I'm piling on....F the AMCs

[Surf Cat]

Corrupt System ? One of the top forensic MAIs that worked for the Fed's at a seminar a few years ago speaking to mostly regulator's and prosecutors stated that in order to commit loan fraud it almost always involves appraisers to help facilitate the loan fraud.

Since mortgage brokers did not have USPAP, form certifications, Fannie Mae guidelines, and lender conditions to sign to….they went hog wild pressuring the appraiser to complete and facilitate pushing the envelope for the value needed…..no skin off their noses. So yeah, the system was shady. And of course this system needed weak minded appraisers.

Not all mortgage brokers were scumbags as Chad pointed out. There were many professional ones to work for and they understood appraiser’s limitations in regards to the condition of the house, lack of upgrades, and the borrower’s poor credit score. They just moved on to the next file.

 

[George Hatch]

When it comes to honest and impartial appraisals, getting more of those is an improvement over getting fewer of them. More is better than less.

 

[djd09]

the deal dont close...they dont get paid well duh

 

[J Grant]

When it comes to honest and impartial appraisals, getting more of those is an improvement over getting fewer of them. More is better than less.

But the AMC system did not result in more honest and impartial appraisals. I bet that nearly every appraiser here can attest to the work suddenly drying up if they came in "low" on more than rare occasion for an AMC.

The people who run AMC's are no worse or better than anyone else.

The problem is the AMC system is a conflict of interest. The AMC;s are supposed to be a firewall against value pressure. But the AMC can only stay in business if it keeps its customer (the lender) happy. And the lender will drop an AMC if an AMC delivers "low" values too often.
Round robin, as you supported, would have prevented this, but the stakeholders did not want it. Real-world example is how degraded FHA lending became with pushed values and rife with fraud in property flips after the FHA panel stopped being round-robin and went to "lender select"9u

 

[J Grant]

Take away AMC selection of appraisers. Make the lenders assign directly again and make the lender directly responsible. Make the lender use a round-robin selection on their panel, with the ability to drop a provider for bad turn times or shoddy work. But assuming they use and screen for competent appraisers, insulation from value pressure by round robin would negate the need for a firewall, which is a failure because the AMC creates a conflict of interest ( see above ). It would also solve the fee problem, since panels engaged by lenders have all the appraisers get paid a same
C and R fee (typically) for non-complex work in a regional area.

If a lender wants to engage an AMC-type third party to manage panel admin of appraisers with regard to QC , reviewing, and turn time delivery, they can hire that service.

 

[George Hatch]

Words still have meanings.

Insofar as safe/sound lending and not cheating the lender in order to book a deal, an AMC working as an agent of the lender is not a competing or conflicting interest. Same as the lender's own internal appraisal dept except that role has been outsourced.

 

[alebrewer]

Not all mortgage brokers were scumbags as Chad pointed out. There were many professional ones to work for and they understood appraiser’s limitations in regards to the condition of the house, lack of upgrades, and the borrower’s poor credit score. They just moved on to the next file.

Based on personal experience, I'd hazard 10-1 bad vs. good...

 

[J Grant]

Words still have meanings.

Insofar as safe/sound lending and not cheating the lender in order to book a deal, an AMC working as an agent of the lender is not a competing or conflicting interest. Same as the lender's own internal appraisal dept except that role has been outsourced.

The conflict of interest is in two areas:

The AMC chooses an appraiser in large part based on the lowest fee to return PROFIT to the AMC (how they get compensated). This creates a conflict of interest in choosing a more competent appraiser who might charge $75 more then a less competent or experienced or out of area appraiser. Guess which one gets the order in AMC land. The appraiser who charged $75 lower, even if that appraiser is less competent /les sexperienced, coming from a far-off geo area. This is a conflict of itnrest built in to how the AMC gets compensated

This conflict of interest is NOT present on lender order panels wrt choosing an appraiser for an assignment. Appraisers are not asked to bid on non-complex orders. The panel appraisers are typically paid the same C and R fees in a region for non-complex orders. The appraisers are either chosen round robin or chosen based on which suits the job at hand.

The other conflict of interest is that the AMC is supposed ot act as a buffer firewall against value pressure. But the AMC has to rely on the goodwill of its lender customers. The AMC is not an end user ( the AMC does not make loans, therefore theoretically should have no interest in whether a deal goes forward or not ). However, the lender customer has a great deal of interest in it, and one assumes will drop an AMC for coming in "low" too often. Result, nearly every appraiser here has had experiences with AMC's dropping them from work if they come in"low " on more than rare occasion.

 

[George Hatch]

Words still have meanings
The issue of "appraiser independence" is about seeking objectivity and impartiality. About not making the engagement and not making payment for the appraisal contingent on hitting the desired outcome,

Appraiser independence is not about how much the appraiser gets paid. Ripping off borrowers by paying the appraisers less and attributing all services rendered to the "appraisal" is a completely separate issue.

And there is no difference between a lender firing a direct contractor (like an AMC or a fee appraiser) vs firing an employee for not returning the desired value. Except when the lender does it they are the only party responsible for it. They can't claim they didn't know the appraiser was dropped or wasn't paid because of their own decision. If the appraiser is being confronted with an contingent engagement or contingent fee the lender can't claim they didn't know. Or that the origin of that pressure came directly from them.
------------
If an AMC is dropping appraisers for not hitting values it will be upon demand of the lender. In direct violation of banking regs.

If an AMC-originated appraisal comes in low the lender can do one of two things: either complain about it and threaten the AMC to drop them (pressure the AMC to transmit pressure to the appraiser) or to not comment on it and move on to the next one (like they're supposed to do).

 

[J Grant]

18. My employment and/or compensation for performing this appraisal or any future or anticipated appraisals was notconditioned on any agreement or understanding, written or otherwise, that I would report (or present analysis supporting) apredetermined specific value, a predetermined minimum value, a range or direction in value, a value that favors the cause ofany party, or the attainment of a specific result or occurrence of a specific subsequent event (such as approval of a pendingmortgage loan application).
Cert 18 above from the URAR form.
The problem with appraisal independence is the above wrt to a client, whether a lender or an AMC. - When a client cuts off appraisers after the appraiser comes in : "low" on an order, it trains the appraisers that they better not do that or else they are out of business. The reason the AMC's were meant to be a buffer firewall was that this was NOT supposed to happen since the AMC was not an end user who makes loans - yet since the AMC's can get cut off by their lender customers if too many appraisals come in "low," the system is a fail. And that is not entirely the fault of the AMC's by any means.
It creates a conflict of interest in how an AMC operates because they can not afford to operate as a neutral third party. They have to favor their lender client, make deals interests, or go out of business. And I suspect that happened to a number of smaller or more ethical AMC's who said "No" to a lender complaining about low values and went out of business as a result.