The New Appraisal Industry

[George Hatch]

so...the estimate value without a license or USPAP

[shrugs] filling out loan applications will include a number of assertions, all of which are subject to verification and consideration during the normal course of business. How could it be otherwise? The MBs have been filling out loan applications all along.

Any assumption that MBs could develop or submit a loan app without any numbers is an interesting stretch of conjecture. I suppose it could happen but I doubt anyone would seriously make such an assumption across the entire spectrum of loan origination.

The way this benefits the GSEs is that if the loan goes bad over value later on it's not THEIR unstated value conclusion that draws the lawsuit. Plausibly speaking. They can turn it back to the lender even though they used their own AVM in their process. If you ask me it's a pretty dastardly move on their part. The lender (not the MB) originated that loan and they're on the hook for the assertions they made.

The GSEs are most likely running their AVMs on deals that are backed by appraisals, too; and on the same basis. They can base part of their decision making - including a decision to individually review an appraisal - on their usage of their AVM without incurring any of the responsibility for the contents of the appraisal.

 

[TerryRohrer]

While some find the MB model undesirable, it was of significant benefit for consumers. The MB would have a loan packaged and ready to pit lender against lender with the winner being the borrower (and probably some extra big to the MB.

There was a statistic out circa 2012, after the MB system was all but gutted, that the spread between what the lender paid for money and what they sold it (their spread) at was at an all time high. This made sense since borrowers were effectively locked into a single lender instead of having a MB who had the ability to find the best deal.

The current system has been detrimental to borrowers.

Well, borrowers are as much a part of the problem as any other cog in the wheel. If you rely on advice from a party who is compensated only if you follow it, you’re accepting (buying) the built-in conflict of interest—and you shouldn’t be surprised by the outcome. I have had people tell me that, "We told the lender not to loan us too much money" when they were facing foreclosure. How stupid is that? Similar stupidity from borrowers who let lenders and realtors battle appraisers trying to increase valuations. Equally stupid are borrowers who sign a contract to purchase a home without having any verification of its physical features or its value, just hoping for the best. The borrowers are being screwed by the current system because they demanded/facilitated its development.

 

[chad hampton]

Why do you even give a damn who orders the appraisal? If it were up to me, borrowers would order appraisals and then the lender could decide if they want to accept it or not. Appraisals were being done just the same and the business youre in is a hell of a lot worse now than it was back then. If the lenders wanted all appraisals to be ordered through them to get business 20 years ago they could’ve requested it. I have no clue why your opinion is so strong on this.

The only thing that would make sense is if you profited by it like the breakfast club members and others do. At least there’s a legitimate reason why they try screwing over the profession so bad. I bet they’ve made a pretty good life for themselves by doing so.

 

[djd09]

in one hand he cries about the mb ordering appraisals....and in the other cares less about mb estimating the value...no arguing with insanity

 

[Surf Cat]

Depending on the lender, I don't think the source of the appeal matters much to them. Borrower, seller, broker, MB, whomever.

Excellent, then we're in agreement. Back to mortgage brokers it is. However, a couple of new rules due to the lessons learned along the way....

If mortgage brokers are found to be pressuring appraisers for value, they lose their license to draw up mortgages. If mortgage brokers are found to be spamming out comp checks.... you guessed it, lose the license.

One more item for mortgage brokers. I mean, this is only fair since appraisers have a plethora of additional tasks to complete regarding the uad 3.6.

When mortgage brokers are drawing up a quote for a mortgage, they must do so in 3 tiers. The best, the middle of the road, and the worst case scenario APRs depending on income, creditworthiness, and value of real property.

If said borrower does not like being in the middle or lower tier.... they can request an ROV with the maximum of three comparables to justify their position.

The real estate appraisal industry would flourish once again, no shortage of entries into the profession...... no need to hybrid anything. A simple Drive By or desktop by licensed appraisers will do for high equity clients.

Let's not forget the lenders.

Mortgage lenders are responsible for ordering the home appraisal to verify the property’s value and protect their investment.
 
Look at that.... they are responsible. I'd imagine they would have to hire an appraisal staff and require three sample appraisals to make sure that the appraisers working for them know what they're doing.....the horror..... doing what they're required to do and creating jobs in the local economies. It's tough making billions of dollars....Oh, still want to have a look at the property to decide which product to order? Yes, licensed, insured appraisers are up to the task! Want to continue doing waivers? Fine, that's their right....just don't feed us this shortage c*ap though....

 

[George Hatch]

Why do you even give a damn who orders the appraisal? If it were up to me, borrowers would order appraisals and then the lender could decide if they want to accept it or not. Appraisals were being done just the same and the business youre in is a hell of a lot worse now than it was back then. If the lenders wanted all appraisals to be ordered through them to get business 20 years ago they could’ve requested it. I have no clue why your opinion is so strong on this.

The only thing that would make sense is if you profited by it like the breakfast club members and others do. At least there’s a legitimate reason why they try screwing over the profession so bad. I bet they’ve made a pretty good life for themselves by doing so.

Because appraisals aren't built for everyone's usage. They're built for the stated users of those appraisals (by name or type), and for the stated usage of those appraisals. And because the regulators hold the lenders accountable for the lending decisions they make; not anyone else.

The borrowers don't make credit decisions either. It's not their money that's being loaned out. They are just as much an outsider to the due diligence process as the outside MBs or the in-house LOs.

----------------
As for your constant accusations that I'm taking sides against the appraisal profession, let me respond like this:

- SFR fee appraisal is not the only legitimate expression of professional appraisal practice, and that's an extremely arrogant and narrow-minded position for you to be promulgating. Your business is a subset of the profession, not the entirety of it, same as applies to my side of the business. Same as applied to the staff appraisers who comprised a much larger subset of the profession back when they were more common 30 years ago.

- The "appraiser independence" term is a concept which predates the HVCC, FIRREA, the GSEs and even USPAP itself. The govt has deliberately adopted the concept for cause, not as a coincident or accident or act of internal corruption.

- My personal interests in these discussions is to strip some of you of your misunderstandings, to bring some objectivity and clarity to your reasoning. I don't believe that trafficking in untruths is going to get you any closer to where you want to go. It hasn't worked so far and the reason it hasn't worked is because it can't work.

- If the real problem here is that the govt is allowing the lenders to take the most expedient-path-to-them instead of forcing them to pay appraisers more then I think focusing on the origin of that problem is the only productive way forward. You need govt to clamp down harder of the lenders and strip them of more of that discretion WRT C&R fees. Complaining about AMCs selling to the lenders what the lenders want to buy is a waste of time/effort. The AMCs are the sellers in those relationships, not the buyers.

 

[George Hatch]

Excellent, then we're in agreement. Back to mortgage brokers it is. However, a couple of new rules due to the lessons learned along the way....

If mortgage brokers are found to be pressuring appraisers for value, they lose their license to draw up mortgages. If mortgage brokers are found to be spamming out comp checks.... you guessed it, lose the license.

One more item for mortgage brokers. I mean, this is only fair since appraisers have a plethora of additional tasks to complete regarding the uad 3.6.

When mortgage brokers are drawing up a quote for a mortgage, they must do so in 3 tiers. The best, the middle of the road, and the worst case scenario APRs depending on income, creditworthiness, and value of real property.

If said borrower does not like being in the middle or lower tier.... they can request an ROV with the maximum of three comparables to justify their position.

The real estate appraisal industry would flourish once again, no shortage of entries into the profession...... no need to hybrid anything. A simple Drive By or desktop by licensed appraisers will do for high equity clients.

Let's not forget the lenders.

Mortgage lenders are responsible for ordering the home appraisal to verify the property’s value and protect their investment.
 
Look at that.... they are responsible. I'd imagine they would have to hire an appraisal staff and require three sample appraisals to make sure that the appraisers working for them know what they're doing.....the horror..... doing what they're required to do and creating jobs in the local economies. It's tough making billions of dollars....Oh, still want to have a look at the property to decide which product to order? Yes, licensed, insured appraisers are up to the task! Want to continue doing waivers? Fine, that's their right....just don't feed us this shortage c*ap though....

Submitting ROVs is explicitly allowed. As it should be. The concept of "appraiser independence" was never intended to shield appraisers from all subsequent questions and challenges. The purpose is to limit or cut out the economic coercion at the initial engagement and payment to tell lies in the appraisal in the first place. Appraiser independence is intended to function as a proactive mitigation of dishonest appraisals rather than a reactive solution after the lies have already been told.

As for what appraisers want for themselves vs what the lenders prefer and are allowed by the govt to do, there is only limited overlap. So far, anyway. TBH, I don't see any legal or regulatory barrier to them eventually going to all-AVMs. And without giving 2 seconds of consideration to what that does to the appraisers.

 

[J Grant]

GH- If the real problem here is that the govt is allowing the lenders to take the most expedient-path-to-them instead of forcing them to pay appraisers more then I think focusing on the origin of that problem is the only productive way forward. You need govt to clamp down harder of the lenders and strip them of more of that discretion WRT C&R fees. Complaining about AMCs selling to the lenders what the lenders want to buy is a waste of time/effort. The AMCs are the sellers in those relationships, not the buyers.

Yet the lenders who use AMC service do not BUY anhing from the AMC's. Buying means the customer PAYS for the product or service. The lenders do not, typically, pay any hard cost to an AMC for the AMC service. which benefits the lender

The AMC, instead, gets compensated from a split of the borrower's covered appraisal fee. (The appraiser kicks back money, in essence, to get work. The appraiser who kicks back more of the fee split by bidding the lowest gets the order. A mob boss would be proud.

The AMC is not a Seller in these relationships since the AMC's lender customer is not paying to buy anything from the AMC. The lender is taking advantage of the free service the AMC offers the lender, which is paid for out of a lower compensation split from the appraiser vendor.

This is almost unheard of in any other business or profession, including the non-res lending side of the appraisal profession. Normal businesses SELL their product or service to a customer who pays a cost for that service or product, including appraisers who sell to lenders directly or to attorneys or other clients.

It is not a case of the govt forcing lenders to pay appraisers more. It is a case of the government stopping the fee split compensation to the AMC - the borrower paid appraisal fee goes to the appraiser, and the lender can pay whatever cost they want as a hard cost to the AMC for the AMC service. The way lenders pay for IT support, or accounting service etc.

Of course, the AMCs and lenders will fight it tooth and nail. Both would instead like things to continue as they are- bleeding appraisers dry, making the field on the res side untenable .. Which is why newbies considering a res license should run, not walk; they should run as far away as they can. I forecast at best 5 more years where appraisers can keep the direct lender work, some of us have. The stakeholders would like to see every $ of it flow to the AMC interest, and this last remaining bit of independence, I believe, those of us who managed to retain lending work outside the AMC loop will see it struck down as "inefficient", or biased, or whatever the profiteers use as the excuse to sway regulators. Just my opinion, but based on the history of events over the past decade.- I hope I am wrong.

 

[George Hatch]

OMG.

Are you actually suggesting that there is no economic relationship between the AMC and the lender? No act of commerce involved?

 

[J Grant]

The foolishment

Are you actually suggesting that there is no economic relationship between the AMC and the lender? No act of commerce involved?

?? I am totally, 100% percent suggesting the economic relationship between the AMC and the lender. I just explained it - the lender gets FREE OF COST AMC service, compensated to the AMC from the appraiser vendor as a fee split from the borrower's covered appraisal fee.

This saves the lender $ by not having to PAY a cost for a service that benefits them, and from not having the expense of an appraiser order panel. Does the lender also get a kickback from an AMC? I won't speculate on that aspect. Maybe you know more about that than I would.

In some cases , a lender owns a captive order AMC as an umbrella company and can profit from the fee split.

So yes, I very much am aware of the economic relationship , and try to explain why it is so unusual compared to how other businesses operate. (including all other segments of the appraisal business outside of regulated lending)

Interesting how the regulated segment turned out to be the most crooked! Looking at you, faceless regulators, whoever you are.