The Culling Process

[Dee Dee]

Arrrrgggghhhh!

The underwriters are driving me nuts! Now they're asking for comps which have sold within the past 4 months, questioning $10,000 condition adjustments on $180,000 homes where the subject has new windows, roof, carpet, landscaping, etc... and the comp has none of these things (all explained in the addendum, I might add), the list goes on and on.
They've been picking on what would have been textbook perfect appraisals just 5 months ago.

I've been calling a number of other appraisers in my area and they're experiencing the same thing. We're all tearing our hair out, and our clients are expecting that by some miracle we're going to make it all better. After swapping stories with my peers, we're starting to reach a conclusion....and I'm wondering if the rest of you are in agreement.

A pattern seems to be emerging that the investors are culling out homeowners who have been doing annual refi's on their homes during the past more prosperous years, and in turn this is having a big impact on the LO's who have learned to rely on those homeowners who come back to them every year. To us this is just more evidence that the investors are trying to cut any future losses and are preparing for harder times in the housing market.

I shudder to think of how many people there are out there who have counted on that annual refi to make ends meet. They're going to be in big trouble, right along with the lenders who have been encouraging them along year after year.

Are the rest of you seeing this same pattern?

 

[Pamela Crowley (Florida)]

I'm seeing the same thing. I haven't been getting too many underwriter questions but that's only because I'm down to a few select clients with underwriters that know me.

I do believe that the investors that are buying the loan packages are starting to really question the appraisals, with good reasons. The latest articles are starting to just touch on these issues and question Fannie, Freddie and others regarding the quality of the appraisals and just what is the real collateral and LTV. No appraisal loans DO NOT know what the LTV is at all. Those should be called LTG - Loan To Guess.

Culling? Absolutely! Gee, I feel like I've been waiting for this for soooo long. IF this continues, the "fast freddie' appraisers are going to be out of business. YIPPEE!!!

I also believe this started right here on the AppraisersForum with the Appraisers Petition and the extra efforts so many here have given in getting the Petition and other information out to the legislators and media.

Thanks Wayne! Again, and again, and again!!!!

 

[Jeff Horton]

The underwriters are driving me nuts! Now they're asking for comps which have sold within the past 4 months, questioning $10,000 condition adjustments on $180,000 homes where the subject has new windows, roof, carpet, landscaping, etc... and the comp has none of these things (all explained in the addendum, I might add), the list goes on and on.
They've been picking on what would have been textbook perfect appraisals just 5 months ago.

Sorry to hear that Dee, I am not seeing that YET but probably will soon. I tell you what I have done in the past. When I get a really stupid underwriting question I will write something like this. As was stated in the Appraisa Report ........ And then I copy my comments from the report and paste them into the addendum. Then I might follow up with a comments like "If comparable sales had been available within 1 mile they would be used in the appraisal.

To my suprise I have never gotten one of those back. Maybe I shouldn't do that but sure makes me feel better. :lol:

 

[Mike Garrett RAA]

 

[Pamela Crowley (Florida)]

Splitting the age and condition adjustments is a good idea Mike! I like that.

Those that have Alamode can use the 'E&O' button (older version is called 'Review') and it will tell you what adjustments ought to be explained.

 

[bradellis]

Guys,

Splitting age and condition adjustments is fine IF you have a basis upon which to do it.

The "age" adjustment is supposed to reflect the difference between subject for long lived incurable depreciation and the condition adjustment is for short lived curable depreciation.

In this case you can make the point that the windows are typically long lived; hence the age adjustment. (Normally, we do not replace windows in the typical useful life of the subject- although I'll grant you that energy savings can be large. Still, they are usually considered long lived).

But please be careful as you may well have to explain the reasons for the age adjustment and this method mayy not only save you no time, but could be considered inappropriate by some actually KNOWLEDGEABLE underwriter (OK - oxymoron!).

Prudence all- prudence.

Brad

 

[Dee Dee]

Sheesh...my ISP went down for most of yesterday, then the wind knocked out our power last evening. Couldn't get back on to check your replies.

Great suggestions from all of you, and I agree with all, but the adjustments on this one report are not the root of the problem. Perhaps my point wasn't clear. Let me try again.

I swear to you, if I thought it was my appraisal methods that was the true issue here (and I have done a lot of soul-searching on this lately) I would change them. I never have and never will 'hit the number' just to keep a client happy. My license and reputation means more to me than any client. Even my clients tell me that I'm conservative compared to most.

Have any of you had experiences where you get the clear picture that the attempt to kill the loan is by using the appraisal as a scapegoat? And you know the appraisal is solid? Maybe it's just my area?

Have any of you ever heard of an investor telling a homeowner,
"Sorry Mr. Smith, but you have been living off of the equity of your home now for many years, refinancing on an annual basis, and you have very few other assets. If you get sick, lose your job, or the economy goes further south we just don't want to get stuck with your loan. You would be a big liability to us and we simply can't have that."
Ha! OF COURSE NOT!

For several years now I've heard other appraisers and my instructors say that when all else fails they'll blame the appraisal to nix the loan. Until lately I never thought much of those statements, but now I'm beginning to wonder. We're all aware that there are appraisers out there that deserve to be ousted from the profession, but when the investors appear to be focusing on the appraisals of people like Mr. Smith (above), it leads me to believe that those same investors are tightening up and avoiding anything that remotely smells like it could be a risk if the economy gets worse. Avoiding conversations like the one above, I believe some of them are using the appraisal to nix the loan.

There are probably a million people like Mr.Smith out there right now that are going to see the gravy train come to a screeching halt. Never mind if they truly do have some equity in their homes, if they don't have other assets to fall back on then they won't get that refi like they have in the past. Many will have no other alternatives but to try to sell out or go into foreclosure. My clients have told me that they're getting more and more homeowners contacting them that have already tried several other lenders with no success, in spite of having some (not much) equity in their homes.
Could it be that investors are starting to batten down the hatches in preparation for the storm?

 

[Dan Tanner]

Brad,

Thanks for the insight.

I think everybody should re-read the "rijman"'s post from a couple of weeks ago. Adjustments should be bracketed. R.E. appraisal is not rocket science. Prove the marketability of a property and support it!!!

 

[bradellis]

Dee Dee,

After you have received a hundred calls from borrowers screaming at you for killing their deals you will KNOW that LOs often and regularly blame the appraiser even if the appraisal had nothing to do with it. I promise.

Brad

 

[Anonymous]

Dee Dee:

I probably average a UW call every couple of weeks. My last one was on a log home. I had two log homes within 5 miles, however they were smaller than my subject. I had two larger homes, within one mile of the subject. The UW calls, wants two more log homes, as large as the subject within 1 mile. I politely asked her if she thought I intentionally was making it harder on myself by not using those two perfect comps in the first place?

As far as using the appraisal as the scapegoat to turn down the loan. It happens all the time. Last year, after about 10 UW calls on one appraisal. More than 10 comprable sales submitted. (it was a really easy one. Cookie cutter type subdivision) I lost it on the phone with the UW. Told her if she didnt want to make the loan, then dont, but quit calling me. My appriasal had been well documented, 10 comps, 8 from the subject subdivision. 2 from the subdivision across the road. The comparables had sales prices with a $20,000 range. Adjusted with a $7,000 range and bracketed the subject.

I think what happens is when it slows down a little in the UW department, they start making more call to justify their jobs.