Pamela Crowley (Florida)
Elite Member
- Joined
- Jan 13, 2002
- Professional Status
- Retired Appraiser
- State
- Florida
Thank you, George.
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July 2008 ASC Q&a- Wink Wink Comp Comp
- Thread starter Mike Kennedy
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Joyce Potts
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- Joined
- Feb 6, 2005
- Professional Status
- Certified Residential Appraiser
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- Florida
Reprinted with Permission
From Broker's Outpost. They don't like this poster very much over there. Oh well.
http://www.brokeroutpost.com/loans/brokers/forum/topic.asp?TOPIC_ID=233573&whichpage=2
Before anyone reads on, I suggest you click on the link below so that any pre-determined opinion of me be put into the proper perspective, as I am NOT against comp checks across the board.
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2007/06/runt_rants_comp.html
Now, lets cut to the chase, shall we? Enough hiding behind slang terms and semantics.
A comp check IS an appraisal, per USPAP.
Like any appraisal there are two kinds: USPAP compliant and non-USPAP compliant. Legal and illegal.
What any appraiser charges for a any USPAP compliant appraisal, comp check, pencil search, research package, etc., is no one's business and has nothing to do with the legal or ethical aspects of this discussion.
This debate boils down to two schools of thought, BOTH of which have merit, IMO:
Pro-Comp Check: Again, click on the link above. We all know that many mortgage brokers consider they're doing their clients' a service by not wasting their time or hard earned money on an appraisal that may ultimately do them no good. And lets be frank, those appraisers who provide the 'comp check' free or otherwise, essentially save the lender time and money, leading to more lender profits. We get it.
Personally, long before USPAP, I did free comp checks, pencil searches, pre-appraisals all the time. Every appraiser that I ever knew did. It was standard industry practice back in those days. That said, I'm one of those appraisers who NEVER, EVER, EVER allowed any prior communication of a value, or range of value, based solely on the research influence me one way or the other once I'd actually seen the property AND the comparables. Unfortunately, that's not the case with way too many appraisers which leads us to:
Anti-Comp Check: Lender comp check requests, a/k/a appraiser or number shopping, has pitted the appraisal community against each other that far exceeds normal competition parameters. Lets call it what it is--number shopping. Has any lender ever called for a comp check and awarded the job to the appraiser who gave them the lowest number? Has any mortgage broker ever pitched a fit with an appraiser that came in lower than the initial value of the comp check?
Lenders compete for clients based on their fees and terms of the loan. If the appraisers were competing with each other solely based on the appraisal fee and turn time that would be analogous. After all, we live in a free market society (for the most part). But the reality is the lenders have pitted the appraisers in a numbers war. Whoever can provide the highest, cleanest (we sure don't want all those deferred maintenance issues raising a red flag, do we?--Gets the job. How about owner occupied? How about declining market trends? How about a 'condition' rating below average?
Over time, and human nature being what it is, this practice helped in the evolution of a whole new type of appraiser who genuinely thought their job was to provide an appraisal to accommodate a loan, instead of the other way around. Hitting the NUMBER became the PRIMARY goal and fell secondary to providing an ethical, honest and unbiased appraisal. These appraisers were trained from their first day on the job to pull comps by price to support the suggested number on a contract or order form.
Now, if you read any of my posts on the Appraiser's Forum or elsewhere, I stand by my assertion that a dishonest appraiser doesn't need a comp check to inflate an appraisal--they're going to do it anyway. Inflated appraisals may not be directly linked to the number of foreclosures we're seeing, but they certainly are attributable to the larger dollar losses. I'm speaking above and beyond the normal, market driven appreciation trends we saw back in 2004-2005.
What happens to the appraiser like myself who would provide a 'comp check' or value range prior to an onsite inspection, but would render the final appraisal honestly and ethically, regardless of what the data previously suggested? You mortgage brokers labeled me problematic and uncooperative and sought out my competition who afforded far fewer impediments to your gravy train--and you felt totally justified in doing so. Just like the 80/20 LTV game to avoid PMI. After all, the larger lenders and regulators all knew you were doing it. It was the reality and many will attest the larger lenders and regulators not only knew you were doing it, they PROMOTED and ENCOURAGED it. $$$$$$$$$$$$$
USPAP has proven to be a miserable failure. I continue to believe that USPAP was essentially written BY the lending industry, FOR the lending. It's taken only 18 short years since the late 1980's S&L bailout for history to repeat itself and prove me right, but this time, with far worse consequences.
An appraisal, BY DEFINITION, is supposed to be an unbiased, independent, third-party value opinion. Not one that accommodates a contract price, an individual's personal financial circumstances or any other pre-determined NUMBER.
For the appraisal process to meet the uncompromised truth of it's own definition, the long standing and customary influences of the lending industry (AND appraisal management companies for that matter), must be addressed truthfully and head on.
The truth is, both the lenders and appraisers had their chance, abused it, and blew it. This country is currently in the throws of one of the biggest financial meltdowns since the Great Depression, and much of it can be attributed to the residential lending mortgage sector. In my experience you don't find much mortgage fraud without also finding appraisal fraud far behind. Too many lenders, appraisers and even members of the general public are so indoctrinated with what they THINK an appraisal is supposed to be, they fail to recognize the blatant and inherent conflicts of interest that have become entrenched and universally accepted. I wish I had $5.00 for every client who thought they were NOT obligated to pay the appraisal fee because the final value fell short of THEIR expectation.
Many are suggesting that the answer lies in totally removing any direct and/or indirect relationship between the lender, Realtor(s) and appraisers for any FRT. I would agree that's the optimal solution, but expensive and not likely to happen.
The HVCC and AMC's are nothing more than a band aid and promotion of a false firewall with a major side agenda.
The Dodd-Crowley IVPI proposal of a non-profit, government backed AMC, that also has pro's and con's, but is probably one of the best solutions out there, so far. IMO, all the proposals are costly, but the larger cost will be in not implementing radical, long lasting and genuine changes.
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2008/03/ivpi-organizati.html
My suggestions have not been met with much enthusiasm either, but I think some things that need to be considered are:
Make only written and signed appraisals legally enforceable.
Amend the "Intended User' aspect of the appraisal 'contract' to include the borrower and let the civil courts remedy damages that may have resulted from a false or inflated appraisal. Yes, you heard me right.
Expand the administrative policing of lenders and appraisers so that any appraiser who feels pressured or unduly influenced by any lender, Realtor or the public at large are afforded SWIFT and FAIR access to any administrative or regulatory agency regarding any unethical or illegal conduct without fear of loss of business or retribution.
Abolish USPAP as it's now written and start over again.
Invoke something similar for lenders so that they're required to operate under similar Uniform Standards of Ethical, Professional Lender Practices.
Fund these agencies so that they're able to function responsibly and effectively.
Raise the educational and training requirements for appraising licensing. Don't get me started on the Appraisal Institute and part they've played in dumbing down the profession.
If nothing else, since the airing/publication of these two links, my requests for comp checks have declined dramatically, so for me personally, it's really no longer an issue. Go figure.
http://www.cbsnews.com/stories/2008/03/14/eveningnews/main3940741.shtml
http://questioningwhatissaid.blogspot.com/2008/03/bankers-telling-appraisers-value-of.html
From Broker's Outpost. They don't like this poster very much over there. Oh well.
http://www.brokeroutpost.com/loans/brokers/forum/topic.asp?TOPIC_ID=233573&whichpage=2
Before anyone reads on, I suggest you click on the link below so that any pre-determined opinion of me be put into the proper perspective, as I am NOT against comp checks across the board.
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2007/06/runt_rants_comp.html
Now, lets cut to the chase, shall we? Enough hiding behind slang terms and semantics.
A comp check IS an appraisal, per USPAP.
Like any appraisal there are two kinds: USPAP compliant and non-USPAP compliant. Legal and illegal.
What any appraiser charges for a any USPAP compliant appraisal, comp check, pencil search, research package, etc., is no one's business and has nothing to do with the legal or ethical aspects of this discussion.
This debate boils down to two schools of thought, BOTH of which have merit, IMO:
Pro-Comp Check: Again, click on the link above. We all know that many mortgage brokers consider they're doing their clients' a service by not wasting their time or hard earned money on an appraisal that may ultimately do them no good. And lets be frank, those appraisers who provide the 'comp check' free or otherwise, essentially save the lender time and money, leading to more lender profits. We get it.
Personally, long before USPAP, I did free comp checks, pencil searches, pre-appraisals all the time. Every appraiser that I ever knew did. It was standard industry practice back in those days. That said, I'm one of those appraisers who NEVER, EVER, EVER allowed any prior communication of a value, or range of value, based solely on the research influence me one way or the other once I'd actually seen the property AND the comparables. Unfortunately, that's not the case with way too many appraisers which leads us to:
Anti-Comp Check: Lender comp check requests, a/k/a appraiser or number shopping, has pitted the appraisal community against each other that far exceeds normal competition parameters. Lets call it what it is--number shopping. Has any lender ever called for a comp check and awarded the job to the appraiser who gave them the lowest number? Has any mortgage broker ever pitched a fit with an appraiser that came in lower than the initial value of the comp check?
Lenders compete for clients based on their fees and terms of the loan. If the appraisers were competing with each other solely based on the appraisal fee and turn time that would be analogous. After all, we live in a free market society (for the most part). But the reality is the lenders have pitted the appraisers in a numbers war. Whoever can provide the highest, cleanest (we sure don't want all those deferred maintenance issues raising a red flag, do we?--Gets the job. How about owner occupied? How about declining market trends? How about a 'condition' rating below average?
Over time, and human nature being what it is, this practice helped in the evolution of a whole new type of appraiser who genuinely thought their job was to provide an appraisal to accommodate a loan, instead of the other way around. Hitting the NUMBER became the PRIMARY goal and fell secondary to providing an ethical, honest and unbiased appraisal. These appraisers were trained from their first day on the job to pull comps by price to support the suggested number on a contract or order form.
Now, if you read any of my posts on the Appraiser's Forum or elsewhere, I stand by my assertion that a dishonest appraiser doesn't need a comp check to inflate an appraisal--they're going to do it anyway. Inflated appraisals may not be directly linked to the number of foreclosures we're seeing, but they certainly are attributable to the larger dollar losses. I'm speaking above and beyond the normal, market driven appreciation trends we saw back in 2004-2005.
What happens to the appraiser like myself who would provide a 'comp check' or value range prior to an onsite inspection, but would render the final appraisal honestly and ethically, regardless of what the data previously suggested? You mortgage brokers labeled me problematic and uncooperative and sought out my competition who afforded far fewer impediments to your gravy train--and you felt totally justified in doing so. Just like the 80/20 LTV game to avoid PMI. After all, the larger lenders and regulators all knew you were doing it. It was the reality and many will attest the larger lenders and regulators not only knew you were doing it, they PROMOTED and ENCOURAGED it. $$$$$$$$$$$$$
USPAP has proven to be a miserable failure. I continue to believe that USPAP was essentially written BY the lending industry, FOR the lending. It's taken only 18 short years since the late 1980's S&L bailout for history to repeat itself and prove me right, but this time, with far worse consequences.
An appraisal, BY DEFINITION, is supposed to be an unbiased, independent, third-party value opinion. Not one that accommodates a contract price, an individual's personal financial circumstances or any other pre-determined NUMBER.
For the appraisal process to meet the uncompromised truth of it's own definition, the long standing and customary influences of the lending industry (AND appraisal management companies for that matter), must be addressed truthfully and head on.
The truth is, both the lenders and appraisers had their chance, abused it, and blew it. This country is currently in the throws of one of the biggest financial meltdowns since the Great Depression, and much of it can be attributed to the residential lending mortgage sector. In my experience you don't find much mortgage fraud without also finding appraisal fraud far behind. Too many lenders, appraisers and even members of the general public are so indoctrinated with what they THINK an appraisal is supposed to be, they fail to recognize the blatant and inherent conflicts of interest that have become entrenched and universally accepted. I wish I had $5.00 for every client who thought they were NOT obligated to pay the appraisal fee because the final value fell short of THEIR expectation.
Many are suggesting that the answer lies in totally removing any direct and/or indirect relationship between the lender, Realtor(s) and appraisers for any FRT. I would agree that's the optimal solution, but expensive and not likely to happen.
The HVCC and AMC's are nothing more than a band aid and promotion of a false firewall with a major side agenda.
The Dodd-Crowley IVPI proposal of a non-profit, government backed AMC, that also has pro's and con's, but is probably one of the best solutions out there, so far. IMO, all the proposals are costly, but the larger cost will be in not implementing radical, long lasting and genuine changes.
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2008/03/ivpi-organizati.html
My suggestions have not been met with much enthusiasm either, but I think some things that need to be considered are:
Make only written and signed appraisals legally enforceable.
Amend the "Intended User' aspect of the appraisal 'contract' to include the borrower and let the civil courts remedy damages that may have resulted from a false or inflated appraisal. Yes, you heard me right.
Expand the administrative policing of lenders and appraisers so that any appraiser who feels pressured or unduly influenced by any lender, Realtor or the public at large are afforded SWIFT and FAIR access to any administrative or regulatory agency regarding any unethical or illegal conduct without fear of loss of business or retribution.
Abolish USPAP as it's now written and start over again.
Invoke something similar for lenders so that they're required to operate under similar Uniform Standards of Ethical, Professional Lender Practices.
Fund these agencies so that they're able to function responsibly and effectively.
Raise the educational and training requirements for appraising licensing. Don't get me started on the Appraisal Institute and part they've played in dumbing down the profession.
If nothing else, since the airing/publication of these two links, my requests for comp checks have declined dramatically, so for me personally, it's really no longer an issue. Go figure.
http://www.cbsnews.com/stories/2008/03/14/eveningnews/main3940741.shtml
http://questioningwhatissaid.blogspot.com/2008/03/bankers-telling-appraisers-value-of.html
J in Florida
Senior Member
- Joined
- Jan 17, 2002
- Professional Status
- Certified Residential Appraiser
- State
- Florida
One again, George, you nail it.
Pamela Crowley (Florida)
Elite Member
- Joined
- Jan 13, 2002
- Professional Status
- Retired Appraiser
- State
- Florida
What percentage of mortgage loans did mortgage brokers originate, year to year, since 1998?
Now take 2005 as an example and I suggest that at least 95% of those MB originations were done by only using appraisers that would do that high enough comp check to get the fee paid Fannie form appraisal order.
So, 95% ??? of the 2005 MB originated mortgage were NOT done by any honest and ethical appraiser that "just said, "NO". Appraisers that just said, "NO" were taken OUT of that much of the residential mortgage lending appraisal business. Add in a good percentage of the lender influenced AMC jobs and how much, percentage wise, of ALL 2005 mortgage origination appraisals were NOT done by the honest and ethical appraisers that 'just said, "NO"'? Reality is, there was not much left for the honest and ethical appraisers by 2005.
Now take 2005 as an example and I suggest that at least 95% of those MB originations were done by only using appraisers that would do that high enough comp check to get the fee paid Fannie form appraisal order.
So, 95% ??? of the 2005 MB originated mortgage were NOT done by any honest and ethical appraiser that "just said, "NO". Appraisers that just said, "NO" were taken OUT of that much of the residential mortgage lending appraisal business. Add in a good percentage of the lender influenced AMC jobs and how much, percentage wise, of ALL 2005 mortgage origination appraisals were NOT done by the honest and ethical appraisers that 'just said, "NO"'? Reality is, there was not much left for the honest and ethical appraisers by 2005.
Last edited:
Ken B
Elite Member
- Joined
- Feb 18, 2004
- Professional Status
- Certified General Appraiser
- State
- Florida
I suggest you got your percentages reversed. I suggest that only 5% of the appraisals ordered by MBs were done using only appraisers that would do comp checks.
Since neither of us is working on any basis in fact, both of our suggestions are equally irrelevant.
However, since many here did MB and AMC work during the period in question, are you sure you want to accuse 95% of them of unethical behavior?
Since neither of us is working on any basis in fact, both of our suggestions are equally irrelevant.
However, since many here did MB and AMC work during the period in question, are you sure you want to accuse 95% of them of unethical behavior?
woodyva
Sophomore Member
- Joined
- Jun 6, 2008
- Professional Status
- Certified Residential Appraiser
- State
- Virginia
Steve;
we agree on Something!!! No more MB's ordering reports. Many prblems solved right there!!
Pamela Crowley (Florida)
Elite Member
- Joined
- Jan 13, 2002
- Professional Status
- Retired Appraiser
- State
- Florida
I added multiple question marks after that 95%; you can choose to believe I thought I had added one question mark when I initially posted that, or not. Sure, 95% is probably too high. I also know that many that post here claim to be pearly white are not and did play the comp check and hit the value wanted games, although it's only a few that I know that about, and others are just guesses. Many more were playing along to get those orders than will ever admit it. Many are now worried they might get caught up with, and they should be. Nope, I'm not being specific or naming any names. Shoot, some don't even realize how bad they were.
Then, many will not be caught up with because at this point, the lenders, GSEs, Fannie and Freddie don't know how many mortgage files contain an appraisal report that does not match what the appraiser sent and I'm guessing they are too afraid to find out.
PropertyEconomics
Elite Member
- Joined
- Jun 19, 2007
- Professional Status
- Certified General Appraiser
- State
- New Mexico
Sandy,
Unfortunately you cant decry that you are a lowly trainee in this thread and in others tell us you have over 20 years experience as an appraiser. Its simply disingenuous. You cant have it both ways. One day you have more money than the rest of us because of your vast Appraisal and Real Estate Experience and then the next come here an play the lowly newbie martar.
Im sorry Im not buying it. You are either one or the other and as loudly as you scream ... I dont think lowly trainee describes you well.
Again I tell you ... SAY NO .... its not such a hard concept to grasp and many many here have told you to do so. Either you will take the advice or you love the juxtaposition you put yourself in. Either way .. the choice is yours. As for me .. Im sick of the lowly trainee mask you appear to want to wear while pointing fingers at those that have been in the business the same amount of time you have but who have taken the time to become certified.
I'd say comp checks are ALMOST always appraisals. Also, there has to be third point of view, niether pro nor con - my point of view - neutral.
Outside of residential mortgage work, there are plenty of cirumstances were a little preliminary research is done to determine whether a more money should be invested in attempting to do some kind of project - like a feasibility test. That's what a comp check really is. They get a cheap (ie free in most cases) appraisal to see if it is worth committing more resources, time and effort (including getting a more expensive appraisal).
Various factors have combined to make this an harmful practice in residential mortgage appraising. You can send out 100 average-Joe appraisers, lend 90% of their value, and have a relatively safe portfolio. Let loan production people comb the country for the 100 highest comp checks, lend 90% of that, and you are upside on day one.
Beyond the current prohitition against number hitting, there is not one thing the makers of appraisal standards can do - EXCEPT - create separate standards for residential mortgage appraisers. I have been considering variations on "durable" intended use, a limitation on re-appraising, but can't come up with anything that works.
That's not "pro" comp check. If you can figure out how to change USPAP and get rid of them (and somehow get everyone to follow the rule), go for it. But you can't screw things up for others.
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MEMBERS OF THE APPRAISAL FOUNDATION
ADVISORY COUNCIL
American Bankers Association
American Institute of Certified Public Accountants
1 American Society of Appraisers
2 American Society of Farm Managers and Rural Appraisers
3 Appraisal Institute
4 Appraisers Association of America
Association of Appraisal Regulatory Officials
5Association of Machinery & Equipment Appraisers
6California Association of Real Estate Appraisers
7Canadian National Association of Real Estate Appraisers
Centre for Advanced Property Economics
8Columbia Society of Real Estate Appraisers
Conference of State Bank Supervisors
Counselors of Real Estate
Employee Relocation Council
9Equipment Appraiser Association of North America
Fannie Mae
Farm Credit Council
Federal Agricultural Mortgage Corporation
Federal Deposit Insurance Corporation
Federal Highway Administration
Freddie Mac
General Services Administration
Institute of Professionals in Taxation
Instituto De Evaluadores De Puerto Rico
Internal Revenue Service
10International Association of Assessing Officers
International Right of Way Association
11International Society of Appraisers
Manufactured Housing Institute
12Maryland Association of Appraisers
Massachusetts Board of Real Estate Appraisers
13Mid-West Appraisers Association
Mortgage Bankers Association of America
Mortgage Insurance Companies of America
National Association of Federal Credit Unions
National Association of Home Builders
14National Association of Independent Fee Appraisers
15National Association of Master Appraisers
National Association of Mortgage Brokers
National Association of Real Estate Brokers
National Association of Realtors
National Auctioneers Association
National Council of Real Estate Investment Fiduciaries
16National Society of Real Estate Appraisers
NeighborWorks America
17North Carolina Professional Appraisers Coalition
Office of Thrift Supervision
U.S. Department of Agriculture - Farm Service
U.S. Department of Agriculture - Forest Service
U.S. Department of Agriculture - Natural Resources Conservation Services
U.S. Department of Agriculture - Rural Development
U.S. Department of the Army
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U.S. Department of the Interior
U.S. Department of Justice
U.S. Department of the Navy
U.S. Department of Veterans Affairs
PARTICIPATING OBSERVER: The Appraisal Subcommittee
17/58 = 29% / 71%
majority rules - The Party Continues :new_all_coholic:---------------------- and the Band Plays On.
LOLLOLLOL---Wow if those usual suspects can't figure it out or don't know how to fix things, then who does?? Mr. Santora?
Oh sorry -I forgot those are the very ones that we can't expect to want to tear it all down and start over.
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