Killing Consumer Property Value Protection

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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

Special Interests Killing Consumer Property Value Protection

Before the ink was dry on FIRREA 1989, special interests were snipping away at it. Originally proposed field review requirements in FIRREA drafts for 1 in 10 appraisals would have made the Great Recession (TARP) impossible. Now those same interests are stripping away at the last vestiges of consumer and taxpayer property value protection. The formal appraisal. The MINIMUM level of protection that should be insisted upon.

Dear Ms Kahng:

My name is Mike Ford. I am Vice President – Special Projects; & Chairman of the American Guild of Appraisers National Appraiser Peer Review Committee; AGA#44, OPEIU, AFL-CIO.

I am writing concerning the upcoming June 20th hearing addressing “What’s Your Home Worth? A Review of the Appraisal Industry”

There is currently so much deliberate misinformation about real estate appraisers and appraisal needs in America, that we believe it is critical the House Committee and any related Sub committees hear from recognized national experts that are currently practicing independent appraisers. Further, those appraisers should be recognized professionals with no hidden agenda. Respectfully they should not be separate self-serving appraisal management company owners or managers. Nor should they be national appraiser franchisees circumventing AMC laws, that also directly benefit from reduced restrictions and standards for professional appraisers. Professionals nationally recognized for their efforts and contributions in preserving appraisal integrity and professionalism should be sought.

Jonathan Miller is such an individual.

So too is Pat Turner, SRPA of the Virginia Coalition of Appraiser Professionals (VaCAP), Richmond, VA; or Maureen Sweeney, SRA, Chicago, IL, and Mark Skapinetz, AGA Executive V.P. American Guild of Appraisers, Atlanta, GA.

Their email addresses are above. All are nationally recognized appraisal profession leaders. Maureen was also a former state appraisal regulator.

I’m told Jonathan is prepared to fly down from New York to attend. The others mentioned could or respectfully, should be contacted for follow up since some may not be able to attend. Each of us has at various points met with Mr. Jim Park of the Appraisal Subcommittee (jim@asc.gov) and shared our views and concerns with him. Collectively we believe Mr. Park as Executive Director, ASC to be an honorable and ethical steward of the Public Trust and responsibility given to him by the ASC. We also know that he is often subject to incredible pressures from lending interests; AMCs, and individual banks across the country seeking to take advantage of FIRREA loopholes to obtain unwarranted appraisal waivers based on spurious ‘support’.

We believe Mr. Park deserves the committees reaffirmation and recognition for his efforts to preserve the national financial services health via the FFIEC, and taxpayers interests arising from proper collateral value confirmation that only formal appraisals prepared by ethical professionals produce.

Ms Kahng, all appraisers need to be assured that the Honorable Chairwoman, Congress Member Waters is aware of the concerted effort there has been in the past two years to strip away consumer protections memorialized under the Dodd Frank Act. The entire focus of the Treasury Department Financial Reform Efforts; Mortgage Information Standards maintenance Organization (MISMO); and appraisal management special interests such as REVAA, and various predatory lenders has been to foster or promote the falsehoods of appraiser shortages; delays, rising costs and ability to substitute professional services with automated ones already proven to be complete failures.

The trend via GSEs, led by FNMA is to coerce or deceive borrowers into waiving appraisals on purchases; or to accept AVM influenced (driven), so called bifurcated hybrid appraisals. They hold out the bait to borrowers that they may save hundreds for appraisal fees ($650 to $1,000) without pointing out the very real risks of overpaying tens of thousands of dollars for property; or being left with undisclosed property defects that can lead to uninhabitability and ultimately foreclosure. Coincidentally, these unspecified alleged savings never filter down to the borrowers. The lenders Appraisal Management Companies still charge them the same amount. They just get to keep more of the spread between lowest fees paid to appraisers, and what they collected from the borrowers.

A false claim most associated with these hybrids is that they will be inspected by engineers, insurance adjusters, contractors, experienced brokers and other qualified ‘professionals.’ In practice they are universally inspected by part timers with little of no training. No successful or skilled broker is going to do property inspections for $8 to $65. That is the compensation range for half-day “trained” unregulated, non licensed and incompetent interlopers.

Property inspection for real estate appraisal purposes requires formal appraisal training and experience. It is an integral part of the overall process. Contrary to the falsehood promoted by hybrid advocates it is as much (if not more) of a fundamental part as data research or desk analysis AFTER a competent property inspection that includes the overall neighborhood and comparable properties too. It takes hundreds of properties and perhaps thousands of hours combined education and experience before appraisers become fully trained in all facets of property appraisal, including inspections. A half day or even week long training course taught by non appraisers to other non appraisers with no license or reputation to protect, is not an acceptable alternative.

Example: A few years ago, the biggest natural gas blowout in the history of the nation happened in the Porter Ranch (Aliso Canyon) area of California (North L.A. / San Fernando Valley). The gas company found the leak 10/23/2015. They did not admit it until 10/28/2015. People were still closing escrow on houses through November and December, 2015 though no new sales were taking place. The smell was overpowering. Driving though the neighborhood, visible signs of soil instability and movement are also (still) visibly readily apparent (in some areas). ANY trained appraiser would see them. Linear as well as cross road cracking; hillside sloughing or collapses throughout the area. No desktop analysis would have revealed the existence of the gas wells. The blowout is a few hundred yards north in Unincorporated L.A. County. The City of L.A. official records (ZIMAS) report no wells in the area. No desktop analysis would have identified the areas problems (hundreds to thousands of people were ultimately affected). No untrained lay person’s property inspection would have resulted in identification of the ‘red flag’ warnings of longitudinal roadway cracking and hillside sloughing back then. No AVM would capture the impact on market value of thousands of pending lawsuits in this multi tiered property value area. This is only one example of issues that will slip through any proposed use of non appraiser ‘inspectors’.

FIRREA and Dodd Frank were both passed to preserve and protect the financial housing markets and the availability of sensible, affordable financing. The MINIMUM acceptable standards for federally regulated transactions require appraisals performed by licensed or certified real estate appraisers. Congress was so concerned that minimum standards must be followed, that every state was required to implement corresponding appraiser qualification criteria.

Before the ink was dry on FIRREA 1989, special interests were snipping away at it. Originally proposed field review requirements in FIRREA drafts for 1 in 10 appraisals would have made the Great Recession (TARP) impossible. Now those same interests are stripping away at the last vestiges of consumer and taxpayer property value protection. The formal appraisal. The MINIMUM level of protection that should be insisted upon.

Congress did it’s job in 1989; and again with Dodd Frank. Now is not the time to let those great appraisal-integrity preservation bills to be undone.

Respectfully submitted, for The American Guild of Appraisers, #44 OPEIU, AFL-CIO

Michael F. Ford, AGA, GAA, RAA, Realtor(R)
California General Certified Appraiser #AG002512
FHA Panel #CAAG002512
Vice President -Special Projects; & Chairman
AGA National Appraiser Peer Review Committee
(714) 366 9404
http://www.appraisersguild.org
http://www.mfford.com

Image credit flickr - Rodrigo Paredes
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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13 Responses

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

    Same mistakes, over and over

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  2. Doug MacLeod on Facebook Doug MacLeod on Facebook says:

    Well written letter.

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  3. Avatar chris says:

    Great letter !!! Thank you !!!

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  4. Avatar Diana N says:

    Mike, excellent letter as always, I sincerely hope they listen, I’m getting to old for all this turmoil in our profession.

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    • Avatar Realrose says:

      Their strategy is to drive us out of business and demoralize us so we will work for peanuts; these are people, not like us, who have no skin in the game. We do; hell, I’ve been working as an appraiser since 1979, but apparently I am not qualified to do lending work??? Part of the plan is to make us tired of fighting; we have adapted to upgrades in the standards for appraisals in the effort to protect the public trust, and now they are willing to throw that all away, asking the buyer to pay $500 for a waiver of an appraisal, essentially saying, “trust us”. Who is us? The banks, wall street and fannie and freddie. Next, opportunity zones will be the new thing, and so they want to be able to manipulate another bailout when they steal our equity again! Engineered bailouts are all the rage; S&L 1989, 2008 Financial Crisis, and all kinds of bad things are said about appraisers. Now we have to compete on time with an algorithm, and they want it for cheap. Cheap and fast doesn’t protect the public trust.

      I say when computers buy houses, then I don’t care if they use zillow! We are working with our hands tied behind our backs when we are licensed and insured; they want us to appraise something we haven’t seen? And they’ll have some guy they got on craigslist to take photos who is paid $1.00 per photo so they at fannie can say we don’t need an appraisal on this because we have zillow! This opens up a lot of room for fraud, and they are just paving the way!

      Unlicensed people have their fingers in our profession and they are like fishhooks that have our whole profession hurting, and the public is definitely not served! Just because we use math to do our job doesn’t mean we should let numbers rule the result! People buy homes and there is some social awareness of trends and human behavior that is worth considering in light of the numbers that guide residential appraising. Commercial has to make financial sense, but trends will make it what the copycat investors expect when they buy income property. All real estate is local, but someone who is out of state and doesn’t see the property is doing an appraisal from their desk in another state? Not good. We know that, but the public looks up their house on zillow and it says it is way higher than they knew, so right now there are a lot of equity loans that are approved without an appraisal. Rates are down right now, so a lot will refi and get some cash, and later could lose their homes if there is another downturn. It is already so expensive to buy and rent, there are so many homeless, so we need to strengthen the programs that allow people (like military, teachers, police officers, etc) to own rather than rent. It makes people take care of the property much better, and it is good for the community. Yes, build more, maybe smaller and denser projects so we don’t have these people on the streets everywhere!

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  5. Avatar mdwnlk says:

    I am sure it will just get “filed away” nobody listens to the actual experts who have been charged with protecting the PUBLIC TRUST for so many years…

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    • Not always. Particularly if hundreds of other appraisers copy and paste the same letter into their own emails to the Committee, or write their own separate letters. The links to write to are embedded above. It was a letter not too different than this that helped stop the early Pace Pro product. Did you know that our federal regulators, as well as many state regulators, also read Appraisersblogs.com?

      Our level of engagement is often suggested by the nature and number of comments here.

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  6. Avatar Peter Gallo says:

    Good letter Mike

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  7. Baggins Baggins says:

    Not to mention data security issues which have not been properly addressed.

    What on earth are these new products? Just noticed them in the Mercury products section.

    Per Roses’ comments; You’d think that for all the glorious millions and millions of dollars the big name players take in, from amc to realty to lending, they’d have like giveaways or promos where they’d buy a condo outright and just put someone into a home free and clear or have dedicated housing the company owns they would at least lease out free of charge limited terms to help families get back on their feet. All this charity and community awareness activity is just for show, they have enough money they would not miss helping a stranger but they really don’t do that. Rather, they seek to put all the under represented aspiring middle class appraisers out of business. Dang! Picked the wrong career again.

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  8. Nicholas Bochicchio on Facebook Nicholas Bochicchio on Facebook says:

    It’s amazing that no one seems to care that we are trying to produce a fair, balanced and credible report and should be compensated for that. Instead, we get nickel and dimed at every turn and they scope creep the hell out of us daily.

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    • Nicholas, Congress cares about the appearance of caring. As long as the unenforceable laws that are passed don’t actually have to be enforced, then they can look as concerned as they want without risking donations. Dodd-Frank was such as law.

      FNMA is nothing more than a money pump. Processing the highest possible number of securities possible is the only objective. As long as they have scapegoats they are content to allow known overvalued loans to fly on through. “Bad appraisal; or bad computer data or glitch in the algorithm” will be the next recession or housing crash’s mantra.

      NAR & state Realtors don’t yet fully understand how exceptional their liability is going to be. They are being fed lies by the software hucksters and mortgage bankers lobbies

      Some people still care Nicholas – The American taxpayers and consumers – or at least those that have become informed on the issues do.

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    • Shaun Murphy Jr. on Facebook Shaun Murphy Jr. on Facebook says:

      Nicholas Bochicchio just don’t do their work..

      If every Appraiser stopped doing AMC work for 2 weeks, the ball would be in our court

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      • Nicholas Bochicchio on Facebook Nicholas Bochicchio on Facebook says:

        Shaun Murphy Jr. I wish I could afford not working for 2 weeks but I def understand the sentiment. But it would take more than me. If all of us did it then yeah we could prob change stuff.

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Killing Consumer Property Value Protection

by Michael Ford time to read: 5 min