FREAB Meeting - February 5, 2018 - EVALUATIONS!!

The Florida Real Estate Appraisal Board will have their first meeting of 2018 on Monday, February 5, 2018. The FREAB meets in Suite N901 (ninth floor) at 400 West Robinson Street, Orlando, FL. The meeting starts at 8:30 AM.

The legal agenda is light; only four cases are on the docket. All involve consideration of a Settlement Stipulation by the FREAB. Nevertheless, there is always a chance something interesting will be discussed, and a learning opportunity will result.

Things are bound to get interesting around 1:00 P.M. At that time the board is scheduled to take up a Discussion of Evaluations. This discussion was prompted by amendments to Chapter 475 Part II as a result of HB 927, passed by the 2017 Florida Legislature, and signed into law by Governor Rick Scott. The amendments became effective October 1, 2017.

There is plenty to say about the amendments, and the attempt to soften standards applicable to the services provided by Florida Appraisers. Rather than reproduce everything here, Appraiser Active suggests you take a look at the documents to be considered by the FREAB, including the comment letter from yours truly. CLICK HERE. My comments start on page 29 of the pdf.

If you have a chance to attend the meeting and weigh in, I'm sure the FREAB will welcome you comments. If not, the meeting will be live streamed. TUNE IN and hear the conversation and how the board decides to proceed. If thee TUNE IN link above does not direct you to the GoTo meeting page, use this LINK and click on live stream.

Home Valuation Code of Conduct?

Since it has been so long since the last post, I should have been able to come up with something more more applicable to the current state of the appraisal profession, but this is in interesting piece. The Research Department of the Federal Reserve Bank of Philadelphia published this nifty little study of the impact on the Home Valuation Code of Conduct (HVCC) on Appraisal and Mortgage Outcomes.

According to the study, despite all the claims by Fannie and Freddie, touting the benefits, research of the effects since implementation is nearly non-existent. The authors claim this study is the first empirical examination of the impact of the first major appraisal rule, the now sunset, Home Valuation Code of Conduct. It measure the share of "low" appraisals (as compared to the purchase price) from the first quarter of 2006 through the third quarter of 2012. There is also a chart on page 23 of the study showing the distribution of high and low appraisals pre- and post-HVCC. The study defines Significantly High Appraisals as those 5% of more above the contract price, and Significantly Low Appraisals as one which is at least 5% below the contract price.

One aspect of appraisals NOT examined pre- and post-HVCC, is appraisal quality.

The Study is at THIS LINK on the Philadelphia Fed site, and just below. Here is one of the graphs.

The Impact of the Home Valuation Code of Conduct on Appraisals and Mortgage Outcomes

Pick a Number, any Number - Who to Blame?

This story is getting huge distribution, but the spin offered by bloggers and commenters on news sites really varies.

Special Report: What's a home worth? Pick a number, any number

 WASHINGTON (Reuters) – Aaron and Beth Stiner are renters, but not by choice and not because they can't afford to buy a house. They had a move-up home in Phoenix selected and good credit scores. They even had buyers lined up for the home they were selling. Then they entered appraisal hell.

 
The first appraisal on their chosen home came in at $295,000, a figure that both the Stiners and the sellers agreed upon. The lender didn't like it, and ordered up a second appraisal. Based on comparable homes that were in a different neighborhood, the new appraisal came in $25,000 lower -- too low to allow the loan to go through.
 
They switched lenders and got another appraisal that, at $290,000, would have allowed the deal to go through. Their new lender was skeptical, and ordered up another appraisal. At the same time, the home they were selling was appraised three times, with each subsequent valuation falling.
 
Four months later, the Stiners and their buyer both gave up. Together, they were out $1,600 for seven appraisals. "As a result, we are now renting our home out, and renting the home we wanted to buy," says Beth. "We were frustrated and we weren't going to keep doling out cash for new appraisals. It felt like a game."

Read the full story HERE.

During the build up to the boom time and housing bubble, the loan originiators and lenders were pushing and shopping for the highest number from the appraiser. It's now come full circle; if the lender doesn't like the number the first appraiser delivers, they start shopping for a lower number.

Interference with the objectivity of the appraisal process is not acceptable, no matter the direction folks are pushing the appraiser. Although it has been, and continues to be fashionable to blame the appraiser, take a close look at the story. It's the lender shopping for a "value" to their liking. By what "standard" are the appraisals being evaluated?

Exempt Bank Owned AMCs? What are They Thinking?

Although discussion of the Wall Street Reform and Consumer Protection Act of 2009 has faded from the front page of the newspapers, in today's Washington Post, Ken Harney offers a column outlining some possible benefits to consumers and what he believes will go to the President's desk affecting housing and mortgage finance.

Of most interest to Appraiser Active is this:

Real estate appraisal improvements. The House bill would give the new consumer protection agency oversight on home mortgage appraisals and the power to create rules and standards to guarantee "appraiser independence" from pressures by lenders, realty agents and others. It also would require that once the new rules are adopted, the controversial "Home Valuation Code of Conduct" mandated last year by Fannie Mae and Freddie Mac be terminated. The code has been criticized by consumers, realty agents, builders and appraisers for encouraging lowball appraisals and the use of inexperienced appraisers willing to work for low fees. The Senate bill does not have appraisal provisions, but a bipartisan push is under way to convince conferees to adopt the House version.

None of the "appraisal improvements" were included in the Senate amendment to the House Bill, H.R. 4173. Some of the "appraisal improvements" are worthwhile, others not so. Among the most meaningful are amendments to FIRREA that will require states to regulate Appraisal Management Companies. (If you follow the link, start at Sec. 9503 and use the FORWARD button under the THIS DOCUMENT tab at the bottom of the page to read all the text)

Unfortunately, the above amendments also include this provision:

`SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM QUALIFICATIONS.

`(b) Exception for Federally Regulated Financial Institutions- The requirements of subsection (a) shall not apply to an appraisal management company that is a subsidiary owned and controlled by a financial institution and regulated by a federal financial institution regulatory agency. In such case, the appropriate federal financial institutions regulatory agency shall, at a minimum, develop regulations affecting the operations of the appraisal management company to--

`(1) verify that only licensed or certified appraisers are used for federally related transactions;

`(2) require that appraisals coordinated by an institution or subsidiary providing appraisal management services comply with the Uniform Standards of Professional Appraisal Practice; and

`(3) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence standards established under section 129E of the Truth in Lending Act.

This is preposterous!

Several states have already enacted laws to regulate Appraisal Management Companies. I’m not sure of the exact language for other states, but the bill to regulate Appraisal Management Companies recently signed into law here in Florida does not exempt ANY Appraisal Management Company from registration and regulation.

Based on comments and conversations with appraisers here in Florida and from around the country, the worst Appraisal Management Company offenders for fee abuse, unreasonable turn time demands and interference with appraiser independence are those owned or affiliated with regulated banking or financial institutions. EXAMPLE, EXAMPLE, EXAMPLE, EXAMPLE.

The failure of banks to properly throttle their lending practices helped to get us in this mess, and now the proposal is to let them run Appraisal Management Companies without state regulation?

It’s important to convince the Conference Committee to strike that exemption for bank owned and operated Appraisal Management Companies. Otherwise, the public can expect nothing more than the same "close scrutiny", "attention to detail", and "rigorous oversight" the Federal Banking Agencies exhibited prior to the current fiasco.

We cannot trust the regulation of bank owned/controlled Appraisal Management Companies to Federal Agencies.

The Senate has appointed their conferees:

Dodd; Johnson; Reed; Schumer; Shelby; Crapo; Corker; Gregg; Lincoln; Leahy; Harkin; Chambliss.

We're still waiting for the House to name their participants to the conference, but Barney Frank is sure to be there.

It's time to fire up the professional associations and the public to write their Senators, Representatives and the bill conferees to make sure bank owned AMCS are NOT EXEMPT from state regulation.

Appraisal Management Company Bill Advances in Florida House

On Friday, March 26, 2010, HB 303 passed the Florida House Government Operations Appropriations Committee with a unanimous vote. (The Staff Analysis link has not yet been updated with the vote tally).

The favorable vote is actually for a Committee Substitute (CS) bill. This is due to amendments suggested as a result of negotiations late Thursday evening. A group of opponents, including Bank of America and SunTrust, headed by a team from LPS (owners of LSI) posed a threat to the bill. LPS had been meeting with one of the members of the committee and she was leaning towards opposition. The Committee Chair suggested we meet and attempt to work things out.

After a nearly four hour meeting, changes were agreed to, an amendment drafted and sent to the committee staff for drafting. We shook hands in agreement close to 10:00 P.M.

Although the committee meeting started at 8:30 A.M, HB 303 was the last bill heard. Believing we had a deal, the proponents of the bill waived speaking in support. To our surprise, the LPS representative rose and spoke in opposition. After fielding questions from several of the committee members, including several stinging inquiries from Rep. Workman, a co-sponsor of the bill, the Chair weighed in.

Rep. Alan Hays, Chair of the Committee, had poked his head in on the negotiating meeting around 9:30 P.M. the night before. At that time, he asked how things were going and was pleased to hear we were all in agreement and had resolved a number of issues. When he addressed the LPS representative that was speaking in opposition, he reminded him of the comments made the night before, asked if they were true, and expressed his amazement at his change of mind and opposition to the deal he agreed to the night before.

There was no debate on the bill, and the vote was unanimous in favor.

If possible, express your gratitude to the bill's sponsor, Rep. Hudson, the cosponsors, Rep. Nehr and Rep. Workman. Include the Committee Chair, Rep. Hays and Committee member Rep. Wood.

Appraisers should also know the Florida Association of Realtors really stepped up to the plate on this one too. There were four FAR Legislative Team Staff members attending. Florida Realtors also facilitated the negotiating session on Thursday evening. This bill is one of their Legislative Priorities for 2010. Trey Goldman of FAR is really helping on this bill.

Here's the way Florida Realtors explain what happened:

The fourth week of this year’s legislative session will be remembered as the week when issues went from important to SERIOUS, starting with HB 303, the bill that requires Appraisal Management Companies (AMCs) operating in Florida to register with the Department of Business and Professional Regulation. Twenty four hours before the bill was to be heard in the House Government Operations Committee, Florida Realtors learned that the bill might be Temporarily Postponed (likely killing it for 2010) unless agreement could be reached among the stakeholders (Florida Realtors, AMC’s and banks). The gap was not small. But locking 12 lobbyists, clients, appraisers and a Representative in a room built for six can — and did — produce results. A mere four hours later, at 9:30 p.m., an agreement was reached and a (late filed) amendment was drafted.



When the bill was heard in committee the next morning, a win-win was narrowly averted when the AMC representative rose to oppose the bill he helped write the previous evening! Fortunately, we had visited with every legislator on the committee or their aide prior to the meeting, and the Florida Realtors secured their half of the Win. It also helped that Realtors in the districts of the 13 members of the Committee responded to a last minute Call-To-Action.

Stay tuned.

Passing this committee was extremely important. It was the last meeting of the Government Operations Appropriations Committee for the 2010 Legislative Session. There is one more committee stop on the Florida House side. There is still work to do on the Senate side as well.

Reactions to Wells Fargo RVS Desktop Appraisal Announcement

UPDATE!! - The North Carolina Appraisal Board Weighs In ON RVS Desktop Appraisal Announcement - Scroll to bottom for full text.

In response to the nasty-gram emailed to me by the fine folks at Wachovia, this email was sent their way:

Mr. Ramirez,

Thank you for your message and expression of concerns.

You may wish to know the post you found to be offensive has been modified. Instead of the Wachovia email, I reference an email from another person/entity with essentially the same information. That email DID NOT come from Wachovia.

Of concern is the fact you did not take issue with any of the points made in my post on Appraiser Active. Instead, your preference was to avoid disclosure, openness and discussion.

This “product” referenced in the email sent to appraisers from coast to coast has been discussed and debated extensively among appraisers, state regulators, AQB Certified USPAP Instructors, past members of the Appraisal Standards Board and users of appraisal services over the past few days. The consensus is that there are serious problems with the terms of the offering by Wachovia.

• It is undeniably a contingent fee arrangement.
• The contingent fee arrangement does not comply with USPAP.
• The contingent fee arrangement does not comply with Florida law.
• Appraisers may be in violation of the Scope of Work Rule by accepting the assignment conditions dictated by the Client.
  
  In the event you would like to discuss these issues or make a statement with respect to making corrections or modifications, I would certainly be interested. State regulatory agencies from Florida to Washington State would be interested as well.
  
  In the meantime, I wish you well.
  
  Respectfully,
  
  Frank
  Francois (Frank) K. Gregoire IFA RAA
  Gregoire & Gregoire, Inc.
  Realtor - Appraiser
  
  P.S. Several folks with an interest in the outcome have been blind copied on this email.

Among the "several folks with an interest in the outcome" were a selection of Administrators, Members and Attorneys representing State Appraiser Regulatory Agencies from one end of the country to the other. My email, along with links to the Appraiser Active and Matrix blog posts, were forwarded to others in their regulatory agency network. Needless to say, the Appraiser Regulatory Agency group is concerned.

Here are a few comments. The names and states have been redacted because these are not yet "official" positions.

A letter from XXXXX could be directed to the Comptroller's office describing how such practices are contrary to their need for ethical, competent appraisers to provide appraisals for collateral decisions. Wells Fargo wants to engage an appraiser, but they only pay for the appraisal is the appraiser is able to report certain predetermined results (e.g. at least two comps in the last 120 days, at least 2 comps within 1 mile, all comps must be listed in MLS, etc.). The problem, of course, is that such fee arrangements are prohibited by USPAP because they inspire unethical behavior by the appraiser.

Since we are all appraisal regulatory agencies, we are bound to process the complaints that inevitably will result from such a business practice. If the appraisers agree to those assignment conditions, they have already violated USPAP. Whether it was Wells Fargo's idea is a moot point as far as our Board. If your friend recommends you break the speed limit, and you do it, you are going to get the speeding ticket, not them.
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I do not think XXXX should take an advocacy position on behalf of real estate appraisers; however, an advisory letter to the Comptrollers office on the above USPAP requirement, wouldn't be overreaching our mission statement, I think.
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My opinion is what Wells Fargo is attempting to do with it's desktop program, requesting a "hit" or "no hit" is a blatant attempt for appraisers to accept assignments based on pre-determined results.
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As most of you know I don't "weigh in" on most things, I sit back and observe what others are saying and doing. This group has, over the past 10 years provided me with a tremendous amount of very good advice and "food for thought" and for that I am very grateful. We have seen both good and bad times in this industry. I realize that our industry is constantly changing and evolving, some change is good and some is bad.

This current issue is bad. I only have two questions for now; 1. What are we as a group going to do about it or can we even do anything about it? 2. When the complaints start coming in (and they will) do we just accept it or do we hand it back to Wells etal and tell them that we, "Can't cure stupid"?
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After 4 years of college, 3 years of experience and years of learning, we now have the opportunity to earn $25.50 per day that won't even cover most of the fees that are required to maintain the data services that are required to complete this "product." Is this a hoax? Did they leave off the first number? A BPO is better than this. No wonder the banks have needed bail outs. This is the most insulting and incredulous thing I've seen yet.
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What a mess! Hard to be it could reach such a low. Seems like they will not be happy until they can have the value before the appraisal is completed!
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You go Frank! We are meeting today to finalize our position on this product and hope to send an email blast to our licensees shortly.
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The XXXXX Board may issue an official advisory opinion regarding this product that will address the contingent fee arrangement and advise licensees of the board’s position.

Interestingly enough, there has been no response from the fine folks at Wachovia and no defense of their "product".

From the North Carolina Appraisal Board

GUIDANCE CONCERNING DESKTOP APPRAISAL ORDERS


A new desktop appraisal product was released in February 2010. The Appraisal Board has received numerous telephone calls and emails about this product and others that are similar. Although the Board does not approve or prohibit specific forms or software used to deliver appraisal results, the Board does have several concerns about this type of assignment.


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CLICK to Read More

FLORIDA - Regulate Appraisal Management Companies NOW

The Florida Real Estate Appraisal Board (FREAB) has been concerned for years about the influence of Appraisal Management Companies on Appraisers. In the interest of of protecting the public and ensuring pubic trust in the Real Estate Appraisal Profession, the FREAB has sought and supported legislation in 2003 and 2006 to assure the public the appraiser has the necessary knowledge and experience to perform the appraisal assignment competently. The efforts have avoided the regulation of companies and concentrated on enhancing the qualifications and abilities of individuals.

Because the world has changed, individuals within companies are gaming the system and influencing appraisers. Knowledge, experience, competency and quality are NOT a priority for these companies and individuals. Their priority is COST and Turnaround Time. There is plenty of evidence of potential and actual harm to the public. It's time to regulate Appraisal Management Companies. Remember, it was the unethical and illegal activity of an Appraisal Management Company that prompted the investigation and complaint by the Attorney General in New York.

Page 9, Paragraph 24. "Despite their claims of independence from their lender clients, First American and eAppraiseIT violate federal and state independence requirements with regard to appraisals performed for WaMu, and in doing so deceive borrowers and investors who rely on their proclaimed independence.

Page 11, Paragraph 29. "Almost immediately after WaMu retained eAppraiseIT to provide appraisals in early Summer 2006, WaMu’s loan production staff began complaining that the appraisal values provided by eAppraiseIT’s appraisers were too low. It was clear, and eAppraiseIT well understood, that WaMu’s dissatisfaction was largely due to the fact that eAppraiseIT’s staff and fee appraisers were not "hitting value,” that is, were appraising homes at a value too low to permit loans to close.

Page 13, Paragraph 37. "In February 2007, WaMu directed eAppraiseIT to stop using its usual panels of staff and fee appraisers to perform WaMu appraisals. Instead, WaMu’s loan origination staff demanded that eAppraiseIT use a Proven Panel of appraisers selected by the loan origination staff, who were chosen because they provided high values.

Appraiser Active has posted several times in the past year about the efforts to regulate Appraisal Management Companies.

January 26, 2009

February 25, 2009

April 13, 2009

May 15, 2009

May 19, 2009

October 8, 2009

November 4, 2009

January 17, 2010

February 2, 2010

Today, another story illustrating the danger to the public appears in the St. Petersburg Times. The poster child of Appraisal Management Company insanity makes another appearance.

Recent appraisal rules open door to shady middlemen

By Susan Taylor Martin, Times Senior Correspondent
In Print: Sunday, February 7, 2010

Last year, Global Appraisal Solutions of Clearwater hired appraiser John Viscusi to do property evaluations in the New York metro area.

But Viscusi says the company failed to pay him for 20 appraisals. And when he tried to contact the owner, Larry Holzer, he got no response.

Then Viscusi made an unsettling discovery. An Internet search for Global immediately linked him to another company, Appraisal Mediation Solutions. Its phone number: The same as Larry Holzer's. Its address: a UPS store in Clearwater close to Holzer's condo.

---

In 2007, Florida regulators permanently revoked Holzer's appraisal license because he had approved an error-filled appraisal done by a trainee under his supervision. The report didn't even have photos of the correct house.

The revocation barred Holzer himself from appraising property in Florida. But it didn't keep him from starting an appraisal management company, Global Appraisal Solutions, that could do business in Florida and every other state.

Read the whole thing.

Folks, there are bills in the Florida House and Senate to regulate Appraisal Management Companies that have been filed by Representative Matt Hudson and Senator Mike Fasano. Let these two know you support the effort and contact your State Senator or Representative and urge them to protect the public from unscrupulous individuals and companies.

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.

1 More Reason to Regulate Appraisal Management Companies

Wouldn't you know it. As soon as I publish "7 Reasons to Regulate Appraisal Management Companies in Florida", I realized the title should have been "8 Reasons". Rather than rewriting the post as ideas come to me and are suggested by others, it seems like a better idea to add posts to the blog.

It seems as though everyone and their brother is jumping on the AMC bandwagon. This company may have been in business since 1991 or since the world was an onion, but their promo demonstrates another reason AMCs must be regulated. Here is the page of interest. Among the "advantages" cited:

100% Loss Warranty - Protection from the liability of an appraisal coming back in the future that could result in a loss.

Will Match any Fee - We will insure competitive pricing and will match any quote provided in writing for any appraisal service.

How in the world can a company be an honest broker for an objective, unbiased, valuation service when the company has an interest in the outcome of the service? If the AMC warrants against loss, does it appear as though the company may have an interest in keeping the opinion of value on the low end? Might the AMC encourage the appraiser to keep the opinion of value close to the AVM estimate?

Is it curious that one of the main "advantages" cited is matching the fee quoted by their competitors? Does this imply a commitment to quality?