At press time, no changes have been announced regarding the landmark HVCC (Home Valuation Code of Conduct) provision in the Fannie-Cuomo agreement, despite the outcry from thousands of appraisers who believe it will put them out of business- except that the agreement date has pushed back one-three months from the original January 1, 2009 start date. (See WorkingRE.com, Library; Fannie/Freddie, Cuomo Agree, Volume 19.) The result of the bill could be the replacement of independent mortgage brokers with appraisal management companies (AMCs), not really fixing the appraiser independence problem, as AMCs are equally notorious for exerting pressure on appraisers. The bigger problem for appraisers, as brokers are eliminated, is the loss of profitable business relationships with the brokers that take years to cultivate. Also, many appraisers say the fees offered by AMCs are too low to support a thorough work product, resulting in even lower quality appraisals.
USPAP & Comp Checks
In July of this year the Appraisal Foundation (TAF) provided more guidance on what comp checks are and whether they are permitted under USPAP, saying, “yes” an appraiser can provide comp checks but within STANDARDS 1 and 2. From TAF: “If the appraiser is asked to ‘provide comps,’ that would typically mean the appraiser would be exercising his or her own judgment to determine which sales are most ‘comparable’ to the subject property. The appraiser may choose to include only those sales that he or she deems are most similar to the subject in size, location, quality, etc., which could mean that certain sales may be omitted. In this case, the resulting data would have been ‘filtered’ by the appraiser’s judgment, which would have the net effect of providing a range of value to the client. This range of value is defined as an appraisal under USPAP; therefore, the appraiser would be obligated to comply with STANDARDS 1 and 2.”
The distinction seems to be tied to whether an appraiser exercises their professional judgment in the creation of the product. From TAF: “‘Comp check’ assignments should be contrasted to requests for an appraiser to simply provide data. For example, an appraiser asked by a client to provide ‘sales data of all homes located within a one mile radius’ of a specific address could comply with the client’s request without complying with STANDARDS 1 and 2, because the appraiser would just be providing sales data pursuant to the client’s defined parameters. In this example, the appraiser must be careful not to communicate any opinions or conclusions regarding the data provided.”
Also addressed are whether an appraiser can provide comp checks for free and whether a free comp check needs to be disclosed in a full report, if one is completed. Read the complete Q&A from TAF.
Why Canceling E&O Insurance in Slow Times Can Cost You
This may be the most important information for your business that you learn today: As business slows, some of you are thinking about cutting expenses by either letting your errors and omissions insurance policy lapse (not renewing) or by canceling mid-term. If you do this, you risk losing coverage for all the appraisals/inspections you completed in previous years. Most every E&O insurance policy is Claims Made and works the same way: if you let your policy lapse, you may be left unprotected should a claim arise from a past report. Switching companies is no problem as most provide prior acts to new clients for free, as long as you make the switch on or before your policy expires. As most (appraiser) claims take several years to surface, letting your insurance lapse or not renewing could be very costly indeed. Imagine a problem surfacing from an appraisal or inspection completed several years ago and now finding yourself with no coverage, even though you were covered at the time you did the appraisal/report! If you are leaving the profession, “tail coverage” is available (call your agent). If you are continuing to work, it pays to keep your E&O in place. To understand E&O insurance more fully, including a list of “Dos and Don’ts,” see Cutting Expenses as Business Slows: Why Canceling Your E&O Can Really Cost You or contact OREP; (888) 347-5273, info@OREP.org.
There is now one site to visit for all U.S. Government recalls including consumer products, motor vehicles, boats, food, environmental and other products found to be unsafe, hazardous or defective by a government agency. The site is www.recalls.gov.
Working RE Interactive PDF Now Online
You can now access the current edition of WRE (the one in your hands) at WorkingRE.com in a new interactive PDF format. Tell your friends and colleagues! You can zoom in/out, flip pages and click directly to content and advertiser offers. The online edition now provides the option of opting out of the print version, in favor of reading it online, saving trees, energy and the other natural resources required to manufacture and deliver the magazine. To test drive the new format, go to WorkingRE.com and click Opt-In. Register once with an email and password. You will be notified via email when each new edition publishes. If you like it enough to forgo the print version in favor of reading the magazine online, simply include your name and mailing address in the login form to be removed from the print mailing. Read More.
WorkingRE.com Information Destination!
WorkingRE.com is an information destination for tens of thousands of appraisers and inspectors every month who peruse the special features, sidebars and 200-plus story library. In the first six months of 2008, over 250,000 unique visitors perused the online magazine, sidebars, premium content and story library, as measured by Urchin analytics (Google product). Come see what you’re missing! WRE is published by OREP, E&O insurance experts for real estate professionals. Complete access to WorkingRE.com premium content and story library requires a paid subscription and/or is a free benefit with the purchase of E&O through OREP.
Working RE’s (free) Email Edition
Working RE is the largest circulation magazine for appraisers and inspectors and is the only publication offering readers free print, email and interactive digital formats. WRE’s email edition reaches 40,000-45,000 appraisers and 16,000-18,000 home inspectors. You can opt in to either edition at WorkingRE.com or email email@example.com with “appraiser” or “inspector” email in the subject. It’s free and your information is never sold or traded. It’s what the other half knows.
Mortgage Broker Fun Facts
According to a story in the Miami Herald, felons can’t vote in Florida but can be mortgage brokers. The newspaper’s investigative team reports that the state has approved over 10,000 mortgage broker licenses for convicted felons since 2000. In another story, the online publication Indystar.com reports that 40 percent of the 950 brokerage companies in Indiana are not in compliance with new state laws requiring mortgage brokerages to employ a principal manager who has passed a competency exam. The story notes that letters mailed to 79 companies informing them of their offenses were returned as undeliverable, indicating they are out of business while another 89 have voluntarily surrendered their licenses. You can find links to both stories at WorkingRE.com (Sidebar Info –Mortgage Broker Fun Facts).
“Goliath” Settles Blacklisting Complaint: Appraisers 3 and “0”
The lawsuit California appraiser Jennifer Wertz brought against Washington Mutual, Lenders Services and others for “blacklisting” has been settled out of court, according to a statement by Wertz, with the terms of the agreement undisclosed. Wertz’s complaint alleged that she was blacklisted for reporting a “declining market” in one of her appraisal reports. (Find the story at WorkingRE.com, Premium Content- Appraiser Sues over Blacklisting. Find the complaint in Sidebar Info- Wertz vs. Washington Mutual). “The lawsuit has been settled to the mutual satisfaction of the parties,” Wertz said in a widely circulated statement. Also recall that the suit against appraiser Pamela Crowley that was dropped by eAppraiseIT earlier this year, for alleged misstatements on her site MortgageFraudWatchList.org (find the complaint in Sidebar Info; eAppraiseIT vs. Pamela Crowley), and Tim Vining’s 2006 “copyright” win/settlement over compensation for the unauthorized use of his appraisal reports (Library; Appraiser Wins Copyright Suit, Volume 12).