Has the quality of appraisals gone up since the AMCs took over?

[George Hatch]

Matter of fact and since we are going off on the tangent of waivers inflating the pricing in the market, let's talk about that.

You guys are dealing with sales data every day and are taking note of the financing amounts for each sale that you're presenting as a direct comparable to your subject. You can see which sales are getting done on the all-cash basis, which ones have the high LTVs that we would associate with conventional underwriting and 1004s and which deals have low LTVs where there may/may-not be using a waiver instead of an appraisal.

If waivers were being used to rubber stamp high sale prices then you would be noticing those - they'd stand out as an outlier when compared to all the others. Right? Okay, so what have your IRL observations been with the data that you've been analyzing? Are you seeing a difference? Because if there isn't some pattern of differences that's apparent to you then it seems to me that is a datapoint all by itself.

Are you routinely discarding sales with low LTVs in your SC or not?

 

[George Hatch]

I believe that the all-cash and low LTV transactions are also the control group when it comes to analyzing for allegations of racist lenders and appraisers, too.

 

[glenn walker]

The problem with so called round robin systems is they reward the bad appraisers and the good ones get no benefit of getting more business. Its a good system for one man order takers but no incentive for good appraisers.

 

[glenn walker]

When we got a "waiver" we also gave the borrower the option of getting a full appraisal if they believed the waiver was not fairly accurate. On homes that has say new upgrades or improvements often a borrower would choose to pay for an appraisal. On others a "waiver' provided what was needed for the borrower and they opted to go that way . BUT no matter what we also ran a AVM and we did comp checks before we as a lender used the waiver. If anything the "Waivers" were more conservative than what a full appraisal may ave come in at and so values were not inflated.

As far as people saying you just tell DU what you need thats bogus, as when Waivers first came out all sorts of people were trying to game it. A few may have done it but soon it was designed to be almost impossible to game the system. My experience when at lender was "waivers" on standard cookie cutters are very good for all parties involved except the appraisers.

 

[RCA]

It's been about 10 years since I did a mortgage appraisal, so I don't have a horse in the race. I still do private work and review appraisals for County Assessment appeals. I read a lot of comments on the Forum about appraisers taking 6-8 hours to complete a single family. But when I review appraisals they all seem to be boilerplate with standard canned comments. Looked at one yesterday and to start off, ALL CAPS, one line for reconciliation and TYPING errors. Is it that hard to spell qualitiy or similiar? At least use your spell check.

So to all you that take 6-8 hours, what are you putting into the report? Graphs, charts, linear regression?

I thought the AMCs were improving every aspect of the business.

I would say that just about anybody could have improved the quality of the worst 10-20% of appraisals before 2007. The quality could only go up really. I am not a reviewer so I can only guess about current quality. But I feel that many AMCs don't improve quality much - in fact, they can be detrimental to quality. It is usually better to deal directly with lenders if you want the comfy feeling that someone knowledgeable is actually reviewing your work.

However, it is all relative. Most appraisers follow what I would call the TAF/AI/GSE protocol for appraisals. The protocol structure is established by TAF (ASB & AQB) via a combination of USPAP and Minimum Course Requirements and Course Design that effectively sets the protocols for doing appraisals. The individuals doing the course design are AI designated members - so that is where the "AI" comes in. The SCA portion of these protocols is based on the archaic methods of matched pair analysis and multi-linear regression that should not even be allowed in many market segments - as they are not sufficiently sensitive or geared to the real complexities involved in pricing.

So, from my perspective, at the residential and, to a lesser extent, commercial level, many appraisals are defective primarily because of protocols and methods specified by TAF, the GSEs, and the consequent incompetence of the vast majority of appraisers who work under the auspices of these organizations.

One might very well claim the design of the TAF/AI/GSE protocol set for the different property types and approaches to value is intentionally deficient. But it could also be due to incompetence. Or, more likely it is a combination of both, if we include the powerful influence of the lending industry on TAF, the lead appraisal element in this corrupt and incompetent appraisal structure.

 

[djd09]

it is eappraiseit on steriords...

 

[Surf Cat]

Over valuation was never a big issue we had except in rare instances, where someone has done it intentionally and maybe only a few a year. The overall quality both Direct and AMC was decent. Quality is something that all appraisers good or bad, they really believe they prepare quality reports. Quality to a lender is if the value is good and supported and nothing else really matters as the minor errors can be mitigated.

The bottom line is the AMC is now a machine built for limited reports, short form reports and the answer is
to eliminate the full 1004 in ll cases except rural or complex. A- two page report with a value is all thats really needed and all the other 30 pages can be kept in a appraisers work file. Short- to the point and a lower cost .

Quality will bet met by the less is more-model-less physical inspections, and the end of using the 1004 model and finally the goal is lowering costs to consumers. So more limited reports, and waivers, will be the standard in a few years. Appraisers will not like this, as fees will be substantially lower, but so will the amount
of work, so it can be made up in volume by some. Others will decide it's no longer a business model that is profitable, and will exit the loan production business one way or the other.

I agree with you in regards to the appraisal report being slimmed down to a one-page form with photos, charts and graphs for market analysis as well as differences in GLA and features.

Having said that, I believe the inspection and driving the comps is paramount to an appraisal. It's amazing what people do to their homes....You and everyone here knows this. In regards to the comps, Realtors only present the very best photos & features of their listings through the MLS, neglecting the pitfalls. After all, they want to sell the home.

 

[Terrel L. Shields]

The first mentor I was with was a shyster, a slick talking shortcutter. Even though I was wet behind the ears, I instinctively knew things weren't right and moved on from his unethical ways to the mentor I was with for years.

Yes I had to untrain 2 such appraisers. They knew the guy sucked putty balls and quit within six months. he basically used "the list". Got the boot off FHA work finally.

The idea that ethical appraisers would kowtow to MBs means we assume the appraiser is not ethical. So can you blame the MB more than the appraiser? As for real LOAN OFFICERS as opposed to loan originators and mortgage brokers, loan officers are frequently fired for making bad loans. After all, this is playing with the house money, not FNMAs or other government backed money. I know a case where a loan officer was fired by his own father who happened to be the VP of lending. The loan decision was too bad to ignore. He moved to another bank where he's been for over 10 years and apparently learned his lesson. So why did D-F apply to loan officers too? Why do they have anything but every incentive to make sure the loan makes money? Their bonuses are almost entirely based upon the profit the division makes, not any commission. I've never heard of a LO paid on commission. Loan originators and MBs yes. Not loan officers.

 

[J Grant]

Matter of fact and since we are going off on the tangent of waivers inflating the pricing in the market, let's talk about that.

You guys are dealing with sales data every day and are taking note of the financing amounts for each sale that you're presenting as a direct comparable to your subject. You can see which sales are getting done on the all-cash basis, which ones have the high LTVs that we would associate with conventional underwriting and 1004s and which deals have low LTVs where there may/may-not be using a waiver instead of an appraisal.

If waivers were being used to rubber stamp high sale prices then you would be noticing those - they'd stand out as an outlier when compared to all the others. Right? Okay, so what have your IRL observations been with the data that you've been analyzing? Are you seeing a difference? Because if there isn't some pattern of differences that's apparent to you then it seems to me that is a datapoint all by itself.

Are you routinely discarding sales with low LTVs in your SC or not?

The problem is that nothing indicates a purchase was financed with a waiver. It is not on public records, it is not on MLS, even the RE agents might not know it. So, there is no way to track which ones are outliers or top-of-the-price ranges. I suspect many are, though, since the pattern of sale prices, unconnected to market value, has increased so much in the past several years - as I said, all it takes is one higher price a month in any market to provide a sale comp for the next AVM or the next appraisal.

The fact that they exist is ironic, considering they achieve what the most used car-like, pushy mortgage broker ever dreamed of, that is, the ability to put down their own value estimate to make the deal work, with no ramifications, ( as long as it falls within the classified secret James Bond AVM, lol )

 

[djd09]

...it is not hard to correlate the massive rise in home prices with the use of waivers