RESPA Reform Rule

[Francois K. Gregoire]

Hi All,

This hasn't received much play over the past few months, with the exception of some stories on the Appaisal Intelligence site, but the HUD proposal has the potential to radically alter our way of doing business for any mortgage loan appraisal work.

The Appraisal Institute and American Society of Appraisers have submitted a joint comment letter. Synopsis and link to download at this link:

http://www.appraisalinstitute.org/publicat..._02.asp#story18

The National Association of REALTORS has submitted a comment letter also. Here's another link:

http://www.realtor.org/GAPublic.nsf/pages/...pa?OpenDocument

In addition, NAR has provided the text of the study upon which their comments are based.

The Downside Risks of HUD's Guaranteed Mortgage Package

Prepared by: Ann B. Schnare, Ph.D.

http://www.realtor.org/GAPublic.nsf/pages/...de?OpenDocument

Bill Sentner's Appraiser's Guild has also submitted a letter critical of the proposal. I do not have a link to that one. Maybe he will provide the text.

 

[Farm Gal]

Frank:
As Usual, Thank you for posting this information!

Folks you might want particularly to look at that final link which has a LOT of food for thought between the lines: as in who the big players are and what this extreme concentration of "those who offer financeing" means to us as an industry: the tail is REALY wagging the dog these days. And those who lead (politicians) I think have very little control over where this run-away train is taking us.

I am concerned not only for that segment of our industry (those of us who are primarily involved in mortgage lending appraisals) but also for the financial health of the nation. Intersting that the costs do NOT decrease for some of the players who have grown (topheavyness I suspect)... and the number of small businesses the author cites as potentially affected.

 

[Francois K. Gregoire]

Too bad this is not getting much play.

More than any lender, lender policy, AVM or AMC, implementation of this new RESPA rule in its present form could drastically alter the manner in which you develop your mortgage loan appraisal business (for both sales and refinancing) and dramatically alter your income. It will not be changed in a positive direction.

Here's what Ken Harney has to say:

http://realtytimes.com/rtnews/rtcpages/200...0021104_hud.htm

 

[Joe Birrell (NY)]

Maybe it's because I havn't had my morning coffee, but could somebody explain to me in PLAIN ENGLISH, how this will affect the way we do business ?

 

[Matt Barr]

Good morning, Joe,

HUD’s economic impact analysis of the reform proposal states that “the nature of locally-provided, third party services (mainly small businesses such as appraisal, survey, pest inspection, closing agents) could remain the same under packaging. The main change is that packagers will be the new purchasers of these services, and third party service prices will be lower.”

In other words, HUD expects that appraisers will all work for AMCs and for less money. "[T]here is no strong reason to expect that locally-based small businesses could not continue providing third party settlement services under packaging, albeit at possibly lower prices and revenues,” it said. It estimates the hit to small businesses and service providers could be about $3.6 billion annually.

It's more complicated than that, of course (the reform proposal is about 1,046 pages long), but that's about as plain English as HUD has gotten relative to appraisers on this.

Appraisal Intelligence has been one hand clapping on RESPA reform, but we're stubborn and are devoting our November 11 cover story to industry implications under the proposal. The Guild, Appraisal Institute, ASA, RESPRO, ALTA and many individuals or smaller organizations submitted comments to HUD from an appraisal and/or settlement services perspective, in addition to the perspectives of others like NAR, MBA and the like.

 

[Francois K. Gregoire]

Thanks Matt,

Written with professional flair, your comments succinctly state the cold, hard facts stated in the HUD Analyis.

 

[Joe Birrell (NY)]

Frank:

Thank you, it makes more sense now.

 

[David C. Johnson]

<span style='color:darkblue'>Frank and Others,

I read much from the hyperlinks you (Frank) posted recently -- even though the small print was an impediment and the pages would not print out well for me so I had to cut and paste two of the URLs into a word processor to read better.

Generally, I am very suspicious of this proposal. I have to questions motivations. I am concerned that this proposal fits into a greater scheme of questionable government/big business behavior whereby a relatively few individuals benefit greatly at the collective expense of the many.

The dead give away of "subterfuge at heart" on the part of HUD and its current "leadership" was the Appraiser Watch initiative which has not been slammed near as hard as it should have been even in polite company. Generally these days, we (and I mean Americans), appear to be getting played for fools.

Also, I understand (maybe incorrectly) that huge amounts of money remain unaccounted for at HUD. Not a good sign, if true.

I agree with the "plain English concern" mentioned, and I am glad this is getting an "airing" on this forum.

My thanks.

dcj</span>

 

[George Hatch]

To me, the biggest problem that may occur is as a result of a services packager having to commit to a set price for those services. What happens when an appraisal doesn't come in at value or includes some other piece of information that incurs a desk review or field review? What happens when an appraisal fee is underquoted by the packager? Additional appraisal related costs apparently cannot be passed on to the borrower, even if the reason for those increased costs is because the borrower inaccurately protrayed the nature of the property to the packager. Who is going to eat these additional costs? Does anyone think it's going to be the AMC? No, the appraisers will be expected to shoulder the majority of the burden.

This is one more reason appraisers should consider declining to work for AMCs or other service packaging entities that 'appropriate' an inordinate share of a fee split even though they contribute little or no value-added services to the appraiser-client relationship. It cracks me up when an AMC or other third party 'packager' touts all their value-added 'contributions' and then cites extra volume, electronic ordering and status checks, electronic transmission of the reports, accounting and some preliminary review. Except for the extra volume, which they just plain don't deliver, all of these functions are already built into the appraisal software packages that are readily available to all appraisers. A large percentage of appraisers already have all of those capabilities at hand, should the market actually ever decide to pay a premium for them. The thing it, those features apparently DON'T have any extra value to a client, otherwise the clients would indeed pay extra for them. Extra, as in above and beyond the standard appraisal fee. The truth is that the AMCs can only be competitive with an independent fee appraiser if they heavily discount the fee splits they pay out. This is because their 'value added' services actually have insufficient value in relation to their costs, at least at this time.

So it's still going to come down to a supply and demand issue. If an AMC or other service packager can't obtain discounted appraisal fees from the majority of appraisers, they won't be able to deliver the appraisal portion of their packages at a discount.

Besides, the lenders are not required to use appraisals engaged by these third party providers. They can always handle that portion of the transaction themselves. Matter of fact, it would be better for everyone if they did.


George Hatch

 

[Francois K. Gregoire]

Hi All,

Here's a status report on HUD's proposal to change the RESPA rule.

Check out INMAN News