Ulterior Motive in Raising De Minimus
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…raising de minimus shenanigans being promoted…
Appraisers, a couple of weeks ago, I sent out a message about a Fee/TT quote conversation I had with an AMC clerk.
I received a number of responses from appraisers across this fruited plain who said often they will receive Fee/TT quote requests for the SAME property from MULTIPLE AMC’s. That corroborates stories I hear from appraisers I talk with at conferences.
The entire AMC situation is a giant time-wasting game that really doesn’t benefit the borrower at all, and least of all, appraisers. Lenders are the coaches in this game.
Another message I received caused the tiny little light bulb in my gray matter to explode in brilliance. The last paragraph is key to the raising de minimus shenanigans being promoted lately, backed by, you guessed it, lenders:
“What you may not see is that there are Lenders that also agree with your statements. However because of all the noise, miscommunication and regulatory interference everyone is starting to just give up and/or default to a legacy AMC model and then micromanage the process. Those same lenders will be the ones that jump on the De Minimus increase and eventually be insolvent at the next market crash.
The De Minimus level was raised to solve a regulator burden created by Regulation, they can’t roll it back so they just make the filter larger.
Prudent Lenders will still get appraisals, the real question is what kind of appraisal? One that complies with USPAP or one that Doesn’t, and who is going to prepare it. Evaluations still require a level of competency under that Regulatory requirement.
Keep in mind USPAP is a road map to a repurchase lawsuit, a non USPAP appraisal isn’t. Lenders are tired of paying legal expenses for USPAP experts to line up in a courtroom and argue if a report and the appraisers workfile complies or not.”
In other words, USPAP is an impediment to the financial bottom line for lenders. To avoid spending thousands to millions of dollars going after licensed appraisers over allegedly faulty appraisals, they are attempting to get the de minimus raised so that EVALUATIONS used to value properties won’t face the same investigative and legal issues.
- EVALUATIONS do not have the same regulatory burden as appraiser’s USPAP compliant appraisals.
- People who perform EVALUATIONS are not licensed by the states.
- “Competency” is mentioned in the Agency regulations, but who monitors that?
- EVALUATIONS may not cost as much as a regular appraisal.
- People who do EVALUATIONS may not have the high level of property analysis training as appraisers have.
- When faulty EVALUATIONS are produced, it will be up to the borrower to bring charges against the lender – which probably will happen less frequently than lenders going after appraisers.
So the lender will save money on legal defense.
The other issue here, that just dawned on me, is what do lenders call property valuation costs when a borrower applies for a mortgage loan? All lenders have a line item on loan requests for “appraisal cost.” Appraisal is a legal term that has a specific meaning. By regulation, the ‘appraisal cost’ must be identified to the borrower up front, after the time of application.
But if the lender is NOT actually going to use an APPRAISAL for property valuation (due to prospective value below the maximum de minimus amount), the fee should not be termed ‘appraisal cost.’
Secondly, due to differing production costs, will the fee charged the borrower be equally the same for both types of valuation reports, even though the EVALUATION probably costs less than an appraisal?? Is the lender pocketing the difference? (Pocketing any portion of the borrower paid fee for ‘appraisal’ didn’t use to be allowed; I’m not sure how that currently applies since Dodd-Frank was signed into law.)
USPAP was mandated by Congress to preserve public trust in the real property valuation process. EVALUATIONS subvert that obligation. (Yes, USPAP also applies to personal property.)