One Small Step for an Appraiser; One Giant Step for the Profession of Real Estate Appraising

On August 10, the Arizona Board of Appraisal dismissed the USPAP violation complaint filed by Chase Bank against John Dingeman on initial file review. Why is this newsworthy? Because it represents a major victory for appraisers everywhere. Dingeman, has been fighting strong arm tactics employed by Chase Bank in an attempt to force him to violate Client confidentiality by discussing details about an appraisal on a no-defunct loan that Chase acquired. Dingman took his fight right to the street starting a petition on Change.org and other outlets to share his story with fellow appraisers. We are happy to also report that Dingman, a founding member of the Coalition of Arizona Appraisers (COAA) and an active AGA member, received assistance through OPEIU coordinated discussions with the AFL-CIO relationship with Chase’s Union Privilege Representative in the weeks leading up to these most recent turn of events.

Opinions vary widely on this issue, but one thing is clear, appraisers are bound by USPAP and, client requirements, even when a user of the report doesn’t like it. Ironically, even Chase’s own appraisal requirements instruct that the appraiser is not to discuss the appraisal:

“Reporting of Values: During and upon completion of the appraisal, neither the value conclusion nor any other aspect of the valuation should be released to anyone other than JPMorgan Chase Bank’s appraisers.”

Pete Vidi, National President of the American Guild of Appraisers stated

“This has clearly been an attempt by Chase to circumvent due process and pressure appraiser to violate their professional standards. Additionally, the action by Chase is a clear example of “pressure” to the independence of the appraiser which is a violation of a number of federal statutes and regulations. This is a critical point that must be reversed by Chase. If this is allowed to stand future disagreements by appraisers will be treated by Chase in the same manner jeopardizing professional appraisers.”

Unfortunately, Chase did not wait for a board decision to put John on several “do-no-use” lists.

They did so at the same time they filed the complaint and all the while, harassing John into answering questions about the report. But yet Chase could not provide written authorization from the original client or a subpoena to allow the appraiser to be in compliance with USPAP if he were to respond to their questions.

It is widely speculated that Chase is trying to defend a repurchase claim on a bad loan for which this appraisal was used. It would appear that Chase failed to execute proper due diligence on the loan in question before acquiring it as certainly the cause of the repurchase is because the loan would have defaulted. One can only assume that Chase was hoping to gain information that is not in the report that would assist them. Two concerns immediately come to mind: if the information is not in the report, it is either not relevant to the opinion of value or, it is confidential.

Public Trust

Consider these statements in the argument of confidentiality of the appraisal report in the name of public trust:

• Suppose an appraiser shares with another an appraisal report – just to show them how beautiful the house is. The person viewing the report recognizes the expensive art and collectables in the house and takes note of the address. The person than commits burglary.
• Suppose and appraiser measured a home 500 square feet larger than public records (right or wrong). The appraiser provides the sketch along with the address to the assessor changes the square feet and raises the tax base of the property.
• Suppose the appraiser identifies an addition. The appraiser provides an address and shows photos of the addition to the building and planning department. The municipality then issues a fine to the homeowner and requires them to abate the addition.
• Suppose the appraiser discusses the assignment results with a real estate agent. The current deal of $200k falls through. The property is back on the market for $200k. The real estate agent makes an offer with a prospective buyer at $190k because they know that is what it appraised for.

The public trust is violated when an appraiser is COERCED into violating federal and state laws. How is the public trust violated? First, they believe that appraisers are regulated and have rules and laws to follow. If the rules and laws are not enforced than the public is harmed. Second, they have a right to believe that the reports remain confidential.

Certifications 21 & 23

There is a huge difference between “user” and “intended user”. ”Users” of our appraisals may confuse the two, but appraisers should not. “Intended User” has a specific meaning to appraisers and the term is very likely not readily understood by “users”. In the development of appraisals, the appraiser is obligated to attend to the appraisal requirements of “intended users”. One intended user is our client; we do not communicate with other identified intended users without the permission of the client. AND, it is the appraiser and no other who identifies Intended Users.

The “intended user” is identified at the time of the assignment, not after the report is completed. The mere fact that an entity or person (e.g., a borrower et al) comes into possession of an appraisal as a part of disclosure requirements or other, this does not make such an entity or person an “intended user”.

Increasing Repurchases

The events that trigger the situation Mr. Dingeman found himself in are certainly not unique. In news items published on August 16, there is more evidence of the growing surge of repurchase activities from Fannie Mae and Freddie Mac and the threat of more to come. FHFA has been quoted as saying on the matter “We’re coming”. On a separate but related note, CNN passes along a “no, really this time, seriously” promise that the Residential Mortgage Backed Securities (RMBS) working group, tasked with looking into securitization fraud as a part of President Obama’s Mortgage Fraud Task Force will soon make a major announcement.

A joint federal and state probe into mortgage-backed securities fraud is close to “significant action,” with a possible announcement in coming weeks or months, according to a source familiar with the probe.

Members of the Residential Mortgage Backed Securities working group, which includes attorneys from the Justice Department, the Securities and Exchange Commission and the New York Attorney’s General’s Office, declined to say who or what they’ve been investigating, citing the sensitive nature of ongoing investigations.

But officials at all those agencies say progress is underway. “Work is being done right now by state and federal working group members across the country on active investigations,” said Justice spokeswoman Adora Andy. “Although these complex cases can be time consuming and challenging, the resources, enthusiasm and organization brought by the members of the RMBS Working group have already resulted in substantial strides toward that goal.”

Borrower Copy of the Appraisal Report

The Consumer Financial Protection Bureau (CFPB) released Wednesday, August 15^th, a new proposed rule that would require mortgage lenders to provide home loan applicants with appraisal reports to determine how the value of a property was determined.

The CFPB proposed the rule in response to a provision of the Dodd-Frank Act that requires creditors to provide mortgage applicants with a copy of written appraisals and home value estimates.

The newly proposed rule would require that creditors inform applicants of their right to receive a free copy of appraisal reports and home estimates. Will this signal more customer service requirements for appraisers in the future? We at AGA stand committed to help preserve and protect the role of appraisers and are engaging with lawmakers and regulators on these very important issues.