Appraisers  . . . please read a letter written by Jeff Schurman, Executive Director of TAVMA - Title/Appraisal Vendor Management Association to the Board of Governors of the Federal Reserve System urging them to delay implementation of the appraisal fee provision in Title XIV of the Dodd-Frank Act. 

Download TAVMA FEE OBJECTION LETTER 8-2010

They are asking the FRB for sufficient time to define and analyze the implications of the "customary and reasonable" appraisal fee provision of the Act. 

Translation...AMC's don't want to comply with this legislation and pay appraisers a fair fee.

The TAVMA letter supports a HUD FAQ clarification in defining what a customary and reasonable fee should be:

The letter claims - 

"Yet, only one agency, the Veterans Administration (VA), publishes an appraisal fee schedule, (available at: http://www.benefits.va.gov/homeloans/fee_timeliness.asp ). These fees, however, are higher than many consumers will expect to pay in a retail mortgage transaction. 

Moreover, VA loan appraisal fees do not purport to be “customary and reasonable” for non-VA loans. Rather, they reflect “maximum allowable fees for the appraisal type” according to the VA website. Thus lenders, AMCs, and appraisers that use the VA fee schedule are very likely to distort (by artificially inflating) appraisal fees in most markets.

This could become a self-perpetuating problem, as higher “customary and reasonable” fees for non-FHA work may have the effect of increasing VA appraisal fees resulting in a vicious cycle."

Guest Post by Fred Rossiter - State Certified Residential Appraiser - Seahaven Appraisal Services

This is the second of a two-part series presenting a case for, and benefits of, centralized appraisal ordering

Benefits of Centralized Ordering: Because the lender is no longer the appraiser’s client, the appraiser’s fiduciary is to a governmental agency. The appraiser no longer has any motivation to appease the lender. Because the appraiser remains anonymous until delivery, the lender has no opportunity to influence the appraiser. This insures a true and honest appraisal of the property.

 Centralized Ordering, through a government run web site, with appraiser anonymity, would provide the perfect “firewall” needed between the appraiser and the lender.

Centralized Ordering provides the ordering, processing, delivery and payment functions of the appraisal process thus satisfying many of the functions currently provided by Appraisal Management Companies. This will reduce appraisal costs to the consumer and insure fair and customary fees to the appraiser. 

Simplicity - All residential appraisals will be ordered through one government web site. The lender would fill out the home page (engagement letter) with property and ordering information and click on the Submit Information button. The lender would then select an anonymous appraiser on the 2nd page of the web site and click on: Order an Appraisal. Once completed, the appraiser would download the appraisal report, through the web site, to the lender and the Consumer Financial Protection Agency (CFPA) for archival. Downloading the appraisal report would automatically trigger the electronic payment of the report by debiting the lender’s reserve account and crediting the appraiser’s account.

Because the lender chooses the appraiser anonymously, the lender has no opportunity to coerce or influence the appraiser or manipulate fees. The lender is not allowed to make stipulations.

Because the appraiser is allowed to determine his own fees, free from influence by the lender, the fees become market based. Appraisers wishing to increase their volume, are free to reduce their fees and appraisers wishing to charge higher fees must compete with all other appraisers on the basis of experience, qualifications and industry affiliations. Because the appraisal fee is passed on to the borrower, the lender has no incentive to order from an appraiser offering the lowest fee.  

Centralized ordering, appraiser anonymity, and fair and customary fees, determined by the market of appraisers, will halt the theft of the appraiser’s fees by lenders and AMC’s. Appraiser’s fees will no longer provide a profit center for lenders nor parasitic AMC’s. 

A government run web site would offer only USPAP compliant appraisal products. AVM’s, BPO’s and non standard appraisal products would not be available, permitted or offered. 

Centralized ordering will negate much of the need for Appraisal Management Companies. Centralized Ordering would break the existing oligopoly now enjoyed by the nation’s five largest lenders. Lender approved fee appraiser panels would no longer be permitted nor would they exist.

Appraisal Management Companies would still exist and provide quality control services only, to those lenders who chose to use them. 

Centralized Ordering would allow the US Government and designated agencies to monitor the nation’s housing market and how well the nation’s housing stock is collateralized.  

Centralized Ordering would negate the need for appraisers to establish business relationships with lenders to promote their business. These business relationships, in the past, frequently provided lenders an opportunity to coerce, intimidate and influence appraisers on their appraised values or extract low fees under the threat of reduced business.

With Centralized Ordering, every appraiser with geographic competence in a specified zip code would be exposed to every lender in the country ordering an appraisal in that specified zip code.

Every lender or mortgage company would be required to use the government run Centralized Ordering website on all new residential loans and refinances.

Centralized ordering with its built in firewall offering appraiser anonymity, and changing the appraiser’s client from the lender to a government entity would have prevented the S & L crisis in the mid 80’s, and the housing bubble and resultant crash of the housing industry and US economy in the last several years.

Part 1 - The Case for Centralized Appraisal Ordering

Download Appraisals - Centralized Ordering

Guest Post by Fred Rossiter - State Certified Residential Appraiser - Seahaven Appraisal Services

This is the first of a two-part series presenting a case for, and benefits of, centralized appraisal ordering.

 For there ever to be true appraiser independence, the direct link between the lender and the appraiser must be forever severed. A fundamental change must occur that replaces the lender as the appraiser’s client. This change would sever the appraiser’s current fiduciary to the lender.  

Moving forward, the appraiser’s new client should be the new Consumer Financial Protection Agency (CFPA), the FHA, VA or a GSE (take your pick). The appraiser’s fiduciary would be owed to a government entity who has no motivation to corrupt him and instead, is interested only in quality appraisal reports and protecting the country from another housing melt down. Only then will there be an end to the lender’s coercion, intimidation, corruption and influence of this nation’s appraisers. This paradigm shift would insure the proper collateralization of this nation’s housing stock.

I envision a government web site, run by the new Consumer Financial Protection Agency (CFPA), that would be accessed by any registered lender or mortgage broker desiring to order a residential appraisal. The Home Page would serve as an engagement letter between the appraiser and a government entity. The lender ordering the appraisal would be noted on the appraisal report, not as the client, but rather as an intended user of the report. 

The lender would populate the blank fields of the engagement letter noting the property address, zip code, contact info, type of appraisal product, turn around time requested, addendums requested, etc. No stipulations would be allowed. Once filled out, the lender would click on the Submit Information button.

The lender would then view the next page which would list appraisers (anonymously), who are actively licensed or certified, have a current E & O policy, and who are geographically competent (based upon the zip code) to appraise the subject property. Every appraiser would certify what zip codes they were geographically competent in.  

This list of (anonymous) appraisers would be generated from the Consumer Financial Protection Agency’s database. Their database would be derived from the Appraisal Subcommitttee’s national registry but include fees and particulars inputted by each participating appraiser.

Qualified appraisers would be listed randomly as: Appraiser A, Appraiser B, Appraiser C, etc., with their basic and ancillary fees. An estimated fee for the assignment would be calculated and quoted for each appraiser on this page for the lender’s consideration. The appraiser’s qualifications, years of experience and industry affiliations would be listed. The lender would select one appraiser from the list of anonymous appraisers and simply click on Order an Appraisal. In doing so, the lender has selected an appraiser anonymously.

The appraisal order (engagement letter plus any purchase contracts) would then be automatically e mailed to the appraiser. The appraiser would have time to research the property before deciding whether to accept, deny, or conditionally accept the assignment based upon a new proposed delivery date and/or fee. The appraiser would have 24 hours to respond to the order or it would be automatically canceled and the lender would then be given an opportunity to select a different appraiser. The web site would automatically notify the lender by e mail of the appraiser’s decision. 

If the appraiser accepted the assignment, he would set up the inspection time, inspect the property and complete the appraisal by the delivery date. The appraiser would be penalized, monetarily, for missing the inspection date and/or the delivery date.

Upon completion, the appraiser would download the appraisal report through the web site to the lender and the Consumer Financial Protection Agency (CFPA) where an original copy would be archived. Downloading the completed appraisal report would automatically trigger the electronic payment of the report by debiting the lender’s reserve account and crediting the appraiser’s account. 

Only upon receipt of the completed appraisal report would the lender discover the true identity of the appraiser. The lender would be able to run a Quality Assurance check of the appraisal. The lender would be permitted to contact the appraiser directly to make any corrections or revisions. And, the lender or the appraiser would be free to refer any complaints or instances of negligence, fraud or coercion to state appraisal boards through a Consumer Financial Protection Agency (CFPA) Hot Line.

In Part 2 of this series, I'll present the "Benefits" of a Centralized Appraisal Ordering System.

You are invited to the second of two FREE regression webinars hosted by David Braun, MAI of AVT.

It will be August 25th at 2:00 EST. Click here to register.

To watch the video of Webinar 1: “Introduction to Regression Analysis”

1) Load the required Webex viewer (click run to load): http://automatedvaluationtools.com/media/nbr2player.msi

2) Click the following link to watch the video: http://automatedvaluationtools.com/media/Introduction_Regression_Analysis.arf This webinar is about 40 minutes long.

FUSION, a low end USPAP compliant appraisal and report will be posted on the site very soon. It is free, but it utilizes updated verions of the Regression+ and the USL Documenter for it to run. If you purchased either of these products in the past year the updates are free. If you purchased over a year ago the update will only be $25.00 plus S&H.

Also, an updated Total Solution will posted the week of August 16th. This will meet the recent FANNIE MAE required changes. This most recent Fannie requirement is better than using the cumulative listing count, but statistically has some issues. One sample from each period for the number of listings may produce unreliable results. The Total Solution for the 1004mc form is now a FREE download. I guess you will just have buy something else (ha ha).

Upcoming Regression Analysis Seminar Chicago, Illinois (October 21-22, 2010) Directions and Hotels Here

Two day seminar (14 hours with test, 12 hours without test) Prerequisites: This seminar requires that attendees have basic (beginner) knowledge of MS Excel®.

This seminar is taught in a computer-lab setting. It presents a unique blend of theoretical knowledge and hands-on case study training. No need to bring your laptop or any software. Your computer will be provided as well as MS Excel® spreadsheet and a demonstration copy of “Regression+ for real estate professionals©” software.

At the end of this seminar participants will be able to:

• Understand how “least squares, straight-line” regression analysis works.
• Demonstrate an understanding of relevant statistical terminology.
• Understand how regression analysis relates to appraising and where traditional appraisal techniques and regression analysis overlap.
• Prepare data for analysis by “scrubbing” it in an Excel spreadsheet.
• Perform regression analysis of sales data to form an opinion of market value and extract adjustment values. o Utilizing the “Stepwise” method o Utilizing “Dummy Fields” o And, much more. ·
• Recognize the weakness (unreliability) of trending one property component at a time (such as sales price or sales price per square foot).
• Able to understand the underlying “assumptions” of regression and how to test that these assumptions have not been violated.
• Able to understand the reliability of the regression analysis results. · Decide if adding regression analysis to your appraisal practice is right for you.
• If you are a user of appraisals; determine if regression analysis can meet your valuation needs.

Click here for more information.

Fannie Mae’s post-purchase reviews of mortgage loan files have identified issues with appraisals. As a result of those reviews, new policy requirements and clarifications concerning existing lender requirements are being added to a number of appraisal sections of the Selling Guide, including:

• Inclusion of interior photographs in the appraisal report 
• Lender changes to the appraised value and guidance on addressing appraisal deficiencies 
• Appraiser selection criteria 
• Sources of comparable market data 
• Selection of comparable sales 
• Communication under the HVCC 
• Seller concessions 
• Treatment of personal property 
• Market Conditions Addendum to the Appraisal Report (Form 1004MC) 

Fannie Mae is requiring that interior photographs of specific rooms and areas be included in appraisal reports whenever an interior inspection is performed. 

 The minimum requirements for the interior photographs are described in the topic noted below. 

Updated Selling Guide Topic B4-1.2-06, Appraisal Forms and Report Exhibits 

Download Fannie SEL 2010-09 06.30.2010 released on June 30, 2010 requires that on all interior appraisals contain at a minimum the following photos:

• kitchen(s); 
• all bathrooms; 
• main living area; 
• examples of physical deterioration, if present; and 
• examples of recent updates, such as restoration, remodeling, and renovation, if present

Updated Selling Guide Topic B4-1.2-06, Appraisal Forms and Report Exhibits

Appraisers……

You can participate with the new appraiser independence regulations that are being crafted as a result of the Dodd-Frank financial reform bill.

http://www.fdic.gov/news/news/press/2010/pr10187.html

"To seek input from the widest audience possible, the public can submit views via email on how the FDIC should implement the new law. These comments will become part of the record and will be posted on the FDIC website. The public will also be able to sign up for a subscription service for receiving notices on major developments. The FDIC has also crafted bill summaries and added a fact sheet that will be regularly updated to reflect policy decisions during the implementation process. This can all be accessed at the dedicated financial reform webpage, http://www.fdic.gov/financialreform/  "

If lots of independent appraisers provide comments, the more likely it will be that your (and our) concerns will be addressed.

If you think direct client ordering of appraisals can be implemented, provide specific methods to do that which will preserve your independence but still allow business relationships.

If you don’t like that idea, then aspects of the current HVCC may be mandated – which will not help your business environment. Remember, the ‘commerce’ section of the HVCC actually had its beginning with FIRREA in 1989. Times change.

AUTHOR: Dave Towne Towne Appraisals & Appraiser Education Service, Mount Vernon, WA

Appraisers…….

I spent time Wednesday 8/04/10 discussing the Dodd-Frank law, and the “Usual and Customary Fee” mandate within it, with an experienced appraiser on the east coast. Also Wednesday, two e-mails arrived which ask appraisers to fill out a ‘fee survey.’

The basic question is ‘when are Usual and Customary Fees’ applicable to our assignments? The actual answer is July 22, the day after the President signed the bill. That fee implementation language is contained in the bill and is separate from Appraisal Independence issues that regulators will define up to 90 days later.

Some people are under the impression that there is a 90 day waiting period before fee implementation. In my opinion, that is incorrect, because the ‘up to 90 days’ as mentioned in the bill applies to the Appraisal Independence aspects of appraisal ordering only, not to fees. It is designed to allow the new “Bureau” time to write and distribute their new Interim Final Regulations (which is an oxymoron!) concerning independence issues. Those probably will be very similar to FIRREA, HVCC, FHA, and other regulators’ policies.

So what are “Usual and Customary Fees?” The answer: It Depends. There is NO one mandated fee that must be charged by the appraiser. “U&C” fees vary by region, and frankly, between appraisers in the same region.

The bill does say that “U&C” fees “may” be based on ‘evidence…established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies SHALL EXCLUDE assignments ordered by known appraisal management companies.’ The bill says ‘lenders and agents SHALL compensate fee appraisers at a rate that is customary and reasonable….in the market area…’ Complex assignments can have a higher fee than a typical basic assignment based on difficulty and additional scope of work requirements.

So, in my opinion, appraisers are free to consult various fee schedules, and decide for themselves what they will charge any client for a particular service. But I will tell you (from personal experience since July 22) that AMC’s are still ‘shopping’ appraisers to find the lowest fee.

For 20+ years, the agent business model for assignment fees has been ‘mandated’ by lender agents – for those assignments in which an agent is involved. In effect, it’s been price fixing, which is illegal. But nobody had the gonads (or desire) to seriously challenge this, and individual appraisers were powerless to reject it if they wanted to continue working for particular lenders who were using agents. Now, with the Dodd-Frank law, that model has been overturned. And with it, if the agent or lender refuses to pay a “U&C” fee to the appraiser, they can be heavily fined.

As a result of this legislation, agents and lenders are renegotiating their contracts now, anticipating that appraisers will begin asking for fees more in line with what they would normally charge local clients that don’t use agents for order placement.

There are currently two ways to research “U&C” fees in your area…VA fee tables and the alamode anonymous survey for the entire country, broken out by county.

Two other established companies are also attempting to collect fee info. One is entirely anonymous, but based on an entire state only.

The other is designed to collect contact info of the survey participant and you cannot fill out the fee survey until you provide contact info….but the survey drills down to the county level in each state and includes several different report types. I don’t appreciate this data collection aspect used to promote the sponsoring company. You can decide for yourself how accurate of required contact info you want to provide, but it may be interesting to see what kind of fee data they obtain. The other aspect of this survey is a ‘subscription’ feature which will allow lenders and agents to gain access to the data……..and possibly the contact info of the survey participants who provide the fee data. That makes me very uncomfortable.

AUTHOR: Dave Towne Towne Appraisals dtowne@fidalgo.net Washington State 360-708-1196 & Appraiser Education Service