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Community Banks Appraisal Waivers Deja Vu - If I Could Turn Back Time

Community Banks want to bypass appraisals in rural area… Evaluations are the answer, right?

There have been lots of discussions lately concerning property inspection waivers, waivers of appraisals in rural areas, and allowing appraisers to complete Evaluations outside of USPAP standards.

Doesn’t this all sound familiar? It should, we have already lived it 30 some years ago, prior to FIRREA.

Back then Savings and Loans had staff appraisers to complete appraisals. The appraisal was not completed by a licensed appraiser, because licensing to protect the public did not exist. Today Community Banks want to bypass appraisals in rural area. Their premise is to help local communities and businesses. History tells us just the opposite will occur. If the community banks are allowed to bypass safe and sound financial decisions for their customers, the consumer will be harmed. Not just with an over valuation of a property, but the destruction of entire communities. Nothing brings down a community faster than job loss, bankruptcies and foreclosures. The community banks will go under as well.

Evaluations are the answer, right? A properly trained licensed appraiser can complete these assignments. No need to follow USPAP standards as everyone is honest and there is absolutely no pressure in this world. NOT! Across the country, states are reducing safe and sound practices, by allowing licensed appraisers to provide an opinion of value and ignore UPSAP, all in the name of helping the consumer and local communities.

Pulling out my crystal ball, I foresee more evaluations being completed. No standard guidelines to follow, just the honesty and integrity of the person completing them. No appraiser independence requirements, so let the pressure for a higher value begin.

Now look down the road a few years, the loans go bad, the loan files are all opened up, analyzed, scrutinized and tossed aside for garbage. The community banks are insolvent and either close down or merge with larger financial institutions. Then some genius, or maybe a few geniuses, determines that Evaluations need some standard guidelines for all to follow. The Evaluation Foundation (TEF) is formed, and as such, The Evaluation Subcommittee (ESC). Finally, the Uniform Standards of Professional Evaluation Practice (USPEP) is written; First edition, to be updated every 2 years.

Cher said it best in her 1989 hit “If I Could Turn Back Time.” Ironically, the same year of FIRREA!

By Milton P, Certified Real Estate Appraiser

Image credit flickr - MattysFlicks
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61 Responses

  1. Tom says:

    The consumer should choose their appraiser, now that they’re throwing them under the bus. I wager $10.00 salespeople will be advised to limit their “valuation guesses”. And or get into lawsuits. The bonus here is appraisers can directly tell buyers and sellers what the Lenders intentions are going forward. 

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  2. Advocate says:

    Another great article from an appraiser. Thank you Appraisers Blogs for providing this forum for us to share and educate.

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  3. Ross Grannan on Facebook Ross Grannan on Facebook says:

    This is interesting, community banks were forced to put appraisers on rotating rosters, forced to hire appraisers that were not geographically competent and now this. I work for a community bank, they would love to go back working with appraisers that know their local market.

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    • Chris says:

      Any appraiser can appraise ANY neighborhood ANYWHERE in the WORLD, given the data and left alone to do the job.

      You must NOT be an appraiser !!!

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      • Ross Grannan on Facebook Ross Grannan on Facebook says:

        Chris you must be one those idiots from the suburbs who thinks he can one off a rural appraisal

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        • Chris says:

          Idiot…no…..lol… I make a ton of money…..rural, ocean, mountain, urban, million dollar lots, multi-million, golf courses, country clubs, historic houses, river houses, one of kind, and than some.

          Blah Blah Blah jack ass,  if your good you can appraiser anything, anywhere.

          Did reviews for years, and paid to review and re appraise properly cause there was still a deal, L.o. just wanted so much padding the report looked asinine.

          And in several states jack ass !!

          Got paid twice as much ($700) to run to the mountains for my better clients back in over 15 years ago….lol  seems they wanted a REAL appraisal to get to settlement than the locals were able to give….

          I love inner city, I love rural, a monkey can appraise suburban even though I have seen reports that say other words.

          Been asked to save an appraisers license once….laughed my ass of at the report sent to me by his lawyer…

          When you say …”would love to go back working with appraisers that know their local market..” do you really mean the locals that you had a great relationship with to make your deals ???

          You don’t have to answer that…we all know….lol

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        • Please be respectful of the opinions of others and do not attack someone for having an opinion that differs from your own; if you disagree with someone, please express yourself respectfully. Snide or rude comments are not constructive and certainly not helpful. We count on your cooperation and appreciate your support!

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        • Ross I didn’t read it that way. He’s right that any reasonably experienced appraiser can appraise anywhere given the data. ..and time to learn area nuances. No, we would not be ‘knocking them out’ at one or two a day like a local that already has all the knowledge and data, may be doing.

          Its not usually economic for people to pay us to learn what others may already know.

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          • Caterina Platt says:

            Sorry, but I read it the same way. Arrogant. That’s an understatement actually.

            I appraise a pretty broad area in my market in Central NM. I’ve done just about every type of residential property in this area over the past 20 years. Rural, suburban, mountain, downtown condos, equestrian estates, golf course monuments to myself, manufactured, REO, etc. There are intricacies and nuances we come to know over time, experience, and a helluva lot of research. Zoning, septic regulations, which area’s water system is flaky/failing, water rights and their effect on pricing of the land, who to contact about them, the failing school districts and the sought after addresses just to name a few things.

            The one thing I try to never forget is that we must stay humble. If someone gave me access to all the data in a market 2 states away, I might be able to pull off a credible valuation, but the ‘what if I blew it due to lack of local knowledge’ would haunt me. There is a myriad of things to know about our local markets and we take them for granted until we sit back and think about the details.

            No, I don’t believe I could stand toe to toe with a Phoenix, Denver or Houston appraiser even if I did have all their data.

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            • Caterina, IF you followed sound professional appraisal practices (which includes consulting with local experts), you certainly should be able to. It’s only an issue of time and relevant data adequacy.

              Government appraisers for IRS; Treasury Dept., DOJ, State Department, GAO, BIA or Dept. of Interior, Dept. of Defense (all branches), HUD/FHA and State Transportation Agencies do it all the time.

              I’d much rather have a competent out of area professional than an incompetent local. (No hidden messages or inferences in that).

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    • Baggins Baggins says:

      Yes Ross, those are complex arguments. I disagree with the below poster. I could not appraise a new york highrise but I could bring a lot of valuable information for an old mountain home, etc, etc. Some individuals ruined it for the rest of us is a simple explanation. There are many ways for local banks to source local talent. That starts with in house appraisal assignment via one of the many tech platforms out there. A single individual could be tasked with this job and then use double blind features from a pre selected trusted set of local appraisers. If they are signed up, you will be able to sort and select them from the available panel pool. Then from a smaller set of persons, run with rotational, standard fees which all panel members are willing to accept, automate the process. It is the addition of unqualified persons that is a problem. The distribution staff is not required to have much talent understanding, that’s very common with almost every middle management agency one might source. The only solution is to budget a full time position for in house management. Also hopefully for review, but one can at least run in house distribution to maintain better integrity even if they then run to outsourced review.

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    • So, how exactly were you forced to do those things? Even when HVCC was brand new banks could still maintain their own appraisal departments; or ordering processes. ALL you had to do was keep the line of control between commission benefits employees separate from non commission staff that would actually order appraisals.

      Tell us also how you were forced to accept appraisers from out of the area. The only time that happens is when the appraisers IN the local area refuse to work for a handshake and a smile, followed up by a hearty “well done” and a bag of peanuts.

      Good news! You can go back to using local area appraisers TOMORROW! Just DO it!

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      • Chris says:

        As hard is this is to believe, They were lied too by the Mang. companies out there. But can you imagine how dumb these “bankers” actually are !!!

        I know companies who swore they had to use Mang. companies…. when I asked the owners where they heard that from……… LOL

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        • Milton P says:

          Lets not forget about the banking regulators who told the bank they have to use an amc. I have heard that from several sources.

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        • Chris, respectfully every one of those bank managers should be fired. In 1980 I was hired as an interim manager of a small FCU that had been cited by NCUA for 41 different areas of non compliance. In less than 90 days I had cleared 39 of those 41 compliance issues – the remaining two required Board authorization.

          I had never managed a credit union before though I had been deeply involved in loss mitigation of various types for the largest one in the country for six years. My skills?

          The ability to read, and then peel away the bullshit separating actual operating policies & practices from the rules.

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      • Baggins Baggins says:

        I have anecdotal input on that. Heads of departments make the call based on bottom line thinking. They absolutely ignore the pleas of their broker and even sometimes managing broker staff. FNMA rule change to allow the individual brokers be in charge of how appraisals are distributed? It’s important to always take this issue back to the very basic point, the complications involved with distribution choices are very complex and there is a mountain of misinformation out there. The amc solicitation schpeel goes something like this; It is illegal for you to talk to appraisers directly, many lenders have faced severe penalties and sanctions, we provide compliant services and necessary regulatory relief….. This is so routine that many people actually believe it. The technology focused people are especially vulnerable to these disinformation points, so much so they’ve developed major distribution platforms which insulate the appraiser from all information. They don’t understand this inhibits accountability. It’s unacceptable assignment conditions at the core, all major distribution portals treat appraisers like employees. You truly are shut out of the open marketplace unless you abide the terms of being demoted and silenced.

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  4. Chris says:

    Well said !!!!

    The saying….Study history to be able to predict the future…comes to mind.

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  5. Jeff says:

    I welcome community banks being able to compete again without having to compete against big lenders. Community Banks are your friends always. Big banks not so much. Remember that 

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    • Baggins Baggins says:

      Yes, there are larger issues at play. Mega lenders monopolized the marketplace with excess regulation. The number of truly community focused and truly community accountable small scale financial institutions that have been crushed or assimilated into larger mega lending institutions in the past 100 years is an astonishing figure.

      Hey, have you looked into this? link below. So, you know, it’s complicated. It is important to understand the strategy used to crush the lending institutions in order to prevent that though. First the waivers, then the cheap servicing products, then various pressure from some inevitable market downturn or external financial pressure, then assimilation or shuttering. It’s been done so many times, quite surprising the local small branches don’t see it coming a mile away. The mistake the local banks make is competing by price and not fostering that special understanding that they are not a bank. It’s important to recognize the American public has had financial education removed from student curriculum for at least 2 or 3 generations now. That’s not a coincidence either.

      So no solutions you might think is my argument. Quite the contrary, it is federal regulation which causes the uniform excess which shuts locals down and keeps the sheeple on the consumer point. National corporations would have a much tougher time and have to move so much slower if they had to abide individual state network rules instead. Financial education is so much more than clearly disclosing mildly understandable terms. It’s not unreasonable for a local community to tax a national company, sanction politicians, demand grand juries. Oh man, I’m living in a bubble which is 100 years old. Dare to dream. The pundits will never stop dialing for dollars. The solution is to shut them out.

      http://www.normeconomics.org/

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      • Jeff says:

        I couldn’t agree more. Big government spurred big lending and corporate America. The community banks some which were doing great had to close their doors. And now look at all the fees being shoved down everyones throat for corporate bonuses

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        • Baggins Baggins says:

          Thank you Jeff. Solutions? Get out of debt and stay there. Limited credit only, limited ranges. If you can’t afford it cash, do not buy. Never lease, always own. Usage rights are for the birds and houses are not atm machines. Most consumers are blissfully unaware their ‘new consumer habits’ were programmed into them for the benefit of corporations and not themselves.

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  6. Baggins Baggins says:

    Oh man Cher video? The sultans play creole.

    Milton what drives me nuts is the illusionary nature of all this. These banks seem to be able to source every talent from the janitor, construction, clerks, guards, high tech safety guards, it people, company heads, and every labor and product service in between. But damned when it comes to the mystery which is quality independent non advocate real property appraisal service, they seem to be having a really tough time. All they need to do is pay for the talent. The fact they won’t is an immoral decision. Lenders are raking record profits, don’t stop now.

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    • Milton P says:

      As long as they are playing with other peoples money, they will continue to take higher risks and cut corners.

      As for the Cher video, well, what can I say, the words of her song are very appropriate.  Wouldn’t you know, I can not get that song out of my head now.

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      • Baggins Baggins says:

        Try using winx, then ripping all your old favorite mtv vids from youtube. Click and go. Download, convert, press. (dvd maker for quick burn.) I watch personally curated mtv vids on home burn dvd in my garage like all the time. And you get to mix in live performances, mixes, whatever. I’ve got a full dvd of just knight rider variants. No commercials, you control the content and rhythm. Paying for usage rights is absurd, go straight dvd or utilize fair use act and rip for ytb. This is why there is such a strong push for new proprietary coding, original tech is like open source analog coding without codex restriction. Old tech will always be better tech.

        Watch out, you might get what you’re after / Cool babies, strange but not a stranger / I’m an ordinary guy / Burning down the house / Hold tight / Wait ’til the party’s over / Hold tight / We’re in for nasty weather / There has got to be a way / Burning down the house / Sometimes I listen to myself / Gonna come in first place / People on their way to work, / Baby, what did you expect? / Gonna burst into flame /
        Burning down the house / My house’s out of the ordinary
        That’s right / Don’t want to hurt nobody / Some things sure can sweep me off my feet / Burning down the house / No visible means of support / And you have not seen nothin’ yet / Everything’s stuck together / And I don’t know what you expect / Staring into the TV set / Fighting fire with fire

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  7. Great article Milton. You know, the feds can save bundle of bucks if they set up the TEF inside TAF and have the same people write USPEP every two years that write USPAP. I mean, look how great a job they are doing maintaining the Public’s trust in the American financial system and appraisal process already

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  8. Vincent R Simon on Facebook Vincent R Simon on Facebook says:

    I’m in a mountain area that rural is 25 miles from me. AMCs call and get a fee quote with time added to the fee. A few weeks ago I had 4 different companies call me for the same address, I gave them all the same fee. Obviously they waste time to find the lowest fee and find anyone who goes out the distance for that low fee. There’s no shortage of appraisers that will accept assignments for less fee, otherwise I would have got that assignment first call.

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  9. Chris says:

    Sorry to say, that is capitalism at work. Don’t waste your time on them !!! They always get what they pay for. The lenders are aware and they are getting pissed. Especially since rates went up !!!

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  10. Retired Appraiser Retired Appraiser says:

    It’s a moot point really. This time next year we’ll be mired in a recession and most of you will only be moonlighting as appraisers with real full time jobs.

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    • Baggins Baggins says:

      I do this for the beer money. The rest is just gravy. Benefits of being mostly debt free, never renting, never leasing, owning or bust with limited overhead. I like the term of inevitable market corrections rather than buzzwording like recession. If people don’t see this coming a mile away, they must be blind. Shall I post the relevant Liberty Report video for you?

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    • Wayne Courtney says:

      Not sure that the recession will come around this time next year. I am positive that it will come around. When the peanut farmer was in the white house there were a whole bunch of high flyers that hit the financial pavement so hard that there were skid marks on their asses. I remember it very well as I personally knew many hot shots that stood in line at the bankruptcy court. I was much younger then and almost followed that crowd into financial ruin. Heck, I formed a corporation and became partners with a savings and loan to build houses. They had the money and I was “their” partner borrowing at 16%, building houses that you could not give away at that time! Trust me, education is expensive! There were folks at that time that really were not wanting to play games. They honestly wanted to know if they had lost the family farm. Were they broke? Run and hide was the financial plan of that day. They did not want the opinion of some clown….they were struggling for their financial life and they wanted to know an honest valuation from an honest appraiser. That was the time I really moved into the appraisal field. We may see those times again.

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  11. Baggins Baggins says:

    What a coincidence! New AI linked article via email newsletter updates. Moody’s possible downgrade of mortgage instruments ratings via hybrid and avm use. Hey, where have I been hearing that story, I know somewhere recently I’ve been hearing that topic matter discussed regularly. And then what really hurt my feelings, a random linked story header below; Home depot donates $50m dollars to train 20k new construction workers to cover the market shortage of laborers. Salt on the wound, what a refreshing start to the day. Maybe I’ll look at a new career in the construction field. At every possible turn no matter where you engage, the unlicensed desk workers and even licensed managers will pressure for better time or reduced fee, often both. The distribution workers job is to press the appraiser and in turn this disrupts fairly balanced distribution almost every time. In the absence of rotational distribution among properly vetted panels and consistent minimum fee schedules, that’s the reality of most ML engagements today. You’ll want to catch this article, it’s a quick read.
    Moody’s: Appraisal alternatives pose new credit risks

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  12. Baggins Baggins says:

    Think the avatar reference was for me. Swapped, I’m not PP if that was directed at me.

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    • Caterina Platt says:

      Once upon a time on the Appraiser’s Forum, one of the regulars put up the Hey Koolaid dude on his avatar in response to a long, sordid discussion regarding Zaio. He was a fan of Zaio if I’m not mistaken. Pittsburgh Pete.

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      • Baggins Baggins says:

        AF is old news, a limited hangout with limited research capability for non members. The best source for industry information became a brain drain where so information is lost behind a membership wall and ad wall now. Every single topic and post on this site is searchable on google and visible to outsiders without having to gain a membership or take down ad block, no throttling or censorship.

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        • Caterina Platt says:

          I was one of the original AF members. In 1999, there were maybe 125 to 150 of us chatting on ancient, archaic software. Our email addresses were all exposed to the world, we used our real names, we were polite and we didn’t wrangle about politics.

          I remember discussion about the run up starting in 2003, and we’d help each other deal with the enormous volume exchanging business ideas. We wept together on 9/11, signed the Appraiser’s Petition and cheered on Frank Gregoire and his colleagues as they tried to get the attention of congress when we had over 10,000 signatures. I conversed (and still do) with several of the appraisers that took on some of the big, corrupt banks back at that time. But we have all moved on to different formats.

          I hung on there up until about 2010. That group, as it grew, became a huge brain trust and information source. I have conversed with many of the movers and shakers in this biz across the country and I’m a far better appraiser from participation there, but the soul of that place died about 8 or 10 years ago, sadly.

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          • Caterina its a downside to success. As groups become larger more individual personalities emerge. Not all of us are as collegial as small core groups may be. I’ve been guilty on occasion. We are after all, human beings. Our issues are appraisers issues. Most of us are willing to call a spade a spade – though sometimes it is necessary to call it an [expletive deleted] – shovel to get a point across.

            Reminders about courtesy are always helpful. I’m told that this group (blog) has a subscribed readership in the thousands – more than several thousand. That includes a lot of subscribers with ‘dot gov’ email addresses.

            I can cite from personal experience (phone calls) that appraiser and other regulators from both state and federal agencies read this blog.

            I choose to use my real name, but (personally) I’d rather an appraiser use a nom de plume than not post at all. Of course, their motives are then much more likely to be scrutinized by regular readers.

            Lastly, if we all agreed with each other all of the time or always thought alike, what would be the point of the blog? I hope you’ll choose to contribute to the discussion more in the future, now that you are here.

            PS: Our administrator (known affectionately as “AB”) is an east coast appraiser and reads all the posts. If you ever have a site problem just post it. She responds rapidly as a rule.

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            • Caterina Platt says:

              Absolutely. I continue to use my real name on all the blogs and forums. It keeps me honest. LOL  Seriously though, I’ve had some opportunities flow my direction as a result of participation in the online appraisal discussion world, both personally and professionally.

              Disagreement and polite debate are most of the fun and learning opportunities. Generally, we appraisers are far better at remaining human and professional with one another. We give it at least 2-3 replies before the ad hominem and name calling starts. LOL

              Thank you for your kindness. All of youse.

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  13. Can there even be such a thing as an upside to appraisal waivers? Time for the buzz to consider a name change.

    https://www.appraisalbuzz.com/upside-appraisal-waivers/ Just sent to me by AGA’s Texas State Representative. I’d missed that one.

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  14. Advocate says:

    Well it looks like the Community Bank failure has already started! Flagstar Bank has acquired Desert Community Bank and part of East West Bank and Santander Bank.

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    • Lol; East West has been making bad C&I loans for over a decade. Guess it caught up to them.

      Anyone buying banks in San Bernardino County obviously hasn’t read a newspaper about the City OR County in the past ten years. Sort of like having an exclusive sales franchise for dust in the desert. What a quality portfolio that must be.

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      • Baggins Baggins says:

        Mike, you bring up an important point that you or anyone could possibly write an article on. 

        I’ve been interested to learn more about portfolio packaging, ratings, saleability, buy backs, just all of that on the lenders side. What occurs to me recently is that many appraisers don’t really understand what happens with their own products, how many eyes may view it down the road, tied to a note through the life of the note. Also it’s just sad that in the past 10 years, I’ve only had one or two effective conversations with panel managers whom can keep up detailed conversations about the need for better defensibility and detailed writing. Help me gauge the balance between defensibly and speed, under the strict assumption that leaving some wiggle room to simply rely on an insurer and file a claim would be unacceptable practice. That’s what’s wrong these days, appraisers dial it in for dollars and then file claims on a dime. If more appraisers qualified the distribution managers, lenders would be forced to hire more quality help. PSI does not touch those subject matters, neither does Jones or Kapplan for the most part. I went 10 years without a complaint. The more I learn about the details the more clear it becomes that persons in charge of appraisal distribution departments whom do not hold active appraisers licenses themselves are clearly improper and severely underqualified persons for those positions. Lately I’ve seen ‘panel managers’ with qualifications ranging from HR persons, to former secretary at an appraiser’s office, former manager at a book store coffee shop, accounting persons, appraisers stripped of their licenses, etc. You can’t make this stuff up and that is a true story of events I’ve experienced in the past only 2 years, swear to it. Despite my best efforts I’ve only found one single lender who is currently employing an active licensed appraiser to manage the panel and distribution.

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        • Baggs, your life of loan scenario would be even more fun if tracked from the perspective a First American Services 100% in house deal from pre listing CMA to loan servicing and ultimate REO activity; to FDIC or PMI intervention (depending on how of if the REO fits in the big picture).

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          • Baggins Baggins says:

            Just the mention of reo makes me think of ocwen, and how because they’re the best straightforward swindlers with a smile, teflon servicers, they have captured a huge portion of reo sourcing from some of the biggest names. If one wanted to simplify all of it, one simply needs to recognize that when companies sell and package rather than holding loans in house for the entire term, calamity ensues. Having spoke with so many homeowners who have dealt with them, it’s a grand tale fit for the Colosseum. I remember being told 15 years ago, this is our in house lender, treat them best. Appraisers don’t talk that way anymore.

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            • Caterina Platt says:

              Do you remember when they were actually a 1/2 viable client? The website always stunk, and God forbid you had to speak with someone, because you weren’t going to get anyone stateside that could be understood and vice versa, but about 2005 or so they actually did pay halfway decent for REO work.

              The properties were B- to D loans, so you weren’t looking at anything in average condition, and they were always a challenge.

              Sloppy servicing is an understatement. These guys made Countrywide look like church deacons. I was floored when they got the VA account. Angered is more like it. Our tax dollars and our veterans deserved better.

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              • Whats scary is that they had Treasury Offset Program account collections for awhile too. Have a friend with student loan? Picture a 1950’s era bill collector with no knowledge that they had any limitations or consumer obligations.

                My GF had a student loan from school that the feds actually shut down two weeks before her ‘graduation’ (med asst.)…then Bangalore Betty thought she’d get paid by calling MY number??? Guess again.

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If I Could Turn Back Time

by AppraisersBlogs time to read: 2 min
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