Fix It Before Replacing It!
Yesterday was the National Association of Realtors Real Property Valuation Forum: Rethinking Real Estate Valuations: Alternatives to Traditional Appraisals.
First, VaCAP was well represented with 8 members present from all over the state. There were many of our Network colleagues there as well from all over the country.
Thank you for taking the time out of your busy schedules to attend.
The forum was moderated by Michelle Bradley and the panelist consists of Julie Jones, Credit Risk Analyst with Fannie Mae, Lima Ekram, Assistant Vice President Moody’s Investment Service, Ernie Durbin, Chief Valuation Officer, Clarocity and John Russell, ASA Senior Director of Government Relations and Business Development.
Each Panelist spoke briefly on various topics:
Julie Jones: She updated the attendees on PIWs and gave some background on the program. Some key take a-ways, PIWs are only issued if there is a prior appraisal on file and there are no flags/ errors on that prior appraisal. PIWs account for less than 12% of total loan volume at Fannie Mae. If an appraisal on file at Fannie Mae is less than 120 days old, the appraisal must be used and no waiver is issued. PIWs are not issued if there is an appraisal contingency in the sales contract.
Fannie Mae is aware there are a lot of misuses of the tools they provide and many issues revolve around the lenders and amcs. They are attempting more transparency to appraisers of the actual policies and requirements. A new page has been added to their website just for appraisers:
https://www.fanniemae.com/singlefamily/appraisers
This page has a lot of information and a direct link to contact Fannie Mae on any issue. It is suggested appraisers utilize this link to express concerns over anything appraisal related. This would include any issues with appraisal management companies associated with a particular appraisal.
Ernie Durbin: His presentation revolved around terminology and the misconception around it. He took us back to 2006 when the Scope of Work Rule was implemented into USPAP and the Departure Rule was removed. He stated all the products being offered are appraisals and just have a different scope of work than a traditional 1004. He also reminded those in attendance no form is USPAP compliant: The appraiser is USPAP compliant. The key take way from his presentation, the ultimate responsibility lies on the appraiser to determine if the product being offered has the appropriate scope of work for the property.
Lima Ekram: Lima discussed the analysis being done at Moody’s on the valuation products being used in today’s loan pools. The pros and cons of each and the risk involved with each. Moody’s has concerns over the vast differences in the models for AVMs and other products that use big data and the accuracy / source of the data. There is no standardization between the products and a greater risk to investors exists as a result. Moody’s has an obligation to their investors to report the risks associated with each pool. Lima pointed out that what Moody’s is seeing is familiar to the build up before the crash and investors are taking notice.
John Russell: John’s presentation was a bit different approach. Fix what is broken before replacing the product. Appraisers are talented professionals that know how to take mass amounts of data, filter through it, analyze and make sense of it all. Utilize the talents of the 70,000 plus experienced, licensed professionals and don’t short change the consumer.
Somewhere down the line more emphasis is placed on pictures of running water from a kitchen faucet that the true reason for the appraisal
John also touched on the responsibility agents and brokers have to their client. If a PIW or product less than a traditional appraisal is used, protect the interest of your client and advise them of the short comings of the product and the risk associated with them. Appraisers, utilize this as a revenue stream for more private business.
John received applause during his presentation and a standing ovation when he was finished!
VaCAP thanks all the Panelist and members of Real Property Valuation Committee for this informative forum.
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First step to fixing the problem, require all AMC’s to operate under a Cost Plus model.
Second step allow the use of third party comp photos if they are available and if they can be verified to be accurate. Sometimes this is not possible like for new construction for example but this would really save time and reduce cost when good and accurate photos are available online. It makes absolutely no sense to allow a third-party inspector of the subject and not allow it for the comparable sales. None I tell you! None!
Its not even a USPAP requirement to take photos of your comps only an AMC and often a lender requirement. The lenders and AMC’s drag down appraisers so they can invent a model that no longer needs the appraiser. Just like Zillow attempting to replace realtors, lenders and especially AMC’s want the whole piece of the pie. Corporate America is constantly at work trying to swallow the American dream
Thanks to everyone who are using common sense to fight for not only our profession but in the end the consumer
Those that are given the opportunity have been taking stabs at fixing it throughout my almost 40 year career. They have generally made it worse in their attempts to fix it, referencing FIRREA, USPAP and my personal favorite, the MC addendum which provides negative information in most cases. Would any of us be working in this field if there were forty years of failure on our resumes? The lenders continue to pressure appraisers with “new” and “better” ways for us to do our job while what they really want if for us to be gone. Why fix it before replacing it? Maybe it is time to throw the baby out with the bath water.
MC form is the most ridiculous form. Most of the time it’s misleading. Instead of making appraisers do their job, they create a form that makes the job even harder. I end up saying, “the MC form says ” but here is the reality.
Agree Roy…that “baby” by the way also includes TAF and the entire MISMO organizations influence, coupled with those conspiring with FNMA to sidestep appraiser’s self identified professional standards with more flexible ones that accommodate whatever fad-winds are blowing at any given time.
FIRREA has now failed, TAF has failed and state regulators have proven themselves to be a combination of the incapable and unwilling in terms of credible uniform enforcement.
And the ratings organizations are apparently inattentive to the brand new risk factors, that’s why I posted that one below. I can hardly keep up with everything new I’m learning here in the past few months. Have a good one.
Can someone (with much more intelligence) please explain what is meant in the context of the sentence “Somewhere down the line more emphasis is placed on pictures of running water from a kitchen faucet that the true reason for the appraisal”
He is stating that some AMC’s and lenders are more concerned with seeing pictures verifying that the water is running than the appraisers value of the property. I loved that he threw that in there because its true. Ive said it for a long time. Shows that the people reading our reports are often not qualified to analyze and underwrite an appraisal.
Low information reviewers, and in many instances, even lower information panel managers. Your resume is worthless because the non licensed manager will typically only care about fee or turn time, or both.
Or the co detectors…
Taunya Richards you beat me to it. Dealing with a client holding up a loan because they want a picture of a smoke detector.
You should always include a photo of the co2 the regular fire alarm, utility items like manifolds, hot water heater, furnace, gas meter, and water meter top. Just good all around filler which helps depict the utility of the home. Welcome to appraisal in 2018, they already have a value before the appraiser shows up.
Generally right, but a bit over the top, I would say. I know of no lender that requires pictures of all that. By the way, there are no Co2 alarms in the house. They are carbon monoxide alarms. If I shoot one of ’em, the furnace and water tank as well as the plumbing array if it a boiler / in floor heating that is fine with my lenders. Why shoot the gas meter? Do you shoot the wires coming to the house if the heat is FAE or Bsbrd? Lets not invent stuff that isn’t needed. We are busy enough with busy work on each and every assignment.
You got me on scientific language, that’s why I spell it out long form in reports though. The meters are helpful items, think nationally and how reports may be packaged at the portfolio level. Big difference between municipal and private water and well areas, Daniel san. If there is a detail which represents difference or even common character to the area, yep, I cover it. Just tried to solicit an amc today, they got fired before they even sent me the first bid request, waste of time. Tried to entice me to use their internal typing services overseas, 10 dollars a report. My response; (I understand), “No, I don’t think you do. My signature. My rules. No exceptions. Typing services is like the blind leading the stupid, we’ll pick this up at a later time.” Obviously they’re not reading this website or they’d have at least a partial clue.
Roy, respectfully multi unit properties (2-4) should have gas meters shot if separate, as it has a big impact on net operating income. Same with separate water meters. The rationale is no different than taking a picture of a boiler or water heater being double strapped…though of course a client could take our word for it. We shouldn’t have to take pictures of any of this garbage unless we think there is something noteworthy about it. With digital imagery I don’t really mind because it helps job my memory or clarify my notes, but it should not be mandated to the point of holding up a loan. Do all these things get photographed in a third party inspection hybrid?
Don’t forget the photo of the mailbox with the street address visible… Because the lender wants to know if I showed up at the wrong property and convinced the owners to let me inspect.
I had that happen on an reo once, the data entry person forgot to put in the S identifier and there was an identical property on the North side of the same block, same address, same home type, same zip. Don’t knock it until it’s happened to you. Luckily they were not home and my report of no access cleared things up when my key did not work. Dodged the bullet that time.
They don’t want the liability of someone dying because there was no C/O detector, just covering up their legal asses
Matt, I got stipped a few months back, need the left side as well as the right side photo. And they used to say all you need is a few photos. 100 photos or there abouts, use the 15 photo pages after a few feature 6 by’s, call it a day. Photos are cheap.
Tim, it can seem that way. It’s good to understand the challenges of national servicing. If something becomes a law somewhere, it’s easier to implement that as a blanket policy everywhere. Bureaucracy in lending, you’re in it now. CO law requiring the alarms for all sales for all properties attached to a gas or possible source of exhausting fumes. Simply stated; if you have a hot wtr htr, frnc, boiler, or have gla attached to a parking structure, gotta have one, so pretty much everyone. Of course they don’t count the exact details, so just a photo in the report always suffices.
https://www.colorado.gov/pacific/sites/default/files/HHW_CSA_FAQ-Carbon-Monoxide-Alarm%20Law-Colorado-House-Bill-1091.pdf
I took it as a reference to scope creep by AMC’s.
yep it is no doubt
Having attending this event from NAR Real Property Valuation Forum this article is great! Thank you for coming out, I was so happy to meet so many of my fellow coalition members that I have been on many phone calls with! Shout out to Beth Graham and Jamie Moore who were the REALTOR/appraiser chair and vice chair.
Rebecca Jones
2018 NAR Real Property Valuation Chair
I uncovered in a series of articles I posted yesterday here;
http://appraisersblogs.com/multi-million-dollar-garbage-technology-vs-appraisers#comment-21283
This is very interesting, the amc’s are branching out and seeking to overtake other positions and industries as well, a larger picture game.
There will be a time not very far from now when everyone from the title agents to the realtors, they’ll say, we should have stood up for those appraisers. Kiss your favorite title people good by, they’re next. Mortgage brokers are not very far apart either. People need to understand one primary goal of these larger cleverly integrated companies is to eliminate all ground level representatives so they can manage the entire process top to bottom. The consumer won’t know what hit them.
Baggs the people (sales reps) at title cos may disappear but not the process itself. Then again, since I’ve never heard of a title claim actually being paid without the policy holder getting an attorney, some folks may be questioning its benefits to cost relationship…not unlike hybrids in lieu or real appraisals.
IF municipalities/ counties started putting ALL recordings associated with a property into an online file associated with that property and had surveys after any improvements (footprint) changes-then I can see scenarios where title insurance could become less necessary.
Moody’s is going to love this story….. Voice of appraisal episode 200. Proof that lenders are abusing the property waiver to push deals through at inflated values. Minute 17.
Pairatrice, or just the one? I double checked and my spiritual advisor assured me listening to the VoA Cult would not violate either 1st OR 2nd Commandments.
Great broadcast! Congrats on 200 shows. I always enjoy speaking with or listening to Pat Turner.
One of the things few people are aware of is that extremely few (if any) appraisals for less than sale price or desired refinance transaction amounts are processed (uploaded to CU) by the AMC before they are shown to the correspondent “loan officers” (loan brokers employees).
The new ‘low’ appraisal will never get entered into the database to begin with if the loan originators don’t want it to be. IF it were, then automatically a PIW would not be allowed per FNMA guidelines. PIWs may NOT be offered where a current appraisal exists.
So despite ALL the efforts, pretense and dog and pony shows about appraiser independence, a process has been officially adopted that expands on and promotes existing loopholes. Here are the options available to the commissioned loan agents now:
1. Don’t permit the appraisal to be uploaded for CU or an SSR, and try for a PIW (they will already have been notified whether one is available or not via Desktop Underwriter); or
2. Try to get the appraiser to raise the appraised value (not improper by itself),
3. Find a technical error in the report via desk review – even a non substantive one, that gives them credible ‘cover’ for shopping the appraisal around to a new, more malleable appraiser. Then get the new appraisal.
IF a PIW is authorized, FNMA TAKES THE LENDERS WORD FOR THE VALUE! Oh, they’ll cross check it via an AVM or faulty value models derived from their own flawed database but unless the lenders value is so far beyond reason, it won’t be flagged. Past experience of in-house FNMA reviewers I’ve spoken with suggests that flexible range amount is 10% to 15%+-. A $600,000 MV property reported to be worth $660,000 to even as much as $690,000 might not do more than raise an eyebrow…before being stamped “Approved”.
Thank you VaCAP for sharing. You guys ROCK!
Just renewed my E & O insurance and it always makes for a good time to reach out to current / past clients for a chat. One client (internet based, no self employed, owner occupied loans, mostly big down payments, etc.) who gave me +/-$20,000 worth of business in 2016, and +/-$15,000 in 2017, expressed to me that “loans they now open in CA use property inspection waivers (PIW) 75% of the time. The powers that be may say they use PIW’s 12% of the time, but history tells us (HVCC, appraiser hotline (not), Dodd Frank, C&R fees (not), etc.), they can’t be trusted.
Seek the truth.
Just awful, sidestepping what should be required regulatory process.
Fitch Ratings complete analysis, lots of gold in here… Annoying pdf download pop up, just take and open, it’s safe.
https://www.fitchratings.com/site/dam/investors/US-RMBS-Aggregator-Originator-Reviews.pdf
Oh wow, it posted in screen as an interactive doc, wild. Thought it would lead to a pop up download pdf file like how I found it. Well, that’s it, and like I said, lots of gold in there, and familiar names……
Look at FNMA and Wells Fargo ratings. Proof positive that either Fitch doesn’t know their ass from a hole in the wall, or their “ratings” are effectively meaningless.
“Ernie Durbin: His presentation revolved around terminology and the misconception around it. He took us back to 2006 when the Scope of Work Rule was implemented into USPAP and the Departure Rule was removed. He stated all the products being offered are appraisals and just have a different scope of work than a traditional 1004. He also reminded those in attendance no form is USPAP compliant: The appraiser is USPAP compliant.”
Someone please tell me again why I should consider anything Ernie says as being credible or pertinent? With his flippant dismissive reminder that the burden is ALWAYS on us to comply with USPAP, Ernie somehow conveys legitimacy to these “simply different scope” $25 to $125 “appraisals”?
I ‘assume’ he shaves without using of a mirror in the mornings. Otherwise how does he keeps from slapping himself for these kind of utterances?