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Ten Ways to Kill the Loan Industry - Not Annonymous

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Steve Owen

Elite Member
Jan 16, 2002
Professional Status
Certified General Appraiser
Joan Trice printed her promised appraiser rebuttal, here it is:

10 Ways to Kill the Home Loan Business by

Peter LeQuire
Fee appraiser
Maryville, TN
865 984-3830
[email protected]

1. Lend money on "over valued" property. The other phrase is "under collateralized loan." This generally results from (1) relying on property assessment data to make the collateral decision on a real estate loan when the credit/income ability appear to be reasonable risks, and, when that won't work (2) have the lending officer, who is paid an incentive, arrange for the lowest possible level of property valuation. Generally, the lending officer has had the loan for so long that every body's ticked, particularly those who think the appraiser should do the valuation right now.

2. Let the incentive-compensated lending officer control the process of documenting and underwriting the transaction. That way the whole system can benefit from a much higher transaction velocity, and we all know that it's only by turning things over that anybody makes any money.

3. Let every lender sell loans to FNMA/FHLMC. They're the leaders, and they're taking the lead in no longer underwriting the collateral they accept for their mortgages, opting instead to underwrite their portfolio performance. And, heck, since nobody has any confidence in SF property appraisal as a legitimate undertaking, there's no point in spending money on an appraisal anyway.

4. Make sure that, particularly in light of #2 above, that there is no independent, reasonably objective, nominally unbiased inspection of the property banks lend money on. All loans are credit deals anyway.

5. Promote 125% of equity deals. That's sure to attract the most sterling class of applicants and the best collateral possible.

6. Refuse to use appraisers who provide reasonably objective, unbiased opinions of value and of property conditions: we don't care about the property, and we sure don't want somebody raining on our incentive comp packages.

7. Don't do review appraisals, either before or after closing. They just might tell us there's a problem with our incented lending officers. After all, the emperor does have a new suit of clothes, and our automated models tell us when we have a problem.

8. Always use AMC's that place your business by going through the yellow
pages: it assures that AAAAAAA Appraisal Company does all your work, as long as they'll do it quicker than anyone else for less fee.

9. Make sure that your lending staff only knows how to find the value number on an appraisal and how to look at the pictures: that will assure that there is never any intelligent communication to or from the appraisers you do have to use. Make sure your staffs include underwriters who won't return phone calls, who don't know the difference between a URAR and a urologist, and who don't know how to read: that way we can spend more time trying to communicate with them what we communicated in the appraisal the first time.

10. Don't remember disintermediation. Don't remember the HUD scandals of the past. Don't remember the prudence of a QC system. Most of all, don't remember to develop a business relationship with appraisers who can't be bullied by your commissioned people. Remember to use the malleable, "What's the number?" form filler. That way, when all of your under collateralized loans - including the ones you have to repurchase from FHMA/FHLMC - come back, and you wonder what happened, those appraisers who wouldn't put up with your guff will be covered up with foreclosure work, and it will be a frosty July in Mobile before you get your four value, interior photos, listings analysis, foreclosure appraisal in a reasonable time frame, and I guarandamntee you it'll cost more than $75.00.

By the way: don't talk to us about collusion on fees. The lending business not only wrote that book, but has taken it to a whole new level. Heck, now lenders can deliver loans without an appraisal if they pay the fee they would have paid an appraiser to FNMA. What a system!
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