AMC Regulation - Florida Style

Since the January 25, 2009 meeting of the Florida Association of Realtors Board of Directors, the Florida Appraisal Council AMC Regulation Work Group has made edits to the Appraisal Management Company Registration and Regulation Model Act. The edits were necessary to reflect the Public Policy statements adopted by the Board of Directors in their motion to approve.

The Association Board of Directors supports the registration and regulation of Appraisal Management Companies involving ALL appraisals and appraisal services, regardless of property type; residential or non-residential. They suggest there should be NO EXEMPTIONS for regulation, even if only a limited number of assignments are placed within the state. Additionally, because the Florida Real Estate Appraisal Board suggested they would not support getting involved in fee disputes and mediation of disagreements between appraisers and AMCs, all references to fees and fee mediation have been removed.

The next steps are coordination with the Florida Chapters of the Appraisal Institute and the Florida Division of Real Estate, bill drafting and bill introduction. Sponsors have been identified.

It's time to Regulate Appraisal Management Companies

Appraisal Management Companies typically administer a network of certified and licensed appraisers to fulfill real estate appraisal assignments on behalf of mortgage lending institutions. They often recruit, qualify and verify licensure for their panel of appraisers.

One major problem with Appraisal Management Companies is they are completely outside the regulatory loop controlling real estate appraisers and protecting the public. No state or Federal agency is tasked with the regulation of Appraisal Management Companies. In fact, there is a documented case of Florida Appraisal Management Company owned and operated by an individual that surrendered his Certified Residential Appraiser credential for permanent revocation to avoid prosecution for several complaints. This individual, in fact, was the subject of at least 10 complaints by consumers, lending institutions and other appraisers. His discipline prior to the surrender for permanent revocation included fines, probation, completion of education and a period of suspension.

Appraisers, appraisal associations, the Florida Real Estate Appraisal Board and the Florida Association of Realtors believes the failure to regulate Appraisal Management Companies is a danger to the public. Their concern is heightened by the pending implementation of the Home Valuation Code of Conduct discussed in a prior post.

Thankfully, the Florida Association of Realtors has stepped up to the plate and stated their support of an effort to establish regulations for Appraisal Management Companies. During their January 26, 2009 meeting, the Board of Directors of the Florida Association of Realtors passed a motion to support the registration and regulation of Appraisal Management Companies operating in Florida. Draft legislation has been written by a concerned group of appraisers consisting of members of the Appraisal Institute, the National Association of Independent Fee Appraisers and the Florida Association of Realtors. The Florida Real Estate Appraisal Board supports the concept as well.

The Florida Chapters of the Appraisal Institute will take the lead in securing sponsors in the Florida House and Senate. We will do our best to keep you apprised of the progress.

Bank Regulators - Concerned About Home Valuation Code of Conduct

As reported by the Appraisal Institute - Appraisal News Online

Four of the five federal bank regulators have called for the withdrawal of the Home Valuation Code of Conduct and the Home Valuation Protection Program and Cooperation Agreements saying they could “unnecessarily undermine the safe and sound extension of mortgage credit, reduce the availability of mortgage credit to many consumers, and ultimately lead to less reliability and accuracy in real estate appraisals.”

FULLL STORY

There may be some sense out there after all!

Pinellas County Condominium Trends

Over the past week two different areas of Pinellas County, Florida were researched and examined in the process of completing appraisal reports. One is a condominium community in mid Pinellas County consisting of about 1,000 units in several buildings, built around a private golf course. An analysis of same unit resales and listings revealed prices and values within the complex declined by approximately 1% per month over the past year.

In December, 2008 the same type of analysis was done as part of an appraisal of a luxury Gulf-Front condominium. The assignment was to develop an opinion of value in a small, boutique project with only 8 units. Each of the condominium apartments had over 3500 square feet and were of very high quality construction. Kitchens, appliances, finishes and fixtures were all of very good quality.

At the time of the appraisal there were over 37 active listings of Gulf Front condominiums with over 3000 square feet of living area in Pinellas County offered for sale in the Suncoast Multiple Listing Service. The average listing price for these listings is almost $2,000,000. Some have been on the market for over two years.

Although an initial examination of sales and recorded deeds suggested this market has held up, closer scrutiny revealed many of the closings involved newly completed units; some of them under contract for as long as 18 months. An examination of listings revealed price reductions, expired listings and re-listing units at a lower price were common. Some developers have reduced prices on their existing inventory by as much as 32%.

After consideration of all the data, it was clear that prices and values for this category of condominium declined by about 18% over the past year. Considering the substantial inventory, it was my conclusion this trend would continue for at least the next few months.

If you or your clients are curious about the pricing of your listings, feel free to give me a call or an email. We're working on a number of assignments involving listings right now; helping folks get a clear idea of their market, the competition in the area, and the pricing level necessary to attract interest. We might be able to assist you, your seller or buyer make the correct decisions.

Home Valuation Code of Conduct

The Federal Housing Finance Agency (FHFA) has announced the "final" Revised Version of the Home Valuation Code of Conduct (HVCC).

The Code is based on an agreement between the Enterprises, the New York State Attorney General Andrew Cuomo and FHFA to improve the reliability of home appraisals.

The "agreement" was originally between Fannie Mae, Freddie Mac, the Office of Federal Housing Enterprise Oversight and Cuomo. The New York Attorney General made a big splash is THIS ANNOUNCEMENT. The settlement was prompted by an investigation of mortgage and valuation fraud initiated by the New York Attorney General in response to allegations of shady dealings between an Appraisal Management Company, Washington Mutual and a group of appraisers doing contract work for the Appraisal Management Company.

"The integrity of our mortgage system depends on independent appraisers," said Cuomo. "Washington Mutual compromised the fairness of this system by illegally pressuring appraisers to provide inflated values. Every company that buys loans from Washington Mutual must be sure that the loans they purchased are not corrupted by this systemic fraud."

The lawsuit filed last week details a scheme in numerous e-mails showing First American and eAppraiseIT caved to pressure from Washington Mutual to use appraisers who provided inflated appraisals on homes.

E-mails also show that executives at First American and eAppraiseIT knew their behavior was illegal, but intentionally broke the law to secure future business with Washington Mutual. Between April 2006 and October 2007, eAppraiseIT provided over 250,000 appraisals for Washington Mutual.

Due to many problems with the original HVCC, the failure of WAMU, Fannie, Freddie and a myriad of other reasons, the agreement was revised after a comment period. However, it's far from perfect and, if implemented, will have a significant effect on your brokerage business and the relationships you have built.

Here's one take:

An Appraisal Upheaval

by Kenneth Harney

When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less than the $300 to $600 you're charged, perhaps half?

Should you know who pockets the rest, or that cut-rate fees are too low to attract the most experienced appraisers?

Should you care that the appraiser might be pushed to come up with a number so quickly -- almost overnight in some cases -- that he or she doesn't have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends?

This agreement is not good for consumers, real estate brokers or appraisers. Why?

• Appraisal assignments will be funnelled through an Appraisal Management Company (AMC). Regardless of the definition and explanation at the link above, the reality is many AMCs have established a priority system that looks like this:

COST

SPEED

COMPETENCY

QUALITY

• The HUD-1, Closing Statement, will contain a charge for Appraisal Fee on Line #804. It will not indicate that the fee is the amount paid to an anonymous AMC and that only a fraction of that fee is paid to the appraiser. Doesn't RESPA require transparency by requiring that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services?
• Not one state in the United States Regulates the activities of Appraisal Management Companies.

Here in Florida, a group of professional appraisal associations, appraisers and others is working to protect the public by initiating legislation to regulate the actions of Appraisal Management Companies. Watch this space for more information once the bill is filed. To protect your business and the relationships you have built with related professions, your support is necessary.