Waiving Appraisals & Lowering Appraisal Standards
Freddie getting aggressive in waiving appraisals & promoting appraisal free mortgages…
Yes, I have a ‘dog in the fight’ with this article, as I have been an Appraisal Institute member since 2003 (along with other association memberships since). But this article provides explanations about changes to the appraisal process I have not seen elsewhere.
Excerpt from “Dodd-Frank rollback weakens appraisal standards“
They started to evaluate whether they wanted to raise that appraisal threshold level from $250,000 to some figure… They left it untouched at $250,000 for residential, but they have increased the commercial real estate appraisal threshold level just in the last month in a half to $500,000…
You are seeing Freddie get very aggressive in waiving appraisals. I have seen ads where they are promoting the appraisal free mortgages. It is kind of a market-share play that they are undertaking. Of course Fannie is the larger player, but they are not going to just let Freddie do that. They are not going to just let Freddie step in there and take market share from them, and so they are going to race to the bottom. Our view is, haven’t we learned the lesson from the last 15 years? That is the last thing we should be doing with groups in conservatorship is allowing them to take risks, particularly on risk management when it comes to safety and soundness issues.
Could Congress have made changes that would help ease the shortage of appraisers in rural areas?
We need to make it an attractive proposition for appraisers to work in those markets. That comes down to issues like the regulatory environment for appraisers, the profitability of being an appraiser, the fees that are being paid in the market. This [the regulatory environment] is putting added pressure on the appraiser-service providers… How are we going to get new people into the industry or the next generation if we are waiving ourselves out of the process?
FNMA’s Appraisers’ Page
Buried within the vast FannieMae (FNMA) web site is an “Appraisers’ Page” filled with lots of info and links to various topics you should be aware of. You can sign up to receive notices from FNMA. You may want to ‘bookmark’ this link in your browser search function.
Keep in mind what you find and see here applies directly to FNMA, but investors, lenders, AMC’s, underwriters, FHA, VA, reviewers, etc., use this info in their work. Much of this this transfers to other users, however it is not 100% de-facto standard across the industry.
But, for the most part, following FNMA recommendations and appraisal policies is a good way to produce credible and well-documented residential reports.
Updated FNMA Selling Guide
FNMA updated their Selling Guide as of June 5, 2018. Part B applies to appraisals. FNMA now securitizes MFH loans, and this Selling Guide has info about that.
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Well that takes the liability off the appraiser and on to the realtor. Eventually the losses will fall on the backs of the taxpayer. And all for a $500 savings. If I were a seller or a buyer, I would want an appraisal.
When will appraisers face the facts? You are the telephone operators of the real estate industry. Caught between the pincers of greed and technology, you don’t stand a chance. In short, you are being exterminated one job at a time. Why be the last appraiser standing?
As far as GSE loan work goes Im inclined to agree that trend isn’t in our favor.
On the other hand non GSE work, and eventually legal work for people wanting to sue any and all parties involved in transactions where PIWS or hybrids were involved could be extremely lucrative.
Non client third parties are suing appraisers in ever increasing amounts. Falsely claiming reliance on appraisals. States don’t seem to care if people filing complaints were intended users or not either.
Given that mindset among potential litigants, I can see a huge new market opening up for us. I for one would consider it to be both poetic justice and personally rewarding to be assisting in lawsuits attacking the credibility of hybrids or PIW lender supplied values.
There are some VERY deep pockets involved (aside from one well known provider that doesn’t seem to have ever turned a profit).
Finally, real estate appraisal (review) would actually become fun again! Start revising your web pages early.
One presumes that because the hybrids are moving through on such a massive scale, but yet still packaged as some sort of regular mortgage instrument, we’ll be able to tap into that default management through large companies. Lenders just opened up the front door for lending fraud, no appraisal needed. Word will eventually get around.
The appraisal is just one of many drawn out bureaucratic processes involved with lending on real property. It’s not something people do every day and consumers are ignorant if they’re allowing real property lending to be a nonchalant thing where they don’t need to spend any time or money, or even stop to think about it as the process draws along.
But that’s the new face of predatory lending. Capture the mortgage consumer one day, have those deals closed the next day. Consumers won’t know what hit them. I wonder if they play so fast and loose with other finances they may be involved in. That’s what lenders say about real property now, time is the new king in lending. It’s no wonder millennials would rather rent, they know the mortgage lending landscape is rife with room for abuse, they witnessed what happened to the guy before them.
Lenders used to fish for a certain measure or type of customer, hooks and bait. Now they just cast a trolling net and are rather indiscriminate about who they catch and for what reasons. Consumers allow this to happen, it’s really confusing for many mortgage consumers, they’re just going to be captured long before they are able to become well educated adequately informed consumers. No shopping time allowed, we’ve already processed your application and are waiting to close.
Enter flat rate listing and buyers agency services, coupled with no appraisal loans, avm and hybrid backed valuation justification, the buyers and sellers will literally never speak to a professional except briefly, won’t’ learn anything, and will be at the mercy of all commission based interests the entire way without effective advocacy or protection from opposing interests advocacy. Appraisers need to put the lenders hat on in order to understand why they’re pushing this. They’ll never lose a customer and the customers frequency of engagement is likely to turn up substantially over time. Scoot the independents out of the way, own those customers. How many times have they had to hear yet another question their realty agent told them to ask, or feedback from the appraisal(er), whatever. It’s time for all of that to end. Loans without service time, they don’t even require a phone call. One button mortgages and avm’s. The big picture.
Exit Strategy 101
Retired Appraiser – How many YEARS have you been saying that? I had a bank owner come back from a conference on the late 90s and tell me “They really want to get rid of you guys. You should have an exit strategy”. I truly hope you are sipping cocktails on a beach somewhere instead of worrying about those of us that are still “surviving”. I do want to thank you for your constant negativism. That is always helpful.
I see it as complete lunacy Bryan; primarily because I’ve witnessed so many appraisers volunteer to live their lives within the appraisal meat grinder. I’m as far from a beach or retirement as you could possibly imagine. After leaving appraising in 2009 I went through my retirement savings taking care of an elderly parent for nearly six years, that my five siblings abandoned. I was simultaneously trading stocks to survive and make my savings last as long as they could. When my mom turned 86 my siblings suddenly reappeared with a scheme to throw me to the curb, cut communications with mom (lawyers friends come in handy in this case), throw her out of her home, and forced her under duress to sign over power of attorney so they could write her will for her. Her beloved pets were thrown away. She was forced to live with a daughter that she could barely endure. Needless to say, one and a half years later my mom was dead. I never even had a chance to say goodbye to her. Those six years were Hell on earth. I slept 4-5 hours a night if I was fortunate, and was under constant stress from watching mom decline, all while fighting the stock market to make my savings last. After she died I turned to extreme manual labor (a sweat shop lumber mill). Believe it or not it was just what I needed. I was 54 at the time and I watched an average of 3-5 men a week come in and quit the same week. One day we lost 3 new hires during the first 2 hours. I am there for as long as it takes to rebuild a stake to start an internet business. I burned both my appraisers license and my broker’s license around 2013 out of disgust for the profession. My Reason: Burn your bridges and you can’t retreat. I am thankful for burning them because doing the easy (stupid) thing and returning to appraising was tempting too many times. Don’t condemn manual labor appraisers, sometimes it’s the best way of clearing your head and allowing yourself to be creative. After a few months I was fortunate enough to move to night shift and run the 22 acre mill on my own. That allowed me more time to think. Early on in my night shift work I ran across a book by William Faulkner titled: As I Lay Dying. I remembered the book from high school but what impressed me was the fact that Faulkner wrote then book over a period of weeks while doing manual labor in a plant similar to where I was working. I decided that night to write a book for caregivers to both honor my mother and illustrate how devious family members can become as a parent nears the end of their life. I also decided that I would think my way out of that lumber mill without returning to appraising. I’ve made a great deal of progress over the past year by buying and selling virtual real estate (internet domains). One domain sale nearly matched my annual salary. That led to me buying more. I convey my story through Hell to illustrate the importance of burning bridges. When you can’t retreat you are forced into the position of becoming creative. In my case I forced myself into a corner when I left a 20 year appraisal career based solely on principle. I then forced myself onto the ledge when I committed to caring for my elderly mother with no regard for my own financial well being. My siblings were more than willing to push me from the ledge when their fears of being written out of her will took over.
Genesis 37:19-20 continues to repeat itself daily
But so does KARMA
Yeah. Sometimes I miss those jobs and hard work, kept me fit and they are helpful for a more level mental state. Isn’t it ironic that the appraisal ‘managers’ throughout the industry are quite often those wash outs whom can barely make it 8 hours at a desk, and have no license or achievement which really lends to their qualification to manage appraisers or have anything to do with construction, lending, or valuation services. Lenders continue to throw blindly at the wall. Business degree people, former appraisal office secretaries, people whom had been hr managers of companies, people whom have crawled up to management without ever having a single day in real estate or lending, former mb’s, and the list goes on. As if experience at multiple amc’s means anything, if you’ve never been in appraisal lending or construction in the first place. All of them now sit in those positions seeking to ‘manage the appraisal distribution process’. The only manager I’ve ever dealt with who’s worth the time of day, is the appropriately qualified certified or cg appraiser. The problem is with amc’s, tech people outnumber the singular licensed appraisal manager usually 5 to 1 or much more. Puppets. The problem with many ‘direct assignment’ outfits is the desk people are often younger phone hot shots, not at all suited or experienced for the task. Some cr appraiser whom was ‘the manager’ called me back from home, a baby crying in his arm, dog barking in the background. Why isn’t he appraising, one might ask? One underwriter whom refused to ring me back eventually did, her cat would not stop meowing. I’m going to need your fee and turn time for every single individual order or we are not able to send you orders. Permanently clueless to both the proper cost and value of the service. Clever illusions to justify a pay to play environment. It seems we’re the only professional on this side of the process, it would just be better if we could speak to other qualified professionals and either every single person involved in appraisal distribution should have to pass tests, hold licenses, and be personally accountable, or we should be allowed to engage directly with bankers and the separation from loan production rules should be rescinded. Your story is just one of many, approximately 130,000 appraisers stories whom have dealt with these betrayal of trust issues in mortgage lending in the past 10 years. The story must be told, somewhere, at some time. The root cause of course, is that non licensed under qualified persons injected into the process does more harm than good, unintended consequences are more common than competent management under current circumstances. I will never train a new appraiser under these conditions, few would.
David, I am so sorry to hear about your Mom and family members abusing her (and you). There really are no words to salve those particular kind of wounds. Sincerest condolences.
As for manual labor, all appraisers should do it periodically just to maintain some level of sanity. Something about manual labor that refocuses the mind to the task at hand, & away from all the business worries. For me, it was raising sunken boats. It ‘fit’ in between appraisals. Like appraising, not everyone could do it.
I understand the concept of burning bridges, and it seems it’s worked for you. I’d not recommend it for most people at our ages. I’ve been working more or less steadily since I was 15. That’s 52 years doing everything from shoveling up after very large dogs to being Budgetary Counselor for the nations largest Federal Credit Union.
Of all the jobs, I’ve liked real estate appraisal the most. It has been my full time career for over 32 years now. I’m pretty good at it. There have been a lot of interesting side jobs, but its appraising that gives the most personal satisfaction. I intend to work at least another 8 years, or as long as I am able to walk and drive.
In my experience, men that have worked all their lives have a tendency to die off when we suddenly stop. Besides there’s so much more I’d like to do. Particularly overseas real property appraisal development, adapted to the cultures involved – rather than merely extending our own broken model.
My point is I am a survivor – in some respects not unlike yourself. I’d survive with or without appraisal, BUT I will be damned if I let opportunists; corrupt regulators and con men turn my profession into a caricature of what it is supposed to be; or push me out of it.
I also know we can win in the long haul. Look what happened when all the appraisers started pushing back against Coester VMS. Now he’s on the verge of bankruptcy.
Arrogant corporate CEOs, and their government regulators should never underestimate the power of a whole lot of upset ‘little people.’ You could continue to contribute – if you chose to do so.
We, as a group do NOT have the resources ($$$$ and political allies) to do anything. Period.
Picture this in 2022, a high school kid is controlling a drone with a camera and a calculator for measurements.
Making an appointment to “Fly” through a Refi, Purchase, Reverse etc. Where will we be?
Fritz, when you don’t have something you need and want, you find out what it takes to acquire it. Remember trying to buy your first car?
Fritz, take heart, it’s not over, till it’s over. The primary point being there has never been and will never be any government which can effectively control risk management of lenders. The consumer takes the risk by stepping in that door, by signing their name. Caveat Emptor. The problem and solution are sung in the same note, consumer beware. This site has probably educated many a consumer, or at least given them room for pause. One by one, the mission of protecting consumers continues to be accomplished by the rarest but most valuable independent participator in real estate markets, the real estate appraiser.
Dick Bove: Big banks are losing lending business to smaller competitors and here’s why
The big banks may be losing touch with their customers due to the excessive use of “hi-tech” banking, while the smaller banks have continued to follow a policy of “hi-touch” service.
The small banks did not have the money to implement advanced technology. They bought some products from third party fintech companies, but in the main they did business through their branch systems.
Love to bank online? You are the next candidate to get hacked. Enjoy the convenience of it all, I’ll stick with checks, cash, and checks and balances.