Unintended consequence of reviews

[John Hassler]

It is much easier to just stop using that particular appraiser.

A lender does not want to become known as the lender that "turns you into the state". That reputation stops appraisers, even good ones, from wanting to do work with you.

Apparently it’s easier to stop using that appraiser than file a complaint.

 

[timd354]

Many years ago, we had a complaint filed because the lender decided to change the mortgage type from conventional to FHA involving an appraisal from my firm. They needed an additional inspection, and a new report but the appraiser just left on vacation for two weeks. Realtor filed a complaint, because her deal was delayed by the appraisers vacation, and that one took 10 months to funnel through the bureaucracy of the system. Nothing-burger ultimately, but the stress and expense was very real.

The problem is that some boards do not immediately dismiss complaints that do not even allege anything that could remotely be considered to be a USPAP violation and instead take that opportunity to go on a fishing expedition to see whether they can find anything that is a violation. I have never been the subject of a complaint, but my mentor had to deal with one that took the board almost a year to investigate befroe they dismissed and the complaint consisted of nothing more than a complaint that the appraisal came in lower than the contract price. Sorry, but coming in below contract price is simply not a USPAP violation and the complaint should have been summarily dismessed on that basis alone.

 

[John Hassler]

The problem is that some boards do not immediately dismiss complaints that do not even allege anything that could remotely be considered to be a USPAP violation and instead take that opportunity to go on a fishing expedition to see whether they can find anything that is a violation. I have never been the subject of a complaint, but my mentor had to deal with one that took the board almost a year to investigate befroe they dismissed and the complaint consisted of nothing more than a complaint that the appraisal came in lower than the contract price. Sorry, but coming in below contract price is simply not a USPAP violation and the complaint should have been summarily dismessed on that basis alone.

You need to realize that state agencies, with few exceptions, cannot adjust staffing on the fly like a private company. That said, maybe a quarter of the complaints filed in CA are dismissed fairly quickly as there was no violation or a negligible violation. The licensee will never even know a complaint was filed. About the same number are closed with an educational call to the appraiser when there was a violation but it did not significantly impact credibility. The rest will get a letter from the state requesting their workfile. As to how long it takes from there is a workload issue. The ASC requires complaint resolution by the state within 12 months unless there are documented circumstances. Again, the state has limited flexibility on staffing, and it takes 6-12 months to transform a new hire appraiser into an investigator. (CA is a bureau, not a board, and uses credential-holding staff investigators.) These stats are consistent with what I was telling the public before I separated from the state. They may or may not be valid today.

As for fishing expeditions, the goal of the investigation is to determine if there were violation of law, not issue citations (or higher). Fishing expeditions would be foolish, be a waste of limited resources, and serve no purpose ... but I understand why licensees need to think this.

 

[timd354]

You need to realize that state agencies, with few exceptions, cannot adjust staffing on the fly like a private company. That said, maybe a quarter of the complaints filed in CA are dismissed fairly quickly as there was no violation or a negligible violation. The licensee will never even know a complaint was filed. About the same number are closed with an educational call to the appraiser when there was a violation but it did not significantly impact credibility. The rest will get a letter from the state requesting their workfile. As to how long it takes from there is a workload issue. The ASC requires complaint resolution by the state within 12 months unless there are documented circumstances. Again, the state has limited flexibility on staffing, and it takes 6-12 months to transform a new hire appraiser into an investigator. (CA is a bureau, not a board, and uses credential-holding staff investigators.) These stats are consistent with what I was telling the public before I separated from the state. They may or may not be valid today.

As for fishing expeditions, the goal of the investigation is to determine if there were violation of law, not issue citations (or higher). Fishing expeditions would be foolish, be a waste of limited resources, and serve no purpose ... but I understand why licensees need to think this.

Maybe the CA board does a great job (I don't know either way), but I can tell you that there are some boards that will accept and do a deep dive investigation on any complaint, even if the complaint does not does not allege and conduct that is a potential USPAP violation

 

[George Hatch]

how many AMC chief appraisers turn in their own staff appraisers....

If you were running a shop and one of those reports had problems the first step would be to correct the problem appraisal. Not send the appraiser up to the state. If the problem continues then your next step is to cut the appraiser off so you won't have to deal with the same problem over and over.

Really, that's how the lenders should be handling appraisers. The appraiser is being paid to perform a service to specs. Until that service is performed to specs the fee has not been fully earned. If the appraiser WON'T clean up after repeated examples of the same problem then it's time to disengage.

It's when an appraiser gets to lying, cheating and stealing in an appraisal that we get to the point where the conduct is incurable - that's the time to send them to the electric chair. So to speak. Not for some trivial housekeeping detail that is of no effect on the value conclusion.

Regulatory enforcement is the last resort. Not the starting point.

 

[John Hassler]

Maybe the CA board does a great job (I don't know either way), but I can tell you that there are some boards that will accept and do a deep dive investigation on any complaint, even if the complaint does not does not allege and conduct that is a potential USPAP violation

Okay.

BTW, CA is not a board, it’s a bureau. All enforcement decisions are made internally by management. Great system used only by a few other states (AZ converted from a board to a bureau maybe a decade ago).

 

[timd354]

Okay.

BTW, CA is not a board, it’s a bureau. All enforcement decisions are made internally by management. Great system used only by a few other states (AZ converted from a board to a bureau maybe a decade ago).

Board or bureau, makes no difference to me. Either way, what is important is the competence of the investigators and the people making the decisions.

 

[jay trotta]

To bad a little "mind chip" (Elon) be installed to record the mental process from the inspection, thru the report writing and final conclusion of the process. That recording would go with each report and fully disclose the mental process Start to Finish.

 

[sputnam]

Mandatory reporting—(1) Reporting required. Any covered person that reasonably believes an appraiser has not complied with the Uniform Standards of Professional Appraisal Practice or ethical or professional requirements for appraisers under applicable state or federal statutes or regulations shall refer the matter to the appropriate state agency if the failure to comply is material. For purposes of this paragraph (g)(1), a failure to comply is material if it is likely to significantly affect the value assigned to the consumer's principal dwelling.

Reporting is mandatory... per law. No one actually enforces the law. Consequently, AMCs and Lenders rarely report appraisers. As already stated, they make revision requests until an appraisal report is a pass... or... they stop assigning work to that appraiser. I'm actually sort of okay with the 1st approach... when it's an appraiser who actually learns from his/her mistakes. The appraisers that fix it this time and do the same thing in the next appraisal report tick me off.

 

[sputnam]

The problem is that some boards do not immediately dismiss complaints that do not even allege anything that could remotely be considered to be a USPAP violation and instead take that opportunity to go on a fishing expedition to see whether they can find anything that is a violation. I have never been the subject of a complaint, but my mentor had to deal with one that took the board almost a year to investigate befroe they dismissed and the complaint consisted of nothing more than a complaint that the appraisal came in lower than the contract price. Sorry, but coming in below contract price is simply not a USPAP violation and the complaint should have been summarily dismessed on that basis alone.

Some appraisal boards... maybe all of them... are required by law to investigate every complaint that gets filed. Depending on the number of qualified investagators, funding, and the number of complaints, it could take a while to slog through the workload. You are correct though, an opinion of value that doesn't meet someone's expectations isn't a USPAP violation.