The Gregoire & Gregoire AMC Experience

Although this has been discussed here in Appraiser Active previously, the post is generating some new interest after a slightly revised version was published by David Brauner's Appraiser Talkback Blog. In addition to the blog, you've probably seen Brauner's popular Working RE magazine and website.

Call for AMC Regulation

The Florida Legislature passed a record low number of bills this past session. Like many states, their time was consumed with trying to balance a budget in tough economic times. The bill to regulate appraisal management companies (AMCs) was not considered. However, the team of appraisers, professional associations and the Florida Real Estate Appraisal Board is lining up support and legislators for the 2010 Legislative session.

Unlike some of my appraisal brethren, I believe AMCs provide a service and are legitimate businesses. AMCs existed long before the federally-mandated licensing, certification and regulation of real estate appraisers. Quite a few lenders opted to utilize the services of AMCs and a couple of AMCs offered quite a bit of assistance to get appraisers and appraisal firms up to speed with appraisal software and office management.

My own firm, Gregoire & Gregoire, Inc., received complimentary appraisal forms software from one of the early AMCs. Although my firm was already using computers for appraisal reporting and some analysis, the software enabled us to move from a mini-computer to personal computers and enabled us to update to revised forms more quickly. Gregoire & Gregoire, Inc. enjoyed a mutually beneficial relationship with that AMC for over a decade.

Visit the Appraiser Talkback Blog to read the rest of the article.

The Greatest Spectacle In Racing - Saturday Update

UPDATE - My Pick (scroll to end of post)

If there is one thing that captures my attention more than real estate valuation, it's racing. If it involves anything with four wheels and an internal combustion engine, I'm interested. Formula 1, American LeMans, NASCAR, NHRA, Grand-Am, Sports Car, Land Speed Record, you've got my attention.

It started when I was in 2nd grade when my Dad would pile the family into the Country Squire Station Wagon for a short drive up the road to the local 1/4 mile track, Sunshine Speedway. They ran jalopies, modifieds and stocks. It was LOUD. The cars were FAST. The action was AWESOME! We would be picking rubber off our arms and out of our hair all the way home.

I followed NASCAR religiously from the time I was 7 years old. My early favorite drivers included Fireball Roberts, Curtis Turner, Fred Lorenzen, David Pearson and Cale Yarborough. In 1963, I got hooked on the Indy 500. That was the first year Jimmy Clark ran the race in a rear engined, Ford Powered Lotus. I devoured the newspaper for stories about anything related to the race, particularly that rear engined Lotus.

Of course, Jimmy did not win in 1963, but he did finish the race. He took the pole in 1964, but didn't win until 1965. Although no driver has commanded my attention as much as Clark, the race continues to be a rite of spring for me and my family. So, isn't it amazing that my two oldest children ended up living and working in Indianapolis! I fulfilled a long time dream and attended my first 500 back in 2005; watched it from the infield! We were able to make it back to the rain shortened 2007 race, but missed 2008. Unfortunately, I will miss attending this years' 500 but will be firmly planted on the couch with a Coors Light in hand to catch "The Greatest Spectacle In Racing" this Sunday.

Now it's time to get to work and finish up some appraisal reports. I plan to update with my pick(s) later, but welcome your comments.

UPDATE - Saturday, May 23, 2009

Because he seems to run up front and has a stong team, Tony Kanan. Of course, if Stephan Gregoire was in the race......

Miller Turns a Phrase

Jonathan Miller authors the "Most Excellent" Matrix blog. He "created Matrix to provide a stream of information and commentary relating to local, national and international real estate topics that were pouring out of the news media. A matrix of real estate information, if you will."

This morning, he has an interesting take on Appraisal Management Companies, the HVCC, Appraisal Regulation and more.

[Appraisal Management Companies] An Accident Waiting To Happen

There's not much I can add, except to offer a different picture to illustrate his headline.

NAR Adopts Policy to Regulate AMCs

UPDATED - May 23, 2009 (scroll to bottom)


From the National Association of REALTORS Appraisal Insight blog:

NAR Adopts Policy to Regulate AMCs at Midyear Legislative Meetings

On Saturday, May 16, 2009, the NAR Board of Directors adopted policy that supports the regulation of appraisal management companies, primarily through FIRREA and the existing appraisal regulatory infrastructure. NAR President Charles McMillan hinted at such a policy in March when he testified before the House Financial Services Subcommittee on appraiser independence.

Regretfully, I missed this meeting of the National Association of Realtors Board of Directors and the meeting of the NAR Appraisal Committee. It was the first meeting I missed in several years. However, it looks like they did just FINE in my absence ;-)

Their rationale for adopting the policy is right on the money:

NAR's Rationale: Appraisal management companies are not currently regulated at the federal level and regulation at the state level varies. Regulation would ensure that AMCs operate within the same basic guidelines and standards as independent appraisers. Further, this allows AMCs to be regulated within the existing appraisal regulatory structure, which avoids the need to create additional layers of government bureaucracy.

Read the post at the NAR Appraisal Insights Blog right HERE

UPDATE - May 23, 2009

Make sure you take a look at the comments. This one caught my eye:

As a producing manager of a mortgage bank who is using an AMC...I could scream. I don't have issue with HVCC. For way too long loan officer and realtor alike have had too much influence over the process which have removed the value of a "disinterested" third party. Secondly appraisers have been allowed to be sloppy and lazy with there work and banks have accepted it with no recourse. I recently received a 1004 appraisal for a refinance that was done by the same appraisal company that did the purchase and the appraiser never even went to the house. They used the interior photos from the purchase. Guess what this is not and isolated case. I just happened to catch this one because I had been in the home the week before and I noticed the paint color wasn't right in the appraisal photos. We regularly get told the appraiser never showed up or was only here for 10 minutes

Look...I hate...HATE AMCs. As a lender I would rather see a black hole system for conventioal and FHA like we have been using for years with VA. At least the appraisers are getting paid and we know it works 95% of the time without issues.

A tip of the hat to the NAR Appraisal Committee (and the Chicago and Washington, D.C. staff!), the NAR Board of Directors and NAR President, Charles McMillan.

It's time to Regulate Appraisal Management Companies - Part II

Back in January, 2009, Appraiser Active wrote about the need to regulate Appraisal Management Companies. The lack of regulation provides way too many opportunities for abuse of the system, scant protection for property owners, borrowers and lenders, and limited means to assure wrongdoers meet justice.

Little by little, this dark secret is coming to light; most recently by this article by Susan Taylor Martin, Senior Correspondent for the St. Petersburg Times.

Bad appraisals hurting sales and costing consumers

By Susan Taylor Martin, Times Senior Correspondent
In Print: Sunday, May 17, 2009

Two years ago, Florida regulators permanently revoked the license of Clearwater appraiser Larry Holzer because he had approved a home appraisal that contained glaring errors:

It said the house was on an asphalt road when it was really on a dirt road. It said the house had public water and sewer when in fact it had a well and septic tank. It said the property was in an area 75 percent developed, not the actual 25 to 50 percent.

The license revocation barred Holzer from appraising property in Florida. But it hasn't kept him out of the appraisal business.

Last year, Holzer started Global Appraisal Solutions, one of a growing number of "appraisal management companies'' that hire appraisers to determine market values. Though the appraisers are licensed, the management companies are totally unregulated. And they are at the heart of a controversy over a new federal policy that critics say is costing borrowers more money and resulting in rushed, poor-quality appraisals that can thwart home sales as the market struggles to recover.

Susan Martin observes....

Critics say the problems with management companies are epitomized by firms like Global Appraisal Solutions and its founder, Holzer.

Holzer, 41, ran afoul of state regulators for inadequately supervising a trainee who had done a flawed appraisal in 2003 on a $250,000 Lake County house. Full of errors, the report didn't even have photos of the right house.

In an affidavit, Holzer claimed it was an isolated incident that occurred at a time he was "impaired'' because of treatment for depression following a divorce. Nonetheless, he surrendered his license, which was permanently revoked in 2007. The trainee and other employees under Holzer's supervision also lost their licenses.

and describes Holzer's attempt to influence an appraiser...

A veteran Illinois appraiser, Don Martin, says he refused an assignment from Global Appraisal Solutions because he felt Holzer was pressuring him to come up with a certain valuation on a house — something the new code of conduct was specifically designed to prevent.

"They asked me to call them if the value wasn't going to be there,'' said Martin, who spoke with Holzer by phone. "In my opinion he is shopping for an appraiser that will make his client happy. It's because of appraisers like he was that we now have the code of conduct.''

There's PLENTY more. READ the Article.

UPDATE - From the comments on the St. Petersburg Times site:

Anonymous from Tampa -

I am one of the trainees that worked for Larry between 2001-2003. During that tme he INSTRUCTED us how to be "shady" when we valued property. Fortunately, I was fully trained by a reputable firm in Seminole and continued on to start my firm.

HVCC Costing Borrowers MORE

UPDATE - MAY 16, 2009

As usual, Washington Post columnist Ken Harney, author of the popular The Nation's Housing column, cuts to the net effect of the Home Valuation Code of Conduct (HVCC).

New appraisal rules costing more for mortgages, refinancing

WASHINGTON — How about this scenario the next time you refinance or apply for a new mortgage: The real estate appraisal that used to cost $325 now costs $450, even though the appraiser doing the work is only getting $175 or $200.

Plus, your appraisal-related charges may now be subject to add-on fees you have never heard of: $50 to $100 in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser, or an extra $50 to $150 tacked on if the property is worth more than $500,000.

and.....

Worse yet, the person now conducting your appraisal may be new to the field — willing to work for a cut-rate fee — and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience. If your mortgage application is denied by one lender, you could be forced to pay for a second full appraisal since the new lender may not accept the first.

and.....

After signing up with one management company, he (an appraiser) says two consumers commented to him, "Wow, you really charge a lot."

They were each being hit with $550 appraisal fees, while Facchini was getting just $250 from the management company. As he sees it, that leaves $300 of "slush" somewhere in the process — some going to the management company, but the rest probably "flowing to the lender for doing absolutely nothing."

Read the story HERE (St. Petersburg Times)

or HERE (Washington Post)

Appraiser Active has been sounding the alarm about the negative effects of the HVCC for months. Now that consumers are getting hit where it hurts, their wallets, will Fannie, Freddie, the Federal Housing Finance Agency and New York Attorney General come to their senses, be responsible, and take action to at least delay the implementation of the HVCC until they get it right?

UPDATE - MAY 16, 2009

A related article has been published on TBO.COM confirming Appraisal Managment Companies are assigning appraisals to individuals quite some distance from the property to be appraised.

Lenders, instead of contacting appraisers directly, now must deal with nationally approved firms. Crowley says: "An appraisal was supposed to be done in Tampa. It was sent to a person in Panama City. We had an appraisal in Parrish and a Miami appraiser was assigned to that."

For you non-Floridians, Panama City is 390 miles from Tampa!!

View Larger Map

and Miami is 246 miles from Parrish!


View Larger Map

Florida Quality Council Meeting

Please take a minute and visit the Florida Quality Council website. This group of mortgage and real estate professionals meets quarterly in the Orlando area in the interest of fulfilling their mission to be a voice for quality and awareness of fraud in the mortgage profession, promoting best practice, and providing exceptional service to its members.

Their meetings are open. The next is Friday, May 15, 2009 near the Orlando Airport. The cost is only $50.00 and that includes lunch. There is a great lineup of speakers and topics.

Preview the program and register for the meeting online right HERE!!

Shareholder Sues First American Corp

From Courthouse News Service:

First American Corp. provided 260,000 false and inflated appraisals to Washington Mutual in the past 2 years, inflating its own share price through false and misleading statements, according to a shareholder derivative class action. The class claims First American did this through its subsidiary, eAppriaseIT.

Read "Shareholders Say Appraiser Lied for WaMu"

Copy of suit HERE

HVCC Explained

Since the beginning of the year Appraiser Active has collected dozens of links to information about the Home Valuation Code of Conduct (HVCC); some of it interesting and informative, much of it otherwise. Given the dire results of the implementation of the HVCC, almost none of the links have led to anything remotely entertaining.

Today, there was a change:

Click to Play Video

Maybe we're just easily amused or suffering from HVCC overload.

The idea is to explain the HVCC to Realtors. To let folks know of some of the effects of the implementation. Most of what they say is accurate, and has been documented HERE over the past few months.

I also meant to post a link to the Jonathan Miller podcast, Home Valuation Code of Conduct: Y2K of Appraising? It turns out that Jonathan is the source of the great quote at the bottom of this post.

Listen to the podcast for some good information and TWO great quotes:

(starting around 13:35)

"We know what they are (AMCs). "they're just robotic entities that crank out documents that have numbers on them".

and this classic

" The quality of their work is just crap."

LISTEN and enjoy (or weep).

They meant for the acronym HVCC to be pronounced "havoc" right?

HVCC: Fix or FRAUD?

We're a couple of days into the HVCC (havok) and the articles keep coming. The best one recently has been this piece from CNBC, posted on May 1, 2009:

Home Valuation Code of Conduct: Fix or Fraud?

By: Diana Olick

Today is the official start of a new policy at Fannie Mae and Freddie Mac, to only buy loans that were appraised under the Home Valuation Code of Conduct. The HVCC was the outgrowth of a lawsuit filed by New York Sate Attorney General Andrew Cuomo against Washington Mutual and was designed to “improve the reliability of home appraisals,” according to FHFA, Fannie and Freddie’s regulator.

Jim Amorin, President of the Appraisal Institute was quoted:

“Yesterday, Thursday, appraisers may have had 50 or 60 clients that they could deal with, so if they were getting undue pressure from somebody they could just tell that client no, I'm not doing any more work for you,” says Jim Amorin, of the Appraisal Institute. “Today the number of players in the field have been drastically reduced to generally these appraisal management companies, so the pressure that's going to be brought to bear on appraisers we fear is going to be as strong if not stronger than it was before, the whole thing the code of conduct was trying to address.”

...and then, this, with a superb statement by Dana Bain:

But the biggest issue is something Dana, a mortgage broker, cites in a blast to the RealtyCheck:

Based on Attorney General Cuomo’s website, the appraisal fraud in the mortgage industry was due to the practices used by some of the country’s largest banks pressuring appraisers to artificially inflate the value of homes.

Why is it that some of the largest banks in the country are allowed to have partial ownership in the Appraisal Management Companies ?? Isn’t this once again the fox watching the hen house??

Read the entire ARTICLE

Don't miss the VIDEO segment

Great Job, Diana!

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Keep checking back for more on the HVCC. Appraiser Active has quite a bit of information to post, but we're trying to get some appraisals out the door (FHA, Relocation, and Private work for guardians and personal representatives), none of it for Appraisal Management Companies