Editor’s Note: Last issue we reported on an important Congressional hearing on the appraisal profession. The following are the Top Ten Appraisal Reform Recommendations [NCRC] as presented at the hearing by David Berenbaum, Chief Program Officer, National Community Reinvestment Coalition.
In conclusion, I reiterate that the time has come for members of Congress, the prudential regulators, the Appraisal Subcommittee and the Consumer Financial Protection Bureau to work collectively to ensure that consumers and all the industry stakeholders involved in the home buying and refinance process will benefit from a system of regulation that helps ensure the independence and integrity of the appraisal process while promoting equal access to responsible and sustainable credit and a robust mortgage marketplace that meets our nations immediate housing finance needs.
To accomplish this end, it is crucial to consider the following recommendations:
1. Review and define a more modern, robust appraisal reporting process and not accept the Uniform Residential Appraisal Report form by the GSEs but rather to call on the industry to define more robust and standardized reporting that can be tailored to the lending situation. The recent changes by FHFA regarding the Uniform Appraisal Dataset have only added further confusion to the already inadequate mandated appraisal form.
2. Require professional appraisals by licensed appraisal professionals for all residential mortgages above $50,000 regardless if they are originated or insured by the private sector or Fannie Mae, Freddie Mac, or Federal Housing Agency.
3. The role and impact of Appraisal Management Companies (AMC) must be critically reviewed by the ASC to ensure that they are not negatively affecting appraisal quality and further Congress should immediately investigate the emerging practice of mortgage originators assigning or requiring that Appraisal Management Companies and/or appraisal professionals they engage for business assume the buy-back risk from the secondary market or insurer claims relating to loan origination.
4. Appraisal professionals enhance safety and soundness and protect the interests of all the parties to a mortgage transaction—including consumers—and they must be appropriately compensated under any usual & customary fee standard that is developed.
5. The banking regulators, Fannie Mae, Freddie Mac and the FHA should not escape Appraisal Subcommittee valuation safety and soundness review and enforcement.
6. While Automated Valuation Models (AVM’s) serve as a useful and cost competitive compliance tool and an effective check against fraud, they should never replace the use of an appraisal by a licensed appraiser for all mortgages that exceed $50,000.
7. There is a need for more effective Consumer Protection, Transparency & Education.
8. Responsible Appraisal Practices Ensure and Expand Housing Opportunities in an Open Society.
9. Inappropriate appraisal undervaluation is equally damaging to homeowners, communities, the tax base, investors & insurers.
10. States must suspend redirecting funds intended for appraisal compliance, professional development and licensing, to their general funds.
Do you Need General Liability Insurance?
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New FHA eBook on Manufactured Housing Marketing Tool
You can find a free PDF at WorkingRE.com (click Sidebar Information) supplied by FHA Guide author Lore D’Astra. According to D’Astra, the new eBook is a great marketing tool. “As a way to build rapport and creditability with clients, I forward to them the new 62-page booklet from the American Council for an Energy-Efficient Economy (ACEEE). Published on July 31, 2012, it is a great resource for appraisers, real estate agents, mortgage professionals or anyone else who is involved with manufactured housing,” said D’Astra. “A great sales technique is for an appraiser to quickly peruse the booklet for information that might help their clients, highlight the section in Adobe Acrobat, and send to them via email.” One example of text pulled out and used by D’Astra is: Energy-efficient manufactured homes can save consumers an estimated $4.6 billion in energy costs over the next 20 years. Mobilizing Energy Efficiency in the Manufactured Housing Sector highlights the economic benefits of energy savings for the 17 million people living in manufactured homes and offers the first comprehensive analysis of the potential for energy efficiency improvements to both new and existing manufactured homes – according to a study by the American Council for an Energy-Efficient Economy. “Ten minutes after sending this, one of our clients called to thank me for the information,” said D’Astra. “He also forwarded my name to two of his clients to see if they might want to order an appraisal. Yeah!”
FHA Appraiser Mandates Utility Requirement
From Lore D’Astra: In an effort to protect ourselves, allow me to relay a recent conversation between an appraiser and agent/builder, that came to me in the form of a question from a reader. The answer is also below. The question said:
“An appraiser friend commented that he completed an FHA appraisal the other day and that the real estate agent/builder was surprised when my friend asked the agent/builder to show that the property had working utilities. The agent/builder told him that he had done five previous transactions with another appraiser and had never been asked to prove that the utilities were operational. The water and electric were on, he said, but not the gas. The agent/builder said that they do not turn the gas on in the summer but that he would make an exception for the appraiser. The fact that the pervious appraiser had not asked for this information seemed odd to my friend, since it was his understanding that confirming working utilities (water, gas and electric) is a requirement by the FHA.”
Q: Was the agent/builder and previous appraiser correct in inspecting a home for FHA without utilities?
Answer: Unless the equipment would be damaged if operated, ALL utilities must be on during an appraisal inspection. For instance, if the home had gas heat and the summer temperatures were above 90 degrees, it may damage the air conditioning unit. Solution: The appraiser would then mention the circumstances and offer to re-inspect, when appropriate, later.
Q: What if the utilities (water, sewer, electric, gas) are not on?
Answer: Make another appointment when the utilities are operational. Not convinced? For chapter and verse from FHA, click to read the following story: FHA Appraiser Mandates Utility Requirements – by Lore DeAstra, MBA, SRA, CDEI is Author of the FHA Checklist and eBook.
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.
New 7 Hour USPAP CE Online: Convenient, Affordable
Enjoy an OREP/Working RE discount on McKissock’s new 7 Hour USPAP online continuing education course, approved in most states. Taking this mandatory continuing education coursework is now affordable and convenient with this new online course. Visit WorkingRE.com and click USPAP CE at a Discount to learn more.
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. 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 go to WorkingRE.com and click 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.