Be the Driver, rather than just a passenger of your appraisal practice

[ramrcdk]

That is a pretty good example showing the reason for some of the controls/requirements that are in place for the desktop appraisals.

Danny, from my Post to yours: please help me understand "what you mean". 1) because I am suppose to be Independent in my roll as an appraiser, I should have turned-her-in to the State Board-AMC Licensing? (Her pressuring me...? Her never using me again?) 2) This scenario happens A LOT, when the AMC Rep' for the Lender "Tells you WHAT TO DO & HOW to do it.
My thoughts were "they do not KNOW what they do ( but we know YES they DO know) when their only concern is getting another Order assigned. Assigning Orders is their JOB" without concern OF much anything else.
Again, as I have said: appears the "M" in management is only to benefit the AMC. No managing the appraisal process.
Plus: In a AMC :Rating The Appraiser System: the appraiser is held accountable for the AMC-Reps' inept "management", especially communication to the Lender given a unique circumstance. Tick Tock : Resulting in "a good appraiser's best attempt to meet the turn-times the lender requested". But the rating system counts the days-hours including the ones The Appraiser had to wait for the Important Response. ( Happens alot. When you ask again, the AMC Rep' overlooked contacting the lender. )
Frankly, very unfair and always UP TO that certain Rep' whether or NOT you receive Future Assignments.
3) How are controls & requirements being better controlled within the roll of the AMC Rep' Order Process?

 

[DWiley]

Since you no longer work for an AMC why do you keep defending their model of extractign payment from the HUD fee split ? I realize you went from private AMC side to a GSE agency side, and likely are more vested in what serves the lenders better, which is the lender able to get free of cost to them service via the HUD fee split compensating the appraiser.

How you think it works, and what you persistently post about how it works, is not how it actually works. The lender does not get the AMC service for free. The lender has to pay for both the appraisal fee and the AMC fee. When the lender gets the bill from the AMC those fees are separated. That is how lenders can compare the fee charged by AMC1 with the fee charged by AMC2 and how lenders can monitor what is C&R in an area.

You view the total fee (the fee paid to the AMC plus the fee paid to the appraiser) as the fee that should have all been paid to the appraiser. That false premise is the foundation of your position.

Basically, you just want higher fees for appraisers. I get that, as I always wanted the highest fee I could get as well. But, I also understood that, like any other business, I could not reasonably expect my clients to pay more than they would have to pay if the engaged another firm that produced work of similar quality and provided similar service. It is the appraisers in a market area that set the fees in that area. Period.

When lenders engage an AMC rather than engaging directly they are well aware that the cost will be more than just the cost of the appraisal. They are willing to pay that because in the long term it is cheaper to pay an AMC $X an order rather than incurring the fixed costs of staffing their own team to engage and review.

 

[George Hatch]

THIS is the problem I was trying to point about substituting risk management " for Evaluation of the subject for a lending decision"
Despite George Hatch saying it is just semantics, they are NOT the same or similar using a different verbiage

Risk management is not just the evaluation about the property, it is about RISK down the road (some loans go bad). That is about borrower performance and future events.
So they assign a not intended use to an appraisal ( risk management ), then, since appraisals were not designed for risk management, they say other valuation methods are no more worse at risk management so let's replace appraisals.
Appraisers fall into the trap when they say other products are more risky than appraisals. The metric is are other products as good as or worse than appraisals at providing ALL the information needed to make a good lending decision for property evaluation purpose.

Is that true though -if a WAIVER is same risk or slightly less risky than an appraisal, then why aren't the humans who came up with the point value for the Waiver liable for the value? Clearly, the stakeholders don't want to assume it, so they relieve the lender of reps and warranties ( liability ) if property was over valued or faulty and a default happens

The appraisal is no better than other products at risk management because an appraisal was not designed as a risk management tool . We are powerless to stop lenders and stakeholders from using appraisals as a risk management tool, but then they use that to say appraisals being nothing to the table wrt risk management so let's replace them.

However, seems appraisals are still "better" as an evaluation product, it's intended use. I say that because the original appraisal is still relied on for a refinance LTV, for an existing loan with a lender when they grant a WAIVER and rework rates on the loan balance. Consider the short form products/desktop/hybrids, are still an appraisal needing the appraiser point value signed by appraiser and by extension lender takes liability for the valuation aspect, because not doing so would add to risk and thus spike mortgage rates up as then all valuation liability would shift to the taxpayer

OMG

Appraisers value the property
Credit reporting agencies value the borrower's credit
Title companies qualify the validity of the title
The underwriters qualify the borrower

The decision makers use all of this information from all of these sources to make a decision about how risky it is to loan this amount of money to this borrower to purchase this property.

If there's a waiver because the LTV is so low that it doesn't matter exactly what the value of the collateral is, that's still a function of their risk management protocols. Why get an appraisal on a property that's obviously worth at least $500k when the LTV is below 50%?

If there's a waiver because their AVM has as high a confidence score as an appraisal then that's still a function of their risk management protocols. Face it. There are some appraisal problems involving subdivision homes that are so simple a monkey with a dartboard could get the "accurate" value.

It's no different from when a lender does a no-doc loan where they're not verifying the income. They're still managing their risks, they're just using lower criteria to do it.

---------------------

BTW, the De Minimus threshold has been a thing in mortgage lending business for many, many years.

 

[J Grant]

How you think it works, and what you persistently post about how it works, is not how it actually works. The lender does not get the AMC service for free. The lender has to pay for both the appraisal fee and the AMC fee. When the lender gets the bill from the AMC those fees are separated. That is how lenders can compare the fee charged by AMC1 with the fee charged by AMC2 and how lenders can monitor what is C&R in an area.

Free of out of pocket expense cost to the lender from their own funds, is what I meant by "free" ( as explained numerous times in my posts )

When you say the lenders has to pay for both the appraisal fee and the AMC fee, the lender gets both covered by what the borrower paid for the appraisal, correct ?

Example:Borrower paid $600 for the appraisal. The AMC fee is $200 and the appraiser portion of fee is $400, in this example- so the lender Paid nothing as a actual cost expense , yes or no -

 

[George Hatch]

WRONG ( about what I admit or believe or have proven)

Since you no longer work for an AMC why do you keep defending their model of extractign payment from the HUD fee split ? I realize you went from private AMC side to a GSE agency side, and likely are more vested in what serves the lenders better, which is the lender able to get free of cost to them service via the HUD fee split compensating the appraiser.

However, you are also on a forum where you see daily how adversely this fee split system affects appraisers, seeing a number of them quit or go part time since unable to sustain themselves from low AMC fees, and a number of experienced/competent appraisers opting out of taking AMC work if they can find a better alternative.

Argument to motive.

 

[glenn walker]

Free of out of pocket expense cost to the lender from their own funds, is what I meant by "free" ( as explained numerous times in my posts )

When you say the leners has to pay for both the appraisal fee and the AMC fee, the lender gets both covered by what the borrower paid for the appraisal, correct ?

Example:Borrower paid $600 for the appraisal. The AMC fee is $200 and the appraiser portion of fee is $400, in this example- so the lender Paid nothing as a actual cost expense , yes or no -

No but so what -The lender also normally doesnt pay any of the title insurance fees, or the escrow fees either.

 

[J Grant]

OMG

Appraisers value the property
Credit reporting agencies value the borrower's credit
Title companies qualify the validity of the title
The underwriters qualify the borrower

The decision makers use all of this information from all of these sources to make a decision about how risky it is to loan this amount of money to this borrower to purchase this property.

If there's a waiver it's because either the LTV is so low that it doesn't matter exactly what the value of the collateral is, that's still a function of their risk management protocols. Why get an appraisal on a property that's obviously worth at least $500k when the LTV is below 50%?

It's no different from when a lender does a no-doc loan where they're not verifying the income. They're still managing their risks, they're just using lower criteria to do it.

---------------------

BTW, the De Minimus threshold has been a thing in mortgage lending business for many, many years.

I very well understand the various roles of appraisal, credit, title etc so please stop making the condescending assumption I don't understand it . I've bought and sold my own properties and used to sell RE out of a loan company who who did both.

Again, the lender can make any risk decisions they want wrt UW, borrower credit etc. None of which concern the appraisal, which has the purpose of evaluating the property.

As to your last question: Why get an appraisal on a property that's obviously worth at least $500k when the LTV is below 50%? First of all, many waivers have LTV far higher than 50% down. But the reason for the appraisal, assuming a borrower puts 50% down is this : 1) the appraisal reveals other information about the property such as condition and neighborhood conformity etc that can influence a lending decision 2) making every property subject to an appraisal keeps a level of uniformity and prudence in the system that benefits borrowers - there is a reason they are keeping waivers to a segment and not all, because for decades, using an appraisal has anchored the loan system of FF to provide better mortgage rates, long repayment terms etc.
)
Compare the rates and terms to FF loans where appraisals re still dominant, ( even with desktop or hybrid appraisals. Prevailing intreert rate, 15-30 years repayment,. Compare that to private money lenders, who often do not use an appraisal for the very reason you state - they reqwuire a hefty amount down -(LTV ratio 50%. ) - wow big whoop they do not use appraisals, borrower saved $500 upfront ! But those private money lenders also charge above prevailing interest rate, and demand a balloon payment in full in 5 years. ( as an example )

 

[ramrcdk]

OMG

Appraisers value the property
Credit reporting agencies value the borrower's credit
Title companies qualify the validity of the title
The underwriters qualify the borrower

The decision makers use all of this information from all of these sources to make a decision about how risky it is to loan this amount of money to this borrower to purchase this property.

If there's a waiver because the LTV is so low that it doesn't matter exactly what the value of the collateral is, that's still a function of their risk management protocols. Why get an appraisal on a property that's obviously worth at least $500k when the LTV is below 50%?

If there's a waiver because their AVM has as high a confidence score as an appraisal then that's still a function of their risk management protocols. Face it. There are some appraisal problems involving subdivision homes that are so simple a monkey with a dartboard could get the "accurate" value.

It's no different from when a lender does a no-doc loan where they're not verifying the income. They're still managing their risks, they're just using lower criteria to do it.

---------------------

BTW, the De Minimus threshold has been a thing in mortgage lending business for many, many years.

Understood.
So, is this an example of your Post? (Being fact-ious) Is the Borrower then stuck with the Waiver- Value? Possibly impacting the RISK & future loans?

Business Insider’s reporting indicates loan officers at the WF bank changed values, since waivers were available only to properties valued below $1 million. Reducing the value of a home in their system below that threshold triggered a waiver. In some high-cost areas where Wells Fargo does considerable business, like the San Francisco Bay Area, databased values – some questionable to begin with – may have been reduced from, say, $2 million to below $1 million.

Dozens of loan officers at Wells Fargo altered values in the bank’s database, so loans would qualify for so-called appraisal waivers, according to recent reporting from Business Insider.

A wider problem is that Fannie’s automated valuation model is based on prior months’ data.
Heredia believes that without new appraisals to scrub Fannie and Freddie’s data, the mortgage giants’ valuation model will become unreliable within the next three to six months.

 

[George Hatch]

Free of out of pocket expense cost to the lender from their own funds, is what I meant by "free" ( as explained numerous times in my posts )

When you say the leners has to pay for both the appraisal fee and the AMC fee, the lender gets both covered by what the borrower paid for the appraisal, correct ?

Example:Borrower paid $600 for the appraisal. The AMC fee is $200 and the appraiser portion of fee is $400, in this example- so the lender Paid nothing as a actual cost expense , yes or no -

You seem to be operating under a fundamental misunderstanding, that some of the lenders uses their own money to pay for managing the appraisal process.

If you had ever worked on staff at a lender you would be knowledgeable about the fact that the borrower always pays, whether its up front and regardless of the loan decision going their way or it's amortized in the loan itself. There is no scenario where the lender isn't getting these services performed for free-to-them. There never has been.

I worked on staff for a commercial lender. I got paid a straight salary (which is still how most staff appraisers are paid). My compensation package amounted to a fraction (less than 50%) of the appraisal fees the bank was collecting from the borrowers. The rest of those fees went to cover the costs of managing the appraisers. The bank didn't pay me and the administrative assistants and my managers out of their end of the loan fees; they paid us all out of the fee they collected from the borrowers, which those borrowers paid up front whether the loan closed or not.

Matter of fact, when the volumes ran low and the bank wasn't collecting enough from the borrowers - i.e., the bank actually was paying the appraisal dept out of their end - that's when they laid most of their appraisers off. Once paying and managing us actually did become an expense to the bank - due to the lack of volume - that was no longer a sustainable mode of operation for them.

 

[glenn walker]

Understood.
So, is this an example of your Post? (Being fact-ious) Is the Borrower then stuck with the Waiver- Value? Possibly impacting the RISK & future loans?

Business Insider’s reporting indicates loan officers at the WF bank changed values, since waivers were available only to properties valued below $1 million. Reducing the value of a home in their system below that threshold triggered a waiver. In some high-cost areas where Wells Fargo does considerable business, like the San Francisco Bay Area, databased values – some questionable to begin with – may have been reduced from, say, $2 million to below $1 million.

Dozens of loan officers at Wells Fargo altered values in the bank’s database, so loans would qualify for so-called appraisal waivers, according to recent reporting from Business Insider.

A wider problem is that Fannie’s automated valuation model is based on prior months’ data.
Heredia believes that without new appraisals to scrub Fannie and Freddie’s data, the mortgage giants’ valuation model will become unreliable within the next three to six months.

The borrower is never stuck with the Waivers Mortgage--IF a borrower believes the properties updates or features or anything else make it worth more than a waiver , they can opt to go ahead and get a full 1004 Interior exterior at their own cost.