Hybrid

[J Grant]

Are you worried about your exposure to liability for an error - of your own - in a hybrid appraisal that was performed for use with a HELOC?

I have not done any hybrid work.... just pondering what can happen to any appraiser as a result of the fast paced hybrids they are doing...a false sense of security that it is "only" low risk work but if a bank or auditor or default makes these products reviewed, seems the appraiser will be as liable/responsible for these reports as they would for any other. Do you agree ?

AKA, the rationale for doing them so fast is they are a low risk/low $ amount HELOC or equity loan 20k to redo a kitchen or (whatever they are used ) However, the appraiser is responsible for the market value of 350k. ( and development that supports the MV opinion )

 

[George Hatch]

Do you feel any more exposed to criticism for items beyond your SOW when you perform a 2055 rather than a 1004?

I don't.

 

[DWiley]

Do you feel any more exposed to criticism for items beyond your SOW when you perform a 2055 rather than a 1004?

I don't.

They are new. Appraisers, as a group, don't tend to handle "new" very well. There are appraisers who still hand draw sketches, scan paper maps and type in all caps

 

[J Grant]

Do you feel any more exposed to criticism for items beyond your SOW when you perform a 2055 rather than a 1004? .

I do very few 2055/s and so do most appraisers ...( that I know) But yest I feel a bit more "exposed " to possible issues with 2055 forms. I did a few last year pre foreclosure for a client and found them more time consuming each time out digging for info, etc I stopped accepting them

And a 2055 is still not a hybrid desktop...appraisers are cranking them out in 45 minutes that's on them, but I am just wondering if any of the reports one day will be looked at more than these appraisers think.

Turn time/speed is very much a problem in these products and in fact of much of res lending work. Though it's understandable clients need/want it fast, many of the deadlines are AMC imposed to impress their clients/win market share and put pressure on appraiser and reduce time for verification, research etc. Appraisers are turning in reports faster than ever, typically 2 days after inspection.

The other pressure of course comes from the speed of data itself. An appraiser can't "compete" with the spit it out in seconds speed of data/software driven products such as AVM 's, but our performance is rushed to catch up with it

 

[ucbruin]

I don't know if this has been mentioned already....

The other day I had an appraisal inspection and mentioned to the agent that the deck/stair railings were in state code violation....
The listing agent told me that the home inspector did not mention this in the home inspection report....

I'm wondering whose responsibility it would be to know/verify this type of scenario...the appraiser inspector or the appraisal appraiser?

 

[Evincere]

Okay, so is that your way of saying that the lenders have a moral obligation to not exploit the principle of substitution?

According to the moral compliance view, corporations are not bound by a moral law unless that moral law is expressed in the law of the land. A corporation, for example, has no obligation to refrain from stealing, cheating, or lying unless they are legally required to refrain from doing so.

We saw the thieving, stealing, robo signing etc in the last bubble resulting in Dodd Frank becoming the law of the land.

And as you say, the government is and will be the “variable” until the law changes. Dodd Frank is on the table for more haircuts because it’s a restrictive impediment to thievery and abuse

 

[J Grant]

They are new. Appraisers, as a group, don't tend to handle "new" very well. There are appraisers who still hand draw sketches, scan paper maps and type in all caps

That would be a small minority of appraisers at this point, agree? And even if they do those things but turn in a good appraisal, so what? What harm was done? Most appraisers are using to what suits mobile appraising /software /tech but in the end it's reliability and credibly of report that matters.

Speed has a place, but does deprive needed time to speak to more sources, reflect on analysis etc.

It's not so much that appraisers don't handle "new" well, as they don't handle "new" when the new puts them in a precarious position ( or impoverished position ) . Appraisers even if they usel the newest technology or products are still stuck with the "old" repercussions, which can last for years...possiblity of board complaints, a client turning them in for USPAP violation, forensic review party to appraisal lawsuits etc. That does not disappear somehow with an app.

Despite pressure to get it in fast, the appraisal will be part of the mortgage file for life of loan written for 15-30 years term.

Just as a borrower getting a loan closed faster with the "new " tech digitized mortgage / quick appraisal still have the "old" repercussions, of an REO or short sale or loss of equity and ruined credit if things go bad.

 

[Terrel L. Shields]

the bifurcated process the appraiser is redoing a couple things the inspector would be doing if their field trip included everything the appraiser does during our field trips

Yes. Isn't that what a lot of us argued from the get go? More work, less pay and quality is created only when adequate time is allowed to develop it. Do you honestly think any bank will offer a "C & R" fee for a hybrid?

Conversation with a local bank's Chief Appraiser on hybrids:

"I see it as a product that requires the management company to have a more active role in the report, which serves as a justification for them capturing a larger portion of the fee split. I don't see a benefit in terms of quality or speed."

Too good...the logic is simple. Splitting up processes slows, not improves, turn times. And do you think the AMC will get that larger portion out of the client? Or, rather out of the appraisers whom they will try to convince that this is EZ PZ and even a caveman can do it...which is an insult to a Neanderthal like me.

Appraisers, as a group, don't tend to handle "new" very well.

Why should we? Every "new" thing Fannie mae adds to the mix has resulted in more work or liability, and no pay compensation for it. MC, for one. Cert 23 for another. UAD. CU. The reports have metastasized from 10-12 pages to 30? I don't give a hoot how much computer programs have improved in the early years, the idea we can prepare a report (1004) is seconds is a pipe dream. Until very recently here, appraisers were getting exactly the same fee they were in 1999. Efficiency did not make up the difference. Most of the group of appraisers I see regularly are now selling RE on the side, managing self-storage, farming, or are semi-retired. Lucky for me that I have two other sources of income besides appraising because it gives me the luxury of NOT doing bank work and I like it that way. Once you escape the Fanrat Race, you realize how much less stressful appraising can be.

FHA added a huge bunch of liabilities back Pre-Great Recession and when everyone said they needed another $100, FHA quickly squashed that saying they didn't see why...so sure enough, that premium for the additional work went south. That was a few years after they insisted everyone had to take a test just for them, a test which they dropped as FHA volume fell and they needed new hands as business boomed for them again. Licensed appraisers were fenced out, despite being acceptable since the inception of licensing. They got stupid I suppose.

New is just another word for pain when it comes to appraising from the appraisers point...you want to improve quality?

Here's an idea. Each time an appraiser gets sanctioned by the state, the AMC should also get the identical punishment. And after 3 sanctions, an AMC should be banned along with each and every identified officer in the company from doing business in ANY and EVERY bank in America. They do that for loan officers who fail to do "safe and sound" banking, so why not extend that to AMCs?

 

[hastalavista]

It may be true that Fannie can dictate and change their requirements at whim per the rules they have written.

Its not at all unreasonable for anyone, especially those expected to fulfill those requirements to question, debate, and openly challenge whether they are acting appropriately and prudently - when considering their ONLY objective and interest is to stay profitable, accommodate and service their partners needs - which does not include Appraisers.

I liked this post and agree with it. It isn't unreasonable at all for anyone (in general) and appraisers (in particular) to challenge the appropriateness or prudence. As I've said over and over, we are stakeholders in the lending process (writ large) and are first-hand parties to the appraisal valuation.

What is unfortunate is that part of the argument against hybrid use is devolved into referencing unrelated policies for different appraisal products that don't apply.
Yes, the current selling guide is explicit as to what is required for the current appraisal products for those loans. Hybrids would not and do not fit into the selling guide... because hybrids are not part of the selling guide.
How much time has been spent pointing out what the current selling guide states and applying it to a product that the current selling guide does not address, and arguing that it doesn't apply to hybrids because the selling guide is not written to address them?
Too much time (IMO); too much time because it detracts from the fundamental issues (as I see them) regarding these products, which I boil down to:
A. Does the collateral value process (hybrid) match the risk of the mortgage-transaction or related transaction (portfolio monitoring of troubled assets) for the specific assignment?
B. What is the SOW to complete the assignment?
C. Can credible results be concluded (an appraiser's call to make) based on "B" and is the appraiser satisfied to the risk-assignment ("A")? And, BTW, some appraisers will make the presumption that a regulated lender has the wherewithal to determine that the risk-profile of the transaction it is requesting a hybrid to be completed for is appropriate. Obviously, depending on what physically exists or is discovered via the appraiser's or inspector's research may alter that conclusion... which, in some cases, it should.
D. Given all of the above, can they be done in a USPAP-compliant manner?
E. If I say "yes" to "D", my final question is, am I going to get paid a price that I'm willing to take? If so, I'm considering taking these assignments. If not, they won't be part of my service offering.

All of the above are reasonable points to raise; especially by appraisers (but not limited to appraisers).

 

[Evincere]

With any "product" on the market you need to know how to handle it.

Simply, know what you are doing and only do what you know.

And the wisdom to question what you’re doing and why. That would include deciding whether you’re going to do it just because your told you can “get away” with it ...and with the hybrid we don’t know what we don’t know.