More On Free Comp Checks

[hastalavista]

Personally, I feel marginal borrowers and marginal properties can pose an uncomfortable level of risk. While I could care less about the FICO scores or employment history (not my business), I do care about the property condition when there is a greater chance of this loan going south. There's a greater chance everything about the file will be looked at under a microscope should the loan go bad. God help me if I missed the failing septic system that they carefully threw dirt over and hid with whatever they could....the weeds and debris is stacked up along the north side of the house such that you couldn't see the crack in the foundation....Can this happen with any place we look at? Of course it can, but the likelihood, in my opinion, is greater with B/C borrowers and their 'haven't had the money to fix it' properties.

OK, here's my take:

In general, my experience is the problem with subprime properties is not condition.
As you may know, I do reviews (direct) for B/C lenders (not mortgage brokers). Our company also does pre-foreclosure, foreclosure, and short-sale (for the lender) appraisals. As a rule, most of these properties are fine as far as condition goes. Many of them are relatively new (less than 5-years old, built in large tract development).
Sure, I've had some dogs. But, within the last 3-weeks I reviewed a $3.3-million dollar subprime property that was probably the best in its neighborhood. So, in my market, condition is not a significant subprime issue.

What is a significant subprime issue is the valuation. 100% LTV loans are no mas. And high-LTV, no-doc loans are also bye-bye. People who purchased their homes with a 80-20 piggy-back and are having them reset now thought they could easily refi (since the market was going only up at the time of their purchase). Minimum FICO scores have also been increased across the board by almost every subprime lender.
Bottom line is this: There is more pressure now than ever before to increase the value to get the borrower "qualified". We already know the borrower in the subprime arena has less than "A" credit. So, where does the leverage come from to borrow? From the equity. And if there is no equity because the market has stabilized or declined, then there is no loan possible. Consequently, the pressure to push the value.

As to the "risk" and microscope concern, certainly the appraisal will be reviewed if the loan defaults. I do these types of reviews. But, for a fact, my clients are only interested in "going after the appraiser" if there are significant and identifiable deficiencies in the original report's due diligence. I'm not talking about 5-10% difference. I'm talking about appraising a $800k house for $1,300k. My clients- and all lenders who are in the position to make a decision- have told me the same thing; they don't expect the appraiser to be 100% accurate and don't blame the appraiser if the borrower defaults. They only get irritated when the report leads them to believe the property is something it isn't: Be that a $1,000,000 house when it is really a $800k house, or a "good condition" home when it is a poor condition home.

So, my opinion is that the "risk" for these assignments is no more than any other. If the value is credible and the property is reported to be what it actually is, no problem. If the value is not credible and the property is reported to be something it isn't, that is a problem.

I also do FHA work. Between the two, I view a subprime assignment as less risky. But, that may be because my market is a different from yours.

And, so this stays on topic, with the exception of the fraud potential Pam pointed out, I don't see the desktop valuations any more or less risky for this type of property than a "A" paper property.

 

[Lawrence R.]

Emerging opportunities

My normal harsh and quick criticisms of appraisers like Dennis is beginning to lighten up, frankly. I think it's time for the appraisers to stop the infighting and band together to get some signficant changes made and level the playing field for the more conscientious appraisers. How many more years is this going to go on? Beating up on appraisers like Denis is NOT GOING TO FIX THE PROBLEM! Obviously, enforcement and education has not worked!

I honestly think that the playing field has been levelled, I think the problem is that nobody has informed the players well.

Besides, the honest folk don't need to level the field, they need to move to a whole new field. Skippys will provide us a whole new line of work:

:new_2gunsfiring_v1: Hunting down and killing skippy's for the Lender, who they are ultimately hurting.:new_2gunsfiring_v1:

The new USPAP is not a stumbling block to good appriasers it is a stepping stool. This is going to go on for a few more years until the people who are enforcing the new ways give up on the old ones. It may take some of those in charge Dying off and Retiring before real change occurs. But it will happen, or else the government is going to have to make some very big sweeping changes in the mortgage origination business.

 

[Smokey Bear]

My normal harsh and quick criticisms of appraisers like Dennis is beginning to lighten up, frankly.

There are VERY few appraisers on this forum, or anywhere else, that are qualified to take on Denis.

 

[JSmith43]

I think the results make sense, but the poll question should have been:

How do you self-rate your phone skills? It would probably graph out the same.

 

[Lawrence R.]

I didn't say that..

There are VERY few appraisers on this forum, or anywhere else, that are qualified to take on Denis.

That was actually form someone else's thread. I was referencing the line about making it easier for honest appraisers, and I was stating that we have never had it so easy.

 

[Joyce Potts]

That was actually form someone else's thread. I was referencing the line about making it easier for honest appraisers, and I was stating that we have never had it so easy.

It was taken from one my responses in another thread, I believe.

 

[Gregory Beck]

They'll burn you every time

I know of an appraiser who was doing the same thing - merely reporting sales to his "buddy" LO all with the clear understanding it wasn't really an appraisal-they just want to know the properties "range of value." The LO used the comp searches to fund loans, without the appraisers knowledge. Several deals went south and the appraiser was named a party to a civil action. He never received a dime. It will cost him several thousand dollars to either defend himself or buy his way out the the action and may be subject to disciplinary action by the state regulatory agency.

thats why you cannot do a comp search

 

[Deleted member 128537]

By "comp checks" I mean giving a lender an idea if a particular value is within a reasonable range for the area. For example just had a lender call and ask for a value in an area where we haven't had a sale that high. So I told him that there have been no sales with that value so it would be doubtful.

I generally stay away from comp checks because in my experience a lender that asks for them are working on a doubtful deal, I typically don't have accurate information on the subject, they are generally a complete waste of time, and because they then go fee shopping to get the appraisal done. Or they want to know if you can get the appraisal done in 2 days, which is ridiculous.

The only people I help out from time to time are steady customers, and it is basically a customer service at that point because I know they will consistenly give me business. And I charge them reasonable fees and they don't bark about it.

 

[Ron Howson]

I got a call yesterday for a comp check. I said something like, "I can't believe people are still asking for comp checks. They are completely meaningless and useless to you".

When she asked what I meant, I explained that I could tell her anything she wanted to hear to get the order - she wants 400, no problem - if it comes in lower, I can just say "Well you didn't tell me it was a peice of ****". Or, if it is worth 350 and an appraiser values it at 400, the bank won't buy it anyway, but the appraiser still gets paid. So she is wasting her time getting comp checks, she really needs an appraisal. I can't tell the total difference between the 400 house and the 350 by looking at a computer screen and without doing an appraisal and nobody can. So an appraiser can tell her anything she wants to hear to get the order. Then I explained a little about the legal problems with comp checks.

She was shocked and I really thought she was going to be insulted. She couldn't believe I was telling her this and started asking what areas I service and such and said that is the first time anyone ever pointed that out and it was right. She said she was going to do what ever she was going to do and call me the next day, I don't know if she will, but I think I will have a new client from it. If she doesn't, well it's about the same result I've been getting from other calls anyhow, so no loss.

I have been wrestling with this comp check thing and trying to figure out a way to make an honest living at this profession. I think that may have been the most direct and effective thing I have done about it besides just saying "no". I mostly have been trying to not do them, sometimes get suckered into it, but mostly do not get work from any callers looking for comp checks. I think that this will be more along the line of what I will do from now on.

I know that when I don't do a comp check, they will continue to call appraisers until someone does. This way, it at least lets them know that the person who does them may not really be that reliable and they will save time and headaches by just ordering an actual appraisal.

 

[jhillas]

Comp checks can be totally legitimate if developed in compliance with Standard 1 and reported in compliance with Standard 2.

Despite frequent fax, email and phone requests, I have yet to find anyone wiling to pay me for such an animal. As result, I don't end up doing any.