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Webinar this Thursday:
Top 5 Questions Asked of an Appraiser and How to Answer
Chase Challenges USPAP Chase, who was not the client, demanded that Dingeman discuss his appraisal report with them (citing possible USPAP violations). Dingeman told Chase that per the Confidentiality Section of the Ethics Rule in the Uniform Standards of Professional Appraisal Practice (USPAP), he is not permitted to discuss the content or conclusion of the appraisal with anyone other than his client. Chase threatened to place him on their Ineligible Appraiser List if he did not comply. In their response, Chase is challenging the commonly held interpretation of USPAP’s appraiser/client confidentiality standard, arguing that it is not a violation for Dingeman to discuss the appraisal with them, even though they were not the client. In defense of their interpretation, Chase appears to be referencing Certifications 21 and 23 of the Uniform Residential Appraisal Report (Form 1004), arguing that because they are in possession of the report and that Dingeman agreed that the lender may “disclose” the report to other parties, and that because they are entitled to “rely” on the report, Chase meets the “information disclosure requirements” under USPAP.
In response to
Dingeman, Chase writes, “We find no USPAP restriction against disclosure, even of
confidential information, to persons specifically authorized by the client or
any restriction against disclosure of non-confidential information to intended
users. When a client sells, assigns, and transfers a loan and delivers the loan
records, including the appraisal report, to the transferee, that sale,
assignment and transfer constitutes such an authorization.”
In short, Chase is arguing that because they are the successor or assignee of
the loan, the content and conclusion of the report are no longer “confidential
information” under USPAP, and even if they are, the fact that they were assigned
the loan constitutes an authorization for Dingeman to discuss the appraisal with
them. Dingeman points out that the Illinois Department of Financial & Professional Regulation issued an FAQ on precisely this situation. In Volume 4, Issue 5 May 2012, the Illinois Appraisal Board writes: “The new twist seems to be, Client A goes belly up. Client B buys up all of Client A’s loan portfolio. Client A made dubious loans. Client B wants answers. Client B contacts the appraiser and demands a response to questions on Client A’s appraisal...or Client B will place the appraiser on their Do Not Use—Exclusionary—No More Work At All List. It is beyond ridiculous to punish an appraiser into violating USPAP. In Illinois, it’s illegal. We are taking USPAP at its word and we saw fit to make it a felony for repeat offenders back in 2009.”
Richard Hagar, SRA, who has been advising Dingeman on the Chase issue, says that
Chase is attempting to elevate their status from intended user to client. “The
fact that Chase is the assignee or successor to the loan doesn’t change the
requirements of USPAP. Chase may very well be an intended user and they can rely
on the report if they choose to, but that doesn’t remove the appraiser’s
obligation of confidentiality to the client,” says Hagar.
Ken Verrett, appraising 25 years and who also worked in commercial banking for
15 years, says that lenders should stop trying to skirt the law just because
they don’t agree with it. “Interested parties can work to change USPAP if they
don’t agree with it, but disdain of USPAP is not a justification for ignoring
its requirements,” Verrett says. Response: No. USPAP has no provision for terminating appraiser-client confidentiality. An appraiser is required to comply with the requirements of the Confidentiality section of the ETHICS RULE, regardless of the status of the client.
Paying the Price
Chase also blacklisted Dingeman but not in the way he expected. Dingeman says
that a few days after Chase filed the complaint, and after calling several of
the Appraisal Management Companies (AMCs) he works for, Dingeman discovered that
instead of being on Chase’s Ineligible Appraiser List, he was instead
placed on the Ineligible Appraiser List for the U.S. Department of
Agriculture (USDA). Since Dingeman has never done any appraisals for the USDA or
does work in rural areas, he immediately contacted the USDA to ask why he was
placed on their list. Dingeman sees Chase’s actions as intimidation and coercion in violation of various appraiser independence laws. “Being on Chase’s internal blacklist is bad enough and can put an appraiser out of business, but the USDA list is a Federal list and it touches EVERYONE, every AMC, every broker, every bank, every lender, including Fannie Mae, Freddie Mac, and Ginnie Mae. In my opinion, placement on this list is no accident; it is intentional and with malice,” says Dingeman.
Dingeman has retained legal counsel and has filed his own complaints against
Chase with the ABOA, the Arizona and New York Attorney Generals, the Consumer
Financial Protection Bureau (CFPB) and the Office of the Comptroller of the
Currency (OCC).
Dingeman has
reached out to various appraiser groups, the Appraisal Subcommittee and
Appraisal Foundation for help. To his dismay, he says, he has received little
support so far. Dingeman believes that this issue impacts more than just one appraiser-it will effect the way every appraiser does business. “Are we to follow USPAP or are we to follow the demands of every bank that threatens or punishes us into violating USPAP?” Most appraisers know that they are held to USPAP and they work hard to follow the law and the standards of their industry. So the question is: who is going to defend USPAP when it’s challenged?
Sidebar: “This is where Chase may have failed the regulatory requirements outlined by the OCC. They may have failed in their own due diligence before they funded the loan. If there was a deficiency, Chase should have reviewed it, communicated it, or replaced it when funding the loan, not after the fact,” Hagar says.
Hagar points to the Inter-Agency Guidelines which addresses the actions that
Chase is required to take if a deficiency is recognized in the appraisal: In other words, Chase and other banks are required to conduct due diligence and identify deficiencies BEFORE the final credit decision.
**Join Richard Hagar, SRA this August 16th in his upcoming webinar:
Top 5 Questions asked of an Appraiser
and How to Answer.
In this webinar, Hagar explains how certain requests/demands from a client can
place the appraiser in legal jeopardy and helps appraisers understand how to
answer legally and preserve their independence.
Sign up today and
learn the right way to help clients, answer their questions, and stay in
business.
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