Bridging The Gap
- What Is My Incentive? - September 20, 2022
- Fraud Facilitating Misleading GSE Products - February 18, 2022
- HUD Dismisses Claims Alleging Racism - December 2, 2021
I’m an appraiser. I look at all proposed financial reform legislation in terms of what it does for, or to appraisers. Not whether it was proposed by a red or a blue.
Dear AppraisersBlogs readers and fellow appraisers;
Anyone who has read my past posts is aware I happen to be a Republican Union Organizer. Usually it isn’t an issue because I try to remain non partisan in my posts and to avoid offensive partisan rhetoric, while promoting appraisers rights; the American Guild of Appraisers, and being critical of bad lending policy and bad appraisal practices.
I have also attempted for several years to bridge the gap that exists between traditional unions and self-employed independent professionals. I’ve always felt honesty is a better tool than blind adherence to dogma. This is an effort to further bridge that gap.
I think the following is too important not to be presented, though I must offer my sincerest apologies to all for the words and phrases I highlighted in red.
The unnecessary, offensive / insulting and partisan rhetoric are exactly why so much of unions positive actions and messages get lost. They do not persuade anyone with an open mind. They close minds that might otherwise be open. It was this exact kind of offensive rhetoric that caused me along with several other tax volunteer experts to resign from being delegates to our local Congress members for AARP; and for me to also resign from the volunteers program itself between IRS-AARP VITA/TCE after two years.
To all the independent voters and my fellow Republicans (and moderate Democrats), I again apologize for the gratuitous insults and ask you to look past them to the substantive content. For my part I’ll ask my union leadership to stop shooting us in our own foot! Just the facts please. Save the hyperbole.
It’s no secret that Dodd Frank was poorly written legislation. For instance, it included provisions requiring reasonable and customary fees to be paid to appraisers, but it lacked any enforcement provision to assure this happened. We all know the result.
The same holds true for appraiser independence requirements (A.I.R.). There is virtually no reasonable mechanism for enforcement. On the contrary, other provisions of the bill provided an inducement for unethical entities (Wells Fargo for instance) to hide behind the requirement to ‘report bad appraisals’ while their own actions violated AIR by their ongoing practice of appraisal shopping to hit value both through their former RELS, and currently contracted CoreLogic AMCs.
For appraisers, these reasons alone should be enough to be upset with Dodd Frank and to seek necessary revisions. Our issue should be ‘what needs to be done’ rather than let’s all oppose anything that’s proposed to be done.
It’s no secret that the DNC blindly supports DF while the GOP blindly opposes it for largely partisan purposes. Naming legislation after two legislators that many if not most Americans hold mostly responsible for the past recession was not brilliant strategy. It was more like a middle finger for America than meaningful consumer protection.
It is undeniably true that other provisions of DF need to be revised as well. The biggest complaint we all hear is that small, local banks are unduly burdened by onerous regulatory compliance requirements that have driven many out of business.
It’s a fair enough concern on the surface though it may lose some of it’s validity when we consider that these same small lenders are making more government insured or GSE assured loans than their traditional niche portfolio loans where they carry a greater portion of risk. It’s a two-way street and requires bipartisan solutions.
My party has never liked the concept of the Consumer Finance Protection Bureau (CFPB). Partly because of who the motivator behind it was and her often voiced left of center positions. I get that.
Having said that, I would be remiss if I didn’t point out that this agency was and still is needed to “keep (presumed) honest people honest”, and to serve as a warning to those that aren’t. It’s the choice of last resort or last chance for many issues.
CFPB is the ONLY place an appraiser or taxpayer / consumer can file a complaint agaisnt a lender that is not otherwise supervised directly by one of the FFIEC agencies.
Does it also over reach? Probably. Why not deal with its more onerous policies rather than eliminating all protection it provides? (Where DID that horrific TRID originate, anyway?)
As appraisers we would most likely have had to seek Rep. Hensarling’s support for any necessary new laws to preserve the integrity of the appraisal process and to fix broken legislation. Not because of political philosophy but because of simple math.
That task has become slightly more difficult. It wasn’t an easy goal to begin with so hopefully merely being more difficult won’t prove to be a fatal flaw.
Let me ask readers to consider the following letter sent to me by ALF-CIO on it’s own merit as if the gratuitous insults and ‘fighting words’ were omitted.
Then follow your conscience. If on balance you concur please click the link and add your name to the effort.
If you agree partially then please post below and explain what you would and would not support. Particularly if you are not Democrats but still have open minds to ideas that benefit all American Citizens.
Party affiliation should not be the metric used to decide what is good for our nation and what is not. We should all consider each issue on its merit rather than by who endorses it.
I’m an appraiser. I look at all proposed financial reform legislation in terms of what it does for, or to appraisers. Not whether it was proposed by a red or a blue.
Wall Street’s Washington cronies are trying to out-do themselves with their latest legislative proposal. Rep. Jeb Hensarling (R-Texas) has introduced a bill that would eviscerate critical financial regulations designed to restore balance to our rigged financial system. That bill, the Financial Choice Act, will soon get a vote on the floor of the House of Representatives—and we need your help to stop it.
The Choice Act aims to roll back many of the policies implemented after the 2008 financial crisis to protect working people from predatory lenders and prevent Wall Street from crashing the economy again. Once again, Rep. Hensarling and other extreme lawmakers are trying to hand more power over our communities to big banks, corporations and greedy CEOs.
Add your name now and tell Congress to protect consumers and the economy, not gut the rules that make our economy safer.
The Dodd-Frank Act was passed in 2010 to rein in predatory lending practices and excessive risk-taking on Wall Street—practices that led to the financial collapse that caused millions of everyday Americans to lose their jobs, homes and retirement savings less than a decade ago.
If this bill is passed, many of the most important policies put in place under Dodd-Frank will go down the drain.
This bill is like “Christmas in June” for financial institutions of all types. The legislation opens the doors, once again, to excessive borrowing and risky practices by too-big-to-fail banks. It would make it easier for private equity funds to manipulate the financial system and exploit investors, mortgage lenders selling predatory subprime mortgages, and payday lenders pushing products that trap consumers in a cycle of ever-increasing interest payments. It also discourages transparency by empowering greedy corporate CEOs to keep their companies’ CEO-to-worker pay ratios a secret and making it more difficult for shareholders to submit proposals for consideration at annual meetings.
This is—as our friends at Americans for Financial Reform would put it—an astonishingly terrible idea. We need to tell Congress to oppose this bill right now, before it has a chance to pick up any more momentum.
Add your name now and tell Congress to protect regulations that guard working people against a rigged financial system.
Heather Slavkin Corzo
Director, Office of Investment, AFL-CIO
I’m curious to see if we can post solutions that are more helpful and or more informative – I had envisioned going to Rep Hensarling with specifics related to appraisers and appraisals. I suspect many posters will remind my union that it was a democrat from New York that single handedly destroyed America’s professional appraiser infrastructure with HVCC. Reminder not needed. All appraisers know how bad HVCC was.
Related, summary of bill. There is a lot to unpack there.
H.R.10 – Financial CHOICE Act of 2017
Financial CHOICE Act
Reading the (complete text of floor arguments) on both sides they cant get past the partisan rhetoric. It’s too bad because the good provisions of the old and new won’t get fair hearing on their own merit. They ‘ll be buried under obfuscation and outright lies (both sides).
Oh my, there is just so much to read. Any chance we can somehow get an appraisal fee provision added at this late stage? (per below comments). Was there any mention of reg z and C&R? What will change for us?
Baggs, probably less recourse; lowered standard or no standard alternative products. Need to look into mechanics of how FIBA will work. We need our OWN appraisal regulation / Act passed. Stand alone Bill.
I added my name to the list in support of my Guild’s ultimate parent union but in comments section I urged sensible bipartisan solutions and in particular not undermining the appraisal process. I further urged reaching out to professional appraisal associations and Guilds rather than only commercial interests (meant Guild and coalitions but my wording may have been off – it’s a small text box allowed for extra comments in the petition.) Regrettably I think we ALL missed the window of opportunity to influence this legislation.
Hopefully we can ALL do better on the ‘soon to become’ an issue FHFA Working Paper. We are out in front of that issue now and a few related follow up concerns.
Dudd-Frank + A.I.R. = C.L.U.S.T.E.R.
There are several lines which caught my eye;
The bill repeals the FDIC’s authority, under the Dodd-Frank Act, to guarantee bank debt during times of severe economic distress.
Each agency must develop a process to allow impacted parties within the private sector to provide input with respect to the development of regulatory proposals containing significant federal mandates.
Subtitle A–Separation of Powers and Liberty Enhancements / (Sec. 717) The bill repeals provisions of the Consumer Financial Protection Act that require courts to defer to determinations by the agency (as converted from the CFPB by this subtitle of the bill) regarding the meaning or interpretation of federal consumer financial law. (C&R penalties possibly a reality then?)
I don’t know, I read through it, and did not once get mention of reg z, C&R, or appraisers. CFPB really sank this industry with the fictitious safe harbor provisions on C&R. What will happen with that? Can we please get a simple rule that the appraisAL fee must go 100% to the appraisER, and all other parties must have separated fee and fee disclosure? ie; the amc’s, the panel managers and staff, their tech people, just everyone who’s funded from the appraisal fee these days. The free market will sort it all out, if we can get everyone’s hands out of the cookie jar. We’ve got a cost offloading problem, because it seems the entirety of order management costs was all offloaded exclusively on to the appraisal fee! At this point it’s a verifiable fact that with many distributors, the majority of the appraisal fee does not go to the appraisal, or towards what the appraisal should represent, an application of check and balance. Rather, with many distributors, a portion or even the majority of the appraisal fee is distributed to tech organizations, data organizations, management organizations, and somewhere at the end of the line, if there is anything left, the appraiser actually gets some of the appraisal fee.
We cant keep trying piecemeal solutions to appraisal issues. We were ALL too slow to get decent items inserted into Choice. Its also too partisan. We’d have been as divided as the legislators are for similar reasons. We MAY have a fair shot at getting it amended downstream though.
(1) let’s stop the AVM/hybrid/evaluation end run first
(2) Get control of the profession back again from states and TAF. TAF is NOT a friend to appraisers or professional appraisal practices. They are riding the fence with their feet in both camps AND willing to change basic principles to remain in existence
(3) In over 29 years they STILL haven’t gotten USPAP right? THEY have allowed trust to be eroded by not standing up to abuses and merely offering restated interpretations of USPAP leading users to think all the crap they are promoting is ok because TAF has conditionally said that technically in can be (but only with provisions no one will be allowed to follow for fees & time allowed /offered).
Our biggest future concern is CECL as it takes predictictive valuation beyond the scope and education of the typical appraisal and appraiser. The bill requires understanding future value 3-5-7 years out for the life of the loan and forces analytics to be used beyond the 1004.
Michelle the biggest problem is that in the use of the terms “appraisal and appraiser” right now we no longer can tell if a person is referring to a Real Estate Appraiser or to a Business Valuation expert. In the latter, are they they speaking as a BV expert or a CPA? When TAF blurred the distinctions they created greater rather than less confusion.
The life of the loan has absolutely nothing to do with the market value of the property today. Nothing. DCF is rarely used (legitimately anyway) for SFR appraisals (you cited 1004’s so my assumption is we are talking about SFRs). Market value is at its core a cash or cash equivalency (to the seller) or typical financing terms comparable thereto. Lender returns or expectations have indirect influence on value only to the extent that financing is or is not available, and at what rates. Knowing return expectations won’t say whether a subject is worth $225,000 or $237,500 today.
Lets call “Predictive Valuation” exactly what it is. Bullshit. Blue smoke and chicken bones analysis counched within an aura of math and advanced scientific study and manipulation of statistics that starts off with requiring the personal opinion of the practitioner as to what data to scrub, adjust or eliminate.
The “science based” study of market adjustment starts off with the premise that THEN it is ok for personal experience and opinion to be used to ‘clean up the data’, while personal experience of an appraiser is dismissed out of hand. When economists can accurately forecast all details of the national economy 3, 5 or 7 years out I’ll open my mind a bit more. So far they can’t even truthfully tell us with 20/20 accuracy what happened in the past let alone what will happen in the future.
Michelle, respectfully to you, when ‘predictive valuation’ goes beyond the scope of education and ability of the typical appraiser I will welcome the change. Because then I can focus ALL my attention on contacting consumers that have been manipulated and lied to about LTVs (hence rates, & all related disclosures); their property value and a host of other issues and providing much higher cost EW services for them in court.
The premise is the market value today has little to do with the overall life of the loan and that risk needs to be looked at along the way. If you studied it for a basic understanding, you would see that it comes into effect soon enough that calling what it requires as “bullshit” is not very encouraging or inspiring the profession to say the least. This is a new accounting or auditing provision that moves the valuation cheese to a new dept.with most lenders and with that, a lot of other changes may happen. Look down and forward for direction instead of up from the weeds and backwards.
Michelle you are aware are you not that this is a REAL ESTATE appraisers blog?
Neither FIRREA nor USPAP address imagined life of loan issues or ‘value added’ concepts. If YOU look at an ordinary appraisal assignment it doesn’t ask what the value of the security will be in the future. We leave that to the fortune tellers and other economists that so consistently predict major economic national disasters in time to prevent them. Some, though not most have even achieved 20/20 hindsight!
Fortune telling is the realm of BV analysts or accounting theoreticians and as it is applied to individual Real Estate (which is what WE appraise) I have not in thirty + years seen one instance when it was anything other than …wait for it…”BULLSHIT!”
Maybe a little more common sense and willingness to call out when the Emperor is wearing no clothes would eliminate a lot of the misdirection and deception being bandied about by special interests these days.
What I do notice as having been a common thread over the past thirty +- years is that people trying to convince me that water aimed at my leg by some stray canine is really rainfall fall back on velvet gloved criticism in the form of meaningless euphemisms. Those who resist are luddites. Backwards – rather than progressive. Stuck in the past. Lacking education. Simple.
“This is a new accounting or auditing provision that moves the valuation cheese to a new dept. with most lenders and with that, a lot of other changes may happen. Look down and forward for direction instead of up from the weeds and backwards” No Michelle. It’s a pile of steaming pony loaf!