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Interagency Guidelines And USPAP

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Dale Floyd

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Apr 14, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
Had a reviewer lately take me to task on a recent appraisal my firm completed for a local lender. The report was made "Subject To" the completion of needed repairs and renovations per the client's specific request, as the home was in below average condition and was being rehabilitated. The list of improvements to be made was quite extensive, and the home is in desperate need of help.

The reviewer sent me a message, stating that we had violated USPAP because the "As Is" value of the property as it sits, with additional comparable sales as evidence, was not provided. He stated because the inclusion of an "As Is" value is a requirement in the Interagency Guidelines of 2010 in these cases, then it now has become a USPAP requirement for any in-house appraisal or evaluation as an ongoing client condition. Bear in mind, the local lender didn't send the request directly to me, as they use a third party provider for appraiser engagement. Whether the mortgage was an in-house loan or not would require an assumption, and I'm not a prophet. The engagement letter was one page, and made no mention of the Interagency Guidelines.

I've taken great lengths in studying the matter, and I have developed some thoughts. But I need other greater minds to chime in.

What think ye?
 

BRCJR

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Licensed Appraiser
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Virginia
Actually, per the IAEG, the reviewer is correct.
I also think common sense should and must apply. I have never had issue from regulators with not having the "as is" for simple non-complex renovations.
I think common sense applies here, if it is extensive and will require a good length of time to complete, creating greater risk for the institution, then an "as is" may be more applicable.

A side note, in my opinion, if you accept an assignment that will be FHA insured you are to be competent regarding FHA appraisal guidelines. I believe if you do regulated lender work you should be competent to their appraisal guidelines (IAEG) as well. I believe if you do estate work you should be competent regarding the IRS appraisal guidelines.

I think there are so many "guidelines" that one must follow it is near impossible to know all of them.

I put this in my letter:


Your appraisal must be performed in accordance with the applicable version of the Uniform Standards of Professional Appraisal Practice (“USPAP”) adopted by the Appraisal Standards Board of the Appraisal Foundation and the Interagency Appraisal and Evaluation Guidelines as adopted by Title XI of the Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).. Your appraisal must meet, at a minimum, Freddie Mac Appraisal Guidelines in effect as of the effective date of appraisal, ie.MC Addendum Form and UAD Compliance.
 
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SpartanAG

Member
Joined
Feb 12, 2008
Professional Status
Certified General Appraiser
State
Arkansas
The reviewer is correct in stating that the "as is" market value is required by the IAEG (page 9 of 45, second paragraph). I disagree that your firm has violated USPAP by not including a value that wasn't requested . The lender should have included a request for both values in their engagement letter and stated why (in order to comply with IAEG).

I understand they didn't ask for the "as is" value; but they do need it. The easiest thing to do would be let them know they didn't ask for it, but you would be happy to provide it. Suggest they make a change to their engagement letter so this doesn't happen in the future. All they need to do is add some verbiage about meeting USPAP and the IAEG guidelines. My old employer has similar verbiage in their engagement letters and it has saved a lot of back an forth with the appraiser.

Keep in mind, the IAEG is guidance for the lender, not appraisers. Although, it would behoove all appraisers to read and understand the IAEG as well as they do USPAP. That way we can anticipate client needs and avoid sticky situations.
 

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Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Sorry Dale,

But this is what happens when appraisers don't read all the rules/regs/laws that apply to the assignment, and rely on a middle man to disclose something that might have caused you to consider a second opinion of value, (as-is and as-if or subject to a checkbox) would cause you to require a higher fee for the assignment.

But hopefully that middle man has added value to your report, as a service provided that warrented a portion of the appraisal fee.

.

.
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Because you do know that if your report went through a middle man, in a state that registers AMCs,
and your report still had a USPAP error,

The AMC will have to also answer to the state - under the AMC Final Rule, so long as both you and the lender report them.


.
 

Dale Floyd

Junior Member
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Joined
Apr 14, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
Good morning to you too Marion....

I'm unsure what you mean by "appraisers don't read all the rules/regs/laws that apply to the assignment." If that reference is to me, then allow me to quell your concerns. I'm very well versed in the laws applicable to an assignment, and I was one of the first appraisers (that I'm aware of) who warned others about the Interagency Guidelines coming prior to their arrival in 2010. But to be very specific, the Interagency Guidelines do not apply to every appraisal. I'm not sure how any of us can magically make assumptions when the engagement letter makes no mention of its applicability to the report.

Does that clear the water a tad?
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Not a specific reference to you,
other than, if you have to sit with the board over a USPAP violation, it's lucky they will be in the same room, and you can question them about the AMC's hand in that violation, and how their hand in it will impact their license.

And you are correct, the IAEG only refers to lenders regulated by the interagencies. The internet is swollen with lenders who are not regulated by the Interagencies. So how were you to know if this was an applicable regulation to your assignment?

Awe gheeze, the lender, through their agent, via the Fannie Selling Guide, was supposed to disclose it to you.

But maybe this wasn't even a loan that was going to be resold into the secondary market?

Oh my,
more lovely dialogue to have with the state board, or possibly the State District Attorney.

Be well Dale,
This won't be fun until the end.


.
 

Terrel L. Shields

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Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
The engagement letter was one page, and made no mention of the Interagency Guidelines.
I always provide an as is value for bank lending. I don't do "subject to" for non-bank clients. And, yes, it is a requirement and we, as appraisers, are told we must be familiar with the regulations regarding our profession. Unfortunately, there is no central clearing house for such information.

But, do you or anyone else for that matter, routinely do an appraisal without knowing whether it is an in house loan or secondary market? I always knew which was which and didn't bother with the fannie crap if the report is "in house".

the Interagency Guidelines do not apply to every appraisal.
If the loan is over $250,000 then it does apply and for proposed construction ditto...always if involving a lender, even when going to secondary market, is my understanding. And that has been around since 1995 although most lenders ignored it until 2010.

The Competency Rule includes "recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment"...nevertheless it is hard to comply with rules when you don't know which rule book applies.
 

BRCJR

Elite Member
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Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Good morning to you too Marion....

I'm unsure what you mean by "appraisers don't read all the rules/regs/laws that apply to the assignment." If that reference is to me, then allow me to quell your concerns. I'm very well versed in the laws applicable to an assignment, and I was one of the first appraisers (that I'm aware of) who warned others about the Interagency Guidelines coming prior to their arrival in 2010. But to be very specific, the Interagency Guidelines do not apply to every appraisal. I'm not sure how any of us can magically make assumptions when the engagement letter makes no mention of its applicability to the report.

Does that clear the water a tad?
IAEG came way before 2010. I think 1994.
 

Dale Floyd

Junior Member
Gold Supporting Member
Joined
Apr 14, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
IAEG came way before 2010. I think 1994.
The original was more simplistic and was written so the examination/auditing groups that existed for the various banking charters could get along in their appraisal reviews... I have that in my files as well from October of 1994. Much different than the one we have now, which came out in December of 2010...
 
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