|
|||
|
|||
Editor’s Note: This letter is excerpted (and edited) from ones sent by the author to the Federal Reserve Board, FDIC and hand-delivered to Washington D.C. The issues it addresses are not settled and the final story not written. The new Working RE print edition, with eight new stories covering many of these issues, is in the mail to the entire appraisal profession currently. To access it now, click the cover image above.
Open Letter to Feds, Banks, Citizens/Taxpayers A credible real estate appraisal completed by an ethical and competent appraiser protects the investor and public. The independent real estate appraiser is the only party to a real estate transaction who has no financial interest in the final closing of the transaction. And unbiased and uncompromised value conclusion in a well-developed appraisal report is a tool for all involved: for the lender/investor to determine the accurate condition and credible value of the collateral; for the buyer to determine whether the property is a wise purchase; for the real estate agent to renegotiate the contract if the value is determined to be different than the agreed upon sales price. The appraisal is an effective tool but only when it is completed by an ethical and competent real estate appraiser.
BPOs, AVMs
Real estate professionals and loan officers realize that automated valuation models (AVMs) are not consistently accurate and reliable. In central California, where I live, the public records and Multiple Listing information available on properties is often inaccurate and unreliable. Real estate and loan agents use public records and the MLS. If the improvement data is incorrect, so is the AVM and BPO. Furthermore, the accurate and actual condition of a property, interior and exterior, cannot be determined without a full property inspection. The current real estate crisis has proven that the lack of a credible, well-developed, unbiased and uncompromised real estate appraisal report in a loan file can and will lead to problems with repayment of the loan. Many who have negative equity in their properties have demonstrated that they will not live up to their loan agreement. Some find it easier to rebuild a credit rating than to continue to pay for a property that it is worth so much less than what they paid. After foreclosure, lenders and investors have difficulty marketing and selling the property for anything other than a loss.
Lack of
Enforcement
When Fannie Mae
learned they might be implicated in an investigation of Washington Mutual Bank
and eAppraiseit, a national appraisal management company (AMC), they agreed to
the Home Valuation Code of Conduct (HVCC) to wiggle off the hook from further
investigation. Too much money was being made for anyone to pause to provide
adequate quality control of the appraisal reports included in loan packages.
They failed to use the government regulated state offices to report inadequate
reports and incompetent appraisers. Less than competent appraisal reports were
overlooked in many cases. The much-heralded passing of the Dodd-Frank Financial Reform Bill is intended to change "Mortgages and the Future of Housing Finance” in our nation. The government may have let HVCC expire but it did not correct the problems it caused. In fact, much of HVCC is reworded and incorporated into Dodd-Frank. Much is also enshrined in Fannie Mae and Freddie Mac’s selling guidelines and is therefore here to stay. If true ethical, honest and competent real estate professionals are not included in the process of creating new regulations, nothing will change. Our government continues to listen to the voices who are part of the problem. It is time for positive change. Though essentially bankrupt and in conservatorship, the GSEs continue to make policy that affects the livelihoods of independent small businesses and which are not in the best interests of the public and the financial stability of our nation. They continue to request additional funding from the government for initiatives like the uniform loan package and new appraisal delivery systems that will lead to further unemployment. They arrogantly mandate the use of such systems before they are ready for implementation. Now the GSEs are suing lenders, banks and appraisers with taxpayer money for loans they themselves funded but which, apparently, did not meet their own guidelines. Where was the quality control? It is time for positive change. Next time in Part 2: another take on “Customary and Reasonable” fees.
About the Author
HTML Comment Box is loading comments...
| |||
ATTENTION: You are receiving WRE Online News because you opted in at WorkingRE.com or purchased E&O insurance from OREP. WRE Online News Edition provides news-oriented content twice a month. The content for WRE Special Offer Editions is provided by paid sponsors. If you no longer wish to receive these emails from Working RE, please use the link found at the bottom of this newsletter to be removed from our mailing list. |