Predetermined Value USPAP

[Ricky LaFleur]

Like the OP, I'd sure feel more comfortable if an engagement letter did not state an estimated value or loan amount and remain blissfully ignorant, even if it wasn't for FNMA.
IMO, a contract is more like property history and is factual, pertaining to the property, as it is a result of subject being marketed.

 

[glenn walker]

Actually the Fannie Loan Application 1005 has a place on it where it asks for the borrowers estimated value of their property, and that is to assist the lender in knowing if there is or is no loan to be done. If the Borrower states on his loan application that he estimates his homes value to be $400,000 but he already owes almost as much or more than the estimated amount, the loan , the lender knows he is not going to be able to offer him a lot of options and then the lender determines to kill it or move forward. NOW that owners estimated value is not an-appraisal and its not even a Predetermined value for the appraiser to hit. This is just an-emotional issue for the appraiser because like a purchase contract he/she knows that if it is lower, someone wont be happy. On a refinance , if the value comes in below the borrowers estimate of value, the lender simply calls the borrower and says Glenn , the appraisal came in at $480,000 or $20,000 low and we can or cannot due your loan at terms we originally offered. There is no issue for the appraiser and he/she did not violate USPAP. The only was a USPAP violation could be claimed is if the appraiser- agreed that he would only proceed with the assignment if HE could hit the $400,000 estimated value. Note: The appraiser is typically the only party in the transaction, that can violate USPAP.

In Summary: The only way an-appraiser is in violation is when he/she, contracturally , either oral, written, by telephone conversation, E-mail, smoke signals or carrier pigeon, has agreed and guaranteed to hit the Bulls-Eye.

 

[ramrcdk]

Current to my business practices:
Where an Order has numbers, either the loan amount or desired number, I have requested that numbers be removed from the assignment and resent. I do not know IF that is still an OK thing to do OR not.
So since I don't really KNOW... I just prefer a clean order in my file. AND/OR an em' copy where I did request removal. (Actually can't recall the last time this happened to mau')
Value found from market: Either way...it is what it IS & their #s don't mean a thing.
Seems Back-in-the-day: Maybe HVCC timeline or during 1 of 2 BIG messes, I do recall the stinky about Wishful #s being on Lender's Orders.

Interested in knowing ... but not found, was how I found the following:
( No wonder why AMCs are thriving: goggling this is what popped up )

Can a loan officer order an appraisal?
Now, loan officers are prohibited from ordering appraisals, and lenders must order them through an appraisal management company or “AMC”. The AMC then randomly places the order with a licensed appraiser.Jul 9, 2019

Where found untrue via Fannie:

Q15. Are lenders required to order appraisals through an AMC?​

No. We do not require the use of an AMC or any other third-party vendor to order appraisals. Single-Family Seller/Servicer Guide Exhibit 35Opens in a new window, Appraiser Independence Requirements (AIR), allows Sellers to use staff (or in-house) appraisers to obtain and prepare appraisal reports. We require Sellers to obtain appraisals in a manner consistent with the AIR.

 

[J Grant]

I am not certain if a lender/client putting a target value /estimate on an order is allowed now or not. I have not seen in in several years. A client doing that is a red flag client imo. The kind of client who will send harassment type ROV if they do not "like" the value, encourage an appraiser to ignore /minimize a property condition, put a multi family on a SFR form and so on, A marginal lender tends to attract marginal al borrowers as well..,

Red flag clients can have their loan files and with that file the appraisals reviewed more frequently-if you want to accept their orders, be diligent about your work- CYA in plain language.

 

[Tru Red]

What is considered predetermined?

It's a fair question.

Common sense goes a long way with most items in USPAP.

 

[breakmaker]

Appraiser Independence Requirements

(6)Providing to an appraiser an anticipated, estimated, encouraged, or desired value for a subject property or a proposed or target amount to be loaned to the Borrower, except that a copy of the sales contract for purchase transactions may be provided

https://singlefamily.fanniemae.com/media/4711/display

Thank you so much djd09!!
With this on an order we cant provide an AIRS statement.
I do not disagree that it probably isn't a big issue, however why call myself into question over a fee.

 

[George Hatch]

As I said before, providing you with the info this is more of a problem for your client than you.

The distinction with the mortgage brokers is that their values were often expressed in terms of a contingent engagement or contingent fee arrangment. "You can have this assignment if you can return this value conclusion". That's not what the situation the OP is describing is doing. So that's the difference between what was happened then vs this current situation.

Now if an AMC is loading their engagements with contingent assignment conditions or contingent fee payment arrangements that result in you only getting the assignment if you cooperate with the predetermined value or only paying you for the deals you enable THEN you can equate that conduct with what the mtg brokers were commonly doing.

But yeah, it would be entirely appropriate to pass along the reference that they're not supposed to be leaving any breadcrumbs about their intentions with value conclusions. That way they won't get in trouble for it.

 

[J Grant]

cert 18 on a URAR form ( a good idea for all of us to read the certs from time time, great information at our fingertips ).

18. My employment and/or compensation for performing this appraisal or any future or anticipated appraisals was not conditioned on any agreement or understanding, written or otherwise, that I would report (or present analysis supporting) a predetermined specific value, a predetermined minimum value, a range or direction in value, a value that favors the cause of any party, or the attainment of a specific result or occurrence of a specific subsequent event (such as approval of a pending mortgage loan application). 19. I personally prepared all concl

An appraiser accepting an order with a target estimated value on it runs the risk of appearing to have violated cert 18 (even if their appraisal work was kosher )

People compare it to a client sending a contract -but it is different. A contract as an offering/agreement is USPAP approved as part of an assignment. Receiving a sales contract alone does not indicate an agreement or understanding to achieve a predetermined value/direction. However, if the client on order form also states the SC price as their estimate of value, that crosses into cert 18 territory ...

 

[J Grant]

Appraiser can write, " Client sent along on order form a borrower estimate of value. I did not accept the order with any understanding or agreement that ( and quote cert 18 )"" For a CYA.

The client will probably hate that statement and ask you to remove it. Which brings us back to the point that this is probably a POS client and in my experience POS clients are not worth doing business with. Appraiser can also ask client to remove that from order form- but for disclosure, the appraise already saw the value estimate from client on first order form.

 

[J Grant]

cert 18 - not conditioned on any agreement or understanding, written or otherwise

And understanding is not necessarily a stated "do this and you will get this assignment/ future assignments."
Even mortgage brokers back in the day were not stupid enough to say or WRITE that kind of promise/quid pro . (though a few were ). However, an understanding was often implied about results and it was more common for a mortgage broker to send comp checks that if came back indicting a probable value of $ X or range, and to work with appraisers they considered deal friendly