Home Appraisers: TARP Inspector General Calls for Appraisals in HAMP, Forced Writedowns

http://realestateappraisertips.info/ — Thu, 22 Apr 2010 00:02:09 +0000

http://www.realestateappraisertips.info/ – Real Estate Appraiser Tips! Home Appraisers: TARP Inspector General Calls for Appraisals in HAMP, Forced Writedowns

Today’s “Valuation’s Appraiser News Online” is reporting that TARP Inspector General Calls for Appraisals in HAMP, Forced Writedowns. The Full Story is located here and here’s the snippet below:

“Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), called for the Department of Treasury to utilize appraisals for the Home Affordable Modification Program to protect against fraud. Barofksy’s comments came during April 20 testimony before the Senate Finance Committee, and are highlighted further in a quarterly report issued to Congress. Citing concerns that inferior methods of valuation could lead to fraud, Barofsky told lawmakers, “Treasury should abandon its differing valuation standards across HAMP and adopt the Federal Housing Authority`s appraisal standard for all HAMP principal reduction and short sale programs.”

Dave Towne Responds To NAR’s Move To Replace Real Estate Appraisers With RVM’s

http://realestateappraisertips.info/ — Sun, 03 Jan 2010 22:44:59 +0000

http://www.realestateappraisertips.com/ - Dave Towne Responds To NAR’s Move To Replace Real Estate Appraisers With “RVM’s”

On December 31, 2009, I published, “Home Appraisers: NAR Trying To Replace Appraisers With Realtor RVMs…Why Are We Paying NAR Dues Again?” In that post, it was stated that NAR is trying to replace home appraisers:

“AVM (Automated Valuation Model) is the term widely used to describe providing property valuation by using a mathematical algorithm based on the data. In real estate AVMs calculate the value of a specific property by analyzing the value of comparable properties sold and registered. The newly announced RVM (Realtor® Valuation Model) follows the same mathematical analysis but hopes to aggregate the information available from 700+ MLS’ (Multiple Listing Service) across the country. The NAR, the driver behind the RVM, hopes that this model will become the default valuation method for all financial institutions nationwide. If achieved, this will be a major industry game changer.”

Now, Dave Towne, Washington Residential Appraiser, Responds:

“But here’s my take on the situation (you can post this if you want):

BPO’s, AVM’s, and potentially a new product called a RVM, have taken millions of dollars out of appraisers pockets. It’s devastating, but did not need to happen.

I have not studied the exact differences between a RVM and a BPO. But they are ‘unregulated’ products, and thus have the potential for major abuse, and little repercussions. Both can be done by licensed real estate salespeople. Both rely on MLS data. I suppose the RVM might couple other sources of data to the MLS info, while the BPO may not. The RVM might generate a value, or value range by its own software processes, where the BPO may rely only on an agent determining and recording the value. I have seen a BPO document, and I have done reports using an AAVM (Appraiser Assisted Valuation Model) software, and frankly there is not very much difference between the two.

Where I get concerned is the potential violation of state laws and federal lending regulations when RVM’s, AVM’s and BPO’s are used in a mortgage loan process. It would be wise for any appraiser concerned about this process to first study state law to see what process is permitted, or better, which is not permitted when a lender is making a decision about writing a mortgage loan on a property. Then, federal lending guidelines must be examined. If an actual appraisal is required, but the BPO, AVM or RMV is used instead, then the lender is at fault and should be prosecuted.

Having said all that, it’s also important to realize that over the years appraisers have been their own worst enemies in their conduct with lenders. For decades appraisers have been stubborn about offering alternative valuation products and have been resistant to change. Appraisers have demanded that only the standard full appraisal should be used in ALL cases.

The reality is lenders don’t always need or want a full blown walk through ‘expensive’ appraisal done, from which to make a lending decision. Or they may just need an evaluation, which can be used on properties valued below the de minimus $250K value. As a result of appraiser behavior not wishing to solve the lender problem, lenders have developed alternative products to meet their needs. Thus BPO’s, AVM’s and now potentially the RVM. Appraisers have to learn how to help solve problems, rather than fighting the inevitable.

There has been some publicity by appraisers and appraiser organizations challenging the use of BPO’s for lending purposes. But it’s like trying to steer an iceberg with a single person row boat. Lenders are the iceberg, and appraisers are paddling furiously but not making much headway.

One software company has introduced a new product they think will compete with BPO’s. It’s similar to the RVM. The advantage is it’s a USPAP compliant product signed by a licensed appraiser with proper certifications attached, which make regulators very happy. BPO’s, AVM’s, etc., are not USPAP compliant. This product couples AVM technology with appraiser interaction. The disadvantage is the training cost and time to become ‘approved’ to use the product. And critical appraiser mass has not yet been achieved to persuade many lenders to use the product.

I have developed a USPAP compliant limited Scope of Work Restricted Use appraisal report that can compete with a BPO when the lender just needs an appraiser’s evaluation of a property and they are comfortable with the necessary Extraordinary Assumptions. This report is built around a form available in the alamode forms package. Other vendors may have a similar form. This service/product is a bit more expensive than a cheap BPO, but not as expensive as a 2055 Exterior-only, due to the reliance upon MLS photos for comps and other shortcuts not included in this Restricted Use report that would be in a ‘standard’ report. Regulators prefer lenders use ‘regulated’ appraisals rather than unregulated methods. So this Restricted Use report can compete in the marketplace as long as the appraiser is willing to add it to their offered services and tell lenders about it.

I hate to be critical of my peers, but appraisers have got to learn to be problem solvers instead of ‘old sticks in the mud.’ Appraisers are tromped on by the likes of the MBA, NAR, NAMB and other advocacy organizations surrounding the mortgage lending process. Appraisers have to learn to band together just like the Realtors and Mortgage Brokers instead of being so fiercely independent. Until they do, there is no real benefit to complaining as a single individual. Remember the rowboat analogy? A tug boat will move the iceberg. Appraiser organizations exist, but only a minority of appraisers belong. If more joined, more advocacy on our behalf can be done. We would/will have a stronger voice. Appraiser organizations represent the tug boat. Engine size and efficiency increases with more members.

The last time a good joint effort worked was the ‘petition’ signed by over 8,000 appraisers demanding more appraiser independence and less value pressure and influence by others in the lending process. Then when the HVCC was implemented, and did exactly that, many of the same appraisers said “hold it, you’ve wrecked my business.” If half of the signers who are not appraiser association members were members in the first place, the HVCC may not have become necessary. For the lack of spending $250-400 dues annually, 50% or more business went away.

So the bottom line is this: don’t be afraid to compete with a lesser product by providing a better product. Use your knowledge and skills to help lenders achieve what they want and need by advocating a service they will want you to furnish. And join an appraiser organization to ensure you have a stronger voice in the industry.

Dave Towne”

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Real Estate Appraiser Tips » NARs Move To Oust Appraisers

Home Appraisers: TARP Inspector General Calls for Appraisals in HAMP, Forced Writedowns

Dave Towne Responds To NAR’s Move To Replace Real Estate Appraisers With RVM’s