LenderNews by Rob Chrisman
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Sep. 10: Sorry for the length, but appraisals are a heated topic, impacting consumers, and appraisers answer

September 10, 2016

Of interest to the industry is that last month the CFPB, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System jointly published in the Federal Register a notice of proposed rulemaking (“NPR”) to amend the Agencies’ respective regulations exempting certain small loans from the special appraisal requirements that apply to lenders in connection with making higher-priced mortgage loans (“HPMLs”). Under the current HPML rules, the small loan exemption threshold is adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”), as calculated and published by the Bureau of Labor Statistics. The NPR proposes specifically to amend the official commentary to HPML rules to clarify how the threshold is calculated when the CPI-W does not increase in a given year.
 
But consumers and lenders are upset with the current residential appraisal situation. This came from Southern California. “Why isn’t anyone publicizing the appraisal gouging going on in select markets? Due to a lack of appraisers since the financial reform acts (must be college educated and possess certificates) there is a ‘rush’ fee on top of an inflated appraisal fee for purchases topping $2,000. All of this is costing the borrower in fees and in rates since some appraisals are taking 6 weeks thus requiring a longer rate lock period and higher rate.  It seems like the financial and consumer protections are working in reverse order for the borrower. And speaking of appraisers, they are all older folks as the younger generation does not want to pursue a career in a dying industry (full automation).”
 
And this from one of the Rocky Mountain states. “Just this month, I have more than 4-week turnaround times quoted by most appraisers through the AMCs and appraisals as high as $2,620 for a non-rural basic FHA appraisal. Taking years to fix the problem is not good: we have major problems now. My first time homebuyers can barely afford the $500 appraisals let alone the $2,620 appraisals (most don’t even have credit cards with a limit that high). I even had an appraiser tell me (and it’s someone I know to be an honest hardworking appraiser) that if he can do 3 appraisals a week for $1000 each or 6 appraisals a week for $500 each, which do you think he will pick? Somebody asked me the other day if we did ‘cost plus’ for the AMC appraisals. We can’t do that as appraisals are one of the items we can’t redisclose if it comes in higher unless we can prove we didn’t know something about the property and that is extremely hard to prove. Something must be done.”
 
From Kentucky Dora Ann Griffin contributed, “The answer is with Collateral Underwriters (CU) – there is no reason we cannot go back to allowing brokers and lenders order appraisals from professional quality appraisers. It would allow small appraisal businesses to thrive and compete. The end result would be a much better pricing and quality. The question is how do we make that happen? I know it would be moving a mountain but is there a way associations, brokers, etc. can affect a movement back to common sense.
 
“I just closed a loan where the property failed CU. A desk review was done. Then a field review. The whole appraisal process spanned six weeks due to appraisers taking 4 days to accept and missing the delivery by four days. I was told repeatedly the AMC could not push because the appraiser would then not do it at all. That appraiser would be still on the roster if that happened!  Meanwhile my buyer is living in a motel for weeks with two dogs, three kids and her husband spending thousands of dollars to get by.
 
“In the end the original appraiser had the wrong property ID and even had an address wrong on a comp along with nine other serious or minor corrections. As a consumer that appraisal was faulty but there is no remedy. I suffer the loss of repeat business and referrals for something totally out of my control.
 
“I dream of the day I can engage a qualified appraiser directly. If that does not happen we are looking at even higher costs and increasingly inferior quality.  All the good appraisers in my market work directly with banks. I get the worst of the worst thru AMCs as a broker – an unfair playing field.”
 
From Washington Theresa Springer mailed, “In the PDX MSA (including Clark County, WA) it is a travesty with an average 4-6 week turn time with high rush fees to get us to this insane return point. Appraisers are cherry picking jobs based on amount given to receive appraisal back at a somewhat ‘normal’ time frame of 3+ weeks and where it is located, i.e. in town vs. ‘rural’ as in Camas and Ridgefield, like those two are rural (not). I spoke with an appraiser buddy of mine a week ago and he said, ‘I just scroll through my email in the AM to see what is being offered and I take the best fee and locale and go from there.’ He said he is getting offered $1,500- $2,000 to do an in-town appraisal with a 3 week turn time. Appraisers are now quoting mid-October to early November for an appraisal that is being ordered this week. We have a lack of appraisers, and here’s a video about why they’re taking so long. They are over loaded and it is the fault of the feds as they have made the bar to entry for an appraiser so high.
 
“This is getting so ridiculous and is causing a large uptick in costs to the borrowers and the sellers are so angry as they cannot close in any timely manner.  Most agents now are writing PSA’s for 8 weeks or 6 weeks knowing that they will need an extension(s). VA loans are upwards of 8+ weeks in town and the VA seems to be doing very little to fix this issue on their end.  Just closed a Brigadier General’s VA loan and he called the VA raised a riot and he was able to get his appraisal turned in 3 business days after an 8-week acceptance time lag. But it is taking the borrowers to call the VA to get anything done. The VA is only assigning out appraisals on Monday’s now and is no longer letting you know where you are in line. This is also hurting the Veterans as many sellers will no longer accept VA loans on their homes, which is their right.
 
“Due to the rules in place where a new appraiser needs a 4-year degree (this was the MOST insipid part of the appraisal license change, then comes the 2 +/- year apprenticeship where the certified appraiser has to personally review EVERY home and its comps in its entirety before approving the report, like they have time) we are not getting any new folks into the business. So much for saving the consumer money as all this is doing is creating more costs for the borrower and a longer wait time for the seller to close. Many sellers are only entertaining cash offers if they have this option due to these issues.”
 
Mike VanDerWeerd sent, “As a former (still licensed) appraiser, this appraisal discussion is quite interesting. In a nutshell, they took the business out of the profession and made appraisers lapdogs to AMCs. There is no incentive to perform quality work on a client basis. All you get is spoon fed assignments with no way of growing the business. My opinion is once the GSEs figure out an automated valuation method with a home inspection, appraisers will be VCR repairmen!”
 
And Bill King opined, “I would proffer that a good appraiser cannot do 2 to 3 appraisals per day and do them well. Unfortunately, that very expectation does more to drive down appraisal quality than almost all other things combined. Unless one has two or three of the same floor plan, in the same plat (rare) on the same day a good, competent appraisal isn’t going to happen with just 3 to 4 hours’ work. Without the ‘assembly line’ operation 2 or 3 appraisals per day is just not possible. The elephant in the living room is appraisal process itself. The single point value and single approach appraisal is fundamentally flawed and antiquated. Small data valuations in a big data world is silly.”
 
From Florida came, “As we all know, according to TRID, a consumer must receive Loan Estimate disclosures within 3 days of submitting all 6 items that comprise a loan application. First, the in-house stall was holding the property address out so more information could be gathered before mandatory disclosures. That worked for a while, except that when we have a purchase contract, we automatically have an address. So that stall doesn’t work anymore though offices do try to bury the contract for a while. Now, local offices are stalling disclosures until the appraisal comes back saying that is the basis for an estimate of property value. The obvious point being ignored by this argument is that if there’s a contract, there’s an estimation of property value. Two people have decided that the property is worth the agreed price and since a copy of the MLS listing is part of the loan file, processors and underwriters can see listed and contract values. The ‘wait for appraisal’ stall is a very thin one, and continues to make consumers wait longer for decisions and closing. As I have said before, every time CFPB tweaks a regulation a new cottage industry opens up in the lending community to try and circumvent the intended benefit to the public.” Thank you to Chris Carter for this note!
 
Chris Nielsen forecast, “I think in 10 years (maybe less) the Certified Appraiser will be little needed. With The UCDP and EAD portals, drone technology and other new intelligent systems, the routine property appraisal by a Human Being will be unnecessary.”
 
But those in the appraisal business deserve to be heard.
 
Mike Ousley, President & CEO of Direct Valuation Solutions, sends, “Being a company that provides solutions for lenders and appraisers to work directly with one another and one that also provides AMC services (DVS-AMC) gives me a unique perspective. On the AMC side we have first-hand knowledge of appraisers purposely and actively trying to damage the AMC by accepting orders, holding them for a week or two or three, then rejecting the order saying, ‘we never accepted the order.’ Recently, we had an appraiser in a well populated area quote a 4 month turn time!!!!  Really? He had 80+ orders in his queue?
 
“The blogs are full of Appraiser v. AMC drama, and for sure there are good and bad AMCs, just like there are good and bad appraisers and yes, it would seem that some appraisers view the AMC as their shield from the relationships with the lender so they don’t have to ‘face the music’ when due dates are missed, report quality is substandard or errors are made and the lender is left holding the AMC responsible for their ‘inability to manage the independent appraiser.’
 
“The real rub is that in some cases the same appraiser who intentionally damages the AMC relationship is the same one professing to want the direct relationship with the lender through our software! Having started as a professional appraiser way back in 1979 and hopefully establishing myself as a ‘professional appraiser’ over the decades since, I am entirely flummoxed by the disconnect between saying as an appraiser you are a professional, acting professional and adhering to the Uniform Standards of PROFESSIONAL Appraisal Practice (USPAP) when the purpose of USPAP is ‘to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers.’ I think it is safe to say ‘public’ here includes the consumer who the lender is attempting to assist in securing a home loan for purchase or refinance purposes, and yet aren’t they the ones being damaged by the unprofessional conduct of the intentional actions of appraisers trying to damage the AMC hired by the lender and almost always paid for by the borrower?  All too often, it seems, the word ‘Professional’ has gotten lost and the very public (read consumer) trust lost with it.
 
Mike wraps up with, “I think everyone, appraisers, lenders & AMCs, need to keep in mind the public we serve and not only maintain their trust but take a big step towards consistent and professional actions. While there is most certainly an issue with the number of appraisers dwindling, the number and frequency of underwriting or lender/investor stipulations and overall volume impacting the appraisal process, keeping professional conduct by ALL parties must be non-negotiable. On a closing note, I hope to drive a conversation with our national representation, the Mortgage Bankers Association, at our upcoming National Convention and bring not only more awareness to these growing issues but discuss forward thinking solutions and inclusion of appraisers & AMCs in the MBA agenda.”
 
Last Saturday in the commentary I quoted a reader who noted, among other things, “AMCs are keeping 1/3 to 1/2 of the appraisal fee.” Paul Dorman, President of Accurate Group, writes, “I did want to respond to this to dispel a myth. Good AMCs who want to promote partnerships with appraisers and expand their appraisal panels are not taking anywhere close to 1/3 to 1/2 of the appraisal fee. Good AMCs are actually sharing more of the appraisal fee with the appraiser and, when necessary, sharing the entire appraisal fee with the appraiser or taking losses on some orders to ensure service levels are met for both consumers and lenders.
 
“Yes, there is an appraiser shortage and good AMCs are working on solutions to that shortage – helping appraisers stay in the business, paying appraisers timely, limiting revision requests, looking for ways to educate and train new appraisers and developing products that make appraisers more efficient so they can complete more than 2 or 3 assignments a day. We’re doing all we can to ensure appraisers understand that the right AMCs can add a ton of value for them. We are expecting to see these efforts differentiate us in the market and expect that overtime more appraisers will see that not all AMCs are created equal.”
 
 
(Thanks to Steve G. for this one.)
Football season? Super Bowl 2017 tickets…
A buddy of mine has two tickets for the 2017 Super Bowl. Box seats plus airfares, accommodations, etc. But he didn’t realize when he bought them that this is going to be on the same day as his wedding, so he can’t go.
If you’re interested and want to go instead of him, it’s at St. Peter’s Church in New York City at 5 pm. Her name’s Louise. She’ll be the one in the white dress.
 
 
If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “The Fed’s QE: Help or Hindrance to Lending?” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
Rob
 
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