As to "wrongful exclusion", I don't know who would be the ultimate arbitrator of that finding. Agreed, what a mess that might become.
I do think this:
I do support notification to the appraiser if they are excluded from from an otherwise approved or open panel.
I think that notification should be made by the entity who makes the decision; if it is the lender, the notification can come through its agent (the AMC), but the lender should be identified as the decision-maker.
I think the reason for the exclusion must be stated; if linked to specific assignments, those assignments need to be listed and the specific reasons need to be stated.
I think an appraiser can be excluded for reasons other than appraisal issues; for example, if I am unprofessional in my business dealings with a client or its agent, there should be no expectation that the client must continue to use me as an appraiser (this works both ways; I wouldn't work with an abusive client, they shouldn't have to work with an abusive appraiser); in such cases, the reason needs to be cited.
Finally, I think the appraiser should have the opportunity to rebut the accusation and have the original, deciding entity reconsider; that reconsideration should contain a comprehensive response to the appraiser's rebuttal. This way, everything is on the record. Of course all, as appraisers, would approve of this requirement. No motivation to implement it though.
A system using the above guidelines may not stop wrongful exclusions from occurring. It would make them more onerous to execute and more risky. It would not be difficult for a regulatory entity to review the data to see if certain patterns exist.
An easy example would be this:
Appraiser is excluded from a list because of an alleged poor appraisal.Won't happen that way, the lender just has an appraiser they prefer over you, just like when you were added and received work ahead of another listed appraiser.
Regulator reviews original file and sees the original assignment was for a refinance. No poor appraisal to look for if that is never cited as the reason you're no longer receiving assignments.
Regulator reviews original appraisal and replacement appraisal. Regulator concludes the original appraisal wasn't that bad, and the replacement appraisal was actually worse.
Regulator notes that replacement appraisal satisfies refinance LTV, while the original appraisal did not. No replacement appraisal, because the original no longer exists.
Regulator asks for additional files where replacement-appraiser was used as the 2nd opinion of value.
The question the regulator is trying to determine is if there is a pattern occurring? A one-off may be due to coincidence. A pattern, however, shifts coincidence over to suspicious. Suspicious activity by a regulated financial intuition is a problem. That creates the reason to widen the investigation and dig deeper in an audit. A potentially costly event for the regulated institution even if nothing is amiss, and a significantly costly event if something is amiss.
If this was the process, exclusionary lists would still exist. But it would be in the institution's best interest to ensure that exclusions are made for legitimate reasons and not illegitimate ones. It further increases the risk if lenders use the practice to "shop" appraisers/appraisal values.
And, in the end, "risk" (IMO) is why the appraisal process for residential mortgage lending is broken. Currently, there is no significant risk for using poor appraisals: even with the so-called buyback push; we've read enough anecdotal stories on this forum to conclude that many of the push-back reviews (USPAP and non-USPAP) are of poorer quality than the original appraisal, and are completed with an apparent bias and not objectively.
Lenders are responsible for the quality of the appraisal reports they obtain.
Lenders have little risk in regards to not diligently obtaining quality (even minimum-standards quality)... although there appears to be some shifting in this stance (I think some lenders are aware that their risks are increasing).
So, enforce the existing regulations and make it a meaningful regulatory risk for lenders not to carry out their existing obligations and ensure that quality is one of the primary criteria used for appraisal assignment/review decisions.
The objective is not to penalize a lender for missing a one-off. The objective is to ensure that there is no pattern of practice which undermines the system: which is consistent with the mission of most bank/lending regulators.
Monitoring the process of exclusionary lists can be a useful tool in the overall regulatory oversight scheme.
