George, and Beth, too as I think this may answer the question she posed:
Brad,
The number of reviews at the 10% level would be huge, if there are 7.5 million loans going though the system that equates to 750,000 reviews per year or 62,500 per month.
I think the concern you are expressing is how would that be possible (yes)?
It is accomplished by using Review Staff and Review Panel Members. It should keep everyone busy.
Or are you asking about the cost?
If the GSEs need to have 10% of appraisals reviewed then that is a cost they will have to pay.
Or are you considering the need for some type of automated (AVM or Zaio) type review?
My reply to that is unprintable
OK- thanks. Now here is the reason I asked.
In my view we collectively can either ignore realities and simply go after Nirvana with this or we can consider realities. In a perfect world, all appraisers would/could be equal in ability, education, customer service, etc. and then each and every one would get orders in a simple rotational fashion like VA, get paid full fee in advance, etc. But I actually live in the real world and know, as I hope you do as well, that real life will inject itself into this.
So, please allow me to focus on the real life stuff here. If a proposal would not work in real life, then real people will not adopt that concept. Now, let's look at the numbers and the effects this would have. We'll start with your numbers.
750,000 field reviews out of 7,500,000 appraisal for QC (10%).
If we then assume a fee of $350 each (because the fee ought to be similar to a regular appraisal fee given the time needed to get it right), using your raw number of reviews, the cost would be $21,875,000 per year.
Now the agreement for the IVPI provides for a 5 year period with varying funding amounts per year but I think the max is $5 million (fi memory serves).
So, I am wondering how this enormous square peg of $21 million plus can fit into that much smaller round hole of $3-5 million per year.
Now- my calculations (based upon my bank's market share and volume) indicates the real overall number is more like half of what you project. But, that is still nearly $12 million per year. I won't even bring up the admininstrative costs, etc. that will eat up a huge chunk of those funds.
Let's talk a bit about the consumer here as well. This 10% proposal increases the cost to the consumer by 10% if we ask them to pay for it. So, even if it is passed along to the consumer so the IVPI can operate as they seemed to intend, that then flies directly in the face of the policies of both major GSEs to reduce the cost of borrowing. They have stated that publicly over many years.
Next, how about the state boards- already typically seriously underfunded. Since the IVPI cannot impose legal sanctions, it must be left to the states-and this is envisioned in the settlement proposal. If only 20% of the appraisals are bad enough for such referrals, we'd be adding 6-7,000 cases per year to their workloads. Please name me a state who could handle 10% of that volume given their budgets (and that would mean only 2% of all reviews rose to the referral stage). I cannot think of any.
And, for the record, I am not advocating using AVMs or Zaio here. But AVMs, BPOs, etc. are also cited in the AG/GSE proposal. That was them- not me.
So, here we have Fannie and Freddie who, almost assuredly, were dragged kicking and screaming to the settlement table and agreeing to $24 million over 5 years and now you want to add over $10 million- PER YEAR- to that amount.
Gosh, I hope you see where I am going with this. So, while I do commend your committee efforts, what I see is tons more work to do if you want to make it at all palatable to those whose checkbooks will be tapped so heavily.
THAT is why I do not think it will work in its current configuration.
But I do wish you all luck with this.
Brad
