Evaluations & USPAP - Question from a bank staff appraiser

[George Hatch]

One more thing about appraisal standards that a lot of people don't seem to get is that these requirements are not aimed at improving the level of play across all tranches of appraisal practice. They're aimed at bringing the lowest performers into an acceptable level of performance.

The rock stars are going to continue to do their thing in excess of the minimum requirements. Same as they always were. It's the donkeys who are constantly flirting with how much they can get away with who are coming to the attention of their state boards. And I daresay THEIR overall performance has improved when compared to pre-licensing times. I think we tend for forget how bad the worst-of-the-worst were back then.

As just one example, it's been many years since I've seen comps created out of thin air in an appraisal report. That used to be a thing back in the day, and the worst an appraiser could expect to happen to them if they got caught telling the lie was they might lose that one client. That is, assuming that the one client wasn't a co-conspirator.

There seems to be an underlying sentiment in some quarters that the level of play among appraisers couldn't possibly get any worse, or that the economic interests of fee appraisers couldn't possibly deteriorate beyond the current state of affairs. I would suggest that such assumptions are subject to challenge. I don't think it takes a lot of imagination or intellect to visualize the potential for the unintended consequences which might result from regime change in the appraisal business.

Others will surely disagree.

 

[TerryRohrer]

As just one example, it's been many years since I've seen comps created out of thin air in an appraisal report. That used to be a thing back in the day, and the worst an appraiser could expect to happen to them if they got caught telling the lie was they might lose that one client. That is, assuming that the one client wasn't a co-conspirator.

How thin must that air be? I reviewed an appraisal a few years ago by an appraiser with 40 years in. Their best comp (the one that established the upper end of the "range" so that they so opine that the subject contract, within said range, was "supported") was "created" by using the "for comparable purposes only" listing the MLS. Thirty seconds of work revealed the site had been purchased by the owner and the home had been constructed under contract by the builder, for the owner. The total investment was reported as a sale by some random realtor.

That is one I observed. I have no doubt the same occurs repeatedly here and across the country on a daily basis. I have been provided "sales" by lenders with the request that I use them in a report for them, even though I couldn't find any evidence of a transfer. I doubt every appraiser says no in that circumstance. Nor is it but a degree of difference from your scenario to one where "private" sales and unlisted "builder sales" are used to support unsupported sale prices. While the appearance of improvement has surely taken place, I doubt there has been significant change overall. No AVM or overseas "reviewer" will discover these games without input from local appraisers with access to and understanding of local data and trends. But that seldom occurs. Reviews are priced to allow a box to be checked without allowing anyone committed to the truth to be competitive.

 

[George Hatch]

My point was about licensing. Prior-to there was no mechanism to kick those appraisers off the island. Now there is. And the builder sales or can't verify private sales you're seeing now were so common back then as to almost be routine in certain circles, not the sub-5% or 10% that someone might think is happening now.

I would posit that even a minor improvement in those numbers completely justifies the effort to improve. AND I would also say that if someone's idea is to roll back the effective level of accountability then that will have a completely predictable (and inevitable) result.

Simple question: What alternative can you envision that would make a big enough difference in safe/sound lending to justify the additional effort?

 

[TerryRohrer]

My point was about licensing. Prior-to there was no mechanism to kick those appraisers off the island. Now there is. And the builder sales or can't verify private sales you're seeing now were so common back then as to almost be routine in certain circles, not the sub-5% or 10% that someone might think is happening now.

I would posit that even a minor improvement in those numbers completely justifies the effort to improve. AND I would also say that if someone's idea is to roll back the effective level of accountability then that will have a completely predictable (and inevitable) result.

Simple question: What alternative can you envision that would make a big enough difference in safe/sound lending to justify the additional effort?

My points are about appraiser licensing, too, and about banking regulation. To be clear, I do not advocate for ending licensing, I advocate enforcement that to date has been essentially nonexistent. Without competent enforcement at all levels, the risks have been multiplying. Appraisers are effectively unregulated in the sense that, while they play a few games and pay a few fees in order to be in the game, regulation as it is currently applied is completely ineffective. Likewise, while many believe that lenders and GSEs are heavily regulated, enforcement doesn't exist.

 

[George Hatch]

I agree. Enforcement is always the weakest link, but that's the case across all criminal and administrative systems. And I think it's more attributable to the limitations in govt funding than to govt corruption or malice.

IMO, I think unfair and unequal enforcement is the result of inadequate resources and support for the function. Not too much support or too many resources. The outcome is more similar to unpredictable passive/aggressive performance than to consistent/assertive performance.

I am disinclined to worry about "too much" until we approach the point of diminishing returns. I think it's ironic that the same people who complain about the states allowing the donkeys to skate are also complaining about the states being too active with appraisers. That's a big intellectual disconnect.

 

[TerryRohrer]

I agree. Enforcement is always the weakest link, but that's the case across all criminal and administrative systems. And I think it's more attributable to the limitations in govt funding than to govt corruption or malice.

IMO, I think unfair and unequal enforcement is the result of inadequate resources and support for the function. Not too much support or too many resources. The outcome is more similar to unpredictable passive/aggressive performance than to consistent/assertive performance.

I am disinclined to worry about "too much" until we approach the point of diminishing returns. I think it's ironic that the same people who complain about the states allowing the donkeys to skate are also complaining about the states being too active with appraisers. That's a big intellectual disconnect.

I generally agree, but not in the case of Montana. They got a windfall 10+ years ago when they began licensing AMCs. About the same time, the started licensing Mortgage brokers, all through the same portal and agency that licenses appraisers. Hard to find the numbers, but I have heard guesses in the $300,000 to $500,000 per year range just from the AMCs. Yet, at the same time, they abolished the "investigator" position, an permanent position held by a certified general appraiser for 20 years. There was no replacement. Reviews are now conducted by low fee idiots, through crooked AMCs who rely on the same fools to rubberstamp their lending assignments. No regard for USPAP, no need for local knowledge, no real substance in any part of it. Regulation in name only. Yet the leader of that charade is on the board of TAF.

 

[Mejappz]

I generally agree, but not in the case of Montana. They got a windfall 10+ years ago when they began licensing AMCs. About the same time, the started licensing Mortgage brokers, all through the same portal and agency that licenses appraisers. Hard to find the numbers, but I have heard guesses in the $300,000 to $500,000 per year range just from the AMCs. Yet, at the same time, they abolished the "investigator" position, an permanent position held by a certified general appraiser for 20 years. There was no replacement. Reviews are now conducted by low fee idiots, through crooked AMCs who rely on the same fools to rubberstamp their lending assignments. No regard for USPAP, no need for local knowledge, no real substance in any part of it. Regulation in name only. Yet the leader of that charade is on the board of TAF.

Well why am I not surprised—TAF is corrupt for sure. Montana's situation is a mess. They made a ton of money from AMC licensing, but then they got rid of the investigator position, which a qualified appraiser held for years. Now they hire low-fee "reviewers" who don’t know what they’re doing, all while AMCs keep cutting corners. And having someone from that whole setup on the TAF board makes it worse. What a mess.

 

[George Hatch]

I don't know, but I kinda doubt the impetus for cutting an investigator position came from the board.

Regardless of whether it did come from the board or not, that outcome has nothing to do with appraisal standards or appraiser qualifications.

 

[TerryRohrer]

I don't know, but I kinda doubt the impetus for cutting an investigator position came from the board.

Regardless of whether it did come from the board or not, that outcome has nothing to do with appraisal standards or appraiser qualifications.

I would take your wager. And cutting that position has everything to do with competent enforcement of standards and qualifications.

 

[George Hatch]

Allow me to clarify: "has nothing to do with the composition of appraisal standards or appraiser qualifications. "

Enforcement and adjudication accrue directly to the state governments, not to the actions at TAF or the ASC. Or Congress. That problem which is created by the local govt can only be fixed by the local govt.