Lender forced to buy back loan from fannie mae

[Peter LeQuire]

An appraiser friend called this AM. She's been asked to respond to faults in the appraisal that were recited in a repurchase demand from one of the GSEs. What were being questioned were a quality call; lack of garage adjustment; use of a dated comp; pool adjustments; condition call (not adjustments, the call).

I haven't seen the appraisal and can't comment on the adequacy of her explanations about aspects of the appraisal that bump against GSE requirements. I'm puzzled by the fact that she's an experienced appraiser, and has been dealing with secondary market guidelines for a couple of decades, and by the fact that the appraisal could pass the AMC's underwriting screen and the bank's underwriting scrutiny without questions being raised.

I suggested that she respond to the issues raised, and that going forward, she forget that the word "summary" was ever part of the language of appraisals.

 

[Terrel L. Shields]

Yes, it is amazing that after two decades, many appraisers have suddenly "got stupid" and are zinged in multiple administrative and technical reviews layered one on the other...meanwhile in the world that appreciates the appraisal, they rarely review anything on a technical level.

 

[hastalavista]

An appraiser friend called this AM. She's been asked to respond to faults in the appraisal that were recited in a repurchase demand from one of the GSEs. What were being questioned were a quality call; lack of garage adjustment; use of a dated comp; pool adjustments; condition call (not adjustments, the call).

I haven't seen the appraisal and can't comment on the adequacy of her explanations about aspects of the appraisal that bump against GSE requirements. I'm puzzled by the fact that she's an experienced appraiser, and has been dealing with secondary market guidelines for a couple of decades, and by the fact that the appraisal could pass the AMC's underwriting screen and the bank's underwriting scrutiny without questions being raised.

I suggested that she respond to the issues raised, and that going forward, she forget that the word "summary" was ever part of the language of appraisals.

Peter:

A couple of forumites (one I recall specifically, Sunshine in VA) are staff employes and deal with the GSE buyback demand. My gist from reading their posts (and asking them direct questions in their threads) is that the GSEs make any and every accusation they can in their buyback demands, whether warranted or not. Their job is to determine if the demands are reasonable or not; many times, they are not (the appraisal is obviously not the reason why the borrower defaulted, but unacceptable appraisals is one of the items the GSEs cite in their buyback demand).
So, I would not take it on face value that the issues cited in the buyback demand are legitimate.
The lender's ability to challenge the buyback demand is probably limited (what are its options if it wants to continue to do business with the GSEs?). I don't think a response to a "buyback demand" given to the lender (the original client) is the same as "being sued", so I don't know if E&O has any role in the process at this stage.

Good luck to your colleague.

 

[JRS at OBX]

Now they are contemplating making a claim against my E&O, and want a full copy of my policy. They have my dec page already. Am I obligated to give them my full copy?

I would be tempted to tell them that I stopped carrying E&O when the voices in my head started arguing with each other.

They really have no need for your policy. Your policy is to protect you. You will be the one to file the claim on YOUR policy, not them.

Of course I'm not an attorney, I'm not longer a licensed insurance adjuster and I didn't stay in a holiday inn express. So my best advice to you is to not follow my advice.

 

[Don Clark]

I would be tempted to tell them that I stopped carrying E&O when the voices in my head started arguing with each other.

They really have no need for your policy. Your policy is to protect you. You will be the one to file the claim on YOUR policy, not them.

Of course I'm not an attorney, I'm not longer a licensed insurance adjuster and I didn't stay in a holiday inn express. So my best advice to you is to not follow my advice.

Actually Jason, I would follow your advice

I would also, burn, shred or otherwise destroy all files 1 minute over 5 years old that have had no legal claim against them in a 5 year period.

Appraisers have not suddenly become dumb. Lenders are being forced to do what the secondary market told them would happen unless they dotted every i and crossed every t in any loan sold to the secondary market.

Since many of them have transferred most if not all due diligence to AMC's they will get what they deserve.

 

[Peter LeQuire]

Peter:

A couple of forumites (one I recall specifically, Sunshine in VA) are staff employes and deal with the GSE buyback demand. My gist from reading their posts (and asking them direct questions in their threads) is that the GSEs make any and every accusation they can in their buyback demands, whether warranted or not. Their job is to determine if the demands are reasonable or not; many times, they are not (the appraisal is obviously not the reason why the borrower defaulted, but unacceptable appraisals is one of the items the GSEs cite in their buyback demand).
So, I would not take it on face value that the issues cited in the buyback demand are legitimate.
The lender's ability to challenge the buyback demand is probably limited (what are its options if it wants to continue to do business with the GSEs?). I don't think a response to a "buyback demand" given to the lender (the original client) is the same as "being sued", so I don't know if E&O has any role in the process at this stage.

Good luck to your colleague.

Denis - I remember (vaguely) the thread you refer to. This process is another facet of what is becoming an increasingly frightening environment in which to do residential appraisal work. The lender will certainly push back against the buyback demand, but one has to wonder that, whether my friend is able to satisfactorily respond to the "deficiencies" raised by the GSE or not, her days doing work for this particular bank are numbered.

Whether the repurchase demand is withdrawn or not, if this is a augury of what appraisers can expect in future, why would an appraiser not shy away from doing GSE-related appraisals of properties of other than highly conforming properties? Why would a bank lend on those properties?

The buy back demand may have been delivered accompanied by a full-fledged fusillade of allegations of deficiencies in the loan documents, but that is small comfort for someone whose livelihood is threatened if an their name appears on a GSE watch list or do not use list.

Perhaps this sort of critique and demand are symptomatic of the GSEs' push to further make uniform the compliance document we called and appraisal, once upon a time.

 

[Delta85]

I would also, burn, shred or otherwise destroy all files 1 minute over 5 years old that have had no legal claim against them in a 5 year period.

I agree. There have been discussions on this forum in which posters have said we should be saving files well past requirements, like 10-20 years or whatever. Why would anybody do that? It's just saving ammo that someone might use against you in the future.

 

[Peter LeQuire]

Actually Jason, I would follow your advice

I would also, burn, shred or otherwise destroy all files 1 minute over 5 years old that have had no legal claim against them in a 5 year period.

Appraisers have not suddenly become dumb. Lenders are being forced to do what the secondary market told them would happen unless they dotted every i and crossed every t in any loan sold to the secondary market.

Since many of them have transferred most if not all due diligence to AMC's they will get what they deserve.

Reap and sow, I suppose.

 

[Junior Member]

I agree. There have been discussions on this forum in which posters have said we should be saving files well past requirements, like 10-20 years or whatever. Why would anybody do that? It's just saving ammo that someone might use against you in the future.

In our experience (5,000+ professional liability claims, disciplinary complaints and demand letters since just 2002), a decent work file contains the keys to an appraiser's successful defense against liability. Without a decent work or without a work file at all, it is usually much harder to defend the appraiser.

-- Peter Christensen, LIA's general counsel

 

[Delta85]

In our experience (5,000+ professional liability claims, disciplinary complaints and demand letters since just 2002), a decent work file contains the keys to an appraiser's successful defense against liability. Without a decent work or without a work file at all, it is usually much harder to defend the appraiser.

-- Peter Christensen, LIA's general counsel

How about the defense of "USPAP requires me to keep my workfile 5 years and this claim is coming 7 years after the report was completed. I no longer have these documents and can not be sure what you have is an original and unaltered copy of my report or if this is even a report I worked on."

With a workfile, a lawyer can pick out anything and everything and build a case around it. You lack this, you don't have that, you can't support this, etc.