“P”s in a Pod

I am with Suzy Orman on this… people come first. In our world we have a lot of Ps–People, Policy, Practice and Product. I think we just need to realign our priorities. As an industry we have invested millions in automated scoring systems of the appraisal report. I personally do not believe a bot can score an appraisal report very well. That would be akin to a computer reading “Fifty Shades of Grey” and comparing it with “Lolita”. Which is the better novel? Ultimately could it ever be done? Yes, but not with the appraisal report in its current form.

The biggest complaint coming from the appraisal community is an ever -expanding scope of work. I read the blogs regularly. My analysis is this– the current set of rules was created to stop appraisers from certain bad behaviors. The problem of course is that the bad actors still behave badly and honest, competent appraisers are punished. The end result is that only a fraction of the activities of the appraiser are left to focus on important processes like verification of the transactions and data analysis.

So what is the solution? It is a very simple one. Fannie Mae and Freddie Mac should not permit known bad actors to submit appraisals to UCDP. This corrupted data becomes a part of the peer data against which your appraisal report will be scored. I have a problem with that. The GSEs have fraud departments and repurchase departments. They should certainly be able to identify who are the repeat offenders. I don’t know how many appraisers fall into this category. Let’s just say it is 1% of approximately 50,000 appraisers who have submitted appraisals to UCDP on Fannie Mae’s behalf. (This number comes for the FHFA OIG Report). Right now Fannie Mae has approximately 12 appraisers on their AQM list. There are no hard stops for reports from these known appraisers from being submitted to UCDP.

Would the 49,500 remaining appraisers be willing to throw 500 of their brethren under the bus? Heck yes, if the process was fair. In the present state good appraisers are suffering and that indeed clearly is not fair. It is completely insane, as opposed to just a little bit crazy, to be concerned about hurting anyone’s feelings. How many trillions must be lost before we take a rational and simple approach to the problem. Remove the bad actors. It’s simple.

I know what the GSEs response will be “our lenders are responsible for the appraiser selection process”. Yes they are. But most of us recognize that mortgage brokers are still ordering appraisals and it is also likely the poor quality is being generated through that channel. Lenders buying loans originated through a broker channel cannot ensure that AIR has been respected. The GSEs would appear to have few controls, if any, in place to ensure that their AIR policies are being enforced.

Appraiser selection is the single most important part of the appraisal process. And it is the simplest part of the appraisal process. This year you will see more and more lenders focused on the due diligence process. To learn more about what regulations and guidelines drive this process please read the white paper Fee Panel Management. While these rules are in place for lenders and their third parties, a read of this paper will help appraisers understand the drivers of these new due diligence standards.

If you have any comments or would like to submit content of your own email comments@appraisalbuzz.com

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About Joan Trice

Joan Trice
Joan N. Trice is the founder and CEO of Allterra Group, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 500 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.

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3 comments

  1. Avatar

    Years ago I worked for a subprime lender performing appraisal review. The low quality of appraisals was staggering. Removing a bad appraiser was extremely difficult, as the lender put much more energy in providing further support for the bad appraisal, rather than removing the bad appraiser from the list and obtaining a real unbiased estimate of value. They just wanted to put lipstick on the pig, when I wanted to cook some bacon!

  2. Avatar

    Collateral Underwriter is a clear violation of USPAP. The Ethics Rule of USPAP mandates that any appraiser accepting any appraisal assignment must act impartially, objectively and independently. (See Page U-7, 2014 USPAP) When an appraiser has been told to explain, clarify or revise a condition or quality label or GLA sq. ft., his or her independence has been revoked. Appraisers and USPAP instructors should be screaming at the top of their lungs about this infraction upon appraiser independence.

  3. Avatar
    Retired Appraiser

    These P words come to mind when I think of the appraisal profession:
    Pillaged
    Pilfered
    Plundered
    Profitless
    Pointless
    Pitiful
    Pathetic
    Preposterous and lastly
    Psychotic (if you are still accepting assignments)

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