FDIC: Help Wanted
According to appraiser Thomas J. Inserra, MBA, MAI, SRA appraisers are adapting their practice to different markets and customers rather than lender loan origination work only and there is great opportunity if you know where to look. Speaking at the Valuation 2010 Expo, Inserra said appraisers can find abundant work, as a result of the current financial turmoil, from private contractors at the Federal Deposit Insurance Corporation site. The work includes: litigation/attorneys; receivership assistance/contractors; investigatory organizations; insurers- E&O, M&I, P&C; asset managers; loan workout and REO; tax and appeal; loan servicers and sub-servicers; accounting, audit, mark-to-market; federal, state and county governments; due diligence, securitization, portfolios; mortgage reps and warranties; auctions, REITs, investors; AMCs; Fannie/Freddie and contractors. “It probably would not do any good to simply send a resume,” said Inserra. “Each company has its own needs and procedures for engaging contractors. But appraisers should be alert to emerging market needs for appraisal services beyond just traditional lending. Appraisers should investigate the firms, establish a relationship, understand their needs and find out specifically how to establish a contractual sub-contracting relationship. The firms on that list are a good start but they have many competitors so there are plenty of opportunities out there for those who want to track them down,” Inserra said. Find links to FDIC Vendors at WorkingRE.com; Sidebar Info.
Reviewer’s Five Golden Rules
Speaking at the Valuation 2010 show last November, Mark D. Liley, Vice President and Chief Appraiser, Residential Review Flagstar Bank laid out five golden rules for appraisers. 1) If you would rather live in the sales selected for comparables than the subject, you have a valuation problem. Using sales with superior design/appeal locations or amenities without proper market derived adjustments will result in an inflated opinion of value 100 percent of the time. Corollary: If you would rather live in the subject property than the sales selected, you have a valuation problem. Using sales with inferior design/appeal locations or amenities without proper market-derived adjustments will result in a below market opinion of value 100 percent of the time. Solution: Bracketing. While bracketing is not a Government Sponsored Enterprises (GSE) requirement, it is a suggested best practice. Use of similar, inferior, and superior sales will allow the appraiser to extract and demonstrate market reaction to various differences between the subject and sales used for comparison. It will also make your underwriter/reviewer happy. 2) Steak Sauce Zoning. The specific zoning classification of the subject property is not the same thing as the Assessor’s Land Use Code. Each municipality that has a zoning ordinance has its own nomenclature for defining various zoning districts (i.e.: A1, RM2, R1, CBD, etc.). Not every single family house is zoned A1 (steak sauce zoning). If you create new files using a template that has a specific zoning classification inserted, delete it. Determine the correct Specific Zoning Classification for each file. Indicating a residential zoning classification for a property zoned for something else will get you in hot water faster than you can say A1/Single Family. 3) Site Dimensions. If you create new files using a template that has “See Plat” entered in the Dimensions Section, delete it. If the subject site is irregular in shape, and your report indicates “See Plat,” you had better include a copy of the plat in your exhibits! If the site is not irregular, enter the correct dimensions. After all, how hard is it to type 85’ X 200’? 4) Recognize, Disclose, Discuss and Demonstrate: External Obsolescence (quit looking the other way). At some point in the process the reader of your report is going to view the subject property using satellite imagery. If they recognize an external influence and you didn’t disclose, discuss, and demonstrate its effect on the subject’s value by using a sale or two with the same/similar external influence, you will be explaining why you didn’t- probably to people you really don’t want to talk about it with. 5) Accessory Units and other Oddities: If the subject improvements have a unique addition such as an accessory unit, indoor pool, racquetball court, etc., segment that area from the Gross Living Area (GLA) and adjust for it separately. By including it in the GLA, and using sales without that amenity but with similar GLA, you will miss the subject’s value 100 percent of the time (i.e.: see Appraisal Review Rule 1).
Feeding the Data Beast
In a “quest to improve loan quality through more robust and uniform data,” the Government Sponsored Enterprises (GSE)- Fannie Mae and Freddie Mac, are introducing a new “language” called the Uniform Appraisal Dataset (UAD). The GSE’s are providing specific and mandatory guidance on how to fill out the 1004, 2055, 1073 and 1075 forms. There will be specific rules and verbiage required for the various fields in the forms. This may be the biggest news of 2011. Unless the date is pushed back, as of September 1, 2011, all appraisers must complete the appropriate appraisal forms as required by the UAD. December 1, 2011 is the date by which lenders must collect the new Uniform Loan Delivery Dataset (ULDD) data points required for the first phase of implementation, as well as the UAD standardized appraisal data for new loan applications. By March 19, 2012 all conventional loan deliveries to the GSEs must meet the Uniform Mortgage Data Program (UMDP) requirements. For appraisals, lenders must submit an electronic appraisal report form through Uniform Collateral Data Portal (UCDP) before delivery if the loan application date is on or after December 1, 2011 and an appraisal report is required. You can learn more at WorkingRE.com; under Sidebar Info: Uniform Appraisal Dataset.
MISMO and You
According to Elizabeth Green, current chairperson of the Mortgage Industry Standards Maintenance Organization (MISMO) Property and Valuation Services Workgroup, open standards provide an important component in moving appraisers beyond the process of data gathering to recognized, respected, and rewarded valuation analysis experts. “MISMO standards provide a common, consistent, and cooperative framework of data definitions to communicate appraisal details,” said Green, who is also Director of Appraisal.com, a new services line from ACI. “The result of adhering to these standards is higher customer satisfaction and better appraisals. Fannie Mae and Freddie Mac have selected MISMO Version 2.6 for the initial launch of the Uniform Collateral Data Portal (UCDP).” The portal is related to the Uniform Appraisal Dataset (UAD) noted above (Feeding Data Beast). “Version 3.1 (latest version) represents a tremendous breakthrough both in technology and in centralizing MISMO formats to a single, common reference model. Working with the model will enable all parties in the mortgage supply chain to develop fully transparent processes driven by technology. That will enable improved appraisal products and processes resulting in stronger data ownership and reporting safeguards for the valuation community,” Green said.
Industry Experts: Evolve, Adapt, Learn
Industry “thought leaders” these days agree that to succeed, appraisers must be able to evolve, adapt, learn new technologies and become market experts. The most successful appraisers today are faster, more accurate, more efficient and, more profitable on a dollars per hour basis. Through the use of technology, the “art” of appraising will become more scientific. In the future, appraisers will routinely analyze large amounts of data to be combined with their local market knowledge to provide more detailed value conclusions. Many believe the days of form filling (and forms) are numbered. Appraisers will provide all of the required information needed to complete an assignment using a well-defined scope of work. The spotlight is back on appraisers. At the same time, lenders have a need for less involved, desktop valuation products. The Collateral Valuation Report (CVR), developed by Bradford Technologies, is an appraisal report generated by CompCruncher, Bradford’s new computer-aided appraisal software. The CVR is produced by appraisers trained in real estate regression analysis. “It is not an AVM embedded in a form filler,” said Jeff Bradford, CEO of Bradford Technologies. “The appraiser is center stage and has complete control over the data analysis and the valuation process. The CVR is a transparent, data rich appraisal report that can be used in any valuation service except for re-finance and loan origination.” (Refinance and loan origination are governed by Fannie Mae and Freddie Mac so their approved forms are required for that type of appraisal work, according to Bradford.) “We have found that lenders and appraisers use the CVR for their alternative valuations,” Bradford said. Here are some suggestions for use of the CVR across the multi-billion alternative valuation market, according to Bradford: bail bondsmen, estate work, divorce disputes, tax assessment challenges for the tax assessor and/or home owners, forensic appraisals and legal work. “Lenders have told us that the CVR is a highly attractive alternative in the following areas,” said Bradford, “Replacement for BPOs, particularly for HELOCs and REO valuations, a replacement to a URAR for portfolio loans (HELOCs, private clients, consumer finance, community banking), in default management where multiple BPOs are used in the process (short sales), as an alternative in the loan modification programs, quality assurance, and secondary valuation in value dispute resolution and value reconciliation.” You can learn more by visiting www.AppraisalWorld.com.
Canceling E&O Insurance/Giving Up Priors Acts to Save Money Can Cost You
If you are considering letting your errors and omissions (E&O) insurance policy lapse (not renewing or canceling) to cut expenses or thinking about switching to a company that does not provide “prior acts” coverage for your past appraisals just to save money, you should think again. Appraisers are being sued in record numbers today- yes even the careful ones. Appraisers are taking fire from all sides: lenders who have had to take back properties are in some cases coming after appraisers for inflating values. Homeowners upside down in their properties are suing claiming they never would have purchased had they known the true value. Others, trying to refinance or sell today, are suing and filing complaints with their state appraisal boards charging appraisers with incompetence for “coming in too low.” In some states anyone can dash off a complaint using an online form in minutes with little thought or evidence. Many complaints and legal suits we see these days are ill-conceived, emotional responses to the dramatic loss in equity many homeowners are suffering. No matter the merit, appraisers have to spend time and resources defending themselves- even if they did nothing wrong. As most claims involving appraisers take several years to surface, letting your Claims Made insurance policy lapse, cancelling midterm or willingly giving up your prior acts coverage at save a few dollars, even a few hundred dollars, could be very costly indeed should a claim arise from the past. For a typical appraiser, it might boil down to 50 cents per appraisal to protect one year’s worth of work. If you have two years of prior acts, it’s twenty-five cents per appraisal to cover those years. Do the numbers and call your insurance agent to find out what is really at stake.
FHA Appraising Made Easier, More Efficient
FHA work is booming. Here’s an opportunity to make your FHA reports easier and more efficient. The FHA Appraiser Inspection Checklist, Checklist Instructions and eBook is designed to get you up to speed and more efficient at FHA appraising. The Checklist serves as a field guide for completing your reports. The Instructions explain how to complete the two-page checklist line by line. The eBook saves you time and money by summarizing and organizing the material you need to know. Author/appraiser Lore DeAstra says, “We reviewed more than 450 pages of HUD materials and spoke with several HUD officials to compile the FHA Appraiser Inspection Form, course materials, and eBook. It will save you time and money.” The guide was recently updated with the following: Formatting updates for improved ease of use: more concise information in an easy-to-follow eBook searchable by topic; web links to topics for easy access; symbols and pictures included by topic for at-a-glance comprehension to FHA Checklist; FAQ from appraisers and lenders by topic with detailed index by page; over 10 new ways to access information and contact FHA to check competencies and get help fast! (Updates are provided free for one year after purchase.)For more, see the inside back cover or go to WorkingRE.com and click FHA Checklist, Instructions and eBook. The latest update includes answers to the following: What should you take pictures of if you suspect Hydrogen Sulfide Gas? What’s important regarding Conditional Commitments? Economic life vs. Effective Age? Fannie Mae Form 2055?
While you’re visiting WorkingRE.com, check out the new section Industry Announcements for the latest press releases and announcements from industry leaders. Send submissions to: email@example.com.
Learn More Online
Find these and other stories online (WorkingRE.com) under Didn’t Make it to Print. Many of these stories were originally published in Working RE’s Online News Edition. (Opt in by emailing firstname.lastname@example.org). Customary and Reasonable Fees: Winds of Change?; Feds Respond: Customary and Reasonable Fees; Back to School: Marketing to Agents & Brokers; Next Big Thing: Appraising Small Businesses; FHA Question & Answers; Better Appraising from the Inside Out; Making Reasonable and Appropriate Adjustments; Appraising Outside the Banks:Public Projects; The Appraisal Foundation Raising the Bar; Notes from a Busy Appraiser; Working with AMCs.
Mortgage Field/Property Preservation
Many appraisers and home inspectors are now providing mortgage field and property preserva-tion services (winterizing, lawn care, change locks, clean out) for bank-owned properties. OREP has provided E&O and GL insurance to this industry for over 8 years and is a leader in the field. If you’d like a quote, please call or visit OREP.org, (888) 347-5273.
Change Happens:HVCC Talkback Surveys – 10,000 and Counting
Over 10,000 appraisers (combined) have responded to two Working RE/OREP HVCC Appraiser Talkback Surveys. Thousands more have left comments regarding current market conditions. Your feedback, published here and elsewhere, made a difference in getting vital financial reform legislation passed last year. If you had not spoken up and spoken out, those who pronounced the Home Valuation Code of Conduct (HVCC) an unqualified success for consumers, lenders and, yes, even for appraisers, would have been the only voices heard. What you told Working RE and others- appraiser associations, software vendors and Congress, about your experiences working with AMCs made a difference. Your participation continues to matter. We encourage you to make your voice heard in the surveys about licensing, time and fee pressure, AMCs competence, appraisal quality and more, if you have not already. (Survey Now Closed)