Round and Round!
Round and Round, what comes around goes around & 10 years later it’s happening again.
I’m a 43-year-old guy and I grew up in the 80’s when music was odd and fun. I had some favorite bands like Def Leppard, Guns N Roses, Bon Jovi (hello I’m from NJ) and Ratt. Yes, Ratt and one of my all-time favorite songs is Round and Round. Here’s the throwback: Ratt – (Official Video) Round And Round
Funny, it’s relevant to me today in the valuation, regulatory and real estate appraisal sectors. One specific lyric offers so much insight into the Lender/ Real Estate Appraisal world…
“Round and Round
What comes around goes around
I’ll tell you why”
Here is where I tell you why
The real estate crash 10 years ago was due to lender pressure on consumers to buy property they could not afford and appraisers to inflate values. If appraisers didn’t fall in line and file to meet those inflated values, they were blacklisted or told you would get no more work. Lenders all over the US were pressuring appraisers to “make value” so that they could lend money; it was never about your biggest family investment as a consumer. Appraisers were giving their unbiased professional opinions of value only to have the lenders strike back with unreasonable demands and some going as far as blacklisting them. Many appraisers did not give into these pressures and eventually wouldn’t see any work. The appraiser was doing his or her job correctly and protecting the public trust only to have the lenders ultimately have the final say.
Round and Round, what comes around goes around and 10 years later it’s happening again.
Appraisers are once again vocalizing about the pressures of lenders and AMCS to make values, do what they say or suffer the consequences. Those consequences are once again blacklisting, removal from appraisal panels, limited work or nonpayment for their services. Isn’t the whole idea to have an appraisal to assist the lender to lend money or not? Assist in the risk? Seems like we are back to 2008 again when the warning shots were being fired but the regulators and public ignored those warnings. The question is, will they ignore them once again?
You don’t believe me, do you? Well here is a recent example from an appraiser this past year and the messages from the lender (shown in 1st pic below). The appraiser did a report, but the lender wasn’t happy with the results. So, they hired another appraiser who appraised it for a higher amount to make the deal work. As you can see the first appraiser was pressured and then removed from getting work. But it doesn’t stop there. In the second picture the lender basically told the appraiser that he knew this wasn’t going to go well and that he (the appraiser) should have said something if it wasn’t going to come in close to the Sales Price (SP) to stay in the GOOD GRACES of the lender. What??? So, I guess that means they would find someone out there to make the deal happen?
Round and round as we are now back to pre-crash pressures and taxpayers may get taken for another ride. To me it sounds like the lenders only care about making a deal work for them while the honest, unbiased appraisers are once again being forced to the side, being strong armed and the consumers are paying the price.
as the song says ”you put an arrow through my heart”.
- Look in the Mirror - February 27, 2023
- AMCs Take a Sizable Cut of the Appraisal Fee - October 5, 2022
- Proposed Rule to Eliminate C&R Fee Tabled - July 21, 2022
There is no bright side. We’re damned if we do and damned if we don’t. Be a number hitter or else be blacklisted and lose business.
Lenders and lender interest group control the entire lending appraisal process. This is just more proof. Hello is anyone home?
The REAL question is “What value was correct” ???
Both reports should be reviewed. And then some heads should roll.
I had a report, major traffic artery, lousy NO site improvements. Only settled sales 3 miles south in beautiful subdivision would support. NO way right ????
Cut deal…..by a lot…buyer walks, renovator pissed.
They found another buyer, went and settled FHA, called a friend, asked to look and see if comps were from 3 miles to the south, YES they were utilized and no mention of MAJOR traffic artery…..he confirmed what I knew, only way to “make the deal !!!” of course. That’s how it was priced !!!
Renovator laughed to the bank, over sold by 35 k. New buyer under water for 10 years !!!
Asked friend to officially report, replied, wont do any good anyway, just a slap on the wrist. wont take license !!!
So lets think about this…..3 miles to the south in beautiful subdivision, superior market area.
And none one gave a FUCK !!! And it passed all reviews ???
WHY do we care anymore ????
Chris the only identified culprit in this case is the ‘friend’ that wont report a bad appraisal. THAT is why this keeps happening. The seller is supposed to do his best to make his own deal work. Is he the one that ordered the second appraisal or was it a loan officer? If your friend is unwilling to turn the report in how the hell would he know whether it would do any good or not? We cannot complain about the process or events if we wont even do our part to make the system (such as it is) work.
The property already settled months ago, it would not have made a difference, I understand your reasoning, but the report was reviewed and passed and settled nobody cared that all the comps were three miles to the South and obviously not on busy streets. How many people turned a blind eye to it through the whole process.
Chris respectfully to both you and your appraiser friend. Its not about FNMA or whoever the report was for. Its about an appraiser that caved in to lender pressure to use inapplicable comps. THAT in turn leads that lender to think that is an acceptable business practice. Your friend suffered no harm and I get not wanting to harm another appraiser. BUT the AMC could just as easily have done a phony desk review of your friends work to justify their appraiser shopping [like challenging the adequacy or assumption of highest and best use-claiming not adequately documented in report even though it was never an issue]. If it was corelogic or rels or WF they likely WOULD have turned your friend in to maintain a clean compliance paper trail while they themselves were violating DF! I deal with these exact scenarios all the time for the Appraisers Guild. It is the single most frequent abuse scenario we see.
We need to STOP protecting our fellow appraisers that violate USPAP because THEY don’t want to stand up to a lender or their AMC. Paraphrasing…”it’s time to either ‘do your business’ or get off the pot”. (Collectively, not you guys personally).
THIS is why LOs and AMCs tell us “You are the first ones ever to tell us that”. Or…”All the other appraisers do it.” If your friend doesn’t want to send it to the state then have him send copy to me and I’ll do it. In any event thanks for sharing the story with us.
Wow, is that factual? You’ve uncovered legitimate fraud and companies are not shut down over that? Shocker news. Please write an exclusive on that one, I’d be all ears. But you know, if you get rid of that one appraiser, the next guy whom outsources and does hybrids take their place, it’s a lose lose. Until there are substantial fundamental process changes, the attrition will continue. Remember this one?
With respect Mike, “They” know they cant go after all the appraisers that do this….Our numbers would fall to 50 k or less.
I have a back bone, had it my whole career. Others…..not at all. I!!
My buddy is not the problem, I agree that the appraiser should be turned in….I was a bit disappointed, but as I am told, They saw this every day !!!
He no longer works for FHA.
Chris I appreciate the view and don’t mean to infer no back bone to you.
Im taking an online class from a former E&O provider right now. Nationally respected instructor points out how the newer versions of CU ARE tagging more and more appraisers AND lenders. As much as I despise CU as it is currently used and abused, it WILL start catching more and more people like the guy in question.
Right now FNMA says we have about 40,000 appraisers doing work on FNMA loans. I sense a scenario in the offing where getting rid of man appraisers will be used as support for even more PIWs and hybrids.
Either we police ourselves or it will be done for and to us. Even the nit picking stuff will or could become cause for censure by state authorities.
Welcome to the “brave” new world where rights trump responsibility and cowardice and laziness trumps what is right.
I would report the appraiser in a minute. Done it before and would do it again. It might cause some hassle on your part but is absolutely worth it to know you helped to keep your profession clean and have integrity.
I told this story in support of the article, the only appraisers in this country that have true Independence are the VA Appraisers.
Nothing will be resolved, ever, until FHA and conventional follow the VA ordering system.
Can you call it independence if you’re not allowed to pass on an order? The vp’s ring you and if you’re into complex, they get to approve your fee increase or not, it’s not quite as awesome as people make it out to be.
No passing on orders is not a problem, trust me. They take a bit longer, but who cares, at the end of the day, the time the VA system saves you in headaches and phone calls is the way to go.
And some of the complex ones make you just a bit better every time you write them.
The VA system is the way to go.
25 year appraiser here, only on VA panel for a few years.
NONE of these past problems would have ever happened !!!
And it is TRUE independence !!! And the lenders hate that more than anything. And you are treated with respect.
The best thing you can do with your appraisers license today is: BURN IT.
Amazingly you don’t lose your knowledge when you burn the license so you can use it to make some REAL MONEY. IF you trust your own intelligence organize a group of investors, bid on bargain properties, and flip them. Bargains are everywhere guys.
WARNING: You may wake up in a cold sweat the first few weeks wondering why AMCs are calling to harass you.
The dog trainer quoted me 125 dollars for an hour and a half. My new side venture is dog whispering.
It should be pretty obvious that your appraiser friend has a good basis for a lawsuit against the lender over that situation. It’s rare to see such direct admissions.
I’ve been an appraiser for 32 years and I see the cycle repeating itself too. The only difference is this time the AMCs are the culprits as they bow to lender pressures then pass it along to appraisers. It’s all about the drop in business volume due to Fannie Mae property inspection waivers, imo.
Agree. Kathy I think the smaller AMCs probably have the kind of pressure you cite.
I think the rest are either in bed with the lender where “It’s just understood” that they dont kill deals or they are absolutely immorally operated companies without an ounce of integrity among their executive leadership. After the next collapse that many posters suggest is near (circa 2019-2020), AMCs and lenders will STILL cite appraiser deficiencies as the cause. These kind of people dont require their story to be truthful.
Mark what a great article. If the person whom wrote that letter you posted had an appraisers license, that conversation is grounds to lose their license. Unless the manager has an active appraisers license, there is not enough accountability. Assessors offices nationwide manage to fill dozens and hundreds of chairs with licensed appraisers, why can’t appraisal distribution departments accomplish that? These guys are not concerned about keeping their licenses, they’re concerned about keeping their jobs. It’s a simple equation with a simple solution.
I can personally vouch for the fact that this “IS” happening to appraisers in our office. Lately we have had lenders soliciting for appraisers with a contract attached to their email. Upon reviewing the contract it is obvious that something it very wrong and the price is not in-line with the market. So it seems that these lenders are shopping for the most desperate appraiser who is willing to rubber stamp the deal. Sadly, the industry has more issues now than it did 10 years ago and the good appraisers have moved on to litigation and private party work with origination being a secondary income.
A rose by any other name, is still a rose. We’ve been reduced to mall cop status.
its actually not illegal !!! Its everything else, but not illegal.
I am surprised that anyone associated with the mortgage/lending/appraisal world is surprised by these reports. There always has been pressure on appraisers doing AMC/mortgage appraisals and there always will be. The exception is doing appraisal work for portfolio lenders who have skin in the game and want to know about deficiencies, external adversities, and all influences on value.
As much as I blame the AMCs and lenders who sell their paper for a quick profit (paper flippers), the real culprits here are the appraisers who play this game. They really aren’t appraisers at all. They give the entire industry a bad name and set up unrealistic expectations for hard-working honest appraisers. Unfortunately the AMCs and their clients gravitate to the unscrupulous number hitters. If you want to work as a professional appraiser I recommend that you move into non-lender work. Now.
Agreed !
No absolutely not. I understand your reasoning. However it’s important to be there, to be present, to provide resistance, to be able to argue real time experience and issues. Stepping out of the way is defeat for all of the millions of home owners whom still have to engage the lending system, and hope to do so in an ethical manner. There are good people whom need protecting with sound process corrections here. The power of the pen. We do not give an inch on liberty, or they will take a mile. We do not step back, we step forward and draw the line.
True.
And then there are the “little things” like expecting you to sign off on an FHA new home assignment certifying that the utilities are on and functioning and that all appliances are operational when the gas meter has not yet been installed. Happened to me a couple of years ago. I would not do it but somehow they closed the deal without my sign off; probably another “appraiser” who agreed to do the lender dirty work. This kind of stuff is rampant in the business.
Who knows, the lender can cert the condition in numerous ways. It’s just we’re so used to all of that landing on our insurance via signature and form filling requests. It’s when fictitious paperwork is filed that’s when the line is crossed. A few lenders had for a while, tried the audit approach for appraisal reporting. I’d get these letters asking me to verify that my report was valid and not adulterated or audited, asked to review a copy of my report from a while ago. However that trend seemed to have vanished as quickly as it appeared. What exactly is the audit for, client confidentiality, etc. So having a private company do that was not really helpful. I appreciated it but it did bring up some challenging client and intended user questions.
If we want to stop adulteration of our work products, we must be given at least limited access to the FNMA CU database and we should be able to review past work, verify it’s not altered, verify no fraudulent activity like finals we did not approve or signature theft for reports we did not complete. Can you imagine if it’s true, what Ford said, rampant abuse of fictitious paperwork. FNMA should really be running some audit program of some sort.
Too late. Fannie has already data mined all the reports that came through the UDCP. They admitted it!
Kathy, it hasn’t been a secret, they’ve been collecting all of the appraisal form field data for years now.
Their intent was to use that data to target the sloppy appraisers who just change, make up or report inconstant information in order for their reports to pass, quickly, because they have 5 more reports to get done before 5pm.
Soo far I think they’ve done is use the data to create ridiculous condition requests for the better appraisers because the computer isn’t able to read and understand the narrative comments. Once the CU finds data in your report that some other appraiser has previously reported differently, your report is scored and rejected back to the lender with CU conditions to approve. This is the point in time where someone, the lender, is actually supposed to read through your comments. Lenders have the ability to approve most CU condition requests depending on the severity and resubmit the report without going back to the appraiser, but many lenders just send all of the CU warnings to back to the appraiser to address instead of reading the report.
All true. Then they score appraisers based on faulty CRs.
Richard Hagar (and another highly respected appraiser) have a 1, 2 or 3 part package course related to avoiding adverse ratings from CU. Its actually a very good course. Im only half way through it right now and can attest it gives very detailed explanation of how the current versions of CU plus impending versions actually work. Its changed a lot since the first version I studied …though its still built on a fundamentally flawed database. Be forewarned parts of the course will make you angry (at ourselves as a profession) …even as you reluctantly admit the information is correct. ALL GOOD ADVICE IN IT!
Read most recent online WorkingRE article / promo or go to OREP site and look for the courses…well worth the money and you get CE credit. Range is $119 to $267 depending on what you select. If you are an OREP member you get $20 discount.
Baggs, you are absolutely right. IF the concern was about producing credible reports they would give us their recommended default setting version of CU without our ability to alter it (like lenders can) so that we could self check for obvious issues. Instead, we are expected to achieve perfection with blindfolds on.
As bad as CU is for the uses it is being put to, it would and still could be a great tool for appraisers to use before and after appraisal inspections; prior to report writing OR as a checks and balance afterward.
It’s clear the intent is not to produce better appraisals. The intent is to cull the herd.
Well if appraisers deal with mystery stips for no apparent good reason, it’s the blindfolded argument again then. Related faq for fnma 2.5 measuring point for cu du. And if you want to learn more, go to the source, du home page second link. Google the issue as if you were an underwriter. fnma cu trigger points, collateral underwriter report, etc. So much info, pointless to try and link much of it. Give the top link at least a quick review, you’ll understand why in some areas it seems like you just can’t catch a break.
Certainty on Appraised Value Frequently Asked Questions
DU home page
https://www.fanniemae.com/singlefamily/desktop-underwriter
Baggs any expertise I have is on FNMAs original version of CU and all subsequent versions have incorporated that same flawed database. The original version was built around mined data from appraisals performed from 2011 through 2014.
In early 2015 FNMA admitted data was seriously flawed because they felt it necessary to formally eliminate any and all adjustment guidelines as percentages. It means the bulk of appraisals they input into it were appraisals adjusted to old and even imagined guidelines rather than market conditions.
Now supposedly they have been culling data ever since but what reassurance is there that the majority of subsequent appraisals were not also performed mostly to the old guidelines…out of habit?
So, DU and fast track guaranteed or “certainty” loans with CU scores of 2.5 are STILL built on a flawed foundation!
The belief that slow incremental interest rates over the next year will keep us from a repeat of the last fiasco is hubris. As soon as the rate hits the traditional 7% to just below 8% necessary for non government subsidized or non guaranteed loans bought by international investors, the system collapses all over again.
Property values have simply increased by too much for most Americans (or even adequate numbers) to afford 7 1/2% rates on $500,000 mortgages… probably not even on $300,000 mortgages. The ONLY thing propping up high and increasing values today are the 4% to 4 1/2% mortgage rates.
Regarding the loan which was the topic of this pages main article. Wouldn’t it be something if in the process of dodging one appraiser for another, to make that deal work, they elevated the cu risk meter? These are the reasons we do not have access, and there are no clear rules for lenders regarding exactly how and when they’re to submit to du, and what notification must be made to the appraiser regarding that submission, auto du findings, and risk assessment score rating. We’d all charge more in the ‘red zone’. Round and round again.
‘Low’ appraisal comes in to AMC. They “know” by prior agreement NOT to submit to CU for an SSR until they clear it with correspondent loan officer that originated the loan application. THAT is how they can shop appraisers without FNMA ever being any wiser. The alternative method where they submit to CU for an SSR does create a record for FNMA.
That is precisely why CL and so many others do a bogus desktop ‘review’ by out of state hacks in order to ‘find’ some technical or even outright imagined flaw which in turn allows the lender to legally decline to use the appraisal they argue is non compliant with USPAP and not credible. As long as that paper trail is clean FNMA can then accept the second appraisal without even a hiccup. Of course the original appraiser must be thrown under the bus for flawed work and either submitted to state boards or even FinCEN for loan fraud (misleading report).
It would be incredibly easy to stop this. Simply REQUIRE copies of the CU score (HUD,VA and Freddie Mac all have different names for their scores but they are still part of an SSR); all comments and the Submission Summary Report (SSR) to be given directly to the appraiser before ANY request for ANY kind of revision can be made. Even a simple typo could not be corrected without the SSR as proof the appraisal is not being concealed..
Mike you are a regulatory solution genius.
Try this idea on: Mirror the FHA case assignment approach for all FNMA orders.
The order does not happen until the assignment is made and the appraiser officially tied in. This would provide more challenges to insta swapping for intended results. Also what you said about back end submission.
When people abuse what are supposed to be honest processes, that’s when they deserve additional and permanent scrutiny and oversight.
Still hoping for the IVPI proposal, these companies can not be trusted to manage the distribution process any longer. There are a few good ones, but the bad players elevated risk ends up in the same pool of packaged loans in the end. They’re ruining it for everyone.
IVPI Proposal
The real question in my opinion is how was the contract purchase price established? I feel that the expectations of market value had not been properly set from early on. Ask yourself this who benefits most from a higher purchase price? The real estate agent! I understand that a sellers agents job is to get the most for their client, but the buyers agent should be the one to inform their client what the market value is. This should be a checks and balance system, but when more parties involved benefit from inflated values than thats when and where pressure is placed on the appraiser. Bottom line is you can try and regulate our industry all you want and I feel some of it (not all) was needed and good, but maybe they should consider regulating the real estate agent/broker system.
Mark, most states did just that. The elimination of dual agency by many states was supposed to stop exactly what you describe. Listing agents could press market, but buyer agents were the gatekeeper for their clients.
The flaw in that system is it diminishes the concept of fiduciary responsibility to all parties. It became a case of “not my job” that’s the buyers agent responsibility. In the era of offers via Mongofax and other impersonal presentations or even held back offers there was no back and forth negotiation between buyers and sellers via BOTH agents sitting at the table with the seller to present, negotiate and counter any offer. ‘Negotiation’ gave way to auction style ‘submit highest and best’; and selling agents routinely lied about multiple offers so fearful buyers overpaid and continue to overpay. Nothing changed. It was still easier for buyer agent to collect commission when they made no waves.
Go back to dual agency representation where agents know BOTH sides of transactions instead of being only buyer or only seller agents; and hold ALL parties responsible for fiduciary obligation to deal honestly with each other.
In commercial real estate (including appraisal) we learn early on that no one will insult our intelligence by telling us the truth right off. It is truly a buyer beware environment. Residential RE is NOT supposed to operate that way.
Again, inspired solutions. Is that how it used to work, seriously? Shared agency? These days there is a rule of thumb for most scenarios; The senior more experienced agent has the listing and the jr agent runs buyers agency, the buyer is therefore always at a disadvantage. It’s a back scratching event. But Mark, it’s not just the agents driving up housing prices, it’s a fed rate tied to fiat instead of savings…