What does it Mean to Protect the Public Trust

[George Hatch]

As for the client, the appraiser/client relationship is the first point of contact albeit not always the most significant point of contact with respect to the work being performed. The Client can sometime have conflicting interests vs those of the intended users, and can sometimes have conflicting uses vs those of the intended users.

Let's go back to the single most common example of conflicting interests and conflicting uses: when a loan originator or a borrower is engaging an appraisal that's stated user/use is for a mortgage lender making a mortgage decision. Neither the business development (loan originator) nor the borrower are in any position to be making any credit/loan decisions beyond submitting applications to the parties who are making those decisions. they're not the lender and they're not making a loan decision. What they ARE doing and how they ARE using the appraisal is as part of their application - in effect an advertising brochure for how great their application is for their trading partner (the lender) to entertain.

If you question the inherent conflict of interest then let's test that reasoning: How would a lender treat the appraisal if the appraiser disclosed that the appraisal was engaged directly by a lender's loan officer or an outside mortgage broker or a borrower, and that it's intended use was to assist those parties in placing the loan with the lender? The answer to that question is obvious, and everyone here knows it. Even if they want to complain about AMCs or say that AMCs are working against the interests of the lending institutions who are their clients.

 

[chad hampton]

I’m sure when it was originally written it meant that when a borrower took out a loan and the bank ordered an appraisal, the borrower had a high level of trust that they weren’t going to borrow more than the home was worth.

And interestingly enough, it was probably written to protect the borrower from the unscrupulous lending practices that banks and lenders have been doing since mortgages were invented. Only in the bizarro world of today could it possibly mean now protect those very same people that have been abusing the system since its creation

 

[alebrewer]

If you question the inherent conflict of interest then let's test that reasoning: How would a lender treat the appraisal if the appraiser disclosed that the appraisal was engaged directly by a lender's loan officer or an outside mortgage broker or a borrower, and that it's intended use was to assist those parties in placing the loan with the lender? The answer to that question is obvious, and everyone here knows it. Even if they want to complain about AMCs or say that AMCs are working against the interests of the lending institutions who are their clients.

But doesn't this go to the heart of the issue? IOW - either an appraiser has integrity, and will produce credible, competent, unbiased appraisal services - or he/she won't. Shouldn't matter who is engaging the appraiser. But because there is no trust in our ability to remain unbiased, we can only be engaged by folks not compensated on the completion of the loan...

 

[jay trotta]

IMO the FAQ is redundant. If you read the sentence out loud from the source material upon which that FAQ is derived it's meaning and the reasoning for its meaning is obvious and apparent. No further elaboration necessary except when people pull the one clause out of the context in which it is used.

If the FAQ clears anything up for a reader beyond the 1st sentence in USPAP then that's great, but I'm sure if someone pondered the sentence within its full context in the first place they wouldn't have learned anything new from the FAQ.

View attachment 77962

IMO- it falls under,
This ETHICS RULE is divided into three sections: Conduct, Management, and Confidentiality, which apply to all appraisal practice.
CONDUCT:
An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests.
An appraiser:• must not perform an assignment with bias;• must not advocate the cause or interest of any party or issue;

Just a thought

 

[ucbruin]

We have laws on the books....
In order to have the right to punish those that break them....

 

[George Hatch]

But doesn't this go to the heart of the issue? IOW - either an appraiser has integrity, and will produce credible, competent, unbiased appraisal services - or he/she won't. Shouldn't matter who is engaging the appraiser. But because there is no trust in our ability to remain unbiased, we can only be engaged by folks not compensated on the completion of the loan...

Who is the judge of a workproduct's credibility? To which party do we index the benchmark of that credibility (meaningful and not misleading) ? The Client or the User? The answer to that question is at the end of the same paragraph that "public trust in the appraisal profession" is used.



Put it in practical terms, outside of what the regulated lenders are currently allowed to do , how many times in the past have we submitted appraisals that were engaged by an outside party but which outcome ran contrary to what they think is usable as a direct result of hitting that "meaningful and not misleading" to the actual user of that appraisal?

 

[glenn walker]

The Public Trust – A Failed Goal?​

Valuation, in the U.S., called “appraisal” is generally subject to the Uniform Standards of Professional Appraisal Practice. Government agencies and “sponsored enterprises,” such as Fannie Mae, Freddie Mac, HUD (FHA), the VA and State regulators generally follow a specific definition of Market Value. Appraisers doing work for “federally-related purposes” are required by USPAP to “identify the type and definition of value.” If this is “market value” it must reflect ( “the most probable price.”)
If we cannot attend to this core purpose, all else is like rearranging the deckchairs on the Titanic.

 

[George Hatch]

IMO- it falls under,
This ETHICS RULE is divided into three sections: Conduct, Management, and Confidentiality, which apply to all appraisal practice.
CONDUCT:
An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests.
An appraiser:• must not perform an assignment with bias;• must not advocate the cause or interest of any party or issue;

Just a thought

"meaningful and not misleading to intended users" is not code for advocacy. Moreover, if we want to qualify their interests we would do so by referencing their legitimate interests, not necessarily all of the interests -stated and unstated - that a user can possibly hold. A user might WANT an appraiser to advocate for them on the down-low but we wouldn't call that a legitimate interest.

There is no case I an imagine where an undisclosed client or user advocacy (which would amount to a lie when we are certifying otherwise) could be construed as furthering the public's trust in appraising. Which is one reason why such advocacy is explicitly prohibited as a "must not' in the ETHICS RULE.

 

[Mike Ault]

This is the most important sentence in that FAQ…



I would hate to be the lawyer who had to convince the public that they "should trust" how these new hybrid appraisals and alternative valuation products are being spit out of the sausage grinder. Or that the appraisers signing those are acting as "independent professionals" who are providing credible results. They are providing "fast & cheap" results, or they are being replaced. Any display of "independence" during the appraisal process, won't last very long.

 

[Surf Cat]

I’m sure when it was originally written it meant that when a borrower took out a loan and the bank ordered an appraisal, the borrower had a high level of trust that they weren’t going to borrow more than the home was worth.

This is what I always took public trust to mean. To add, not let the client or the borrower over extend themselves.

The problem is, the borrowers and the client for that matter, don't need you telling them what they can or cannot afford...they want the house (or to make the loan) and they want it now.

Trust is an essential part of a functioning society. Too bad distrust is off the charts right now. Especially in our government. I'm referring to both sides. I don't trust any of them.