Why Loan Officers Should Order Appraisals

[Terrel L. Shields]

Caveat - I do not consider a "mortgage broker" a loan officer. An MB is a commission driven shill and should never be allowed to order an appraisal. The people funding a loan should order the appraisal.

After letters went out to banks, a number of my clients now have a separate person or department who places the order. The LO does not contact me. One large client now has a "credit dept" which orders the appraisals. They are clerical staff. At first, a Res appraiser might get an appraisal order for a chicken farm or industrial, and Oklahoma appraisers were getting Arkansas work and vica versa. That has improved but communications is totally lacking.

I received a request to a farm that I appraised several years ago which is now in court for foreclosure and the order came in as a request for a new appraisal to them as the owner in possession.

I faxed back the following questions.
1 - Is the farm operating?
2 - Is the contract in place and will it remain in place?
3- Are the previous owners still there?
4- Who do I contact to get a key or entry and who is going to accompany me to the subject if the previous owners remain on the premises?

Of course, this totally blew the mind of the clerk in charge. She hasn't a clue what I am talking about. So tomorrow I will go to the bank and try to local the loan officer who is handling this and ask them directly what I need to do.

USPAP said we have to communicate with our client. It doesn't make our client communicate with us and that is why USPAP should be abolished and a set of simpler rules need incorporated into bank law so that both the lender and the appraiser are on the same page.

 

[Mike Garrett RAA]

Unfortunately, not all appraisals are for banks...so, having banking laws rule appraisals isn't the answer.

There is nothing wrong with a set of Uniform Standards for appraisers. What is needed is for all of the participants to the transaction understanding those standards and then acting ethically.

 

[Metamorphic]

Simply put, the person ordering the appraisal should only ever be a person with a long term financial interest in the correctness of the appraisal.

 

[Terrel L. Shields]

the appraisal should only ever be a person with a long term financial interest in the correctness of the appraisal.

and loan officers meet that criteria. If their loans go under, they lose their job. I can tick off a handful of bankers who were fired over making bad loans. It is only the Mortgage broker and the secondary market where the problem lies. Pressure is very rare among 'real' banks.

 

[SANDY]

There are fewer and fewer clients out there with anyone remotely qualified on their end to communicate with an appraiser-meanwhile scope of work process seems to assume the opposite. People with suits and ties sitting around making up some great sounding rules without much regard for the practical application of those rules.

 

[The Warrior Monk]

and loan officers meet that criteria. If their loans go under, they lose their job. I can tick off a handful of bankers who were fired over making bad loans. It is only the Mortgage broker and the secondary market where the problem lies. Pressure is very rare among 'real' banks.

I agree.

I think in my entire appraisal career I've had one pressure-incident with an LO.

 

[SANDY]

How soon we forget-anyone working on a commission basis should not be involved in the ordering of an appraisal.

 

[The Warrior Monk]

How soon we forget-anyone working on a commission basis should not be involved in the ordering of an appraisal.

There is a difference between someone that is responsible for their actions and someone that is not. A mortgage broker is responsible to nobody, so they could care less what happens after the loan is closed. A LO that is an employee of the lender they work for is responsible for what happens with the loan, especially if it portfolio. These persons are typically VPs that will be quickly sent packing should a loan go south due to their irresponsibility.

Another way of looking at it is you were lending $1,000,000 of your own money, would you prefer to have a hands on approach, or delegate the responsibility to some third party that will use the cheapest appraiser they can find?

 

[Ken B]

What have you guys been smoking?

On the residential side, as a staff appraiser for a large regional mortgage lender, I did not see any hesitation by loan officers to pressure appraisers or underwriters. Branch managers may be "VPs" in title only, but that is for "status" purposes only. I am aware of at least one occasion where a LO stormed into a regional VPs office and demanded that the head underwriter be fired because she was killing a deal. The UWer didn't get fired, but there were no consequences against the LO either. Top producers are coated in teflon and anyone who does not believe that can best be described as naive.

Now, that described the residential lender. Commercial lenders have been completely different. But I have not dealt directly with any commercial account managers; all work has come from persons associated with QC. I have only been pressured once and that was by the MB associated with the deal and he was a typical MB scumbag.

In my experience, pressure comes from those working on commission. With a transaction associated with a sale, it starts with the agent pressuring the LO which gets passed on the appraiser. With refinances, it an LO trying to make a deal work. And LOs are pressured to make deals work by branch managers who are trying to get bonuses for efficient operations. Every deal costs the branch money; deals that don't close are money losers. LOs that don't close deals are fired. LOs that make deals work get nice bonuses and recognition.

It's that simple.

 

[The Warrior Monk]

Now, that described the residential lender. Commercial lenders have been completely different.

Not necessarily. In certain residential segments (non-GSE), financing for residential properties can be similar to that of commercial properties.

LOs that don't close deals are fired. LOs that make deals work get nice bonuses and recognition.

LOs that make money for their employer get bonuses and recognition. LOs that lose money get shown the door.

Closing the loan and losing a few hundred grand for the employer isn't "making the deal work."