There are thousands of heroes among us. In my own mind, a hero is one who perseveres in times of crisis and operates on core principles. The fundamental belief system of an appraiser should be rooted in integrity.
Yet every day, an appraiser is challenged not to be “so rigid.” “Come on; you can’t be that good.” Or one of my personal favorites, “if you don’t help this little old lady she will lose her house.” Everyone else is doing it, right?
There are so many misaligned incentives in housing finance and in particular the appraisal process that they are too numerous to mention. But I will try to name a few, and I expect to hear from you so we can add to the list. Just for starters:
- Contract –you must be given the contract (the answer to the question) according to USPAP. Oh, the irony.
- If your estimate is below the contract price, you are punished- more work, more comps, and possibly removal from the panel.
- Measured on fee and turn time- while service is important, quality should trump everything yet it isn’t in anyone’s scoring.
- Certifications should come at the beginning of a report, not at the end. In a court room, you swear to be truthful before you testify, not after.
Fannie Mae and Freddie Mac maintain a very limited “do not use” list of their own. Perhaps it is time they reconsider and become more diligent. Their legal teams have stated in the past they are concerned with being sued by appraisers if they have stricter enforcement. In a perfect world, that wouldn’t be a concern. It still seems befuddling that they would allow known bad actors to infect their data pool against which honest and competent appraisers are measured. If UCDP is an effective risk management tool, then surely it can ferret out appraisers who are submitting reports that do not meet their standards.
Lenders also maintain “blacklists.” While not strictly required in Interagency and Evaluation Guidelines (IAEG) from a practical matter they must. Where the problems lie are in the provenance of these lists. Some of these lists predate HVCC and AIR whereby an appraiser could have made it to a list for not cooperating with loan production. Lenders need to be radically transparent about their processes, practices, and procedures for managing these lists.
What does an appraiser do if they are aware of an incompetent or unethical appraiser? There isn’t much they can do to act on rumor or innuendo. If you have a report in your possession, you are obligated to report it to your state agency. What does an appraiser do when they feel as though their independence is violated? There are a couple of options:
- File a complaint through the ASC.GOV website
- Figure out who the lender’s regulator is and file a complaint directly with the regulator
- Send it to me, and I will forward it to the proper regulators, with your permission
- Contact the compliance officer with the offending lender
- All of the above
“All that is necessary for the triumph of evil is that good men do nothing.” (Edmund Burke)
While I wouldn’t be too confident yet, the word is that Congress will soon be taking on housing finance reform issues. Let’s keep the faith that we can finally have a bipartisan discussion that is open and honest. And let’s hope that appraisal reform issues are a part of the conversation. Maybe, just maybe, next year will be the year.