Borrower Lying About Occupancy Status

[Webbed Feet]

<snip> ............... Mark it owner occupied and put a statement in the addendum that as per the owner of the home is owner occupied and that if this statement is false than the appraisal will be null and void.

Mr. Shapiro,

Pretty much I agree with your post. But what you just did above is you added a EA to your appraisal. If you remember that is against the SOW using the 03/2005 forms unless you use CB4 and get an inspection.

Mr. Myers,

What do you do when the assignment is for a sale and the client has paid you ahead of time? Do you, or would any of us, check to see if the current occupant is the seller instead of the seller's tenant as of the effective date? I never have, in fact I've never even thought about that. The appraiser arrives, has arranged to go in via MLS entry key, no one is home but it is full of furniture... I have always checked owner occupied.. you?

For me the occupancy boxes on the forms are a bunch of horse dung. In no way should our trade accept that they rise to any level of a supplemental standard in checking them off in any fashion at all. Our entire trade should reject any idea we are responsible for that little tidbit of information. If the secondary market wants us responsible in someway, then it is going to have to deal with the fact that we should demand required notarized affidavit forms from all borrowers for our work files. It would have to become like our reviewing of sales contracts. If the parties won't provide them, we report that and move on with no occupancy box checked. It then becomes an UWing issue.

Barry Dayton

 

[Carnivore]

Barry,

First I agree that much of whats on the form is not needed for many appraisals. Lenders and Fannie Mae have decided that they need ALL that information and Fannie Mae has made it part of your SOW.

We can not pick and choose what parts of the Fannie Mae form we will comply with as part of reporting requirements under Standard 2. Why do we need a tax id number? How about flood zone designation? There is stuff all over the form that is required because it is published(the form) by fannie Mae(read the SSR again and see what it says).

Occupancy of the real estate improvement is important for several more reasons other then possibly income approach to value;

1. What type of Insurance will the Lender require to meet Fannie Mae requirements on loan purchase.

2. Tenent occupancy may indicate that the real estate is under a leasehold estate!

 

[Webbed Feet]

Mr. DeSaix,

I usually love your posts. ... I'm going to have to challenge you on your last one however and if I go down in a blaze hopefully it will be a glorious one!

Fannie's handbook for appraisers... XI, 102.01: Objective and Unbiased Appraisals (03/20/95) Fourth paragraph, second sentence.....

"Including an unsupported descriptive comment or drawing an unsupported conclusion from subjective observations is an unacceptable appraisal practice that may have a discriminatory effect"

I'll put this thought forth. Our original poster's conclusions were ALL subjective observations. Non-english speaking people were all involved. Could her conclusions have a discriminatory effect on the lending process... My answer.. you bet your *** they could. .. If you are suggesting that we all go forth with our diligence and use our best guesses regarding occupancy, then I put forth that if we are incorrect then everyone of us has indeed violated a Supplemental Standard put out by Fannie.

So now we supposedly have a supplemental standard we must answer those occupancy boxes correctly, and another that if we mess it up we are equally into a USPAP violation because it probably caused discrimination. So our trade in this thread just created a damned if you do and damned if you don't situation. I now put forth that our entire trade, to answer occupancy, now has to identify by photo, finger print, obtained signed affidavits, and otherwise subject all borrowers and occupants to invasive personal identification techniques. I guess we could all become notary publics so we can witness that affidavit while we are at it.

Cool! .. I was looking for a way to make additional fees anyway. .. Affidavit fee, notary fee, finger print fee, photo verification fee, and that DNA test could make a tidy profit for us too!

Barry Dayton

 

[hastalavista]

Mr. DeSaix,

I usually love your posts. ... I'm going to have to challenge you on your last one however and if I go down in a blaze hopefully it will be a glorious one!

Fear not, Barry, we are not in disagreement! So, you will not :new_ukliam2: .

As I said, I think there is a gray area here. To summarize my posts:
1. Occupancy is not a trivial matter given the intended use of the reports.
2. In cases where I'm unsure (but have doubt), I give the benefit of that doubt to the client/homeowner.
3. In cases where I am confident that the occupancy is contrary to what I was told, I indicate what I conclude (and why) and advise the client/borrower to make their contrary argument to the lender.
4. I can end up being factually wrong in either scenario (owner or non-owner occupant status), but my engagement with and the expectations of the client require me to exercises reasonable diligence in my reporting.

Are we in harmony?:new_smile-l:

 

[JSmith43]

I really hate to end arguments, but just put these definitions in your scope:

Subject section-Occupancy: Owner box and tenant box are checked per information supplied by client. Vacant box checked per observation by appraiser at time of inspection.

Another way to put it: Lender's declaration of occupancy status accepted for report purposes. Appraiser will note if subject is clearly vacated at time of inspection.

For the timid: If unit occupancy is not clear, appraiser may supply interior photos to aid UW in drawing a conclusion.

 

[Couch Potato]

Mr. Myers,

What do you do when the assignment is for a sale and the client has paid you ahead of time? Do you, or would any of us, check to see if the current occupant is the seller instead of the seller's tenant as of the effective date? I never have, in fact I've never even thought about that. The appraiser arrives, has arranged to go in via MLS entry key, no one is home but it is full of furniture... I have always checked owner occupied.. you?

For me the occupancy boxes on the forms are a bunch of horse dung. In no way should our trade accept that they rise to any level of a supplemental standard in checking them off in any fashion at all. Our entire trade should reject any idea we are responsible for that little tidbit of information. If the secondary market wants us responsible in someway, then it is going to have to deal with the fact that we should demand required notarized affidavit forms from all borrowers for our work files. It would have to become like our reviewing of sales contracts. If the parties won't provide them, we report that and move on with no occupancy box checked. It then becomes an UWing issue.

Barry Dayton

When it is a sale, I simply use what is in the MLS listing, what I am told or what I observe (in the case of vacant properties.) For a sale, the occupancy on the day of my inspection is irrelevant to the mortgage for the new owner and to my valuation. (I firmly believe the applicability of the income approach is based on the neighborhood/market, not the occupancy of a particular property.)

I sort of agree with your opinion of the occupancy boxes on the form; except the last word should begin with "s" and rhyme with "hit." :new_all_coholic:

 

[Ultraviolet]

I had a similar situation recently, including meeting with a relative of the borrower.

I checked the box owner occupied, because that's what I was told by the client. I then made comments (in bold letters, on the front page of the URAR) that I didn't personally speak to or meet with the borrower at any time during the assignment because he was out of the country. I stated there appeared to be several immediate family members (his childre/grandchildren) currently living in the property. Occupancy confirmation is outside the scope of the assignment and is not relevant for forming an opinion of market value (I agree that the neighborhood determines applicability of the IA - not occupancy).

The last thing I need is for an angry borrower to come after me for screwing up his/her loan when it's none of my business who lives in the house. How do I know for sure who lives there full time? I regularly see properties occupied by two people per bedroom - what business is it of mine? I think the key is raising enough of a red flag for the underwriter, who will then go back to the client if he/she wants further occupancy clarification.

If there is subsequent occupancy fraud, I've covered myself by including occupancy as being outside the SOW and relying solely on information provided by the client. It's all about intent. If I provide sufficient commentary regarding what I did and didn't do, it shows I made an effort without going overboard and playing detective (which I am not licensed to do ... ).

The one I'm working on now that's vacant with the "for rent" sign in the window is obvious ... I will not be marking "owner" on that one ...

 

[hastalavista]

Like Roger (and others), here's my statement in my SOW:

• Occupancy of the subject was determined based on information provided to me by my client and verified to the best of my ability during my site visit. If there is a conflict between what I observed and what I was informed, I will report the conflict and declare what occupancy condition I used. An example of a conflict would be if I am informed that a property is occupied, but upon site visit it appears unoccupied.

 

[Caterina Platt]

The form that Andrew provided to Alison is exactly what the borrower signs at closing. I'm sure it carries far more wieght than our occupancy boxes on the report. It is beyond the scope of the appraiser to have this signed, and I personally believe that if you did do this, you're opening up a can o' worms for more responsibility in the matter.

The crux of the issue, in my mind, is

1) although somewhat tongue in cheek, our poster with the example of the fair housing violations and arguments against all the circumstancial evidence in front of the appraiser has a valid point.

2) According to Fannie Mae reports, this is the largest area of mortgage fraud occurance. (We'll see what the next reports about stated income loans say....but that's another issue). When the appraiser makes an incorrect statement on his/her report and the deal is under investigation, you know we'll also be getting a supeona. Lovely.:icon_frown:

So how do we avoid circumstances 1 and 2? My best suggestion is to disclaim it in such a way that it can't be misconstrued as an extraordinary assumption. I'm not so sure anything in our addendas such as our 'I'm not an expert in the field of HVAC, plumbing, electrical, didn't inspect the septic tank, etc.' statements couldn't be misconstrued as EA's, but hell! We have to do something.

My earlier post offered a loop hole and cover yourself method that is rather blatant. I suppose you could also bury it in the addenda.

Edit: Hang on here....isn't an extraordinary assumption something that would, if found to be contrary, affect the results of our appraisal??? Occupancy of the borrower has no effect on my value. Just food for thought. Anyone??

 

[Webbed Feet]

Mr. Picarsic,

Well then I suggest that since you firmly believe answering the occupancy boxes, and answering them correctly, is required, that you are boxed into a corner.

Next time your subject property has any form of minority involving occupants or borrower you're going to have to verify their identities and show cause for your occupancy opinions so that they are not subjective. And if you get caught doing that only on minority owned or occupied properties you are also violating standards because it would be discriminatory. So you will have to do this identification on virtually all your appraisals of real estate in the future and prove it was not subjective based. Also because if any MB lies to you then you just failed to catch Leased Fee and violated USPAP again for not considering it.

Got your finger printing equipment on order?

I tend to disagree with you about SOW and reporting requirements. I take my reporting requirements from USPAP and any signed certifications, not any and all items that happen to be on the form. If perfection was required for every form item then I put forth we'd all be in deep doo doo everytime any of us filled out the "Present Land Use %" boxes for neighborhoods. Also, I take Fannie documents and handbooks to need to use language such as "Must", "Required", or "Unacceptable Appraisal Practice" to be needed before something should be considered to rise to a level of a Supplemental Standard.

Want to have more fun with this while you state "Owner", "Tenant", or "Vacant" must be checked and must be correct? ... Find a definition of "Vacant" for me and what that means as it applies to how Fannie wants those boxes used. Afterall, according to your use of the S.S. Rule I have to know if it takes a chair in the living room, bed in any bedroom, or pencil in the kitchen so I can use what check box. So Fannie has set a S.S. here.. what is it?.. Because it sure looks like only a guideline at best to me. And if it really is a S.S. where are Fannie's instructions to us to follow in order to avoid discriminatory subjective use of those check boxes regarding complying with that S.S.?

Barry Dayton