Ulterior Motive in Raising De Minimus

Ulterior Motive in Raising De Minimus

…raising de minimus shenanigans being promoted…

Appraisers, a couple of weeks ago, I sent out a message about a Fee/TT quote conversation I had with an AMC clerk.

I received a number of responses from appraisers across this fruited plain who said often they will receive Fee/TT quote requests for the SAME property from MULTIPLE AMC’s. That corroborates stories I hear from appraisers I talk with at conferences.

The entire AMC situation is a giant time-wasting game that really doesn’t benefit the borrower at all, and least of all, appraisers. Lenders are the coaches in this game.

Another message I received caused the tiny little light bulb in my gray matter to explode in brilliance. The last paragraph is key to the raising de minimus shenanigans being promoted lately, backed by, you guessed it, lenders:

“What you may not see is that there are Lenders that also agree with your statements. However because of all the noise, miscommunication and regulatory interference everyone is starting to just give up and/or default to a legacy AMC model and then micromanage the process. Those same lenders will be the ones that jump on the De Minimus increase and eventually be insolvent at the next market crash.

The De Minimus level was raised to solve a regulator burden created by Regulation, they can’t roll it back so they just make the filter larger.

Prudent Lenders will still get appraisals, the real question is what kind of appraisal? One that complies with USPAP or one that Doesn’t, and who is going to prepare it. Evaluations still require a level of competency under that Regulatory requirement.

Keep in mind USPAP is a road map to a repurchase lawsuit, a non USPAP appraisal isn’t. Lenders are tired of paying legal expenses for USPAP experts to line up in a courtroom and argue if a report and the appraisers workfile complies or not.”

In other words, USPAP is an impediment to the financial bottom line for lenders. To avoid spending thousands to millions of dollars going after licensed appraisers over allegedly faulty appraisals, they are attempting to get the de minimus raised so that EVALUATIONS used to value properties won’t face the same investigative and legal issues.

  • EVALUATIONS do not have the same regulatory burden as appraiser’s USPAP compliant appraisals.
  • People who perform EVALUATIONS are not licensed by the states.
  • “Competency” is mentioned in the Agency regulations, but who monitors that?
  • EVALUATIONS may not cost as much as a regular appraisal.
  • People who do EVALUATIONS may not have the high level of property analysis training as appraisers have.
  • When faulty EVALUATIONS are produced, it will be up to the borrower to bring charges against the lender – which probably will happen less frequently than lenders going after appraisers.

So the lender will save money on legal defense.

The other issue here, that just dawned on me, is what do lenders call property valuation costs when a borrower applies for a mortgage loan? All lenders have a line item on loan requests for “appraisal cost.” Appraisal is a legal term that has a specific meaning. By regulation, the ‘appraisal cost’ must be identified to the borrower up front, after the time of application.

But if the lender is NOT actually going to use an APPRAISAL for property valuation (due to prospective value below the maximum de minimus amount), the fee should not be termed ‘appraisal cost.’

Secondly, due to differing production costs, will the fee charged the borrower be equally the same for both types of valuation reports, even though the EVALUATION probably costs less than an appraisal??  Is the lender pocketing the difference? (Pocketing any portion of the borrower paid fee for ‘appraisal’ didn’t use to be allowed; I’m not sure how that currently applies since Dodd-Frank was signed into law.)

USPAP was mandated by Congress to preserve public trust in the real property valuation process. EVALUATIONS subvert that obligation. (Yes, USPAP also applies to personal property.)

Dave Towne
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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20 Responses

  1. Matt McCormick on Facebook Matt McCormick on Facebook says:

    Love this blog btw. Keep up the great work

  2. Taunya Richards on Facebook Taunya Richards on Facebook says:

    I never realized or thought about this angle for raising the deminumus.

    As far as Dodd-Frank the lender still can’t pocket the difference. If a bank has an in-house AMC it is ran and regulated separately. What isn’t required is separation of the administration portion of what they charge as the appraiser fee. They should be required to disclose the AMC separately.

    • Avatar Louise Jeffers, SRA, AI-RRS says:

      Yes, simply stating ‘appraisal fee’ on the settlement sheet and NOT separating the fee to the appraiser and the fee to an AMC is still going on and it’s outrageous that it is permitted. Talk about misleading.

      • Avatar Ex appraiser says:

        How about the appraiser not ever knowing what the amc (pimp) made off our experience? I have heard on this blog that some amcs get a higher fee from “managing” our work, but there is no way to find out what they are getting for pimping us out to do work when we have the education, experience, must produce a USPAP report, hold insurance, get licensed and certified, buy MLS (which has faulty info we must verify), get continuing education and get put out of business by a computer? 

        Bank lobbyists have tons of money to influence congress and they are ripping off their borrowers, leaving them with a risky, high loan amount when they paid for a real appraisal, but the amc got most of the fee. Also, aren’t some of these amcs actually owned by lenders, so there again, it is all about the banks, then they sell the loans and really have no skin in the game, so when they go belly up again in the next engineered bailout, they’ll come crying to the American taxpayer that they need us to take the cost of their doing business in a way that is not ethical or sound, but then, they’ll still have their mansion on the beach with a nice view, and a pocket full of kryptonite to spend on caviar, while people get foreclosed and their house is bought by the investor class that rents it out to them for more than their former mortgage payment. 

        Welcome to the upside down world, where experts are worthless, so salesmen can profit off de-regulation. In today’s political world, it is suicide to even consider this as a future if one is a millennial looking for an honest day’s professional work. Better go study and learn welding, you could actually make a house payment with what one can earn doing work that gets you dirty and doesn’t require all that education and expense!

        • Baggins Baggins says:

          That’s awesome commentary and so true.

          The viral statement of the day for alternative career choices is; learn to code. Pretty funny actually. It remains to be seen how this bubble will pop, so fewer unstable loans, but it appears inflation and taxation can be counted on to scoot this line forward. The pressures are building and we’re seeing tightening of access, non qm pushes, and other ninja type loans with clever new rebranding. Where will it all lead, who knows?

          I’m just the appraiser and look at homes on an individual basis. I will however be much better equipped to make the most of it if the bottom falls out somehow. Grab up a few discounters off shorts, something will present. No regulation is possible to quell American consumers demand for debt and luxury though, I’m a believer that educating the youth on the dangers of debt and credit, the merits of liberty, being the most viable long term solution. “You don’t actually own it, until the last payment is made.” Sending bankers up the river is clearly over my position. As long as consumers keep consuming, there will be a lender to lend to them. One at a time, some of them escape mortgage lending and actually do own the land. The most inspirational home owners I have met are the ones whom are fast tracking to complete home ownership. ‘Fast tracking’ should be reserved for people in unusually strong positions and should not be extended to origination or even moderately leveraged positions. Most of us have seen enough reo homes to prove it.

  3. Avatar JW says:

    Great article

  4. Avatar JW says:

    AMC”s have guidelines under USPAP just like appraisers do. Is anyone looking at the changing terminology under USPAP for AMC’s. Very interesting some of the recent changes being adopted. The words appraiser and inspector are emphasized as words being stricken from AMC standards positioning AMCs to independently hire site inspectors for property loans

    • Taunya Richards on Facebook Taunya Richards on Facebook says:

      JW how is AMC have guidelines under USPAP? The only person who can comply with USPAP is an appraiser. An AMC is not an appraiser. They should have an understanding of USPAP and how an appraiser complies, but they, the lenders, the realtor the homeowner cannot and is NOT required to comply with USPAP.

      Furthermore, AMCs are required to hire appraisers as agents of the lender. Without the lender and the lender’s regulations, the AMCs do not have any need to hire. Doesn’t matter WHAT the AMC legislation says, the person hired for an appraisal must be an appraiser for federal-backed loans. Other loans can use evaluations as long as they have a physical inspection. There is nothing requiring that to be an appraiser.

      • Avatar JW says:

        I’m sorry but through your local state board and FIRREA not USPAP.

        Seek the truth state boards are adopting changes to AMC’s definitions and guidelines that a lot of appraisers probably aren’t aware of.

      • Avatar JW says:

        State boards are changing the very terminology you are talking about. The wording is being changed striking the word appraiser out of terms associated with inspection and appraisal

      • Avatar JW says:

        You should ask your state board for upcoming changes to AMC definitions and guidelines

        I’m trying to put my finger on the proposed changes in New Mexico but am unable to locate them right now

  5. Avatar Ex appraiser says:

    Raising the De Minimus for rural areas is a move to secure their votes in 2020 for trump and company; this is the same thing they are doing to release federal prisoners early, then restore their voting rights for felony offenders which is a lot since their failed practices of 3 strikes and racism locked up mass numbers of men, kept out of the job market for years……

    • Avatar JQ says:

      Are you sure it’s not a savvy maneuver by the underground lizard people to secure the economic collapse of the real estate market, thus creating a domino effect that will affect all markets across the economy, so precipitating chaos and giving them a stepping stone from which they can rise to rule? Geez

  6. Here is some dialogue from the film Jurassic Park. I’ve edited just a few words: http://bit.ly/2C7eAPo

    Malcolm- John, the kind of control you’re attempting is not possible. If there’s one thing the history of [lending] has taught us, it’s that [greed] will not be contained. [Greed] breaks free. Expands to new places and crashes through barriers. Painfully, perhaps even dangerously. But… there is is.

    Hammond- “there it is.”

    Wu- You’re implying that a group composed entirely of [Evaluations] will… fail?

    Malcolm- No, I’m simply saying that [greed]… uh, finds a way.

  7. Baggins Baggins says:

    For all the hype, a lender can never be absolutely in control whether a loan continues to perform or not. Professional services come complete with insurance coverage. Evaluation digital tools do not provide a similar coverage for lenders. The appraiser, in part, protects lenders from exposure to insolvency. The originators trying to maximize efficiency are not seeing the big picture.

  8. Dave, there are an awful lot of senior designated appraisers from a large and powerful appraiser educational & professional association that promote evaluations AND run companies that specialize in evals and ‘alternative’ appraisals.

    According to one commonly held belief (& especially themselves), they are the appraisal gurus of the nation. Ever stop to think WHY folks with so much truly professional backgrounds would undermine their peers within their own organization as well as the entire profession outside their group?

    I had a great laugh when I saw another advertisement for COMMERCIAL Automated appraisal services run by a couple of non-appraiser software whizzes with one such senior designated kamikaze.

    • Avatar Ex appraiser says:

      we should name names; we are out here struggling to survive, and we don’t know who are the people doing it to us, and ruining our profession. be specific people, then we can clean up our profession by exposing their role in the demise of our profession.

      • Baggins Baggins says:

        Oh, that’s covered regularly.  These blogs move swiftly so it’s important to now and then review older articles.

      • Ex, sometimes we cannot name names for legal reasons. Almost always, you will see the associated articles here or in 100% Appraisers FB group.

        My comments above were about a new company called Bowery Valuation (posted in 100% group) and if you google the company, go past the two non-appraisers owners and you’ll see name and title and designation of their Chief appraiser. Cushman Wakefield just gave them five million as seed money.

        Ex, those of us that dig away and pick away at the onion skin of appraisal problems have limited time. Most of us are unpaid volunteers and we too have to earn our living.

        • Baggins Baggins says:

          Somehow I’ve become the volunteer crack researcher. I’m good at speed reading and google research. Mainly for self interested reasons because I do not want to have to find a new career. It’s all or nothing these days. Appraisers should get off the sidelines.


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Ulterior Motive in Raising De Minimus

by Dave Towne time to read: 3 min