The link below was provided by the publisher of Working RE magazine, a division of OREP, this appraiser's insurance provider. The Executive Essay was printed in the April 2011 issue of Mortgage Banking magazine. The essay provides a thorough and cogent explanation of the market for lender-based appraisals here in the spring of 2011.
The appraisers are out there, however, many refuse to complete appraisals for the below market fees being offered by many AMCs. One factor not mentioned in the article is that a number of lenders (not identified here as it is common for AMCs and lenders to "blacklist" appraisers who speak out against a particular company) actually own their own AMCs either outright of through joint ventures. These particular AMCs are some of the worst offenders regarding unreasonably low fees being offered to appraisers.
Do not hesitate to write of post feedback. Here is the link:
http://www.workingre.com/workingre/missing-appraiser-essay.pdf
A recent blog post in the appraiserlawblog by Liability Insurance Associates (LIA) details the FDIC's recently filed suit against two large AMCs. As stated in the conclusion, while it may warm the hearts of appraisers to see two AMCs being sued, it probably means negative outcomes for all appraisal related industries as it diminishes the overall perception of the importance of appraiser conducted services in the minds of the courts and public.
To read the full post (recommended), please click link below:
http://www.appraiserlawblog.com/2011/05/fdic-sues-corelogic-over-wamu.html
The link below is a story published 5/25/2010 on the blog of Liability Insurance Administrators. It details recent happenings in a lawsuit by a group of homeowners against one of the country's largest lenders. The subject of the suit is that homeowners' equity lines of credit (HELOCs) were unjustly reduced based on flawed valuations completed through the use of an automated valuation model (AVM) rather than a full appraisal.
If the lawsuit is successful, it will put new scrutiny on the use of AVMs which could potentially favor independent fee appraisers whose businesses have been negatively impacted by the use of AVMs for lending decisions.
http://www.appraiserlawblog.com/
The Mortgage Asset Research Institute (MARI), a division of Lexis-Nexis, published an annual report on April 27, 2010, revealing that appraisal fraud actually increased following the implementation of the HVCC May 1, 2009.
Click the link below to read the full story by syndicated real estate columnist Kenneth Harney:
http://www.bostonherald.com/business/real_estate/view.bg?articleid=1251682&srvc=rss
Six states, including California, now have laws in place requiring various levels of regulation of Appraisal Management Companies (AMCs). Click the link below for an article appearing in Valuation Review. Confusion abounds as to what each state requires of the AMCs to be compliant.
http://www.valuationreview.com/ME2/Audiences/dirmod.asp?sid=270E8EBA5AF64172B917EBD588EDB85A&nm=Daily+News&type=news&mod=News&mid=5F249E552B2C49509BC41751816632F3&AudID=F0F48C5C19CB47B3A675FD6074A3CB8A&tier=3&nid=1231938861B64EF49DB8853A46D248D8
California's Office of Real Estate Appraisers (OREA) passed emergency regulations requiring AMCs to register within 30 days of passage on 12/30/2009. As of March 12, 2010, only six AMCs had registered on the OREA site. As always, enforcement of the laws and regulations will dictate the success or failure of said regulations. Click link below for OREA announcement.
http://www.orea.ca.gov/pdf/2010AMCRegs.pdf
The following is a link to a Yahoo News story reporting on the phenomenon of homeowners who purposely default on their home mortgages through a "strategic default". To read the Yahoo News story, please click on the link below:
Read the complete article at the link below: http://finance.yahoo.com/news/Strategic-Defaults-and-the-usnews-2190373684.html/print?x=0
Strategic defaults are explained in great detail in University of Arizona Law Professor Alan T. White's paper, which can be accessed by downloading here:
http://ssrn.com/abstract=1494467
The following Realty Times article penned by syndicated real estate columnist Kenneth Harney discusses one of the potential impacts of the proposed Consumer Financial Protection Agency. In the House version of the bill it calls for the elimination of the HVCC. Now, if the Senate can finish their version and vote for approval of the new agency, we will be getting somewhere. To read the full article, click on the link below. Do not hesitate to call or write with questions.
http://realtytimes.com/rtpages/20091221_washingtonreport.htm
The link below leads to a Yahoo News article highlighting a recent trend where real estate deals are compromised or killed by appraisals that are coming in lower than the agreed upon contract price.
What the article does not explain in enough detail is that in many markets (including here locally in Sonoma and Napa counties) the percentage of distressed sales (foreclosures or "short sale" properties) exceeds 50%. In cases such as these, the appraisal opinion and analysis should reflect a representative sampling of sold comparables. If half of the market's sales are distressed properties, it stands to reason that half of the sales used in the appraisal analysis should be distressed properties in order to properly reflect the market.
Do not hesitate to call or write with any questions. Here is the link:
http://news.yahoo.com/s/ap/20100103/ap_on_bi_ge/us_home_prices_appraisals
Per a 10/22/2009 story on CNBC (click link below), Rep. Gary Miller introduced an amendment to the Consumer Financial Protection Agency act to end the HVCC. It passed the initial house vote. Of course, it has a long way to go (through committees, Senate vote, etc.), but here is a positive sign that some in the government are waking up to the ills caused by the HVCC. Contact me any time to discuss. Erik Kirby
It appears that FHA/HUD is taking steps to avoid the inflation of fees to the borrower with this announcement (below). One has to ask, does the average homeowner want to pay (as an example) $625 for an appraisal where the appraiser only receives $200 and the AMC receives $425 for "management"? Hopefully, new guidelines like those below will reverse the current trend of lack of disclosure regarding fees to the borrower and how much of those fees actually are received by the appraiser.
The following information was taken from an FHA announcement on 9/18/2009.
"FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report. FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal. Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing. AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised."