Simply too BIG to Say No to…
Latest posts by Michael Ford (see all)
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If they can’t even get their own PACE Pro form right, how are these alternative “valuation” providers going to get something as complicated as the value right?
First American, and to some extent similar large scale conglomerate “players”, supply everything to the transaction: from the Home Warranty for the buyer, to the escrow services, to the mortgage company, to the mortgage servicer, to the title company, to the appraisal management company, to the appraiser panelists, to the software company that DESIGNS the software used for PACE Pro and almost all other appraisal software (ACI), to the BPO providers, to the “reconciliation”.
How could ANYONE in such a powerful chain be expected to stand up to or against the kind of improprieties that forms like PACE Pro promote and encourage?
A copy of the PACE Pro value reporting form and cover letter to appraisers is embedded at the bottom of this article. PACE Pro is provided by ACI. The latter is owned by the promoter of the form.
First American Mortgage Solutions “Valuation Professional” cover letter is a direct invitation to appraisers to violate USPAP, as well as most states appraisal licensing requirements. In California, the Appraisal Licensing Laws, as well as applicable sections of the State’s Business and Professions Code, consider a ‘product’ to be an appraisal when a value is being requested. Whether that is parsed as an opinion of value, estimation or reconciliation, it is an appraisal. Further, IF an appraiser is hired to do a job because they are an appraiser, then applicable appraisal licensing laws apply, even when that job IF performed by a non appraiser, might otherwise be permissible (BPO for listing purposes for instance). California, like many states, has adopted USPAP. Therefore USPAP are the minimal acceptable standards.
A closer look at First American Mortgage Solutions PACE Pro:
- First American expects PACE Pro to be “reconciled” based on datasets that THEY provide. “Reconciled” has different meanings to an appraiser and to purveyors of these sub-standard ‘valuation products’. To an appraiser reconciliation is the culmination of up to three or more recognized appraisal techniques properly applied before arriving at a credible opinion of a clearly defined specific type of value. It’s not clear what it means to the promoters of PACE Pro, or their users.
- The form will have gridded sales and/or listing “comps” very much like a real appraisal would have. Clearly it is intended to appear as some type of acceptable appraisal product. Though it is not.
- The PACE Pro form uses euphemisms like Collateral Evaluation and ‘reconciliation’, in an apparent effort to mislead from the fact that what it describes is in fact a real estate appraisal, albeit a very bad one.
- It permits the appraiser to find “additional sales…if the appraiser determines that is necessary.” NOTE that MANY OTHER STEPS would be an absolute requirement in order for an appraiser to comply with most state’s appraiser license laws, and/or USPAP. It is not the form that determines an appraisal scope of work. It is the intended use, purpose and law. The client’s scope may NOT be so abbreviated as to render a result that would be confusing to the public; or which would diminish the public trust in appraisals or the agencies that are supposed to regulate them. ALL of the steps necessary to produce a so called desk-appraisal, or an appraiser assisted Automated Valuation Model (AVM) conclusion, would be required at a minimum, along with far more disclosure about what has or has not been done to derive an (undefined) “value”.
- Completion of any form on the client’s own website may not allow the appraiser to comply with state appraiser record keeping requirements.
- The proposed fee of $70 for an appraisal is not remotely compliant with any reasonable interpretation of Dodd Frank’s requirement to pay reasonable and customary fees based upon assignment complexity, or time needed to properly complete it in accordance with law rather than as per the form.
- Page 1 of the PACE Pro form itself contains information that its signatory is attesting as being factual. However, that cannot possibly be known on a desk analysis basis. Condition, occupancy, structure value, land value, or whether specific unseen features are typical or not, cannot possibly be known by the appraisers. To label them as indicated in the sample is disingenuous and deliberately misleading.
- Nothing in the “datasets” provided, enables an appraiser to determine if the neighborhood characteristics being reported are correct or not. If it were not intended to be a deliberately misleading form, the section should simply state “All of the following characteristics are assumed…” without having been analyzed by a qualified appraiser.
- Almost all of the positive or negative influences being cited cannot possibly be known by the licensed appraisers being asked to sign this form. There is no indication of the inspecting party’s qualifications to make such determinations. No ethical appraiser would make such assumptions without having a reasonable basis for doing so, and clearly stating what assumptions have been made and what their impact on value may be.
- Subject property condition – same as above. Factual statements are made that have no basis for being assumed, let alone being claimed as facts! The zoning and legal use statements are particularly troubling to legitimate licensed appraisers. And they SHOULD be a concern to regulated lenders.
- Property damage – same as above.
- Page 2 of the PACE Pro form – Many, if not most appraisers, would not even perform the broad market analysis to factually determine normal marketing time for a $70 fee. This is one of those areas that is intended to have (at best) such a cursory analysis as to be completely worthless. Consider that $70 is about the minimum that most appraisers expect to earn in one hour time. This type of market analysis alone can take an hour or more.
- Number of sales reviewed, or simply counted? Again, how careful a ‘review’ is being performed in just a few minutes, if at all?
- A market trend conclusion is expected. FNMA itself does not trust appraisers to competently document or report market conditions or trends without the use of the 1004MC form. So how would this specific trend report of stability be supported by the broker that provided this information?
- No appraiser could purport to know the fact of, or specific degree of, adjustments being reported as facts in the sales grid in any work scope described or likely for $70. Yet the form grid infers a level of accuracy to within tens of dollars!
- Signature – The form infers a broker’s signature and license number but does not specifically state that is the case. The disclaimer below it suggests the form may be signed by an appraiser. This is misleading. To state that the form “may not have been prepared by an appraiser”, OR may not “have been acknowledged by USUAP” is parsed purely to facilitate deception. It certainly is not advertised on the website as being an essentially garbage product of no real worth to any professional appraiser, OR underwriter concerned with impartiality, accuracy or honesty.
- The DISCLAIMER box was apparently written on an attorney’s recommendation rather than with a concern toward either appraiser’s ethical obligations or broker’s moral ones. “…it is not intended to be, nor shall it be deemed to be an appraisal or any other form of appraisal.” The value and sales comparison information is selected from public records or a variety of database valuation models based on the geographic location of the property. There is verbiage about having advised the customer that this is not an appraisal but a ‘restricted report’. Inaccurate and non existent USPAP references further supports a conclusion that this is not merely a deficient reporting format for ANY kind of value, but that it is one in which the form authors had at least a superficial awareness that the product they are promoting has serious issues related to basic honesty and specifically with respect to regulations governing real estate appraisals and appraisers.
It should be a matter of grave or extreme concern to all regulatory agencies, and investors in loans even partly supported by such products, that entities, simply “too big to say no to” by anyone involved at so many levels of a financing transaction, are promoting the deminimus increase.
It is clear that major participants in so many aspects of the appraisal process, whether called collateral risk, evaluation, valuation or appraisal, are also more than willing to side step almost ALL the protections afforded and anticipated by Congress under FIRREA and subsequent laws and regulations designed to protect American Taxpayers and consumers.
It is possible that a more misleading, deficient product to report ‘some kind of value’ has appeared in the past thirty years. However, the author of this document cannot think of it. Worse than the PACE Pro form itself, is the deficient level of service that it promotes, which is too inadequate to be relied upon for any loan purpose.
Lastly, the fact that PACE Pro is being provided by ACI, one of the top three appraisal form software companies, will mislead many appraisers who still believe that any form based appraisal ‘must be OK’ or the appraisal software writers would not produce it.
If they can’t even get their own form right, how are these alternative “valuation” providers going to get something as complicated as the value right?