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Editor’s Note: This interview took place prior to the Coronavirus outbreak. In the midst of the Coronavirus lockdown, the VA allowed appraisers broad discretion to perform exterior-only appraisals with enhanced assignment conditions that include the property’s occupant taking photographs and providing information to the appraiser.
VA Backs Appraisals for Vets
Interview with VA’s Chief Appraiser
By Isaac Peck, Editor
Last June, the Blue Water Navy Vietnam Veterans Act of 2019 passed, including a provision mandating the Department of Veteran Affairs (VA) to allow a bifurcated appraisal process—but the story does not end there.
The provision in question took much of the industry by surprise, with some appraisers speculating that it had been added quietly in the final hour as a result of lobbying efforts by special interests. Many appraisers feared that their relationship with the VA, which has a longstanding reputation of encouraging appraiser independence and paying customary and reasonable fees—with the goal of protecting veterans, would be degraded and short-circuited by AMCs proffering bifurcated solutions. The Bill read: “The Secretary shall permit an appraiser on a list developed and maintained under subsection (a)(3) to make an appraisal for the purposes of this chapter based solely on information gathered by a person with whom the appraiser has entered into an agreement for such services.”
However, in November 2019, the VA published guidance outlining the rules for its Assisted Appraisal Processing Program (AAPP). The VA’s guidelines surrounding bifurcated appraisals have been heralded as a common sense approach to the valuation process that allows appraisers flexibility while serving and protecting the veteran community.
Working RE sat down with James Heaslet, Chief Appraiser at the VA, to learn more about the agency’s new bifurcated appraisal rules. Heaslet is a United States Marine Corps veteran, as well as a second generation appraiser who started as an appraiser trainee at his father’s office in 2007.
Appraisers and Trainees Only
The first thing that stands out about the AAPP program is that the VA panel appraiser must contract directly with the individual performing the property inspection, as part of any bifurcated appraisal. Additionally, any person the VA appraiser contracts with to gather information is considered to be acting as an agent for that VA appraiser, with the VA appraiser responsible for paying that individual’s fees.
The VA rules also require that the outside individual contracted by the VA panel appraiser to gather information be another licensed appraiser or appraiser trainee. Specifically, that individual must be “an individual who may perform appraisal-related work in compliance with VA policies, USPAP, state, and local laws,” such as “another VA fee panel appraiser licensed in that jurisdiction, a non-VA fee panel appraiser licensed in that jurisdiction, or an appraisal trainee/apprentice registered or otherwise authorized to provide valuations in that jurisdiction.”
Heaslet says this rule was essential because the VA recognizes the experience and training that appraisers bring to the process. “Instead of looking at the subject inspection as only ‘data gathering,’ the inspection of the collateral being appraised is actually one of the most important parts of the valuation. We want to keep the subject inspection under the appraiser umbrella and have someone with experience and training inspecting the property. Even a trainee is getting valuation training, learning USPAP, and learning to recognize value-producing features of a home. I don’t believe it’s good for our veterans or for the VA’s program to depend on unlicensed and untrained individuals to perform such an important aspect of the valuation process,” says Heaslet.
Opportunity for Trainees
The result is more flexibility for the VA’s appraisal panel as well as more flexibility for appraisers to work with other appraisers and to bring on trainees, according to Heaslet. “Working within the Congressional mandate, we’ve made it much easier for VA appraisers to bring on trainees and integrate them into their business model. The response we’ve received from the appraisal community has been overwhelmingly positive. I’ve gotten many text messages and phone calls praising the VA for taking a step in the right direction. People have told me that they never wanted to take on a trainee, but now they are considering it. We are allowing trainees to actually inspect the properties and sign on the report, with the VA supervisor accepting the responsibility,” Heaslet says. Some lenders are still resistant to the AAPP process but Heaslet reports that many are coming on board and will allow a trainee inspection. “We do allow our lenders to opt out of the AAPP process because we want to make sure they feel comfortable working in our space. On a positive note, we see a good mix of lenders allowing it. They are monitoring it carefully but as long as it’s a USPAP-compliant report, credible, timely, and worthy of belief, then a trainee can be part of the process. A trainee is still an appraiser; I do find it odd that some lenders will accept a Property Data Collection (PDC) performed by an unlicensed third-party who goes into the property, but they have trouble understanding that a trainee can do the same thing,” says Heaslet.
Some states still preclude a trainee from inspecting a property on their own. Heaslet argues that it is unfortunate that some states don’t have faith in their trainees to do that kind of work, especially with some industry stakeholders pushing for unlicensed personnel to perform the PDC. “Our hope is that state regulators and lenders will take note of what the VA is doing. Appraisers working with other appraisers and trainees goes back to the foundation of what appraisers have always been able to do since the profession began. I hope this gives the opportunity to bring new blood into our profession. It’s hard to bring people into the industry if they can’t do work. I believe this program will allow appraisers to work with Trainees and convert Trainees into Certified and Licensed Appraisers,” Heaslet says.
Primary Appraiser Responsible
Another unique item about the AAPP program is that the VA appraiser remains fully responsible for all loss, damage, or other harm caused by the person who they hire to gather information. Additionally, the VA appraiser must include and sign a statement in each appraisal report that contains the following language:
I participated in VA’s Assisted Appraisal Processing Program to complete this appraisal report. The final opinion of value for the subject property is based upon my supervisory status and analysis of all available information. The person who provided information to me to assist in the opinion of value is: Full name (First/Middle/Last), license number, date of expiration, state of issuance of the person. I take full responsibility for any errors in and/ or omissions from this appraisal report.
Heaslet says that this policy is primarily about protecting the veteran in the transaction. “Our number-one mission is to take care of our veteran. In the event someone is going into a veteran’s house, we want to be sure we understand who that person is. It would be reckless if we didn’t. We do a background check on our VA panel appraiser, and so by holding them accountable, they are putting their relationship with the VA at risk depending on who they select to go into that veteran’s home,” says Heaslet.
One of the requirements of the AAPP program is that, if questioned by the VA, the VA appraiser must provide the agency with all relevant information concerning the person they contracted with to gather information, including “a copy of the agreement and all evidence relied upon in determining that such person met the ethical and moral character requirement.” In a further effort to protect veterans, the AAPP program also stipulates that in any instance where the VA panel appraiser is not performing the inspection, they must communicate to the contact person (real estate agent, Veteran, homeowner, etc.) who is conducting the site visit and that that person is working on their behalf. Additionally, in any case where Tidewater is invoked, the VA appraiser must make a site visit to the subject property, if they had not, at no additional fee to the lender or Veteran.
Limitations and Turn Times
The VA indicates that “to reduce risk of the program and to ensure quality, VA may limit the VA fee panel appraiser on the quantity of weekly appraisal assignments or on geographical areas covered.” In other words, the volume of each individual VA appraiser will be monitored and limited per the VA’s discretion as well as based on VA need and “other issues that could adversely affect Veterans, the Government, or individuals who are indirectly affected by AAPP (e.g., a homeowner who is in a contract to sell a home to a Veteran).” Heaslet says the intent is to avoid a sweatshop environment where a single appraiser is just rubberstamping appraisals without doing the proper analysis. “We want to ensure that we have control measures in place, while also taking into account the needs of the VA, and the geographical competence of the appraiser. For example, in the state of Montana, we don’t want a new appraiser go, sign up to service the entire state, not be geographically competent, and then hire five trainees. We believe that would be reckless, putting our veterans and our program in harm’s way. However, if an appraiser is in Montana and wants to expand from five orders a week to 10 orders a week, that helps out our veterans and it helps our program,” says Heaslet.
The VA has struggled in some rural areas where appraisers are few and turn times long, so the hope is that these new rules will allow appraisers in those areas to scale up their businesses to meet demand. “In rural, remote areas, our new AAPP rules allow appraisers to be able to expand and provide coverage where it is hard to get appraisers to work. But it can also be used in larger cities to cut down traffic time. You can have one appraiser perform the inspection and the other do the analysis. We hope to see faster turn-times as a result of this change,” Heaslet reports.
Working with VA – Five Stars
While Heaslet says that the VA is “always hiring,” they have some specific needs for panel appraisers in Maine, Colorado (southeastern areas) and parts of Montana, Texas and Alaska. “The common denominator is that all lenders are having trouble in the rural communities, but we always accept applications in all areas. We always want the best appraisers out there. Most of the applications that we get are in highly populated areas. We have plenty of appraisers in Dallas, Atlanta, Phoenix and San Diego; it’s the rural areas where we really need them,” says Heaslet.
In terms of why an appraiser might want to work for the VA, Heaslet says the VA has a longstanding and well deserved, positive relationship with appraisers. “We support complete appraiser independence; that’s the cornerstone of the program. We don’t want favoritism. We put a lot of trust and faith in our appraisers to do what they do best. Once an appraiser joins our panel, it takes them a while to break out of the Fannie Mae funk, the unwritten guideline rules that everyone used to go by, like—you can’t have sales older than 180 days and you can’t go more than five or 10 miles away for a comparable. All we ask is that you give us a solid and credible reason for doing what you did,” Heaslet says.
The direct relationship between the VA and the appraiser—with no AMC—also translates into higher fees. “We are the client and the fee goes straight to the appraiser. VA appraisal fees are some of the best in the industry and when combined with the way we treat our appraisers, this is the best program to be involved with. On top of that, you get to meet some of the greatest Americans out there. I’ve heard many stories from our panel appraisers about how they get to share time with a WW2 or Korean War veteran, and how they sometimes find themselves just listening or talking to them for 20 to 30 minutes. It’s a very enriching experience for our appraisers,” says Heaslet.
With Fannie Mae and Freddie Mac issuing appraisal waivers on an estimated five to 10 percent of all purchase and refinance mortgages, appraisers are likely eager to hear about the VA’s thoughts on the issue. Heaslet says that while the VA doesn’t have any immediate plans for waivers, it is something that is being explored. “One of the questions being asked is: if a veteran has a 50% Loan-to-Value (LTV), or a very low LTV, do we really need an appraisal? Why does the veteran have to pay a premium fee for an appraisal, and wait that extra time, when the risk is so low to us? One reason is that the appraisal allows us to make sure the home is safe, sound and sanitary, which is part of our Minimum Property Requirements. But we are looking at ways to better serve our veterans who are doing a refinance with a very low LTV,” asks Heaslet.
However, Heaslet insists that the VA continues to view appraisals as a cornerstone of a good loan. “The last thing we want is a veteran to be upside down in value. The cornerstone of a good loan is getting the value right. AVMs and data can be accurate sometimes, but we still put our faith in the appraisers because they are independent. We want honest values,” says Heaslet.
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About the Author
Isaac Peck is the Editor of Working RE magazine and the Vice President of Marketing and Operations at OREP.org, a leading provider of E&O insurance for appraisers, inspectors and other real estate professionals in 50 states. He received his master’s degree in accounting at San Diego State University. He can be contacted at email@example.com or (888) 347-5273.
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