Rotating pool concept idea

[Hal Mann]

For Mortgage Lending Appraisal Practice

The real solution is true independence.

First of all, the travesty of mortgage brokers ordering appraisals should be halted immediately. How this blatent conflict of interest was permitted the very first time, and each and every time since is beyond imagination. Is there anyone who is going to argue that the broker is not the borrower's agent? FIRREA specifically mandates that borrowers are not to select the appraiser.

Beyond that, all appraisals without exception are to be ordered by a separate, unrelated (to lending) department of the bank. Input from lending agents would be limited to address, description, and contact.

How simple is that? Doesn't sound all that costly to me.

 

[Hal Mann]

Oh, By The Way

Independence as described above is not some pipe-dream; that's the rules we live under today, as promulgated by the major banking regulators (FDIC, OCC, etc.).

 

[JENIFFERW]

I agree with what you are saying, but sometimes the current laws are violated even though a department unrelated to lending is supposed to order the appraisals. Then what? Wouldn't it be even better to just prevent violations of policies and laws?

 

[Hal Mann]

Actually my point was that the rules are violated pretty close to constantly. Clearly there's no interest in enforcement by any of the several appropriate authorities...

 

[The Warrior Monk]

The real solution is true independence.

First of all, the travesty of mortgage brokers ordering appraisals should be halted immediately. How this blatent conflict of interest was permitted the very first time, and each and every time since is beyond imagination. Is there anyone who is going to argue that the broker is not the borrower's agent? FIRREA specifically mandates that borrowers are not to select the appraiser.

I'm one that doesn't believe that the MB is the borrower's agent. I've always argued that the one person that has no obligation to anyone (or at least acts that way) is the MB...they represent nobody but themselves. For example, it doesn't matter to the MB whether or not the borrower can actually afford the payments on the mortgage...what matters is getting their commission.

 

[Tom Woolford]

Jennifer,

You have some good ideas, and I appreciate the time you took to present them. One of MY pet ideas was legislation REQUIRING the loan originator, broker, bank, who ever, to keep the loan in-house for three years before it could be sold on the secondary market. The originators have to take the same risk as the rest of us, and would be a little more diligent about the deals they put together.

 

[TJSum]

Jennifer,

You have some good ideas, and I appreciate the time you took to present them. One of MY pet ideas was legislation REQUIRING the loan originator, broker, bank, who ever, to keep the loan in-house for three years before it could be sold on the secondary market. The originators have to take the same risk as the rest of us, and would be a little more diligent about the deals they put together.

This is the concept I like best. Hold the clients accountable for the loan, like Tom said, make them hold any loan for three years, and then after the three year holding period once the loan is sold, if the investor finds any fraud in the loan file, which includes a "bad" appraisal, make it mandatory for the original client to buy back the bad loan. It will force the lenders to seek out good, honest appraisers.

 

[Hal Mann]

I'm one that doesn't believe that the MB is the borrower's agent. I've always argued that the one person that has no obligation to anyone (or at least acts that way) is the MB...they represent nobody but themselves. For example, it doesn't matter to the MB whether or not the borrower can actually afford the payments on the mortgage...what matters is getting their commission.

I would agree to the extent that mortgage brokers so very often do not live up to the responsibilities imposed by agency. But I believe MBs are generally considered a borrower's agent under the law.

 

[Jim Onderisin]

When I started appraising, I trained with a fellow who had several clients, but one BIG client. That client basically used a rotational system, which was more common then and in prior years. That client then decided to go to a "loan officers choice" type appraisal ordering system. That was the beginning of the end of that fellow's business. His previously "buddy-buddy" loan officers instantly disappeared. They found other appraisers to hit the numbers and kick back. The rotational system is/was good for appraisers...but lenders don't care about appraisers.

 

[JENIFFERW]

I like the 3 year idea too.