Merry Christmas

Wishing you all the best for this Holiday Season from the Sunshine City in the Sunshine State.

eAppraiseIT Settlement - Is it Over?

Over the past few days the wire services, appraisal blogs and real estate news sites have shared the headline:  

"WaMu apprasial company settles with New York"

Bullet points from the story include:

* eAppraiseIT accused of inflating home appraisals
* Agrees to pay $7.8 million to end lawsuit
* eAppraiseIT now part of CoreLogic Inc
* NY AG Schneiderman took case to trial
* Schneiderman to bring new mortgage-related action soon

According to the story:

The case, filed in New York state court in 2007, is one of the few related to the housing meltdown that the government has brought to trial. The trial was in recess when the settlement was reached.

Schneiderman is co-chair of the federal mortgage fraud task force formed in January to probe actions that led to the financial crisis. He has said he plans to take legal action against other targets soon.

Homes that were appraised above their value, allowing mortgage companies to issue bigger mortgages, are among the causes cited by experts for the housing bubble and subsequent financial crisis.

EAppraiseIT, a major appraisal management company during the housing boom, was accused of colluding with Washington Mutual, which had been of the largest U.S. mortgage lenders until the housing market collapsed.

Appraiser Active covered the story after the suit was filed by then New York Attorney General, Andrew Cuomo. As a result of the suit, we appraisers have endured the Home Valuation Code of Conduct, and are now struggling under the effects of appraiser independence provisions in the Dodd - Frank legislation.

Does the New York settlement with eAppraiseIT signal the end of the story? Not by a long shot. There are at least two high profile cases involving eAppraiseIT in the system.

FDIC v. CoreLogic 

In another sign that the Federal Government is turning its focus towards prosecuting the securitization players who may have contributed to the Mortgage Crisis, the FDIC filed separate lawsuits against LSI Appraisal (available here) and CoreLogic (available here) earlier this month.  In the suits, both filed in the Central District of California, the FDIC, as Receiver for Washington Mutual Bank (“WAMU”), accuses vendors with whom WAMU contracted to provide appraisal services with gross negligence, breach of reps and warranties, and other breaches of contract for providing defective and/or inflated appraisals.  The FDIC seeks at least $154 million from LSI (and its parent companies, including Lender Processing Services and Fidelity, based on alter ego liability) and at least $129 million from CoreLogic (and its parent companies, including First American Financial, based on alter ego liability).

Spears v. First American eAppraiseIT, LLC

The United States District Court for the Northern District of California granted class certification in a mortgage loan appraisal suit alleging defendants conspired to inflate appraisals to increase the sale of loans in the secondary market. 

The Court found that plaintiffs presented sufficient evidence to establish common questions of fact and law, holding that common questions and answers need not uniformly apply to all class members. The Court also found that the analysis of individual appraisal fees would not create individualized issues, but instead would provide additional support for plaintiffs’ claims that an inflated appraisal scheme existed. Finally, the Court also held that the Real Estate Settlement Procedures Act’s treble damages, attorney’s fees and government enforcement mechanisms did not make class action an inferior method of litigation.

The CASE FILE is available at this LINK. More information about the suit, and a means for parties to join the class at this LINK.

Maybe there are more in the pipeline. Let me know if you are aware of additional suits filed in other jurisdictions. It will be interesting to see how these all shake out.

Consumer Financial Protection Bureau: Two Appraisal Related Proposed Rules

This week, the Consumer Financial Protection Bureau (CFPB) issued notice of two proposed rules affecting appraisals and consumer access to appraisal reports. Follow the links for the full text and to submit a comment to the CFPB.

First:

The Bureau of Consumer Financial Protection (Bureau) is proposing to amend Regulation B, which implements the Equal Credit Opportunity Act (ECOA), and the official interpretation to the regulation, which interprets the requirements of Regulation B. The proposed revisions to Regulation B would implement an ECOA amendment concerning appraisals that was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). In general, the proposed revisions to Regulation B would require creditors to provide free copies of all written appraisals and valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. The proposal also would require creditors to notify applicants in writing of the right to receive a copy of each written appraisal or valuation at no additional cost. 

Click HERE for Proposed Rule

Submit a Comment on Proposed Rule

Second:

The Board, Bureau, FDIC, FHFA, NCUA, and OCC (collectively, the Agencies) are proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA), and the official interpretation to the regulation. The proposed revisions to Regulation Z would implement a new TILA provision requiring appraisals for “higher-risk mortgages” that was added to TILA as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. For mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the proposed rule would require creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used.

Click HERE for Proposed Rule

Submit a Comment on Proposed Rule

Appraisers and Regulators Give Congress an Earful

On June 28, 2012, two panels of witnesses appeared before the Insurance, Housing and Community Opportunity Subcommittee of the U.S. House Committee on Financial Services. The hearing, held in room 2128 of the Rayburn House Office Building, started at 10:00 A.M. and continued for two hours.

The topic of the hearing, "Appraisal Oversight: The Regulatory Impact on Consumers and Businesses" was addressed in written testimony, oral presentations, questions and answers. The panel members, and links to the written testimony, are listed below.

Panel I Mr. William B. Shear, Director, Financial Markets and Community Investment, Government Accountability Office Mr. Don Rodgers, President, Association of Appraiser Regulatory Officials Mr. James R. Park, Executive Director, Appraisal Subcommittee, Federal Financial Institutions Examination Council Panel II Mr. David Berenbaum, Chief Program Officer, National Community Reinvestment Coalition Mr. David Bunton, President, Appraisal Foundation Mr. Francois K. Gregoire, 2011 Chair, National Association of Realtors, Appraisal Committee Mr. Don Kelly, Executive Director, Real Estate Valuation Advocacy Association (REVAA), on behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform  Ms. Karen J. Mann, President, Mann & Associates Appraisers, on behalf of the American Society of Appraisers Ms. Sara Stephens, President, Appraisal Institute   C-Span covered the hearing. The entire presentation is available below. Panel II starts about 50 minutes into the video.

Appraiser Active in Washington, D.C.

While browsing at Tampa International Airport, waiting to board my flight to Washington, D.C., I picked up a copy of the Tampa Bay Times. On the tarmac, waiting to take off, I noticed a familiar face looking at me from page 4B; the Business Section. 


The headline:


PINELLAS PROPERTY APPRAISER TO TESTIFY BEFORE HOUSE SUBCOMMITTEE


I'm pleased the writer, Elizabeth Behrman, decided to include these points:

"The bulk of my testimony has to do with ensuring appraiser independence, and the value and importance of appraiser independence," Gregoire said.

"Buyers don't expect the appraiser to just rubber stamp the sale price," he said. "They want a good, honest, objective appraisal by somebody that has the necessary qualifications to do a credible job."

As long as the appraiser can demonstrate that his data is supported and correct, the lender should just lay off," Gregoire said.

For those interested, the testimony I am offering on behalf of the National Association of REALTORS is at this LINK, along with that of the other panel members.


UPDATE: There is a link to the video of the entire hearing at the link above.

This is what the hearing room looked like, just prior to 10:00 A.M. That's subcommittee chair Biggert preparing to gavel the meeting to order.

Appraisal Industry Hearing - June 28, 2012 - UPDATE #1 6-22-2012 UPDATE #2 6-26-2012

In a release, Chairman Spencer Bachus of the U.S. House of Representatives Financial Services Committee, announced the committee and subcommittee schedule for the month of June, 2012.


There is one interesting among them:



Thursday, June 28:
The Insurance and Housing Community Opportunity Subcommittee will hold a hearing on the appraisal industry and regulations impacting the single-family mortgage market. The hearing will begin at 10 a.m. in room 2128 Rayburn.

As soon as more information is available, we will do our best to update this post.


UPDATE #1 - 6-22-2012: The hearing has been added to the calendar of The Committee on Financial Services and is posted online. The new title of the hearing is "Appraisal Oversight: The Regulatory Impact on Consumers and Businesses". We are waiting to see the makeup of the witness panel.


UPDATE #2 - 6-26-2012: The members of the hearing panels have been posted online. Two panels will be providing testimony. Yours truly is on Panel II, providing comments on behalf of the National Association of REALTORS®. The written testimony will be delivered to the committee today, and should be posted online.

AppraiserLoft Update

It might not be the largest scam pulled on appraisers, or even the latest, but it happens to be the one in the news today. According to Lily Leung at the San Diego Union Tribune:

AppraiserLoft, the company in question, has been at the center of several non-payment and late-payment claims from appraisers, former employees and other parties, before and after it shuttered suddenly in October, according to public records. 

In this bundle of cases, administrative law judge Diane Mihalsky found that the company failed to pay Arizona appraisers for completed work within the required 45 days set by Arizona state law -- 181 times. It appears AppraiserLoft either resolved or made attempts to resolve 10 of those cases, but appraisers in the remaining 171 cases say they haven't seen payments yet, court documents show. 

Mihalsky, in a June 6 order, recommended that the Arizona Board of Appraisal fine AppraiserLoft $5,000 for each of the 171 violations, totaling $855,000, and revoke the company's license as an appraisal management company.

AppraiserLoft joins Global Appraisal Solutions, Appraisal Mediation Solutions, (Larry Holzer affiliated companies), and Security One Valuation Services (a Todd Barfield enterprise), as the poster children of fly by night Appraisal Management Companies. The unpaid fees are in the hundreds of thousands of dollars.

Please be careful in extending credit to unknowns.

LiveValuation Magazine: Maintaining Your Workfile

UPDATE! Since the demise of LiveValuation Magazine, the links to the article are dead. The article is now posted on my SCRIBD page, and available after the jump

This topic is also addressed in the Appraiser Active MAYHEM post.

The September issue of LiveValuation Magazine has an article written by yours truly on the subject of workfile maintenance and retention. Maintaining Your Workfile was written to remind appraisers your first line of defense in the event of a suit or complaint is your workfile.

UPDATE:  Over on the Appraiser Law Blog, there is a new post with information about the statute of limitations for suing appraisers. It's worth reading, if only for this quote:

Because this is so frequently misunderstood by appraisers, let me say this first: the relevant time period for suing an appraiser or AMC about an allegedly bad appraisal has nothing to do with USPAP's minimum 5-year record keeping requirement.  (Don't throw those workfiles away!) 

CLICK to Read More

New Laws, New FREAB Members

The Florida Real Estate Appraisal Board held their regular meeting in Orlando April 2 and 3, 2012. This was the first meeting for newly appointed Certified Residential member Matthew Simmons. Matt is a REALTOR® and the Residential Manager for Fort Myers based Maxwell & Hendry Valuation Services, Inc.

The Governor made additional appointments to the FREAB just prior to the April meeting. The current Chair, Evalyn (Fran) Oreto, was appointed to fill one of the Appraisal Management Company positions, and Certified General Appraiser, Mike Rogers, was appointed to a second term. Although she did not attend the April meeting due to the late date of the announcement, Governor Scott also appointed Tamara Jones McKee to fill the vacant Consumer spot on the FREAB. These appointments fill all the vacant positions on the FREAB. 


For fans of Burn Notice, Tamara Jones McKee might be familiar!

The FREAB considered over 20 disciplinary cases. At least six involved a voluntary surrender of license for permanent revocation.

One of the most interesting discussions involved the board developing an answer to a question about out of state reviewers of appraisal reports; must they be licensed in Florida? Although the FREAB did not issue a formal declaratory statement, the consensus made it clear they believe providing appraisal services related to a property in Florida requires registration, license or certification in the Sunshine State.

In addition to making appointments to the Florida Real Estate Appraisal Board, the Governor signed two important bills into law. HB 887 and HB 517 were signed into law on April 8, 2012. HB 887 is effective October 1, 2012, and HB 517 is effective July 1, 2012. There are some important chances to Chapter 475, Part II in both. Most notably, HB 887 establishes discipline if an Appraisal Management Company:

(v) Has required or attempted to require an appraiser to sign any indemnification agreement that would require the appraiser to hold harmless the appraisal management company or its owners, agents, employees, or independent contractors from any liability, damage, loss, or claim arising from the services performed by the appraisal management company or its owners, agents, employees, or independent contractors and not the services performed by the appraiser.

FREAB Meeting - April 2 and 3, 2012

The Florida Real Estate Appraisal Board (FREAB) will be meeting in Orlando April 2 and 3, 2012. This will be the first meeting that includes two FREAB members that represent Appraisal Management Companies.


A couple of weeks ago, Governor Rick Scott appointed Evalyn F. (Fran) Oreto to the second AMC position.  At the same time, Governor Scott appointed Michael J. Rogers to a second term, filling one of the State-Certified General Appraiser positions. Fran Oreto had just completed a term as a State-Certified Residential Appraiser member. She served as Chair of the FREAB in 2011, and was elected as Chair for 2012 during the February, 2012 meeting. 


As another March, 2012 appointee, Matthew S. Simmons  will be attending his first meeting as a State-Certified Residential Appraiser member.


Since I will be attending the Probable Cause Panel meeting on Wednesday, April 4th as a past  member of FREAB, I had planned to attend the Monday and Tuesday sessions. Unfortunately, due to assignment deadlines and workload, I won't get a chance to get up to Orlando until Tuesday morning. We'll try to get some photos and an update posted later this week. It should be an interesting meeting. 

Remembering Jon

In honor of my nephew, Jon, this a repeat of a post from March 15, 2010. We think of you every day.

It's a sad day in the Appraiser Active family. My nephew, Jonathan Porto, a Marine, was killed yesterday in a non-combat accident in Afghanistan, near Marjah. My sister, Rachel, his mother, Jon's wife, Rachel Jewell Porto, and their two month old daughter, Ariana, could use your prayers. Jon was 26.




The Hillsborough County Sheriff's Office provided an escort for the motorcade from MacDill Air Force Base to St. Petersburg. The Tampa Bay Community showed their respect for Cpl Jonathan Porto.



Barbara Guzzon had produced the first segment of a tribute video.

Cpl. Jonathan D. Porto - "Bringing Him Home" from DiamondFilms on Vimeo.

Two Bills With Appraisal Implications: To Governor's Desk

The regular session of the 2012 Florida Legislature wound up on March 9th. Hundreds of bills were considered, but the papers and news sites spent their time watching the usual subjects. Appraiser Active watched several bills with important amendments to Chapter 475, Part II, and implications for Florida Appraisers. After winding their way through committee meetings, analysis by staff, negotiation and amendments, two bills with significant amendments to Chapter 475, Part II were passed by the Florida House and Senate; HB 517 and HB 887. Both are headed to Governor Scott for his signature.


Here are the highlights. 

Probably the most important is the amendment to 475.6245 Discipline of appraisal management companies. Included among the grounds for discipline is this language:

(v) Has required or attempted to require an appraiser to sign any indemnification agreement that would require the appraiser to hold harmless the appraisal management company or its owners, agents, employees, or independent contractors from any liability, damage, loss, or claim arising from the services performed by the appraisal management company or its owners, agents, employees, or independent contractors and not the services performed by the appraiser.

Both HB 517 and HB 887 revise the definition of appraisal management company and appraisal management services.

(c) "Appraisal management company" means a person who performs appraisal management services regardless of the use of the term "appraisal management company," "appraiser cooperative," "appraiser portal," "mortgage technology company," or other term. (d) "Appraisal management services" means the coordination or management of appraisal services for compensation by: 1. Employing, contracting with, or otherwise retaining one or more licensed or certified appraisers to perform appraisal 370 services for a client; or 2. Acting as a broker or intermediary between a client and one or more licensed or certified appraisers to facilitate the client's employing, contracting with, or otherwise retaining the appraisers.

The term "subsidiary" is defined with respect to the relationship between appraisal management companies and banking entities.

(t) "Subsidiary" means an organization that is owned and controlled by a financial institution that is regulated by a federal financial institution regulatory agency.

To comply with the Dodd-Frank Act, an exemption was created for appraisal management companies owned and controlled by a federally regulated financial institution.

Additional amendments require the Florida Real Estate Appraisal Board to adopt standards of practice that "meet or exceed nationally recognized standards of appraisal practice, including standards adopted by the Appraisal Standards Board of the Appraisal Foundation.

Applicants for appraiser registration, certification, or registration as an appraisal management companies must sign a pledge indicating that upon becoming registered or certified, she or he will comply with the standards of professional practice established by rule of the board, including standards for the development or communication of a real estate appraisal.


If signed by the Governor, HB 517 has an effective date of July 1, 2012, and HB 887 will be effective October 1, 2012. Afterwards, the FREAB will certainly be busy working on rules to implement the new provisions.

Ken Harney Shines a Light on AMC Appraisal Fee Splits

Along with all the appraisal related mandates in the Dodd-Frank Act is the primary reason for the legislation; creation of the Consumer Financial Protection Bureau.


The CFPB and the individual recent appointed to head the agency have been in the news quite a bit recently. Without offering any opinion about the agency, the appointments, and the politics, it is important to be aware of the CFPB's massive rule making authority. 


This week, Ken Harney writes about the CFPB reviewing ways to bring more clarity and better disclosure to fees associated with Real Estate Transactions. The focus of the story is the failure to inform borrowers of the fact a significant part of the fee may be paid to an affiliate or subsidiary of the lender. The CFPB is considering rules to require disclosure of the portion of the appraisal fee retained by Appraisal Management Companies.

Ken writes:

One of the fees being scrutinized might surprise you: appraisal charges. Why do they need clarifying? Doesn’t just about everybody who applies for a mortgage, whether it’s to buy a house or refinance, have to pay $450 to $600 — sometimes more — to find out what the property is worth?

and

Say you’re charged $550. There is no hint that the appraiser may be getting $250, with the rest going to the management company and the lender. The CFPB is considering whether to shed light on this by mandating two disclosures: what the appraiser is paid and what the management company is taking.

Frank Gregoire, a past chairman of the Florida Real Estate Appraisal Board, which oversees and regulates the industry in that state, says that while appraiser independence is important, banks and their affiliated management firms are raising the costs of appraisals to consumers without improving services.

Defenders of management firms, such as Donald E. Kelly, executive director of the Real Estate Valuation Advocacy Association, strongly disagree. Kelly says management firms perform the “back office” functions — including reviews and quality control — “that in the past were done by lender staff and employees.” In other words, they earn the money they get. And there’s no pressing need for consumers to see additional disclosures. They just need to know the bottom line.

Read the article HERE.
On the floor, next to my desk, is a stack of appraisal reports. Borrowers, lenders, real estate agents, and other appraisers sent them my way as examples of shoddy work and lack of quality control by AMCs. How do appraisal reports pass through a quality control check when the appraiser cites ZILLOW or TRULIA as the source of his date of sale, time, or market conditions adjustment, and that it is based on data from a zip code, not a market area? >
Wondering.

Florida Realtors Mid-Winter Meetings - January 11 - 15, 2012

Florida Realtors meet in Orlando this week. There is an Appraisal Council meeting on Friday, January 13, 2012 at 1:00-2:30pm in the Captain room at the Buena Vista Palace. The agenda includes quite a bit of interesting topics for discussion.

If you are a Florida Realtor - Appraiser, it would be great to have you attend. You may register onsite. There is no registration fee for Realtor - Appraisers.

AMC Indemnification: Bill Introduced to Limit Use in Florida

Over the past six months, Appraiser Active has posted several times about the use of indemnification clauses in Appraisal Management Company agreements with their panel appraisers. NAR has called for a ban on such agreements, particularly those that indemnify and hold harmless the AMC against any suit, threat, or claim on any work product or service provided as part of the contract agreement.

The 2012 Florida Senate and House have stepped up to the plate with the introduction of SB 1252 and H 887. The bills are virtually identical. Both include this language: (proposed amended/added text is underlined)

475.6245 Discipline of appraisal management companies.—


(1) The board may deny an application for registration of an appraisal management company; may investigate the actions of any appraisal management company registered under this part; may  reprimand or impose an administrative fine not to exceed $5,000 for each count or separate offense against any such appraisal management company; and may revoke or suspend, for a period not to exceed 10 years, the registration of any such appraisal management company, or place any such appraisal management company on probation, if the board finds that the appraisal management company or any person listed in s. 475.6235(2)(f):


(v) Has required or attempted to require an appraiser to sign any indemnification agreement that would require the appraiser to hold harmless the appraisal management company or its owners, agents, employees, or independent contractors from any liability, damage, loss, or claim arising from the services performed by the appraisal management company or its owners, agents, employees, or independent contractors and not the services performed by the appraiser.

It's a start. Next on the list of things to do is propose some amendments to pare the size of the FREAB back down to 7 members, and limit the guaranteed AMC representation down to 1 member.

In the meantime, let Senator Dennis Jones and Representative Clay Ingram know you of your appreciation and support.

Happy New Year. Stay tuned.