Evaluation Liability

[Meandering]

When ordered by an AMC

AMC's don't order evaluations. If a lender orders an evaluation from an outside contractor, that order comes directly from the lender.

for a loan secured by the consumers principal dwelling, the AMC must pay the appraiser the C&R for the lending appraisal.

Evaluations are for exempt transactions that do not require appraisals. Just because an evaluation done by an appraiser must meet the standard of an appraisal, does not automatically make the transaction non-exempt. Additionally, evaluations are done on all property types that fall under the exemptions, not just principle dwellings.

I don't know why you guys spent all these pages of electrons arguing with me.

Because the information you are putting out is so wrong it could be both financially and professionally detrimental to some of the appraisers reading it.

I understand that you think you are right, but you are doing more harm than good. Hopefully, one of the mods will lock this thread down soon. It is just spinning in circles now.

Please refer yourself back to the AMC final Rule.
The USPAP
The TAF Q&A you attached to your own email.

along with the footnotes that go back to the TILA, specifically, 12 cfr 226.42 and 12 cfr 1026.42.

Have a great day reading!



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[Meandering]

Until sometime in late November, the turkey thinks the world if fine and the farmer is my friend because he brings me food every day.

The perfect example!

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[SpartanAG]

My open ended question is this: evaluations have been around a long time and per your above , used as collateral review or internal bank purposes. They were very different in purpose and scope from appraisals. To my knowledge, in all these years, appraisers were not considered /asked to do these evaluations, or at least not in any great number. ( correct me if I am wrong). From what I can gather these evaluations were done mainly in house by staff ? For the most part, that is correct.

There seems to be a shift in past year plus, where banks are reaching out to appraisers for evaluations, not to do the above evaluations for internal purposes as the above, but for a NEW purpose...aka, the change in regulations that no longer allows an AVM or evalution ONLY to be used for a HELOC or any other loan purpose...it has to be upgraded to at least an evalution with some form of inspection such as an exterior inspection. The purpose is still the same. Evaluations can only be used for exempt transactions. There are three exemptions that allow for the use of evaluations. Evaluations always require some form of inspection; however, the person doing the inspection does not have to be the person doing the evaluation.

THIS product seems to be the form of evaluation that lenders are now looking to appraisers to do...not necessarily for appraisers to suddenly be offered a nice work flow of the evaluations not used for any loan purpose....if staff were fine to do them for years, why would lenders change from staff doing them now?

The evaluations meet the same standards. Some of the reasons lenders would go to outside contractors for evaluations is: 1) Competency: Appraisal know their markets and valuation better than in-house staff. 2) The lender doesn't have someone that can go inspect the property. It is easier and cheaper to higher an outside contractor. 3) Cost savings to the lender. In-house staff is expensive. Pay, benefits, work space...etc. It all adds up. Lenders are discovering that they can contract the evaluations out and save money on staffing costs.

, I am not on lending end so am not privy to their decisions, but I have noted the outreach to appraisers since the change for any violation product used for a mortgage loan purpose of any kind, even if a tiny 5k line of credit,, must be upgraded to an evaluation with some form of inspection, and THIS kind of evaluation is the reason for outreach to appraisers . And THIS form of evaluation might be a bit more complex/ value oriented than the kind described by Dale in his post. Would like feedback, agree or disagree...( particularly from those with direct bank experience).

Each real estate related loan that goes out must at a minimum have an evaluation in the file. Evaluations require an inspection and photos of the property, always have. Things haven't really changed on the lending side. This is just a newer topic to many appraisers because they are being engaged to do something they have always been allowed to do, they just didn't know it.

 

[Meandering]

That, and you can charge a borrower a full appraisal fee, then tell the appraiser "it's only an evaluation" so the appraiser fee is much less. While the borrower, who doesn't know any better, gets a "real appraisal" for the fee they paid.

Let's not forget the important parts.

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[Terrel L. Shields]

As disclosure I was provided a copy of my evaluation when the farm loan ballooned. The 40 was ~35 acres. in soybeans. This is NWA, none of the 10 comps were tillable land - w/o comment or even acknowledgement that it was in waist high soybeans. Had it been an appraiser a complaint would certainly led to sanction, yet an appraiser is expected to compete on price with the non-licensed and non-liable evaluator?

 

[J Grant]

That, and you can charge a borrower a full appraisal fee, then tell the appraiser "it's only an evaluation" so the appraiser fee is much less. While the borrower, who doesn't know any better, gets a "real appraisal" for the fee they paid.
Let's not forget the important parts.
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Even greedy lenders are not THAT greedy, and even stupid appraisers are not THAT stupid. The borrower gets a copy of the appraisal by law now. If it says appraisal on it, clearly the appraiser recognized they did an appraisal, not an evaluation. If it is done on a fannie/URAR form, clearly the appraiser realizes what that is. Even the sleaziest clients are not so crazy that they would try to pass of an evaluation as an appraisal, just to squeeze a few $ more out of what borrower pays and what the appraiser gets. They have already squeezed that to the bone as we know, I doubt they'd risk such visible fraud do so further.

 

[J Grant]

Whatever lenders' motives are to shift evaluation work more to appraisers, if it they are substitute for traditional appraisals but instead provides alternative/additional work for appraisers, I am in favor of it. I doubt the fees will be good, they won't be, why would lenders or AMC' s suddenly pay well? But even if the fees are X$ ( small per eval) it might help appraises raise their fees for traditional appraisals which are far more labor intensive. With an additional income stream, albiet a modest one, appraisers might be in a better position to say "no" to low fees for the traditional appraisal.

 

[Meandering]

Even greedy lenders are not THAT greedy, and even stupid appraisers are not THAT stupid. The borrower gets a copy of the appraisal by law now. If it says appraisal on it, clearly the appraiser recognized they did an appraisal, not an evaluation. If it is done on a fannie/URAR form, clearly the appraiser realizes what that is. Even the sleaziest clients are not so crazy that they would try to pass of an evaluation as an appraisal, just to squeeze a few $ more out of what borrower pays and what the appraiser gets. They have already squeezed that to the bone as we know, I doubt they'd risk such visible fraud do so further.

Then we disagree with the amount of sleeze out there.

Although, not sure if you remember, but you can search the archives and check it, but,

When ES Appraisal was about to go down, I started posting lots of warnings to appraisers about it and to get their receivables in a row. Lots of pooh, poohs, and kool aid spreaders claiming no harm could come of it, a few thousand dollars was not a big deal to the profession.

When it broke out in the millions of dollars, most people, including appraisers were shocked!

Since then,

Fees charged to borrowers have gone up, less completion among AMCs says more volume than there was back then.

Check the GAO studies (2 of them).

Something like 70% of failed loans were below deminimus thresholds (From memory, but if you want the links to the studies let me know and I'll post it).

So a little math, based on what the GAO said - tempered with current fees,

Ought to give you a very good idea of just how profitable this is. It's a bank incentive to lend. And don't worry tax payers, you still have their backs.

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[Meandering]

That,

and as far as "appraisers ought to know"

Just look at all the threads this year about "desktop" appraisals, and the links Notrav posted asking if those "formats" were good for appraisals.

These products are already prolific in the industry, and appraisers could care less about their liability,

oh, until they get sued.

Then again there will be a gnashing of teeth and lots of moaning and whining.

After all, no appraisal, and no "evaluation" have to be produced on a Fannie Form. That's an Assignment condition, you're just used to seeing.

OMG did you ever wonder why AMCs make a big deal out of Assignment Conditions?

Because they can give you any form they contrive, call it an appraisal, and you can fill it in from your desktop and take all the liabilities.

But you know that horse story.

You can lead them to water but........

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[J Grant]

The lenders are capable of being sleazy, but are not stupid...their attorneys keep gray area activities within at leas appearance of compliance...passing off an evaluation as an appraisal is outright visible fraud and they are not stupid enough for that.