Washington, D.C. Events: AARO, NAR - Valuation Summit

There are two major appraisal/valuation related events in Washington, D.C. this week. First, the Association of Appraiser Regulatory Officials (AARO), along with The Appraisal Foundation and the Appraisal Subcommittee, is holding a joint conference October 1 - 5, 2010. Their Agenda is full, and packed with interesting speakers and timely topics. AARO president, Bruce Fitzsimons, has invited me to attend. As a former regulator, and current Honorary Member of AARO, it will be great to see long time friends (and foes) from the appraisal regulator world.

Immediately following the AARO Joint Conference, the National Association of REALTORS® is hosting a Valuation Summit October 5 - 6, 2010. Several folks from the AARO Conference will be making appearances for panel discussions. Once again, it will be great to see long time friends and acquaintances like NAR President Vicki Cox Golder, NAR President-Elect Ron Phipps, Kentucky Real Estate Appraisers Board Executive Director Larry Disney, Steve Fritts from the FDIC, and Jacqueline Doty from Freddie Mac. Having crossed swords with him during the negotiations over the Florida AMC Regulation Bill during the 2010 Legislative session, it will be interesting to hear what former TAVMA President Don Blanchard has to say.

By far, the most entertaining portion of the day will be the last session. I've been asked to moderate the panel discussion among Dave Bunton, Jim Park and Bruce Fitzsimons. It would be great if we could arrange for a webcast!

Here's the agenda.

Valuation Summit Final Agenda

TAVMA to FED: Please Delay Rule on "Customary and Reasonable Fee" -UPDATED

It was inevitable, but the plea from TAVMA's Executive Director, Jeff Schurman to Federal Reserve Board Chairman Ben S. Bemanke is remarkably lame and pitiful.

In an August 25, 2010 letter to the Federal Reserve Chairman, TAVMA begs the FRB to delay consideration of  the “customary and reasonable” fee provision that would be part of the proposed interim final rule required by Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As Appraiser Active described in a recent posts (HERE and HERE), The Federal Reserve has the chore of  translating the legislative language into interim rules that will govern how brokers, lenders, appraisers and appraisal management companies will operate. Final rules will be developed by the federal banking agencies.

TAVMA is concerned about this section of the Dodd-Frank Act:
....and goes on with this claim:

(1) In General.-Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. Evidence for such fees may be established by objective third party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments offered by known appraisal management companies.

At present it is unclear whether the “customary and reasonable” provision should be adopted in the 90 day interim final regulations. TAVMA believes that the effective date should be delayed under Title XIV Section 1400(c)(3) until after a formal rule making process. Additionally, we believe that the provision should not be adopted yet, because the “customary and reasonable fees” requirement is not an appraisal independence requirement. Further, the fee provision was added late in the Congressional Conference Committee process and never received any meaningful legislative discussion or clarification.

It's amusing to read TAVMA's claim that AMC compensation of appraisers is the "predominate fee model now in use." The only reason it may be is because of the Home Valuation Code of Conduct. Appraisal Management Companies did not gain their share of the market by competition with appraisers; it was handed to them on a silver platter. TAVMA, your "predominate fee model now in use" is not market based, has no relationship to reality, and the new statutory requirement to ignore it in the determination of customary and reasonable for appraisal services is one of the few high points in the dismal legislation. Quit whining!

Of course, this bothers TAVMA and the 58 "appraisal transaction management companies" counted among its members. TAVMA says:

The wording of 129E(i) Appraisal independence requirements, “Customary and Reasonable Fees” seems to either ignore or outright reject FHA’s and HUD’s prior interpretation; however, it fails to provide any direction or guidance about what the term means and/or how it is to be calculated other than that fees negotiated with AMCs should be excluded from the determination, i.e., that market participants should ignore the predominate fee model now in use. It is unreasonable given this history and marketplace realities to expect the FRB to formulate a definition of “reasonable and customary fees” within the few weeks leading up to the October 20, 2010 effective date of the interim, final rule.

TAVMA's plea to Bernake becomes REALLY desperate with their offering of this reason for delay:

Appraiser Trainees. Fee parity (non-negotiated fees) will create a preponderance of “experienced appraisers,” which on one hand is good in that the most experienced appraisers will compete on quality and service for assignments; however, what will be the impact on appraiser-trainee development? Will appraisal firms have any motivation to train new appraisers, and will less experienced appraisers be able to compete for appraisal work if fees are not a factor?

Where was all this concern for appraiser-trainees in the past? How many appraiser readers of this post are willing to provide engagement letters or orders from TAVMA members with the wording "Trainee Appraisers cannot sign the appraisal", or word to that effect.
 
TAVMA, get off your knees and get with the program.

My fellow appraisers, it's time to fire up the letter writing machine and let Ben Bernake know what the real story is.

More on this subject, along with a slew of comments at Appraisal Scoop. Brian Davis has a particularly good one:

Maybe someone can explain to me why we need studies and surveys on customary and reasonable fees when appraisal fees have been reported for years on the HUD closing statements? I've always assumed that the information on the HUD form was collected and databased somewhere?

If this hasn't been done in the past . . .it could certainly be implemented NOW. The HUD form shows exactly what the borrower was CHARGED for the appraisal . . . right?

Well said, Brian. This aint brain surgery.

UPDATE - From several sources comes this tidbit:

The direct contact person at the Federal Reserve Board where you can send a letter to discuss your personal AMC and Customary and Reasonable Fee situations, or anything else having to do with appraiser independence. (Can include Stips and mandatory comparable requirements and mandatory Cost Approach).


Please do so in the next few days, as new appraisal regulations are being drafted now, with implementation set for October, or perhaps sooner.


Here is the contact information for the person at the Fed that is handling the Interim rulemaking on appraiser independence (including customary & reasonable fees):


Ms. Sandra Braunstein, Director
Division of Consumer and Community Affairs
Federal Reserve Board
1709 New York Avenue, NW
Washington, DC 20006

I strongly suggest you provide your own letter in your own words, rather than rely on ‘template’ content from another source. Keep it short and to the point.

Appraisal Management Regulation Bill Advances in Florida Senate - UPDATED

Scroll for UPDATE.

Proposed legislation to regulate Appraisal Management Companies cleared the Regulated Industries Committee in the Florida Senate April 8, 2010. Bills introduced by Senator Lee Constantine (S2210), and Senator Mike Fasano, (S1552), were consolidated with a Committee Substitute.

Senator John Thrasher, of Jacksonville, FL, offered an amendment to the Committee Substitute. The amendment increases the size of the Florida Real Estate Appraisal Board from 7 to 9 members. The two additional members of the FREAB will be representatives of the appraisal management industry.

This is certainly a poke in the eye from the AMC stakeholders. More than likely, the amendment was suggested by the folks from LPS. The company is headquartered in Jacksonville. The deputy general counsel and chief compliance officer for Lender Processing Services, Donald Blanchard, is taking the lead for the AMC stakeholders and actively promoting amendments to weaken the effort to regulate AMCs in the Sunshine State.

Check out Don Blanchard's profile on LinkedIn. Prior to taking the position at LPS, he was Deputy General Counsel, EVP for Countrywide Financial Corp. He also served as president of TAVMA.

It remains to be seen if this amendment will survive through appropriations. Additional board members cost money. We'll keep you posted.

UPDATE - 4/9/2010

HB 303 - Regulation of Real Estate Appraisers and Appraisal Management Companies, was passed by the House General Government Policy Council with amendments similar to those offered in the Florida Senate Regulated Industries Committee. The General Government Policy Council was the last committee stop for the bill on the House side of the Legislature. Consideration by the full House of Representatives is the next step.

At the request of the Department of Business and Professional Regulation, HB 303 was amended to make the effective date July 1, 2011. This will allow time for the Florida Real Estate Appraisal Board to adopt the necessary rules to enact the legislative requirements.

Appraisal Institute, Others, Suggest AMC Statement of Principles

From Appraiser News Online:

The nation’s largest professional organizations of real estate appraisers have set forth a list of business-related principles that they say appraisal management companies should adopt and advocate. The exposure draft of “Appraiser and Management Company Statement of Principles,” released March 11, is open for comment and discussion from all stakeholders through May 1.


“Adherence to these principles will help ensure that quality appraisals are prepared by competent appraisers for financial institutions and other clients in a timely manner,” Appraisal Institute President Leslie Sellers, MAI, SRA, said.

“Agreement with these principles will promote equality and a mutually beneficial relationship between professional appraisers and the AMCs using their services,” said Mike Evans, FASA, president of the American Society of Appraisers. “Most importantly, adherence to these principals will ensure consumers are protected, and safety and soundness fostered, when lenders use AMCs for valuation services.”

The statement is a joint effort of the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers.

Following the public comment period, the professional appraisal organizations will request that AMCs formally adopt the revised Statement of Principles and agree to comply with them in their interactions with appraisers, their clients and consumers, according to Sellers.

After adoption, the appraisal organizations will continue to work with all stakeholders, including the AMC community, to provide further clarification of each of the principles through such means as guidance documents and responses to frequently asked questions, Sellers said. The Statement of Principles is intended to evolve as the AMC industry continues to mature, and state and federal laws applicable to AMCs continue to be enacted and implemented, he added.

“The organizations look forward to working with AMCs, state boards, local chapters and consumer groups as the business practices of AMCs are refined to comply with the principles. The principles are intended to promote mutually beneficial business relationships between management companies and professional appraisers,” Sellers said.

In 2008, the professional appraisal organizations drafted and released model legislation for the registration and regulation of appraisal management companies. Laws based upon this model legislation have been considered by at least 25 states, with 10 states passing the bills – some of which await enactment – and the rest still under consideration.

CLICK HERE for a pdf copy of the draft Statement of Principles.

Since the TAVMA folks have been free and easy with their advice to the appraisal community, it will be interesting to see their reaction to this proposal.

TAVMA Blog - 10 Reasons for Federal Regulation of AMCs

Jeff Shurman, over at the TAVMA Blog, as recently submitted a post - Ten Reasons Why Federal AMC Oversight is the Better Solution. Please take a look when you have a chance. Here's his list:

1. Compel the federal regulator to create a uniform set of standards for AMCs, which may include or build upon TAVMA’s own Standards of Good Practice in Appraisal Management
2. Compel AMCs to improve quality as needed to meet the agency’s rules and regulations;
3. Flag educational and compliance gaps in AMCs’ systems that they can duly address;
4. Encourage AMCs to invest in IT to meet reporting and compliance rules (compliance, record-retention, performance report generation, etc.);
5. Provide compliant AMCs with a competitive advantage over those that lag in the compliance area;
6. Put AMCs – which at the core act as agents of the lender conducting functions that the lender would otherwise do and be responsible for – under the regulatory auspices of the same entity tasked with overseeing, auditing, and supervising the mortgage lending industry;
7. Ensure compliance of AMC product development efforts to consistent and reasoned standards and guidelines; regulatory clarity leads to innovation;
8. Provide mortgage lenders a meaningful set of standards against which to assess current and potential AMC partners;
9. Level the competitive field while weeding out bad actors; and
10. Eliminate the oft-cited objection that AMCs are unregulated.

Interesting list. Would anyone care to address these one-by-one?

Appraiser Active wonders why TAVMA and AMCs are encouraging Federal Regulation now. It's also interesting, given the increasing number of AMCs being created by unsavory individuals with regulatory agency disciplinary history, that protection of the public does not make the list.

Maybe if the Federal government had not demonstrated such an inability to regulate financial institutions and Government Sponsored Enterprises, we would have a bit more enthusiasm for the TAVMA point of view.

TAVMA Blog

Appraiser Active has linked to the TAVMA Blog previously. It prompted a few comments and an interesting discussion about Appraisal Management Companies and the effect on them as a result of efforts by states to bring them under the regulatory umbrella.

This post, interests me. Here's an excerpt:

And, although I've not written an article on the topic, I'd say that the HVCC has to some extent forced some good appraisers – and bad and in-between appraisers too to be fair – out of the market. My theory about where HVCC may play a role involves appraisers who built their marketing strategy around direct-orders from mortgage brokers and Realtors. Banning broker- and Realtor-ordered appraisals abruptly severed these appraisers’ direct marketing ties to some long-time clients. Some were able to acquire new clients and join one or several AMC fee panels. However, it is likely that others lost their traditional client base (i.e. brokers) without an immediate alternative or perhaps the business development acumen to sustain the business.

Yet if demand for appraisers has dropped by half over the past 6 years as measured by mortgage originations, and the number of certified and licensed appraisers has trended upward during that time frame, wouldn't it make sense that there'd be shakeout in the ranks of appraisers?

FWIW, there has been a shakeout in the ranks of appraisers, but at least here in Florida, the dramatic drop has been in the number of TRAINEE Appraisers. during the last renewal cycle (November 30, 2008), over 4,000 Trainees failed to renew their license. Here is the current licensee count. It will be interesting to follow the renewal statistics in states AFTER the HVCC implementation. Talk on the street is the Appraisal Subcommittee is worried about their budget for the coming year because of dismal appraiser renewal numbers.

I've had some interesting back and forths with Jeff. This seems like it will start another one. What do you think?

Jeff was supposed to be on the AARO Panel with me next weekend. It's too bad the cast of characters has changed.

REALTOR Mag - The Trouble With the HVCC

Here is the long awaited REALTOR® Magazine article about the Home Valuation Code of Conduct (HVCC), HAVOC. Blanche Evans, Stacy Moncrieff and I spent quite a bit of time discussing the issue, including the initial investigation, the companies under investigation, appraisal practices, appraisal standards, enforcement and the effects of the HAVOC on the appraisal profession and real estate markets. In an effort make sure all points of view were represented, I furnished names and contact information for several parties in favor of the agreement, including several folks involved with Appraisal Management Companies (AMC).

Not only did Blanche and Stacy collaborate to produce a balanced and informative article, the story includes the best HVCC/HAVOC graphic encountered by Appraiser Active. We might just award a gold star or seal for that one.

It's appropriate for the article, "The Trouble With the HVCC" to start with a quip from Jonathan Miller:

"You can't make this up," New York appraiser Jonathan Miller riffed in his entertaining blog, Matrix, back in June.

Miller was recounting the frustration of a real estate salesperson who was trying to refinance her own New York apartment with her current lender. According to Miller's telling, the out-of-town appraiser walked into the apartment, threw his hands in the air, and asked "How am I supposed to appraise this thing?"

Of course, the favorite quote is from yours truly:

"The HVCC sets up AMCs as the guardians of appraiser independence, and isn't it ironic that the investigation that prompted the rules centered on an AMC allegedly manipulating the system to please its customer?"

Later in the article comes this gem:

For the largest lenders, AMCs are simply the way business is done today. "When you're ordering thousands of appraisals every single day, the risk to you is extraordinary," says Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association in Pittsburgh, which represents a variety of settlement service vendors, including large AMCs. "Would it make sense to hand those off to thousands of [independent] appraisers?"

To which Appraiser Active responds: "Yes, it makes sense to "hand off" those to thousands of [independent] appraisers. Unlike Appraisal Management Companies, the appraisers are licensed and certified by an agency of government and subject national standards; recognized by every state and territory of the United States. What appraisal standards must the Appraisal Management Companies follow?" Which agency of government regulates their involvement in brokering valuation services?

There's much more. Read the whole thing right HERE.

UPDATE: Jonathan Miller provides his take on MATRIX.

Another View of AMC Regulation

UPDATE!! April 3, 2009

Scroll to the end of message

It looks like I spend WAAAAY too much time scouring the web and sources for information about the HVCC, Appraiser Regulation, Appraisal Standards, Mortgage Fraud and Appraisal Management Companies. There's quite a bit of information available, and I happened to run across a post on the TAVMA Blog.



TAVMA calls itself the voice of the settlement services industry. TAVMA is a 501(c)(6) non-profit trade association headquartered in Pittsburgh, PA that represents nearly 100 companies engaged in the real estate settlement services industry.

At any rate, TAVMA is concerned about the efforts to regulate Appraisal Management Companies. Here is the post from the blog:

Why State Regulation of AMCs Will Put Small AMCs Out of Business

Finally, someone in media has reported what I've been trying to get across for the past month: That state registration and regulation of appraisal management companies (AMCs) will assure the survival of only the largest of the large AMCs.

Unintended Consequences

In a story, about a proposed AMC bill in Missouri in today's Valuation Review, I am quoted (correctly) as saying that, “'… (T)his new legislation will have unintended consequences. Small or in-state AMCs won’t be able to afford the initiation fee. The state is essentially forcing small or local AMCs out of business. They’re taking jobs out of the state and putting them in other states with the large, national management companies.'”

FULL POST


My response is posted in the comments. Feel free to provide your point of view here.

UPDATE - April 3, 2009

It looks like several folks have surfed over to the TAVMA Blog to add their comments. Blog owner, Jeff Shurman has responded to my comments and several others. He has also promised to post a new entry in response to some of the issues raised. Use this LINK to access those comments when posted.