Bankers Concerned About Appraisals

Community Bankers Voice Their Concern About Real Estate Appraisal

Community bankers said appraisals are becoming a concern…

A survey was distributed by state banking regulatory agencies in April and remained open through July. More than 600 community bankers from across the U.S. lent their voices to this year’s survey, and those views are captured in this volume.

Responses are summarized and presented in following five major areas: Local market conditions; regulation and supervision; small business lending; management structure and succession planning; and technology. The responses provide context for the data gathered through the survey and highlight some of the dierent challenges faced by community banks in different states.

The real estate appraisal portions of the survey are summarized as follows:

Bankers in Arkansas said that areas in which bankers see regulatory expectations as unreasonable, or where regulations are outdated, include appraisals and evaluations of real estate.

Connecticut community bankers suggested areas for immediate relief include increasing Currency Transaction Reporting (CTR) filing thresholds from $10,000 to $20,000 and increasing the appraisal threshold from $250,000 to $500,000.

Idaho community bankers are concerned about obtaining evaluations for real estate, citing issues with expense, time commitments and the relative value of appraisals versus evaluations which, according to regulatory guidance, are not much different from each other.

Kansas bankers recommended increasing the dollar threshold requiring a certified appraisal. The current amount of $250,000, set in 1994, was said to be out-dated, as prices obviously have increased.

Massachusetts community bankers report that CRE loans remain a lower risk for most banks, but there has been an increased scrutiny of appraisals, particularly on speculative development.

North Carolina bankers said appraisals are also becoming a concern, as appraisers from outside the local market are overvaluing properties for other lenders, leading to additional competitive pressure.

Bankers in South Dakota said regulatory relief for community banks should include revision of appraisal thresholds and appraiser qualification requirements.

Click here to read the 2017 “Community Banking in the 21st Century”

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Provided as a service to licensed and registered Illinois appraisal professionals as well as Illinois course providers and users of appraisals. Illinois Appraiser Newsletters promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois. promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois.

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19 Responses

  1. Matthew Ellis on Facebook Matthew Ellis on Facebook says:

    Honestly do not understand why someone, who is making the largest investment in their lives, would let an institution talk them out of a professional appraisal.

  2. Avatar Long Time Residential Appraiser says:

    I agree with the Kansas bankers:

    “Kansas bankers recommended increasing the dollar threshold requiring a certified appraisal. The current amount of $250,000, set in 1994, was said to be out-dated, as prices obviously have increased.”

    It is out-dated and would give additional opportunity to certified residential appraiser to expand their business and get away from AMC work.

    • LTRA How does the passage of time have relevance to current risk in raising de minimis? In 1989 when the deminimus was first proposed it was scheduled to be set at $25,000…not $250,000. Just because HELOCS grew to be outrageously risky amounts, doesn’t mean the deminimus should continue to support that risk.

      That brings up your other point. How does raising the threshold for which no appraisal at all is needed, result in MORE work for certified appraisers,rather than less?

      lastly if the excuse of age is the sole criteria, then maybe the level at which a certified appraisal is needed should alsobe raised from $1,000,000 to $2,000,000? (JUST KIDDING ABA! Dont try to do it!

      My friend, please rethink your position and advocacy.

  3. Avatar B says:

    Gee I don’t know how about we get rid of AMC’s and miraculously the fees will be cut in half for appraisals like they used to be no but the big banks are making money off of the appraisals too aren’t they

  4. Avatar B says:

    Gee I don’t know how about we get rid of AMC’s and miraculously the fees will be cut in half for appraisals like they used to be no but the big banks are making money off of the appraisals too aren’t they I’ll even bet that the turn times at cut in half and we’ll have more appraisers doing mortgage appraisals because they won’t have to work for the AMC’s who take half their fees

  5. Frank Cox on Facebook Frank Cox on Facebook says:

    It all comes down to fees. The bankers want to make more many but don’t want to pay more for quality apraisals. If they pay appraisers from outside the market less money to appraise in an unfamiliar area both the client (paying the low fee) and the appraiser (no compentency) are to blame. You can’t define the appraisal industry by a small percentage of bad appraisers driven by greedy bankers! (just my 2 cents)

  6. Avatar Tim says:

    I agree, the AMC’s have single handedly ruined the appraisal profession. It is now only a business model, they have the say-so, control the fees & turn times and dictate sometimes 10 pages of requirements for the report. I never heard that a fee was too high until the AMC’s started riding the appraiser’s back and stealing their fees. How does the government let a mortgage company apply for a corporate license, make it a different name, BE AT THE SAME ADDRESS and then state it is a separate entity (with no conflict of interest) when the fees go into the same pockets in the end? I see how it now works. I know of one mortgage company that, if they NEVER closed one loan, they would still make a minimum of $2,000,000 just on the 30% or more fee that they take from appraisers and then try to pass it off as the appraiser’s fees. I think we should INSIST that the invoice be included in every report showing how little we get.

    • When we speak of AMCs many of us think “Rels size, or old Landsafe; or even Coester VMS, but its much worse today. The super monopoly comprised of the First American /CL family and affiliates is the biggest threat to sound appraisal polices today.

      That PACE PRO fraud-inducing document was prepared using ACI. I don’t think THAT one was done under Richard Heyn…though I could be wrong. Anyway, now that they own ACI and control Mercury and AppraisalPort who is to stop them or at least be able to make them comply with USPAP rather than circumvent it?

  7. Baggins Baggins says:

    Colorado bankers continue to struggle to keep up with technology and cybersecurity. In addition, low unemployment levels and a lack of training programs make it increasingly challenging to find good potential employees. Some bankers noted that they have shared services with their sister banks in an approach that has benefited both institutions, but talent acquisition is still generally problematic./
    Schnapp!  Finger on the pulse.  I’m going to seek a work from home position doing something related but different.

  8. Arkansas has vague concerns.

    Connecticut bankers want less regulation and oversight. They want the $250k threshold (that never should have been above $25k to begin with) doubled. Its taxpayer guaranteed money and that doesn’t require nearly as much oversight? Just because prices go up does not mean risk doesn’t go up too.

    Idaho thinks evaluations and appraisals “are not that much different from each other’.  When federal and state regulators completely abdicated their number one responsibility to protect the American Public by pretending ‘evaluations’ were somehow a legitimate valuation method separate from appraisals, this was an inevitable result.

    My interpretation of their lament is that they can’t know what an appraisal is supposed to be if they don’t know or see the difference between an evaluation and appraisal. One is a credibly supported opinion of value; and one isn’t. Again, this is purely regulators fault for allowing this deception to be legitimized to circumvent USPAP while maintaining the illusion of meaningful oversight. Sooner or later we’ll all be discussing why/iff verbally reported comp checks should be allowed in lieu of appraisals. That would REALLY speed up the appraisal process! Not to mention, reduce the cost.

    Kansas proves the need remedial classes on FIRREA requirements by their bankers. Having a threshold for certified vs non certified appraisers was never primarily because of the money involved (despite the perception and wording). It was ALWAYS about presumed complexity and risk. Just as the “R” part of C&R was never given serious attention; the ‘non complex appraisal’ requirement for completion by licensees versus certified appraisers was and still is rarely given any consideration. maybe they take the Wells Fargo approach that ‘Some waterfront property may be complex’. Apparently nothing else is.

    Massachusetts. NC and South Dakota all express valid concerns. These ranged from SDs issues shared by most appraisers (thresholds and qualifications); to North Carolina banks extremely serious claim that they are under increasing competitive pressure by out of area banks that bring in out of area appraisers to over value property! I thought RELS was out of business?

    IF bankers in NC have knowledge or a reasonable basis of belief that out of area appraisers are being brought in to over value property; then they should be turning those lenders, AMCs and appraisers in to their respective regulators. If they have real knowledge of such serious wrong doing and do not report it, then one has to wonder what their regulators are doing!

    The IDFPR Board has posted some excellent information in the past but this particular piece leaves the intent of their post unclear. Is Illinois concerned about what other states bankers think? Do they believe I should be?

  9. Bubba Jay / Retired Appraiser II Bubba Jay / Retired Appraiser II says:

    too funny.

    banks (and regulators), create a MASSIVE mess, and now “Community bankers said appraisals are becoming a concern…”?


    that bed has been made, now they can lay in it. (and apparently begin to realize there might be a problem).

  10. Avatar Nancy Burnett says:

    I have been in the Appraisal business for 27 years, long enough to see the cycle a couple of times. My market is rural and the $250,000 threshold cuts out almost all appraisals for some local lenders. Every Appraiser I know is tired of trying to make a rural property fit into an urban mold. The MC Appraisal Addendum Form and UAD Format are a waste of time here. Because of the filters set up for UAD report many do not want to do UAD assignments in our area. Every assignment can throw up a red flag just trying to do an honest days work. Throw in the AMC’s and you have a disaster work environment. I hardly work for any AMC’s and have found small bank clients that do not need the UAD Format or MC Addendum. A trainee coming in would have a hard time working here. The lack of good appraisal requirements got all of us in this situation with a some people inflating values, now they want to lower standards for being an appraiser so we can suffer this again. The Appraisers are not the problem in Rural America. Trying to make a square peg fit into a round hole so a computer can read a report is a problem. We also suffer from bad MLS data with basement area added in with above grade GLA, missing data and many courthouse records not online. I spend 2-3 days trying to get a UAD report completed to have Fannie tell me my adjustment per square foot is below the $25.00 per square foot minimum and some of my comps don’t match the square footage used by others even when I measured a property. Who needs this? Right seems wrong and wrong seems right? Where have we heard that before?

    • baggins baggins says:

      Something from an fha reverse borrower today, they got in just in time before even higher mip’s hit, and the borrowing against thresh hold went down to 50%.  The difference between private lenders and gse originators remains obvious, the taxpayer backing relieves them of risk and the normal business requirement to recognize and allow market corrections.  This approach where regulation saves their businesses is the problem.  Let them take risk, let them fail if they don’t handle that correctly.  Let them compete independently, and they can sort out what works and what does not.  One of the themes I picked up on;  competition bad, we must maintain our dominant positions in the changing market landscapes. If they want to be relieved of any requirement, please let them. But only so long as they no longer participate in any government insurance or backing programs, and shoulder the risk all by themselves.

      • FHA should not be involved in Reverse mortgages at all. It is the most dishonest lending process still legally allowed to take advantage of senior citizens. Speak with any ex reverse mortgage broker and ask them.

        THEN speak to any tax accountant; and then a social security expert and ask them about the pitfalls. Your reverse mortgage can actually COST you monthly income instead of supplementing it!

        Seniors BEWARE!  Appraisers ALSO beware. Cutting values on RMs in the review is common and usually unsupported. On the other side of the coin, owners that feel cheated in the process may seek to recover from those ‘dishonest appraisers’ that were  in cahoots with lender to (1) either over appraise or (2) under value…take your pick, Reason doesn’t matter…just the fact you had E&O does.

        Borrowers: The February 2017 AVERAGE US Home sale price per US Census was $390,400. Just for kicks, lets  say you own it free and clear. Reverse mortgage gives you 50% of equity.Say $195,200. You are 62 years of age and haven’t pulled SS yet. Assume you live to be 82 (only 20 years; my own mother and father are 86 and 87), but lets say 82. $195,200/ 20 = $,9760 a year…only $813.33 a month.

        20 years ago that wasn’t enough to live decently on in most locales. It certainly wont be 20 years into the future. (For those that have double that equity keep in mind that Social Security deducts or ‘taxes’ benefits $2:1 for every dollar above a certain threshold that you earn before a certain age.

        For others, the manner in which you take your RM payment (lump sum or payments) can have tax consequences despite being a loan. Its been too long since i investigated this stuff. Talk to experts the tax and social security experts BEFORE you talk to the loan brokers.

    • Nancy, the MC form is a waste of time in almost ALL areas! It was poorly conceived and poorly implemented, but it makes FNMA managers feel all warm and fuzzy so they keep it.

      (1) Defined neighborhoods rarely fit or match local MLS reporting areas; or even tax book areas. Nor do they usually fit zip codes. (2) Rarely do they encompass competitive market areas. (3) Consideration of only comparable properties presents a sliver of information about an area. It does not indicate prevailing trends in the entire neighborhood or area – so at best the MC results are an out of context snapshot that are largely meaningless in terms of either market value, or marketability.

      A good rural appraisers description of the competitive market area being “generally comprised of Townships 1, 2, 3 and the Village of XYZ  in the south county area” is more meaningful than saying the Spring Valley Lake Area is comprised of 200 seasonal and year round homes and trying to draw ‘market’ conclusions from such a small sample size where there just may not be enough activity to do so. Saying its bounded on the north by Robin Lane; South by Hwy 30 and east and west by lakes or whatever means nothing to an underwriter or investor or pretty much anyone else. People looking to buy there already know what the boundary is/are.

  11. Avatar Bernard says:

    Let the banks increase the threshold level to $1,00,000 that will create more work for appraisers, the foreclosure and on the way back now! The No qualifying loans are back and the new market downturn is around the corner. Interest rates are on rise, equity lines are becoming due, payments will double and borrowers will walk away again.

  12. Avatar Fritz Vogel CREA,CRS,CEI,GRI NY Cert. Appraiser 26+yrs says:

    Lenders don’t pay us, it’s not about our fee. $ 400-600 SF URAR is nothing. WE are just a cog in the machine that can run smooth or put the brakes on the whole deal. Lenders just want to ELIMINATE the COG so the machine never stops. We even “delay” the process. “It’s out for appraisal” would no longer be true, they could save 1-5 days on each Deal so they can run off to the next without looking back. Soon they will try to eliminate Title Insurance, that costs $$$ and time to secure.


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Bankers Concerned About Appraisals

by IDFPR Board time to read: 1 min