Speed Regardless of Accuracy Under the Banner of Modernization
Appraisers, something – comparing and contrasting – dawned on me last week, after reading another news release titled “Dean Kelker: Appraisal Modernization is Starting to Gain Momentum“, which is basically pushing an “Enterprise” singular ‘agenda’ of valuation speed regardless of accuracy. Under the banner of “modernization.”
VA does not demand appraisers complete assigned appraisal assignments extraordinarily quickly. They give appraisers 7 – 10 days (depending on location) to submit the report after assignment. VA expects good quality and accurate information.
FHA/USDA/ONAP also expects appraisal accuracy using an inspection protocol that many appraisers object to, and some choose not to do these assignments, but which is designed to have the home examined with more detail. These folks expect a report to be submitted within a reasonable time frame of several days, not 48 hours, unless of course the assignment comes via an AMC whose only objective is to ram as many appraisals through their business as rapidly as possible.
Freddie Mac has basically been reticent to demand speed of appraisal report submittals. They’ve not been saying much publicly. I know from communicating with their Senior Director of Valuation (an actual appraiser) that this Enterprise expects a high level of accuracy in the appraisals they process. In other words, I don’t see proclamations from Freddie with the same focus on turn times that their larger sibling espouses. That’s to Freddie’s credit.
That leaves us with Fannie Mae, the ‘big dog’ in the mortgage lending arena. They do process the majority of mortgage loans across the nation, roughly 60%. Thus, they have an elevated opinion of themselves, which seems to me that they believe they are invincible, which some call “too big to fail.” Just about all the public discussion I’ve seen about “appraisal modernization” has been issued by Fannie Mae. And seldom, if ever, do they place weight on reporting accuracy. Instead, it’s always focused on how they can generate a loan acceptance in the shortest amount of time.
Fannie Mae is the principle Enterprise in all of mortgage lending which is also focused on eliminating appraisers. We see that in various communications they distribute to stakeholders and the public. Fannie Mae is being swayed by the lending organizations who also basically hate that appraisers are the last cog in the lending wheel, and can, if the inspected property issues are adverse to decent, or have incomplete, conditions, derail the loan. Lenders are in the sales business. They just want to churn out as many loans as possible, in the shortest amount of time, with no interference. They don’t like it when that does not happen largely because the appraiser does their job properly. So lenders have been constantly hounding Fannie Mae about designing processes that speed up the lending approval process while at the same time negating appraisers in the process. This Enterprise has been a willing partner in this endeavor. They’ve done so recently with changes to the Fannie Mae Selling Guide which ELIMINATES appraisers from doing final inspections for items reported as ‘subject to’ in the original appraisal.
Fannie Mae is like a charlatan (a fake, quack) who presents different perspectives separately to those of us who really want to do good work. On the one hand, Fannie Mae says they really want more appraisers to be employable in the U.S., while their other side is demonstrating by actions and communications that appraisers are a pain for them.
It’s really disappointing that our honorable profession has been subjugated in the way it has.
And it’s really disconcerting to me that after nearly 22 years I’m finally to the stage recommending that appraisers avoid doing assignments for Fannie Mae if at all possible. I’m not the only one who’s come to this conclusion and publicly stated this position.
Here is the link to the news release I mentioned at the start of this article. Keep in mind that it is written by a person ‘on the inside’ of an organization that just wants to help his company process as many loans as is feasible in a given day, with the least interference from appraisers. Speed is paramount.
You need to read this carefully so that you gain understanding of how you are being mistreated by Fannie Mae and others. You will see that removing appraisers is a primary objective to “appraisal modernization.”
Dave Towne on e-AppraisersDirectory.com
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I received a request at 6PM Tuesday, from a new client, to do a complex appraisal that MUST be completed by March 10th. I didn’t quote. I didn’t accept. I responded “no thank you.” What do these people think we do, press a button? And to that end, it should be required that those making the rules for us, spend a day with a boots on the ground appraiser. I would never accept an assignment with 3rd party inspection by a person I don’t know, and accept responsibility for their reporting, making my E&O the fall guy for their actions.
I posted the below comment to the link above (https://mortgageorb.com/dean-kelker-appraisal-modernization-is-starting-to-gain-momentum). Its under consideration by the moderator, meaning based on the site and their agenda it won’t get posted.
As an appraiser, let me cut to the chase. Lenders, loan officers, processers, agents, state and local property tax boards, federal agencies, etc., only want to churn and burn as many loans as possible without regard for public trust. Although yes appraisers do get paid for their services, unlike the parties above, the appraiser’s role and requirements are to remain independent from the pressure and push to close the loan at all costs. Meaning, we often find the bull crap (incorrect physical characteristics, non-permitted / illegal structures, lying cheating commission earning staff, etc.) that changes the perceived value of a property prior to the appraisal. Having the professional obligation to disclose, and thus the apparent power to postpone, alter, and or as a result have a transaction halted, is the real issue.
Relating to speeding up the appraisal process, considering the typical appraisal is completed within 5 days, and the typical loan takes 40 days to close, how is the appraiser the issue? If the lender outsources the appraisal to an appraisal management company (AMC) which can create days / weeks of delays, and or sits internally on the appraisal for weeks, again how is the appraiser the issue?
Having Dean Kelker say they want the appraisal process to take around 2-3 days is a clear indication he has no idea as to what goes into doing an appraisal. One thing an appraiser considers is the subjects zoning. Considering zoning is often done on a local government level the appraiser is often delayed while waiting for clarification. Considering this clarification could mean the property is not legal, or is legal and nonconforming, etc., these issues could mean you wouldn’t be able to rebuild if say the property is destroyed. Why the push for speed when a home is most likely the most important investment in one’s life. Does Mr. Kelker understand how appraisers analyze local multiple listing service (MLS) data to determine market value and the time often needed? What happens under the following scenario? The appraiser finds three perfectly matching sales / comps to the subject with all of them being on the same street and at the same price (say $500,000). Without doing one’s due diligence, one could think the subject is worth $500,000. However, what happens when the agents indicate in words only that each sale had seller closing cost and or rate buy down concessions? The appraiser must determine the actual dollar amount of the concession, and apply reasoning to determine the impact of such a concession. The timeline to disclose that information from an outside source (the listing agent) can often take days but ultimately is outside the appraiser’s control. Relating to the subject’s value, what happens when through the appraisal workflow its determined that all three sales / borrowers were given $30,000 in concessions / credits? You do the math ($500,000 – $30,000 = xxx,xxx / net price).
With regards to outlying areas and potential longer turn times, these challenges have nothing to do with the appraisers themselves, but rather is typical for all aspects of someone who is more isolated. If I was three hours from the nearest Walmart, and wanted a pool to be built, I would expect it to take longer to find someone to build it, and would expect to thus pay more. Appraising is no different.
Turning to the phrase appraisal modernization, in part what does that truly mean? Fannie Mae is pushing for the appraisal process to be split into separate parts (hybrid appraisals). One way is to have a separate person conduct the inspection and to then forward the results to the appraiser for analysis. Considering at one point to become a certified appraiser in my state one needed a 4 year degree, no less than 2.5 years of supervised training, and entities like the VA required 5 years of experience post issuance of licensing just to apply, what could possibly go wrong when that Uber driver is doing “appraisal” inspections in between trips to the airport (no offense to Uber drivers)? Considering the average appraiser has nearly 20 years of experience, and Fannie Mae has said we aren’t good enough, what’s the problem with hybrid appraisals? Garbage in, garbage out.
Seek the truth, find the truth, tell others about the truth, and expose those who ignore the truth to profit from the propaganda.
Yes! In my area the information within the mls is usually wrong, missing, exaggerated, and or outright lied about 90% of the time. What takes me so long in my rural area is researching, verifying, and trying to figure out the truth. I’ve practically become a private detective in order to do my job!
There is so much more to each and every report than they seem to understand or care about.
I’ve been sent many of the “new and exciting” 1004/70H assignments to give a quote on; I don’t want to do them as I am not personally looking at the home, the amenities, the positives, the negatives, any Codes & Zoning issues (illegal additions etc)…do you think the 3rd party individual gives a rats tush about the things I just mentioned? If you ask most realtors “was that addition legal? Did they get a permit?”, usually the response is like a deer in headlights. What about the condition of the foundation? The well & septic? The barns? The patio & deck? And the list goes on and on…we appraisers are a dying breed, not because we want to die off, but because everyone wants us to, the homeowner, the realtor, the AMC, the lender, and of course Fannie/Freddie…I hope I can get another 5 years but it doesn’t look good…diversify, diversify, diversify is my goal for 2023.
Hate to tell you but I track loan closings and it still takes 40-45 days for lenders to close loans from start to finish. Perhaps if lenders did not wait until the last minute to order an appraisal which might take 7-10 for delivery. Appraisers do not slow down the closing process. Lenders slow down the closing process.
The only reason it is taking so long is because AMCs are shopping for the cheapest and the fastest while hiding the fee paid by the consumer and fee paid to the appraiser or lack of fee paid to the appraiser. Consumers and Appraisers need full disclosure on fees. Cost Plus Model!! I wonder how much the AMC is charging the Consumer for their so called Hybird Appraisals.
Yes DK. Although its a long story as to why I keep getting offers from a certain company, I’ve been offered the same property three times over the past three weeks. The value per Zillow is nearly $3,000,000 (semi ocean front with a good view but what looks to be in tear down condition for the area), with the offer being $275 for a drive by / 4 day turn time.
Who would want the lability of evaluating a tear down property from the street while making single line item adjustments of perhaps $500,000 or more? Apparently no one at $275.
Seek the truth.
In NY State an invoice has to be included in the report showing how much the appraiser is paid and how much the AMC retains; when this was first enacted the AMC’s went ballistic on us wanting the invoice OUT of the report, I never caved but always left it in. There is one AMC who I won’t name but their vision is “Clear” that offers me $175 for a 1004/70H while keeping $355 for themselves, oh yeah, they want the report back in 2 days from acceptance, Clearly not something I want to accept. A 20-20 tv show interviewing several appraisers with garbled voices for fear or retribution and also some borrowers to show what they actually paid would be interesting to say the least, I think I would sign up to be interviewed as long as I could remain anonymous.
Yeah exactly. And somehow the agents now think it’s important to delay the appraisal until after the home inspection, in case they may need to cancel, don’t want to get stuck with an appraisal bill. Ignore the mountains of other fees already paid or soon to be paid.
FNMA will eventually relent, and my fee will continue to climb when that time eventually comes. And if I am personally purchasing a home, and the lender tries to issue me an appraisal waiver, I’ll be the one slowing everything down another month while I order an independent appraisal and write in terms the entire deal is subjected to my independent appraisal results which the lender will have no control of redress regarding, because I’ll be the client now. It just take a lot longer than if the lender would have simply ordered the appraisal themselves. My consumer position as a market participator and stake holder in the home purchasing market, is that the FNMA ‘modernized appraisal process’ is worthless, so I will insist on a traditional full service appraisal from a qualified person whom did not enter through PAREA programs.
Finally consumers will be able to select their own appraiser based on competency and experience first, something amc’s have failed to accomplish over the last 15 years. Look at me. Look at me. I’m the client now. This was a fun article, thanks Dave.
Don’t forget the 2 weeks for the AMC to shop for the lowest price of $150 + 24 hour turn time.
As Appraisers maybe we should start a campaign titled Who’s coming to view your home (like what”s in your wallet commercials) is it a Qualified Certified Appraiser with years of experience or is it a want to be Uber valuator with no experience. FNMA & Bankers don’t want you to know! The homeowner might also want to know if that full Fee that they paid the AMC was for a Full 1004 URAR Appraisal Report, a FAKE HYBRID Report or a Appraisal Waiver, on the biggest purchase of their life. WHO’S IN YOUR HOUSE!!
All they have done is try to eliminate appraisers!!! I hope it all blows up on them!!!
How has the AMC model sped up the Appraisal process?? Shop 7-10 days and stealing Ind Appraiser resources in time and $$? Then a few stoopid revisions requests and wallah!! Get rid of this business model and give us back our BUSINESS and turn times will NOT be your PROBLEM!! You’re welcome 😉
I can certainly understand the frustration of every commentator before me. It’s not easy watching your job go away, especially after many years in service. I’ve been doing residential appraisals longer than most. 48 years to be exact + a year or two as a gofer. During that time I’ve seen everything in this business including every boom, every crash, every bailout, and every response. The crooks, the liars, the cheats, the good decent folks and reliable companies. The legalized theft of our data. Good appraisers. Bad appraisers. You name it. The good, the Bad and the Ugly.
What we are seeing now is largely the result of advancing technology and old fashioned greed. Let’s be honest. I didn’t object when fees jumped from around $450 to $800+ for a cookie cutter assignment and neither did you, right? I also embraced as much technology as I could absorb. And yes, absolutely, others working in a transaction and paid on percentages have a vested interest in speed to closing. So do we. We like to get paid ASAP. We’re not to blame for higher fees offered by others. They came to me with that but it did expose a glaring weakness in our industry.
As we know, a lot of our dilemma has to do with the piling on of regulatory burdens, such as onerous qualifications to obtain a license, increasing liability, and clients excluding trainees from greater participation in reports which has driven away too many younger people, leaving the industry with an age problem and a shortage of appraisers to handle boom cycles. The boom and bust nature of residential markets also make it hard for small appraisal firms to hire and retain employees.
But folks, a 500 pound gorilla has moved into our china shop wearing a tee shirt that says, Artificial Intelligence. Follow the AI news and you’ll see the impact it is already having on our world and it is only the beginning.
Artificial Intelligence (AI) with access to the entirety of human knowledge can already write a PhD level dissertation on virtually any subject in 5 seconds with a mountain of citations and references. Imagine what it could do with an appraisal form. We have no chance against that for routine urban/suburban residential appraisals when our clients now rely primarily on credit reports, with collateral quality and even income verification taking a distant back seat.
Think also about what highly sophisticated AI reviews of your work could look like to your clients, state boards and eager attorneys.
I’d love to offer a solution but I cannot think of any realistic ones. We just don’t have the political clout or resources to resist anymore. Even thankfully stubborn VA is under intense pressure to “modernize” its appraisal panel and recent legislation now mandates it.
It’s of little comfort but knowledge workers everywhere are facing similar futures. There are many appraisers out there who are a lot smarter than me. If anyone can offer solutions or alternatives that lenders and the GSEs can work with, let’s run with that, keeping in mind that appeals to moral considerations get us, like our fellow knowledge workers, nowhere anymore and that’s been the case for a long time.