Supplemental Standards Rule Elimination

[Fred]

If the ground rules for an assignment were in place and available to the appraiser prior to their completion then the appraiser should both be aware of and address those elements in their report.

Should or must?

 

[Otis Key]

Well, that would be one way I could beat Otis' poundage!

I have your phone number and know where you are. Now cut that out. It's railroad spikes.

 

[Couch Potato]

No different from now.

With SSR the only groups that could "officially" USPAP the appraiser into going above minimums were the GSE's (etc) and their policies were well documented and easy to research. Now every Tom, Dick and Harry has that power and their policies are not well documented nor easy to research.

They have had that power since July 2006 when the scope of work rule we have today was introduced. It's the appraiser's job to be sure the SOW fits the client's needs. True, most residential appraisers don't bother doing that part of their job properly, but that is not the fault of the clients or USPAP. :new_smile-l:

 

[Marcia Langley]

I have your phone number and know where you are. Now cut that out. It's railroad spikes.

No wonder your addendum is so weighty! You lace it with railroad spikes!

All this time I thought it was due diligence!

 

[Marcia Langley]

Yeah. That's kind of what I'm saying. Can we still tell a client/lender/user to go pound sand if we don't want to comply with their after-order conditions?

Sure, Greg. Why would that change?

The point is that in the past we have never just assumed client requirements and have held them responsible for making their conditions known, up front at the time of accepting the order. That does not change. After-the-fact conditions will be handled just as they always have been.

The exception has always been USPAP, the FRT regs, and the GSE guides. The system has developed (dumbed down appraisal ordering personel) to the point where we know what they need better than they do. That part is not likely to change, either.

Our responsibilities in this area have not really changed. There is just more emphasis on it. We have significant responsibility to make sure the client understands what they have to ask for in order to have the assignment be meaningful and credible in answering their question.

And we have broad flexibility in making sure those conditions do not diminish USPAP, violate law, or otherwise reduce the credibility or meaningfullness of the appraisal. In other words, we are empowered to reject inappropriate conditions, just as we always have been.

But we do that up front, in the assignment acceptance stage and not after the fact. Neither the client nor the appraiser can change the goal post after the assignment parameters have been negotiated unless new information comes to light and the assignment parameters must be renegotiated (including all the considerations of appropriateness and fees).

 

[Carnivore]

Marcia,

Greg and I seem to be the only two people on the planet that believe
there was a distinction between specifically identified parties and other users of appraisal services when it came to standards.

In a prior post Steven Santora metioned that around the year 2000, the SSR included everyone. Sometime after that, either 2002 or 2003 the TAF/ASB dropped financial instituions from the list and created a distinction.

The 2006 USPAP kept that distinction in several places. 1. SSR and 2. in the definitions section of USPAP. see below.

You have said many times that you believe that it is highly likely most financial users see the URAR 1004 as an appraisal report that meets or exceeds Fannie Mae Guidleines by default. I agree with you 100% and I see no reason for that thinking not to continue. This would seem to create problems the further downstream your report was passsed around in the world of Mortgage backed securities portfolio's. Keep in mind that Lenders(and I mean all of them as a group) are not very trustworthy. Frankly, they are down right dishonest(to wit the current mortgage crisis).

Here is my questions to you. How will you demonstrate your reports do or donot meet certain published standards by former parties identified in the now defunct SSR? Will you be proactive and specifically exclude those parties or will you simply rely on the reader paying attention to the details of your SOW and deciding for themselves?

Definitions: http://commerce.appraisalfoundation.org/html/2006 USPAP/DEFINITIONS.htm

SUPPLEMENTAL STANDARDS: requirements issued by government agencies, government sponsored enterprises, or other entities that establish public policy which add to the purpose, intent and content of the requirements in USPAP, that have a material effect on the development and reporting of assignment results.

Comment: Supplemental standards are published in regulations, rules, policies, and other similar documents, and have the same applicability to all properties or assignments in a particular category or class regardless of the contracting entity.

Contractual agreements that are unique to the contracting entity and that apply specifically to a particular property or assignment are not supplemental standards.

 

[Marcia Langley]

Carnivore,

I propose to continue to assume that appraisals performed for mortgage lender clients will be expected by the client to conform to either FRT or Freddie/Fannie minimums (depending on the category). Even if the appraisal ordering party does not understand that ... unless that client specifically tells me that they do not have that expectation of GSE compliance, in writing, on letterhead, from the underwriter. And in that case I will advise the client, in writing, that I will not use the new GSE forms and that any later decision to the contrary will result in an additional fee.



In doing so, I will continue to force these clients to acknowledge that GSE compliance is in fact a condition they themselves are placing on the assignment.

When the assignment is not for a mortgage lender/client, such as when it is for a homeowner or lawyer, I will continue to not mention GSEs in my SOW or engagement letter, unless the client instigates the requirement (so far, no one ever has and of course the actual lending form would have to be an exception to the guidelines).

The only problem I forsee are for those appraisers who insit on using the new forms and also do not intend to comply with one of the guideline publishers. You and I agree that there is beaucoup liability connected to that.

This has been my policy since 2005.

---

----

And in case you missed it in my previous post, I do proactively state that the client requires conformance to Freddie Mac (or FHA, etc) guidelines in my SOW.

 

[SANDY]

Bottom line is that more responsibility will have to accepted by the appraiser. Sounds like a good plan given the number of good appraisers out there. Same ole same ole-skippy will be out there goin along to get along either ignoring the rules or being just plain ole ignorant of them. But skippy will be getting mucho work.

 

[Marcia Langley]

Greg and I seem to be the only two people on the planet that believe
there was a distinction between specifically identified parties and other users of appraisal services when it came to standards.

In a prior post Steven Santora metioned that around the year 2000, the SSR included everyone. Sometime after that, either 2002 or 2003 the TAF/ASB dropped financial instituions from the list and created a distinction.

The 2006 USPAP kept that distinction in several places. 1. SSR and 2. in the definitions section of USPAP. see below.

Carnivore,

It's not that I don't understand that a distinction was made in the various versions of USPAP. It's more that I don't see how adding or removing the SS Rule (and it's distinctions) changes the way appraisers have to address those distinctions.

It all goes back to client/participant expectations.

It is simply a fact of the mortgage business that the clients 'assume' compliance with the GSEs in certain situations. That pervasive yet often unspoken expectation is, I believe, both what triggered the SS Rule in the first place and rendered it not really necessary in the end.

I don't know how it happened that this expectation was allowed to become unspoken (by clients) but it has. I can guess that the reason was simply because the expectation has in effect become an industry standard.

So, in my opinion, even after the SS Rule is gone, the pervasive client expectation remains and the appraiser's obligation to address that expectation also remains.

 

[Don Clark]

Carnivore,I don't know how it happened that this expectation was allowed to become unspoken (by clients) but it has. I can guess that the reason was simply because the expectation has in effect become an industry standard.

Ot their own interpretation of what the GSE's guidelines are. Many of them have no real clue what those guidelines really are. They throw in stuff like "no more than 5 acres", or no sales over a mile from subjects. Or whatever they think is correct. I would bet that many do not even have a copy of Fannie Mae/Freddie Mac, or FHA guidelines or handbook in their office. To me, that is why I believe an appraiser will need to spell out exactly (at least by referrence) what guidelines, requirements, laws, or handbook/requirements they are complying with when they write a scope of work. Since USPAP does not require a seperate and distinctive place for the SOW, it should at least be evident within the report itself.