Let the borrower order it. The case for it.

[Smokey Bear]

I've had borrowers shop for appraisers the same way MBs do - they want a comp check first, or want to make sure I can say it's owner occupied etc. I seem to remember that borrowers showed up often with bogus appraisals for what later became the S&L crisis.

 

[RSW]

John,

I have to disagree with you. Letting the borrower be the client and order the appraisal will not fix the problem. MBs and LOs will feed the name of the appraiser they want the borrower to choose. They will tell the borrower what to ask for and what to say. Nothing will change other than the person applying the pressure to the appraiser.

I believe that taking the ML/LO, borrower, real estate agent and anyone else that would directly benefit from the appraisal out of the picture. Let the lender order the appraisal or send it to a third party where it would go to an appraiser on a rotational system. This may be an AMC or some other type of system. Then, use the review process that has been discussed in this thread as a safety net.

The only problem with my plan is the fee. That has to be worked out. The fees need to be market based and not dictated by the AMCs.

 

[PropertyEconomics]

I've had borrowers shop for appraisers the same way MBs do - they want a comp check first, or want to make sure I can say it's owner occupied etc. I seem to remember that borrowers showed up often with bogus appraisals for what later became the S&L crisis.

The point that is missed is no matter who orders the appraisal there should be a FULL AND COMPLETE REVIEW .. that is the key to making everyone understand what will happen and what WE are looking for in our business.

 

[Hamlet]

Dean,
though I agree a rotation panel does not sound like the best opportunity for us...it may be better regulated for the lending industry. Remember you can always appraise RE for private ventures, Divorce, retrospectively or many other reasons other than a loan.

The focus has to be on what is best for the industry and I agree that a review process by qualified reviewers as well as better education is key to stopping number hitting pressure.

 

[Marcia Langley]

Anyone can order an appraisal for their own purposes and in any given mortgage transaction the various parties can each order their own appraisal.

The intended use for each of the various parties would be different. I can't imagine a regulated lender (as opposed to a private lender) making a lending decision based on an appraisal where the intended use was to make a borrowing decision.

Per USPAP, the client is always an intended user but there may be additional intended users. Are you suggesting that the appraisals should have more than one intended use?

I'm trying to imagine how that would look.

"... for the client to make a borrowing decision and the additional user to make a lending decision? ..."

I'm not liking that very much. I'd much prefer the status quo of each party obtaining a separate appraisal and each appraisal being for a single intended use.

 

[PropertyEconomics]

Anyone can order an appraisal for their own purposes and in any given mortgage transaction the various parties can each order their own appraisal.

The intended use for each of the various parties would be different. I can't imagine a regulated lender (as opposed to a private lender) making a lending decision based on an appraisal where the intended use was to make a borrowing decision.

Per USPAP, the client is always an intended user but there may be additional intended users. Are you suggesting that the appraisals should have more than one intended use?

I'm trying to imagine how that would look.

"... for the client to make a borrowing decision and the additional user to make a lending decision? ..."

I'm not liking that very much. I'd much prefer the status quo of each party obtaining a separate appraisal and each appraisal being for a single intended use.

Marcia .. the problem with the status quo is ....

1) the borrower is an intended user of the report whether we like to admit it or not

2) by telling the borrower we cant do an appraisal for them for mortgage lending purposes we leave the false impression that the values will be different.

3) barring any special circumstances, and relating only to mortgage transactions, why would the value ever be different?

4) with a review being mandatory on all reports for lending purposes .. isnt there a greater degree of safety .. wouldnt it promote better work by all?

As I ahve said we make a big deal about who orders the appraisal when we should be making a big deal about how the appraisal is done and that it is done competently no matter who orders it.

 

[RSW]

PE,

Your suggestion looks good on paper but when applied in reality doen't work. There are too many appraisers out there that just don't care about reviews. Those Skippys have been around for years and play the odds that they will not get caught. I know of appraisers in my area that will hit that magic # no matter what. You can lead a horse to the water but you can't make him drink. If someone doesn't have any ethics, nothing is going to make him get any. I think that the review thing is only part of the solution.


Scott

 

[PropertyEconomics]

PE,

Your suggestion looks good on paper but when applied in reality doen't work. There are too many appraisers out there that just don't care about reviews. Those Skippys have been around for years and play the odds that they will not get caught. I know of appraisers in my area that will hit that magic # no matter what. You can lead a horse to the water but you can't make him drink. If someone doesn't have any ethics, nothing is going to make him get any. I think that the review thing is only part of the solution.


Scott

They take the chance because being reviewed is not very likely. IF every report WAS reviewed .. I think there would be a difference and rather immediately.

 

[TJSum]

The point that is missed is no matter who orders the appraisal there should be a FULL AND COMPLETE REVIEW .. that is the key to making everyone understand what will happen and what WE are looking for in our business.

If the Lender has to order a review on every appraisal to make sure the appraisal ordered by the borrower is legit, why not just eliminate the first appraisal entirely if it can not be relied on and let the lender order the appraisal. I agree with LeeLansford in post #14, what you are telling everyone is that Appraisers should not be trusted, you might as well be telling the world to order an AVM because appraisers are no good.

The best fix is not to go after the unethical appraiser (only), as long as the system stays the way it is, there will always be number hitters because the system rewards it. The entire system has to be changed where the honest appraiser is sought out instead of the number hitters.

The Appraisal must be ordered by the party actually loaning the funds, not the borrower, not the loan originators, but rather the party who will be lending the money and holding the loan. If/when the loan is sold higher up the food chain, if any fraud is found with any actor in the process, there has to be an easy sent back policy of the loan to the fraudulent party for them to eat the loan. True transparency and accountability to all actors in the process. Fraudulent activities will no longer be profitable, and good honest appraisers will be sought out instead of the number hitters.

That is the best fix, most other things will just be rearranging the deck chairs on the titantic. IMHO the rotational panel will work in theory, but in the real world, it will drown in its own bureaucracy, the aggenda and massive management, middle management and micro-management will be swayed by the politics of the day and it will be so user unfriendly to the process, that it will just end up promoting more and more use of AVM's and other alternatives to get rid of us entirely.

P.S. I like the idea Marcia was promoting a few months ago, about a uniform appraisal order form, and this form should be page 1 of the actual appraisal report, to promote the transparency aspect of the process.

 

[Marcia Langley]

Marcia .. the problem with the status quo is ....

1) the borrower is an intended user of the report whether we like to admit it or not

PE,

The intended users of my reports are who I say they are. You may argue that the courts may see it differently but that's not really the point. This still does not address the intended use(s).

2) by telling the borrower we cant do an appraisal for them for mortgage lending purposes we leave the false impression that the values will be different.

I'm not sure this is true but if it were, we should do a better job of explaining.

3) barring any special circumstances, and relating only to mortgage transactions, why would the value ever be different?

It wouldn't be. That is not the important issue here. The important issue is properly identifying the intended user(s) and intended use.

When my intended user is an individual and the intended use is unique to him, even if it is to make a borrowing decision, my report and language is much, much different than when the intended user is a sophisticated financial institution. Even though the opinion of value on the same effective date would be the same.

4) with a review being mandatory on all reports for lending purposes .. isnt there a greater degree of safety .. wouldnt it promote better work by all?

Mandatory reviews would be effective in any case. That is a side issue to intended user(s) and use(s).

As I ahve said we make a big deal about who orders the appraisal when we should be making a big deal about how the appraisal is done and that it is done competently no matter who orders it.

I'm happy to make a big deal about appraiser competence. That does not change my feelings about properly identifying my intended user(s) and use(s). For me, keeping borrowers' intended uses and lenders' intended uses on seperate reports is also important.