Appraisal Institute's PAREA receives approval from the Appraiser Qualifications Board

[Elliott]

From his newsletter: "Jeremy Bagott, MAI, AI-GRS 5/19/23:

"VENTURA, Calif. (May 19, 2023) – A corner of the Administrative State will be on display today as a political partisan, an entrenched federal bureaucrat and several private individuals mimic a hallmark of the legislative branch – the committee hearing. Why? The House Financial Services Committee is under new management and can no longer be trusted to get it right. Enter the Regulatory State. See the end of this press release for instructions on how to view the hearing.

Today’s hearing will be “gaveled to order” at 10 a.m. (Eastern) by the appointed director of the Federal Housing Finance Agency, Sandra L. Thompson. It will feature a handful of “witnesses.” The group will grapple with a phantom issue known as appraisal bias. It’s the newest pretext advanced by special interests in a yearslong effort to lobby government for a competitive advantage: elimination of the appraisal of collateral in federally backed mortgages. It’s the age-old story: privatize the profits, socialize the risks.

Alas, much of the damage has already been done, and today’s “hearing” is more a mop-up operation. A policy called “value acceptance” has already been adopted by Freddie and Fannie, which are overseen by Thompson’s agency. The policy overrides the appraisal of collateral on the mortgages the twins buy or guarantee. It’s a twist on the disastrous stated-income loan popularized during the run-up to the 2007-2008 financial crisis. Fannie and Freddie are now backstopping mortgages based on stated collateral values – no appraisal required.

With Freddie and Fannie under federal conservatorship, vilifying the nation’s 80,000 state-licensed real property appraisers fits nicely with Executive Order 13985, a whole-of-government decree to advance social justice across the federal bureaucracy. The false narrative is stoked by the twin gorgons and their powerful allies in the private sector – the Realtors, homebuilders, banks, nonbank lenders and fintechs.

Casting a long shadow on today’s tribunal will be a 16-employee nonprofit publisher known as the Appraisal Foundation. It’s run by a long-tenured Beltway entrepreneur named David Bunton, who is not himself an appraiser. The nonprofit is now promoting the fiction that appraisers value homes based on the race of the property owner. This obscure 501(c)(3) brandishes a publishing franchise awarded it by Congress in the aftermath of the savings-and-loan crisis of the late 1980s. Since then, the publisher has created a lucrative ecosystem of copyrighted regulatory products available for purchase on its online store. In plain language, this nongovernment organization creates and sells binding law to captive citizens. Bunton and a favored group of trustees travel the globe with the publishing proceeds. You can’t make this up.

The nonprofit has silently accumulated $10.5 million in cash and publicly traded securities, according to its 2020 IRS Form 990, the most recent available. The appraisal-bias narrative gives the nonprofit a new raison d'être."

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[Zoe]

Appraisers just can't get united. I think the only way it would happen is for big time rich consumer protection lawyer to instigate it.

Appraisal Institute has fumbled the ball. Many players have fumbled the ball.

Most all professions are united in one way or another. Pick one. Electrician, plumber, doctor , lawyer, teacher, police, banker, etc.etc. All united in one way or another

 

[DWiley]

You wouldn’t have your trainees with parea. What you are describing is an additional CE class for them to take. There’s nothing wrong with that.

Sure I would. We always had trainees (because we were always trying to grow the business), and if I still was operating a firm I would still have trainees - they would come and train with us because we would pay for all the education/training, just as we did for all our appraisers.

I would take on a trainee and train them in a hybrid way - using the traditional approach and augmenting that with having them get experience credits through PAREA as well. Even factoring in the cost of PAREA, that would reduce my overall training costs and allow a faster path to certification (we always took trainees down the certification path rather than licensed).

Many supervising appraisers have not created an environment that encourages people to stay on staff after they are certified. Long term success with trainees requires a business arrangement that is a win for both the company and the trainee - too many set up arrangements that incentivize folks to leave as soon as they get credentials rather than sticking around and helping grow company revenue. That is just training your future competition. I stayed with my first company for 14 years, mainly because they provided the economic incentive to do so. I replicated that environment when I spun off on my own. I had folks that worked as staff appraisers for me for over 20 years. My goal was to create a support system and pay structure that produced profit for the company while making it difficult for them to leave without taking a pay cut. That basically meant sacrificing short term profit for long term company growth. It also meant investing in support staff to handle administrative tasks so appraisers could focus solely on appraisal (rather than billing, scheduling, records retention, marketing, etc.)

 

[Zoe]

Being united carries a big stick.

 

[ucbruin]

Appraisers just can't get united. I think the only way it would happen is for big time rich consumer protection lawyer to instigate it.

Appraisal Institute has fumbled the ball. Many players have fumbled the ball.

Most all professions are united in one way or another. Pick one. Electrician, plumber, doctor , lawyer, teacher, police, banker, etc.etc. All united in one way or another

I don't want to be in a union with biased MAGA....

 

[chad hampton]

Sure I would. We always had trainees (because we were always trying to grow the business), and if I still was operating a firm I would still have trainees - they would come and train with us because we would pay for all the education/training, just as we did for all our appraisers.

I would take on a trainee and train them in a hybrid way - using the traditional approach and augmenting that with having them get experience credits through PAREA as well. Even factoring in the cost of PAREA, that would reduce my overall training costs and allow a faster path to certification (we always took trainees down the certification path rather than licensed).

Many supervising appraisers have not created an environment that encourages people to stay on staff after they are certified. Long term success with trainees requires a business arrangement that is a win for both the company and the trainee - too many set up arrangements that incentivize folks to leave as soon as they get credentials rather than sticking around and helping grow company revenue. That is just training your future competition. I stayed with my first company for 14 years, mainly because they provided the economic incentive to do so. I replicated that environment when I spun off on my own. I had folks that worked as staff appraisers for me for over 20 years. My goal was to create a support system and pay structure that produced profit for the company while making it difficult for them to leave without taking a pay cut. That basically meant sacrificing short term profit for long term company growth. It also meant investing in support staff to handle administrative tasks so appraisers could focus solely on appraisal (rather than billing, scheduling, records retention, marketing, etc.)

Yeah, it’s the appraisers fault there aren’t enough trainees in the profession.

 

[J Grant]

From his newsletter: "Jeremy Bagott, MAI, AI-GRS 5/19/23:

"Alas, much of the damage has already been done, and today’s “hearing” is more a mop-up operation. A policy called “value acceptance” has already been adopted by Freddie and Fannie, which are overseen by Thompson’s agency. The policy overrides the appraisal of collateral on the mortgages the twins buy or guarantee. It’s a twist on the disastrous stated-income loan popularized during the run-up to the 2007-2008 financial crisis. Fannie and Freddie are now backstopping mortgages based on stated collateral values – no appraisal required.

.

The above was mostly on point but they did not quite get it right wrt value waivers (to be called value acceptance).

Fannie or Freddie is not backstopping loans based on a waiver. The backstop is on the taxpayer, with zero, as in no , onus on the lender for a loan that was overvalued. With an appraisal, a lender is responsible for an overvaluation. This creates even more incentive and reward for a lender not to use an appraisal. I don't believe the taxpayers as public even realize, they have taken on more liability with the loans approved for the waiver/value acceptance program. To sum up, a borrower saves a few hundred in valuation cost, the lender gets relieved of any liability for the value, and the taxpayers get stuck with it.. Supposedly the FF agency's studies show "lower risk" for the waiver loans. Their studies always result in the outcome they want to promote, yet usually show it in a thin margin. But if the waiver loans are slightly lower risk, that risk is now 100% on the taxpayer, vs a value risk could be shared or borne by the lender, or an Appraiser's E and O insurance if they truly did a bad job.

Not that it is the appraiser's job to "protect markets", but imo a larger preponderance of waiver values can definitely affect market prices. With a 100% sale contract price outcome for properties that qualify and are a purchase, how could they not affect a market? The rate overall if I remember for appraisals with SC was about 90% + or_- average,

based on stated collateral values

Based on stated collateral values sound neutral, but the values of these waiver/value accepted loans are target values, either the sale contract price or the lender's own value estimate ., used as long as it fits within the Fannie or Freddie proprietary AVM value range. (with a few property qualification caveats)

The ironic part is the HVCC and then Dodd-Frank had sections devoted to removing the target number as a predetermined value for appraisals, so the agencies did an end run around that, by developing an alternative product that is not subject to appraisal regulations and therefore could use a target value.

 

[J Grant]

Yeah, it’s the appraisers fault there aren’t enough trainees in the profession.

What will happen to all the new res license trainees when they find out they trained for a "profession" that offers pay and working conditions not much better than for an UBER driver?

 

[Bobby Bucks]

If current trends continue in the nation’s capital, I honestly fear that within a decade we will see the appointment of an appraiser czar with the temperament and vindictiveness of a Jeffy, who will be unable to develop a GRM, but will be highly skilled in parroting preferred pronouns.

 

[chad hampton]

the way this profession should work is get a trainnee, have them do inspections on their own for 2 years (once you are satisfied they have a clue), then get certified and go on their own if they choose to. States did the right thing when they put in a trainee limit. The usuals suspects made it impossible when they basically made it a crime punishable by ending your career if you did that.

Their solution was to allow convicts to go into people homes to perform appraisal inspections.