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Draft Of Letter To Appr Board And Banking Commissi

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Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Still needs work obviously but this is the draft of the letter I am working on.



Dear Sirs;

I am writing this letter to ask for assistance in a major problem that exists within the Appraisal and Mortgage Brokering system. The problem is the pressure applied to Appraisers by Mortgage Lenders and Brokers to report predetermined values on our appraisals. Appraisers that work in the residential Mortgage fields constantly find themselves pressured to return predetermined values in their appraisals.

Almost every request received for an Appraisal at least hints at the value the Lender/Broker needs to make their loan work. Some of the hints are subtle such as;
· Owners Estimate of value $___
· Loan amount $___.
· Need $__ to make the loan work

Sometimes the Loan Office requests the Appraiser to do a comp search to see if $___ is a reasonable value. This is often followed "If you can help me out on this one I have more work I can send you."

Any experienced Appraiser knows this is just another way of trying to get a free appraisal. If an Appraiser gives a value indication of any kind per the Uniform Standards of Professional Appraisal Practice (USPAP) which all Appraisers in Alabama are bound by law to uphold, we have performed an Appraisal and must have a work file showing how we arrived at these numbers.

This is considered by many of us as a bride. If the Appraiser “makes the number” the Loan Officer will most likely send us more work. As soon as we don’t make their needed value the work ends. It is also very likely they will try to not pay for the Appraisal or hold out payment for as long as possible.

Another problem is that Loan Officers expect the Appraiser to reduce their fee if an appraisal doesn't “make the value”. If an Appraiser reduces his fee it is my understanding that he has then violated The Ethics Rule of USPAP because his appraisal was contingent on a value. The Ethics Rule of USPAP reads;

"It is unethical for an appraiser to accept compensation for performing an assignment when it is contingent upon:

1. the reporting of a predetermined result (e.g., opinion of value), or
2. a direction in assignment results that favors the cause of the client, or
3. the amount of a value opinion, or
4. the attainment of a stipulated result, or
5. the occurrence of a subsequent event directly related to the appraiser 's opinions and specific to the assignment's purpose."

If the Appraiser doesn’t reduce or wave his fee they have lost that client.

I know this from personal experience. I started to work for a Mortgage Company with the promise of lots of work. As soon as the first Appraisal didn’t come in high enough and I refused to waive or reduce my fee I never heard from this Mortgage Company again. It took several attempts to receive the fee for that appraisal too.

Mortgage Brokers also try to make Appraisers change our reports so that we don’t say anything about any problems that may exist with a house because it might cause their loan to be rejected. If the Appraiser does this to many times they will find another Appraiser that will look the other way.

Most Loan Officers work on a commission, the more money they loan the more they make. If the loan doesn’t close they don’t make any money. I have heard of salaried Loan Officers being offered bonuses based on the amount of money they loan.

One of the root problems is the Loan Officer's are normally the one that chooses the Appraiser. He or she uses the Appraiser that makes their loans work because he makes them more money. This seems like a conflict of interests to me. The Loan Officer can pressure the Appraiser but he has no accountability for it. If the loan goes into default, defects are found in the house that were not reported or the house was over valued the Appraiser has to answer for this, and rightfully so. However the loan officer that applied the pressure has no accountability and has his commission check.

This is not to say that the Appraiser should not be punished. Any Appraiser that is willing to cooperate with these lenders should be firmly disciplined when caught. Still many honest Appraisers are feeling the pressure because their work is going to another Appraiser. Some feel they have no choice but to cooperate unless they want to find a new career.

Lender pressure is getting worse every day. It is no longer just hints; I have had Loan officers all but say that if you don’t cooperate then they will quit using my services. I even had one offer me a bribe in a higher fee if I would help him out.

I believe there are enough laws to punish the unethical Appraisers when they are caught. New Appraisal laws and/or requirements are not going to change unethical Appraisers. I think it is time to look a bit deeper at the root of the problem.

I would like to see the State Banking Department and Alabama Real Estate Appraisers Board would meet jointly to address this problem and look for solutions.

I believe many ethical Loan Officers are just as tired of what is going on as the Appraisers are. I have heard some good ideas from members of the Mortgage community and other Appraisers on how to correct this problem. The following is a list of some of the suggestions that have been made.

· Require everyone who has any involvement in using, ordering receiving and appraisal have at least a basic understanding of the requirements of Uniform Standards of Appraisal Practice (USPAP)
· Require everyone who has any involvement in using, ordering receiving and appraisal be bound by the Uniform Standards of Appraisal Practice (USPAP)
· Any one that stands to make a Commission based on a loan that has to have a Real Estate Appraiser involved should be removed from having any influence on choosing the Appraiser. As long as Loan Officers are allowed to choose the Appraiser there will always be what I see as a conflict of interests.
· If the Loan Officer is allowed to choose the Appraiser then he should be held responsible for the Appraisal as well as the Appraiser.
· Require Lenders to sign the Appraisal report saying they agree with the content for the Report and assume at least some liability. I believe that would make the unethical ones a little less likely to push Appraisers if they knew they had to answer for their actions.
· Require Lenders to pre-pay for Appraisals. This will eliminate the threat of non-payment when the Appraisal doesn’t meet their need.
· Stop direct contact between the Loan Officer/Broker and the Appraiser. The Appraiser is supposed to be the independent third party in the deal. Give us some independence from the pressures applied to us.
· Chose Appraisers off a rotating list such as VA does. This way the Loan Office is not able to pick the Appraiser and apply pressure to the Appraiser.

Another Issue that I feel should be addressed by the Appraisal Board has to do with Trainee Supervisors. As it is any Licensed Appraiser that wants can take on a Trainee Appraiser. My suggestion is that would-be Supervising Appraiser should have to be approved before being allowed to train someone.

The potential Supervisor could be required to submit a log of perhaps the last 100 Appraisal they have performed and send this into the Appraisers Board. Then the Board could randomly pick a four appraisals and have them field reviewed by competent Appraisers in the appropriate Market Area. They would then return the review to the Appraisal Board for their review.

I believe this would accomplish two things. First I suspect most fraudulent Appraisers would not be willing to turn in random samples or their work and therefore would not try to take on trainees.

Secondly if the Supervisor is producing improper Appraisals he should not be allowed to train the next generation of Appraisers. He will most likely teach the Trainee’s to Appraise using the same methods.
 
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