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What Now? - Working in an HVCC environment

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by George Hatch, Dec 27, 2008.

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  1. George Hatch

    George Hatch Elite Member

    308
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    It looks like there is still a little room for some changes to be made to the GSE appraisal niche, but the overall thrust of it to cut the mortgage brokers out of the loop will probably remain.

    There are a lot of appraisers who have built their appraisal practice on a business model that is oriented to the MB-appraiser relationship. Putting aside the debate of whether that should ever have been allowed to become the dominant business model, the fact remains that the GSEs have agreed not to enable it any more. That is a fact that most residential appraisers are going to have to deal with. These changes will (probably) occur whether appraisers are ready to do deal with them or not.

    The trick is: how best to adapt?

    The first step to prevailing in any environment is to identify the elements of that environment as objectively as you can. The HVCC is going to have a lot of consequences, and the apparent bias toward the AMCs won't be the only "unintended" consequence. There will be others, too. Those appraisers who are able to identify as many of them in advance as is possible may end up having the edge over those who passively sit back and simply allow events to transpire.

    With that in mind, a little brainstorming may be in order. Here's a glimpse of what has been going through my mind. The following posts are broken into smaller segments because some posters like to use the "quote" function:
     
  2. George Hatch

    George Hatch Elite Member

    308
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    Some of the lenders who have not been using AMCs don't do it because they don't like the results. Their response to the HVCC may not involve going to an AMC. They may go to direct engagement instead. A few of them might even boost their appraisal staffs. We already know that 100% of these direct lenders will be doing more reviews, presumably by using appraisers for many of them.

    One of the elements of the HVCC is for the direct lenders and AMCs to use people who "are trained". Meaning, they intended to discourage the control of appraisers by clerks with minimal understanding of the appraisal process. That could mean more opportunities for appraisers at varying levels of training and experience.

    Many of the lenders will not want to order virgin appraisals for deals the MBs are shopping around - they'll go directly to the original appraiser for that "new assignment", even if that appraiser did the first one through an AMC. Most AMC appraisers aren't going to be feeling a whole lot of loyalty to the original client, or the AMC, so there won't be much to stop them from just negotiating their best deal and taking that new assignment for whatever fee the market will bear.

    There are apparently something like ~45,000 mortgage brokerages in the U.S. The employees of these businesses are not all going to just go away simply because they can no longer control the appraiser. It's not like many of them have significantly marketable skills outside the loan origination business. No, they're going to keep plugging away and submitting deals. And the only way they'll be able to reliably get an advance indication of which deals have the potential to fund and how to price those deals is to get a value opinion from an AVM or an appraiser; the former being cheaper but often almost worthless, the latter being 10x better in many cases.

    You never know, some of the lenders might actually demand that wholesale packages being submitted to them include a desktop appraisal provided at borrower or MB expense. After all, not even the lenders are going to like the hit ratio that will result from blindly accepting packages and sending appraisal assignments out. Another possibility is the use of separate DAs by lenders to vet wholesale packages prior to processing them.

    If appraisers are willing to market it, we may finally see the rise of the for-pay desktop appraisal for MBs as well as lenders.
     
  3. George Hatch

    George Hatch Elite Member

    308
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    Many of the fee shops that still remain today probably will be starved out due to the migration of half the mortgage appraisal assignments away from MBs and towards direct lenders and AMCs. The veteran appraisers at those fee shops will simply put on a different company logo as they switch from working for half for a fee shop to working for half for an AMC. They might end up having access to more assignments. Heck, their fee splits might even increase.

    The trainees are probably toast; not because of any decrease in the degree to which their supervisors will be willing and able to lie about "did inspect", but simply due to the decrease in the number of trainee-driven fee shops. Unlike with the MBs, when a direct lender is "the client" and they have the option to make the choice they won't overtly choose to deal with trainees.

    Heck, a few of them won't even choose to deal with State Licensed appraisers.

    No more trainee-client relationships. No matter how you feel about the appraiser-MB business model you have to recognize that the trainee-MB relationship is a pestilence that should have never been allowed.

    These factors will work against the interests of those appraisers who have been much better at running a business than actually doing appraisal work. I guess people can decide for themselves how much sympathy to have for these appraisers-in-name-only.

    Strangely enough, I think many of the fee shops that remain viable in an HVCC environment may actually come out stronger due to the reduction of competing fee shops. If an appraiser has already been running a fee shop based on their relationships with direct lenders and non-lending clients rather than MBs then those relationships aren't going to be changing. There will still be the odd request come in for large bundles of assignments that will basically have to be done by a single fee shop for the purposes of continuity, both for mortgage underwriting as well as other functions. There will be fewer shops capable of handling such requests.

    This last factor could lend considerable incentive for at least a few appraisers to seek and obtain an SRA designation.

    The decline of the sweatshops and the abolition of trainee-client relationships will return most of the excess assignments these operations were soaking up back into the overall pool of assignments. Who among us knows what volumes these operations were soaking up and what effect they've already had on the existing fee splits?


    A few of the appraisers who refuse to work for AMCs will be able to realign themselves away from MBs without having to deal with the AMCs. That includes both the lending and non-lending assignments. Others will be forced out of the business altogether. The workloads - both lending and non-lending - that these appraisers were performing will also return to the overall pool of assignments.

    If we put all these factors together, it looks to me like there will actually end up being more appraisal assignments overall. More work, dispersed more evenly. Think about it; what are the ramifications if the gross number of assignments increases by 5% (due to reviews and new assignments) and 15% of the workload gets redistributed away from the trainees and the stragglers?



    The extent to which any of these changes are good or evil will depend on the individual appraiser's perspective and their willingness and ability to adapt. No matter what, the appraisers who have been relying on the MBs for the bulk of their clientele will be suffering for the decisions they have made in the past that led to their reliance on that business model. The bigger the transition they are forced to make, the more pain will be involved. For some appraisers, the pain involved will be too much to bear.
     
  4. George Hatch

    George Hatch Elite Member

    308
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    With all that in mind, WHAT NOW?

    Are you now willing to market yourself to direct lenders and non-lending clients? Are you now willing to market "new" workproducts to your MB clients and/or are you willing to consider accepting assignments for different types of workproducts other than what you've traditionally offered in the past? Are you finally willing to choose to align with and support and even market the alternatives to appraiser-hostile AMCs?

    Not every aspect of your appraisal business is under the control of external forces like the MBs or the AMCs or the direct lenders or even the government. There are some aspects that only you control.

    You can't change what decisions the other players make, but you can make your own choices.
     
  5. Mr Rex

    Mr Rex Elite Member

    213
    Jan 12, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    I have personally spent the last week or so upgrading technologically so that I can hopefully reduce the overall time it takes me to produce a report and keep up with billing etc. Dual widescreens on the desktop, with 1 in portrait for the 11 x 14 forms, a Pentablet for field data gathering and remote MLS access, paperless record keeping, using more of the bells and whistles in my software package like MLS importation of comps etc. If I am forced to compete in the AMC pool, then I want to be as lean and mean as possible. If I don't and am able to secure more direct lenders, attornies, estate work, and other non lending assignments, it will only make me more efficient for those assignments as well.

    While I have had many of these tools available in the past, I have not taken advantage of them fully and intend to do so now. I have also diversified so that I am not a 1 or 2 trick pony, as I think the next 12 months are going to be very interesting to say the least. As the cajuns say, Laissez les bon temp rouler. Let the good times roll.:unsure:
     
  6. Greenback

    Greenback Senior Member

    0
    Apr 20, 2007
    Professional Status:
    Appraiser Trainee
    State:
    Louisiana
    I guess I'm an optimistic Trainee. I'm not scared, and I'll never quit. I only see opportunity. I see no reason to fail; the only option is success. Full speed ahead! I will get my certification no matter the circumstances. This Trainee is far from being toast.

    Even-so, there's no reason to take eyes off the De Minimis and the AVM. The short run looks nice and cozy (better than yesterday's dilemma so to speak), but, the application of the principle of substitution (without comsidering the sacrifice) appears to be too tempting for the powers that be..

    Sincerely,
     
    Last edited: Dec 27, 2008
  7. INSPECTOR

    INSPECTOR Sophomore Member

    0
    Jul 4, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Thin man

    Lean and mean is certainly good in most cases, but if our appraisals are to be judged for quality by the use of an AVM or BPO as the HVCC states then we are going to be spending a lot of time reviewing lender supplied comps and defending our own. No appraisals will not be “faster” in the future regardless of how much technology we use. Somehow we have to impress upon the powers that be how pointless BPO's and AVM's are and get them better acquainted with desktop appraisals. Could be that once the IVPI is established complaints from appraisers regarding the use of same will make them take note......ok not likely.:Eyecrazy:
     
  8. Mike Kennedy

    Mike Kennedy Elite Member

    254
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    how pointless BPO's and AVM's are and get them better acquainted with desktop appraisals

    ALL 3 - unverified garbage in - garbage out. No problemo - they only need "the $$ number" any way :new_smile-l: WITH an Appraisers License and E&O.


    the game plays on ...........IN EARNEST THIS TIME.


    Desktops - nah .........Insured AVhums at 110 bucks a throw (or less).

    http://rds.yahoo.com/_ylt=A0geu7b4t1ZJ62MB1bpXNyoA;_ylu=X3oDMTEzM2FzNHBxBHNlYwNzcgRwb3MDNwRjb2xvA2FjMgR2dGlkA0gyMjNfMTI3/SIG=125unso8p/EXP=1230506360/**http%3a//www.allbusiness.com/finance/3595663-1.html


    http://rds.yahoo.com/_ylt=A0geu7b4t...8A&tier=4&id=8D306750D74F412CB71A4A9753245E8D
     
    Last edited: Dec 27, 2008
  9. Mr Rex

    Mr Rex Elite Member

    213
    Jan 12, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    North Carolina
    Mike, I only briefly read through your links, but would it be a stretch to say an Appraiser using technology (and creating their own AVM for their individual market area) and acquiring the proper "bonding" could compete with the "insured" AVMs? The days of the interior walk through and 3 sold comps may not be dead, but is dying. Care to share ways to make a new idea work, rather than refuse anything but 3+ comps and a cloud of dust?Or is that beyond your SOW?:rof:
     
  10. TJSum

    TJSum Elite Member

    16
    Nov 12, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    Maryland
    George, you are very correct that there will be many consequences to the HVCC and many will be unintended. It could turn out that the mortgage broker will still "order" the appraisal, before submitting the loan package, through the lenders approved AMCs. This way the wholesale packages will be complete upon arrival to the lender. I predict there will be "skippy" AMCs just as there are skippy appraisers. Once the recovery starts, the spotlight will fade, it will be the same ole, same ole once again. The better AMCs will lose business to the skippy AMCs and there will be the same pressures to make deals work. It could turn out to be the same song and dance, only on a larger scale.

    If a Lender only offers strict AMC options to the brokers, they will lose massive business to those lenders who will allow use of the skippy AMCs. The AMC business model does not stop pressure, it just hides it better and gives the lenders better cover.
     
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