Fraud Facilitating Misleading GSE Products

Michael Ford
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Catch-22 Fraud Facilitating Misleading GSE Products. 

I can and will decline to do any of these Catch-22 Fraud facilitating misleading products promoted by a GSE…

There are many legitimate times and reasons a desktop appraisal may be performed. In every single one of them, it is assignment specific based on the assignment specific needs of the client with a mutually agreed upon scope of work between the client and the appraiser.

They also include a scope of work decided upon and explained in the appraiser’s own words. Any relevant extraordinary assumptions and limiting conditions dictated by the nature and use of the assignment are able to be identified and explained. Such assignments may or may not be USPAP compliant. Many aren’t required to be.

The new desktops are all required to conform to USPAP… though the appraisers’ hands are tied as to how they achieve this in any reasonably economic business scenario.

Fannie Mae’s new desktop (like all bifurcated hybrids that came before it) is very different from private desktop assignments for clients that understand what they are and are not getting.

First of all, they are all pre-labeled as being USPAP compliant. Next, NO extraordinary assumptions or hypothetical conditions may be employed. ADDITIONAL limiting conditions can only be used as long as they do not conflict with Fannie Mae’s pre-approved one-size-fits-all limiting conditions.

Then there is the laughable requirement of an interior floor plan, complete with interior walls. Apparently, they misunderstand the concept of DESKTOP appraisal.

So, some third party has to be relied upon to go measure the interior. This is either an untrained owner or, a cheap, poorly trained third-party non-appraiser vendor.

Keep in mind that NO EXTRAORDINARY ASSUMPTION of accurate or competently completed interior representations can be employed. The appraiser is responsible for all content of the report including representations of the interior. Some past bifurcated formats have even gone so far as to say the appraiser deems the (unknown) inspector to be competent!

At best this means we are reliant upon (and liable for) an owner honestly and accurately reporting interior conditions and drawing a floor plan of all living areas. We report GLA as a stated fact (a specific amount). Traditionally we explain any variances between public records and observed conditions and why we conclude our own estimates to be essentially correct. Now we must cite that some third party is factually correct.

Keep in mind the further requirement that we must verify through credible, disinterested sources any information that is provided by parties with an interest in the transaction.

Such as GLA. Or interior condition. See where this is going yet?

All without the ability to limit our exposure based upon the limited scope of the assignment. That doesn’t even consider yet that all promoters are hyping these products as cheaper and unrealistically faster. Based on WHOSE analysis?

Since Fannie Mae has tied my hands as an appraiser by not permitting me to use logical, professional limiting conditions if I perform these, then I have ONE limiting condition left that they have no say in whatsoever.

I can and will decline to do any of these Catch-22 Fraud facilitating misleading products promoted by a GSE that was so inept that the government had to take over their control as a result of their last major fiasco in the first five to ten years of this millennia.

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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16 Responses

  1. Avatar noydb says:

    I absolutely and completely agree with the author. I refuse to put my professional and personal reputation at risk by accepting this type of assignment. There will always be poorly trained, hungry or unethical appraisers out that accept these types of assignments. Taking into consideration the unethical and irresponsible actions of the end user (FNMA), I too refuse to play in this sandbox.

    16
  2. Avatar CJK says:

    I have already removed desktops from my product list in Mercury Network and Appraisalport. I will also inform all of my direct lenders that I will not be doing any of them. I do not work for any AMC’s so I will not need to deal with them. FNMA is a joke, and I will not let them tell me how to run my business. If I can hold out for 3 more years, I will be done with all of this BS. 39 years ago my mentor told me that this day would come, I am happy that he retired years ago so he did not have to watch our profession be destroyed by dimwits.

    I am calling it now, when these properties end up as REOs the lenders, FNMA and your state board will be coming after you. The only real reason they keep us around is for our license and insurance. So, if skippy wants to do these reports for $100 make sure your E&O is up to date. You might want to call your insurance company to see if they will even cover you, if you are signing off on someone’s floorplan and photos. Remember they will be coming after the appraiser not the other person, have fun.

    11
  3. Avatar Jason T says:

    What about driving the comps ? Are we required to drive the comps on a desktop appraisal ?

    3
  4. Avatar dale bailey says:

    One thing is for sure, the paradigm will drastically change as those with the gold make the rules and those with the egg on their face for not banding together, 60,000 strong, will either go with the change or just go.

    And I will not do the Desktops at this point until they remove any and all liability associated with them.

    6
  5. Avatar EJ Brown says:

    43 days until retirement, counting down !

    7
  6. Avatar Pat Turner says:

    Wait until the realtors begin to get sued right along with us. Don’t forget their listings usually contain a sf!

    3
  7. Avatar Jodi Standaert says:

    What I find really ironic is that on one hand Fannie wants these desktop appraisals with dubious floor plans, while at the same time everybody must use the ANSI measurement standard by April 1. It really puts into question any leadership and/or forethought. I am not planning on accepting any desktop orders, but honestly if I was an older appraiser that was planning on getting out relatively soon and really didn’t want to be in the field anymore, and if the fee was reasonable then I might consider them. However, I don’t see how much time is really saved by not doing the physical inspection. They might want to pay less for a product that relies on a lot of assumptions, but I am not willing to get paid less for essentially the same amount of work and greater liability.

    2
  8. Avatar DAK says:

    Thank you, Mr Ford.

    Every Appraiser needs to read this if they are considering doing this type of desktop work .

    4
  9. Avatar Scott says:

    I wonder if the people they will hire know how to measure to ANSI standards.

    As mentioned by others, what happens when the appraised value is $25K short of contract? The realtor will say “the appraiser never set foot on the property.” Lawsuits for everyone.

    This is the death rattle of the appraisal profession, all in the name of lenders, banks, the NAR, et al getting their ‘valuations’ faster.

    3
  10. Avatar Jim says:

    Since under this program the appraiser no longer goes to the neighborhood how will the appraiser remain geographically competent? Who will drive by the comparable sales? I have not seen the criteria for the appraiser’s replacement in the home and neighborhood. Who are they? When the forms were changed in 2005 it seems we had more input.

    2
  11. Avatar John Pfeizer says:

    First of all, they are all pre-labeled as being USPAP compliant. Next, NO extraordinary assumptions or hypothetical conditions may be employed. ADDITIONAL limiting conditions can only be used as long as they do not conflict with Fannie Mae’s pre-approved one-size-fits-all limiting conditions.

    -the exact same thing as any other appraisal completed on a FNMA form, so nothing new here…

    Then there is the laughable requirement of an interior floor plan, complete with interior walls. Apparently, they misunderstand the concept of DESKTOP appraisal.

    -the appraiser is not required to create this, it is provided by the lender

    So, some third party has to be relied upon to go measure the interior. This is either an untrained owner or, a cheap, poorly trained third-party non-appraiser vendor.

    -the exact same thing as public records and MLS – cheap, poorly trained people supply the information you take as correct on every appraisal you have ever created

    Keep in mind that NO EXTRAORDINARY ASSUMPTION of accurate or competently completed interior representations can be employed. The appraiser is responsible for all content of the report including representations of the interior. Some past bifurcated formats have even gone so far as to say the appraiser deems the (unknown) inspector to be competent!

    -wrong! the appraiser is only responsible for their opinions and conclusions. if the data that lead to that was erroneous the appraiser cannot be held accountable for it.

    4
  12. Avatar Kenneth Yasinski says:

    I will not be accepting any of these BS appraisal (so-called) assignments.

    4
  13. Avatar Jaydee says:

    If you’re interest in committing suicide by being sued, winding up in court, loss of your E&O carrier. Please continue to do desktop “appraisals”. Thinning the herd comes to mind. I will not be doing this sort of “work”.

    8
  14. Avatar Jesse says:

    Given the lending industry’s reputation of blacklisting appraisers who “didn’t hit the number” – who will protect the third party inspectors who “refuse to hide the problems” in their reports? This is a massive step backward towards pre-2008 fraud levels.

    3
  15. Avatar Adele Lindquist says:

    My lenders already know that I will not be doing these. I still have not heard how this is going to save appraisers time!!!

    1

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Fraud Facilitating Misleading GSE Products

by Michael Ford time to read: 2 min
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