Lender Guideline Against Value Requests?

[Doug in NC]

We are all aware of how pervasive the practice of a lender's intent to get a valuation, prior to the appraiser doing an inspection, has become in our industry. I am wondering, is there some FDIC or other federal regulatory law which prohibits this practice? (ie. "stop if _ value is not reached, call if _ is not possible, charge trip fee if _ does not seem possible, etc.)

The only way there is going to be a stop to this is if laws are either enforced, or new laws put in place to prevent this behavior. If lenders are now required to be licensed, doesn't it seem unethical that one "professional" would ask another professional (the appraiser) to violate his/her standards? That type of behavior is certainly not acceptable between appraisers, and I suspect that it would not be acceptable to a lender ethics board either (if such a thing exists).

If government officials or Congressional representatives need some proof of what we are talking about, I think it would be easy for a few justice-minded appraisers here to come up with that proof. Save those requests that you have gotten, but had to turn down because it would have been unethical for you to accept, under the lender's terms. Don't know about you, but I am sick of what is happening to good appraisers because they don't "play along" by the lender's grossly misguided and unethical behavior.

 

[Karl]

Doug would you accept the position of "Recivership" (just a title) Appraisers from throughout the country could send you copies of "inappropriate" request then after 30 days you could send them to the proper commissions in DC to show that the FEW that do contact them every so often are not ALONE?

 

[Doug in NC]

I would consider that, but first I am interested to know if anyone else is aware of any current laws that could be used to bring some attention to what is occurring on a daily basis, in the lending industry. My thinking is that it would be much easier to utilize laws that are already in place to bring about some change, rather than have to resort to lobbying for new legislation. But, if that is what it takes, I would support the effort.

 

[Karl]

Need the direction of a Real Estate Lawyer, I'll try to get in contact with my East Coast contact see if we can find ACTUAL printed laws. I was under the ASSUMPTION that there is actual laws against influencing of appraisal. This is Y I think showing the proper authorities that the current laws are abused MAY get some attention.

 

[Carnivore]

Doug,

This is the link for getting paid. It also says something about pressure being a NO NO!

NC Banking

Other than doing reviews and killing a fewq skippies I am not sure what else to do.

 

[Ross (CO)]

It starts with....does anybody really care ? O.K., leave the appraiser out of that question, as to require any response from us. Now ask, does anybody ELSE in the country really care ? The only "laws" deemed needed are those very ones put in front of our eyes every January 1st, perhaps after a little spit and polish from the year before....but, there they are in that new publication with a varying light field of a new color on the cover.

Have you ever imagined the fuss that could be created if ~87,000 appraisers on October 1st said "No" to comp checks, and also required payment up-front on all orders ? Don't waste too much time trying to imagine it......'cause it is never going to happen. It sure would be a boondoggle of glee for the AVM'ers and the BPO'ers and all the others making and concluding valuation decisions. The answer.....might be in ~87,000 persons let their licenses expire, without renewal, and returned to the marketplace with a resume' showing "Former State-Licensed Appraiser, with X years of experience, un-licensed today by personal choice and the economic advantage to do so". We then hire ourselves out as an "Evaluator".....and there would be no rules. Then it's.....What value do you need ?

Rather (no reference to Dan) than showing us how much they do NOT want us....start showing us how much they DO want us. Until that happens, they lower the bar with each passing year with few to none (clients) having the gumption to declare that they "care", they push for progressively "cheaper" reports as if that is supposed to assure more quality ? ! ...and appraisers will continue to renew their licenses, anyway.

 

[Lee Lansford]

My opinion: IF interested parties (i.e., Fannie Mae, Freddie Mac, other major investors, lending entitities with a national presence) were REALLY interested in cleaning up the mess (i.e., mortgage broker pressure on appraisers etc.), something would have happened by now. But nothing of any significance has happened, has it?

I spoke with a friend of mine who works for one such national entity. He says that he estimates that 80% of the appraisals that they receive it is evident to him that the appraiser is "pushing" the value. The REALLY bad ones they catch (for the most part) and kick-out.

This tells me that the problems are so prevalent that the system, as it is, is either unwilling, more likely UNABLE, to change the course that we are on.

Do you wonder why lenders rely on AVMs when and where they can? Why bother with an appraisal if you can't depend upon it?

Let me ask you: How many of you would be willing to accept an appraisal--completed by an unknown Certified Appraiser--as an accurate representation of the market value (or whatever value is sought) of the subject property WITHOUT conducting your own due diligence? Your answer to that question is another indication of the mess that we all find ourselves in.

I do urge all interested appraisers that when you get your hands on a really bad appraisal to forward it on to state's regulatory agency that oversees appraisers.
The wheels of justice may grind slowly, but they grind over so fine.

I also urge you to--if you are not already--to be active in the profession whether it be by teaching, being a member of a professional association, making yourself available to speak at public functions to groups with interest in the profession etc.

"Never, ever give up!" (paraphrasing Winston Churchill).


--Lee Lansford, IFA

 

[Ross (CO)]

Lee, .....Your second paragraph speaks volumes. If your friend feels that 80% of those appraisals he receives and sees are "pushing value", then why would this group not directly fire/excuse/dismiss that middle party between them and the appraiser (as in, the appraiser "got" pushed to do so, right?)....OR....take that intermediary party "to the woodshed" for pushing the appraiser to push that value, or cut off any future report from the appraiser who is now found to be "pushing" ! Does your friend's group ever go out seeking/interviewing/talking with other (under-worked) appraisers who might have, say, perhaps more than 5 years of experience under their belt ?

Why is it the appraiser who must go out and market and sell themselves to be directly recognized......when the usual reply is "we have our approved appraisers, they "charge" lesser fees than you do, and they'll do comp-checks for us to see if we can likely complete the deal" ? THAT, is all too often the reply that I am likely to receive when I go-a-callin'. But wait.....the end recipient of the other guy's report has an 80% chance of being poorly-served by an appriasal with too-high a value. What is wrong with that picture ?

It's the football season now, so here is an analogy to consider. If the first string is scoring too many points (their values are too high), then it's time to put in the second and third-strings to achieve the result this end-recipient of the appraisal report might prefer to see on the playing field !

Here's another, what's that economic principle by that famed Italian economist ? ....something about 80% of the money or means-of-production being held by 20% of the people. Is it the Peretto Principle ? Anyway, I'd bet you that the greater potential exists for 80% of the nation's appraisal reports to be completed by 20% of the nations' appraisers. Bet ya' ! Your acquaintance has a unique opportunity to get the results he/she wants.......change the players on the field.......just go to the bench......before those players head for the locker room at half-time......take their showers.....and head for their cars while the starters go back out for the second half. The cavalry is just over the rise. Send out a scout, and sound the bugle.

(I welcome the opportunity for your friend to simply come into the Forum, send me a PM, and interview me with my return phone call to them.)

 

[Lee Lansford]

ROSS...
With it obvious (reference your immediately prior post, your comment about my friend who commented that "80% of the appraisals are 'pushing the value'") that the problem is wide-spread, there is only so much that can be done. If my friend's company does their own in-house review (they have MLS data ALL OVER) and also run an AVM on the property in question, if the appraiser is..what?...10% 'high', there just is not much that they can do with it...they'd be out of business if they attempted to maintain tight control. THAT'S the problem! "Bad" appraisals are pervasive and it is only the REALLY BAD appraisals that the system can deal with.
Sad? Certainly.

--Lee Lansford, IFA

 

[Ross (CO)]

Lee, .....I figured out how your friend probably rectifies their "problem" cases. They simply knock that appraised value DOWN by 10%, and then suggest the transaction be made with the 10% lesser value. Problem solved.

When they experience this is there any mechanism or protocol in place whereby your friend's company would ever create some type of communication in-return, which might notify that appraiser that their value was effectively seen as being 10% too high ?....and telling the appraiser why and how they feel that way....not that they would want to have it appear as if that appraiser had done "wrong", but maybe giving them this hint......."my friend, we are having to spend too much money on reviews, AVM's and raw MLS database research, and you are affecting our bottom line because your reports are proving to be less reliable in their conclusions than we would prefer".

I am still convinced that many of the "problems" clients feel they have are predominantly brought on by their unwillingness to ask-for-help from the many other appraisers who can actually affect a positive and preferred outcome. That's right, another problem.....better quality, more diligence and logically explained value conclusions generally will "cost" more. Dang, always that money thing !