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David C. Johnson

Senior Member
Joined
Jan 15, 2002
<span style='color:darkblue'>ksappraiser, Pamela, TC, Oregon Doug & Ray Ohler:


First, ksappraiser:

Real Good post (in my opinion). Thanks for posting it.

I liked your accounting exercise in your second post of the thread. But you left out the influence of PMI (Private Mortgage Insurance) which further supports your case.

Pamela:

"The Appraiser is the Mortgage Insurance through your E&O!!!"

Well Said! In fact, somewhere in the arrangement will be the specific language stating that the appraisers they are looking for MUST have E&O Insurance -- I guarantee it. However, again, do not forget about PMI, which is absolutely required in any such loan-to-value ratio (i.e., any LTV higher than 80%). The lender, if no one else, appears very well protected indeed.

It would be my guess that rates and terms for PMI are going to become unusually "User-Unfriendly" starting in the near future, which will hinder homeownership (thereby performing in direct conflict with FNMA's & FHLMC's Original Congressional Charter). This will be most significant to the most needy of our society -- fortunately, they are also the least powerful and least knowledgeable, so there should not be a whole lot of noise. It will also increase foreclosures substantially in the country. (Remember: The lender "gets the house" in addition to a guaranteed income stream during all of the foreclosure proceedings due to PMI, Right?) There have also been some very significant changes in Federal Bankruptcy Laws recently -- long pushed for by lenders -- that, I suspect, factor into the equation in a very favorably manner for lenders. Remember, ANYTHING that lending community devises should be considered more than suspect from a "health of the country" perspective -- No exceptions. Now, even the secondary market is Especially and Specially Privatized (while still, most Americans appear not to be aware of this fact). Lenders evil? Nope, not at all -- merely finding themselves minding the store all alone these days -- with no effective checks or balances at all. But remember: They are simply doing their jobs -- to minimize risk and maximize gain -- as required by law. Note: Are/Were we the check and balance?

The Name of the Game for "free enterprise" in the 21st Century has been Chipped in Stone as follows: "Socialize the Costs, Privatize the Profit." This also means: "Socialize the Risk, Privatize the Reward." Simple as that. True, the rich get richer while the poor get poor has been our unspoken motto for many, many years in this country, but now it has Drastically Changed: Now, it is going to be happening MUCH QUICKER. Self-destructive behavior from a national survival perspective? You bet. But, how is that really so important so long as I get what is coming to me and at least part of what is supposed to go to you. Get it?

PMI rates will be going up for another reason. Part of the tremendous overcharges in PMI premiums (specifically being that part that has not gone into PMI company stockholder's or owner's pockets or lender's or stockholder's pockets, who often own the PMI companies in one way or the other) paid needlessly by hundreds of thousands of American homeowners for several decades, has in fact, been cycled back into the system -- thereby lowering the cost of this insurance for new home purchasers. Note: historically, many or most homeowners with PMI have continued to pay many tens of thousands of dollars LONG AFTER it was necessary for them to continue to do so -- because they were not told they could discontinue PMI, let alone how to do it. Unlawful? No, Sir -- completely in keeping with an interpretation of the any existing law at time (i.e., actually there was no law specifically addressing the issue). This huge extra, unearned source of (now officially unlawful) funding will be drying up gradually over time due to a fairly recent Congressional requirement for mandatory yearly disclosures made to homeowners as well as an automatic elimination provision occurring at a specific point in the amortization process for PMI. (The fastest growing segment of mortgage borrowers these days get PMI attached to their mortgage payments.) This will have to be made up for somewhere, ergo, higher PMI premiums and longer PMI terms. Not to worry, most Americans (particularly the unsophisticated, which is the prime market, and also, by far, the largest market in this case) do not shop for price, they shop for monthly payments -- just like new car buying. It's the American way.

TC:

"...I personally would not consider this kind of work,
but I am sure there are plenty of "appraisers" signed
up and ready to go..."

Yep, no doubt about it. It only takes a few state-licensed / state-certified individuals to make it fly. He/she may become rich, but, at very least, will survive in the profession / industry, where others (who turn down such deals) have no such assurances. Penalize the unquestionable, Reward the questionable.

Oregon Doug:

Did you intend to be responding to ksappraiser with your post?

Ray Ohler:

"...the stuff that's being foreclosed on THESE days wasn't
worth $100,000 to begin with. It was "probably", "may have",
"allegedly", "could have been" only worth $70,000-$75,000..."

Real good point.

____________________________________

All just my opinions...

Regards,

David C. Johnson, Raleigh, NC
www.pmirescue.com

PS: We developed the PMI Threshold Calculator -- an invaluable aid to many thousands of homeowners, including appraisers, to figure out when one's PMI burden has been reached. (We also coined the term "PMI Threshold Value," a term which is now even used by the PMI Industry itself.) The website is an excellent source of information for appraisers to know about -- including the calculator. For years we have refused to charge homeowners for its use. Since inception, we have not received so much as a single negative comment from a purchaser of the information and instruction package we offer. Incredible. We consider the effort to be a self-perpetuating public service. It is.</span>
 

Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
in this market. To avoid the PMI, they are jacking the price up 20% having phony seller take-backs for the 20%, forgiving them at settlement OR having title clerks issue checks to non-existent contractors for work that was allegedly performed (but wasn't) and destroying the checks after settlement (going to have MORE accountants in deep s***). There are litlerally a dozen or so ways to get these "deals" through. One more thing, I said, I believe it was about 8 years ago, the "sleazeball" lenders spell "PMI" - "E&O" (NOT saying that I "coined" it), which, according to me, is going to skyrocket not unlike medical malpractice insurance. BUT, how could that be, EVERY appraiser I know says they are completely ethical and would NEVER "stretch" a value. That's because a good number of them don't even know they are doing it. Just stating what the "evidence" shows me. I hope (sincerely) that some people do not take it the wrong way. Hey, maybe is doesn't happen as often in their markets. It sure is here and one day the state agencies will wake up. Biggest problem is that it is a COOPERATION problem between agencies. Ever wonder why the interstate "investor" market has grown so rapidly? Why out-of-state "investors" are buying properties sight unseen (a lot of them don't show up on the internet)? Really reminds me of the late 80's but you're dealing with a LOT more properties.
 

David C. Johnson

Senior Member
Joined
Jan 15, 2002
<span style='color:darkblue'>Ray,

I read someone's post on AppraisersForum last year where "an official" with the agency (don't remember which one it was) responsible for discovering and prosecuting "inflated"/ fraudulent income, asset and expense statements by borrowers on mortgage loan applications was quoted as saying something to the effect that this (apparently rampant) problem was not considered much of a priority. And also something to the effect: "Hey, we don't want to interfere with a borrower's attempt to attain "the American dream" (i.e., homeownership).

Just Wonderful.

By the way, lenders, in a way, are in the same boat as appraisers in that "sleaze is rewarded" and non-sleaze is not. I consider it a Congressional (and Executive) shortcoming and shortsightedness in regulatory responsibilities. It is kind of a grand Social Darwinism in reverse: Survival of the least fit (i.e., the least scrupulous). Regardless of moral right or wrong, it's inherently unsustainable for anybody, any system or any country.

OK, back to "The Fugitive" on CBS.

Man, Tommy Lee Jones is good.

dcj</span>
 

Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
ANY MORE exact than that myself. That is where the "blame" lies. Congress and the Executive Branch for "rewarding" sleazeballs. The same people who will say "My, we have to pass MORE legislation to do something about this" AFTER billions are lost. What the scam artists in this country RELY on "government" being - REACTIVE not PROACTIVE. That's just the way it is. The next 12 months are going to be very interesting.
 

Randy Beigh

Senior Member
Joined
Jan 16, 2002
I got a copy of this form last week and have only glanced at it so far. Having said that, it doesn't appear to me to be much different than a desk review. In this case, the desk review is an AVM with internet derived comparables, rather than an appraisal.

I assume most of us will do a desk review, so what's the problem?
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
The problem is the "certification". In the post, it appears that there are a lot of conflicting statements.
 

Ted Martin

Thread Starter
Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
I tried to figure out how to post the PDF files that FAAS sent me on the fourm but couldn't figure it out. If anybody wants to look at these send me an email and I'll be happy to forward the PDF's to you.

Ted Martin
 

David C. Johnson

Senior Member
Joined
Jan 15, 2002
<span style='color:darkblue'>ksappraiser & Randy Beigh,

My thoughts are not so much directed toward this particular "proposal." They are geared more towards the bigger picture -- the trend.

Generally, if this particular scheme is clearly intended to be a very limited scope assignment to the appraiser, and well disclosed as such, "no problem" -- at least per the USPAP.

I am not sure how AVMs work, for instance:

Do (such) AVMs provide adjustments in a Sales Comparison Approach Grid? Are values expressed as a point value or a range?

ksappraiser brings up some interesting points and questions; he wrote the following:

1)
"...You also get to certify that "this appraisal process is not so
limited that the results of the assignment are not longer credible..."

2)
"...Another certification is that 'There are no significant descrep-
ancies between the public record information or other data
sources and the existing site or improvement.' How would you
know since you didn't look at it?"

3)
"...There is also a certification that "No one provided significant
professional assistance to the person signing this report",
keep in mind that the order came over prepopulated with sales? ..."

4)
"...No mention of the fee..."

Is there a stipulation that the appraiser must carry E&O? Is a minimum dollar amount of such coverage a requirement? Is the intent to "share financial liability" by attaching an appraiser's E&O policy? Might the intent actually be to unduly bolster the credibility of the AVM with an appraiser's signature & stamp? Could this be misleading to an unintended user, such as the homeowner or home purchaser?

If you would fax (919-834-1134) me a copy of the proposal / mailing, I would be interested in seeing it. I hope one or both of you will. Thank you in advance.

_______________________________

AVMs or not, the "big picture" -- the real trend these days -- is to down play and trivialize the importance of appraisals (collateral securitization) in the lending process. But there is an unexpected concern never discussed by any of those who advocate the demise of residential appraiser and serious appraisals. And, by far, it is the most important reason for, and greatest utility of, appraisals in the lending process. While this is true, you have probably never heard it specifically mentioned in your entire career as an appraiser. What could this issue be?

It is the concept of "deterrence." And it's much more concrete than a mere "concept," and it is absolutely HUGE. It's also largely unquantifiable.

Let's do it by analogy:

If an average of 10 people successfully shoplift from a particular retail store on a daily basis, and then a conspicuous security system is installed including cameras manned by hired security personnel, how many people, on average, will be caught shoplifting on a daily basis?

Is the answer 10?

Even if the system were 100% effective, the answer would be much less than 10.

Why is this?

The reason is the deterrence factor. Shoplifters decide not to shoplift because of the conspicuous security system in place. Therefore the numbers of those available to be caught is much less.

But here's the (flawed) logic we hear from the lending community:

Wait a minute, since there are now so few shoplifters and nobody is stealing anything anymore, and the security team hardly ever catches anyone anymore, why keep and pay for the security system! -- after all, it is an additional expense for the store that has to be passed along to the consumer (+/- $300).

Should we therefore not do away with this expensive system?!!

Making little attempt to deter the shoplifters is not good because the consequences of the shoplifting must be absorbed by everyone else (but not the lending community as these costs are passed along). By giving the nod to shoplifters, we reward them while penalizing everyone else who then not only pay for their own, but also pay for the shoplifter's. Since shoplifting is now so much less expensive than paying for items, shoplifting is directly encouraged. Only the stupid pay for items, the smart shoplift.

Again:

Reward the Cheater, Penalize the Honest

Survival of the least fit (i.e., the least scrupulous).

Now wait, that's not fair. There are other reasons for downplaying the appraisal:

It's just much more efficient (i.e., easier & faster) if we eliminate or lessen the security system in loan processing. We need to be able to open and close the same day (i.e., open a loan application and close the transaction)! Appraisals add unnecessary time and effort to the transaction.

What's the huge rush? Here's where the retail analogy falls apart. If we were talking about a small retail purchase, OK. Who likes waiting in line at the Walmart checkout. But what's wrong with a few days to think it over -- since we're talking about the most important purchase of the typical American's life (which may include refinances to a lesser degree). Some states allow for a three day return policy for much lesser purchases (a mortgage has a contractual price and terms -- I contend it's a purchase).

As a country, should we do away with, or lessen, the security system we have so painstakingly put in place?

As Marisa Tomei so convincingly (and so delightfully) testifies from the stand in "My Cousin Vinnie":

"Noooo -- The argument don't hold waadaah!"

www.foxhome.com/capsule/vinny.htm

Regards,

David C. Johnson, Raleigh</span>
 

Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
"They" ? are turning the real estate business INTO a retail business. However, keep in mind that we are not "apprasing" cars, diamond rings OR big screen TV's. Yes, a lot of those carry "financing". Quick analogy - retailer advertises he will sell you a diamond ring for $1,995 and GUARANTEE an "appraisal" for $3,000. Take it back to him next day and he'll give you $900. Hey, I thought it was worth $3,000? What happened?
"Overhead", that's what happened, along with BS. No BIG deal. Usually someone buying a diamond ring isn't living with a 30 year payment that they can't afford if the water heater goes. Different thing. Hey, this house I'll sell you for $40,000. The "appraisal" came in at $55,000. Never mind the board up on each side, go back tomorrow, look, buy this house back, YOU said it was worth $55,000 - I'll sell it to you for $45,000. NO WAY. I'll give you $25,000. I've got OVERHEAD. Also BS. The real estate business IS NOT a retail business. Pretty soon I'll be snorting the coffee up my nose through a straw.
 
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