Appraiser Active

Ken Harney Shines a Light on AMC Appraisal Fee Splits

2012-01-28T08:40:00.002-05:00

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

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

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

Ken writes:

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

and

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

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

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

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

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

2012-01-11T16:26:00.000-05:00

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

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

AMC Indemnification: Bill Introduced to Limit Use in Florida

2012-01-08T10:27:00.000-05:00

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

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

475.6245 Discipline of appraisal management companies.—

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

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

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

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

Happy New Year. Stay tuned.

Merry Christmas

2011-12-21T09:41:00.000-05:00

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

Just in case you might believe all my time is spent at the beach, the clipboard has a list of 12 sales and listings in St. Pete Beach. After 5 minutes on the beach to take a few photos for my northern US friends, it was back to work.

Appraisal Management Companies - Background Checks

2011-12-07T20:56:00.000-05:00

In the past week a reporter for my local paper, the St. Petersburg Times, wrote an article about applicants for real estate licenses with criminal convictions. Marc Puente described how some folks with what appear to be convictions for serious crimes find that is not an impediment to getting a Florida Real Estate License.

As a former member of the Florida Real Estate Appraisal Board (FREAB), I found the article interesting and informative. Although the "character" requirements for real estate licensees and real estate appraisers are similar, on more than one occasion the FREAB denied an applicant the Florida Real Estate Commission found acceptable. After reading the article I took at look at the agenda for the December meeting of the Florida Real Estate Appraisal Board. Their meeting is December 8th and 9th, 2011.

An item on the agenda is labeled "Summary of Applicants". The individuals named fall in to one or both of two categories:

Their application disclosed a criminal history record, or disciplinary action against a professional license.
Their application did not disclose a criminal history record, but the check of fingerprints by the Florida Department of Law Enforcement and/or the Federal Bureau of Investigation revealed a conviction.

Florida appraiser and appraisal management company applicants are required to disclose any criminal history and actions against any professional license in Florida or any other state.

Do you all find it interesting that of 11 names on the list of Summary of Applicants, 8 are with Appraisal Management Companies?

Knowing that folks with dubious backgrounds have started Appraisal Management Companies, and that a well known AMC recently folded and left a reported $3,000,000 in unpaid appraisal invoices, I expect the members of the FREAB will give these folks the scrutiny the law demands

Florida Real Estate Appraisal Board - New Rule to Regulate Signatures

2011-12-07T19:41:00.000-05:00

Effective as of December 20, 2011, there is a new Rule that updates signature requirements on an appraisal report and certification. This new rule, 61J1-7.0065 Signatures on Appraisal Report and Certification, was adopted by the Florida Real Estate Appraisal Board (FREAB) to comply with a recent amendment to Chapter 475, Part II. The amendment, adding 475.614(2) requires the FREAB to adopt to include requirements for protecting the security of an appraiser’s signature and prohibiting practices that may discredit the use of an appraiser’s signature to authenticate the work performed by the appraiser.

Here's the way it reads:

61J1-7.0065 Signatures on Appraisal Report and Certification.

(1) Each appraiser signing a certification of an appraisal report must sign the certification with the name that the licensee has registered with the Department. A signature may be represented by a handwritten mark or a digitized image controlled by a personal identification number, password, or other security feature. A facsimile signature may be either affixed by hand or electronically by computer software. An appraiser shall at all times maintain direct control of the appraiser’s signature.

(2) An appraiser shall develop and maintain a written method by which his or her signature shall be affixed, for its security protection and the prohibition of practices that might discredit its use.

(3) An appraiser shall not grant blanket authority to another to affix the appraiser’s signature to an appraisal report or other work performed by the appraiser. Any grant of permission to another to affix an appraiser’s signature to an appraisal report or other work performed by the appraiser shall meet the following requirements:

(a) Be in writing;

(b) Extend only to one specific appraisal report; and

(c) Be maintained in the appraiser’s work file.

Rulemaking Authority 475.614 FS. Law Implemented 475.613(2), 475.614 FS. History–New 12-4-06, Amended 12-20-11.

It might be wise to keep this rule in mind and ready for quick reference when some folks (like those mentioned in THIS post) attempt to require you to upload a copy of your digital signature.

Appraisals: What You Absolutely Need to Know

2011-11-12T10:09:00.001-05:00

This morning, November 12, 2011, along with several other speakers, I will be participating in a panel discussion as part of the National Association of REALTORS Annual Conference and Expo. Given the number of headlines, news stories and blog posts about appraisals in today's market, the topic and title is appropriate: Appraisals: What You Absolutely Need to Know.

If you're here in Anaheim attending the Conference, please stop by. The program starts at 9:00 A.M and runs until 10:30. We'll be in the Anaheim Convention Center, Ballroom A.

They're bound to put a hook on me if I talk too long, but I plan to reference the Continuing Education Course I wrote for the Bert Rodgers School to help folks get a better understanding of the appraisal process. Follow the link to he free pdf of the Bert Rodgers book, and take a look at the course starting on page 79. For you non-appraisers, I hope it helps you understand why things are the way they are. If you have a Florida real estate license, you just might like to use this course for your continuing education.

Note: I do not get a royalty on the number of courses taken; I just believe it might be informative.

Valuation Support Services (VSS) - Appraiser Panel Agreement

2011-11-06T08:27:00.001-05:00

As long as we're talking about AMC Appraiser Indemnification, here is a copy of the Valuation Support Services (VSS) Standards & Approval Documentation Requirements and their Appraiser Panel Agreement. This gem has some interesting twists and language. The full copy is available after the jump, but here are a couple of clauses I find interesting:

Page 4:

The intent of this Agreement between Valuation Support Services (VSS) and Appraiser is to outline the roles, responsibilities, commitments and escalations of the parties.

Conviction of Crimes: VSS is unable to enter into associations with individuals, who have been convicted of or plead guilty to any crime involving dishonesty or breach of trust, or have been convicted of or plead guilty to any felony or misdemeanor. Appraiser warrants he/she has truthfully and accurately answered the "Additional Information" questions on the VSS Appraiser Application, has provided full disclosure through letter(s) of explanation for all questions answered affirmatively. Appraiser acknowledges and agrees he/she will be directly involved in providing services in accordance with this Agreement and has met this standard.

Fees: VSS Reserves the right to charge fees for appraisal panel services rendered to Appraiser, such as systems access, technology and website applications utilized by Appraiser, and/or allocate the cost of state or federal appraiser/panel registration and similar fees. Advance notice, as practical, shall be provided to Appraiser along with a description of the fees to be charged. Appraiser agrees to pay VSS promptly per the payment terms specified in the notice provided. (Red Added for Emphasis) (It's RED in their agreement)

Page 6:

3. Appraiser will not accept orders directly from VSS' clients. Appraiser agrees that all orders must be received from Valuation Support Services (VSS) electronically.

4. VSS clients Appraiser may service include, but are not limited to: CoreLogic Appraisal Services, Prime Valuation Services, and RelsValuation.

Page 7:

17. Revisions to Sales Contracts: Appraiser acknowledges that in connection with his/her appraisals, he/she may receive revised sales contracts that change the purchase price due to alterations of the improvements. Upon receipt of a revised sales contract that modifies the purchase price due to alterations of the improvements, Appraiser will analyze the change(s) and make appropriate revisions to the appraisal report. The revisions to the report include changing the terms of the contract for sale in the contract section, adjusting the comparable sales as needed, and if the opinion of value is changed, providing a detailed explanation for the change in value.

(Hmmm. I wonder what a state regulatory board would have to say about this provision?)

Of course, on Page 9:

Indemnification: Appraiser will indemnify and hold harmless VSS, a division of RELS, LLC, and each VSS entity for any liability arising out of Appraiser's work product or for the release of any appraisals without VSS' permission. Appraiser is liable for payment of any legal fees, claims, damages, losses and liabilities resulting from Appraiser's work product or non-performance of the duties and obligations identified herein.

One of the best, however, is the requirement on Page 2:

Appraiser (signature)(Requires Digital Signature to be uploaded.):

All very interesting. Also interesting is the number of Florida Appraisers asked to send in a copy of a digital signature to OK this agreement, given the fact that VSS is NOT currently registered as an Appraisal Management Company with the Division of Real Estate or the Florida Real Estate Appraisal Board. The MyFloridaLicense site does not show an application in process either. Does this outfit look like a Management Company for Appraisal Management Companies?

Agreement in full is after the jump.

Valuation Support Services (VSS) Appraiser Panel Agreement

AMC Indemnification Clauses - Comments From Peter Christensen

2011-11-06T07:01:00.001-05:00

Back in August, Appraiser Active posted about NAR President, Ron Phipps' letter to the heads of the Department of Housing and Urban Development, Federal Financial Institutions Examination Council, Veteran's Administration and the Federal Housing Finance Agency encouraging the bar of indemnification clauses used by Appraisal Management Companies (AMCs). Robert Freedman provided some context in a later post on the Speaking of Real Estate blog.

Needless to say, the issue is has not yet been resolved. In the November issue of REALTOR Magazine, there is a piece written by Peter Christensen about indemnification clauses. Follow this link to his post on the Appraiser Law Blog. Peter links to the REALTOR Magazine article too.

Among many other things, indemnification clauses and appraiser independence are on the agenda for the NAR Appraisal Committee meeting next week during the NAR Annual Conference in Anaheim, California. The NAR Appraisal Committee meets Friday, November 11, 2011 from 2:00 - 4:00 P.M. at the Anaheim Marriott Hotel in Grand Ballroom F. See you there!

REALTOR®, Appraiser, or Both?

2011-10-30T23:37:00.001-04:00

If I was paid a nickel for every time someone asks if they "can be frank with me", I would have a better computer. If a nickel was paid every time someone tells me, "you're not a REALTOR®, you're an appraiser", my house would be paid off.

Clearly, there is some confusion about the term "REALTOR®" and what it means. The common misconception is to equate the term REALTOR® with home seller, agent, or broker. The fact of the matter is the term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics.

Membership in the NATIONAL ASSOCIATION of REALTORS® is available to individuals engaged in the "real estate business." "Real estate business" as defined in the bylaws of the NATIONAL ASSOCIATION of REALTORS® includes real estate brokerage, management, appraising, land development or building. An Official Interpretation of the bylaws of the NATIONAL ASSOCIATION of REALTORS® states:

"It is not an inequitable limitation on membership for a Board of REALTORS® to require that applicants for REALTOR® Membership who are principals in a real estate firm must maintain a real estate broker's or salesperson's license or must be licensed or certified by an appropriate state regulatory agency to engage in the appraisal of real property."

To be clear, the term REALTOR® may include individuals involved in real estate brokerage, but does not eliminate individuals involved in other specialties included in the definition of "real estate business."

As an appraiser, and member of the NATIONAL ASSOCIATION of REALTORS®, all the benefits of membership are available, including some of particular interest to my Appraisal specialty. These include:

The NAR Appraisal Designation Program and Fast Track Program to Designation
NAR involvement and participation in The Appraisal Foundation

Representation on The Appraisal Foundation Board of Trustees (sponsor)
Representation on The Appraisal Foundation Advisory Council (TAFAC)

The NAR Library and Information Central
Access to the Multiple Listing Service
Networking opportunities with other real estate professionals

Increased business (over half my assignments are referred to me by real estate brokers)
Using brokerage contacts as source for market information, transaction specifics and confirmation

Legislative and advocacy efforts

There are many reasons I belong to the NATIONAL ASSOCIATION of REALTORS®. Being confused with the good folks involved in real estate brokerage is not one of them.

Mayhem - Protect Yourself

2011-10-21T00:29:00.000-04:00

In addition to being entertaining, the "Mayhem" series of commercials offer a message important to any of us in business; protect yourself. My recent article in LiveValuation Magazine, "Maintaining Your Workfile" was intended to convey the idea an appraiser's best protection from Mayhem is their workfile.

The article was prompted by examination of hundreds of workfiles from appraisers of all stripes from every corner of the State of Florida. Workfiles were provided with nearly every case considered by the Florida Real Estate Appraisal Board during my eight years of service. After completing my two terms as a member of the Florida Real Estate Appraisal Board, another hundred or so workfiles have been examined as part of my continuing responsibility as a member of the FREAB Probable Cause Panel, and as an expert engaged by the Department of Business and Professional Regulation and lawyers representing appraisers.

Unfortunately, many, if not most of the workfiles maintained by appraisers fall short of the bare minimum requirements outlined in the Record Keeping Section of the Ethics Rule of Uniform Standards of Professional Appraisal Practice. Even if USPAP did not require the appraiser to keep a record of their work, data, information, and documentation to support their opinions and conclusions, it appears many appraisers fail to grasp the concept that maintenance of the workfile is for THEIR benefit and will protect them from MAYHEM.

The real prompt for the article was an appraisal review assignment accepted from an attorney representing an appraiser who was the subject of an Administrative Complaint filed against him by the Florida Real Estate Appraisal Board. The complainant, made by a well known national lender, included allegations that the opinion of value was inflated, the selection of comparable sales was poor, comparable sales were not similar to the subject property, some of the comparable sales were from outside the immediate competitive market area, and the appraiser failed to recognize and report declining prices and values.

The appraiser responded to the complaint and cooperated with the investigation. Part of the process was providing the investigator with a copy of his workfile, or what he thought was his workfile. At the time of my engagement, the attorney provided me with a copy of the complaint, the state's investigative report (including the appraiser provided workfile), and correspondence between the parties. My engagement included a review of the subject appraisal. In the process of developing my Scope of Work for the assignment, it became clear an interview of the subject appraiser was necessary, along with an examination of his actual, original workfile.

Expanding the Scope of Work to include the interview and examination of original documents was clearly the right decision. When the subject appraiser put the workfile in my hands, it was clear relevant information had not been included in the "workfile" he submitted to the state investigator. The file folder holding the loose pages was filled with notes, all related to the assignment. Within the folder were handwritten memos of conversations with the loan originator. Among these was a request that additional comparable sales be included in the appraisal report to support the appraiser's opinion of value.

My interview with the appraiser revealed that as of the effective date of the appraisal, the lender had strict guidelines for the selection of comparable sales. Highest in the lender's priority was proximity to the subject property and date of sale. Of secondary importance to the lender was similarity to the subject in physical features and size. Unfortunately, there was no reference to the lender guidelines or instructions in the appraisal report or the workfile.

To make a long story short, by reconstructing the subject appraiser's actions and thought process in developing the appraisal and writing the report, it was clear the selection of comparable sales was limited by the lender's own guidelines and instructions. As a result the most recent and proximate sales were included in the report, rather than more similar sales that happened to be distant (the subject property is a waterfront residence in a barrier island community).

Although the original appraisal report was not pretty, a review revealed the opinion of value was credible and not overstated, and the market as of the effective date was stable, rather than declining. It's too bad the appraiser failed to recognize the importance of the ALL of the information in his file, and neglected to provide the state investigator with the lender guidelines he attempted to follow. This complaint hung over his head for about 3 years and cost thousands to defend.

Proper creation and maintenance of his workfile could protect him from MAYHEM!

Remember

2011-09-11T11:18:00.000-04:00

It's not only on this day I remember.

Post from March 15, 2010 - Personal Note

LiveValuation Magazine: Neutral Valuation

2011-09-02T13:59:00.000-04:00

The September issue of LiveValuation Magazine was released online yesterday. There are several articles, but the most worthwhile is a piece written by Jonathan Miller, author of the Matrix blog.

In his opinion piece, Neutral Valuation, Miller summarizes the ordeals we have all experienced as appraisers, and makes the case for appraiser neutrality. There is much to like in this article, but I have a couple of favorite sections:

Over the past decade the global credit boom ultimately forced most experienced appraisers to choose between feeding their families or changing their business models and even their careers. The refrain “always hit the number” would get you more work. After the credit crunch, the refrain was modified to “occasionally hit the number” and you get more work. The sheer critical mass of the moral flexibility of many in our profession during the go-go credit era nurtured a whole new class of appraiser: the form filler that dominates the profession to this day. They work well with the gum-chewing 19-year-old appraisal processors who call every day on the status of an assignment, having no idea what an appraiser actually does and only cares when the report will be delivered.

and...

Following the credit crunch, the valuation bias is now in the opposite direction. In fact many of the morally flexible appraisers that were biased toward higher valuations for mortgage brokers during the boom, are the same appraisers biased toward lower valuations for appraisal management companies the in post-boom world. These appraisers are rewarded for performing high-volume work at low fees and conservative values. And these values aren’t just low by a few percentage points. We have observed values from a nationally well-known appraisal management company as much as 50 percent below current market value for a property with multiple bidders, largely because the appraisers they use have no local market knowledge.

and....

Since the beginning of my career, I’ve always held out hope that most of my clients actually wanted me to provide “the number” that represented market value. Some clearly did.

I’ve found the concept of neutral valuation to be intoxicating and powerful in my business. As a result of shifting our practice toward clients that actually want to know “the number,” we have remained at our most profitable level in our 25-year history.

Fire your retail banking clients and stop burning calories for clients that don’t want your expertise and will only pay for a form filler. If you don’t they are going to fire you eventually and your practice will die a slow death.

It is better to serve and expand on clients that actually want to know what “the number” really is. You’ll be surprised at how your quality of life improves and how much more business you are able to get.

Great work, Jonathan!

Read the whole thing.

American Banker: Appraisal Management Companies Create More Problems

2011-08-23T09:49:00.008-04:00

Here'a an opinion piece from American Banker - Appraisal Management Companies Create More Problems Than They Solve. Sure, a couple of the details about the Home Valuation Code of Conduct (HVCC), and lenders being required to place their appraisal orders with Appraisal Management Companies are not quite right, but it's hard to argue with this comment:

When the final chapter on this housing crisis is written, I hope that I am still around to see those who were responsible for its cause and the feeble attempts to fix it held responsible.

One of the worst fixes is the Home Valuation Code of Conduct. Enacted in 2009, HVCC was spearheaded by then New York Attorney General Andrew Cuomo. His objective was to rein in appraisal abuses by the lenders sending loans to Fannie Mae or Freddie Mac.

The author, Richard Booth, fails to point out the HVCC was negated by Dodd-Frank, but let's face it, the replacement has the same effect on appraisers and consumers.

Today many of these AMCs are directly or partially owned by mortgage wholesalers and large national banks. They hide behind the firewall of an independent company, but if they own that company, either in whole or a piece, who are they kidding?

Imagine needing a medical doctor and having to go through an intermediary who will decide which doctor you may visit, and that doctor is chosen primarily on his fee charged, not expertise.

Consumers are paying more for residential appraisals. The appraisers who are doing the work are receiving a fraction of what they once earned. Unfortunately this structure has chased away many good appraisers who are unwilling to do more work for much less money

and

Since the HVCC was enacted I have seen a steady decline in the quality of residential appraisal reports. I have witnessed appraisers who are traveling from out-of-state and without any basic knowledge of the subject community. Understanding the area in which you have accepted an assignment is a basic rule of appraising.
Appraisers are under pressure from their new bosses at the AMCs. An extremely knowledgeable appraiser confided in me that he is forced to produce more comparables within a specific time period, judge the future value of a home in a declining market and most recently provide aerial photographs for the subject property.

Read the entire article HERE.
.

Indemnification Clauses - UPDATE

2011-08-21T20:04:00.000-04:00

A few days ago Appraiser Active posted about a from NAR President, Ron Phipps, to federal agency heads encouraging the bar of indemnification clauses used by Appraisal Management Companies (AMCs). Brian Davis, from Appraisal Scoop, was kind enough to spread the word, and many others read the letter on the NAR Appraisal Insight blog.

Now, Peter Christensen, from the Appraiser Law blog, has a very informative new post: "What's Wrong with Most Indemnification Clauses in AMC Contractor Agreements?"

Peter echos several points that were expressed as concerns in the NAR letter. For example:

5. The clauses negatively affect the quality of an AMC's appraiser panel. All things being equal, a rational lender should have less interest in retaining an AMC that uses an unreasonable vendor agreement. I believe that unreasonable contract language results in an overall lowering of the quality of an AMC's appraiser panel because, on average, fewer appraisers who are better trained, economically stable, and careful about reading legal verbiage choose to work for AMCs with the worst agreements.

7. The bottom line. Perhaps the bottom line is that a $200-$400 appraisal can't and shouldn’t be relied on to guaranty repayment of a $1 million loan if someone later deems the appraisal “faulty.” Every appraiser performing valuations will have appraisals that can be deemed "faulty." Good appraisers should be selected and used because they are trusted as competent, reliable and honest and render opinions of value that are on average accurate and reliable and within a range of acceptable errors. They should not be employed as financial guarantors of value -- unless AMCs or lenders are willing to pay for the price of shifting that risk.

Head on over to the Appraiser Law blog to read the full post. Spread the word!

Appraisal Events - Florida Realtors® 2011 Convention

2011-08-21T19:33:00.000-04:00

From August 24 - 28, 2011, Florida Realtors host their Annual Convention & Trade Expo in Orlando. The event will be held at the Rosen Shingle Creek, 9939 Universal Boulevard, Orlando, Florida.

In addition to the regular business meetings for committees and the Florida Realtors Board of Directors, a number of education sessions will be offered on a variety of topics. There are two specific offerings available for attendees:

On Friday, August 26, 2011, the Florida Appraisal Council will meet from 1:00 - 2:30 P.M. If you are an appraiser and belong to a local association of Realtors, you are welcome to attend. The new AMC Registration laws and rules will be discussed, along with the Fast Track Application for NAR Appraisal Designations. Educational opportunities to assist in completing 2012 Continuing Education will also be planned. Your thoughts, ideas and suggestions are welcomed.

On Saturday, August 27, 2011, Rick Baumgardner, Chairman of the Appraisal Foundation Appraiser Qualifications Board, will present "What's Happening With Appraiser Qualifications?" This will be a discussion of the 4th Exposure Draft of Proposed Revisions to the Real Property Appraiser Qualification Criteria. Among other things, Rick will discuss trainee and supervisor qualifications, background checks and education.

Take a ride over to Orlando and stop by!

NAR Encourages Bar of AMC Indemnification Clauses - UPDATED

2011-08-11T15:30:00.001-04:00

UPDATED - August 15, 2011

In a letter to the heads of the Department of Housing and Urban Development, Federal Financial Institutions Examination Council, Veteran's Administration and the Federal Housing Finance Agency, NAR President, Ron Phipps, encourages the bar of indemnification clauses used by Appraisal Management Companies (AMCs).

Appraiser Active last mentioned indemnification clauses in a post about the LandSafe Appraisal Services Agreement. The folks over at the Appraiser Law Blog have written extensively about the danger to appraisers stemming from agreeing to indemnification.

A pdf of the full NAR letter is posted after the jump, but here's a preview:

Appraisers provide an independent and impartial analysis of the market, and acredible opinion of the value of real property. This analysis is a critical component of the mortgage transaction and, in recent months, has become thesubject of unnecessary pressure. The mounting use of indemnification clauses by AMCs may be interfering with the appraiser’s independence and objectivity. In many cases, appraisers are asked to sign contracts that include language to indemnify and hold harmless the AMC against any suit, threat, or claim on any work product or service provided as part of the contract agreement. In some instances, the appraiser is even required to indemnify the lender and the AMC for amounts equal to their costs in repurchasing a mortgage loan, regardless of any proof of culpability on the part of the appraiser.

Let's see if these government agencies respond to the challenge.

UPDATE - August 15, 2011: The Appraiser Law Blog has a review of the LSI Appraisal Independent Contractor Agreement. Here's an excerpt.

"LSI’s agreement itself is only three pages and does not contain many of the unreasonable provisions found in other AMC contractor agreements. However, like most AMC agreements, it does contain an indemnification provision. While the indemnification clause is not as extreme as found in some other AMC agreements, the provision in LSI’s agreement is still. . ."

"Also, we do have concerns stemming from the FDIC’s civil complaint for negligence and breach contract against LSI Appraisal relating to appraisals performed for WaMu in 2006-2008. The FDIC has specifically alleged in that case that appraisals supplied by LSI from approximately 200 of its panel appraisers were deficient and has suggested that many additional appraisals beyond the ones specifically identified may become part of the lawsuit. We will update our appraisers here on readimember.org if we begin to see LSI attempt to shift liability to individual appraisers in that case."

Letter to Regulators on AMC Indemnification Clauses

New GAO Report Released - Residential Appraisals

2011-07-14T16:23:00.000-04:00

The GAO has released their latest study of the Real Estate Appraisal Profession and the appraisal regulatory structure. This full title of the report is RESIDENTIAL APPRAISAL - Opportunities to Enhance Oversight of an Evolving Industry. It's just out, and I've not had a chance to read it all, or very closely, but it looks like the Evolving Industry referred to is Appraisal Management.

Here's a LINK to the GAO site for the document. The full document is also posted vai SCRIBD after the jump. Let me know what you think in the comments. Here are a couple of interesting excerpts:

In contrast with appraisals, BPOs do not have standard requirements and are generally not considered a credible valuation method for mortgage originations. According to some mortgage industry participants, a key disadvantage of BPOs is that real estate brokers and agents who perform them are not required to obtain training or professional credentials in property valuation, and the BPO industry lacks uniform standards. At least one industry group has developed standards of practice for BPOs, which are reportedly used by some BPO providers, but adherence to these standards is voluntary. Similarly, the industry has not adopted standardized BPO forms, resulting in differences in the content and quality of BPO reports, according to some mortgage industry participants. Additionally, BPOs provide somewhat different information than appraisals—a sales price or listing price rather than the property’s market value. The enterprises do not permit lenders to use BPOs for mortgage originations, and guidelines from federal banking regulators state that BPOs do not meet the standards for an evaluation and cannot be used as the primary basis for determining property values for mortgages originated by regulated institutions.

In the section with observations about AMCs, you'll find this:

Selecting appraisers. Appraiser groups said that some AMCs select appraisers based on who will accept the lowest fee and complete the appraisal report the fastest rather than on who is the most qualified, has the appropriate experience, and is familiar with the relevant neighborhood. They said that, with many experienced appraisers departing from the industry, less experienced appraisers, who are often willing to accept lower fees, are left to perform most of the work.
Reviewing appraisal reports. According to some appraisal industry groups, some AMCs’ appraisal reviews overemphasize how close the appraiser’s value conclusion is to an expected value generated by an AVM, at the expense of other important elements of the appraisal, such as the appropriateness of the comparable sales. One group noted instances in which AMCs told appraisers which comparable sales to use when the appraisers’ original value conclusions were not consistent with AVM-generated values.
Establishing qualifications for appraisal reviewers. Representatives of an appraisal industry group told us that some AMC reviewers may lack the expertise necessary to identify problems with quality. They noted that in some states appraiser licensing and certification requirements do not address qualifications for appraisal reviewers.

Read and Comment!

GAO Rept Residential Appraisals July 2011

U.S. House Committee on Financial Services - Hearing, July 13, 2011 - UPDATED

2011-07-12T22:00:00.004-04:00

UPDATED - VIDEO LINK ADDED

Tomorrow, July 13, 2011, the U.S. House Committee on Financial Services, Subcommittee on Insurance, Housing and Community Opportunity, will hold a hearing at 2:00 PM in 2128 Rayburn House Office Building.

The get together, entitled “Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses” has two panels of "witnesses" representing a wide array of government agencies and interest groups. These include the Federal Reserve, HUD, the Appraisal Subcommittee on the side of the government.

Interest groups to be represented include appraisers, mortgage bankers, mortgage brokers, Realtors, appraisal management companies and Hispanics. As is the custom, most of the witnesses have submitted written testimony in advance of the hearing. Some of it is interesting, some thoughtful. Portions are pandering, and some will infuriate. Most likely, you don't have time to read it all, but here are a couple of interesting excerpts:

Sara W. Stephens, MAI, CRE, representing the Appraisal Institute, includes these thoughts about Reasonable and Customary Fees:

Unfortunately, the Federal Reserve Board issued a rule that fails to implement the plain language and public policy intent of defining reasonable and customary fees as those not involving appraisal management companies – a retail fee, if you will. In our view, the reason Congress included this provision in the Dodd-Frank Act is to help ensure that appraisers receive adequate compensation for the education, experience, and time necessary to prepare credible appraisal reports. While the price of any service will always be a factor, quality and competency and transparency to the consumer should come first. Business models that helped fuel the fundamentally unsound run-up of the past decade placed far too much emphasis on pricing and bundling of services and focused scant attention on appraisal quality. Congress got it right; unfortunately, the Federal Reserve got it wrong.

National Association of Realtors representative, Steve Brown, has this to say about appraisals:

REALTORS® support and encourage credible, independent appraisals and valuations of real property, which are critical to the health of the overall real estate industry. A trustworthy valuation of real property 1) ensures the real property value is sufficient to collateralize the mortgage, 2) protects the homebuyer, 3) allows secondary markets to have confidence in the mortgage products and mortgage backed securities, and 4) builds public trust in the real estate profession. Professionally developed valuations provide an independent, objective analysis of real property. Valuations that are not credible or not independent harm communities and result in unintended consequences. The purchase of a home is the largest investment most people make. A valuation that does not properly reflect the owner’s equity and may require the owner to pay increased fees or inject unneeded additional liquidity into a collateralized loan to meet higher lending requirements. Valuations of real property that are too high give a false sense of security to homeowners seeking access to the equity in their homes and to lenders making a determination as to the security of their loan. Valuations that are too low may create a downward cycle of economic deterioration for neighborhoods and communities and cause increased cash requirements on lenders.

and, Don Kelly, speaking for both the Real Estate Valuation Advocacy Association (REVAA), on behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform provides some views of the landscape from the perspective of AMCs:

Fair is a coalition of five of the nation's largest AMCs, which operate networks of individual appraisers and appraisal firms for the completion of appraisal reports (These five AMCs include: 1. LSI, a division of Lender Processing Services, Inc; 2. ServiceLink Valuation Solutions, LLC, a Fidelity Natioinal Financial, Inc. company; 3. Valuation Information Technology, LLC d/b/a Rels Valuation; 4. CoreLogic, Inc.; and 5. PCV/Murcor. Rels Valuation is an affiliate of CoreLogic, Inc. and Wells Fargo Bank).

There are significant benefits for both an appraiser and a lender when they work with an AMC......

That's as much as I can take on that one. You'll have to follow the LINK to read the rest of Don's comments.

If there ever was a time to contact your member of Congress, this is it.

UPDATE - VIDEO LINK ADDED

It's a long hearing, almost 3 hours. To save time, check Marc Savitt at 1:35, Sarah Stephens at 1:40 and her discussion of appraisal fees at 1:42. Don Kelly talks at 1:46 and tries to justify the AMC support of unreasonable fees at 2:46.

AMC Independence Clipped in Florida - July, 2011

2011-07-04T15:31:00.001-04:00

Despite the efforts of the Florida Legislature and Appraisal Management Companies, the regulation of Appraisal Management Companies became effective July 1, 2011. The Florida Real Estate Appraisal Board posted the following on their site:

Regulation of Appraisal Management Companies – Effective July 1, 2011

On July 21, 2010 President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act requires State regulatory agencies to regulate Appraisal Management Companies (AMC). Florida’s regulatory program for AMCs was created in 2010 when House Bill 303 was signed into law. It became Chapter 2010-84 and amends Section 475, Part II, Florida Statutes..

The Department of Business and Professional Regulation has added information about the registration and regulation of Appraisal Management Companies to their FAQ site.

FS 475.6235 states in part, A person may not engage in appraisal management services for compensation in this state advertise or represent herself or himself as an appraisal management company, or use the titles appraisal management company, appraiser cooperative,appraiser portal, or mortgage technology company, or any abbreviation or words to that effect, unless the person is registered with the department as an appraisal management company under this section. However, an employee of an appraisal management company is not required to obtain a separate registration.

Additional guidance answers the question: Should I close my business while waiting for my license to be issued?

As of July 1, 2011, it is essential for an appraisal management company to immediately file an application to register with the Department; however, you can continue to operate while the Department and/or the board is considering your application for approval. Once approved, you will receive your license in the mail. An application that is denied must comply with the terms of the Final Order issued by the board.

The Department of Business and Professional Regulation, Division of Real Estate, and the Florida Real Estate Appraisal Board continue to develop the program to meet the needs of our customers. Please refer to the FAQs for AMCs and check back for more information weekly.

As of today online registration is not available. A printable application is available HERE.

There's bound to be some growing pains, but the regulation of AMCs is great for Florida consumers and real estate appraisers. Thanks to the Director of the Division of Real Estate, Juana Watkins, and her staff for putting in the extra hours to make sure the information and applications were available on the effective date of the law. Great Job!

Annual Indy 500 Post

2011-05-29T06:59:00.005-04:00

NOTE: This is a reposting from last year. My workload precluded a trip to this years 500, but Fran and I are celebrating our 1st Anniversary. We'll be watching the race at home. Video of the ceremony in Turn 3 at this LINK.

If there is one thing that captures my attention more than real estate valuation, it's racing. If it involves anything with four wheels and an internal combustion engine, I'm interested. Formula 1, American LeMans, NASCAR, NHRA, Grand-Am, Sports Car, Land Speed Record, you've got my attention.

It started when I was in 2nd grade when my Dad would pile the family into the Country Squire Station Wagon for a short drive up the road to the local 1/4 mile track, Sunshine Speedway. They ran jalopies, modifieds and stocks. It was LOUD. The cars were FAST. The action was AWESOME! We would be picking rubber off our arms and out of our hair all the way home.

I followed NASCAR religiously from the time I was 7 years old. My early favorite drivers included Fireball Roberts, Curtis Turner, Fred Lorenzen, David Pearson and Cale Yarborough. In 1963, I got hooked on the Indy 500. That was the first year Jimmy Clark ran the race in a rear engined, Ford Powered Lotus. I devoured the newspaper for stories about anything related to the race, particularly that rear engined Lotus.

Of course, Jimmy did not win in 1963, but he did finish the race. He took the pole in 1964, but didn't win until 1965. Although no driver has commanded my attention as much as Clark, the race continues to be a rite of spring for me and my family. So, isn't it amazing that my two oldest children ended up living and working in Indianapolis! I fulfilled a long time dream and attended my first 500 back in 2005; watched it from the infield! We were able to make it back to the rain shortened 2007 race, but missed 2008.

For this years' Indianapolis 500, we will be among several hundred thousand race fans, enjoying all the antics and activites of the infield. Look for us in Turn 3. Something special will happen just before the race.

HB 5007 -Delay in Florida AMC Regulation - DOWN IN FLAMES!!

2011-05-07T10:27:00.000-04:00

Since the beginning of this years' Florida Legislative Session, Appraiser Active has posted about the disaster that was HB 5007, "Reducing and Streamlining Regulations".

Well, yesterday was the last day of the 2011 session. HB 5007 had passed the House. It's companion, SB 1824, had passed the Senate. Both, however, had been amended several times in their respective chambers, and several differences had developed. The differences were significant enough for a Conference Committee to be appointed to iron them out.

The Conference report was adopted by the House, but late last night, my email inbox received this message:

H 5007 (2011) - Reducing and Streamlining Regulations - SENATE - Failed to pass as amended by Conference Committee Report; YEAS 18 NAYS 21.

LINK!!

NAR Statement on Appraiser Independence

2011-05-07T09:59:00.001-04:00

Next week, the National Association of Realtors meets in Washington, D.C. for their Mid-Year governance meetings. The NAR Appraisal Committee will meet on Wednesday, May 11, 2011 at 8:00 A.M. We will meet in the Virginia Suite A and B in the Marriott Wardman Park Hotel.

The agenda is full, and it will be a challenge to cover it all in the 2 hours allotted, but we will do our best. One item, not on the agenda, but sure to be a topic of discussion, is the recently released Statement on Appraiser Independence.

NAR Statement on Appraiser Independence

April 2011

"In recent months interference in the appraisal process has unnecessarily put at risk a sustainable housing recovery. Our member appraisers are dealing with changes in the real estate market due to economic conditions in the country, their long time business relationships with market participants have been destroyed and their business models have been shattered. The latest blow is their enduring the consequences of the implementation of aspects of the Dodd-Frank Act.

Appraisers are being asked to include distressed transactions as comparable sales, to complete the appraisal in an unreasonable and unrealistic short time span, and to comply with a scope of work not justified by the fee being offered. In some situations appraisers are required to provide as many as eight comparable sales and/or listings. NAR believes this is interference in appraiser independence, causing harm to the real estate recovery, and harmful to consumers.

This month, compliance with the Federal Reserve's interim final rule amending Regulation Z (Truth in Lending) became mandatory. Early reports indicate that some appraisal management companies may be misinterpreting the reasonable and customary fee requirements of the statute and the interim rule. Although NAR has not commented on the customary and reasonable fee language of the statute or the interim rule, we are concerned that unfair treatment of our member appraisers will further erode their businesses and impact the quality of appraisal reports, adding risk for consumers and lenders.

NAR 2010 President Ron Phipps said "asking for up to 10 comps, reducing turnaround times, and expanding the scope of the assignment without appropriately adjusting the fee is adding unnecessary risk to an already fragile mortgage market system. We must maintain an environment where our independent appraisers are treated fairly as they are the lynchpin of the mortgage transaction." NAR has long advocated for an independent appraisal process and enhanced education requirements to promote public trust in the appraisal profession. NAR wants to ensure the consumer is provided the service bargained for along with a well-supported, credible opinion of value."

Much more will be discussed. If you are a member of the National Association of Realtors, and happen to be attending the meetings, or are in the DC area, stop by. We encourage your participation.

LandSafe Appraisal Services Agreement

2011-05-07T09:44:00.000-04:00

This LandSafe Appraisal Services Agreement made its debut within the past couple of weeks. It has prompted heated discussion on appraiser bulletin boards and facebook groups. For those of you not familiar with the name, LandSafe, Inc., established in 1994, is a wholly owned subsidiary of Bank of America. Along with a wide variety of real estate closing services, LandSafe operates LandSafe Appraisal Services, Inc., an Appraisal Management Company.

A copy of the agreement is available at the link above, or below the fold. As an appraiser, it's your decision to become a party to the agreement or not, but you should take a long hard look at the obligations imposed on you.

For instance:

13.11 One aspect of the determination of Appraiser compliance with LandSafe Security Requirements is a review of Appraiser Security Controls. As a condition precedent to performance under this Agreement, Appraiser agrees to satisfy the following validation requirements: (a) participation in LandSafe’s Appraiser assessment process including the completion of online or on-site assessment(s), as appropriate, and remediation of any findings; (b) periodic discussions between LandSafe personnel and Appraiser Information Technology security personnel to review Appraiser Security Controls; and (c) if requested delivery to LandSafe of network diagrams depicting Appraiser perimeter controls and security policies and processes relevant to the protection of Confidential Information. Examples of these policies include, but are not limited to, access control, physical security, patch management, password standards, encryption standards, and change control.

and

14.1 Appraiser shall indemnify, defend, and hold harmless LandSafe and its Representatives, successors and permitted assigns from and against any and all claims or legal actions of whatever kind or nature that are made or threatened by any third party and all related losses, expenses, damages, costs and liabilities, including reasonable attorneys' fees and expenses incurred in investigation, defense or settlement ("Damages"), which arise out of, are alleged to arise out of, or relate to the following: (a) any negligent act or omission or willful misconduct by Appraiser or its Representatives engaged by Appraiser in the performance of Appraiser’s obligations under this Agreement; or (b) any breach in a representation, covenant or obligation of Appraiser contained in this Agreement.

17.1 Appraiser shall maintain at no additional cost to LandSafe, in a reasonably accessible location, all Records pertaining to its Services provided to LandSafe under this Agreement for a period of ten (10) years, and if such Records are used in a judicial (or other dispute resolution) proceeding related to an Appraisal Order(s), Appraiser shall retain them for ten (10) years following the disposition of the proceeding. Such Appraiser Records referenced above may be inspected, audited and copied by LandSafe, its Representatives or by federal or state agencies having jurisdiction over LandSafe, during normal business hours and at such reasonable times as LandSafe and Appraiser may determine. Records available for review shall exclude any records pertaining to Appraiser’s other customers deemed proprietary and confidential and Appraiser confidential and proprietary records not associated with the Services provided under the Agreement. Appraiser will give prior notice to LandSafe of requests by federal or state authorities to examine Appraiser’s LandSafe Records. At LandSafe’s written request, Appraiser shall reasonably cooperate with LandSafe in seeking a protective order with respect to such Records.

17.2 During regular business hours but no more frequently than once a year, LandSafe may, at its sole expense, perform a confidential audit of Appraiser’s operations as they pertain to the Services provided under this Agreement. Such audits shall be conducted on a mutually agreed upon date (which shall be no more than ten (10) Business Days after LandSafe’s written notice of time, location and duration), subject to reasonable postponement by Appraiser upon Appraiser’s reasonable request, provided, however, that no such postponement shall exceed twenty (20) Business Days. LandSafe will provide Appraiser a summary of the findings from each report prepared in connection with any such audit and discuss results, including any remediation plans. If audit results find Appraiser is not in substantial compliance with the requirements of this Agreement, then LandSafe shall be entitled, at Appraiser’s expense, to perform up to two (2) additional such audits in that year in accordance with the procedure set forth in this Section. Appraiser agrees to promptly take action at its expense to correct those matters or items identified in any such audit that require correction. Failure to correct such matters shall be considered a material breach of this Agreement.

Of course, there's more. Take a look at the assessment of the agreement at the Appraiser Law Blog, and their sister site, READI.

A complete copy of the LandSafe Appraisal Services Agreement is below the fold.

Landsafe Appraisal Services Agreement (2) and

Florida Legislature Committees: Delay AMC Registration Until 2014 - UPDATED

2011-04-04T12:59:00.007-04:00

SCROLL DOWN FOR UPDATE

Last year, Florida real estate brokers and appraisers expended a tremendous amount of energy, effort and human capital to ensure HB 303 passed the Florida Legislature and was signed into law by the Governor. It was clear that Appraisal Management Companies were endangering the public, improperly influencing appraisers, utilizing appraisers lacking the necessary competence, and jeopardizing transactions. As part of the negotiations, sponsors agreed to an implementation date of July 1, 2011.

The United States’ Congress recognized the same potential for danger to the public, and included a requirement for states to regulate Appraisal Management Companies in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The minimum requirements in the Dodd-Frank Act are virtually identical to those in the Florida law passed last year.

Unfortunately, the Florida Legislature, in their quest to avoid what they view to be unnecessary regulation, has several bills that seek to delay implementation of Appraisal Management Company registration until July 1, 2014. Of course, this is not explicitly stated in the several bills under consideration, and making their way through the committee process. Among them is CS/HB 5007. The language to delay implementation looks like this:

Section 58. (1) Effective upon this act becoming a law, section 10 of chapter 2010-84, Laws of Florida, is amended to read:

Section 10. This act shall take effect July 1, 2014 ~~2011~~.

(2) If this act becomes a law after June 30, 2011, this section shall operate retroactively to June 30, 2011.

The rationale provided in staff analysis is that it is wise for Florida to wait until the affected Federal Agencies adopt their rules and regulations for the states to follow. I believe this is faulty reasoning for several reasons. Among them are:

• Florida is a leader, and should not be waiting for Federal Agencies to tell us how to protect our citizens, conduct our business, or toe their line.

• There is no significant conflict between the language of HB 303 and what is required by Dodd-Frank.

• All the reasons the Florida Legislature and their committees cited in support of the law are true now; in some cases even more so.

• Delay in implementation will assist Appraisal Management Companies in transferring hundreds of thousands of dollars from Florida to other states.

• Delay in implementation will allow unscrupulous individuals with criminal records and administrative sanctions to continue to operate appraisal management companies in our state.

If real estate brokers and appraisers are serious about the immediate need to regulate appraisal management companies, it’s time to do something about it.

UPDATE - Bills to delay implementation of AMC Registration until July, 2014 are moving in both the House and the Senate.

House - CS/HB 5007

Senate - CS/CS/SB 1824

....and in the meantime, Appraisal Management Companies are routinely interfering with appraiser independence.

Appraiser Blacklists

2011-04-03T11:19:00.001-04:00

Along with discussions of Customary and Reasonable Fees, the subject of Appraiser Blacklists is most likely near the top of the list of concerns for real property appraisers. Appraiser Active has discussed them previously, and those posts are some of the most widely read on this site.

The folks at Live Valuation Magazine asked me for some comments about blacklists from an appraiser's perspective for their April issue. It's been published and delivered, and is available online. My comments are included at THIS LINK.

Ken Verrett also provided comments from an appraiser's perspective. In addition, the views of a lender and appraisal management company are presented.

I've got a few more things to say on the subject, but would like to hear what you think about the articles and the topic first. You comments are encouraged.

A New Spin on Short Sale Fraud

2011-03-30T23:11:00.000-04:00

This is a couple of weeks old, but is certainly timely. The podcast is about 18 minutes long, but you can listen while you search the interwebs for the perfect comparable sales.

Courtesy of the National Association of REALTORS.

Freddie Mac Investigator Robert Hagberg in a podcast from NAR Legal Affairs discusses some of the recent short-sale payoff fraud schemes, such as "flopping," that he’s seeing. He also discusses the various ways—good and bad—that real estate professionals are involved.

HERE is the LINK.

Florida Legislature - Major Fail

2011-03-26T09:48:00.000-04:00

Appraiser Active has already posted about CS/HB 5007. The bill is making its way through the legislative committee process. The bill, originally with the title, "Reducing and Streamlining Regulations" includes amendments to statutes regulating several professions. Among them are real estate brokers and real estate appraisers. Two sections related to real estate with the potential to weaken consumer protection.

In addition, the legislature appears to be making an attempt to solve a problem related to how the Uniform Standards of Professional Appraisal Practice is interpreted by some Administrative Law Judges as a result of a Florida Appellate Court ruling. See pages13 and 14 of the Staff Analysis for the explanation.

Below is the language proposed. Other specific references to the Uniform Standards of Professional Appraisal Practice in Chapter 475 Part I and Part II are removed. I'm not sure if the amendments will do what is intended because the section below, from page 19 of the bill, is a major FAIL.

Section 19. Section 475.628, Florida Statutes, is amended to read:

475.628 Professional standards for appraisers registered, licensed, or certified under this part. The board shall adopt rules establishing standards of professional practice that meet or exceed nationally recognized standards of appraisal practice, including those standards adopted by the Appraiser Qualifications Board of the Appraisal Foundation. Each appraiser registered, licensed, or certified under this part must ~~shall~~ comply with the rules Uniform Standards of Professional Appraisal Practice. Statements on appraisal standards which may be issued for the purpose of clarification, interpretation, explanation, or elaboration through the Appraisal Foundation shall also be binding on any appraiser registered, licensed, or certified under this part.

Please join me, and let your representatives know that the Appraiser Qualifications Board of the Appraisal Foundation does NOT adopt standards of appraisal practice. That would be the Appraisal Standards Board of the Appraisal Foundation.

I'm anxious to see what the Appraisal Subcommittee has to say about the proposed language.

Florida Legislature: Weaken Consumer Protection, Delay AMC Regulation

2011-03-26T09:10:00.000-04:00

As if there are not enough negative vibes surrounding the appraisal profession, the Florida Legislature seems to be hell bent on weakening consumer protections in Florida's real estate and appraiser licensing laws, and delaying implementation of Appraisal Management Company registration and regulation.

CS/HB 5007 is making its way through the legislative committee process. The bill, originally with the title, "Reducing and Streamlining Regulations" includes amendments to statutes regulating several professions. Among them are real estate brokers and real estate appraisers. Although some new, necessary language was added to the Committee Substitute bill, there are two sections related to real estate with the potential to weaken consumer protection.

Section 21 of the bill effectively eliminates criminal penalties for certain violations or Chapter 475, Part I, and Sections 22 eliminates criminal penalties for certain violations of Chapter 475, Part II. The logic(?) is spelled out in pages 8 and 9 of the Staff Analysis.

After spending 8 years as an appraisal regulator, the explanation does not wash with me.

The second problem with the bill is the DELAY in the implementation of AMC Registration and Regulation until July 1, 2014. Take a look at the logic(?) presented on page 12 of the Staff Analysis.

This delay is unwise, unnecessary and foolish. Consumers, real estate brokers, real estate appraisers have been paying the price for the lack of AMC regulation. All the reasons for AMC regulation are still valid. Why does the legislature believe folks like THIS deserve to continue operating AMCs in Florida?

Alert the media, and let your representatives know that delay of AMC registration and regulation will hurt consumers.

Harold Huggins Realty, et al v. FNC, Inc. - Going to Trial - UPDATED

2011-02-25T16:21:00.001-05:00

Scroll for UPDATE

Although Appraiser Active has not posted about this, we have been following the case for a while. A quick synopsis is provided on the Valuation Review blog.

In Harold H. Huggins Realt, Inc., P.E. Turner & Company, LTD., Residential Appraisal and Consulting, Inc. and Alfonoso V. Torres doing business as Front Door Appraisals vs. FNC, Inc., a trio of appraisers filed a federal class action lawsuit against the technology firm seeking damages for negligent misrepresentation, misappropriation, breach of implied contract and other charges.

A copy of the complaint against FNC, Inc. and their AppraisalPort service was posted over on WorkingRE way back when.

As with any complex litigation, particularly a class action suit, the clock and calendar have gone around several times while parties make and argue motions, and the defendant seeks to have the action dismissed. The latest action was the plaintiff's appeal of the district court’s order granting the defendant's (FNC, Inc.) motion to dismiss the case under Federal rule of Civil Procedure 12 (b)(6). (NOTE: I will not even pretend to know what that means.)

An audio of the oral argument before the United States Court of Appeals for the Fifth Circuit (New Orleans, Louisina) is available at this LINK. It takes a while to listen to the entire proceeding, but it's WORTH IT!

Yesterday, the Court of Appeals rendered their decision in favor of the plaintiffs. The Appeals Court reversed the decision to dismiss and remanded the case back for further proceedings.

Here is the Court of Appeals' decision:
FNC Case - Opinion 24Feb2011

UPDATE - March 30, 2011

The Letter of the Law page on Realtor.org has been updated with a synopsis of the case and an informative explanation of the decision.

A federal appellate court has considered whether to reinstate a possible class action lawsuit against a vendor that had allegedly promised its appraiser clients that information submitted through its system would be confidential but the vendor actually collected the information and offered it for resale.

Four real estate appraisal firms (collectively, “Appraisers”) brought a lawsuit against FNC, Inc. (“Company”). The lawsuit sought class action status for other similarly-situated appraisers and alleged that the Company had violated the Lanham Act (“Act”) by informing the Appraisers that their appraisals submitted through the Company’s AppraisalPort would be confidential when the Company was actually repackaging the data for resale.
Here is a link to the full article.

Pick a Number - Take #2

2011-02-16T17:47:00.002-05:00

On Valentine's Day, KCBS out of San Francisco, aired a story about homeowners with low appraisals, and how they are "fighting back". It's not a new story, nor is it a new argument. Appraiser Active has posted on the topic several times since the HVCC took hold back in 2009. HERE, HERE, and HERE. Folks in the brokerage community have documented plenty of sad tales and a number of stories have been written in newspapers and magazines.

Some of the claims appear to have merit; others are outrageous. The video at the link above is included because we take issue with a couple of statements made by the "experts".

“An appraisal is just an opinion,” said Tara-Nicholle Nelson, consumer educator at Trulia.com.

Sorry, Ms. Nelson, but I must disagree. An appraisal may be stated as "an opinion" but the opinion is stated in the appraisal report after research and analysis of relevant evidence, application of reason and logic, and development of the necessary approaches to value. An appraisal must be developed and reported in accordance with applicable standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP), and standards and guidelines required by client groups, government agencies, and individual clients.

Ms. Nelson also claims that “Appraisers are under regulation and under pressure to be much more conservative because they took so much pressure for inflating values at the top of the market,”

Appraiser Active has heard plenty of claims from appraisers about pressure from clients and some AMCs to be conservative, but must have missed the regulation that requires "conservative" opinions of value.

A real estate broker in the video makes the claim that 1 out of 7 deals is killed because of the appraisal. That may be her experience, but she goes on to whine about the buyer's reaction "when an appraisal doesn't come in at value".

Here's a clue for you, my dear: The negotiated sales price is not necessarily the value of the property. It may be an indication, and should certainly be considered in the development of the appraisal, but it's only one small bit of the mountain of data that will be collected, verified and analysed.

Take a look at their story, HERE, and make sure to read the comments.

Just had to get that off my chest.

How About an NAR Update!

2011-01-18T23:16:00.002-05:00

The National Association of REALTORS® met in New Orleans November 3 - 7, 2010 for their Annual Conference and Expo. As an active participant in the NAR Family, the Appraisal Committee met November 5th.

The agenda included reports from the NAR representative to The Appraisal Foundation Advisory Committee, Vic Knight, and an update about The Appraisal Foundation from the NAR representative to Board of Trustees. H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act was discussed, along with our participation in the rules-making process. The committee was briefed on the activity of the NAR HVCC Work Group, and the progress of the Realtor's Property Resource (RPR).

The Appraisal Committee learned that Joe Traynor, GAA, a past Chair of the Committee, has been selected as Chairman of The Appraisal Foundation Board of Trustees for 2011. Another past Chair of the Committee, Vic Knight, has been named as the NAR representative to the Board of Trustees. The Chair of The Appraisal Foundation's Appraiser Qualifications Board (AQB) is another past Chair of the NAR Appraisal Committee, Rick Baumgardner. Since one of the 2011 goals is to maintain NAR representation within The Appraisal Foundation, it's nice to see an early fulfillment of that aspiration. All three are good friends, and tolerate my kidding them about going over to the Dark Side.

In addition to the above accomplishments, the Committee discussed the upcoming meeting of the NAR Professional Standards Committee. Back in August, 2010, the Appraisal Committee submitted a letter to the Professional Standard Committee with several suggestions for amendments to the NAR Code of Ethics and Standards of Practice. The recommendations were considered by the Interpretations and Procedures Subcommittee, and their report would be considered by the full committee. Later, it would be considered by the NAR Executive Committee and Board of Directors.

Although not all of the Appraisal Committee recommendations were accepted, two important ones were, and approved by the Board of Directors.

Standard of Practice 3-7 was amended to recognize that appraisers do not typically "represent" a client. Realtor Appraisers, when seeking information about listed property, now must merely disclose the "relationship" with their client to the listing Realtor. Representation of the client is no longer required.

That's nice, but the Board of Directors also approved an amendment to Article 15, and Standard of Practice 15-3. An amendment to an Article of the Code of Ethics must be approved by the NAR Delegate Body. The Delegate Body will consider this amendment in Anaheim, California during their meeting on November 14, 2011. If approved, Article 15 will read:

REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses, or their business practices.

The amendment to Standard of Practice 15-3 will be effective if the change to Article 15 is adopted by the Delegate Body. It will read:

The obligation to refrain from making false of misleading statements about other real estate professionals, their businesses, and their business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the statement is false or misleading.

Since many Realtor Appraisers have expressed their concern about the Quadrennial Ethics Training Course, we're in the process assembling a group of folks to make some recommendations for course content. It's unlikely that fulfilling this education requirement will ever be a favorite for appraisers, but we aim to make the content more appropriate for our niche of the real estate profession.

Well, that's part of what the Appraisal Committee has been up to. There's more and more updates to come. There are a few appraisals on my desk to complete.
“That NAR’s Appraisal Committee be asked to provide content applicable to appraisal practice and NAR’s Code of Ethics, and that such content be developed as a separate course or an optional component of the existing Quadrennial Ethics Training Course.”

Rationale: A separate ethics course, or course component, with content applicable to appraisal practice would make the Quadrennial Ethics Training requirement more meaningful to the appraisal practitioners as they satisfy their ethical duties of REALTOR® membership.
There was one additional recommendation considered by the Professional Standards Committee: Currently, the term "competitors" is used in place of "other real estate professionals".

New Year Surprise

2011-01-16T10:39:00.000-05:00

Right around Thanksgiving, my trusty desktop computer fried a motherboard. After cleaning up a few viruses, my tech installed the old hard drive in a new used machine. After half a day spent installing all my software, I was up and running. No data was lost and I was able to recover about 5 years worth of emails and correspondence. That lasted about 10 days.

The new used machine slowed dramatically and then refused to boot. Another trip to the computer shop. My tech found a nasty virus; one he was sure that hid itself in my old hard drive. After carefully scanning all my data from the old hard drive, it was transferred to a new, larger drive along with different virus protection. Another half day was spent reinstalling all my software and a new external hard drive for backup. At this point, all my data and correspondence is still intact. Whew!

Everything was fine until 1/11/11. I'm sure you all have experienced the "joy" of having your home page changed, your search engine hijacked and rogue software installing itself on your machine. It's not pleasant, and does not contribute to productivity. Even worse, the cure for this attack cost me in the form of lost data. For some reason, my backup included only my archive of emails. As a result, I've lost the most recent 12 months of emails. That is the reason for this post. I'm not looking for pity.

Plenty of readers have emailed over the years with questions about items posted here on Appraiser Active. We've done our best to correspond help out when possible, and check back to see how things are going. With the loss of those emails, I'm in the dark.

If you have emailed me with a question, concern, or suggestion, I would appreciate hearing from you again. If I have not responded to something sent my way in the last month, it's most likely because the email has been lost. Please send it one more time.

francois @ tampabay.rr.com (just remove the spaces)

With a healthy computer I hope to catch up on work and post some REAL news soon.

All the Best for 2011

2010-12-31T10:26:00.000-05:00

Fortunately, for me, 2010 is ending with a flurry of activity. Folks are calling in with requests for valuations for estate purposes, and several lawyers have inquired about engaging me for expert witness assignments. Unfortunately, that has kept me from posting here on Appraiser Active. My resolution for 2011 is to post more regularly, and to follow up on promises of information.

HAPPY NEW YEAR!

Merry Christmas

2010-12-24T09:47:00.000-05:00

Appraiser Active wishes you a Merry Christmas. We hope you have a chance to visit St. Petersburg some winter. It's expected to be about 70 degrees later today, although the temperature is only 51 at 9:45 A.M.

Pick a Number, any Number - Who to Blame?

2010-12-14T16:37:00.003-05:00

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?

Trying to Catch Up

2010-12-05T13:48:00.000-05:00

It's been over a month since posting. Please do not take that as an indication nothing is going on; things are hopping! Over the past 30+ days, I've attended the meetings of the National Association of REALTORS® and NAR Appraisal Committee in New Orleans, finished up a big appraisal review assignment for a potential class action lawsuit, completed a few single family and condominium appraisals, and put a dent into examining 52 cases for the Florida Real Estate Appraisal Board's Probable Cause Panel.

The picture with this post shows what 52 cases looks like.

Every day, I wake up hoping to have some time to make a few comments here, and post some information. The time flys by. Although I'm still up to my eyeballs in files and have two appraisals due tomorrow before noon, I did some updating to the site by adding a few links to section on the left of this page.

Over there you will find a link to the Interagency Appraisal and Evaluation Guidelines released by the
Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); and National Credit Union Administration (NCUA). I also added a link to Fannie and Freddie's Appraiser Independence Guidelines, and the "redlined" version of TITLE XI as amended by the Dodd - Frank Act.

For your reading pleasure, the ASC produced "red lined" version of Title XI is reproduced after the jump.

As soon as the FREAB Probable Cause Panel meeting is over, I hope to provide an update of some of the goings on during the NAR Appraisal Committee meeting and NAR Board of Directors. Some good things for appraiser members of NAR are coming up.

Here is the ASC take of the effect of Dodd - Frank on Title XI of FIRREA:

Title XI as Amended by the Dodd-Frank Reform Act

Ken Harney Weighs in on the FRB Interim Final Rule (TILA Section of Dodd-Frank)

2010-10-29T19:01:00.000-04:00

If there is one national columnist with his ear close to the ground and regularly checking the pulse of the real estate and real estate appraisal professions, it's Ken Harney, of the Washington Post. In his latest column, Ken examines the Interim Final Rule released by the Board of Governors of the Federal Reserve System. The rule provides the implementation language for Appraiser Independence standards and Customary and Reasonable Fee requirements included in the Dodd-Frank Act amendments to the Truth in Lending Act (TILA).

Ken interviews a few appraisers, including Pat Turner (VA), Leslie Sellers (President of the Appraisal Institute) and yours truly. Although none of us talked with each other prior to the interview, it looks like we share the same concerns. Consumers, borrowers, and real estate agents should be concerned as well.

So what sort of changes are you likely to see? Experienced appraisers say probably not enough, at least in the proposal's current form.

"It's just a rehash of the [code]," says Pat Turner, a Richmond area appraiser and critic of the Fannie-Freddie rules.

Leslie Sellers, president of the 26,000-member Appraisal Institute, a professional group based in Chicago, says the Fed's proposals include important core principles of freedom from coercion and outside influence on valuations but don't lessen the current system's tilt toward cut-rate fees and short turnaround times over appraisal quality.

Frank Gregoire, past chairman of the Florida Real Estate Appraisal Board and incoming chairman of the National Association of Realtors' appraisal committee, says that "until the federal banking agencies decide to enforce some of the words they're putting on paper, the public can expect business as usual."
There's more, so please CLICK HERE and read the whole thing.

I've got more to say, but it's Friday night, and my wife, Fran, and I are headed out for some seafood ;-)

Federal Reserve Releases Final Interim Rule For Comment - Customary and Reasonable Appraisal Fees

2010-10-18T18:46:00.003-04:00

It's HOT off the press! Here is the Interim Final Rule and Request for Public Comment from the Board of Governors of the Federal Reserve System to amend Regulation Z, Truth in Lending.

For immediate release:

The Federal Reserve Board on Monday announced an interim final rule to ensure that real estate appraisers are free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions. The rule also seeks to ensure that appraisers receive customary and reasonable payments for their services.

The interim final rule includes several provisions that protect the integrity of the appraisal process when a consumer's home is securing the loan. The interim final rule:

Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and
Requires the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or of the appraisal management companies hired by the creditors.

The interim final rule is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance will be mandatory on April 1, 2011. Public comments are due 60 days after the interim final rule is published in the Federal Register, which is expected soon.

The Board is publishing for public comment an interim final rule amending Regulation Z (Truth in Lending). The interim rule implements Section 129E of the Truth in Lending Act (TILA), which was enacted on July 21, 2010, as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. TILA Section 129E establishes new requirements for appraisal independence for consumer credit transactions secured by the consumer’s principal dwelling. The amendments are designed to ensure that real estate appraisals used to support creditors’ underwriting decisions are based on the appraiser’s independent professional judgment, free of any influence or pressure that may be exerted by parties that have an interest in the transaction. The amendments also seek to ensure that creditors and their agents pay customary and reasonable fees to appraisers. The Board seeks comment on all aspects of the interim final rule.

HERE is a link to a pdf of the rule. I have also posted a copy of the pdf on SCRIBD. That is available after the jump.

Most appraisers have been expressing interest and concern about how the Federal Reserve Board of Governors would deal with the section of the law addressing Customary and Reasonable Fees. There's quite a bit to chew on in there. To save time, read pages 57 - 59 for an overview, and pages 124 - 130 for the rule.

What do you think?

Just in case the link above goes bad, here's another copy of the notice.
Appraisal Independence FedRes Regs

Freddie Mac - Appraiser Independence Requirements Announced

2010-10-16T08:47:00.000-04:00

On the same day Fannie Mae announced their Appraiser Independence Requirements, Freddie Mac issued a Single Family Seller/Servicer Guide Update letting the world know of their Appraiser Independence Requirements.

In their release, Freddie states :

Effective October 15, 2010 we are adopting appraiser independence requirements that maintain the spirit and intent of the Home Valuation Code of Conduct (HVCC). Freddie Mac has worked with the Federal Housing Finance Agency and Fannie Mae to develop appraisal independence requirements to replace the HVCC, which is expected to sunset this month.

Here's the Freddie Mac Appraiser Independence Requirements:

Freddie Mac Appraiser Independence Requirements 10-15-2010

Fannie Mae - Appraiser Independence Requirements Announced

2010-10-16T08:21:00.001-04:00

As expected, Fannie Mae has issued an Announcement, SEL-2010-14, with their new Appraiser Independence Requirments.

After H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, many folks cheered the sunset of the Home Valuation Code of Conduct (HVCC). Appraiser Active took a more cynical view. It looks like we were right on the money. Here's what Fannie has to say in their release:

The Appraiser Independence Requirements replace the Home Valuation Code of Conduct (HVCC). These updated requirements maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, home buyers, and the housing market.

The HVCC is being replaced by the Appraiser Independence Requirements; however, all conventional, single-family mortgage loans with application dates on or after May 1, 2009, must additionally comply with the HVCC until the earlier of the release of the Interim Final Rules by the Federal Reserve as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or November 1, 2010.

For those with an interest, the Fannie Mae Appraiser Independence Requirements:

Fannie Mae Appraiser Independence Requirements 10-15-2010

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

2010-10-02T08:27:00.000-04:00

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

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

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

Here's the agenda.

Valuation Summit Final Agenda

Appraisal Associations Comment on Dodd-Frank Rulemaking

2010-10-02T07:54:00.001-04:00

Back in August, shortly after the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, Appraiser Active commented on the rule making. Quite a few individuals have commented, along with some associations, like TAVMA.

Here is a copy of the comment letter submitted by the appraiser professional associations. It's certainly comprehensive, and provides some ideas for your comments.

Joint Letter to Federal Reserve TILA Appraisal Provisions

Fannie Mae Announcement! - More of the Same

2010-09-17T12:13:00.004-04:00

In a breathtaking SELLING POLICY UPDATE, Fannie Mae announces:

"Selling Notice: New Appraiser Independence Requirements Being Developed"

Fannie Mae has issued the following Notice (the entire text of the Notice is included in this e-mail):

Fannie Mae is working with the Federal Housing Finance Agency (FHFA) to develop and adopt appraiser independence requirements that will replace the Home Valuation Code of Conduct (HVCC). Until the revised requirements are released, the existing HVCC provisions in the Fannie Mae Selling Guide continue to apply. Updated requirements are expected to be substantially similar to the current provisions.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, HVCC will sunset when interim final regulations are released to implement the appraisal independence-related provisions of the Act, which is expected to occur on or about October 21, 2010.

Fannie Mae is committed to supporting strong appraiser independence requirements. The revised requirements will maintain the spirit and intent of HVCC, and continue to provide important protections for mortgage investors, home buyers, and the housing market.

The revised appraiser independence requirements will be based on Fannie Mae's experience under the HVCC and will continue to support the integrity of the appraisal process. As part of the process to develop the revised requirements, Fannie Mae has received input from key industry participants.

Fannie Mae expects to announce the revised appraiser independence requirements in an upcoming Selling Guide announcement.

No surprise in this release. About a month ago, in a post providing my view of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, this prediction was made:

Modifications to the TILA include the appraisal independence standards, portability of appraisals, customary and reasonable appraisal fees and sunset of the HVCC. Although it may appear as though appraisers will benefit from this section of the new law, it’s a bit early to get our hopes up. In all likelihood, the new rules for selection and retention of appraisers will look much like the HVCC.

Let's see if my low expectations for the balance of the "reforms" are on target.

More on The Appraisal Foundation Side - Jonathan Miller Interviews David Wilkes

2010-09-17T10:33:00.000-04:00

Sure, this is inside baseball, but it IS important to appraisers and the appraisal profession. Jonathan Miller has an regular feature on his blog, MATRIX, and iTunes, The Housing Helix. He interviews a variety of folks about timely topics of interest to anyone involved in real estate. This week's podcast is with David Wilkes, Chairman of The Appraisal Foundation Board of Trustees.

It's important to hear about the kerfuffle from The Appraisal Foundation's point of view. Mr. Wilkes answers some tough questions and pulls no punches. It's worth your time.

Appraisers, Dust Off the Crystal Ball - UPDATED - Realty Trac Release

2010-09-14T09:16:00.004-04:00

Scroll down for UPDATE

Although residential real estate markets are local, granular and segmented, they are most certainly subject to national events and circumstances. These days, appraisers' clients are looking for an explanation of the condition of the current market in the appraisal report, and are less interested in reading about what "has happened in the area.

Here's a couple of articles with a national view. It might be wise to consider the implications in your local market.

From the Wall Street Journal:

Banks Plans for Foreclosed Homes Will Drive Market

The speed at which house prices fall over the next few months could depend less on mortgage rates and Americans' appetite for home buying than on how banks decide to manage the huge number of foreclosed homes they own or may take from delinquent borrowers in the near future.

Unlike home owners, banks often are much quicker to slash prices to unload properties quickly.

The upshot is that, the more homes being sold by lenders, the faster prices tend to fall. That pattern was clear over the past two years: Price declines that began four years ago accelerated rapidly in 2008 as banks dumped foreclosed properties at fire-sale prices. By January 2009, the share of distressed sales had soared to 45% of all sales nationally; it was even higher in hard-hit markets such as Phoenix, according to analysts at Barclays Capital.
---
The Home Affordable Modification Program has fallen short of its goals. So far, fewer than 500,000 loans have been modified, below the target of three million to four million. Yet the program served as a "closet moratorium" on foreclosures that stanched the flow of bank-owned homes to the market, said Ronald Temple, portfolio manager at Lazard Asset Management.

The result: The share of distressed sales fell by November to 25% of home sales, and prices stabilized. After rising in the winter, the distressed share fell to 22% in June, before bouncing to 30% in July.

The problem is that these measures are wearing off. Demand plunged this summer after tax credits expired, and unsold homes are piling up. More foreclosures could move onto the market as borrowers fall out of the loan-modification program.

"We see the perfect storm brewing with rising supply and falling demand," said Ivy Zelman, chief executive of research firm Zelman & Associates and one of the first to warn of trouble five years ago. She estimated that distressed sales could account for half of the market by year-end if traditional sales didn't rebound

Read it all HERE.

And from the Huffington Post?:

Home Prices Set to Fall Further

Speaking at the Barclays Capital 2010 Global Financial Services Conference, Capital One CEO Richard Fairbank was pessimistic about the housing market and about consumer demand -- but optimistic about his bank's prospects.

Fairbank, in remarks that were broadcast on the web, was asked by an audience member whether there will be a double-dip in the housing market. He chose his words carefully. "I think we feel very cautious about the housing market," Fairbank said. "I think that even despite some of the recent months where home prices have gone up, I think it's a very plausible case for home prices to go back down again."

Full article HERE.

It would be wise to pay close attention to changes in housing supply in your local market, as well as the source of that supply.

Be careful out there.

UPDATE - Realty Trac News Release: Foreclosure Activity Increases 4 Percent in August

It looks like the Crystal Ball was working. In a press release, Realty Trac notes:

“The trend lines of decreasing default notices and increasing bank repossessions converged in August, with virtually the same number of new default notices and bank repossessions for the month — a clear indication that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers,” said James J. Saccacio, chief executive officer of RealtyTrac. “On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate, while on the back end the dammed-up inventory of properties already in foreclosure is moving to REO in steady stream rather than a flood — presumably to prevent further erosion of home prices.”

Full release HERE.

The Appraisal Foundation Comments on AI Resignation

2010-09-10T21:12:00.002-04:00

In the interest of equal time, HERE is a link to a communication from The Appraisal Foundation explaining what happened between them and the Appraisal Institute.

Below is a brief series of Q&A designed to reflect The Appraisal Foundation’s position with respect to the September 7, 2010 decision by the Appraisal Institute to withdraw as a Sponsor of The Appraisal Foundation.

Question: Why did the Appraisal Institute choose to withdraw as a Sponsoring Organization of The Appraisal Foundation?

Answer: Obviously, only the Appraisal Institute can provide their full reasoning for this decision. However, the simple response to this question is the Appraisal Institute was unwilling to accept sanctions imposed by The Appraisal Foundation as a result of their conduct as a Sponsoring Organization.

Question: What did the Appraisal Institute do or not do that The Appraisal Foundation objected to?
Answer: In simplest terms, The Appraisal Foundation expects its Sponsoring Organizations to communicate with it first regarding any matters that have a direct or indirect impact on our organization. The Appraisal Institute failed to comply with this expectation.
Read it all HERE

My only comment: Do you find the format of communications from the Appraisal Foundation as annoying as I?

It's ON!! - Appraisal Institute Withdraws Sponsorship from TAF

2010-09-07T16:00:00.001-04:00

The letter speaks for itself. Although Appraiser Active has not had much to say on the kerfuffle between the Appraisal Institute and The Appraisal Foundation, that does not mean I do not have any opinions on the matter. My belief that The Appraisal Foundation has morphed into a behemoth far beyond what had been envisioned by the original Appraisal Sponsoring Organizations is well known.

This action by the Appraisal Institute will have far reaching and lasting consequences. I applaud their testicular fortitude.

The Foundation, not so much. IMNSHO, their actions are typical of the bullying tactics usually reserved for comments to state appraiser regulatory boards.

AI Withdraws Sponsorship from TAF

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

2010-09-06T19:29:00.004-04:00

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

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

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

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

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

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

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

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

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

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

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

TAVMA, get off your knees and get with the program.

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

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

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

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

Well said, Brian. This aint brain surgery.

UPDATE - From several sources comes this tidbit:

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

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

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

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

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

Dodd-Frank Wall Street Reform and Consumer Protection Act - Now, the Rules

2010-08-23T07:12:00.002-04:00

In support of one of my observations about H.R. 4173, Dodd-Frank Wall Street Reform and Consumer Protection Act, the following quote from an editorial in today's New York Times is offered:

Read the whole thing.

The Federal Reserve must now translate the legislative language into rules that will govern how brokers, lenders, appraisers and investors behave from now on. Given the Fed’s long history of putting the financial industry first and consumer protection second, Congress will need to keep a close eye on the rule-making process.

The expectation that Congress will "keep a close eye" on anything is a stretch, however. WE must keep a close eye on the rule-making.

Although the FED will be writing the interim rules, all the Federal Banking Regulatory Agencies will be participating in the final rules. The FDIC has issued a statement announcing an "Open Door Policy for Regulatory Reform Rule-making." Time to subscribe to their emails and notices.

H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act

2010-08-17T01:13:00.001-04:00

My world was much different in the late 1980’s. Although I had been in the real estate and appraisal profession for a decade, political activity did not interest me. Here at Gregoire & Gregoire, we had been using a networked mini-computer for appraisal reporting since 1983, but I did not have an email account or address. I did not surf the web. Our clients were savings and loan associations, FHA lenders, loan discount companies (purchasers of privately originated first and second mortgages), real estate brokers, and several lawyers. All our research was completed through examination of paper and microfiche records. We went through Polaroid SX-70 film packs by the case and always kept a spare camera or two in the back seat or trunk of the car. Life was good. A career in the appraisal profession, at least here in the Sunshine State, was one coveted by many.

In-person networking with other appraisers was a regular activity, and usually accomplished at the monthly meetings of the local chapter of the Society of Real Estate Appraisers. My memory may be a little foggy, but I do remember sitting down with a few appraiser friends after a Society meeting to discuss the pending implementation of Title XI of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA). Unlike most of my peers, I was not enthused or optimistic about the new law. It was difficult to see any upside for me or the profession by involving the federal government in appraisal regulation. I lost the argument with my friends, shouted down with comments about “professionalism” and “national standards”.

About 20 years after that discussion, technology has influenced many of the actions involved in the research, development and reporting of appraisals. Our ability and means to research and communicate has improved exponentially, and personally, my interest in regulation, government, and politics has become an obsession. The nature of some folks within the sphere of real property, loan origination, lending and banking is, unfortunately, just as it was. A mere 25 or so years after the disintegration of the savings and loans that prompted FIRREA, the country finds itself in the midst of an even worse financial mess. In response to crisis, and true to form, Congress has once again sprung into action to save us all. Their solution is H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Appraiser associations, individual appraisers, real estate associations, real estate brokers and BANKERS had seats at the table when Subtitle F, the Appraisal Activities section of the Dodd – Frank bill, was crafted. Using 21st century technology, following the progress of the bill, communication with my elected representatives, the House and Senate Committees, and the Conference Committee was a regular event once the Senate took it up. It seems as though everyone got a little piece added here and there. Some interest groups won and some lost. How did appraisers fare? Based on my read of the legislation, these are the provisions with the most impact on appraisers and the profession:

Appraiser independence standards have been added to the Truth in Lending Act (TILA)
Conflicts of interest are defined and prohibited on the part of appraisers and appraisal management companies (AMCs)
Reporting of appraiser violations of the Uniform Standards of Professional Appraisal Practice (USPAP) by persons involved in real estate transactions is mandated
Regulations facilitating appraisal portability will be issued
Customary and reasonable fees for appraisers mentioned
Sunset of Home Valuation Code of Conduct (HVCC)
The deminimus must be agreed to by Bureau of Consumer Financial Protection
State registration of AMCs required

AMCs owned and controlled by financial institutions exempt from state registration

Minimum requirements established for AMCs
Appraisal Subcommittee (ASC) will maintain national registry of appraiser management companies and collect registry fee from states
ASC can increase appraiser registry fee collected from states
ASC gains ability to make grants to state appraiser regulatory agencies
ASC may impose sanctions, short of non-recognition, against states
Office of Thrift Supervision is axed from the ASC and Federal Housing Finance Agency and Bureau of Consumer Financial Protection added
Appraiser Qualifications Board (AQB) gets new charge

Establish requirements for Trainee Appraiser
Establish requirements for Supervisory Appraiser
States are required to comply with AQB requirements for Licensed Appraisers

Automated Valuation Models (AVMs) must comply with quality control standards

Appraisal Standards Board (ASB) to promulgate AVM regulations

Restriction on use of Broker Price Opinions (BPO) for loan origination created
Borrowers entitled to copies of all appraisals and valuations
Government Accountability Office (GAO) Study of the Whole Ball of Wax

There’s not enough space to comment on each and every section, but here are a few thoughts:

All the appraisal related modifications made to the TILA call for “Rules, Interpretative Guidelines, and General Statements of Policy” to be issued by the Board of the FED, Comptroller of the Currency, National Credit Union Administration Board, Federal Housing Finance Agency and the new Bureau of Consumer Financial Protection. Interim regulations will be prescribed by the Board of the FED. Even reading between the lines, I can’t find any appraisal related agency in that group. As is the Appraisal Subcommittee, it’s dominated by banking regulators.

Modifications to the TILA include the appraisal independence standards, portability of appraisals, customary and reasonable appraisal fees and sunset of the HVCC. Although it may appear as though appraisers will benefit from this section of the new law, it’s a bit early to get our hopes up. In all likelihood, the new rules for selection and retention of appraisers will look much like the HVCC. Although customary and reasonable fees are required, by my reading, the amendments do not provide for a clear enforcement mechanism, other than the banking agencies. Personally, there is discomfort with any agency of the federal government, especially a federal banking agency, passing judgment on the reasonableness of my professional fees. The groups charged with the task of ensuring appraisal portability do not have an appraiser’s understanding of Client, Intended User of Intended Use. Although there may not be mandatory requirements imposed on appraisers, it will be no surprise if fee appraisers end up obliged to furnish copies of reports to more than one loan originator to facilitate their idea of portability.

The TILA amendments seem to be generating the most buzz in the appraisal community, but the amendments to FIRREA will have a much more serious and severe impact on appraisers and the profession. These changes will cost appraisers money, impose new requirements and may have significant detrimental effects on our businesses.

A new requirement requires AMCs to be registered with the states. Those states, possessions and territories not regulating AMCs must establish a program within about 3 years. Although many states have already adopted such legislation, the federal banking agencies, along with the new Bureau of Consumer Financial Protection will establish the minimum requirements for the state AMC registration programs, and inform the states of the “correct” means of corralling the activities of these brokers of valuation services; AMCs. Of course, the huge AMCs owned and operated by financial institutions already regulated by one of the banking agencies are exempt from state registration.

Do you see a pattern? Was the Dodd-Frank Wall Street Reform and Consumer Protection Act designed to protect consumers and appraisers, or was it crafted to concentrate power, influence and control with another group?

All AMCs will pay a registry fee and be included in an ASC registry. Although some AMCs are not required to register with states (those owned and controlled by the banks), it appears states are responsible for collecting the fees to be remitted to the Appraisal Subcommittee. These fees will be based upon the number of appraisers contracting with the AMC, and are subject to an ASC imposed minimum amount. There may be cheer erupting from the appraiser community on this point of the law, but you should expect the AMC registry cost to be passed on to their contract fee appraisers and be cited as a reason to limit the size of a particular AMCs panel. In fact, several AMCs are already informing appraisers that their end of the appraisal fee will be reduced by $25 - $50. The excuse is the ASC registry fee.

Of course, Congress did not pass up an opportunity to raise the registry fees for appraisers either. The stated annual maximum increases from $25.00 to $40.00 a year, and could increase to as high as $80.00 with the approval of the Federal Financial Institutions Examination Council (FFIEC - another group of banking regulatory agency chiefs).

With a 60% increase in the registry fee, where will all the extra money go? In a classic transfer of wealth scheme, the Appraisal Subcommittee gains the ability to make grants to state appraiser regulatory agencies to assist in their enforcement efforts. It would be a surprise if states with effective appraiser regulatory programs will receive grants. In other words, successful programs will subsidize ineffective systems.

Of course, the registry fee tax on appraisers funds the operation of the ASC, but it is also distributed The Appraisal Foundation, the ASB and the AQB in the form or grants. In fact, since 1989, the ASC has disbursed over $12,500,000 to The Appraisal Foundation. Over $2,750,000 of that was transferred to The Appraisal Foundation over 2008 – 2009. Given the fact the ASB and the AQB have new charges as a result of the Dodd-Frank amendments to FIRREA, count on The Appraisal Foundation being first in line with a request for a substantial grant.

Real Property Appraiser Qualification Criteria, developed by the AQB, has already been adopted for Licensed Appraisers and Trainee Appraisers. The AQB will need a grant to create minimum qualification requirements for Supervisory Appraisers. Get ready for exposure drafts, comments on exposure drafts, even more exposure drafts and, an eventual edict from the AQB concerning Supervisory Appraisers. Sure, the members of the AQB are honorable people and will likely produce Qualification Criteria that many consider to be reasonable. My concern is that the AQB is the final authority; the board operates autonomously, and there is no regulatory body designated as authorized to hear an appeal of their decrees.

The ASB is given the task of consulting with The FED, Comptroller of the Currency, National Credit Union Administration Board, Federal Housing Finance Agency, the new Bureau of Consumer Financial Protection and the staff of the ASC to develop regulations and quality control standards for AVMs. Of course, a grant from the ASC to the ASB is likely. My take on the Dodd – Frank language is that it opens up the possibility for increased use of AVMs for mortgage lending purposes. Keep in mind the entities involved in crafting rules and regulations and cross your fingers if you believe their decisions will be made with a tilt in favor of the appraisal profession.

Although The Appraisal Foundation was created through the efforts of professional appraiser associations for the advancement of professional valuation, it can be argued the organization has morphed into something never imagined by the original sponsoring organizations. The Appraisal Foundation Advisory Council (TAFAC) and the Industry Advisory Council (IAC) are dominated by non-appraisal organizations, many of which are involved in banking, lending, and appraiser panel management. As a result, some have suggested, decisions made by The Foundation and its independent boards tilt more to the interests of users of professional appraisal services than to the appraisers that pay the freight and are bound by the standards. That determination; I’ll leave it to you.

One encouraging aspect of the Dodd – Frank Wall Street Reform and Consumer Protection Act is an amendment to Section 1104(b) of FIRREA. The change will require the ASC to meet in public session after notice is given. Unfortunately, The Appraisal Foundation, ASB and AQB escape obedience to the same open meeting standard. Sure, the ASB and AQB hold some meetings in public, their important discussion is accomplished behind closed doors. It’s probably fair to say that any resolution adopted by either the ASB or AQB in a public meeting is a mere confirmation of a decision debated and decided in secret, behind closed doors. In this day and age, there is no credible reason for surreptitious deliberation of appraisal standards and appraiser qualifications. Regulatory boards, government agencies and tribunals all over the country routinely conduct all their business in the sunshine. Even if these boards are making sound decisions, their furtiveness encourages suspicion, especially among those subject to the regulations.

Clearly, I am not among the appraisers jumping for joy and singing the praises of the Dodd – Frank bill. It would not surprise me if, just as in 1989, I am in the minority holding that opinion.

In preparation for recognition of the 15th anniversary of FIRREA, I was asked my thoughts. Here’s what I said in August, 2004:

“In my humble opinion, at least in my part of the country on the residential side, the result of increased regulation and federal oversight has contributed to an oversupply of minimally qualified appraisers, the diminishment of quality education and the unfortunate loss in prestige of several professional associations."

"Fifteen years after FIRREA, it seems as though appraisers are held in lower esteem, their opinions and services are often regarded as unnecessary, burdensome and impediments to commerce, and a higher percentage of our ranks are occupied by individuals hell bent on developing one 'skill' — filling a form with canned comments."

My views of federal interference in appraiser regulation will change when it’s demonstrated that the amendments in the Dodd – Frank Bill address the damage to the appraisal profession, and to the public trust of it, caused by FIRREA.

NOTE: Although I maintain membership is several professional associations, the views expressed are my own, and do not reflect the policy or position of any organization.

UPDATE: Text and Title changed to correct the bill number - sheesh!

Work in Progress - Post on H.R. 4173 The Dodd-Frank Bill

2010-08-15T23:11:00.002-04:00

In between appraisal reports, speaking to groups about market conditions, and working on Holly Benson's Campaign for Florida Attorney General, I've been writing an opinion piece about the appraisal related sections of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act. (848 page pdf)

It's near completion. Copies have been circulated among some columnists, bloggers, appraisal regulators, and trusted appraisers for comment. Portions may be posted on some other sites as quotes, but the entire piece should appear here on Appraiser Active within the week.

Check back soon!

UPDATE: It's DONE!

For Friday the 13th - A Little Bit of Humor

2010-08-13T13:53:00.000-04:00

My close friends know I harbor a few superstitions. One of them has to do with Friday the 13th. I never plan anything of significance for this day. Although I'm in the middle of several important assignments, there is no way my signature will be affixed to a document with today's date.

Instead, I offer this video about BPOs or Broker's Price Opinions.

Hat tip to Cherolyne Fogarty from Walk the Talk Presentations.

Time For Politics - Holly Benson for Florida Attorney General - UPDATED!

2010-08-05T22:33:00.002-04:00

Although Appraiser Active enjoys readers from across the United States and has visits from each continent (except Antarctica), I am a Florida State-Certified Appraiser and interested in the future of the Sunshine State. Since I'm "On a Quest to Improve the Profession" it's important to be involved in the political process. We appraisers and real estate practitioners have a chance to help elect a candidate with firsthand knowledge of our professions as Florida Attorney General.

As a member of the Florida Real Estate Appraisal Board (FREAB) from 2000 until early 2008, I had the opportunity to work with 5 different individuals that served as Secretary of the Department of Business and Professional Regulation (DBPR). Not all of them were interested in real property appraisal and real estate brokerage. Holly Benson, appointed as Secretary of DBPR in late 2006, distinguished herself by taking an interest.

Although the DBPR is a huge state agency, responsible for licensing and regulating over 1,000,000 in the state of Florida, Holly made it a point to attend several meetings of the FREAB during her term as Secretary. Her attendance was not merely to update the members of the board on activities of the DBPR. She watched the board in action, listen to the discussion during rule making and the deliberation when disciplinary cases were considered. Holly Benson assisted the FREAB by assuring we were able to meet standards of performance required by the Appraisal Subcommittee. Our requests for action did not fall on deaf ears.

Because so many appraiser disciplinary cases involved mortgage fraud, Holly learned of many of the schemes and heard of the losses and consequences suffered by lenders and the public due to illegal behavior by real estate insiders. If elected Attorney General, she is ready to use this experience to prosecute the wrongdoers.

Florida has just passed a bill to regulate Appraisal Management Companies. There will be some conflicts with H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act. It includes changes to the Appraisal Subcommittee, and calls for more responsibilities and power to be vested in the Appraisal Foundation. Florida Real Estate Appraisers will benefit if the Attorney General has firsthand knowledge of the federal influence on appraiser regulation.

As Secretary of DBPR, Holly Benson was instrumental in reducing bureaucratic red tape, enhancing customer (licensee and public) service, and streamlining procedures. We need a Pro-Business candidate as Florida's Attorney General.

There are plenty of reasons I'm supporting Holly Benson for Florida Attorney General, and working hard to assure she prevails in the August 24, 2010 Primary. I hope you take the time to visit her site, Holly Benson for Florida Attorney General, learn a bit more about her background and join me in casting a vote for her in the primary.

Although an army marches on its stomach, political campaigns run on cash. There's a CONTRIBUTE button on that site. Every bit helps. Don't be shy about $25.00, $50.00, or $100.00. It will be worth it to have a friend of appraisers as Attorney General of Florida. She will help in our quest to improve the profession.

UPDATE 8/15/2010 --

Earlier today we proudly represented Holly Benson during the Pinellas County GOP Victory Picnic. We had an opportunity to talk to the over 300 people attending about Holly's plan for Florida as the State Attorney General. Here's my wife, Fran Strayhorn, ready to talk about Holly.

NOTE: This is NOT a Paid Political Advertisement. It has not been paid for or approved by any candidate.

Two Favorites: Fannie Mae and Countrywide

2010-07-21T18:14:00.000-04:00

It's rare to post a video here on Appraiser Active, but CBS News has a story that WILL NOT make you feel all warm and fuzzy.

Now, what we need is to get a look at the appraisals used to value the collateral for those loans. It would also be interesting to take a long, leisurely look at the workfiles; particularly the communication between the loan origination staff and the appraiser. Do you reckon there may have been a little bit of pressure?

Are you as curious as I am?

More on Fannie Mae Update to Appraisal Policies

2010-07-09T19:02:00.003-04:00

Just a little over a week ago, Appraiser Active POSTED about Fannie Mae updating their Selling Guide and Appraisal Policies. We linked to the June 30, 2010 Fannie Mae Announcement and offered a few comments about items of interest.

Three items on that list are worth more discussion:

Lender changes to the appraised value and guidance on addressing appraisal deficiencies
Appraiser selection criteria
Market Conditions Addendum to the Appraisal Report (Form 1004MC)

In this week's The Nation's Housing column, Ken Harney lets consumers know about some of the shenanigans going on behind the scenes while borrowers are gnawing their fingernails, waiting for their mortgage loan to be underwritten and approved.

Picture this: You've signed a contract to sell your house. Your buyers say they have nailed down the right mortgage. All is well. But then the appraisal comes in low -- $25,000 to $50,000 under what was agreed upon in the contract.

The lender insists on cutting the mortgage amount to reflect the lower appraised value. You refuse to negotiate anywhere near the price indicated by the appraisal, and suddenly -- poof! The whole deal is off. You, the buyers and the agents involved are all left sputtering over the appraisal that scuttled the transaction.
This scenario is not unusual in many markets across the country, say home builders, brokers and appraisers.

Here's one little-publicized reason why: Lenders unilaterally may be lowering the numbers on the appraisals submitted to them, in order to avoid accusations that the loans they sell to giant investors Fannie Mae or Freddie Mac are based on inflated appraisals -- even slightly inflated.

Fannie Mae, in their Announcement, links to language in the Selling Guide to make it clear that such actions by the lender or underwriter are NOT PERMITTED.

Changes to the Appraised Value

The lender is responsible for ensuring that appraisal reports are complete and that any changes to the report are made by the appraiser who originally completed the report. If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser who originally prepared the report. If the lender is unable to resolve its concerns with the appraiser, the lender must obtain a replacement report prior to making a final underwriting decision on the loan. Any request for a change in the opinion of market value must be based on material and substantive issues and must not be made solely on the basis that the opinion of market value as indicated in the appraisal report does not support the proposed loan amount. For information concerning the process lenders must follow to address a change of the opinion of market value, see Guidance on Addressing Appraisal Deficiencies, below.

Lenders must pay particular attention and institute extra due diligence for those loans in which the appraised value is believed to be excessive or where the value of the property has experienced significant appreciation in a short time period since the prior sale. Fannie Mae believes that one of the best ways lenders can reduce the risk associated with excessive values and/or rapid appreciation is by receiving accurate appraisals from knowledgeable, experienced appraisers.

That guidance certainly differs from reports we've heard from the field and relayed to Ken:

In other situations, we have seen out of state reviewers and "Chief Appraisers" for certain lenders contact appraisers with their concerns about value, suggest alternative comparable sales and "more credible" value estimates. These comments are based on first hand, personal experience.

Typically, Gregoire says, the lender orders a low-cost electronic valuation -- based on publicly available statistical data, with no onsite inspections -- to review the accuracy of what was submitted by the appraiser. If there's a discrepancy between what the computer says and what the appraiser reports, the lender's underwriters sometimes simply cut the number -- even if this means knocking the real estate transaction off track. Or they demand an immediate explanation from the appraiser.

The fact that Fannie decided to specifically address this in the Selling Guide seems to indicate the practice of arbitrarily changing the opinion of value must be fairly widespread.

Ken also addresses the Fannie guidance on Appraiser Selection Criteria:

Fannie also makes it clear that the use of an Appraisal Management Company is not required to comply with the HVCC.

Fannie's new guidelines also attempt to clarify other issues that have arisen during the past year, including the widespread use of inexperienced appraisers who are unfamiliar with local market conditions. Real estate agents, builders and mortgage brokers have complained to Congress that rules adopted by Fannie and Freddie last year encouraged lenders to use "appraisal management" companies to value properties.

Those companies, in turn, often pay appraisers deeply discounted fees -- half off traditional prevailing rates in some cases -- and require them to complete their assignments far faster than normal turnaround times. Critics have said that low-budget appraisers working for management companies frequently travel long distances to do their valuations, have minimal access to local data, and make excessive use of foreclosures and short sales as comparables

Fannie's letter attempts to clarify its "appraiser selection" standards. Top on the list: Appraisers should be experienced, "have the requisite knowledge" about local market conditions and have access to all local data sources. Fannie also emphasized that the demonstrated experience of an appraiser should always trump fees or turnaround times -- a clear swipe at management companies that bid out their work on the latter two criteria.

Specific guidance is in the Selling Guide, page 476

neither the Home Valuation Code of Conduct (HVCC) nor Fannie Mae requires the use of a third-party vendor;
lenders are ultimately responsible for representations and warranties related to the value, condition, and marketability of the subject property; and
lenders must hold the AMC responsible for complying with Fannie Mae’s requirements.

The clarification about the lender's use of AMCs is welcome. More than likely, many lenders believed the use of an appraisal broker absolved them of any responsibility for the appraisal report, or assuring the qualifications of the appraiser. It's nice to see Fannie actually mention "qualified" in reference to appraisers working for AMCs.

There is still a BIG question about the use of Review Appraisers. This section of the Selling Guide requires an inspection of the subject property by the appraiser signing the report. The section of the Selling Guide that addresses lender/underwriter changes to value opinions outlines the procedures the lender must follow if they do not have faith in the original appraisal. One of those is an Appraisal Review.

Although Fannie has not spelled it out, in reading all the sections together, I believe the Review Appraiser would have to meet the same, "USPAP Plus", Competency Standard the new language makes clear.

That leaves the Fannie Mae 1004MC. There's plenty to discuss about the "new" guidance. My concern is that it will result in a misleading report, or misleading information about the condition of the current market. It's worth a post of its own.

Stay tuned.

UPDATE - Thanks to Jonathan Miller (MATRIX) for the mention and link!

Fannie Mae Updates Selling Guide and Appraisal Policies

2010-07-01T16:52:00.000-04:00

Fannie Mae has issued an Announcement, dated June 30, 2010, titled Selling Guide Updates and Additional Guidance on Appraisal-Related Policies. The Announcement includes:

Appraisal-related policies that update the Selling Guide
Miscellaneous appraisal-related guidance (no impact on the Selling Guide)
Miscellaneous Selling Guide updates
Updates to Special Feature Codes
Updates to Mortgage Insurance Codes

The last 3 will not be of much interest to appraisers, but the first two include information of interest and importance. As a result of these changes, the online Fannie Mae Selling Guide has been updated, and now carries a June 30, 2010 date. Use this LINK or the Fannie Mae Selling Guide Link in the Links Section.

You will be interested in:

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)

Conference Committee Agrees to Appraisal Changes - UPDATED AGAIN

2010-06-28T18:22:00.002-04:00

Scroll for UPDATE

After an all night session, the House and Senate Conferees declared the Conference Report passed early in the morning of June 25, 2010. Their report will now be filed with the House and Senate for consideration.

The bill is "only" 2315 pages; it will not be posted here. However, Subtitle F, referencing appraisal activities, is only 39 pages, so here it is for your reading pleasure.

HR 4173 Subtitle F Appraisal Activities

Within the document you will find amendments that mandate an "onsite" appraisal for certain high risk mortgages, wording to establish Appraiser Independence Standards, a requirement that appraisal fees conform to customary and reasonable standards, and a sunset of the HVCC.

There is also language to establish minimum requirements for AMCs, require states to register AMCs, exempt bank owned AMCs from state registration and an increase in the ASC Registry Fee.

The Appraisal Foundation, particularlly the Appraiser Qualifications Board, is granted even more power and control.

Mixed bag, in my opinion.

Your Comments?

UPDATE - 6/29/2010 Wall Street Journal: Finance Bill's Fate Uncertain in Senate

2ND UPDATE - 6/29/2010 The Hill: Wall Street bill back to conference

There's nothing in the Hill story about the appraisal provisions in the bill. It's all about the politics of getting the Conference Bill passed by the Senate.

Court - Suit Against First American May Proceed

2010-06-09T06:36:00.006-04:00

A state appeals court ruled that New York can proceed with its lawsuit accusing First American Corp. of inflating home values under pressure from Washington Mutual Inc.

According to a recently posted story, in a unanimous decision, presiding justice Luis Gonzalez wrote for a four-justice panel of the New York State Appellate Division:

“The attorney general claims that defendants engaged in fraudulent, deceptive and illegal business practices by allegedly permitting eAppraiseIT residential real estate appraisers to be influenced by nonparty Washington Mutual,” presiding justice Luis Gonzalez wrote in today's unanimous decision. “We conclude that neither federal statutes, nor the regulations and guidelines implemented by the OTS, preclude the Attorney General of the State of New York from pursuing litigation.”

Additional stories HERE , HERE, HERE and HERE.

EAppraiseIT gave in to demands for higher appraisals to secure more of Washington Mutual's business, Attorney General Andrew M. Cuomo said when he sued in 2007. States including New York began investigations of the mortgage industry in 2007 as foreclosures rose nationwide.

This should be interesting.

HERE is the decision.

HERE is the Cuomo press release about the investigation.

In light of the language in H.R. 4173 that exempts bank owned/controlled AMCs from state regulation, isn't it interesting that First American (now Core Logic) is the partner with at least two big bank AMCs? First American is the alleged culprit in a huge fraud and now stands to benefit by escaping state attempts to regulate AMC activity.

Exempt Bank Owned AMCs? What are They Thinking?

2010-06-05T08:59:00.000-04:00

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.

CRT Announces "Appraisal Dashboard"

2010-06-03T11:49:00.002-04:00

On May 27, 2010, the Center for REALTOR® Technology announced "Appraisal Dashboard". Here's a portion of what their blog post has to say:

This project was made possible through a 6 month collaboration with RMLS of Minnesota, Live Valuation and the Center for REALTOR Technology. It was actually inspired by an appraiser getting the ear of Ed Newman from RMLS, who then got the ear of CRT who then got real jazzed up about this. This all coincided with some fortuitous events that led us to choose Live Valuation — who by the way, has one amazing programmer (Kannan), which you will soon agree to after you see the demo and the functionality, and the all out pure slick of this application.
So what the heck is the Appraisal Dashboard? Well, the basic summary is, it is a PHP web application that interfaces with live MLS data (MLS authentication and access required) and provides a visual search interface. The data can be exported (again, please refer to your particular MLS data rules/regs) into various formats that can be used with the Uniform Residential Appraisal Report and the MISMO format.
That's all I have for now. We have not yet tried the application, but should be able to find some time in the near future.

Cost? FREE for members of the National Association of REALTORS®. Yet another benefit of membership; this one specifically for Appraiser Members!

Rather than the link in the blog post, use THIS LINK for the video demos.

The Greatest Spectacle in Racing - UPDATED: Pre-Race Ceremony

2010-05-29T08:21:00.001-04:00

This is reposting from last year. This year, I am in Indianapolis for the race. We will be watchng from the infield, turn 3.

If there is one thing that captures my attention more than real estate valuation, it's racing. If it involves anything with four wheels and an internal combustion engine, I'm interested. Formula 1, American LeMans, NASCAR, NHRA, Grand-Am, Sports Car, Land Speed Record, you've got my attention.

IT'S OFFICIAL! - IVPI is Vaporware

2010-05-20T11:38:00.001-04:00

According to a story posted on RealEstateRama, in a letter from FHFA Acting Director Edward J. DeMarco to New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac, now in conservatorship, will not be funding the Independent Valuation Protection Institute (IVPI).

Back in December, Appraiser Active said:

If you were inclined to give Freddie Mac (and Fannie Mae) the benefit of the doubt, our suggestion is to avoid holding your breath waiting for the IVPI. Why don't these folks come clean and admit wishful thinking will not make it happen?

Instead,we get this:

“As conservator of Fannie Mae and Freddie Mac, our priority is to keep the Enterprises focused on the important role they play in supporting the mortgage market,” said DeMarco. “The need for a complaint process is being addressed in a way that we believe is more practical than with the Institute.”

Fannie Mae and Freddie Mac will deploy a complaint process to address suspected code violations including a mechanism for providing pertinent information to state and federal regulatory and enforcement departments. The process will be put in place within the next few weeks.

Press Release and Letter HERE.

In my opinion, it's LATE, it's LAME, not in compliance with the agreement signed among the New York Attorney General, Fannie Mae and Freddie Mac, fails to address the role of Appraisal Management Companies and DOES NOT provide a means for appraisers to complain about non-compliant tactics and actions by AMCs.

IVPI = VAPORWARE

Appraiser Representation? Represent Yourself. Get Things Done!

2010-05-18T15:37:00.002-04:00

One of the most common complaints heard from appraisers is their belief no association represents them or their interests in their state or in Washington, D.C. Of course, there is the Appraisal Institute, the National Association of Independent Fee Appraisers, and other Professional Appraiser Organizations. They do a great job, however these days, many appraisers cannot afford to pay dues to another organization.

Here's an opportunity to participate as an appraiser member of an organization(s) you may already belong to. Think about volunteering to serve as a member of the National Association of REALTORS® Appraisal Committee or the Florida Appraisal Council.

The purpose of the NAR Appraisal Committee is:

To serve the specialized needs of those members with an interest in real estate appraisal by:
1) monitoring, reviewing, examining, and analyzing appraisal-related issues for NAR;

2) referring appraisal-related issues to appropriate NAR committees for their consideration; and

3) providing recommendations on appraisal-related issues to the Board of Directors.
If you are a member of a local association of REALTORS, you may recommend yourself to serve as a member of the Appraisal Committee. The committee meets in person twice a year. In 2011, we will meet in Washington, D.C. (sometime between May 9 - 14, 2011), and in Anaheim, California (sometime between November 9 - 14, 2011)

Follow this LINK to recommend yourself. You will need a login. If you do not have one, just follow the prompts. It might help if you have a copy of the mailing label from your REALTOR® Magazine.

The Florida REALTORS® have the Florida Appraisal Council. The Council makes recommendations directly to the President of the Association. As an example of their accomplishments, last year the Council worked with the Florida REALTORS® to get HB 303 introduced and passed into law. HB 303 requires the regulation of Appraisal Management Companies.

Use this LINK to volunteer for the Florida Appraisal Council. Again, you will need a login, but if you are a member of a local Association of REALTORS in Florida, just follow the prompts to get yourself a login and password.

The application period for both NAR and Florida REALTORS® Committees is May 24, 2010, so act soon! Both of these groups have a history of representation and getting things done.

Governor Crist Signs - HB 303 - Regulation of Appraisal Management Companies

2010-05-17T07:45:00.000-04:00

It was a busy week in Washington, D.C. NAR Appraisal Committee Leadership met with 2010 President Elect, Ron Phipps and Senior NAR Staff to discuss appraisal issues. We also met with Professional Standards Committee leadership on a number of issues. There were trips to Capitol Hill to meet with our US Representatives and Senators.

The most anticipated event, however, was playing out right here in the Sunshine State. Despite the fact HB 303 - Real Estate Appraisers/Appraisal Management Companies passed both the Florida House and Senate unanimously, the AMC crew was lobbying the Governor's Office to veto the bill. The Florida Realtors sent a Call to Action to their members late on Wednesday, the 12th. By 8:00 A.M the next morning, over 800 members had responded and contacted the Governor, urging him to sign the bill. The Appraisal Institute initiated their own Call to Action on Thursday the 13th.

All day Friday, the 14th, there were frantic emails and phone calls among Florida Realtors legislative staff, the Governor's office and contract lobbyists for the Florida Realtors. The focus was on convincing the Governor to sign the bill. Shortly after 5:30 on Friday, we heard the Governor signed the bill!

There's still quite a bit of work to do. The bill is effective July 1, 2011. Now the Florida Real Estate Appraisal Board has a little over one year to adopt the rules needed to implement the law.

Updates on the Appraisal related events from the NAR Meetings and Washington, D.C. a little bit later.

NAR Legislative Meetings - Appraisal Committee

2010-05-09T18:02:00.000-04:00

The National Association of REALTORS® meets in Washington, D.C. May 10 - 15. This is the 2010 edition of their Annual Legislative Meetings and Expo. The NAR Appraisal Committee will meet on Wednesday, May 12th. In addition, Appraisal Committee Leadership has a couple of extra meetings planned to advance the interests of appraisers within the NAR family.

Monday afternoon, Appraisal Committee Chairman Mack Strickland and I will meet with NAR 2010 President-Elect Ron Phipps. There are a number of issues we plan to discuss. Among them are REALTORS Property Resource and the REALTOR Valuation Model, NAR Legislative and Regulatory priorities with an effect on appraisers and valuation, and the NAR Appraisal Designation Program.

The Appraisal Committee has a full agenda. An overview of the agenda, along with that of all the NAR Public Policy Committees and Forums is available here. (See page 4).

In addition, on Wednesday afternoon, Mack Strickland and I will meet with the Leadership and other representatives of the NAR Professional Standards Committee. In addition to opening up a dialogue concerning Article 11 of the Code of Ethics and Standards of Practice of the NATIONAL ASSOCIATION OF REALTORS®, we will initiate an effort to more fully embrace appraisers in the wording of the Code. We will also propose that NAR develop a Quadrennial REALTOR® Ethics Training specifically for valuation professionals.

Both Mack and I will attend the Public Policy Coordinating Committee on Thursday, and will discuss legislation pending in Congress that affects the appraisal profession. I will be part of the NAR Board of Directors meeting on Saturday, in the event any appraisal related issue is to be decided.

There's much on our plate. I'll do my best to update you all when I return to the Sunshine City.

"Happy" Anniversary HVCC

2010-05-01T01:06:00.001-04:00

As this is written, it's just a few minutes past midnight on May 1, 2010. Two news articles have already hit the web to commemorate the anniversary of the Home Valuation Code of Conduct (HVCC).

Ken Harney commemorates this event with "Despite 2009 restrictions, mortgage and appraisal fraud spiked".

For anyone who assumed that the toughened real-estate appraisal rules imposed on the mortgage market last year would mean less monkey business in home valuations, here's a shocker: Fraudulent appraisals soared in 2009, according to a lending-industry study released this week, and they now represent the fastest-growing form of home loan fraud.

My favorite parts?

Freddie Mac spokesman Brad German offered a different view. Because the MARI study made no specific reference to the rule changes by Freddie and Fannie or to the use of appraisal-management companies, "we see no connection between [the code] and appraisal fraud." Fannie Mae officials declined to comment.

Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association, which represents the appraisal management industry, had no immediate comment on the findings, pending a review of the data.

Read the whole thing.

Here in the Sunshine State, Beth Kassab, a business columnist for the Orlando Sentinel, offers "Still a long way to go on appraiser reforms".
Beth also picked up on the recent MARI Report.

One year ago this week a set of sweeping reforms took effect to prevent real estate appraisers from gaming the market with inflated values at the urging of lenders and mortgage brokers.

So by now, buyers and sellers should feel sure that the appraisal system is working and won't contribute to another housing crisis, right?

I feel about as confident in the reforms as I am that I could sell my house the same day I put it on the market.

Don't take my word for it.

"It's a disaster in many respects," said Frank Gregoire, a 30-year veteran of the appraisal business and former chairman of the Florida Real Estate Appraisal Board who has been a vocal critic of the bad behavior by some appraisers.

"Borrowers find themselves paying more for an appraisal, and they have a higher likelihood that appraisal is being done by someone with less experience who will spend less time researching the market and actually preparing the report."

And what about all that fraud that was so prevalent during the bubble? There's no indication that it's let up as a result of the federal reforms.

A report released last week by the Mortgage Asset Research Institute and Lexis/Nexis said that in 2009 Florida had the highest year-to-year increase in appraisal fraud. The complaints centered on appraisers who intentionally fabricated comparable sales, ignored sales prices on similar properties or incorrectly adjusted the comparable sales of houses with slightly different features than the one being appraised.

Here's the Sentinel article.

More about the MARI Report on Rachel Dollar's Mortgage Fraud Blog.

HB 303-Regulation of Appraisal Management Companies, Passes Florida Legislature

2010-04-27T12:34:00.000-04:00

Mark this date: April 27, 2010. On this date, the Florida Legislature passed HB 303 - Regulation of Appraisal Management Companies. The Florida House passed the bill on Monday, the 26th. The bill was sent to the Florida Senate and referred to three committees. The Senate decided to lay their bill, S 2210, on the table, and vote on the House bill. The vote was 35 Yeas / 0 Nays.

In addition to requiring the registration and regulation of Appraisal Management Companies, if signed by the Governor, the bill will require the Florida Real Estate Appraisal Board to adopt rules to specify the means by which an appraiser's signature may be affixed to an appraisal report and include requirements for protecting the security of an appraiser's signature.

If signed by the Governor, the effective date of the legislation is July 1, 2011.

Thanks to Rep. Matt Hudson, the sponsor of the bill, and all the cosponsors. We should also acknowledge Sen. Lee Constantine and Sen. Mike Fasano, sponsors of the bills on the Senate side of the legislature. The Florida REALTORS® demonstrated determination and perseverance in getting this bill introduced, through all the committees and on the floor for consideration. A special thanks to Trey Goldman, Legislative Counsel for the Florida REALTORS®. Region X of the Appraisal Institute, and their lobbyist, Bob Hartnett were actively involved in this effort as well. Well done!

Rating Agencies - Gaming the System?

2010-04-24T08:49:00.001-04:00

Real Property Appraisers are subject to a myriad of regulations, must comply with standards and guidelines promulgated by Federal Agencies, Government Sponsored (OWNED) Enterprises, state governments and state agencies. Many appraisers have effectively lost their ability to compete in the market on the basis of their skill, experience and service because of a negotiated settlement agreement (HVCC), initiated because of allegations of illegal and unethical business practices by non-appraisers.

Appraisers have taken it on the chin for the excess that caused the Savings and Loan collapse in the 1980s, and are now the scapegoat for the ineptitude of others involved in the mortgage meltdown of the 2000s. Sure, some of the current problems are due to inept and corrupt appraisers, but it's time to focus the investigative light on much bigger fish.

A few months ago, Appraiser Active wondered about a Code of Conduct for the rating agencies. After all, the rating agencies analyse and offer an opinion of the value and risk for an investment in the hundreds of millions of dollars. Residential appraisers, on the other hand, provide value opinions on very small parts of this pool.

Via Calculated Risk, we found a story about the recent grilling of the chairman and chief executive of Moody's Corp., Ray McDaniel.

Moody's chief Ray McDaniel, under questioning, said that he didn't think his company had continued to rate complex deals backed by U.S. mortgages after it and competitor Standard & Poor's jolted the markets in July 2007 with massive downgrades of earlier deals.

"I apologize, I do not recall that," McDaniel said.

The panel's chairman, Sen. Carl Levin, D-Mich., then presented him with documentation that both Moody's and S&P gave investment-grade ratings to a Citigroup deal in December 2007, worth almost $400 million, backed by shaky subprime loans that by then clearly were toxic.

The point Levin was making — and made repeatedly — is that credit-rating agencies did whatever was needed to get lucrative fees, some as high as $1.4 million, for rating complex deal.
....
While other Wall Street executives have expressed contrition when they appeared before Congress, McDaniel and former S&P President Kathleen Corbet were unapologetic on Friday.

Throughout the day in earlier testimony and in e-mails released by Levin, however, former Moody's and S&P officials told how they were pushed out or quit in frustration because managers badgered them to "massage" complex deals until they could land the business.
....
Investment-grade ratings gave investors the illusion of safe bets, allowing big Wall Street firms such as Goldman Sachs to peddle the securities across the globe. Moody's and its chief competitors were key players in the prelude to a near meltdown of global finance in September 2008.

Called to appear before the panel, Richard Michalek, a former Moody's vice president and senior credit officer, described the ratings process for deals that could bring more than $1 million in fees as a "must say yes" atmosphere.
....
In one e-mail presented by Levin, an S&P employee inquiring about evidence that subprime lender Fremont General was showing problems with poor underwriting was told not to worry about it. Levin seized on this e-mail when grilling Susan Barnes, an S&P managing director, angrily asking her why relevant information and poor performance was discarded.

"Why doesn't the supervisor say, 'Damn right, it's relevant,'?" demanded Levin, eventually coaxing a response from Barnes

.
Read the whole thing

Why, when there is clear evidence of the fee being paid having an effect on the opinion rendered, is there no movement to provide a firewall between the securitizer and the rating agency? Why all the attention on appraisers?

Ineptly Prepared Appraisal? - What to do? - UPDATED 5-2-2010

2010-04-23T15:50:00.003-04:00

Back in February, Julia Brazier sent me an email. The subject line read "Another HVCC Disaster". Attached to the email was a pdf copy of an appraisal of single family residence in the Woodlawn area of St. Petersburg, Florida. The property was originally listed at $495,000, was now priced at $399,400, and was under contract at $375,000. The out of town appraiser stated his opinion of value to be $315,000.

Julia asked me to take a look at the report and provide some suggestions for a course of action. After identification of some problems with the appraisal report, Julia shifted into high gear. The sale closed April 8, 2010 at $375,000. Financing was 80% of the purchase price. How did this happen? Susan Taylor Martin explains in the St. Petersburg Times.

A year ago, the nation's housing industry adopted new rules aimed at preventing the kind of appraisal-related fraud that helped drive home prices to ridiculous — and unsustainable — heights.

Now, many Tampa Bay real estate agents say the appraisal rules are a good idea gone bad, delaying and threatening sales as the market struggles to recover.

Take the case of Luke Nuemann, who was planning a move from Tampa to Pinellas County.

In February, Neumann found his dream home: a lovingly restored, 1936 traditional with garage apartment in St. Petersburg's desirable Woodlawn area. He signed a contract for $375,000, and the lender ordered an appraisal.

The results flabbergasted everyone.

A Tampa appraiser unfamiliar with Woodlawn valued the property at $315,000 — $60,000 less than the amount the buyer and seller agreed was a fair price. Even the normally conservative property appraiser's office showed the house to be worth $331,000.

Read the whole story HERE.

There were quite a few problems with the appraisal; more than described in the story. Among the most disturbing were internal inconsistencies. This included a description of the neighborhood price trend as "declining" when the appraiser's own data in the report and addenda revealed it to be "stable". Erroneously stating there was a lack of vacant land sales, and pulling a land value estimate of $115,000 out of thin air was another problem. A quick search of data sources revealed four vacant land sales ranging in price from $120,000 - $237,500.

It remains to be seen if this report will find it's way to the Florida Real Estate Appraisal Board.

UPDATE 4/29/2010

Bill Cobb, over at Real Estate Appraiser Tips, linked to this post. He tells a story of a similar situation in his neck of the woods. Unfortunately, it has not turned out so well.

Cruise on over and READ his tale.

UPDATE 5/2/2010

The Business Section of today's St. Petersburg Times publishes three Letters to the Editor about Susan Martin's story. Here are some highlights.

Lizabeth Cantos, from Tampa, says:

I, too, was shocked at the way appraisers now appraise homes. They seem to be scared to death to place a "true value" on homes.

Last August, I started getting our home appraised. Four appraisers came out, not any of them were close to each other in our home's value. The ranged from a high of $745,000 to a low of $470,000.

Karen C. Willis, a St. Petersburg, Florida State-Certified Appraiser offers these comments:

However, I take offense at the comment that appraisers drove home prices to ridiculous and unsustainable heights. Bad appraisers are not the only reason we are in this housing mess. Realtors who had overpriced the market, unscrupulous lenders and homeowners who used their home equity as a line of credit are also to blame.

There are severe flaws in the Home Valuation Code of Conduct. I received an order from an appraisal management company recently. It was for $135. For the same report one year ago, I would have made $350. Now I have to "share" my fee with the "management company," but not the liability. It doesn't pay for my errors and omissions insurance, continued education, software, car maintenance, office space, computers, etc.

Now a college education is required (to become a state-certified appraiser), and for what, to make $135 an appraisal? Forget it. Who will want to work for that?

New HVCC Appraiser Talkback Survey

2010-04-21T16:58:00.000-04:00

David Brauner, from Working RE Magazine, has posted a new survey on his Appraiser Talkback blog. Take a look at the post, New HVCC Appraiser Talkback Survey: One Year On, and spend a few minutes letting him know of your experience with the HVCC.

Here's what David has to say:

Editor’s Note: After a year of turmoil since the Home Valuation Code of Conduct (HVCC) was implemented, we know at least one thing: that you are being heard and that your feedback does make a difference. Don’t give up now. You’ll find the new survey questions about life after HVCC below. It’s up to you to let regulators and lawmakers know what is working and what isn’t. Is the FHA mandate, that appraisers be paid “customary and reasonable fees,” working? Has appraisal quality improved? Should Appraiser Management Companies (AMCs) be regulated? Are you feeling less pressure today to “make a deal work”? Are appraisers hired based on low fees rather than competency?

Click HERE to take the survey.

Results of previous Working RE and NAR Surveys HERE.

Head's Up!!

2010-04-21T16:35:00.000-04:00

This just posted over on the Appraiser Law Blog. Authors are attorneys with LIA Administrators & Insurance Services.

The Single Biggest Liability Threat to Appraisers: the FDIC

By Peter Christensen

The single biggest liability threat to both residential and commercial appraisers is the Federal Deposit Insurance Corporation. The FDIC held a conference last week in Chicago for law firms interested in representing the FDIC. What came out of that conference made me very anxious for appraisers, but it's much more than just a threat to individual appraisers. What the FDIC is doing hampers the ability of the appraisal profession to deliver accurate valuations going forward. The reason is: if you're an appraiser doing work for a lender (which may or may not be one of the 700+ troubled banks on the FDIC's watch list), you know your risk of being sued by the FDIC for overvaluation in hindsight is eliminated by "coming in low" on the appraisal. That means more loans don't get made.

The FDIC has taken over more than 200 banks since the beginning of the mortgage crisis. When the FDIC takes over a failed bank, it usually sells off the banking assets to an existing lender but retains all of the potential legal claims against the failed lender's directors, officers, mortgage brokers, accountants, lawyers, appraisers, AMCs, etc. The FDIC is now in the business of suing these parties, blaming them for its failed banks' bad lending practices.

Read the whole thing...

Sorry for the light posting lately. I've been swamped with appraisal and consulting assignments, and have been working on getting HB 303 and S 2210 (Regulation of Appraisal Management Companies) passed in the Florida Legislature. Both are on the 2nd Reading Calendar as of today.

Expect more information soon.

Appraisal Management Regulation Bill Advances in Florida Senate - UPDATED

2010-04-08T08:06:00.002-04:00

Scroll for UPDATE.

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

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

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

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

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

UPDATE - 4/9/2010

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

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

Great American Realtor Days

2010-04-05T07:37:00.000-04:00

The odometer on my car indicates I've been racking up the miles in 2010. Expert witness assignments accounted for two trips to West Palm Beach and three to Jacksonville. Two weeks ago, it was a drive to the state capital, Tallahassee, to provide testimony in support of HB 303 - Regulation of Real Estate Appraisers and Appraisal Management Companies. Another trip to Tallahassee is in order.

Early tomorrow, I'll make the 260+ mile trek up yonder for Great American Realtor Days. On Wednesday morning, it will be time to attend the Florida Senate Committee on Regulated Industries meeting. S1552 and S2210, both addressing the Regulation of Appraisal Management Companies in Florida, will be heard by the committee.

The Florida Association of Realtors has identified the Regulation of Appraisal Management Companies as a legislative priority this year. Take a look at their talking points. It's nice to know I will not be the only one speaking to legislators in favor of this effort.

Revised Talk Pts

Appraisal Management Company Bill Advances in Florida House

2010-03-27T11:42:00.005-04:00

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.

FREDDIE MAC UPDATES HVCC PAGE

2010-03-18T09:15:00.005-04:00

According to folks at Freddie Mac, their Home Valuation Code of Conduct Questions and Answers Page has been updated. The link to the left leads to the updated page.

I don't have a printed copy of the old Q and A page handy. As a result, it's difficult to determine the additions or deletions. These are among the ones we find to be interesting:

Q 2. Does the Code apply to non-origination valuation activities such as appraisals performed for loss mitigation activities?

A 2. No. The Code only applies to the loan origination process. It does not apply to a lender’s foreclosure/REO process, workouts, or any other type of loss mitigation activity.

Hmmm.

Q 5. Does the Code apply to Freddie Mac purchases of private-label securities backed by mortgage loans that do not meet the requirements of the Code?

A 5. No. The Code only applies to 1- to 4-unit single-family loans sold to Freddie Mac by mortgage originators; it does not extend to Freddie Mac’s investments in mortgage-related securities.

Wondering why Fannie and Freddie are not interested in a Code of Conduct for rating agencies.

Q 6. How will you handle issues and concerns raised by customers as the Code is implemented?

A 6. Freddie Mac will work with our customers to address any issues or concerns regarding implementation of the Code. We will maintain ongoing contact through our various communications channels including newsletter articles and Web content. If customers have immediate questions, they should contact their Freddie Mac account representative, 800 – FREDDIE, or e-mail us using our Home Valuation Code of Conduct Inquiry Form.

Great! A form. Notice that the form is for sellers only. Where do borrowers, appraisers and others bitch?

Q 8. Does the Code apply to other valuation methods (i.e., automated valuation models, broker price opinions, tax assessments, etc.)?

A 8. No. The Code applies only to appraisals.

There are too many reasons to comment on this question and answer. How about you all have at it in the comments.

Q 39. May an appraiser update an appraisal for another lender?

A 39. Yes. The Code does not prevent an appraiser from performing an update of an appraisal for another lender.

Maybe the HVCC does not prevent it, but that does not mean it can be done easily. Consult your 2010 - 2011 Edition of the Uniform Standards of Professional Appraisal Practice.

Q 61. Can an appraiser’s information be omitted from the appraisal report prior to sending it to the borrower?

A 61. No. A complete, unaltered copy of the appraisal report must be provided to the borrower.

No comment.

Q 62. If two appraisals are obtained as part of the underwriting process, does a lender have to provide copies of both appraisal reports to the borrower or only a copy of the appraisal used to determine value?

A 62. Section II of the Code requires that the borrower be provided with a copy of "any" appraisal report; therefore, copies of all appraisal reports obtained must be provided to the borrower.

And how, exactly, is that being enforced?

Q 65. If I am permitted to use an AVM such as Home Value Explorer® to estimate property value, am I required to meet the Code requirements in Section II and provide the borrower with a copy of the AVM result three days before closing.

A 65. No.The Code does not require lenders to provide borrowers a copy of an AVM result.

Why not?

Independent Valuation Protection Institute

Q 82. When will the Independent Valuation Protection Institute be established?

A 82. We are working with the New York State Attorney General, FHFA, and Fannie Mae regarding establishment of the Institute. Because the Institute has not yet been established, the provisions regarding it in the Code are not yet effective.
Question 82 and the answer do not present any change from prior Q and A lists. In my never so humble opinion, that is the most important question. It's telling that the answer is the same. It's also telling that the LINK to the IVPI has been removed from their answer!

How is it that other parts of the HVCC are deemed to be more important than the Independent Valuation Protection Institute? Why is it acceptable to implement only parts of the HVCC?

There is QUESTION #83. How about an answer to that one, FREDDIE?

Appraisal Institute, Others, Suggest AMC Statement of Principles

2010-03-18T08:12:00.000-04:00

From Appraiser News Online:

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

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

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

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

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

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

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

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

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

Peronal Note - UPDATED

2010-03-15T14:44:00.005-04:00

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

UPDATE - Jon's wife, Rachel, runs a blog - A Little Pink in a World of Camo.

It has recently been updated with the sad news. However, the prior postings show the joy they shared in their life together.

Please keep Rachel and Ariana in your prayers.

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

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

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

Florida Senate - Second Bill Introduced to Regulate Appraisal Management Companies

2010-02-27T12:47:00.002-05:00

Back in November we were excited to announce Representative Matt Hudson's introduction of HB 303, Regulation of Real Estate Appraisers & Appraisal Management Companies. In the first week of February, we posted about S1552 - Appraisers & Appraisal Management Companies, filed by Senator Mike Fasano.

Today, we can report a SECOND bill to regulate Appraisal Management Companies has been filed in the Florida Senate!

On February 18, 2010, Senator Lee Constantine filed S2210 - Appraisers and Appraisal Management Companies.

Requires the Florida Real Estate Appraisal Board to adopt certain rules. Requires application, registration, and renewal fees for appraisal management companies. Requires such companies to register with the DBPR. Requires nonresident appraisal management companies to consent to commencement of actions in this state. Establishes additional acts for which appraisers are subject to disciplinary action, etc. EFFECTIVE DATE: 07/01/2010.
Read the whole thing.

How about sending an email or fax to Senator Constantine to let him know of your appreciation. Either that or give his office a phone call to let him know how important this bill is for the appraisal profession, the real estate market and consumer protection in Florida.

Senator Constantine has been a great friend of Florida Real Estate Appraisers. He sponsored both of the most recent bills to amend Chapter 475 Part II (2003 and 2006). Both were passed and signed into law.

Here's the contact information:

District Office:

378 Centerpointe Circle, Suite 1268
Altamonte Springs, FL 32701-3442
(407) 331-9675

Tallahassee Office:

418 Senate Office Building
404 South Monroe Street
Tallahassee, FL 32399-1100
Phone (850) 487-5050

Wells Fargo Visits Appraiser Active!

2010-02-18T13:00:00.003-05:00

To tell the truth, Wells Fargo did not drop by my office, but folks from Wells Fargo have been visiting the Appraiser Active site.

There are a few tools used to help me determine the level of activity on Appraiser Active. In addition to lijit and Google Analytics, sitemeter provides quite a bit of information. Not only does it keep a running total of visits to the site and page views, it lets me know the service provider and what keywords are used by folks to get to this site.

Given all the interest in the Wells Fargo RVS Desktop Appraisal and their heavy handedness in dealing with questions about an appraiser's ability to comply with mandatory appraisal standards when accepting a Wells Fargo "opportunity" to participate in the exciting new program, it was amusing to learn what keywords are used when Wells Fargo employees land here on Appraiser Active.