Wednesday, August 19, 2009

NYT - Lotsa Love for AMCs and the HVCC - NOT!

Yesterday it was the Wall Street Journal. Today, it's the New York Times! It's nice to see all the love going to the Home Valuation Code of Conduct (HVCC) and Appraisal Management Companies. In this article the NYT even throws a dig in at Andrew Cuomo.

In Appraisal Shift, Lenders Gain Power and Critics

Mike Kennedy, a real estate appraiser in Monroe, N.Y., was examining a suburban house a few years ago when he discovered five feet of water in the basement. The mortgage broker arranging the owner’s refinancing asked him to pretend it was not there.
Kudos, Mike! By the way, what's a basement?

The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.

The agents, maintaining that the changes are effectively blocking home sales by encouraging the use of inexperienced appraisers, are asking Washington to suspend the code until 2011. For their part, appraisers acknowledge that the change may have been well intentioned but contend that it has no teeth and is undermining the economics of their profession.

There's more!

Appraisal management companies and lenders say the agents’ charges are not true. “We’re an easy scapegoat,” said Donald Blanchard, chief compliance officer of Lender Processing Services Inc., which works with 20,000 appraisers. “We’ve yet to see any quantifiable proof as to the problems that management companies are supposedly causing.”

The real source of trouble for independent appraisers, he suggested, is not the code but a changing economy.

“Appraisers want to go back to the way it used to be,” Mr. Blanchard said. “But it’s good business for us to demand more for less.”


Appraisers might be earning less, but consumers are being asked to pay more. The cost of an appraisal is now about $500, up from $400, appraisers say, because of the management companies’ share.

Moreover, if the goal of the code is to lessen pressure on appraisers, it is not clear that is happening.

A memo from U.S.Bancorp, which is based in Minneapolis, was posted recently on Appraisers’ Forum, an online discussion group. The memo bluntly urged the lender’s appraisers to “try and get the value we need the first time.” (A U.S. Bancorp spokeswoman said the memo was “not an official document.”)

There's even mention of the phantom Independent Valuation Protection Institute!

Under the code, the role of deciding what is pressure is assigned to a new entity called the Independent Valuation Protection Institute. If appraiser complaints are deemed valid, the institute is supposed to forward them to regulators.
Seventeen months after it was announced, the institute has no staff and no appraiser complaint hotline. All that exists is a single Web page.

My comment posted to the NYT site:

The comments from the AMC folks are telling -“Appraisers want to go back to the way it used to be,” Mr. Blanchard said. “But it’s good business for us to demand more for less.” This line of thinking is exactly why credentialed, designated, and experienced professionals refuse to accept work from meddling middlemen.

Many of the Appraisal Management Company assignments are accepted by recently licensed, inexperienced folks that often travel a significant distance to provide their supposedly "expert" service in areas where the buyer has examined more of the market than the appraiser is allowed to in order to meet the AMC mandated 48 hour turnaround time.

Mr. Blanchard will soon see the "quantifiable proof as to the problems that management companies are supposedly causing.” It will come in the form of complaints to state regulatory agencies due to poorly developed and incomprehensibly reported baloney prepared by their rookie independent contractors.

The source of the pressure, claimed by Mr. Cuomo to be eliminated, has shifted to the AMC. Although value pressure still exists, the real culprit is fee and turn time pressure. Their panel of appraisers will tend to deliver a product and service commensurate with the price paid, and the AMC will charge the borrower a premium.

When consumers, borrowers, and the public at large get the full story, attitude and demands may change. Folks will learn that the largest banks all have a piece of one or more Appraisal Management Company. The fact that Appraisal Management Companies are, for the most part, unregulated will not go over well with consumers. Borrowers will be surprised that these invisible middlemen often take a larger part of the borrower's appraisal fee than the appraiser, and that the AMC portion of the payment and their relationship with the bank is not disclosed at any point in the transaction.

Homeowners trying to refinance will be shocked to learn that the AMC appraiser was provided with an Automated Valuation Model generated value indication with the appraisal assignment; ostensibly to "assist" the appraiser. Without a doubt, the borrower will be pleased to learn the appraiser's opinion of value duplicates the computer generated number.

There are many more stories to be told and much more investigation needed of the Cuomo generated deal. It will be interesting to sit back and watch it develop.


Rita B. said...

I thought the NY Times article did a good job covering the issue.