Evaluation Liability

[SpartanAG]

I think this topic has been successfully beaten to death. Evaluations aren't intended to replace appraisals; they are simply used only when a real estate transaction qualifies for one of the three exemptions as detailed in the Interagency Appraisal and Evaluation Guidelines.

There is no grand conspiracy involving evaluations whereby the government or lenders will come after appraisers years down the road because they did an evaluation. If it was going to happen, it would have happened in 2008-2010 when appraisers were being blamed for everything. Evaluations had been around for decades at that point. No one went to appraiser jail for doing an evaluation.

Another thing to keep in mind: Evaluations aren't used for secondary market lending...those require appraisals. Evaluations apply only to certain exempt transactions that stay in-house with the lender.

I encourage all appraisers to read the Interagency Appraisal and Evaluation Guidelines (see attached). That is the minimum set of standards that lenders must follow regarding appraisals and evaluations. It is what the lenders and regulators/examiners go by when dealing with appraisals and evaluations.

The Appraisal Foundation, the group that promulgates the Uniform Standards of Professional Appraisal Practice, has issued a fact sheet which in part covers evaluations (see attached).

My state appraisal board has approved a class, which in part, covers how appraisers can do evaluations and still comply with USPAP. That class is based on Guide Note 13 from the Appraisal Institute. http://www.appraisalinstitute.org/assets/1/7/guide-note-13.pdf

In summary: The five agencies that jointly issued the IAEG, the Appraisal Foundation and my state board are all ok with appraisers doing evaluations. No one has gone to appraiser jail for doing an evaluation in the decades that evaluations have been used.

 

[SpartanAG]

One last thing...If appraisers, lenders...etc. are in violation of certain regulations and standards, then those violations should be brought to the attention of the proper authorities not aired out on an internet forum.

I am certain, state boards, lenders, regulators and professional associations would be grateful if someone was to present them with the relevant facts regarding these violations.

 

[Meandering]

You know what?

While we're posting the regulations,

Here is also
The AMC Final rule, which "covers" the "covered transactions" when "valuers" are retained through an AMC.
https://www.federalregister.gov/doc...quirements-for-appraisal-management-companies

And just because no one as yet has not been "prosecuted" for evaluations................

Think about all those "bad" appraisals that the banks commissioned from 1998 until 2008 when the FDIC brought lawsuits. Lots of people running around from 1998-2008 saying "nobody ever got prosecuted for this"

https://www.lw.com/thoughtLeadership/lw-decisions-expanding-firrea-liability

Hidden agenda's

Be very aware!

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[Meandering]

One last thing...If appraisers, lenders...etc. are in violation of certain regulations and standards, then those violations should be brought to the attention of the proper authorities not aired out on an internet forum.

I am certain, state boards, lenders, regulators and professional associations would be grateful if someone was to present them with the relevant facts regarding these violations.

And Kool Aid should not be dished out on an internet forum.

But you know we still love you guys anyway.



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[Meandering]

That's what I've been saying all along.

They are appraisals, (by USPAP definitions) and you are required to follow USPAP, and,
When ordered by an AMC for a loan secured by the consumers principal dwelling, the AMC must pay the appraiser the C&R for the lending appraisal.

I don't know why you guys spent all these pages of electrons arguing with me.

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[J Grant]

I don't know Marion. I keep reading your commentaries, and it seems there is an impossibility that anybody else has made a point for consideration in the discussion. I do believe you've made some good points, although we disagree about many of your interpretations.

From my banking days until now, I have always known the differences between evaluations and appraisals. That's even discussed in our banking schools. One of my tasks in the day, was to deal with the examiners. (Don't call them auditors, by the way - It's offensive to them..) In those instances when they were suspect of a loan with an evaluation, they required a full appraisal to be obtained during their examination. (Of course, they knew things from other banks we did not, so loans were sometimes pulled for reasons we could not know.) I've never EVER had a single examiner treat an evaluation as an appraisal. I've spoken with past members of our appraiser commission, and many performed/perform evaluations. I've read the Interagency Guidelines, USPAP, T.C.A. and the TN AG's opinion of Evaluations, and all agree that evals are not appraisals. The very fact that an advisory opinion was given, tells us that the ASB recognized there was a difference between the two products. My E&O provider says they aren't the same things, which is why this thread was started in the first place.

Bottom line - An evaluation is not an appraisal. It is the more modern reference to a "Collateral Review" and they've been around long before FIRREA. SpartanAG is also from banking, and will know exactly what I'm referring to. An evaluation has no teeth, nor is it designed to do anything other than fill in the gap for banking files where appraisals are not required. If appraisers don't do evaluations, then insurance agents, realtors, bank employees, or somebody will. If appraisers refuse to do them, then that business WILL go to non-appraisers. I honestly think we have a few out here who would be glad to see that happen, which is just foolish. That business belongs to appraisers because they are perfectly suited for it.

An appraiser's E&O insurance will only cover appraisals and will not cover evaluations. Why? Because evaluations are NOT appraisals. Business risk management is a business decision, and appraisers should always be aware of risks. (I've never heard of an evaluation being the subject of a lawsuit, but a few people have sued over bathrooms these days.)

Whether or not evaluations must conform to USPAP is something we can debate, but until there is the finality of a judges hammer about that, then everything is nothing more than an opinion or interpretation.

My open ended question is this: evaluations have been around a long time and per your above , used as collateral review or internal bank purposes. They were very different in purpose and scope from appraisals. To my knowledge, in all these years, appraisers were not considered /asked to do these evaluations, or at least not in any great number. ( correct me if I am wrong). From what I can gather these evaluations were done mainly in house by staff ?

There seems to be a shift in past year plus, where banks are reaching out to appraisers for evaluations, not to do the above evaluations for internal purposes as the above, but for a NEW purpose...aka, the change in regulations that no longer allows an AVM or evalution ONLY to be used for a HELOC or any other loan purpose...it has to be upgraded to at least an evalution with some form of inspection such as an exterior inspection . THIS product seems to be the form of evaluation that lenders are now looking to appraisers to do...not necessarily for appraisers to suddenly be offered a nice work flow of the evaluations not used for any loan purpose....if staff were fine to do them for years, why would lenders change from staff doing them now?

, I am not on lending end so am not privy to their decisions, but I have noted the outreach to appraisers since the change for any violation product used for a mortgage loan purpose of any kind, even if a tiny 5k line of credit,, must be upgraded to an evaluation with some form of inspection, and THIS kind of evaluation is the reason for outreach to appraisers . And THIS form of evaluation might be a bit more complex/ value oriented than the kind described by Dale in his post. Would like feedback, agree or disagree...( particularly from those with direct bank experience)

 

[hastalavista]

There seems to be a shift in past year plus, where banks are reaching out to appraisers for evaluations, not to do the above evaluations for internal purposes as the above, but for a NEW purpose...aka, the change in regulations that no longer allows an AVM or evalution ONLY to be used for a HELOC or any other loan purpose...it has to be upgraded to at least an evalution with some form of inspection such as an exterior inspection . THIS product seems to be the form of evaluation that lenders are now looking to appraisers to do...not necessarily for appraisers to suddenly be offered a nice work flow of the evaluations not used for any loan purpose....if staff were fine to do them for years, why would lenders change from staff doing them now?

Lenders will continue to use staff or non-appraiser personnel for evaluations when they can. However, anyone who does an evaluation must be competent to do so; and competency includes sufficient market knowledge to provide a supported and reliable result.
In cases where the lenders do not have (a) sufficient staff or (b) they believe their staff doesn't meet the competency level necessary (which includes knowledge of the specific market) they can and should engage a valuation professional to complete the evaluation. Some choose appraisers to do that (and it makes inherent sense).

 

[SpartanAG]

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When ordered by an AMC

AMC's don't order evaluations. If a lender orders an evaluation from an outside contractor, that order comes directly from the lender.

for a loan secured by the consumers principal dwelling, the AMC must pay the appraiser the C&R for the lending appraisal.

Evaluations are for exempt transactions that do not require appraisals. Just because an evaluation done by an appraiser must meet the standard of an appraisal, does not automatically make the transaction non-exempt. Additionally, evaluations are done on all property types that fall under the exemptions, not just principle dwellings.

I don't know why you guys spent all these pages of electrons arguing with me.

Because the information you are putting out is so wrong it could be both financially and professionally detrimental to some of the appraisers reading it.

I understand that you think you are right, but you are doing more harm than good. Hopefully, one of the mods will lock this thread down soon. It is just spinning in circles now.

 

[Meandering]

Hey J,

Let me try and answer your question, with my opinions, which are based upon my research, and not just my opinions.

Prior to last year, Lenders and "their agents" (read AMC there) held liability for put backs of loans. Put backs are when the GSEs takes the loan out of their portfolio, as the secondary market, and puts it back into the lender's portfolio, removing all the happiness and joy, along with lots of $$s, from the bank for the loan.

The GSE's got to do that if they felt the lender had violated the reps and warrants, which are kinda like an indemnity agreement between lenders and GSEs in that, the lender's representations and warrants are the assurance to the GSEs that the loan packages were good, and no funny stuff that would get the GSEs in trouble, were in those loan packages.

So, because of Dodd Frank, and the take over of the GSEs, the need for reps and warrants on more loan products were increased, which caused lenders to tighten credit and lending, because they had to make sure all their loan packages were good and clean for the GSEs to accept them.

However, those reps and warrants requirements were loosened last year, so banks can make more loans that they don't have to worry about everything in the loan file being up to snuff, because the GSEs will not put back the loans to the lenders, if the loan amount is below current threshold.

So now walks in Mr. Public who wants a mortgage for less than the amount of money needed for a rep and warrant from the lender to the GSE. Well, the lender can lend to Mr. Public, and pretty much be safe from getting the loan put back into the lender's portfolio, costing the lender $$$.

Well, Mr. Public, we can give you a loan for that. The appraisal fee is $600.

Oh ghee, the loan is below the threshold, we don't really need an "appraisal", we just need a "evaluation". But Mr. Public paid for an appraisal, and has to get a copy of it, 3 days before the loan closes.

No problem. If we can't get a PIW waver from the GSEs, we just order an evaluation from an appraiser. We get an appraisal for Mr. Public, who will get a copy of an appraisal, signed by an appraiser, they can verify the appraiser on line, to see that's what they got. We can pay the appraiser $75, and pocket $525. If anything goes bad, the GSEs have our back, and it's the appraiser responsible for the value, not us. Mr. Public has no idea about any of this because the CFPB says as long as he gets a "service" he has not been financially harmed by paying a fee, no matter how much that fee is. And besides, there is so much profit in this, we might even spend the $35 for a GSE AVM to "verify" some due diligence of the "evaluation" along with the print out of the CU comps and scores, cause you know, lenders know how CYA.

So,

Expect lots more convolution, and kool aid stories, because the loosening of the reps and warrants was done to increase the availability of credit to more people, which means, many more loans can be made, and only the appraiser has the liability.

But that's just my opinion, yours may differ.


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[Terrel L. Shields]

An evaluation is not an appraisal

To the examiners...we,as appraisers, are 100% liable. That's the point of the thread.

To my knowledge, in all these years, appraisers were not considered /asked to do these evaluations

Actually the majority of my appraisals qualified as evaluations from day on (1991). Even poultry farms in the late 90's rarely sold for more than $250,000. 90% of my work was for in house work of six small banks, three that didn't even have any loan originator for secondary market.

There is no grand conspiracy involving evaluations whereby the government or lenders will come after appraisers years down the road because they did an evaluation.

Does that mean they can't? Especially when your "evaluation" becomes our "appraisal". By definition, appraisers can't do evals, except in 2 states. I did numerous new appraisals for two clients between 2009-2012 because the examiners ordered them. As a result, two loan officers & their boss were banned from banking. Two board members also were banned from banking. All files of an in-house evaluator whose father sit on one bank's board had to get an appraisal, to replace the eval's.

Think about all those "bad" appraisals that the banks commissioned from 1998 until 2008 when the FDIC brought lawsuits. Lots of people running around from 1998-2008 saying "nobody ever got prosecuted for this"

Until sometime in late November, the turkey thinks the world if fine and the farmer is my friend because he brings me food every day. We exist to deflect liability from the bank. nothing more. We do appraisals. They are NOT evaluations created under the protection of the bank. Quite the opposite. Again, it is duplicity to suggest the appraisers have less liability simply because the bank calls those kittens biscuits. The subject of this thread is our liability and my argument is, as appraisers, eval or appraisal, our exposure is the same, and therefore even the best wordsmith cannot ĉompete with sloppy evals. The appraiser's easiest "evaluation" has more liability than the evaluators hardest "evaluation". Thus evaluations are a contrived and artificial way to escape the USPAP straitjacket and noose, but appraiser cannot used that loophole.
http://www.pressreader.com/usa/siloam-springs-herald-leader/20130130/281505043594732/TextView