Comprehensive Nature of Cuomo's Actions

[Marcia Langley]

Marcia-

When I say "outsource the responsibility" that does not mean that a FRI must physically control the entire appraisal process.
For example, if I'm a bank, I can hire a company to do my due diligence work. I've given them the authority to complete it for me. However, the responsibility for appropriate due diligence is mine and mine alone. It doesn't matter if the ones who I authorize to do it for me do it well or poor- however they do it, it is my responsibility. This was a golden opportunity to re-affirm that direct line of responsibility. Who cares who physically manages the process as long as the responsibility for the outcome is defined?

Instead of drawing the hold-accountable line directly to the FRIs, the agreement has set up a third-party vendor system that, in my opinion, shifts much of the due diligence responsibility to the third-party vendor.
The only thing I'm held accountable as the lender under this agreement is to randomly review 10% of the appraisals and report them to a yet-to-be-constituted body.

Again, as a lender, I would welcome this agreement because it requires me to use someone else to control what I should be responsible for controlling. If you take away my ability to control a process, you take away my responsibility for ensuring the process works as intended. Its that simple. :new_smile-l:

Denis,

You know already that I think extremely highly of your opinions. I am simply not reading this part the same way you are.

Our earlier posts were so full of issues, I may have gotten lost from your point.

If you aren't worn out by me :icon_mrgreen: please narrow my attention down to the part of this code that you see as relieving the bank of their responsibility for 100% due diligence in appraisal selection/ordering.

The code expressly says that banks can choose to order appraisals directly from independent fee appraisers. How does that fit with your remark that they would be required to order from third parties?

Or did you mean that from the simple fact that this settlement agreement was not directly with the banks that it imposed a third party requirement upon the bank? If so, what are the chances that since the banks are not required to sell to the GSEs (as if there were any other buyers, LOL) that it does not put a defacto requirement on the banks?

I'm sort of lost.

 

[hastalavista]

The code expressly says that banks can choose to order appraisals directly from independent fee appraisers. How does that fit with your remark that they would be required to order from third parties?

I don't see it explicitly stated. It is implied, but it could be that I am over-focusing on the AVM part (which is explicit).

Or did you mean that from the simple fact that this settlement agreement was not directly with the banks that it imposed a third party requirement upon the bank? If so, what are the chances that since the banks are not required to sell to the GSEs (as if there were any other buyers, LOL) that it does not put a defacto requirement on the banks?

(my bold)

I think the possibilities are very slim for this reason: While a bank may not choose to sell to the GSEs at any given point, they would certainly want to keep that option open and be flexible to do so if it became advantageous (or necessary).
This happened with a FRI I worked directly with- they held all their own portfolio but required the assignments to conform to GSE guidelines in case they ever changed their minds. And, they did change their minds.

Another example would be lenders such as Countrywide- until recently, they didn't sell much to the GSEs. Now, the GSEs are the only buyer in town (other than FHA).
So I do think in the world of residential mortgage lending, the GSEs do set the guidelines that agency and non-agency lenders alike follow.

But, back to your main point- I'm going to consider my position some more- you've made me question myself and perhaps I'm over-reacting and seeing a requirement (must use third-party vendors) when it is really only an option (may use third-party vendors or manage your own independent fee panel that is independent of your loan production staff).

Thanks, Marcia! :Emoticon_hug:

 

[Marcia Langley]

Denis,

Take a look at item IV-ii after the words, "other than". I think that is the point where you and I see something different.

 

[Mike Kennedy]

Denis DeSaix;1557566]I don't see it explicitly stated. It is implied, but it could be that I am over-focusing on the AVM part.

III. The lender,

or any third-party specifically authorized by the lender (including, but not limited to, appraisal management companies and correspondent lenders)

shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser.
​

Notwithstanding these prohibitions, the lender may use in-house staff appraisers to (i) order appraisals,

 

[hastalavista]

Mike-

I read that to say the lenders can use their in-house appraisers to order appraisals. But all I see explicitly named are AMCs or "third-party vendors". Did I miss the part somewhere that connects the "independent fee appraisers" to the ordering of the assignment without going through a third-party vendor or AMC (I may have)? When I read what the requirements are for a third-party vendor from your excerpt

or any third-party specifically authorized by the lender (including, but not limited to, appraisal management companies and correspondent lenders)

shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser.

that appears to deal with payment- nothing more or less. My question is about the ordering process from the lender to the appraiser?

But, regardless, I'll let my point rest and see how this thing plays out. If I'm wrong and the system reverts back to what I always thought was a first-class process (Wamu of old), I will be very happy!! :new_smile-l:

 

[moh malekpour]

Denis,
I think the lender still can order appraisal but it has to be done by someone who is not part of the loan or origination department of the bank. Not even working in the same unit. No connection with the loan people of any kind.

 

[Marcia Langley]

III. The lender or any third-party specifically authorized by the lender (including, but not limited to, appraisal management companies and correspondent lenders)

shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser.

That's the perinent part of item III.

What I like about item III is that it says that third parties must be specifically authorized by the lender. Since MBs will be out of the picture, that means all the questions of whether the AMC is actually an agent of the bank will be answered. We should always know who the lender is and have their name on the report.

As long as this equal treating of fee shops and AMCs remains in the code, I'm thinking the client name on an AMC order should be just like it would be on a split fee order. Just the bank with the appraisal company name elsewhere in the report.

----------
The part about in-house appraisers is limited to non-origination work.

 

[TJSum]

Marcia, from your quote above, it has me thinking again, sorry. What would stop a lender who owns their own AMC, from just "merging" the AMC into the company itself, after all they are owned by the same entity. The AMC personnel do not actually do the appraisals themselves, they just are the middle man in the process. Their functions would be pretty much the same and they could basically still run things the way they are run now. They could do this to get around the 20% ownership rule. What am I missing?

 

[Michael Tipton]

Item VIII, the 10% QC item only lists the lender. No mention of third parties (AMCs or Mortgage Lenders) in the paragraph as authorized to perform the QC function.

Additionally, I do not read this as a replacement of the contract(s) between the GSEs and the FRIs. Their due diligence obligation would remain in affect.

 

[moh malekpour]

That's the perinent part of item III.

What I like about item III is that it says that third parties must be specifically authorized by the lender. Since MBs will be out of the picture, that means all the questions of whether the AMC is actually an agent of the bank will be answered. We should always know who the lender is and have their name on the report.

As long as this equal treating of fee shops and AMCs remains in the code, I'm thinking the client name on an AMC order should be just like it would be on a split fee order. Just the bank with the appraisal company name elsewhere in the report. ----------
The part about in-house appraisers is limited to non-origination work.

Marcia,
but after you read paragraph III, read paragraph IV. It says who, from the bank or lender , cannot select,retain or order appraisal. The bank is going to be very restricted in ordering appraisal based on item IV and most likely are going to send them to AMCs.

IV. All members of the lender’s loan production staff, as well as any person (i) who is compensated on a commission basis upon the successful completion of a loan or (ii) who reports, ultimately, to any officer of the lender other than either the Chief Compliance Officer, General Counsel, or any officer who is not independent of the loan production staff and process, shall be forbidden from: (1) selecting, retaining, recommending, or influencing the selection of any appraiser for a particular appraisal assignment or for inclusion on a list or panel of appraisers approved to perform appraisals for the lender; (2) any communications with an appraiser, including ordering or managing an appraisal assignment; and (3) working together in the same organizational unit, or being directly supervised by the same manager, as any person who is involved in the selection, retention, recommendation of, or communication with any appraiser. If absolute lines of independence cannot be achieved as a result of the originator’s small size and limited staff, the lender must be able to clearly demonstrate that it has prudent
safeguards to isolate its collateral evaluation process from influence or interference from its loan production process.