PIW’s Get National Attention

Appraisal-Free Race to the Bottom Home Loans - Risky Business

…“a race to the bottom” between the two companies in pushing for more appraisal-free loans

Ken Harney, a friend of the appraisal community has written an article about Fannie and Freddie waiving appraisals. The article will be seen by consumers throughout the country. VaCAP encourages everyone reading this to share Ken’s article on all your social media outlets, your websites, blogs, etc.  See the article here.

For homeowners and buyers, appraisal-free loans have offered an unexpected windfall: relief from having to pay between $400 and $600 for the service…

Fannie’s and Freddie’s no-appraisal option has been popular with lenders… The company is now doing more than 10 percent of its home-purchase loans appraisal-free…

Pat Turner, a Richmond, Va., appraiser, says worse yet, “savings” from Fannie and Freddie may not always flow to buyers. He cited a recent case in the Richmond area where a major online lender allegedly charged a buyer $600 at settlement on a loan with an appraisal-free waiver…

In other News:

Bloomberg reports on April 27, 2018 in an article by Christopher Maloney, Fannie and Freddie join forces for a “RACE TO THE BOTTOM”

Investors may see a “race to the bottom” in loan quality because of their inability to price in prepayment speed differentials in the so-called to-be-announced market. Consequently, the UMBS TBA will favor the worst performing loans, as they are the “cheapest to deliver,” according to Schmidt. That could hurt lenders, investors and borrowers.”

See the article titled New Mortgage Bonds May Prove Double-Edged Sword for Investors here.

Are you an employee or independent contractor?

Peter Christensen published an article on Appraiser Law Blog concerning a a ruling by a California Court. The article is very telling and a positive for many appraisers. Many AMCs may find themselves at the receiving end of some very large class action suits from appraisers. because of this ruling. Well worth the read. Please share on all your social media accounts.

To prove the key point that the company’s vendor panelists should be classified as employees, rather than contractors, plaintiff’s counsel offered evidence that the company “tells vendors where to go, when to go, what to do, when to get it done and how much and when they will be paid for their efforts.”

California Appraisal Firms and “Hybrid” AMCs: Beware of the Dynamex Decision and Its Impact on Classifying Appraisers as Independent Contractors

VaCAP Board
Image credit flickr - Frank Hebbert
VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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16 Responses

  1. Avatar TruthBTold says:

    Just posted this article to all my social media outlets. The so-called consumer protectors are boasting about saving the consumer a few hundred dollars for an appraisal fee, in exchange for possibly overpaying several thousands of dollars for a house!

    • When FNMA identifies closing cost over payments by consumers and tells the lenders they have to refund the borrowers, how many times do they also re-amortize the loan when any of those costs were initially rolled up into the loan?

      Answer-“None”. They allow the consumer to keep paying that $1,000 or $3,000 overpayment for the entire life of the loan. That’s about $3,500 to $10,500 (4 1/4% compound x 30 years). OK, loan payments aren’t compound but alternative investments the consumer could have made, are.   Remember the LIE FNMA told about UAD being for the benefit of consumers in that it was easier to understand? Same thing with the LIE they are telling above. Consumer benefit is the LAST of their concerns.

      NEVER FORGET that FNMA is just as much a member of MISMO as First American (PACE PRO infamy); Corelamode, major title insurers and Mortgage Bankers are. NOT ONE of whom has ever been concerned with consumer benefit except to the extent the feds require them to be.

  2. Ken’s article was generally good but you have to register with Chicago Tribune to offer comment…so it’s a one side discussion or analysis.

    The FNMA/FreddieMac joint effort seems more interesting “Investors may see a “race to the bottom” in loan quality because of their inability to price in prepayment speed differentials in the so-called to-be-announced market” My only question is what on earth  prepayment speed differentials can possibly have on loan quality? Loan yield, yes. Quality? WTH?

    The California ruling could be a huge deal. One that we should all investigate and analyze by reading each of the four case reference links in the original article. We need to memorize the “ABC’s” test cited by the court…and then start applying this to every single AMC order across the country. Contrary to FNMA policy we need to (1) establish our right to collect our own fees direct from borrowers; (2) set appointments anytime within say the first week of receiving an order and (3) have turn around times of one to two weeks. (assuming 90%+- will still be delivered faster because its in our interests to do so) and (4) eliminate all directive client special requirements that tell us HOW to do any part of an appraisal!

  3. Avatar Bill Johnson says:

    If after my appraisal work is complete, and in some alternate universe some computer system could perfectly match my numbers 50 out of 100 times, what does that say? It means ALL 100 assignments MUST BE DONE in order to FIND the magical 50 that are of a perfect match. If even possible, one can’t predetermine which properties can be equaled by a computer. In part, this week I completed  a VA appraisal of a 500 sf 1 bedroom purchase for $605,000 (condo), where as the market value was determined to be $523,000. With 20% down, and a recent sales history (within 3 years), thus recent appraisals on file, had this been a conventional purchase loan, perhaps a PIW would have been issued (no appraisal performed). In addition, I worked a property located in a PUD that I didn’t know even existed (100 custom homes from the 90’s), where the value inside was 1.3 million (supported), even though outside the walls the median price was $700,000. There’s no way a computer would have hit the mark, when 98% of the greater market data was centering near $700,000. 100% percent of the work needs to be done, to perhaps find the few that might be equaled by an AVM.

    Seek the truth.

  4. Avatar TruthBTold says:

    FYI; I’m sure all of you appraiser wizards have heard the cry for years from appraisers, “there should be a law that requires every house to be sold, to have an appraisal done first, for complete consumer transparency”! With the advent of discounted and flat fee brokerages, online sales portals etc…, which is a band-aid fix,  I think its time to re-direct our focus to the general public and let them know how they have been taking additional risk, so others can make large sums of money. I have started an ad campaign using blog posts via social media, that lets consumers know what’s been going on. The main analogy I use is what has happened in the auto industry. Consumers were aware that they were overpaying for cars as a result of dealing with a commission based “salesperson”. The auto industry and government decided to produce the “Manufacturers Retail Report”, that gives the consumer all the information they need to know what a “reasonable” price is to pay for that car. Today, with this increased transparency, there are very few complaints. The real estate appraisal is the equivalent to the auto industry’s’ Manufacturers Retail Report. As you know, we’re up against sales organizations that contribute millions to Washington lobbyists and whoever else they need to “pay for play”, but we have access to social media. I invite all of you to join me in this type of campaign!

    • Baggins Baggins says:

      Well it’s not quite that simple and unlike automobiles, there is no chiltons book for any given home type. One may freelance home care and there is no carfax. They’ll never get handyman and hvac guys to report track history of home, like they can with auto, houses do not have vin#’s, the 5 point inspection is more like 5,000. Like up here in Adams county, new builders race to build and they sell quickly. What many buyers don’t know, is that big oil and gas is fracking the hell out of lands with mile long lateral approaches and refracking wells every 5 years. The builders raced to build, to claim maximum value of the land, because they knew the fracking companies were going to be there soon. Now all these ultra luxury to avg developments, they’re all watching monster frack wells and big industry set down right there in the parks, the greenbelts, the drainage basins, atop the hill. The move to eliminate appraisers and other independent service providers is more in the spirit of eliminating checks and balances, a continued erosion of property rights and financial sovereignty of an individual person with rights. Consumers ultimately have to get educated about private property, the fed, and how debt inhibits their ability to be sovereign, if they expect to retain any of those rights. Most people have never had full private property rights, and never will either. Look at the bigger picture of private property vs major industry, it’s the same story, repeating yet again, in yet another ‘new’ industry.

      Map: Oil and gas wells in Colorado

      On a more thread realted note; I have an email from a panel manager whom told me ‘every other appraiser on panel finishes within 48 hours of inspection, but you do not. Are you willing to complete in those time frames to remain on the panel?’ Would that qualify me for seeking unemployment since I was taken off the panel for the specific reason of not posturing like an employee like the other appraisers? I inspect three in a row on saturday for christs sake, how am I supposed to flip 3 in 2 days? That one is the gem from the ‘panel manager’ whom used to have an appraisers license, the state yanked it, and now he gets to enjoy a management position over appraisers at a major Colorado salaried based lending outlet.


  5. Retired Appraiser Retired Appraiser says:

    More Than 50,000 University Of California Workers Prepare To Go On Strike

    Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint Hint

    • Baggins Baggins says:

      SAN FRANCISCO – Tens of thousands of University of California workers started a three-day strike on Monday, which will impact all the campuses and the people who get services from them.

      For patients, that means hundreds of medical procedures have had to be postponed or rescheduled.

      This protest is organized by workers and their union, AFSCME Local 3299, which represents about 25,000 employees in the UC system.

      They held a similar demonstration and picket line in February. These workers have been in contract negotiations with UC representatives for more than a year with no agreement.

      A UC spokesperson said they are offering a 3 percent pay raise over four years and that anything more than that is unreasonable. The pay raises the union has asked for, according to UC, equal around 20 percent a year.

      The union countered that they are the lowest paid in the system and that UC wants to raise the retirement age as well as their health care premiums.

      The union says at issue is not only increased wages. But the union wants a guarantee from the UC system that those food service, security, and custodial jobs won’t be outsourced to an outside company that would pay minimum wage with little to no benefits.

      The lateral comparisons are not there. If the MB’s and the underwriters, the title and closing people all stand in solidarity with appraisers, sure. We’re 10 years in with all of the negatives that crush other industries in a mere few years time. Some appraisers whom vainly try to be so positive all the time, they’re just tools whom wear blindfolds so as not to accidentally wake up to the realities of how many unethical practices they engage in, and go on all around them. For those in the appraisal industry without licenses, god help them for not even understanding what ethic is in the first place. We don’t need a boycott, we need to demand every single person involved with appraisal and order distribution be required to have licenses themselves. Hint, hint.

      • A 3% pay raise spread over a four year period? Seriously? The feds usually get 3% per year. More importantly is the UC systems head guys paycheck and its usual annual pay increases that are one of the biggest causes of increasing tuition. More than a 1/4 million per year is too much for ANY public servant, including the President of the United States. NO PUBLIC servant other than a surgeon should earn over $150k a year!

        I know – that wasn’t the point of the post but bad faith negotiations really trip my trigger. How about the Chancellor of the UC system limiting his raise to 3% over 4 years?

        Anyway Baggs, your correlation is on point. Outsourcing and low fees do NOT make for any degree of integrity of process when it comes to real estate appraisal. Thank MISMO, FNMA, and TAF for ALL of the current appraisal ‘problems’. Even above REVAA.

        • Baggins Baggins says:

          The article was worth a little copy and cut. They’re worried about outsourcing and low wages. They’d make it exactly 2 seconds in real estate. The behavior tolerated in the appraisal industry is clearly recognized as unethical, irresponsible, and non-tolerable behavior in many other major industries. On the educational and medical side such behavior is worthy of strike. In appraisal, such behavior is worthy of valuation visionary and top company awards and other such nonsense.

          We’re treated as less than human by amc companies, lenders distribution department people whom can’t be bothered to hire qualified persons. It’s just not fair how evil the distribution of appraisal systems have become due to separation from loan production rules. We need to separate the consumer from the mortgage broker, that’s always were the problem, if one was to exist, is most likely to surface.

          The appraiser’s position was a check and balance in the simple triangle, consumer, lender, and appraiser trifecta. Now that we’re out of the picture, lenders can work consumers over without any fear of negative consequences. They call their distribution minions to do the dirty work, and they do it without even understanding they’re being unethical. The ‘value’ of hiring under qualified staff. It was all so much simpler when the appraiser kept the mortgage banker honest, directly, right then and there, engagement forged between two licensed professionals. Tom and Jerry managers, and dumb and dumber distribution people had nothing to do with it.

          • Baggs, The distribution side already has laws requiring that they assure the competency of appraisers. ASC holds the lenders accountable.

            Admittedly, the Federal Regulators are DOING NOTHING to assure that requirement is met. Passing more laws or regulations that will also be left unenforced isn’t the solution.

            Maybe we ALL need to start filing formal complaints against the lenders that use Blast ordering AMCs and others where it is clear no consideration beyond price and turn time was the determining factor?

      • Avatar Margot Ferguson says:

        “Some appraisers whom vainly try to be so positive all the time, they’re just tools whom wear blindfolds so as not to accidentally wake up to the realities of how….. ”

        “Who” not “whom”. Why do so many folks think that the latter needs to be swapped for the former in every instance? Kind of like “I” and “me.” Yes, using the word “me” is sometimes correct.

        The gist of your letter (and of several others in this thread) is, however, spot on. I am a very recently retired, old appraiser who has seen it all. To all of you who are still there, in the trenches day in and day out, my hat is off to you. “They” have been predicting the end of appraisal as long as I can remember (late eighties.) Here’s hoping that the value of what appraisers do remains clear enough to the major players and to consumers that 30 years from now appraisal services will still be an integral part of the business. Just remember, you are the last vestige of objectivity and for that you should all be proud.

  6. Avatar Tyler says:

    Some banks, even though there is a PIW, still require a full appraisal. Also, there is the possibility that since the appraisal is ordered so early in the process – the PIW might be missed altogether by the loan officer/processor because the PIW is buried in the Fannie/Freddie response. Furthermore, you’d be surprised how many people in the mortgage business do not know how to fully understand/read those responses “IMO”. Cheers.

    • ALL federally regulated banks should be ordering appraisals. You may want to recheck your own internal processes if you think appraisals are ever ordered ‘early in the process’. If people in the mortgage business don’t know how to read relevant communications from major players, then they should either be trained, or sent back to work at Burger King. Maybe there are too many unlicensed participants acting as “loan officers” these days.

      • Avatar Tyler says:

        Mike: I agree with you. Although I no longer work in mortgage lending, I can tell you that the vast majority of the folks I worked beside were competent individuals. I cannot speak for the rest of the country. The bottom line is that reliance on automated valuations and data analytics is concerning. There is no substitute for a licensed appraiser walking through a property. The data mining and automation is something that can be manipulated on a grand scale, by people with potentially damaging intentions. As a consumer, I would not be comfortable with my lender telling me the appraisal has been waived because Freddie Mac’s HVE is within a certain threshold. Maybe others with less knowledge of the day-to-day industry would be indifferent but I am paying for a service (even though the bank is the client) to give me an honest opinion on whether I am overpaying for the property. Why “fix” something that is not broken?


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PIW’s Get National Attention

by VaCAP Board time to read: 2 min