of heaven: infinite loans and infinite growth. Appraisers just get in the way of that dream…

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    • Retired Appraiser Retired Appraiser says:

      “I resemble that remark”

      ~ President  Trump

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    • Baggins Baggins says:

      “100 years of not being federal, and not having any reserves.” Mismo is just the latest face in an ever evolving usury, now even more efficient than before! Lenders can not be contained. However, consumers can be educated to understand the dangers of debt, usury, and fiat currency systems. To take the loan, or not take the loan is everyone’s individual choice. Abdur, you should post more and how about another article?

      To also respond to Chris above; Did you notice how brief this up swing period was this time around? Powers that be were successful at making sure institutional investors were well positioned prior to opening the flood gates of inflation and rising prices for the masses. Not a moment after the affordability threshold was exceeded, it appears we’re moving right back into recession territory. Not a coincidence, audit the fed.

      And to Retired; Are you back on that fake news again? Corporate media is a well oiled sophisticated psychological operation, don’t trust your mind and independence to them or you will be led away from traditional American principals and be delivered mind body and soul to a new global order.

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    • Avatar Gynell Vestal says:

      Well said Abdur!

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  6. Baggins Baggins says:

    Mismo talks a big line… “MISMO, the leading technology standards development body for the residential and commercial real estate finance industries, is a wholly owned subsidiary of the Mortgage Bankers Association. The MISMO standards are grounded in an open process to develop, promote, and maintain voluntary electronic commerce procedures and standards that allow mortgage lenders, investors in real estate and mortgages, servicers, industry vendors, borrowers, and other parties to exchange real estate finance-related information and eMortgages more securely, efficiently, and economically. An all-volunteer organization, MISMO promotes data consistency among transaction participants, reduces processing costs, increases transparency, and boosts investor confidence in mortgages and real estate as asset classes, while permitting cost savings to be passed on to borrowers and other customers.”

    There is a lot to unpack when it comes to learning about this group. Let’s talk numbers and income first.

    https://docs.google.com/viewerng/viewer?url=http://www.mismo.org/Documents/MISMO/Documents/Policies+and+Procedures/MISMO+PandP+v4.0_11_16_17_APPROVED.pdf

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  7. Avatar Wayne Courtney says:

    Gee…there are some of us that want to appraise the universe…we want to be quoted in all professional publications! Then there are those of us that just want to work a typical week and provide for our family. Why does it piss me off to hear members of an organization such as AI saying that they are “THE BEST” if you do not believe it just ask them! REALLY?…they are NOT the best! All of us have backgrounds and previous experiences that make us valuable as appraisers. How many of us have appraised an explosive manufacturing facility or a partial interest for the air rights for the area above the moon! This bullshirt as I am a better appraiser than you should stop now! We should work as a group and get some results!

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  8. Avatar Joe Henkel says:

    Most AMV fall within 10%. These loans are packaged up and sold to investors. Lenders do not needs anything exact as values change over time anyhow $500 for an appraisal and wait a week or eappraise it for $30.00 and get the loan rolling?

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    • Avatar Wayne Courtney says:

      Very true….if lenders lend their OWN money. They can lend to anyone anywhere for any purpose. If they are going to take MY money as a deposit and lend it to bozo the damn clown…..I have a problem with that! Get an appraisal or lend their own money! People should be told that the bank is lending to any clown without any regard to safety….if depositors are ok with that then everything is okey dokey!

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    • Baggins Baggins says:

      Joe, that’s an incomplete picture. The loans are backed by fdic insurance which we the taxpayers are on the hook for. For that and many other reasons, the public has an interest in responsible lending practices. Cost is a side issue. Please stop shilling for big lenders.

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  9. Avatar Wayne Courtney says:

    I just received an email requesting a bid and turn time for a “Commercial Only Exterior Narrative” property located about 2 hours away from my home. The appraiser is to complete a “Cost Approach” but the appraiser cannot inspect the property. The assignment requires “TWO APPROACHES”. I think they want one approach to be from an idiot and the other from someone retarded. Who in the hell is working for companies like this? No wonder why my E&O is so expensive!

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    • Baggins Baggins says:

      My first question is who ordered that, do they have any practical experience in real estate and lending, and are they individually licensed. I’ve never seen such a large group of ‘managers’…

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      • Avatar Wayne Courtney says:

        Does it really matter who ordered such foolishness? The typical appraiser should take the time to let the “WORLD” know that they are an appraiser and open for business. If they would do this they would have so much appraisal work that they can just hit the delete button when crap such as this is in the mail. Appraisers have NO bigger enemy than themselves!

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Big Battles Ahead for Appraisers

by Michael Ford time to read: 3 min