A question for review departments

[Doug Wegener]

If you are a staff review appraiser,working for one of the
major review departments, I have a question for you.

Many appraisers are still marking neighborhood trends
as stable, even as values plummett. Everybody knows
it. They do it as they know mortgage brokers will
stop using them if they put the truth.


Why do you guys let them get away with lying like
that? Will you lose your job if you insist on the truth?
Is it possible you dont know values are declining in
most areas?

 

[Joyce Potts]

If you are a staff review appraiser,working for one of the
major review departments, I have a question for you.

Many appraisers are still marking neighborhood trends
as stable, even as values plummett. Everybody knows
it. They do it as they know mortgage brokers will
stop using them if they put the truth.


Why do you guys let them get away with lying like
that? Will you lose your job if you insist on the truth?
Is it possible you dont know values are declining in
most areas?

YA THINK!

 

[Wendy]

Doug,

I have areas in my market that are stable and areas that are declining. I mark as appropriate. It is not an across the board decline (no matter how much the media would love to report).

Some forumites are even in areas that are increasing.

What's up? Seems like there is something particular that has torqued you.

 

[Doug Wegener]

Im sure there are some segments of the market that are increasng and some areas that are stable.However, in general, I think its accurate to say many markets are in decline.

I just want to know why staff reviewers of major lenders dont call appraisers on it. In fact, I heard a case recently of a VERY VERY LARGE wholesale lender who refused to make a loan on a property in declining area and the borrower had to get another appraisal.

Apparently, their policy is not to make loans in declining areas but they will make loans on fradulent appraisals.What's up with that?

 

[3 Putt]

I spent many a years doing nothing but reviews, when I looked at the report it did not matter to me if you marked decreasing, increasing, or stable. That was just a box to be checked on the report. If you marked decreasing, I would be looking to see how old the comps were. (Did you use really old ones to help the value?) If it was increasing, were all of the comps less than 3 month's etc. It's just one piece of the puzzle.

I was more looking for fraud type items. Made up sales, sales from another market, all sales that sold higher than the subject and were adjusted downwards, easily forgetting to note the last sale, etc. There are a great deal more things that throw up a red flag, other than a box in the neighborhood section.

Some lenders will not take a declining neighborhood, that is true. Just like some will not take an area built up less than 25% and some will not take areas that have extended marketing times. My market has some that are up, some that are down and some that are stable. Some people confuse a slow market for a declining market. Just give them your opinion, have a little proof to back it up if need be, and let the chips fall.

 

[Doug Wegener]

Correct me if Im wrong, but cant checking the declining box also change the
loan to value ratio.

If the appraiser marks stable and the market is declining, hasnt he changed the loan-to-value ratio or in some cases approved or disapproved the loan?

Thats seems like more than just checking a simple box, doesnt it?

 

[Otis Key]

From what I know Doug, yes it does change the LTV. That's because the investor doesn't want to be upside down on the loan. I've heard that they (many) will require additional explanations and then, depending on the statistics, lower the LTB to 75% or even lower.

 

[PropertyEconomics]

Its all a measure of risk isnt it? WHY would a lender tell you DONT CHECK DECLINING BOX .. when their risk is increased .. OH thats right .. they are MBs ... they dont care .. they just want money .... commissions .... doesnt the secondary market buyer need to know their level of risk?
I personally think this will be an avenue of increased business ... having secondary lenders calling and asking for a quick down and dirty analysis ...perhaps even a restricted report so they can just check the value of the appraisal done for the loan so they know whether to buy this loan or exclude it from the package they are looking at. A USPAP compliance issue for us .. but a really cheap product they want for sure and its only to check to see their level of risk and how much they should offer if ANY for the loan.

 

[lofapco]

I usually comment in red on the report when I see conflicting information like "stable" or "increasing" when reviewing areas I know are in decline like Detroit, Columbus, Denver etc. If it is a pre-funding situation, I likely will call the appraiser and discuss it with him/her. Unfortunatly many of the situations are post-funding and the appraisal is a 3rd party review. The best I can do is highlight the discrepancy and see if the value appears supportable based on information I can get. At least the OCC can see that I noticed it even if it didn't change the value.

I agree, everyone should be looking at their check-boxes to make sure they make sense!

 

[THOMAS MAZZEO]

this is a "trick question"!!! I often see a decline over the prior 12 months, but in the past 30 to 60 days of that 12 months sales appear to be stable or slightly increasing, did we hit bottom? is the market actually stable? What picture are you painting? In the last 12 months yes you could say declining, but current market is ?????? What would you say? To many variables? What does it take to support an comment of a "Stable Market"?