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Scope of Work Responsibilty

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by Stephen J. Vertin MAI, Sep 11, 2007.

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  1. Stephen J. Vertin MAI

    Stephen J. Vertin MAI Senior Member
    Gold Supporting Member

    5
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    I took USPAP seven hour update yesterday. The AI class really hit hard the appraisers responsibility in controlling the scope of work. The bottom line was "the appraiser is responsible for scope selection and implementation". There is no doubt this point was hammered hard.

    This aspect of USPAP seems really out of touch with the realities of the modern biding and puts an uncontrollable strain on appraisers. Especially on RIMs'. These systems provide much of the scope already. Their instructions are always spelled out, i.e., a drive-by, one approach to value, two approaches, etc......., I fully understand why the client would want this control. They are trying to get a handle on pricing appraisals in order to get the lowest fees. You simply can not have people making up scopes in the bid process due to fee spreads.

    What I do not understand is how the appraiser is suppose to provide a logical scope of work without pertinent information (remember you are totally responsible). The most important of which is credit worthiness. If I am a lender and have a client who has $2 million in the bank, a house that is paid for and excellent credit I may only want a drive-by for a $20,000 loan secured by a $500,000 property. However, I may want a complete report if it is a sub-prime loan where the property is near 100 percent financed. These are obvious scope of work issues. However, there are examples where latter loans only had drive-bys. Loan goes bad, regulators now can go after appraisers due to inappropriate scope of work.

    Everyone realizes value confidence intervals change depending on credit worthiness and security held. Much of the scope is based on the value confidence interval required. But we have little relevant information as to this issue.

    When I questioned the instructor on this issue his response was to call the client and inquire as to the borrowers financial means and credit worthiness. Are other people doing this?

    Further it was the instructor's opinion this is freeing allowing us greater ability to produce credibly. However, I see it as a step backwards. For the most part I think it will pigeon hole most appraisers into one product, complete self-contained reports due to liability. What do you think?
     
  2. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    I agree with you. We have 'choices', but they will hurt us.
     
  3. PropertyEconomics

    PropertyEconomics Elite Member

    0
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico

    Mr Vertin ... thank you so much for your post ... I believe it is in the wrong place ... as I believe this to be URGENT and I hope the moderators move it there ... only because it deserves URGENT ATTENTION ...

    The Update is not available in my market yet, however, I forsee appraisers being in a position of not being able to obtain the data as it is most probably covered by Graham/Leigh/Bliley ... and is a privacy issue ... my initial reaction is that this is the final nail in the appraisers coffin as now we are responsible for appraisal of the borrower as well as the collateral. I have long said that in the old days of lending two appraisals were done ... one for collateral and one of the borrower for credit-worthiness ... if this is the new rule .... I will take some lending / finance classes, I will raise my fees, and I will plan for my demise within this industry.
    This is a prime example of the ASB not giving one damn iota of care about the health or well being of an appraiser ... but rather is further proof that more burden shall be borne on our backs for things for which we have no control.
    I fully believe your posting ... and if it is true ... heaven help us.


    ADD: Doesnt this further fly in the face of USPAP in that the appraisers are to be unbiased in their analysis of the property value ... wouldnt knowing the credit worthiness of the borrower have a tendency to sway an appraiser toward more conservative values in instances where we question whether the borrower can pay the loan back? Maybe I am reading too much into this but it seems to me this is agasint other provisions of USPAP requiring the appraiser to NOT know certain things for fear of being swayed. Im at a complete and utter loss here. The implications are astounding and very far reaching.

    Is there ANY CHANCE the instructor was wrong????
     
    Last edited: Sep 11, 2007
  4. Joyce Potts

    Joyce Potts Elite Member

    11
    Feb 6, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Was the appraiser's responsibility and/or liability also addressed as to their 'control' over the 'intended use' and the 'intended user' when using pre-printed FNMA forms?
     
  5. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    46
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    Interesting point, especially in the current market. More and more the appraiser is not being given estimated values and LTVs, so the appraiser doesn't know what type of confidence level that lender needs. The appraiser can certainly prepare a drive-by report, but IMHO, the burden of responsibility falls entirely on the lender. They got what they asked for.

    Fact is, lenders are still going to try to blame the appraiser. I've personally avoided that situation by not doing drivebys for lenders, with the occassional rare exception (about one every two years).
     
  6. Ross (CO)

    Ross (CO) Senior Member

    0
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Colorado
    The race to the bottom.....is quite fast and verifiably furious.
     
  7. Carnivore

    Carnivore Elite Member

    0
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Steven,

    I always found the lender SOW input based on credit and job history, etc was rather foolish and really none of our concern. As everyone knows real property market value is usually not very volatile. Whats determined MV today is probably going to be good several months in the future. On the other hand credit score or job history can disappear over night!

    This is where the ASB I think has failed. TO me the client only has input by providing conditions under which an appraisal can be done. Thats not making a SOW decision, thats should only be viewed as parameters for an appraiser to develope his/her SOW. I think this is a fine point and not very well understood by many appraisers and clients.

    Then again, I may just be all wet and stupid.
     
  8. The Matrix

    The Matrix Senior Member

    0
    Apr 28, 2003
    Professional Status:
    Certified General Appraiser
    State:
    Colorado
    Unfortunately, the public does not understand--Scope of Work--many believe an appraisal is an appraisal, is an appraisal. I believe, appraisals should be standardized in their level of research and quality. What the public is currently looking for is lower price, not understanding lower price and lower quality often go hand in hand. If scope of work were standardized..appraisers could re-establish their trust with the public, and lenders and the public could once again place trust in an appraisals bottom line. Currently, appraisals have too many disclaimers and limiting conditions. Many appraisals are written with the intent of freeing appraisers from all responsiblity for the content and the value conclusions in the appraisal report.

    A borrower's credit history should not determine SOW.
     
  9. Lawrence R.

    Lawrence R. Senior Member

    0
    Mar 27, 2007
    Professional Status:
    Certified General Appraiser
    State:
    South Carolina
    Fickle Forumites and the Mobilus Vulgarus

    I brought this point up about a month ago and was basically landbasted for it. I asked if anyone was considering creditworthiness during any part of the appriasal process--be it development or whether or not you would accept an order.

    I got shill cries and catterwalls about what would creitworthiness have to do with market value.

    Which anyone knows it has nothing to do with value, but may have a whole hell of a lot to do with whether or not you would accept an assignment.

    As for me, hell yeah, I don't want to "cosign" somebody who is barely hanging on finance 99.99% of full market value. I may not know I have, but if I could know, I would want to.

    Now, truth is, you can't be disclosed that info, GLB says no way. But You can know the loan amount and the bank involved, which may clue you in.

    I don't think credit will be a big factor in the short term...b/c paper is finding it hard to get approved these days.

    But, I wish I could know.
     
  10. Stephen J. Vertin MAI

    Stephen J. Vertin MAI Senior Member
    Gold Supporting Member

    5
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    I believe this is the most important issue in new USPAP changes and something to seriously be considered by all appraisers. You are correct that the USPAP section is not a very well read segment of this forum but I have to obey the rules for posting. I wish I could post it on more widely read segments.
    No, there is so little time in the update course.
    It did in 2005 but not in the updates of 2006. You are now responsible.
    Could you elaborate on this? I do not understand.
    I think there are to many types of assignments and market area difference for this. Verification alone has so many meanings depending on the data sources available and specific location.
    I disagree. I believe it is a tremendously important factor in the value confidence interval sought by the client. My first post exampled the two loans where such issue is important. Further the 2005 USPAP indicated scope was both an appraiser and client decision. Not simply an appraisers decision.
     
    Last edited: Sep 11, 2007
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