The New Con: Hybrids, Waivers & AMCs Threaten Public Trust
Last month marked the 7-year anniversary of Appraiser Fest. The conference was truly like nothing that had been done before. It was organized by appraisers for appraisers. The agenda was more about bringing the profession together and protecting the public trust. Appraiser Fest was not about promoting the profit of others at the expense of appraisers; nor was it about hiding the unchecked facts of fraud and ill doings against consumers. It was about public awareness and trust. It all started with a renewed sense of energy with appraisers at Appraiser Fest.
The excitement and energy from Appraiser Fest did not stop at those attending the conference, this renewed energy spread throughout the appraisal community. Appraisers were talking to each other, holding lunch an learns with Realtor sales offices, writing blogs, posting podcasts and spreading the word about the shenanigans that had and continued to occur. Warnings to all were now part of appraiser’s everyday communication.
The impact of the Dodd Frank Legislation and lack of enforcement was in full swing. States allowed Appraisal Management Companies to go unchecked and the blow back to the states that attempted to enforce the law were shot down with FTC complaints and expensive lawsuits. Louisiana fought long and hard against the status quo. The end result was the very law that was designed to protect the consumer ending up costing the citizens of Louisiana millions of dollars and they received no protection. Consumers across the country are still unprotected from the lack of enforcement.
This begs the question, is the system corrupt? We all know the answer, so there is no need to expand the discussion.
In 2020 a documentary directed by Patrick Lovell was released called The Con. The 5-part series was a story about the housing market and the fraud that occurred. The appraisers who attended Appraiser Fest know first hand why this documentary was part of the renewed energy among appraisers. Many of those that attended were interviewed and shared their stories of what was going on. Many shared how appraisers warned for years of what was going to happen and no one listened. Profit above public trust.
You are probably asking why is this being brought up again, this is old news. Well let me tell you, this is not old news it is current news. Hybrid Appraisals, Appraisal Waivers and Appraisal Management Companies are the new Con.
Public protection is being dismissed for profit; consumers are being misled; warnings on what will occur are being ignored. Homeowners who purchased their home with an appraisal waiver or hybrid appraisal are finding out they over paid and are now upside down on their home. This is the absolute worst position; short sales and foreclosures have already started in some areas, unless something changes, this will only continue and lead to another financial crash.
Now this is not being pointed out to spread doom and gloom, but for all of us to pull out the energy we had in 2018. Let’s get vocal! Tell everyone what is happening, when you talk with an Realtor agent, share what the appraisal management company is charging their client, inform them of the consequences of hybrid appraisals and appraisal waivers. Remind them of their duty to inform their buyers and sellers.; Remind them if the market crashes, so does their income. Buyer and seller lawsuits against the agent who did not advise their client can and will happen. Fannie and Freddie have already come after appraisers. What is stopping them from going after sales agents?
We all need to watch The Con again to remind us of what happened. Then let’s get out there and tell everyone of the new Con!
- The New Con: Hybrids, Waivers & AMCs Threaten Public Trust - December 16, 2024
- VaCAP Supports Shane Lanham’s Legal Fight - September 10, 2024
- It’s Just Responsible Journalism! - February 21, 2024
See the harm to the public here
https://appraisersblogs.com/uncovering-flaws-in-fha-appraisal-n-loan-review-process/#google_vignette
I’ve always thought mortgage purposed appraisals were to mitigate collateral and valuation risk for the lender and associated investor – not for consumer use. The consumer should retain an appraiser and pay for an appraisal service for their use if they are concerned about the value of a property. The consumer is not first or last with the lender-client appraisal process…
Same story, different day. Hybrid appraisals and waivers are just shortcuts that put profits first and consumers last. It’s frustrating to see public trust getting tossed aside again. If we don’t keep speaking up, we’ll see history repeat itself with more homeowners upside down and another mess on our hands.
I’ve always thought mortgage purposed appraisals were to mitigate collateral and valuation risk for the lender and associated investor – not for consumer use. The consumer should retain an appraiser and pay for an appraisal service for their use if they are concerned about the value of a property. The consumer is not first or last with the lender-client appraisal process…
Although not the client, it’s typically the consumer who pays the client for the appraisal in a mortgage procurement process. While the lender wants to assess risk and the value of the collateral in its fiduciary concern, the consumer benefits and is protected by the same. One is the byproduct of the other.
One of the reasons the appraisal requirement was included as mandatory for GSE backed mortgage lending activity was to protect the American mortgage consumer. No longer necessary. Internally controlled proprietary third and fourth party AI assisted avm value output software which is not subject to independent scrutiny or meaningful oversight will now replace the independent human appraiser. The pertinent question; Protect the American consumer from what, and who?
Houdini; enter stage left. On stage is a large sign; Racist appraisers. Houdini pulls the curtain in dramatic fashion. Flashing lights and images of police oppression, attention and emotional redirection. A new sign appears; AVM final rule approved!
As a Real Estate Professional since 1980 and an Appraiser since 1986 before licensing, we have had 3 or 4 economic melt downs in property values due to high interest rates and terrible loans terms. Loans with 1st, 2nds and 3rd Mortgages to Purchase or the 125% loans with no equity in the mid 1990’s. The one common denominator has been it was always the appraisers fault when lenders and the public blamed the appraiser for the mess. That’s the history that I have lived through and now I am taking a MLO course to change my financial position in 2025.
Hopefully the new administration will see the importance of an actual appraisal instead of a hybrid, waiver or a PDC doing half the work of an appraiser.
Has anyone come across any official policy statements by the income admin? I’d be curious to see if they or any of their appointees have a position on this.
Edit, will repost later. Meant to comment on the other page.
Haha! Trump has engineered appraised values for his entire career – obtaining high values for lending and financial statement purposes, and low values for property taxes. The idea that he would care about the integrity of the valuation process is laughable.
I’ve always thought mortgage purposed appraisals were to mitigate collateral and valuation risk for the lender and associated investor – not for consumer use. The consumer should retain an appraiser and pay for an appraisal service for their use if they are concerned about the value of a property. The consumer is not the client and is not the first or last with the lender-client appraisal process…
‘greed is good…greed is right…greed works..’.gordon gecko
97% of all purchase appraisals hit the number anyway. So why is an appraisal necessary?
That percentage figure you’re referring to is not as straight forward or simplistic indicator as people think. They use figures like this as justification to remove appraisers from the process. There is far less consistency on the initial price formation side. Price is not the same thing as value. Every factor along the way has real world implications for how much people pay, how much they earn or take a loss on, when conveying real property.
When the appraisal requirement is no longer present, what the people end up with is a system where the most powerful or influential person in the process, the people whom stand to gain the most, they set the final price and that’s what the consumer is subjected to. Over time as the vested sellers interests have no opposing force, you end up with overpriced unaffordable housing markets and rental markets. Exactly what people are complaining about today with the supposed affordability crisis. 97% is the loan capture rate, not a true expression of honest dealings.
amc’s are the biggest con jobs…pushed through by crooked coumo and fannie after they got duped by the no doc loans
Review the definition of market value… explains the ~97% of market defined transactions are supported as market defined value.
We never learn from history. The tightening and loosening of regulations is the cyclical reaction to catastrophic events. We had the Savings & Loan Crisis then the Great Recession because of loose regulations. The result was the tightening of regulations. The government gets lobbied by housing and loan industry to loosen the regulations over time. They lie and state it’s to help the consumer when it’s really so industry can make more money at the expense of the consumer. Consumers ask for the regulations to be loosened because they think it will help them buy a home and make a ton of money. Instead consumers get burdened with large payments on homes which may not be worth as much as they thought or hoped. Today we have appraisal waivers, hybrids, higher LTV loans, low down payments, down payment grants, down payment loans, higher concessions… In the end appraisers get blamed when it all comes crashing down. Then they tighten regulations again.
Any way the State can make money by creating one or more useless agencies that can punish people for doing their jobs and collect ridiculous fines, they’re going to do it. We have no political power and we don’t make enough money to donate to politicians to gain any. Why would any lender, AMC or GSE care when they’re extremely rarely prosecuted and the taxpayer always bails them out? We all know that the AMC’s were nothing but a scam to begin with. I’m all for things getting better, but it seems like it’s always going to be one step forward, two steps back. The people at the AMC’s are marginally literate anyway. I’m lucky to get the correct address in a bid, they’re withholding sale prices, if I ask them a question the bid disappears, etc. I’m near Dallas and they send me bids in Laredo! Hey, Texas is Texas, huh?!
This is all well and good but a continuation of talking. I would hope if this is the message taken from appraiser interaction at a national convention, someone, with a enough clout to get the ear of someone in a position of influence can bring this to someone in the new administration. From all outward appearance the newly created DOGE would be a great start given the complexity of what is in process of taking place within HUD, FNMA and Freddie. As aptly pointed out, the current plan will benefit big banking and investors who will be insulated from any loss since the US tax payer will be on the hook for the next bailout while all the bad players will be sipping margaritas on the beach in Rio. How can this be so obvious yet so aloof to all oversight? Something makes no sense in terms of common sense.
To end this year and prepare for 2025, I am taking a 20 Hour MLO Mortrgage Loan Originator Course for the next 2 weeks. Having this additional license will allow an additional unrestricted income and a new adventure. Take a look on line and see what’s involved for your state. I am a Broker Owner/ Certified Res Appraiser and one of 4,372 Certified Residential Appraisers left in California. Out of the 8,078 Total Licenses total for California only 2,584 General Certified Appraisers are left as of BREA State 11/01/24. The mortgage rates have no where to go but down unless the USA is in an another War Conflict. Lenders are all ready tooling up for office staff again for 2025. So I will cheerfully focus my energy in 2025 on making mortgage loans as I have no plans on filing out appraisals that include the new 26 page form in the near future. I really think again, we as appraisers are in the right place at the right time to see what other ways of income can we create from our talents. If you can’t beat, join them. Check out how simple it is to get a MLO endorsement and be making money in 60 days or less.
Guess what they’ll be finding a lot of … Yep, appraisal bias, you know, for “profet”. LMAO emoji.
https://www.valuationreview.com/vr/articlesvr/r3-amc-chooses-profet-edge-review-for-appraisal-bi-93145.aspx
Great post! The Gramm Leach Bliley act just jumped out of the grave, and promptly jumped directly into an incinerator.
https://www.ftc.gov/business-guidance/privacy-security/gramm-leach-bliley-act
https://www.capterra.com/p/232247/Profet-AI/reviews/
Nothing says respecting mortgage borrowers privacy, like subjecting their appraisals and likely associated loan data, to an AI database that services manufacturing, pharmasuetical, medical, computer engineering, legal, realty sales, hardware and software for computers, etc.
https://www.profet.ai/profet-review-platform / A product of; Propmix.
https://propmix.io/about
ACI, Clearbox, among others. / Since 2003 we have been collecting, curating, and distributing real estate data to the industry as Software Incubator, Inc. / There is your Indian outsourcing tie in. Otherwise known as unrestricted data mining for future data brokerage and unsuspecting customer exploitation. They’re going up against Corelogic, so they’re naturally following a similar model. Pure unadulterated data exploitation using advanced AI systems. Brilliant. Privacy and data confidentiality be damned, investors demand returns.
Rocket Mortgage Turns the Table on HUD
As Rocket Mortgage observes in its compliant, the competing factors put “Rocket Mortgage between the proverbial “rock and a hard place.” If it takes action with an appraiser regarding an allegedly discriminatory appraisal, then it faces the prospect of a government enforcement action or private lawsuit alleging violations of statutory appraiser independence requirements. But if it complies with those independence requirements by not taking action to “directly or indirectly” attempt to influence the “independent judgment” of a third-party appraiser, then it faces the prospect of government enforcement actions and private lawsuits for alleged violations of the FHA. This reality of the government’s inconsistent and conflicting approach requires judicial intervention.”
https://www.consumerfinancemonitor.com/2024/12/17/rocket-mortgage-turns-the-table-on-hud/
rocket should just hire relman…
‘Rocket Mortgage requests that the court issue an order vacating HUD’s policy of holding mortgage lenders responsible for failing to correct or remediate perceived or alleged appraiser bias or discrimination in an appraisal.’
Absolutely incredible. All over a fictitious non existent premise of ‘appraisal bias’. Andre Perry from Brookings will be remembered as being one of the most destructive forces the American housing market has ever seen, claiming fame among the most incompetent data analysts of all time.
Quick industry recap summary, if any serious researchers are interested.
https://appraisersblogs.com/lack-of-evidence-appraiser-challenges-discrimination-claims/#comment-43935
Perry, Fudge, Harris, Bunton, and Relman should obtain appraisal licenses and they could appraise the undervalued houses all they want…
That Julia Howell lady who’s dissecting Shane L’s appraisal workfiles, her website is something else. Her proposed valuation methods would result in immediate underwriting rejection, and also require any appraisal using those methods be submitted to her respective state licensing agency for additional review and possible penalty actions. She’d be on the FNMA probationary list after the very first appraisal.
https://twitter.com/i/status/1869071018545029367
they are delusional…
Housing Bubble & Bust #1 and #2 as Seen through Employment in Mortgage Lending
by Wolf Richter • Dec 16, 2024 • 36 Comments
Employment at nonbank mortgage lenders collapsed by 37% this time around, to the lowest level since 1997.
Mortgage applications to purchase a home are down by 40% from the same period in 2019, and by 48% from the same week in 2021, according to the weekly Purchase Index by the MBA. This is a stunning collapse of activity.
By comparison, sales of existing homes dropped by 35% in 2024 from 2021, to about 4 million homes, the lowest since 1995.
Housing bubbles are just so much fun, and everyone in the industry makes money, but the inevitable housing busts are a mess.
https://wolfstreet.com/2024/12/16/housing-bubble-and-bust-1-and-2-as-seen-through-employment-in-mortgage-lending/
what you are witnessing is the largest frozen bubble in the history of the world..
The hits keep on coming. Current status of the GSE managers; tap dancing on a bubble, cigar and whiskey in hand.
Central planning never works.
the current home prices makes the 2009 financial crisis prices the floor…