Exemption from Fed. Regulations and raising DeMinimus

[Restrain]

The bankers are at it again. The following was taken from the AI website. Appraisals are being declared exempt from federal regulations and the deminimus is going up instead of down where it belongs.


"Qualifying Loans Deemed Exempt from Federal Appraisal Requirements

Federal financial regulators recently clarified regulations stating that loans held in portfolio that qualify for sale to Fannie Mae and Freddie Mac are exempt from federal appraisal requirements, whether or not they are actually sold to either entity or remain held in portfolio. The clarification makes clear that such loans do not require an appraisal that conforms to the agencies’ appraisal regulations nor an evaluation prepared in accordance with the interagency appraisal and evaluation guidelines.



The clarification letter, written by the Federal Deposit Insurance Corporation, the Federal Reserve Board, Office of the Comptroller of the Currency and the Office of Thrift Supervision, came in response to a question asked at a recent meeting with America’s Community Bankers. The new clarification adds to the list of exemptions established by federal regulators in 1994.



Recently, the Community Bankers also requested the FDIC to increase the threshold for requiring the services of a licensed and certified appraiser in transactions to conform to the recently raised loan limit of Fannie Mae and Freddie Mac. This would raise the de minimis from $250,000 to $300,700. Because of administrative laws, the FDIC is required to consider this request, although the agency has not begun the process of formal rulemaking."

 

[Austin]

This is nothing new to me as I have been fighting this fight for ten years. I do most of my appraisals for a community bank. When appraisal regulation started I would go to USPAP classes and find out what had to be done, and then come home and tell the bank the new rules. They would say: “We are exempt from those rules.” I would go to the next AI chapter meeting and talk with an MAI buddy that was chairman of the state appraisal board. He would say, "not so, if you give a price estimate it is an appraisal and you have to conform to USPAP and be licensed and certified.” We went round and round like this for months. Finally the banker called the state bankers association and let them explain it to me. A regulated bank under Title XI can have a written appraisal policy in which they state that they do not make loans based on the collateral but on the clients income and they only take the collateral under an abundance of caution, then they can name a person in whom they have confidence to do their appraisals whether he is licensed and certified or not. It is called an evaluation. This does not cover “loans” above the deminimis level, which are very few. They can get a real estate agent to do the appraisals if they want to.
This has been a pain in the butt for me and I have had to learn to satisfy both camps by doing limited appraisals that conform to USPAP. On residential appraisals the bank policy only requires drive-by appraisals. At first I thought this was nuts. How can you appraise a house you haven’t inspected? That is how I got into regression analysis. How can you be accurate with some degree of diligence? Actually, as much as I hate to admit it, with available tax records and MLS data, I would put my price estimates up against any other method. In the last five years I have had about three complaints mostly from nut cases. In the last 17 years of appraising for this bank, two foreclosures and zero loss from real estate loans. You guys might as well get ready, it is coming. The market does not want or need floor plans, flood maps, pages of CYA-addenda, etc., they want a fast, cheap, accurate, and convening price estimate.
I saw the handwriting on the wall in FNMA mortgage appraisals ten years ago and got out of it. I have only done one in the last ten years. It is a house of cards along with this whole evolution of USPAP crap, and the house is about to come tumbling down.

 

[Joe Birrell (NY)]

That's a strange deminimus number, hmmm .....hell why not $100,000,000,000 and that would take care of 100% of the real estate in US of A. Then we could all make plans to get out of this stinking business.
I have two questions - will Realtors still be doing BPOs ? and what will the fees be for a BPO ?

 

[jtrotta]

Austin
appears our other conversation with regards to this situation is now backed up in Your Favor. If RStahan is right, and the OTC; FRB; OCC and all the rest are in favor, our business just bit the big one.

Anyone for another "Petition" telling everybody about preditory lending :?: Seems like it may have instigated an improper response don't ya'll think :?:


There Is No Finish Line 8)

 

[Ben Vukicevich SRA]

Guys,

You are fretting about nothing. Things remain the same. Thank God they did it. Who the hell wants to be under their stupid guidelines for a residential appraisal. The morons are finally staying where they belong, in non-residential. I don't want to conform to Statement 10 for a residential appraisal.

Basically, they realize that FNMA and FHLMC have their own adequate appraisal books/instructions, just like FHA and VA, and don't need their esteemed guidance via the USPAP crap.

Ben

 

[BarbaraNJ]

I have read all the posts to this topic carefully, and am a bit confused by Ben's reply.

While I agree that FNMA regs. are adequate, I seem to remember that the reason the Fed got involved at all was because of the S&L (and other bank) failures in the late 80's and early 90's. Surely there were FNMA guidelines at that time; what the Fed found out was that if there was no "punishment" attached, there was no reason for an appraiser to be 100% impartial.

It is my impression (correct me if I'm wrong) that everyone--including me---is upset that lenders INSIST we have a license and then do everything they can to use lower priced and/or non-licensed "appraisers".

As the need for licensed appraisers shrinks, the cost of doing business rises. Even Ben knows that license fees in the State of NJ were just raised to $600.00 for two years. Add 4 days of mandatory classes @ roughly $150.00 per class and you have $600.00 PER YEAR just to keep a license. Now add E&O, MLS Dues, etc and you begin to wonder how soon the day will come when you are no longer making a profit.

I Love the business, and have been at it for over fifteen years now-----yes, "B.L." (before licensing). It just seems that with the Fed wimping out to the states and the industry, and AMC's mushrooming, we are being squeezed from both ends.

By the way, any one have any comments on WaMu owning its own AMC??
Not bad, making money on the loan as well as making money on the backs of the appraisers by charging the applicant about $100.00 more than the appraiser gets for the appraisal. Where is the Fed in protecting the consumer????

Thanks All, for letting me vent.

 

[Don Clark]

8)

Barbara:

Don't worry, Chicken Little has been saying the sky is falling for many years now and it ain't fell yet. Not only does WAMU own it's own AMC but so do a lot of other major lenders including Wellsl Fargo(ValueIt) and too many to mention here. That is not new. In 1992, October to be exact, when the deminimus was raised 2 months before mandatory licensing went into effect on January 1, 1993, appraisers around the country were weeping & wailing and some even got out of the business because they just knew that in a short period of time they would be out of work. The same sorrowful song has been sung over and over again. Personally, I have not seen any real difference in my work load. The real cyclic effects of the economy, interest rates, consumer confidence, and a host of other issues have had much more of an effect on our business.

Yes, there were FNMA/FHLM, VA and FHA standards long before we had USPAP, and the original URAR. The original URAR was supposed to make a variety of forms "Uniform". The URAR was then change in 1993 to clear up some possible discriminatory language and procedures in the original version such as the neighborhood rating grid. Then FNMA wanted a more complex, detailed form for the 2-4 family so it brought about the 1025 in 1994. This replaced the original 2 page version that was the silliest thing I have ever seen. Now, probably because the american tax payer is the ones taking the risk, not FNMA with their direct line of credit with the U.S. Treasury, old Fannie and Freddie don't want an appraisal at all, not even the new ones they dreamed up to replace the URAR such as the 2055,etc.

However, most lenders, and the VA & FHA still require appraisals to protect their interest in a property. Even the small 2nd mortgage lenders who loan their own money, require an appraisal. Mortgage Brokers require an appraisal before they shop the loan.

So sit back, keep your eye on events, but don't let the nay sayers cause you any concern. Appraisers have been around a long time, and we will probably be here when the next century rolls around, or, our heirs will be back to bows and arrows because we couldn't get along with each other.

Don

 

[Austin]

I agree with what Don said. The bank I do work for strongly believes in appraisals for a good reason, so I don’t think community banks and others are out to thwart the appraisal process in general. The main objections of these banks to USPAP in my experience, is that in a majority of the cases that kind of detail is not necessary. LTV ratio is 80% or less for their loans and the loans are based on income not property collateral. In my practice in this community in 90% of the cases I can get a number that is well supported and serves the banks purposes in 15 minutes. If a bank client wants an equity line loan of $10,000, and he owes $20,000 on a $100,000 house, why spend $350 on a FNMA appraisal. If I do 200 residential appraisals a year, how long could it take to appraise a 1,100 sq ft rancher for the 50th time.
I sit here for to many hours reading the chatter on this board about ACI, Lighthouse, MCS, Toolbox, maps, flood information, etc., and I ask myself what does that have to do with appraising. Most of the posts on this board are about legal USPAP procedure and software issues. If we could spend as much time appraising and learning new technology as we did on this irrelevant crap we would all be better off. I don’t see this as a sell out of appraisers, I see it as an attempt to by-pass a total fiasco known as appraisal regulation and USPAP. The banks want what they need not what some state board thinks they ought to have. Most banks just want something in their file for examination management purposes or for legal protection. No intend at all to deceive. I have little if any pressure to embellish a value. It is all about freedom to appraise and not spend time jumping through legalistic hoops.
Appraising is fun if we have the freedom to appraise. USPAP and regulation have turned the profession into a nightmare. Read Tom’s post on this board and Steve Vertin’s thread or David Johnson’s experience. The government has created a monster and it is time to put the monster in the pit and seal it up forever.

 

[Ben Vukicevich SRA]

Barbara,

Why are you confused by my reply?

First, FNMA/FHLMC/FHA and VA loans did not cause the S&L collapse.

The loans that did cause the collapse were typically portfolio loans. The appraisers were accountable only to the Board of Directors for discipline. Not a good system.

Enter FIRREA and licensing for FRT's. FHA,VA,FNMA and FHLMC appraisals are not FRT's so why would you want to be under the regulations of more agencies like FDIC, OTC, etc when you complete an appraisal-ie Statement 10. I view this action as the salvation for the residential appraiser who is not aware that s/he could be in violation of Statement 10 if the loan was portfolioed by the bank or S&L and they did not provide an "as-is" value as required by Statement 10.

Me, I'm happy with all the instructions I have from FHA/VA/FNMA and FHLMC on how to complete an appraisal for them. And FNMA and FHLMC along with FHA and VA have the right to remove appraisers at any time for poor appraisal quality-it's in their "books."

As far as the cost of doing business, especially in NJ, I am aware of that as I've been doing it for 28 years. Yep, we're being squeezed. So what you'll find is that you will work 7 days a week, 16 hours a day to make the money you formerly made in 5, working 8 hours a day. It's a decision we all have to make. As I said in a post over in the Watercooler, there are alot of easier ways to make money. Which is probably why none of my four kids has chosen to be an appraiser.

Ben