Adapt or Die?

[Mike Boyd]

Everyone seems willing to "throw in the towell." Whatever happened to standing up for what we all know is right?

BPOs, drivebys, AVMs, accepting work from AMCs.........that's caving in!

I guess too many appraisers like the break we are all getting with the collapse of the major lenders, rising unemployment, record numbers of families losing their homes.

The title companies still get full fee for escrow fees no matter how small the transaction. Pest inspectors charge full fee for a report even if there are no bugs, roof inspectors get their full fee even though there may not be a problem. Most brokers get a full 6% commission based on the sales price and lenders get the full origination fee even if it's hidden in a slightly higher interest rate.

Once the lenders are finished with the "appraiser problem," they will start on the title companies. Then, they will probably rest for a decade or so. However, you can bet origination fees will never get chopped nor will broker fees. They are too big and strong.

Kinda reminds me of the US foreign policy. We beat up on small, seemingly harmless countries while China and Russia oppress their own citizens hardly any different than they did in the middle ages. "Pick on the little guy. he/she is EASY!"

 

[JSmith43]

Everyone seems willing to "throw in the towell." Whatever happened to standing up for what we all know is right?

BPOs, drivebys, AVMs, accepting work from AMCs.........that's caving in!

I guess too many appraisers like the break we are all getting with the collapse of the major lenders, rising unemployment, record numbers of families losing their homes.

The title companies still get full fee for escrow fees no matter how small the transaction. Pest inspectors charge full fee for a report even if there are no bugs, roof inspectors get their full fee even though there may not be a problem. Most brokers get a full 6% commission based on the sales price and lenders get the full origination fee even if it's hidden in a slightly higher interest rate.

Once the lenders are finished with the "appraiser problem," they will start on the title companies. Then, they will probably rest for a decade or so. However, you can bet origination fees will never get chopped nor will broker fees. They are too big and strong.

Kinda reminds me of the US foreign policy. We beat up on small, seemingly harmless countries while China and Russia oppress their own citizens hardly any different than they did in the middle ages. "Pick on the little guy. he/she is EASY!"

The appraisal of residential RE got devalued because of visible, semi-visible and invisible strings tug at the appraisers during and after the appraisal process. The strings from MB tend to be most visible: Call if you can't hit value, Stop, don't even start if you can't hit value, etc.

Up the food chain a bit, and the strings are a bit less vsible. Kill deals and work tapers off, rather abruptly or gradually. The big players have the resources to make things less visible and subtle. Heck, get a pet AMC to do it.

Some of the big players are more honest than others regarding influence on AMC's, etc. No doubt, they are probably internally conflicted, with sales pushing one way and operations, the other. Some took a dark path, compared to others.

The basic evil in the whole situation has been ignored. Where is the support from ASB? Mortgage appraisals are an UW tool, allegedly. What the heck is all of this emphasis of point value in time? Just because it is cooked into UW decisioning rules? The appraiser walks the plank.

If appraisers were free to choose an answer, such as a range of value, along with a profile of the market and trends, the decision where to draw the line would fall more squarely in the lap of the UW and the policies of the lender and/or end investor.

But no, the appraiser is not free to describe the market and a range, letting that be the final answer. The dart must be thrown and the result signed and certified to. Instead of being value consultants, appraisers are cast as the "determiners" of loan terms.

If appraisal products were cheap enough, perhaps quite a few thrown dart values would graph the solution. But point value is only one parameter. Quality and quantity of the data should be darned near as important. How many times do appraisers have to hang their hat on one or two sales, perhaps each one a bit out of date? Point value generated. Pass/fail grade given to appraiser.

Somehow, the invisible and low visibility strings have to be cut or effectively exposed to the general public. But, some would say some actions are contrary to building public trust. I say, it is a faulty trust in as much as it is built upon faulty perception.

Throw us a bone, ASB. How about a Q & A illustrating a situation where an appraiser decides that due to the quality and quantity of data, coupled with the theoretically pure intended use as an UW tool, the appraiser determines an answer other than point value be delivered to the client.....and make it clear that the appraiser is not going to USPAP jail as a result?

Sort of like, "Sorry, not enough reliable data to do a drive by 2055, must upgrade." This time it is "Sorry, due to the limitations of data, a value range and market conditions solution will be offered, so as not to mislead with a point value conclusion."

 

[JSmith43]

I don't know Rog, those who passed for old-timers when I got into this business used to tell me how residential appraisals were reported on 3x5 index cards - and other such war stores about how one day the bank President said, "Hey! What if we have a picture of the property in the file along with the appraisal card?"

Printed in pencil on a match book. Reduced scope I've heard such stories....25 years ago, when we were just on the verge of making fun of VA appraisers still using type writers.

In 1986, I cranked out a form filling program that worked on my 128K Mac, (upgraded for $600 to a 512). It allowed me to print on pin feed forms. About 70 hours of screwing with it, just so I could fit 4-5 reports on a floppy, they changed the stink-en forms within a few months! Luckily, Bradford & Robbins made a commercial Mac compatible product available. Jeff did some really great work! I fondly remember the sketcher.

 

[Doug Smith SRA]

Form follows Function

The appraisal of residential RE got devalued because of visible, semi-visible and invisible strings tug at the appraisers during and after the appraisal process. The strings from MB tend to be most visible: Call if you can't hit value, Stop, don't even start if you can't hit value, etc.


The basic evil in the whole situation has been ignored. Where is the support from ASB? Mortgage appraisals are an UW tool, allegedly. What the heck is all of this emphasis of point value in time? Just because it is cooked into UW decisioning rules? The appraiser walks the plank.

Throw us a bone, ASB. How about a Q & A illustrating a situation where an appraiser decides that due to the quality and quantity of data, coupled with the theoretically pure intended use as an UW tool, the appraiser determines an answer other than point value be delivered to the client.....and make it clear that the appraiser is not going to USPAP jail as a result?

Sort of like, "Sorry, not enough reliable data to do a drive by 2055, must upgrade." This time it is "Sorry, due to the limitations of data, a value range and market conditions solution will be offered, so as not to mislead with a point value conclusion."

No USPAP jail time for concluding a range of values:

APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).

But as the great architect Louis Sullivan said:

"It is the pervading law of all things organic and inorganic,
Of all things physical and metaphysical,
Of all things human and all things super-human,
Of all true manifestations of the head,
Of the heart, of the soul,
That the life is recognizable in its expression,
That form ever follows function. This is the law.”

Some where along the line, Fannie MAE and Freddie Mac came along and created the spare, streamlined structured appraisal report but provided only one parking space. The function of the report was for decision making. Although some borrowers take many months to pay their credit card debt and some just miss a payment once and awhile, lender don't want to see a range of FICO scores, they want one number.

Even the Quigi Board, the dart board, the throw of the dice comes up with one answer. I forget if the Quigi Board has a "Maybe" I don't use one to find a value very often. The dart board suits my needs.

Still, an appraisal report is a blueprint and the appraiser as architect certainly is free to present the debate that leads to reconciling the arguments for concluding parking the car in the only space available. The existing fill in the blank appraisal reports are meant to be read in their entirety and the underwriter should read the summary of the sales comparison approach and form some conclusions based on the bracketed range of values. The underwriter should then go to the reconciliation and follow the reasoning for the final opinion of value. In the cyber age, however, few reports are read in their entirety.

I do want to ask a basic question, however, in the historical context.

The Savings & Loan debacle mainly centered on commercial appraising. Appraisals on office buildings, hotels, malls etc were absent basic methodology and support of conclusions. Some commercial appraisals were nothing more than a letter. Was the cure worse than the disease when it came to residential appraising? Should there be a subset of USPAP that confines itself to residential appraising? My non-appraiser friends are fascinated with Zillow and are starting to hear about ZAOI and the likes. Residential appraising is changing in a way never contemplated in the beginning.

Mentor has some good points. Maybe the function is really different for residential appraising and the time of one size fits all USPAP is passing.

 

[Kevin Mc]

Everyone seems willing to "throw in the towell." Whatever happened to standing up for what we all know is right?

BPOs, drivebys, AVMs, accepting work from AMCs.........that's caving in!

Thanks Mike. That is hitting the nail on the head. I don't do it. Most professionals I know don't do it, and shame on those that do. It is called as Tony V. put it, "professional suicide". Rationize and spin it anyway you'd like, it is letting the tail wag the dog.

 

[JSmith43]

No USPAP jail time for concluding a range of values:

Perhaps not, since supplemental standards are not specifically cited anymore.
But, there is some sort of "gotcha" in there for the rebel who would dare to draw the line at not reporting a point value for a GSE residential appraisal assignment.

This is on the verge of encroaching on Austin's anti-GSE rant, and what he calls a built in conflict of the GSE standards and MV definition. I used to skim some of those posts, so I hope I do them justice in my reference.

 

[Dutchman]

deleted ........

 

[JSmith43]

The function of the report was for decision making. Although some borrowers take many months to pay their credit card debt and some just miss a payment once and awhile, lender don't want to see a range of FICO scores, they want one number.

I forgot to comment on this item.

Currently, the determinant score for conv conforming-most products, is the middle score of the low scoring borrower on the note. Risk based pricing kicks in at a pretty high score now a days. Other factors can put the loan into A- pricing category. The AU model must be run with verifiable input.

It is highly speculative to quote someone a rate without knowing in advance who is on the note, their credit scores, the appraised value of the property and a few other factors, before quoting a rate that is reliable.:new_smile-l:

 

[47mcmillen]

USPAP reference-BPO's,AVM etc.

BPO is a "Broker" price opinion. I guess this means ,must be completed by a broker. I know they are often not completed by brokers, but the new realtors needing income at the beginning of their careers.
"Price opinion" differs from an opinion of "market value".
BPO's are not regulated by any state or federal adminstrations.

AVM-Appraiser: Check out advisory Opinion 18, page A-47, lines 88-94.
USPAP does not regualte AVM's.

Market Value is an economic concept. It is not a fact.
In my opinion the concept of market value would not exist without appraisers. When residential appraisers consider properties for use as comparables for a market supportable indicator of the subject's market value, appraisers must analize the sale to opine if the sale price was market value. State certified appraisers are regulated by state and federal.

Appraisers do have an obligation to inform the TAF of important professional issues. Appraisers would be well served to encourage the TAF to promote the appraiser/appraisal as the "most reliable" indicator of market value. I am a USPAP Instructor and the TAF will listen to appraisers. They will pay attention to large numbers of appraisers.
How many?
40000 state certified appraiser should do it.
Now let's get 40000 appraisers together. This is the solution.
If you say "can't be done". You are the problem.

 

[xmtpedprl]

So glad you "opined." You're correct, if 40,000 strong began to act like it, to think like professionals who tendered LEGAL documents, man, who knows how nice things might be.

BTW, I took an REO class given by you in Arlington Heights, and it was a good one.

Hope you stick around!

Dave...