U.s. Regulators Ready To Ease Check On Property Values

[J Grant]

GH-I was telling you guys 20 years ago to be mindful about not taking on too many trainees. Some of the old timers listened, and some of them didn't listen, which is why we now have a bunch of 2003-2009 appraisers who apparently don't realize that they are part of the oversupply that has killed their fees, and that if their supervisors had been more judicious they wouldn't even be here to complain about fees.

You don't think AMC taking half the appraisal fee has anything to do with it? You never mention it, in any of your posts, as if it does not exist. I find that amazing. It's like looking at a house with a roof falling down and saying the roof is fine.

If per your reasoning over supply of res license appraisers is the driving force behind lower fees to them ( borrowers pay a higher fee) Explain then how n the same regional area with the same supply of appraisers, the non AMC clients pay more ( C and R) to the appraisers while AMC's will pay far less. So how is that possbile if it is all due to appraiser supply. raisers.

Your stance about under supply would have prevented fee issues, had their been an under supply of appraisers, lenders would not have stood for it ( as they are not now) they'd have been screaming about slow turn times and not getting assignments fulfilled years ago, as they are now in reaction to COW states and look where it is leading, appraisal waivers, bifurcated, etc.

Nearly every profession has an ample supply or over supply of people because that is what it takes to get the services done for customers in a timely manner. A healthy field always has new graduates or new people entering. Yet you seem to think appraisals needs a tight under supply, it never needed an under supply prior to the HVCC with AMC control of large segment of work. I don' do low fee AMC work btw, which is quite a feat in my area...it's that your complete denial of what is driving the low fees is incredulous. Crt Gen fees are higher because the clients are more diverse, therefore AMC's could not become gate keepers to large segments of work as they have on res lending side.

 

[Terrel L. Shields]

t's that your complete denial of what is driving the low fees is incredulous.

The key argument in many of the threads of the past 90 days relates to the reduction in the scope of work and attendant reduction in fees. And the ones who seem to say it is "a business decision" to do them, etc. accuse the rest of asking the simple question, "How do I make money doing it?" and "What happens to appraisal volume when I do?" as if monetary consideration does not come into play, just as it did in 2008 when appraisers felt compelled to take anything offered or starve. And some did. I know at least two appraisers who had to file bankruptcy, and several who quit the business entirely.

In 2006 it was all hands on deck. You did everything possible to cover the amount of work. Had the appraisers not taken on trainees, then likely the bankers would have sought and got relief then from "onerous" appraisal regulation. The slave drivers at this point were the AMC's demanding a percentage of the take and shifting as much work as possible to the cheap seats - the newbies, the mills, the least qualified and least experienced among us. The Interagency admonishment be damned, the matching of the appraiser to the difficulty of the assignment boiled down to two things....fee and turn time. We met demand in 2006, nothing more. The surplus of appraisers arose from the collapse of mortgage lending as we knew it then. No one should be blamed for hiring a trainee in the early 2000's. Many of us worked 7 days a week then.

The raising of the de minimus clearly will reduce the amount of valuation work available so despite the loss of thousands of appraisers since 2008, the pressure will once again be for fees to match that of the evaluators - real evaluations, ones done by non-appraisers who do not have to confirm data, nor register, nor license, nor pay any such fees, nor face the state board, nor take any continuing education, etc. That is no level playing field. The trained and vetted appraiser will earn much less than the work a day evaluation who has virtually no liability. One of the best appraisers I worked with is now an evaluator, dropped his CG, and "works in his pajamas". And I bet he is making far more money than he was as a CG, doing commercial warehouses and retail shops for $1,000....and again, zero liability.

There are ones on this forum who claim that "if they did one", they could get a fee in excess of $250, they could do the appraisal within a couple of hours or so, they would not get any stips, and they would not have a problem rewriting the SOW time and again and getting it approved by the client, and they would not have any liability in doing so. And I bet not single one of the above has done, nor will do a hybrid, it's not even part of their job. Since it is clear those gang of four or five have no intention, nor reason to ever "do" a hybrid, they might as well claim they would charge $1,000....because they aren't about to do one anyway. It's like the guy complaining why a sack of feed was $8 and the customer claimed his competitor only charges $5. The feed store owner asked, "Then why not buy it there?". "They are out of feed." "Oh, when I am out of feed I only get $4 for a bag." replies the store owner.

The truth is the hybrid reduces the sum total work for the assignments that the appraiser will get, reduces the total monies spent by lenders for appraisers but not necessarily for AMCs, hence the appraiser gets a much smaller slice of the pie. Meanwhile the appraiser gets potentially increased liability for a much lower fee. And if perchance some event occurs where appraisers are actually needed like when all those small banks were told to replace their evaluations with appraisals (like I spent two years doing for two banks) appraisers will have their revenge even though the bank will only pass that onto the customer.

I hope to live long enough to see the cookie cutter appraisal cost $1,500 a pop be it I might be long retired, and as a deaf old man, I can hear the squeals of the banker and borrower alike from five miles away. And WHEN, not if, this bubble pops again, I bet the banks will wish they had the cover of the APPRAISAL and not that of the EVALUATION. That may be in a year, five years, or even ten, certainly it took basically from 1994 to 2008 to see the last time it cratered, but I see no reason to think that 1987 crash to the 2007-08 crash (20 years) is impossibly short to see it happen before or within circa 2028.

 

[J Grant]

From what I know about them, the type of hybrids shopped out for low fees ( $50-75 ) are not a replacement for traditional appraisals, but rather an upgraded evaluation to a short form appraisal, aka they replace or augment valuations, which in theory creates a new income stream ( albeit a drone one that I would not like doing but if some can handle it, their choice).

However the "other" type of hybrid, that used for an origination appraisal be it refinance or purchase, seems we have not seen them yet for lending as Fannie is still in a pilot project to test it... I personally think it is an inane idea and imo makes more sense for staff appraisers than fee appraisers. The deminimus increase to 500k is for commercial, not residential. And in res many loans are made with appraisals under the deminums anyway. Of more concern is Fannie's accepting waivers and trying to become the new UBER ...the whole emphasis for speed is insane for lending work, considering mortgages are for 15 -30 years and buyers in a purchase can't move in right away anyway. Increasing speed of closing a loan or lowering appraisal costs will not increase the number of borrowers so one has to wonder what the point of it is...there is no point,the lenders are in competition for a limited number of borrowers, so if one lender advertises they can approve a loan in 10 minutes with an Appp the rest want to copy them...though the smart ones won't because the company advertising that is full of issues once the borrower has the faux instant approval. RE is a big expensive investment that can help or wreck a borrower's credit , equity and impact them for years to come. Trying to turn it into fast food franchise is dangerous but capitalism unchecked by prudence is bottom line profit, the end justifies the means and it is always the avg working person who feels the pain...the borrowers and home owners who need their equity and their home to be a reasonable investment who can come out on the wrong side of it...

Yes it might make sense for some appraisers to drop their appraisal license and just do evaluations or inspections ...depending on how the business unfolds.

 

[George Hatch]

GH-I was telling you guys 20 years ago to be mindful about not taking on too many trainees. Some of the old timers listened, and some of them didn't listen, which is why we now have a bunch of 2003-2009 appraisers who apparently don't realize that they are part of the oversupply that has killed their fees, and that if their supervisors had been more judicious they wouldn't even be here to complain about fees.

You don't think AMC taking half the appraisal fee has anything to do with it? You never mention it, in any of your posts, as if it does not exist. I find that amazing. It's like looking at a house with a roof falling down and saying the roof is fine.

If per your reasoning over supply of res license appraisers is the driving force behind lower fees to them ( borrowers pay a higher fee) Explain then how n the same regional area with the same supply of appraisers, the non AMC clients pay more ( C and R) to the appraisers while AMC's will pay far less. So how is that possbile if it is all due to appraiser supply. raisers.

Your stance about under supply would have prevented fee issues, had their been an under supply of appraisers, lenders would not have stood for it ( as they are not now) they'd have been screaming about slow turn times and not getting assignments fulfilled years ago, as they are now in reaction to COW states and look where it is leading, appraisal waivers, bifurcated, etc.

Nearly every profession has an ample supply or over supply of people because that is what it takes to get the services done for customers in a timely manner. A healthy field always has new graduates or new people entering. Yet you seem to think appraisals needs a tight under supply, it never needed an under supply prior to the HVCC with AMC control of large segment of work. I don' do low fee AMC work btw, which is quite a feat in my area...it's that your complete denial of what is driving the low fees is incredulous. Crt Gen fees are higher because the clients are more diverse, therefore AMC's could not become gate keepers to large segments of work as they have on res lending side.

You saw what happened to fees in the COW states, didn't you? How can you possibly deny that it happened even though the AMCs operate there as well? How can you possibly deny the reasons why it happened - the demand outstripped the supply.

It's common knowledge that the fees the AMCs pay vary from one locale to another, some being even worse than others. How many examples of that do you need to see before you'll acknowledge the primary reasons for that? The AMCs who operate in your area wouldn't be able to get a $250 appraisal fee done if every one of the appraisers on their panels had access to higher fees from other clients.

If your argument is that the lenders should have never been allowed to do business with the AMCs then the only way that happens is if government actively prohibited it, which is how they cut the MBs out of the loop. Obviously, that has not happened yet. It could happen the next time around if the AMCs are found to have acted as badly as the MBs, but if not then it won't happen.

 

[George Hatch]

The key argument in many of the threads of the past 90 days relates to the reduction in the scope of work and attendant reduction in fees. And the ones who seem to say it is "a business decision" to do them, etc. accuse the rest of asking the simple question, "How do I make money doing it?" and "What happens to appraisal volume when I do?" as if monetary consideration does not come into play, just as it did in 2008 when appraisers felt compelled to take anything offered or starve. And some did. I know at least two appraisers who had to file bankruptcy, and several who quit the business entirely.

In 2006 it was all hands on deck. You did everything possible to cover the amount of work. Had the appraisers not taken on trainees, then likely the bankers would have sought and got relief then from "onerous" appraisal regulation. The slave drivers at this point were the AMC's demanding a percentage of the take and shifting as much work as possible to the cheap seats - the newbies, the mills, the least qualified and least experienced among us. The Interagency admonishment be damned, the matching of the appraiser to the difficulty of the assignment boiled down to two things....fee and turn time. We met demand in 2006, nothing more. The surplus of appraisers arose from the collapse of mortgage lending as we knew it then. No one should be blamed for hiring a trainee in the early 2000's. Many of us worked 7 days a week then.

The raising of the de minimus clearly will reduce the amount of valuation work available so despite the loss of thousands of appraisers since 2008, the pressure will once again be for fees to match that of the evaluators - real evaluations, ones done by non-appraisers who do not have to confirm data, nor register, nor license, nor pay any such fees, nor face the state board, nor take any continuing education, etc. That is no level playing field. The trained and vetted appraiser will earn much less than the work a day evaluation who has virtually no liability. One of the best appraisers I worked with is now an evaluator, dropped his CG, and "works in his pajamas". And I bet he is making far more money than he was as a CG, doing commercial warehouses and retail shops for $1,000....and again, zero liability.

There are ones on this forum who claim that "if they did one", they could get a fee in excess of $250, they could do the appraisal within a couple of hours or so, they would not get any stips, and they would not have a problem rewriting the SOW time and again and getting it approved by the client, and they would not have any liability in doing so. And I bet not single one of the above has done, nor will do a hybrid, it's not even part of their job. Since it is clear those gang of four or five have no intention, nor reason to ever "do" a hybrid, they might as well claim they would charge $1,000....because they aren't about to do one anyway. It's like the guy complaining why a sack of feed was $8 and the customer claimed his competitor only charges $5. The feed store owner asked, "Then why not buy it there?". "They are out of feed." "Oh, when I am out of feed I only get $4 for a bag." replies the store owner.

The truth is the hybrid reduces the sum total work for the assignments that the appraiser will get, reduces the total monies spent by lenders for appraisers but not necessarily for AMCs, hence the appraiser gets a much smaller slice of the pie. Meanwhile the appraiser gets potentially increased liability for a much lower fee. And if perchance some event occurs where appraisers are actually needed like when all those small banks were told to replace their evaluations with appraisals (like I spent two years doing for two banks) appraisers will have their revenge even though the bank will only pass that onto the customer.

I hope to live long enough to see the cookie cutter appraisal cost $1,500 a pop be it I might be long retired, and as a deaf old man, I can hear the squeals of the banker and borrower alike from five miles away. And WHEN, not if, this bubble pops again, I bet the banks will wish they had the cover of the APPRAISAL and not that of the EVALUATION. That may be in a year, five years, or even ten, certainly it took basically from 1994 to 2008 to see the last time it cratered, but I see no reason to think that 1987 crash to the 2007-08 crash (20 years) is impossibly short to see it happen before or within circa 2028.

You have still never answered the question of what the evaluator is doing for that $1000 that the appraiser couldn't do in an appraisal report.

Nor will you be able to accurately answer that.

 

[J Grant]

GH-You saw what happened to fees in the COW states, didn't you? How can you possibly deny that it happened even though the AMCs operate there as well? How can you possibly deny the reasons why it happened - the demand outstripped the supply.

The fact that AMC's ONLY pay good fees in the 3 COW states illustrates the problem- it SHOULD NOT take a massive under supply of appraisers to force the AMC hand where they finally have to pay a C and R /decent fee. Because the massive under supply in the COW states wreaked havoc on turn times and assignment fulfillment and imo drove fees to an excess in some cases for the appraiser side.

The fact that GSE lender is tax payer funded should imo provide some kind of protection around it, that protection was supposed to be C and R which is a failure to enforce and too complicated, there are other solutions but that is for another thread.

I notice you still did not comment on the fact that in all regions, non AMC's pay higher than AMC's for the same work with same pool supply of appraisers. Will you ever comment on that?

Common knowledge that the fees the AMCs pay vary from one locale to another, some being even worse than others. How many examples of that do you need to see before you'll acknowledge the primary reasons for that? The AMCs who operate in your area wouldn't be able to get a $250 appraisal fee done if every one of the appraisers on their panels had access to higher fees from other clients.

I get it, but my position is that it should not be happening for GSE tax payer backed work. When AMC's pit apparisers against each other in over supply or ample supply area it has consequences for the profession and the cure is get the AMC profit apart from what they pay appraisers, as long as what appraisers get paid is covered by borrower it does not matter to lender.

If your argument is that the lenders should have never been allowed to do business with the AMCs then the only way that happens is if government actively prohibited it, which is how they cut the MBs out of the loop. Obviously, that has not happened yet. It could happen the next time around if the AMCs are found to have acted as badly as the MBs, but if not then it won't happen.

My argument is lenders can use AMC's of course they can, if a lender can own/run an AMC ordering arm of own stock in one, how can that be divested or a law made not to use them, you know that is absurd. Lenders can use AMC's, but they should pay for their management service apart from the fee the appraiser gets, teh fee from borrower. That, or make it cost plus or impose C and R percent on the AMC what the can get from the borrower paid, such as 20% and let lender pay the difference. There are easy to implement solutions possible..

 

[J Grant]

The AMCs who operate in your area wouldn't be able to get a $250 appraisal fee done if every one of the appraisers on their panels had access to higher fees from other clients.

Every appraiser on their panel has access to higher fees from other clients, may not be able to get enough of them though, or not be able to be approved on higher standard non AMC lender direct panel. Or some might charge $250 as a business decision and pump out volume fast food style. Isn;t that the Forsythe and Mettro West model, who do bulk low fee work for AMC's?

Why is it a good policy for a borrower get stuck with an appraiser not good enough to get on a higher standard panel when their $ borrower fee covers that appraiser's fee? Or why is a borrower assigned an appraiser swamped with volume because they agree to the $250 fee and therefor treats their report like fast food? Please don't comment on me or about min standards, just answer the question. Why this is allowed to happen on tax payer funded loans it is a disgrace.

The fact that AMC's profit and appraisal fees are intertwined is a problem as is that AMC's have a conflict of interest as they depend on their clients (banks or lenders ) for business as a firewall.

The first few years after HVCC prices were so low any appraisal could be done and there was lots of built in equity protection . Over last 2 years and particularity last year prices have risen and we all know or have experienced personally appraisers suddenly getting work flow cut off if they come in :"low" on more than rare occasion, so how is that an impartial firewall? We've seen an increase in the public posts here lately asking about crappy appraisals and also concerned they paid to much, the canary in the coal mine, appraisal quality was bound to be impacted at some point by low fees and the failure of the firewall to function as intended.

 

[George Hatch]

By definition, what "should be" is usually different than "what is".

What do you think it will take to require AMCs to pay what you consider to be a fair rate? Because you certainly don't seem to believe it can happen under the normal functions of supply/demand.

Let me rephrase: Since you're obviously angling for divine intervention via government regulation on the matter, what do you think it will take to force lawmakers to intervene in the market on our behalf?

Bonus question; how can we force lawmakers to prohibit the lenders from exercising their other alternatives as they see fit?

 

[J Grant]

By definition, what "should be" is usually different than "what is".

What do you think it will take to require AMCs to pay what you consider to be a fair rate? Because you certainly don't seem to believe it can happen under the normal functions of supply/demand.

A simple change to the HUD dropping the blended fee, or change one simple regulation to cost plus, the lenders pay AMC's as they pay for other services they use and separate it completely from appraiser fee.

 

[J Grant]

By definition, what "should be" is usually different than "what is".

What do you think it will take to require AMCs to pay what you consider to be a fair rate? Because you certainly don't seem to believe it can happen under the normal functions of supply/demand.

Let me rephrase: Since you're obviously angling for divine intervention via government regulation on the matter, what do you think it will take to force lawmakers to intervene in the market on our behalf?

Bonus question; how can we force lawmakers to prohibit the lenders from exercising their other alternatives as they see fit?

We can't force lawmakers to do anything, can we...seems regulators respond after a crisis to correct it, rather than proactively. Lawmakers increased the upgrade from AVM to minimum of an evaluation, so their prudence in that regard did impart alternate products. If an alternate product is used as approved by regulators nothing we can do about it, But as long as appraisals are being used, why are AMC's allowed to wreak havoc with the fees ( and lenders get a free ride from them)