VA Appraisal Request Form at Heart of AIR Violation Class Action
While the statute doesn’t explicitly mention that providing a loan amount is an AIR violation…
When a mortgage lender seeks to make a Veterans Administration-backed home loan, the lender requests an appraisal from the VA’s appraiser panel by using a form entitled Request for Determination of Reasonable Value. For many years, until it was revised in July 2022, this form had a box labelled “Refinancing-Amount of Proposed Loan.” This box asked the lender to fill in the proposed loan amount for refinances. Once submitted, the form begins the appraisal process and is provided to the appraiser assigned by the VA to perform the appraisal.
A lawsuit – Gregory v. Toler Appraisal Group and Gateway Mortgage Group – filed on behalf of a proposed class of borrowers in West Virginia alleges there’s problem here. The lead plaintiff contends that the mortgage lender’s provision of the proposed loan amount to an appraiser via use of this form violated federal Appraisal Independence Requirements (“AIR”) that are part of the Truth in Lending Act (in 15 U.S.C. § 1639e). These requirements make it unlawful for a creditor to seek “to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction.” While the statute doesn’t explicitly mention that providing a loan amount is an AIR violation, the lawsuit complaint points to guidance in the Federal Interagency Appraisal and Evaluation Guidelines. That guidance states that inappropriate actions violating valuation independence include: “Communicating a predetermined, expected, or qualifying estimate of value, or a loan amount or target loan-to-value ratio to an appraiser or person performing an evaluation.”
Accordingly, in this case, the plaintiff borrower alleges that Gateway Mortgage violated federal Appraisal Independence Requirements when it included the proposed loan amount in the appraisal request for her loan back in 2018 and in the appraisal request forms for other VA borrowers. On behalf of other Gateway Mortgage borrowers in West Virginia, the action seeks, among other potential remedies:
- Restitution to borrowers of the appraisal fees;
- Statutory damages of up to $4,000 per borrower; and
- Other damages that may stem from the alleged AIR violations.
The case also includes an individual claim by the plaintiff that the appraisal for her loan was inflated – and she is suing the appraisal firm for alleged professional negligence on that basis. A central problem alleged with the appraisal is that the home described in the appraisal is not located on the real property appraised.
While this case is currently pending in U.S. District Court for the Southern District of West Virginia, it was first filed in April 2020. Why am I writing about it now? Because the District Court has just ruled on an important issue.
Gateway Mortgage sought to have the AIR violation claims dismissed, asserting in a motion for judgment on the pleadings that AIR violations could not be pursued by private plaintiffs. In legal jargon, Gateway Mortgage contended that 15 U.S.C. §1639e does not create a “private right of action.” On May 17, 2023, however, the Court ruled against Gateway Mortgage on that fundamental point. As the Court wrote: “Looking at the language of the statute, the Court finds no ambiguity – Congress intended to create a private right of action for violations of §1639e.“
The Court’s unambiguous ruling shines a light on an opening for other claims by borrowers alleging AIR violations.
Links to the complaint in the action and the Court’s ruling are below.
- VA Appraisal Request Form at Heart of AIR Violation Class Action - May 23, 2023
- Lender Liability for a Negligent Appraisal? - October 26, 2022
- CFPB Investigations in Alleged Appraisal Discrimination - August 9, 2022
Yes. That field should be removed. But it doesn’t stop the borrower from telling you what he needs, while he giggles, knowing he has just attempted to influence you.
The field was removed from the 1805 last year.
Yet they still communicate this through the assignment details…
Thanks Peter!
Very interesting. Now, playing devil’s advocate here, couldn’t it be said that providing a Contract for Purchase of a stated property (per USPAP, and GSE/VA/FHA guidelines) to the appraiser, which contains the agreed purchase amount could also be tantamount to ‘influencing the appraiser’ such as this VA case alleges?
That’s a big yes!
Absolutley
Took the damn thought right out of my head!!
I’ve always asked and wondered why the sales contract was included due to the influence factor. I always use a range of values in my comp search,ie,if a home is contracted for $300,000, common sense dictates that the home is worth more than 200K and less than 400K, I always include the following statement; “In the search for suitable, similar sold comps the contracted sales price is NEVER a comp search criteria or parameter”.
Price relations in appraisal reporting is one of the more sophisticated and complex skills an appraiser picks up over time. Geesh, and lenders jump on that like nobodies business if you dare mention a price search filter, even if there is no way this is biased, like a $100k margin on either side, still have to avoid that method. In most markets which contain an adequate set of reasonably uniform properties, simple data sorting for a more narrow home type or home character will usually result in the same thing as a price search filter, but with additional benefits and market insight, as the price search can omit the outliers. Like only one certain type, size filter, ten years age up down, adjust out the rest. This market overview approach helps the appraiser understand the high and low potential, aka floor price, ceiling price, middle of the market, etc. Valuation analysis becomes more comprehensive with time and repetition, and get better reliable MC data. There is the low side, the middle, the highest and best market. Writing in laymen explanation within free writing areas helps limit the reader complaints, confusion, keeps clarification and revision requests down. Like for the topic of this article one wonders if the appraiser might have had better protection with a clearer use and recognition of the difference between ordinary and extra ordinary assumptions, because there is a difference and it’s important to be specific which one the appraiser may have relied on. I like to take the position that I’m doing all the value analysis work and want to share as much of the data and conclusions as possible for the reader, so if they have a different take on values, they can view the research exactly as I did. The graph and data extraction thing is good but the meaning of that approach can be lost on the common reader.
This article got me thinking of law and such, and then I got another annoying robocall, so I checked in on the stir/shaken thing and such. Filing scam call complaints daily is quite the chore. 25 billion voip sourced robo calls, from just this one company. Unbelievable, at least they’re doing something.
https://coag.gov/press-releases/attorney-general-phil-weiser-sues-avid-telecom-over-illegal-robocalls/
When I have asked VA about this very topic, should I evoke Tide Water Protocol on orders where this number can’t possibly be met, they simply stated that figure is to be ignored in all cases. However, that number was use in retribution against me that I should have notified the lender/client (Guild in this case) that value needed to get the loan to go through was possible and they should cancel the order. VA was notified, but nothing done about it (they don’t want to lose Guild’s VA business). Guild since terminated all orders that are not VA (they can’t stop the VA order from coming to me). If we can’t call Tide Water and I can’t provide value for a house that I haven’t even inspected (any value provided over the phone is a value opinion/conclusion), seem like it’s just another example of how appraiser’s are there to speak for the market, but the market just want all things to go through at all time and there is simply no stopping it. This little box on the VA form is just the tip of the iceberg with week to week operations.
Yeah, well it’s like I was saying below, what if the lender would simply lean a little more to the middle, get on the phone, be honest with the borrower, be willing to sit back down and reform the terms of the deal. The instances like you mention are less likely to happen if a lender was using reliable valuation services at a different point in the mortgage origination pipeline, ordering the appraisal first, rather than last, using comp search methods prior to solidifying full engagement. The miracle which is automatic valuation modeling is coming up a little short lately.
It’s unlikely that a power player like the lender you speak of would pull back from one of the three major GSE’s. More likely there are simple technical controls to sub out a specific appraiser who’s not a good fit for their process needs. All lenders do that and it’s not necessarily a bad thing, to be able to work with who works best for your company needs. Sometimes they refer to this as mini panels or parsed vendor lists, things like that.
One can imagine the VA or any other well formed appraiser panel functions as a true rotational clearing house, and sometimes they do, but not always. The trick is to get on panel, provide best of ability performance, and be patient.
Personally I jumped off the VA list because it was tiresome and tedious to work with every single lender out there, it’s way nicer to just land with a small set of well performing reliable lenders who’s process you agree with. Run across fewer desperate borrowers. That being said though, it’s give and take, there is more potential and staying power with the VA model from the appraisers perspective, just comes with a lot of hassle though. Those same lenders whom use amc’s are also forced to deal with appraisers directly under the VA model, they let their resentment of the independent process be know, they can’t help themselves. I would not read too much into that, eventually you’ll be back in rotation. Don’t brush off Guild, they’re one of the better ones.
Missing the IVPI proposal yet?
https://www.workingre.com/wp-content/uploads/2013/08/IVPI-Proposalfinal.pdf
So, a Realtor that refuses access to an appraiser because they killed the Realtor’s last deal could be sued by the appraiser for violating AIR? This could get interesting.
Yes. That is also violation of NAR golden rules, conduct rules 10, 11, 12 and 15 if I remember. They are attempting to influence the market and/or which contractors are permitted to work on site. It is a form of discrimination. However, unless you are actually going to sue someone privately, don’t expect anyone in the regulatory industry to care.
VA can get away with just about anything. What could regulatory agencies do?
The regulator agencies could actually uphold the laws in place. Simple as that. Dodd Frank, Air, etc.
The reason the VA holds up better with more integrity than other GSE’s is not due to the management structure or any specific difference in rule making. The reason is primarily because military service persons have a better understanding of their constitutional rights, they are more prone and likely to insist on due process. Those benefits rarely flow all the way downstream to the appraisal value servicer.
Besides, when the CFPB wrote away the AIR provisions in Dodd Frank Regulation Z on appraisal independence which specifically levied $10k/$20k daily fines for failure to compensate appraisers with Customary AND Reasonable fee structures, that paper tiger lost it’s teeth.
Good luck taking a NAR backed Realtor to civil court for affecting an appraisers lender client arrangements. You would need a damned miracle or intervention from a superior race of sentient beings from another galaxy to pull that one off. All it takes is a single phone call, happens every single day of the week. It’s better to just let the realty person or broker company know they’re incompetent by simply picking up the phone and replacing them with someone else. The only just deserts an appraiser can expect in this system is a 100% fee and robust consistent fee for direct assignment and somehow form a remarkably low personal tax rate. This job is not for everyone.
I am a VA appraiser and I do not recall that box being filled in. While I agree with Dave’s comments it is not unusual for me to find issues with contracts that need correcting. Maybe that is why we get the contract??
I am as well. The sales contract is a piece of market data that needs to be analyzed. Some one signed a contract that they would pay “x” for said residence and putting down “x” in earnest money and/or an actual down payment. The bank is asking if the assets are worth the note being sought at a minimum, yes or no. Then the report is the articulation of the simple yes or no. I think the sale contract should be looked and provided, but the other side of the coin does make sense where it CAN unintentionally create bias.
Close and I understand your points, well taken regardless. Spencer, imagine a better run system, like comp searching, or some better elevation and respect for the appraisers vital role and important worthy participation in mortgage lending. Perhaps showing actual respect for the appraisers independent conclusions on property value, forming the terms of the deal around the appraisers figure, rather than pushing the appraiser to provide values that fit their preconceived terms. Like perhaps showing actual compassion and respect for borrowers to assure they do not become over leveraged. I think somewhere in some dusty legal manual long since filed away at the bank, they used to refer to this concept as being an ethical responsible mortgage originator.
Sure with concept of collateral valuation consideration, that’s valid but is not the entire picture. How about some humble pie and reigning in lenders to better understand their job is not to say yes every damned time irregardless of harm. Personally I only work with salaried based mortgage lenders for my persona mortgage loan interests, for this exact reason. Protect yourself, the bias and harm is baked into the majority of originators business structures, they continue to form new schemes which increase risk while simultaneously managing the appraiser right out of the picture. In pursuit of the loan commission.
If there is bias to be found, it’s baked into this ridiculous notion that the terms of the deal must be formed prior to any communication with the appraiser, and absent of any reliable human based appraisal valuation analysis service. You know, like before Coumo sold us all down the river with HVCC to bail out his pinstripe bankster bandit buddies and their sweetheart junk fee raking insider colluding appraiser value pressuring amc buddies at EappraiseIT/Corelogic.
Because that’s how it used to work before a few bad apple appraiser and mortgage people ruined it for every single borrower and value related servicer in this entire country with their inflated value schemes which sent something like one in ten or more people into foreclosure. And now every appraiser is under a state of permanent probation, unending scrutiny, and unyielding pressure to posture as subservient to lenders. Or else the appraisers are denied participation in our own industry, forced to accept an ongoing conscious and blatant implementation of restraint of trade and racketeering activities perpetuated by groups like REVAA appraisal management company representatives, as somehow being legitimate business practices. The schemes they leverage upon the appraisal industry, in turn leveraging upon nearly every borrower in this country. Co opting the TAF leadership, implementing pay to play, a never ending series of insider trades to monopolize the lending industry. They’ll do and say anything. I guess give everyone a refund on their appraisal fees, as the lenders baked in pressures rendered that as inconsequential irrelevant service anyways. Throw the whole thing away and just let the lenders have total control without any meaningful checks and balances systems. That’s the federal governments idea of ‘consumer protection’, and ‘industry modernization’. One more time; Where does the actual money come from?
https://www.valuationlegal.com/2010/06/cuomo-v-eappraiseit-no-surprise-that-appellate-court-affirms-denial-of-eappraiseits-motion-to-dismiss/
Given that a lender does not select the VA appraiser or to directly provide the form to the appraiser I do not see how it is an AIR violation.
The allegation of including property not in the legal description is another issue.
It is because the lender is providing a predetermined value point they need to hit in order to make the loan work. It doesn’t matter the name of the Appraiser. They don’t care who the appraiser is, but what value point they hit. That is the whole, send a message to the appraiser with the number that work. I literally just got a VA order with a value point listed. The lender and the party that provides the order show a number to hit.
And if the appraiser doesn’t hit the number?
I have already shared my experience with one client where I lost all other work with them that wasn’t VA. I also shared that the regulatory agencies don’t really care, or at least they don’t care about small time stuff. If it was a multi million issue that is reoccurring, a news splash, they won’t lift a finger. Only option is to sue people personally, or take it and move on to new clients.
Allow me to post ten dozen instances of lenders somehow either purposeful or accidental, pushing ‘the number’ somehow into my field of view. It happens, this is not that big of a deal for the appraiser to know the terms of mortgage lending arrangements. As if the VA is somehow more exceptional than other GSE’s, they’re not. VA appraisers know darn well how top mortgage people are on the horn every single time like take care of our special borrower. Furthermore, only on paper is the notion true that nobody ever influences the rotation of appraiser selection. All it takes is a single upset phone call, you’re out. This happens to a random appraiser somewhere in this country literally every single day of the week.
Seems ‘thin’. VA has also had a Tidewater provision that absolutely runs contrary to AIR. If AV is lower than contract Tidewater had to be invoked. In a nutshell it tells borrower and agents value is an is due and come back with your nest support for value (like an ROV in advance.)
Flip side…back in 1971 I learned CRV / value will not come in higher than requested amount. In a property split on $25k house Vet only asked for $12,500. That’s what appraisal came in at.
Can’t imagine a vet. feeling screwed by a system that lets them buy with no money down and no closing costs.
It will be interesting to see how jury goes. Plaintiffs could win the battle and lose the war.
Mike Ford, Tidewater allows the agents to present sales to support the contract price. However, it is extremely rare that they can. So it’s pissing in the wind and proves the appraisers point that the contract price is too high. It also diffuses the situation where tempers are flaring and shows the agent to be at fault for not representing their buyers’ best interests. So I personally think it’s a good thing.
Tide Water is the pinnical of the way the entire industry should be run. If they appraiser can’t locate sale and the agents have sales they think are relevant, it has helped with the transparency of the entire process. 1. It let the seller/agent know the were just fishing with a high listing price ( or acting out of the norm with buyers bidding up); 2. Typically does assist in proving the appraiser’s point with sales that are mostly price grabs, or going well out side of typical search perimeters for price grabs; 3. On the off chance there was a listing that was mislabeled, or lacked any labeling and therefore didn’t show up in your searches, can then be used in the report. I have only had this happen 2 in all of the Tide Water’s that I have evoked. This would be SOOOO helpful in FHA and conventional orders. I think this would allow for folks to understand more about what appraiser’s do and how we do what we do.
Sounds like a great idea!
I know what Tidewater is. As to the frequency they fail to provide support, it depends.
The point is that it is a routine and accepted (by VA) disclosure of contract amount and an additional opportunity for involved parties to provide any information they may have failed to provide before.
That field has been removed from the 1805. The new 1805 form is dated Jan 2022.
Silly. The previous model of comp searching with appraisers seemed to make more sense. There is a difference between knowing the number and being pressured to hit the number. What’s next, with hold the contract from the appraiser too? Every single regulatory move just makes the target on the appraisers back larger, offloading liability and operational concern risk from everyone else, onto the appraiser. There is nothing wrong with the appraiser knowing the terms of the deal, in fact, rescind these rules and just go back to comp searching again. It was so easy to tell ethical brokers from predatory ones before these rules came forth. The predatory ones shopped the comp search to hit unrealistic numbers (of which the majority body of foreclosures eventually came from, which is how many of those whom participated in that process ultimately landed on suspension revocation lists or otherwise washed out), and the ethical brokers simply assigned direct assignment and skipped the comp search process all together. Or perhaps they still would comp search, one single time, to their individually trusted appraiser, then honestly relay the appraisers estimates back to the borrower before forming the terms of the deal, and everyone was happy. Hardly anybody became over leveraged. Instances of being disappointing with appraisers full service activity were rare, liability exposure was a fraction of what occurs now. And best of all, there were no predatory appraisal management companies preying on appraisers and mortgage lending consumers under this illusionary appraiser independence bull.
Stop relying on just the headlines, read the case file. The heart of this one is a divorce which happened within the first few years, and what appears to be generational property holding of multiple parcels, of which it appears that there was confusion what was included in terms of the mortgage, and what was not. I’m not quite clear because they don’t tackle the notes of review and assessors detail directly in the file, but I imagine one could research this amazing foresty area properties plat maps and property description to better understand how this occurred. My bet would be on systemic data irregularities where a seemingly benign mistake with multiple parcel identification recording steamrolled into the digital age, and everyone just took it for granted that information was accurate. What came to mind first for me after reading the file was how in the hell could an appraiser even begin to navigate that kind of complexity if relying on a third party property inspector, or having such unreliable non qualified support systems like having to run that order through an appraisal management company. For a tenth of the fee, expected to flip them in a half ours time on a bifurcated form. Yet another proof positive point the people running the ‘appraisal modernization’ campaign are plainly incompetent.
Direct assignment or bust. Additionally, there is nothing unethical about knowing the terms of the deal. Protect yourself, because all the liability is passed onto the appraiser. Take a very special note that (correct me if I”m wrong, it’s a difficult read), but take very special note that nowhere through the course of these proceedings, did the court challenge or even touch on the matter of the so called ‘intended user’ issue. Personally I’ll continue to operate under the duty of care principals, that regardless of whatever is written in the appraisal, everyone and their mother can and will rely on the appraisal report conclusions. Yet another instance of blowback occurring years later. Who in their right mind would skip the essential step of redundant parcel identification review and plat map verification at the county seat? The appraiser whom was sued, that’s who. Has that guy ever heard of walking the property? The lender was stupid, why didn’t they just adjust the loan down or release the lady’s interest or something, ridiculous. Talk to me about appraiser independence. That’s the appraisers sole and lone responsibility, nobody elses. Stop supporting the illogical notion that the appraiser somehow is more independent or more competent when forced to operate in the blind with inadequate data or poorly qualified information. The trip point for this one appears to be lack of adherence to the essential step of qualifying data from multiple sources, including assessor direct research. That’s how these things shake out, you can’t control what happens with peoples personal interests. There is always someone whom dies, divorces, becomes unable to work, and that’s when, for the very first time years later, people actually perform due diligence and take a hard look at ‘the appraisal’. Damn, I need to get out and do some yard work. I’m refusing to touch the mower because this industry crushed all my hopes and aspirations, just wasted talent.
I would sure like to see what’s going on in the courts and how they’re handling these issues. The hell with the sale agreement being provided or not. What’s in the report? Is the final opinion of value supported by the information provided in the report and is the analyses performed supportive? If so, wouldn’t it be harder to prove bias or anything else the accusers want to prove? Also, why not sue The Appraisal Foundation that’s authorized by congress “as the Source of Appraisal Standards…” as they are the ones who state, “an appraiser must…analyze all sales agreements of sale…?” Ultimately, it’s always about the appraiser.
I get where you are coming from, but you brough up another interesting point, analyze all sales agreements…Yes we are. You would be shocked at how many agents I ask for a redacted copy of the sales agreements and they say no. Even in the pandemic times with everything selling for higher at every turn. I would be denied so many times when the agents say the have “x” offers above listing, or at the same price, but when it’s put up or shut up….they chose shut up more times than not.
This is also the case in the request, or notification of value for VA when you first get an assignment, to get the loans to go through. Everyone that is not an appraiser seems to think they know what the value is, but as soon as you start asking for support, or where they got the notion their value….crickets. Nothing but crickets.
We are the easy target to point the finger at in all situations due to “other’s” preconceived notions of value. I assume it there wasn’t value estimates splattered all over the internet, there would be a greater reliance of what an appraiser actually said and not what all the unlicensed sources are saying.