Tuesday, June 30, 2009
Sunday, June 28, 2009
UPDATED!! - Scroll for UPDATE
Peter Miller, a syndicated columnist who appears in newspapers nationwide, also shepherds the Our Broker site. Our Broker is chocked full of advice and information for real estate professionals and consumers.
Like many, Peter has a slightly different view of the Home Valuation Code of Conduct (HVCC) than Appraiser Active. We spend quite a bit of time railing against the HVCC, so it's time to provide some balance. Peter provides that in his recent post How to Pick on Appraisers.
Peter starts off with:
Many in the real estate community are upset with the newly implemented Home Valuation Code of Conduct (HVCC) and want it suspended or revoked so we can go back to the good-old-says when it was okay to threaten and pressure appraisers.He goes on to say:
There are a number of points under the Cuomo agreement, but three important
items look like this:
___ Mortgage Brokers are prohibited from selecting appraisers. Since the mortgage broker profits when the loan is originated, it follows that such folks are only going to select appraisers who come up with the “right” price valuation.
___ Lenders are prohibited from using “in-house” staff appraisers to conduct initial appraisals. This is a built-in conflict of interest since the lender (meaning, usually, not a mortgage investor but rather a party that originates a loan and then sells it as quickly as possible) wants appraisers to approve any and all deals, otherwise the lender doesn’t eat.
___ Lenders are prohibited from using appraisal management companies that they own or control. This is another overt and obvious conflict of interest
— and still another way to screw buyers who are not getting the protection for which they paid if an appraisal is less than accurate.
The post is worth a read, and worthy of comment. Appraiser Active is interested in your views and encourages your comments here and on Peter's Our Broker site. I've got a few things to say, but have unfinished appraisals all over my desk. As soon as I put a dent in that stack of work, some comment will be provided in an update.
As long as we're looking at all points of view, the comments to THIS POST by Steve Brown, NAR Vice President and Liaison to Committees, has something for everyone! My comment was one of the first, but dozens have been added expressing their view of the HVCC from every perspective imaginable.
Friday, June 26, 2009
UPDATED - Bill Text Added
On June 25, 2009, Representative Travis Childers from Mississippi introduced H.R. 3044. The bill title: To impose an 18-month moratorium on the Home Valuation Code of Conduct.
The text of the bill is not yet available on Thomas, but I'll post the pertinent information when it is available. If you do not want to wait for me, surf on over to THOMAS and type H.R. 3044 into the search box.
There is one co-sponsor as of now; Representative Gary Miller from California. Appraiser Active last mentioned him in THIS post.
To impose an 18-month moratorium on the Home Valuation Code of Conduct.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. MORATORIUM ON THE HOME VALUATION CODE
4 OF CONDUCT.
5 During the 18-month period beginning on the date
6 of the enactment of this Act, the Home Valuation Code
7 of Conduct announced by the Federal Housing Finance
8 Agency on December 23, 2008, shall have no force or ef-
Monday, June 22, 2009
Sunday, June 14, 2009
A significant issue not quelled by the Code is that it allows if not encourages lenders to outsource the selection to appraisal management companies or AMC’s who will charge the appraisal firm anywhere from 30%-40% of the fee for administration, overhead and, pardon the sarcasm, quality control. Exacerbating the problem is that lenders can own stakes in AMC’s. Thus, the conflict of interest is ever present.
Reports are prevalent that AMC’s shop around for the lowest appraisal fees that frequently end up on the desks of appraisers who are geographically distant from the subject property’s market, are not fully familiar with the local market and thus present sales that are not directly relevant.
(emphasis is mine)
Friday, June 12, 2009
From a southern Pennsylvania Appraiser and offered by Appraiser Active with no comment. We'll leave that to you.
Although such stories are not new, they are becoming much more prevalent since the implementation of the Home Valuation Code of Conduct (HVCC). Appraisers are bound by something called the Uniform Standards of Professional Appraisal Practice (USPAP). Within the USPAP are a number of Rules and Standards; among them the Competency Rule.
Mike Kennedy, a New York State Certified Residential Appraiser, suggests Real Estate Agents, Appraisers, and Loan Originators should supply owners and borrowers (and their Listing Agents) with a "flash card" to phone interview ANY Appraiser contacting them for access PRIOR to setting an appointment to help determine the competency level of the appraiser.
Here's his list of questions, with a couple of minor modifications:
- what license do you hold, what is the number?
- when did you first obtain your license?
- are you a licensed or certified appraiser, or are you a trainee appraiser?
- where are you from?
- when was the last time you appraised a property in my neighborhood?
- do you know any of the local long term Realtors or Agents in this area?
- after visiting the property how long will it be until the report is delivered to the lender?
- do you have any idea approximately how much my home is worth? ballpark? (you may not get an answer to this question)
- do you have access to the local Multiple Listing Service? Does my Assessor know you? (my Assessor-County Property Appraiser knows me, but only because I ran against her in the last election. This answer to this question is important in locations where the Assessor is THE source of property and sales data)
- please give me a general physical description to enable me to recognize you at the appointment
The appraiser's answers will help you gauge his/her Competency to accept and complete the assignment. If the Lender does not insist on Professional and Geographic Competency, the borrower should. After all, they are entitled to a copy of the appraisal report and will be responsible for repaying the loan.
Here is reprint of the COMPETENCY RULE from the 2008-2009 Edition of the Uniform Standards of Professional Appraisal Practice. My emphasis on the points that may be of interest.
Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively, must:
- disclose the lack of knowledge and/or experience to the client before accepting the
- take all steps necessary or appropriate to complete the assignment competently; and
- describe the lack of knowledge and/or experience and the steps taken to complete the
assignment competently in the report.
Comment: Competency applies to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property, a market, a geographic area, or an analytical method. If such a factor is necessary for an appraiser to develop credible assignment results, the appraiser is responsible for having the competency to address that factor or for following the steps outlined above to satisfy this COMPETENCY RULE.
The background and experience of appraisers varies widely, and a lack of knowledge or experience can lead to inaccurate or inappropriate appraisal practice. The COMPETENCY RULE requires an appraiser to have both the knowledge and the experience required to perform a specific appraisal service competently.
The COMPETENCY RULE requires recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment.
If an appraiser is offered the opportunity to perform an appraisal service but lacks the necessary knowledge or experience to complete it competently, the appraiser must disclose his or her lack of knowledge or experience to the client before accepting the assignment and then take the necessary or appropriate steps to complete the appraisal service competently. This may be accomplished in various ways, including, but not limited to, personal study by the appraiser, association with an appraiser reasonably believed to have the necessary knowledge or experience, or retention of others who possess the required knowledge or experience.
In an assignment where geographic competency is necessary, an appraiser preparing an appraisal in an unfamiliar location must spend sufficient time to understand the nuances of the local market and the supply and demand factors relating to the specific property type and the location involved. Such understanding will not be imparted solely from a consideration of specific data such as demographics, costs, sales, and rentals. The necessary understanding of local market conditions provides the bridge between a sale and a comparable sale or a rental and a comparable rental. If an appraiser is not in a position to spend the necessary amount of time in a market area to obtain this understanding, affiliation with a qualified local appraiser may be the appropriate response to ensure development of credible assignment results.
Although this Rule requires an appraiser to identify the problem and disclose any deficiency in competence prior to accepting an assignment, facts or conditions uncovered during the course of an assignment could cause an appraiser to discover that he or she lacks the required knowledge or experience to complete the assignment competently. At the point of such discovery, the appraiser is obligated to notify the client and comply with items 2 and 3 of this Rule.
USPAP 2008–2009 Edition
©The Appraisal Foundation
Thanks to Michael Kennedy for the list of questions. Here's Mike's contact information if you would like to take advantage of his expertise:
Michael E. Kennedy
New York Certified Residential Appraiser
Owner - KENNEDY APPRAISAL COMPANY
LEGAL, FORENSIC REVIEW, AND MORTGAGE APPRAISERS EXCLUSIVELY SERVING
ROCKLAND & ORANGE COUNTIES IN THE SOUTHERN HUDSON VALLEY NY SINCE 1993
Wednesday, June 10, 2009
On June 3, 2009, the House Committee on Capital Markets, Insurance, and Government Sponsored Enterprises held a Hearing on Fannie Mae and Freddie Mac. The first part of the hearing was over two hours, but three speakers stand out for their questions to James Lockhart.
HERE is the Video
If you have the time, watch/listen to the entire Hearing. Otherwise move the timer to
1:22 for Representative Juddy Biggert, (R) Illinois
1:45 for Donald Manzullo, (R) Illinois (The BEST, by far)
1:57 for Gary Miller, (R) California
HVCC CALL TO ACTION
To: All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers
From: Marc Savitt, President- National Association of Mortgage Brokers
After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, James Lockhart, Director of FHFA (GSE Regulator), and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.
In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing everyday, until advised to stop by NAMB. This will NOT be a one day action!
We have received hundreds of e-mails through the email@example.com e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.
Who will you be contacting?
- NY Attorney General Andrew Cuomo’s Office: (212) 416-8000, Internet Complaint
- Federal Housing Finance Agency (FHFA): (866) 796-5595, firstname.lastname@example.org
- Fannie Mae: (202) 752-7000, email@example.com
- Freddie Mac: (703) 903-2000, Internet Complaint
- Senators, Representatives and Governors: Click here for contact information.
Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.
1) NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.
2) Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.
3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.
4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.
5) No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.