Customary and Reasonable Fees 2/13/2018 at 9am

I submitted a request to add an agenda item to define C&R fees to the Real Estate Appraisers Board and received a request to address the board on the issue 2/13/2018 at 9am. I have never attended a board meeting. Come and show your support for defining what customary and reasonable fees are. Send me your input on why we need a fee survey and any support for your opinions. The biggest problem with the customary and reasonable fee requirement in the Dodd Frank act was that it turned the appraisal industry over to the AMC’s and because no one ever defined C&R fees, no one ever paid them unless they cared about appraisers or getting a good appraisal. They just kept paying their low ball fees, added more work with scope creep, inane requirements, and 20% of the appraisers left the industry because it was no longer financially feasible to be an appraiser or hire a trainee.

It sounds like we are down to a little over 60,000 appraisers in the country with about 31,000 over the age of 50. How many more are still looking for a way out or a way to hang in there?

I do not think it is fair to require the AMC to do something and not define what it is. I do not think it is fair to have to accept a low ball fee just to get an AMC to admit that it’s fees are only acceptable to bottom feeders barely paying there bills. It’s not like the average appraiser can afford a lawyer. How is an appraiser going to prove that they are not doing it if there is no definition of what it is? Dodd Frank says they have to pay C&R and know one would define it. (No one is allowed to discuss what it is, because that would be price fixing) Finally Louisiana defined it and the Federal Trade Commission took them to court for price fixing. Where is the logic and how do we make this work?

Here are some items I took off the internet as reference materials.

The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203H.R. 4173, commonly referred to as Dodd–Frank) was signed into United States federal law by President Barack Obama on July 21, 2010.[1]

https://www.housingwire.com/blogs/1-rewired/post/40362-sorry-appraisers-youre-wrong-there-is-a-shortage

https://www.inman.com/2017/07/20/bad-appraiser-shortage-get-solutions/

http://blog.dwellworks.com/whats-causing-the-appraiser-shortage-and-what-can-be-done-about-it

Within the past 10 years, the number of licensed appraisers has decreased by nearly 25 percent. Furthermore, the current crop of appraisers continues to grow older. According to the Appraisal Institute, more than 60 percent of appraisers are over the age of 50 and fewer apprentices are entering the industry.

http://www.workingre.com/decoding-customary-reasonable-fees/

Decoding Customary and Reasonable Fees

by David Brauner, Editor

Congress, recognizing that quality reports are dependent on paying appraisers “fairly,” wrote a customary and reasonable fee provision into Dodd-Frank, and going further, stipulated that any independent studies to determine such fees should specifically not take into consideration fees paid by appraisal management companies (AMCs), suggesting their acknowledgment that AMC fees are artificially low.

The Interim Final Rule (IFR), provides two distinct presumptions of compliance, with respect to customary and reasonable fees under Dodd-Frank, saying that AMCs, lenders and others can meet the standard by satisfying either presumption, without having to meet both. The first presumption outlines “customary,” which seems to mean “recent” fees paid to appraisers by AMCs- the status quo in other words. The second presumption, which outlines “reasonable,” calls for the use of independent fee studies which specifically exclude fees paid by AMCs. So not only do the two presumptions of compliance contradict each other but by making compliance, in effect, customary or reasonable, the spirit of Dodd-Frank seems to be missed, if the status quo is upheld. (FindInterim Final Rule, 2010 at WorkingRE.com, Sidebar Info.)

Senior Counsel at the Federal Reserve told WRE that reliance on the first presumption of compliance alone- that is, fees that appraisers are currently accepting, is not a “safe harbor” if an AMC is challenged over customary and reasonable fees. (Federal Reserve Board policy does not permit staff to be quoted by name.) She points to this language in the IFR: “The Board understands that some AMCs have begun requiring fee appraisers to agree that the fee is customary and reasonable as a condition of obtaining the appraisal assignment. In these situations, the Board believes that an appraiser’s agreement that a fee is customary and reasonable is an unreliable measure of whether the fee in fact meets the statutory standard.”

The Board has collected comments from appraisers and will release a Final Rule, on or before the April 1, 2011 implementation date.

Passing the Smell Test
It is estimated that AMCs controlled about 10-15 percent of mortgage appraisals prior to the Home Valuation Code of Conduct (HVCC) and about 70-80 percent immediately thereafter. Many question whether this represents natural market forces at work.

https://www.appraisalinstitute.org/file.aspx?DocumentID=1685

NORTH CAROLINA APPRAISAL BOARD 5830 SIX FORKS ROAD RALEIGH, NC 27609 TELEPHONE: 919-870-4854 FAX: 919-870-4859 E-mail: ncab@ncab.org Website: www.ncappraisalboard.org

Guidance Document Customary and Reasonable Compensation for Appraisers On January 1, 2017, Session Law 2016-61 will become effective. SL 2016-61 states that: For appraisal assignments of property secured by the principal dwelling of the consumer, an appraisal management company shall compensate appraisers in compliance with section 129E(i) of the federal Truth in lending Act (15 U.S.C. §1601 et. seq.) and regulations promulgated thereunder. The Board shall adopt rules necessary to enforce this subsection. Rules establishing customary and reasonable rates shall be based on objective third-party information such as academic studies and independent private sector surveys.

The Board anticipates beginning rulemaking on this law in the near future. Until that time, however, the Board issues this Guidance Document for AMCs and appraisers to interpret and implement the requirements of SL 2016-61.

According to 12 CFR §1026.42 there are two ways in which an AMC may comply with the new law.

  1. AMCs are presumed to comply with the new law, if:
  • The AMC (agent) compensates the appraisers in an amount that is reasonably related to recent rates paid for comparable appraisal services performed in the geographic market of the property being appraised.

In determining this amount, a creditor or its agents shall review the factors below and make any adjustments to recent rates paid in the relevant geographic market necessary to ensure that the amount of compensation is reasonable:

(1) The type of property,

(2) The scope of work,

(3) The time in which the appraisal services are required to be performed,

(4) Fee appraiser qualifications,

(5) Fee appraiser experience and professional record, and

(6) Fee appraiser work quality

(b) The AMC (agent) and the Client (creditor) do not engage in any anticompetitive acts in violation of state or Federal law that affect the compensation paid to fee appraisers, including:

(1) Entering into any contracts or engaging in any conspiracies to restrain trade through methods such as price fixing or market allocation, as prohibited under section 1 of the Sherman Antitrust Act, 15 U.S.C. 1, or any other relevant antitrust laws; or

(2) Engaging in any acts of monopolization such as restricting any person from entering the relevant geographic market or causing any person to leave the relevant geographic market, as prohibited under section 2 of the Sherman Antitrust Act, 15 U.S.C. 2, or any other relevant antitrust laws.

  1. AMCs are also presumed to comply with the new law by determining the amount of compensation paid to the fee appraiser by relying on information about rates that:

(a) Is based on objective third-party information, including fee schedules, studies, and/or surveys prepared by independent third parties such as government agencies, academic institutions, and private research firms,

(b) Is based on recent rates paid to a representative sample of providers of appraisal services in the geographic market of the property being appraised or the fee schedules of those providers, and

(c) In the case of information based on fee schedules, studies, and surveys, such fee schedules, studies, or surveys, or the information derived there from, excludes compensation paid to fee appraisers for appraisals ordered by appraisal management companies.

The Appraisal Board hereby states that the Appraisal and Inspection Fees Schedule for North Carolina appraisals published by the Department of Veterans Affairs, Atlanta Regional Loan Center (VA fee schedule) is a government agency fee schedule which AMCs may use as a presumption of compliance with SL 2016-61. The Board does not require AMCs to pay appraisal fees only in accordance with the VA fee schedule. An AMC may pay a fee that differs from the VA fee, but must be able to show compliance with SL 2016-61 if a complaint is filed regarding the fee offered or paid to the appraiser. The customary and reasonable fee for a complex assignment may reflect the increased time, difficulty, and scope of work required for such an appraisal and may include an amount over and above the customary and reasonable fee for non-complex assignments. Rev. December 12, 2016

Interim Final Rule

https://icapweb.org/uploads/C%20and%20R%20Appraisal%20Fees-wording%20comparison_1430406779.pdf

CUSTOMARY and REASONABLE

(10) is this: 12 U.S.C. 3353(a). For regulations implementing TILA section 129E, 15 U.S.C. 1639e, see 12 CFR 226.42 (Board) and 12 CFR 1026.42 (Bureau).    12 CFR 226.42 has this: (f) Customary and reasonable compensation— (1) Requirement to provide customary and reasonable compensation to fee appraisers. In any covered transaction, the creditor and its agents shall compensate a fee appraiser for performing appraisal services at a rate that is customary and reasonable for comparable appraisal services performed in the geographic market of the property being appraised. For purposes of paragraph (f) of this section, ‘‘agents’’ of the creditor do not include any fee appraiser as defined in paragraph (f)(4)(i) of this section. (2) Presumption of compliance. A creditor and its agents shall be presumed to comply with paragraph (f)(1) if—

The creditor or its agents compensate the fee appraiser in an amount that is reasonably related to recent rates paid for comparable appraisal services performed in the geographic market of the property being appraised. In determining this amount, a creditor or its agents shall review the factors below and make any adjustments to recent rates paid in the relevant geographic market necessary to ensure that the amount of compensation is reasonable: (A) The type of property, (B) The scope of work, (C) The time in which the appraisal services are required to be performed, (D) Fee appraiser qualifications, (E) Fee appraiser experience and professional record, and (F) Fee appraiser work quality; and (ii) The creditor and its agents do not engage in any anticompetitive acts in violation of state or federal law that affect the compensation paid to fee appraisers, including— (A) Entering into any contracts or engaging in any conspiracies to restrain trade through methods such as price fixing or market allocation, as prohibited under section 1 of the Sherman Antitrust Act, 15 U.S.C. 1, or any other relevant antitrust laws; or (B) Engaging in any acts of monopolization such as restricting any person from entering the relevant geographic market or causing any person to leave the relevant geographic market, as prohibited under section 2 of the Sherman Antitrust Act, 15 U.S.C. 2, or any other relevant antitrust laws.

(3) Alternative presumption of compliance. A creditor and its agents shall be presumed to comply with paragraph (f)(1) if the creditor or its agents determine the amount of compensation paid to the fee appraiser by relying on information about rates that: (i) Is based on objective third-party information, including fee schedules, studies, and surveys prepared by independent third parties such as government agencies, academic institutions, and private research firms; (ii) Is based on recent rates paid to a representative sample of providers of appraisal services in the geographic market of the property being appraised or the fee schedules of those providers; And (iii) In the case of information based on fee schedules, studies, and surveys, such fee schedules, studies, or surveys, or the information derived therefrom, excludes compensation paid to fee appraisers for appraisals ordered by appraisal management companies, as defined in paragraph (f)(4)(iii) of this section.

https://www.appraisalinstitute.org/assets/1/7/U.S._Appraiser_Demos_3_1_16.pdf

https://www.marketwatch.com/story/the-number-of-real-estate-appraisers-is-falling-heres-why-you-should-care-2015-11-18

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AMC regulation passed today. Appraiser Lunch Friday December 8th at east Great Dane

I received some links to the new AMC legislation, which is supposed to be passed today. The links are below. I read through the bill and highlighted some things. You can read it. It also looks like they amended somethings, which I don’t have time to read right now. This will be a good topic for lunch next Friday at the east side Great Dane.

There were a few items not related the AMC portion. One very interesting one is You can be imprisoned for not more than 6 months for violating USPAP or any of the other rules.

AMC’s will be required to be of good moral character and major controlling entities cannot have lost an appraisal license.

Every year the AMC has to have it’s appraisers sign something saying that they are competent and where the do appraisals and for what type of property. The AMC is also required to obtain the same information before assigning an appraisal to an appraiser. If the appraiser misrepresents his qualifications he is subject to disciplinary actions.

An AMC has to regularly review the work of their appraisers and the review appraisal has to be conducted by some one who at least has a license equal to the appraiser being reviewed. Appraisal review does not include checking for grammatical, typographical, errors, completeness, including regulatory, SOW, or client requirements. It is awesome that we will at least be reviewed by a real appraiser.

Appraiser shall be paid a C & R fee. (Who is going to decide what that is?)

The AMC has to tell their client what fee I paid to the appraiser and what fee the AMC is charging.

We have to be paid within 30 days of completing an appraisal.

An appraiser is allowed to include the appraisal fee in the appraisal.

We cannot be required to say that the fee paid by the AMC is customary or reasonable.

The AMC cannot do another appraisal unless there is a reasonable basis to believe the first appraisal was flawed.

We cannot be threatened in any way to coerce the appraiser.

We cannot be required to indemnify or hold the AMC harmless for any claims brought against the AMC.

We cannot be required to change the appraisal. (Does that include requiring more comps to bracket every line of the grid? Guess that depends on the original SOW)

The AMC may not Require an appraiser to prepare an appraisal report or complete an appraisal service under a time frame that the appraiser, in the appraiser’s professional judgment, determines will not allow the appraiser to satisfy the

appraiser’s relevant legal and professional obligations, if the appraiser notifies the licensed appraisal management company in writing of that determination.

This section does not prohibit a licensed appraisal management company from asking an appraiser to consider additional appropriate property information, including additional comparable sales, to make or support an appraisal; provide

further detail, substantiation, or explanation for the independent appraiser’s value conclusion; or correct errors in the appraisal report.

You cannot be removed from an appraisal panel unless you do something wrong.

This act takes effect on July 1, 2018,

https://docs.legis.wisconsin.gov/2017/related/enrolled/sb453.pdf

https://docs.legis.wisconsin.gov/2017/proposals/reg/sen/bill/sb453

 

 

WTF Wells Fargo, Freddie Appraisal Fraud List, Appraiser Lunch

I received 2 replies to the request to do an appraiser lunch. (1 from Milwaukee) Anyone else interested? I send out emails to appraisers in the area on a fairly regular basis complete with photos and links. If you would like to be on that list let me know. I put my contact info at the bottom. The photos don’t transfer, so here are the links, sort of.

I found Freddie’s list of what to look for in an appraisal to detect fraud. How many of these things are typically in your appraisal?

Freddie Mac Fraud Screening Guide

What to do if you are put on the Freddie Mac exclusionary list.

WTF Wells Fargo?

Wells Fargo used to have a good name and the stagecoach is cool. Ever since the great depression they have been a leader in earnings. Why are they trying to promote their business as a criminal enterprise?

Here are a few blog posts from the National Real Estate Post.

https://thenationalrealestatepost.com/?s=wells+fargo

Search for Homes Here

Dean Smith

Cell: 608 712-6086

Email: RealEstateEinstein@gmail.com

Secondary Email: Dsmith@starkhomes.com

Blogs: https://realestateeinstein.wordpress.com

https://wisconsinappraiser.wordpress.com/

Website: dsmith.starkhomes.com

 

I always appreciate referrals

Now that things have slowed a bit before school starts, I thought I would send out a letter to see if there is any interest in doing an appraiser lunch. No one showed up for the last one, so I would like an RSVP. Let me know if you want to commit to lunch.

Excerpts were taken from various reports and articles from the WRA’s recent report, the Federal Housing Financing agency, the Federal Trade Commission, Housing wire, and there is a link if you would like to read more.

The attack on the appraisal industry has also slowed so much that there has been very little negative news to report. The only thing that has really been messed up is the FTC’s complaint against Louisiana for requiring C & R. There reasoning is kind of flawed because they stated “ Nearly everyone that purchases or refinances a home in the state of Louisiana pays appraisal fees, these consumers deserve to benefit from a free market where those fees are set by competition.” As if AMC’s are a benefit to consumers or even competitors to appraisers. They do not produce anything. We are one of the 7 remaining states to pass AMC legislation.

https://www.ftc.gov/news-events/press-releases/2017/05/ftc-challenges-louisiana-real-estate-appraisal-board-regulations

Last week, the state of Louisiana asked the Federal Trade Commission to pause its legal action over the state’s appraisal laws after the state’s governor and the Louisiana Real Estate Appraisers Board issued complementary orders that addressed the FTC’s charges that the board was stifling price competition by requiring that appraisal management companies follow the state’s established polices for how they pay appraisers. Well, the FTC received that request, considered it, and promptly swatted it out to half court.

https://www.housingwire.com/articles/40778-ftc-forcefully-rejects-louisianas-request-to-pause-regulatory-action-over-appraisals

As you know the real estate market has been stymied by low inventories, but listings are slowly increasing. There are currently 101 single family properties available for sale in Dane County under $200,000 and 1,237 total. There has been some desperation in buyers and I am sure we have seen offers $10,000 or more over list price. With many homes saying no showings until Saturday and all offers will be reviewed on Tuesday there is the question of whether or not it would be considered an arm’s length sale and the buyer is acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. The buyer and seller are typically motivated, well informed or well advised acting in their own best interest and a reasonable time is allowed for exposure in the open market. Could the buyer be distressed and acting on emotions?

14% of sales have been cash sales, but affordability has been pushed this summer with over a 7% increase in home prices in Madison over this time last year. Are you making market adjustments for time? Are wages rising? Where are all of these new home owners coming from?

Read Dave Stark’s latest quarterly newsletter at http://dsmith.starkhomes.com/market-source-newsletter/

He has lots of information on recent listings, showings, and pending offers. Since he has been doing a quarterly newsletter for years, it is a good resource for retrospective appraisals and reviews to put in perspective what was going on in the past.

SCWMLS http://www.scwmls.com/public/stats/stat_search/monthly_composites/2017/monthly_stats_july_2017.pdf

Federal Housing Financing Agency

The link below is for the FHFA housing price survey for the second quarter of 2017.  You can click through below to get the very detailed report giving statistics for national, state, and local price appreciation.  Remember that this survey is largely thought to be the most comprehensive and accurate gauge of home price movements, since it uses the “repeat sale” method to track prices.  This means that each time a house sells, the sale price is compared to the most recent previous sale price for the same house.  This accurately measures actual changes in home prices, as opposed to estimating them based on movements in aggregate medians or averages.  It is also more accurate than the more widely quoted Case-Shiller index, which uses a similar methodology but is not as broad based and is more influenced by higher priced homes, making is more volatile.  The differences between the indexes are spelled out in this report.

Nationwide, home prices rose 1.6% for the quarter and 6.6% year over year.  In Madison, we had stronger appreciation, with 4.3% appreciation for the quarter and 7.29% appreciation year over year.  Over the past five years, our prices have risen 21.53%, or about 4.3% per year.  Our year over year appreciation ranks 94th out of 254 metropolitan statistical areas (our area includes Dane, Sauk and Iowa Counties).

Obviously, our appreciation over the past quarter has been more than we’d like, reflecting our tight inventories.  As we head into fall, with more inventory hitting the market, we’ll watch future price movements closely.

https://www.fhfa.gov/Media/PublicAffairs/Pages/U-S-House-Prices-Rise-1pt6-Percent-in-Second-Quarter-2017.aspx

https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2017Q2_HPI.pdf

NAR Appraisal Trends Study from March

https://www.nar.realtor/sites/default/files/reports/2017/2017-03-appraiser-trends-survey-03-16-2017.pdf

Identify the extent to which certificate or license holders who are REALTORS® are actively involved in the appraisal business.

— Evaluate appraisers’ likelihood of staying in the field over the next 5 years.

— Examine levels of satisfaction with various aspects of appraisers’ work.

— Identify key drivers in the decline in the number of appraisers and explore the impact, if any, that it has had on their work.

— Explore appraisers’ perceptions as to the barriers that may exist for new entrants to the field. ◦ Examine issues related to appraiser training and determine the extent, if any, that they contribute to the decline.

— Develop a detailed description of REALTOR®-appraisers in terms of relevant characteristics.

From AI (We need some of these laws.)

http://www.appraisalinstitute.org/advocacy/washington-report/washington-report-state-news-current-issue/#6

3 States Enact Laws Protecting Appraisers

The governors of Minnesota, Oregon and Tennessee signed legislature that establishes statutes of limitations regarding civil lawsuits against appraisers. Appraisal Institute chapters petitioned for creation of these bills, and chapter members lobbied hard for their passage.

The Minnesota and Tennessee laws took effect July 1, while the Oregon law takes effect Jan. 1.

Under the new laws, any action to recover damages against a real estate appraiser must be brought within the prescribed time-period. In Minnesota and Oregon, civil actions against appraisers must be brought within six years from when the appraisal was performed. In Tennessee, the time is one year from the discovery of the act of omission giving rise to the action. However, no action can be brought more than five years after the date the appraisal was performed. Additionally, the state appraiser commission cannot consider a complaint for a disciplinary action that relates to an appraisal that was completed more than three years before the complaint was submitted.

These bills are the direct result of lawsuits and administrative complaints filed against appraisers for appraisals performed many years ago. Many of these lawsuits and complaints have been filed by the receivers of failed financial institutions and other entities that purchased the rights to sue appraisers. Most of the appraisals in question were performed during the real estate boom years ago and have now defaulted.

5 States Pass AMC Laws

HawaiiMaineNew JerseyRhode Island and South Carolina recently have enacted new laws requiring the registration and oversight of appraisal management companies. Forty-five states now have comprehensive AMC laws.

The new laws in each of the five states mostly are consistent with the federal minimum requirements established by the federal bank regulatory agencies in 2015.

Florida Makes Significant Changes to Appraiser Licensing Law

Florida Gov. Rick Scott on May 23 signed HB 927, legislation that makes two significant changes to the state’s appraiser licensing law. The law takes effect Oct. 1.

The first provision defines an evaluation and allows Florida licensed appraisers to perform them. The second provision clarifies that the Florida Real Estate Appraiser Board has the authority to adopt rules allowing for the use of standards of professional practice other than USPAP for nonfederally related transactions.

The Region X Government Relations Committee, under the leadership of Chair Wesley Sanders, MAI, advocated for this legislation, meeting with the state’s Department of Business and Professional Regulation about these two provisions. Additionally, AI professionals in Florida participated in Region X’s ValuEvent on Feb. 14 in Tallahassee, meeting with many legislators to urge support for the provisions.

Minnesota Updates Appraiser Law

Minnesota Gov. Mark Dayton on May 11 signed HF 593, legislation that makes several important changes to the state’s appraiser licensing and certification law, including issues concerning non-compliance with the appraiser licensing law and background checks.

Under the new law, an allegation of non-compliance with the appraiser licensing law that does not rise to the level of being a disciplinary action is not considered to be a formal complaint. This is an important provision because under current law, all allegations of non-compliance — including frivolous accusations — are complaints that must then be reported by the appraiser when asked if the appraiser has ever been the subject of a complaint. The new law will not require appraisers to report allegations that don’t result in a formal disciplinary action. Likewise, minor disciplinary actions are expunged from an appraiser’s public record five years after an appraiser completes any sanctions.

The new law also clarifies that only an applicant for an initial appraiser license must undergo a formal background investigation. Existing credential holders need only disclose at time of renewal if they have been convicted of any crimes involving moral turpitude or that are substantially related to the real estate valuation profession.

Importantly, the new law establishes a six-year statute of limitations on civil actions against real estate appraisers for issues not related to fraud or intentional misrepresentation. The statute of limitations accrues from the date on which the appraisal services are performed or completed.

The Government Relations Committee of the Appraisal Institute’s North Star Chapter was heavily involved in lobbying for the passage of HF 593, which took effect July 1. This major bill is the second one proposed by the chapter that has been enacted into law in the last two years.

Search for Homes Here

Dean Smith

Cell: 608 712-6086

Email: RealEstateEinstein@gmail.com

Secondary Email: Dsmith@starkhomes.com

Blogs: https://realestateeinstein.wordpress.com

https://wisconsinappraiser.wordpress.com/

Website: dsmith.starkhomes.com

 

Continue reading

The push is on to eliminate the need for an appraiser.

Things are busy, but not crazy due to a lack of inventory. Is anyone interested in getting together for lunch? Send me your thoughts.

I haven’t put out many emails in the last year in part due to some computer issues messing up my email list and the fact that there have not been too many bad things happening in the appraisal industry lately. That is amazing. If you know someone that is no longer getting my emails, let me know. I had to piece things back together and I am getting some kicked back as spam. When I have time I will try to get things figured out to get the emails going the way that they should.

The shortage of inventory is doing a number on buyers out there. Folks are starting to get a bit crazy in their attempt to get a house. We now have a new phenomenon of the weekend listing. Listings fell 11% from last month. You may see things in the MLS notes of “no showings until Saturday. Offers being presented on Sunday”. That is how crazy it is. Sellers in the first time home buyer market can go away for the weekend and come back to a pile of offers to choose from. The competing offers are hitting $10,000 or $20,000 over asking price and the buyers feel justified because that is the only way that they can win the bidding war. The question is this going to relate to market value? Is there some duress in the auction setting? Home owners seeing the feeding frenzy may become motivated to put their homes on the market to take advantage of demand. What happens when rates go up? Will they go up? The Fed says yes, but they seem to have gone down. Lenders have tightened requirements but are pushing to eliminate the need for appraisals so they can do more loans faster. Appraisers keep slowing things down and coming in under contract price.

One question is how will this affect risk for the lenders and what is this shortage of supply going to do to borrowers 5 year down the road when demand is down and rates are up. Will the lenders come back on the appraisers questioning why the homes were appraised so high 5 years ago like they did in 2008 and later. If the market is paying higher prices that would relate to market value. How will this year compare to next year?

There is an appraiser shortage, so let’s eliminate the need for the appraiser and make things better.

That is what I have been hearing from the GSE’s and AMC’s. I keep seeing and hearing about all of these moves by the major players to change the appraisal industry (Modernization they call it). Fannie and Freddie both changed their requirements for licensed appraisers to do inspections of properties for certain loans. There is a push to put out property reports where they send a person out to take pictures of the subject and then an appraiser uses the AMC’s AVM to analyze the market and choose some comps and give a value. There is a video below about a Value Net appraisal. It shows all the reasons not to use a real appraisal. There is also a link to an example of one.

They always seem to miss the elephant in the room. What about paying reasonable fees? What about eliminating AMC’s continual bombardment of revision requests? What about eliminating excessive AMC fees? What about eliminating AMC’s? There answer always seems to be to eliminate the appraiser.

https://www.fanniemae.com/singlefamily/property-inspection-waiver

http://www.freddiemac.com/learn/pdfs/uw/hve_fun_guide.pdf

The VA had a hearing speaking to appraisal related representatives about how to make the industry better. It is good that those in charge are asking questions finally about why appraisers are getting out of the business. You can listen to Phil’s comments on the Voice of appraisal broadcast. The speakers include Mr. Jeffrey London Director Loan Guaranty Service Veterans Benefits Administration U.S. Department of Veterans Affairs, Mr. Gerald Kifer Supervisory Appraiser Loan Guaranty Service Veterans Benefits Administration U.S. Department of Veterans Affairs, Ms. Michelle Bradley 2016 Real Property Valuation Committee Chair National Association of Realtors, Mr. Stephen S. Wagner, MAI, SRA, AI-GRS Vice President Appraisal Institute, Mr. Russell Johnson Chief Revenue Officer Clear Capital – See more at: http://veterans.house.gov/calendar/eventsingle.aspx?EventID=1666#sthash.hCy2I8zK.dpuf

Clear Capital was pushing the desktop appraisal at the hearing with a professional photographer doing the inspection.

The complaints include:

It takes too long to get an appraisal done.

It cost too much.

There aren’t enough appraisers.

The number of appraisers is declining.

Rising revision rates.

Appraisers are killing deals.

Delayed Profitability.

Frustrated borrowers.

Poor Quality.

Fast forward to about half way through because the video doesn’t start until then.

http://veterans.house.gov/calendar/eventsingle.aspx?EventID=1666

November Congressional hearing on Modernizing Appraisals.

https://www.youtube.com/watch?v=_XwhTQsguYI

Sample Value Net Appraisal

http://www.valuenet.com/

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April 11, 2017
The new Fannie Mae Appraiser Update keeps you on top of the latest appraisal newsHow do appraiser-related policy updates, technology changes, and industry trends affect your business? To stay on top of the latest Fannie Mae appraisal news and policies, check out the new Fannie Mae Appraiser Update, a newsletter providing periodic updates for residential appraisers serving Fannie Mae lender customers.

Our first issue covers Day 1 Certainty™, including Property Inspection Waivers (PIWs) and certainty on appraised value, Collateral Underwriter® (CU™) stats, and Selling Guide updates relevant to appraisers. Whether you’re a field appraiser or work for an appraisal management company or lender, we have the information to help you effectively serve your clients.

Read the March 2017 issue and sign up to continue to receive the Fannie Mae Appraiser Update and other appraisal-related news.
https://www.fanniemae.com/content/news/current-appraiser-newsletter.pdf

 

The government says that customary and reasonable fees are anti competitive and the Louisiana state appraiser board are gangsters.

I thought I would send out this latest news on customary and reasonable fees. So far I only have one response about lunch and that is that it be on a Tuesday or Wednesday. I know school will be getting out soon and graduations will begin, vacations will start. Work is steady and we will be seeing a bubble form in our market, but there is time for lunch this month. Can I get a show of hands of anyone who wants to meet?

The thing that we are not allowed to talk about and nobody wanted to do anything about is being challenged because someone did something about it. Louisiana is being charged with racketeering for doing what the Dodd Frank act told them to do. And to think I was just getting used to nothing bad happening in the appraisal industry.

https://www.ftc.gov/news-events/press-releases/2017/05/ftc-challenges-louisiana-real-estate-appraisal-board-regulations

2017 I Predict

It is a new year and the plethora of appraisal orders have dropped of significantly since Christmas. That appears to be due to Donald Trump getting elected, causing rates to go up ½ a point.

Last year was relatively uneventful as far as bad things happening in the appraisal industry. There was a lot of controversy over the issue of whether or not there is an appraiser shortage. The consensus by the appraisers is that there is not a shortage, just a shortage of appraisers willing to work for AMC’s. The other people seem to want to believe that there is, kind of like that appraisal buzz survey saying that the thing appraisers are most worried about is appraiser fraud. Now the GSE’s are moving toward no appraisal loans as seen in the article links below. In order to save money and time, I predict that there is going to be a big push this year to eliminate appraisals by using big data instead.

They could also save money by eliminating AMC’s. One big question is how much work will there be this year with rising rates and the GSE’s decreasing the need for appraisals.

Showings have started out robust for January and there is still a lot of demand for home purchases. I predict that the Dane County market will be similar to last spring with competition for homes as people attempt to buy a house before rates decrease affordability. The refi market will drop of as rates increase.

Freddie Mac would like to make traditional appraisals history (Washington Post)

Can computers, big data and advanced analytics replace real live humans when it comes to accurately valuing the house you want to buy? One of the two largest financial players in U.S. real estate thinks so and is preparing to introduce changes that could prove momentous — and highly controversial.

Giant mortgage investor Freddie Mac plans to dispense with traditional appraisals on some loan applications for home purchases, replacing them with an alternative valuation system that would be free to both lenders and borrowers. The company confirmed to me last week that it may begin the no-appraisal concept as early as next spring. Instead of using professional appraisers, Freddie plans to tap into what it says is a vast trove of data it has assembled on millions of houses nationwide, supplement that with additional, unspecified information related to valuation, and use the results in its assessments of applications.

Fannie Mae

Enhanced Property Inspection Waiver Frequently Asked Questions Updated November 28, 2016 Property inspection waiver (PIW) is an offer to waive the appraisal for certain refinance transactions. PIW offers are issued through Desktop Underwriter® (DU®) using Fannie Mae’s database of more than 20 million appraisal reports in combination with proprietary analytics from Collateral Underwriter® (CU™) to determine the minimum level of property valuation required for loans delivered to Fannie Mae. Effective December 10, 2016, an enhanced PIW offering will be available to all lenders via DU. This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide. In the event of any conflict with this document, the Selling Guide will govern.

Which transactions are eligible for consideration for a PIW? The PIW offer will be considered on the transactions below: § One-unit properties, including condominiums § Principal residence, second home, and investment property transactions § Limited cash-out refinance transactions up to a 90% LTV/CLTV for principal residences and second homes; up to 75% LTV/CLTV for investment properties § Cash-out refinance transactions up to a 70% LTV/CLTV for principal residences; up to a 60% LTV/CLTV for second homes and investment properties § Loan casefiles that receive an Approve/Eligible recommendation Purchase transactions and the majority of refinance transactions will not receive a PIW offer, which means they will require an appraisal by a qualified residential appraiser to establish the market value. The following are not eligible for a PIW offer: properties located in a disaster-impacted area; purchase, construction, and construction-to-permanent loans; two- to four-unit properties; loan casefiles where the value of the subject property provided to DU is $1,000,000 or greater; HomeStyle® mortgage products (Renovation and Energy); DU Refi Plus™ loan casefiles; leasehold properties, community land trust homes, or other properties with resale restrictions; cooperative units and manufactured homes; DU loan casefiles that receive an ineligible recommendation.

Congress finally listened to some of the issues in the appraisal industry. I wonder if any of those guys got re-elected? Donald is going to get rid of Dodd Frank. I wonder if that will fix the AMC issues? Will he want to replace it with something better? What will we end up with in Health Care? Something affordable? I am sure it will be big league, amazing, fantastic, super classy, and something terrific.

Donald Trump on Budget & Economy

I predict that the next big change will be the appraisal forms. They will answer all of the questions that GSE’s want answered and will be filled with big data analytics. The data will auto fill the forms and the only work that the appraiser will do is choose the data. The software company that comes up with this will be the leader in appraisal software.

I have a new website for real estate sales if you want to check it out. I will be adding more to it in the near future. Let me know if you know anyone who wants to buy or sell a house this year.

http://dsmith.starkhomes.com/

Dave Stark’s quarterly newsletter that just came out. He always has a good analysis of what happened in our real estate market and a prediction on what is to come.

http://stark.media.active-clients.com/files/rich_content_company/370/373/File/

NAMB president thinks appraisers make $250,000/year as a trainee.

Here is a post from the National Real Estate Post with the President of the National Association of Mortgage Brokers Fred Krieger. He says that appraisers in Portland Oregon are getting $1,200 to $2,500 for appraisals and he thinks that a new appraiser makes $250,000/year easy. You would think that the president of NAMB would be from the planet earth.

http://thenationalrealestatepost.com/namb-pres-addresses-appraisal-epidemic/. He is glad that Fannie Mae is going to waive the requirement for an appraisal on a loan. I am also getting the impression from watching DC RESource, the mortgage industry thinks that we are gouging consumers. It sounds more like they are getting gouged by the AMC’s and do not even know it. Nobody wants to talk to the horse, the appraiser. Even in the talk to congress, they put most of the blame of the market crash on unscrupulous appraisers. It could be the greed of the lenders, willingness to lend to anyone who had a pulse with a loan laden with fees and a penalty for paying off a loan early, and an coercion to manipulate appraisers who were only making $250 an appraisal.

 

Appraisal Gouging says appraisal fees in the Rockies are as high as $2,620. It must be time to move out west.

He also says that appraisers are trying to purposely damage AMC’s by holding orders for a month and then telling the AMC that they never accepted an order. Everyone wants to blame the appraiser for the industry’s Insanity.

http://thenationalrealestatepost.com/real-estates-greatest-challenge-2/

 

Take time and read the comments after the videos and hear the appraisers responses.

The future of the Appraisal Industry. Overhaul or Destruction?

All of a sudden after 8 years of destruction of the appraisal industry, congress finally listens. Will they do anything? We are down to 7,900 licensed appraisers in the country. Finally after 8 years the appraisal institute went before congress to discuss the over regulation and excessive requirements of the appraisal industry. There are some excerpts from the meeting on the recent voice of appraisal. The attachment and link is a summary from the appraisal institutes view on the subject.

You can also watch the whole thing at http://www.theresource.tv/homepage/modernizing-appraisal-industry-dc-weighs/ It is the second video and you might want to forward to the part where people are talking.

The call is for total change of how things are run. It’s worth watching! Send this out to other appraisers.

Eliminate bank owned AMC’s and AVM’s.

Items in the summary include making appraisers pay for AMC regulation, fingerprint and background check requirements,

How the supervisor class requirement is worthless.

The continuously changing of USPAP instead of only changing it when it needs to be changed. If standards were well written they would not need constant changing.

The TAF requirement to pay $75 for USPAP as well as the $40 per appraiser fee given to the ASC and the continuous requirement to purchase it every time it comes out.

New rules  expected to be finalized next year by the ASC will expand the agencies budget on the backs of appraisers.

There are 2 appraisers supporting examination functions in all 3 major examination agencies.

The impact of AMC’s on appraisals.

The GSE’s UAD and seller/services guidelines drive the appraisal process and are used to judge the appraisers. Appraisers are not given any input into the forms, which reduce quality and are in need of change.

Adding AMC fees covertly into appraisal fees on consumer disclosure documents.

The lack of a requirement for an appraisal to get a loan.

Fannie and Freddie have not gotten the guidelines right.

http://www.voiceofappraisal.com/

http://financialservices.house.gov/uploadedfiles/hhrg-114-ba04-wstate-wgarber-20161116.pdf

The NAR also submitted their view on the appraisal industry at http://narfocus.com/billdatabase/clientfiles/172/1/2787.pdf