GAO Report on Appraising Released
The long-awaited report on appraising by the Government Accountability Office was released to the public in July, in accordance with Dodd-Frank. Many of the issues familiar to appraisers are acknowledged in the report but many appraisers are asking: now what? You can find the report here.
UMDP/UAD: Road to Ruin?
In this opinion piece, Andy Anderson expresses what many fellow appraisers are thinking about the upcoming UMDP requirements. The story first ran in Working RE’s Online News Edition, E-mailing to 80,000 appraisers every other week. To Opt In, click here.
The Uniform Mortgage Data Program (UMDP) is mandated by Fannie Mae and Freddie Mac (GSEs) under the direction of their federal regulator, the Federal Housing Finance Agency (FHFA). As every appraiser knows by now, these mandates include new methods and requirements for completing appraisal reports and for the delivery of loan packages and appraisal reports. These new requirements are in the best interests of Fannie Mae and Freddie Mac, not the American taxpayer. The United States is experiencing financial instability due to the lack of enforcement of lending guidelines and quality control of regulations and review policies that were already in place. The failure of the Government Sponsored Entities (GSEs), lenders and investors to “follow the rules” is at the heart of the economic crisis we now find ourselves in. This is NOT the time for these types of dramatic changes in lending and appraisal quality control and delivery requirements. What is and will continue to be needed are experienced and educated underwriters and review appraisers who can recognize a reliable loan package and a credible appraisal report and make good business decisions regarding them.
The new Uniform Mortgage Data Program (UMDP) and the Uniform Appraisal Dataset (UAD) are the beginning steps toward the automated review of individual loan packages and appraisal reports. The Uniform Loan Delivery Dataset (ULDD) requirement assures future income and “job security” to MISMO and possibly the GSEs but will generate additional cost and expense to the consumer/tax payer, as the GSEs continue to request more financial assistance from Uncle Sam to fund the changes. When implemented, the faster and easier methods of review will continue to fuel the economic crisis and financial instability of our nation. The new changes and mandated regulations include:
* UMDP – Uniform Mortgage Data Program, which is a program to standardize appraisals and loan delivery data for mortgages that are purchased by the GSEs.
* UAD – Uniform Appraisal Dataset, which is intended to standardize key appraisal data elements to promote consistency.
* UCDP – Uniform Collateral Data Portal, which is a portal for the collection of loan and appraisal data for loans sold to Fannie Mae or Freddie Mac, which must be used by lenders (sellers).
* ULDD – Uniform Loan Delivery Dataset, which is a standardized format for transmitting loan data (including appraisal data) from the originating lender to the GSEs; this includes implementation of MISMO® Version 3.0.
* MISMO® – Mortgage Industry Standards Maintenance Organization, which is a mortgage industry organization that created a set of technical standards which are being leveraged by the GSEs as part of the UMDP.
MISMO is a wholly-owned subsidiary of the Mortgage Bankers Association. Visit the website at Mismo.org and you will find confirmation that this entire effort is to create and promote automated underwriting and service fulfillment through loan administration and investor reporting. Now that this is implemented, we will see further devastation of small businesses similar to that experienced by mortgage brokers and independent fee appraisers following the GSE’s implementation of the HVCC (Home valuation Code of Conduct). This time, however, the loss of jobs and income will be felt to a greater degree by other real estate professionals, specifically GSE bank-and-lender-staff loan originators, loan officers, processors and underwriters. Eventually, real estate agents and real estate service providers will be affected as the ability to mine MLS (Multiple Listing Service) data and real estate information from appraisal reports will minimize the need for lenders and investors to participate with real estate associations and pay for MLS services.
Fannie/Freddie Track Record- Um…Not Good
The use of automated evaluations with less than diligent property inspections of collateral has been a Fannie/Freddie benchmark for decades. The attempt to speed up the lending process during the past “bubble” resulted in less-than-reliable loan packages and less-than-credible appraisal reports. The fact that the GSEs have thousands of loan packages and appraisals under review, to force loan originators to “buy back” loans in default, is proof positive that quality control by the banks, lenders and the GSEs was less than acceptable. Where is the accountability? Local appraisers should be able to continue to complete a report in English with terminology that the local borrower and lender can understand. Especially since the Dodd/Frank Reform Bill requires each borrower to receive a copy prior to the close of escrow. No appraisal client other than the GSEs and lenders want to see “codes” in the reports. Without a substantial addenda with an explanation, the new codes will be misleading to any reader of the report not familiar with the UAD requirements. It is a disappointment that the VA and FHA government agencies have agreed to the GSE mandates. The new requirements appear to have the potential of creating a misleading report to anyone not trained in the new codes and requirements.
It is much more important to have qualified and experienced underwriters and reviewers reading the report for clarity than to streamline the reports and loan files with “fast and easy.” That is what got us into the financial mess we are in. Some uniform standards may be an asset but the appraiser who puts misleading or inaccurate quality, condition, etc. statements in a report will also put misleading and inaccurate codes in the report. A lie is a lie and changing to the mandated format will not change the character of the person who completes the report.
Any investment into the creation and implementation of these new requirements by the GSEs is nothing less than a misappropriation of taxpayer funds and a further lack of oversight by the FHFA. To repeat, this is NOT the time for dramatic changes in lending and appraisal requirements. To allow the GSEs to mandate the use of these new lending and appraisal requirements is to agree that the GSEs know what is in the best interests of our nation, when in fact, they, along with the investors, banks and lenders are responsible for the current financial crisis. According to CNNMoney.com’s Bailout Tracker website, approximately 1.3 trillion taxpayer dollars have been spent on or are earmarked to save the GSEs (Money.cnn.com). When will it be time to stop supporting the GSEs’ demand for unnecessary changes?
It is time for accountability. It is time to educate the consumer and insist our government stop fueling the financial crisis by financially supporting the GSEs, major banks and lenders. It is time to encourage the consumer to use local banks, lenders and credit unions that will use ethical and competent professionals for much needed quality control. It is time for integrity in the real estate professions.
About the Author:
Andy Anderson is a taxpaying American citizen, a Vietnam-era Marine Corps veteran and independent fee appraiser. He is an appraisal education author and instructor and the founder of Integrity~ An Association for Real Estate Professionals (Integrity-arep.org), a grassroots effort created to promote the public trust through the use of honest, ethical and reliable real estate professionals and sound business practices. To read the scores of comments on this story or to leave your own, go to WorkingRE.com, click WRE News Editions (left column) then click the story UMPD/UAD: Road to Ruin. You can opt in to Working RE Online by clicking here
Learn UAD with Approved Education Credit
McKissock Education has a UAD course (online and onsite) called Introduction to the Uniform Appraisal Dataset. Go to OREP.org(click Benefits, OREP Education Network and search your state).
OREP.org/WorkingRE.com Blogs & Surveys
Challenging Low Fees
This blog is an information exchange by and for appraisers seeking help with the customary and reasonable fee appeal process. Visit our Challenging Low Fees blog now.
This blog is an information exchange by and for appraisers about working with the various AMCs- read the good but mostly the bad and ugly about which AMCs to avoid, such as the following: “Boy, are you right! I had to chase (AMC name removed for publication) for months for a check. We have friends that had to chase them for 120 days for $3,000+. They are supposed to be run by an ‘ethical’ appraiser but I think not! I did an appraisal for them, busted by rear to get it in in their turn time and then I got an email back saying they had cancelled it and utilized one of the appraisers in the area that does most of their work. I never got a cancellation email. So, I was out two day’s work and $375. Nice!” Learn what you need to know about working with AMCs at this blog. Visit WorkingRE.com and under Blogs click AMC Rater.
Download Results Free: C&R Fee Survey 16,000+
Join over 16,000 appraisers who have participated in the Working RE/OREP.org Customary and Reasonable Fee Survey and download the results free. To learn what appraisers in your area consider customary and reasonable fees (CRFs) for a variety of reports, including FHA appraisals, view Survey Results here. This Customary and Reasonable Fee Survey includes 365 Metropolitan Statistical Areas nationwide plus rural areas for each state; eight products/services, including reviews and FHA reports. You will also find turnaround times surveyed, which is unique to this report. It’s good business to know what other appraisers in your area are reporting. This report is free. One goal of the survey is to support appraisers when negotiating fees with appraisal management companies (AMCs), lenders and others. Fees paid by AMCs are fluid and negotiable. Knowledge is power and greater data results are harder to dismiss. A number of AMCs have contacted Working RE requesting nationwide survey results in an effort to set fair fees. It’s your data, use it to your advantage!
Insurance: How Saving Money Can Really 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- even the careful ones. Appraisers are taking fire from all sides: lenders who have taken back properties are 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, are 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 to save a few dollars could be very costly indeed should a claim arise from the past and you have no coverage. Call your insurance agent to find out what is really at stake. For more on E&O insurance issues, see Insurance: Insight and Advice from the Inside, an interview with OREP.org Senior Broker David Brauner, who has been point of sale for appraiser E&O insurance for 20 years.
FHA Appraising Easier, More Efficient
FHA work is booming. Here’s an opportunity to make your FHA appraising faster 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 is 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! For more, see the inside back cover or click here FHA Checklist, Instructions and eBook. “Differentiating yourself from others improves your business and marketing efforts,” says author Lore DeAstra. “These revised materials will help you obtain additional avenues of income pertaining to your FHA expertise now and into the future.” OREP insureds enjoy a discount.
Business Opportunity: Energy Auditing
Here is one way appraisers and home inspectors are diversifying their incomes: energy auditing. It’s a service people want. Real estate professionals are diversifying their incomes by adding energy auditing to their list of services. Jeff Patterson, an appraiser in Maine and the author of Real Estate Appraisers and Building Inspector’s Guide to the Energy Auditing Business ($30), has been doing energy auditing for some time and finds that appraisers are “naturals” at the work. “The service involves a thorough survey or audit of a home or property and assisting owners in lowering energy costs,” said Patterson. “Once a home is audited the ‘energy efficient’ improvements are eligible for many financial rewards such as tax deductions, grants and low interest loans. The process requires accurate measurement of the property, calculating the return on investment, coupled with an appraiser’s expertise and knowledge of real estate markets- specifically how these improvements will effect operating cost and value. Who better than an appraiser?” Save time and money getting up to speed on the basics of Energy Auditing with this new Energy Guide from an appraiser who is doing it. What’s involved? Is it for you? What’s the demand? Who are the key players? How much does it cost? How much can I make? How do I make it work? You can find out with this 41-page guide. Home Inspectors Note: If you’re a home inspector currently doing energy audits, errors & omissions insurance for energy auditing is included with OREP’s home inspector program. Others can obtain E&O and general liability ($1 million) from OREP for under $1,000 (plus taxes and fees). Visit or call OREP.org for more: (888) 347-5273.
Do you Need General Liability Insurance?
Do you need general liability insurance? You just might. Business Owner’s / General Liability Policy has been compared to a homeowner’s policy for your business. Coverage includes but is not limited to Property Damage to others, Bodily Injury, Business Interruption and Loss of Income coverage, Personal Property Coverage (computers, client records, buildings) and employee dishonesty. Inspectors, appraisers and real estate agents/brokers need this coverage. Minimum premium is $500. Workers Comp also available. Call OREP.org for details and a free quote (888) 347-5273 or email: firstname.lastname@example.org with your request.