Appraisal Articles

This year the Annual NCPAC conference was held September 13th –15th, 2007 in downtown Asheville, NC. Before the conference started, members were able to take advantage of a 7 hour continuing education class featuring “Scope of Work”. Also at this year’s conference was guest speaker Charles Fields, Jr., Director of Mortgage Division, for the North Carolina Commissioner of Banks.

Mr. Fields informed us that effective January 1, 2008, House Bill 1817 (NC GS 53-243-11(11), the Residential Mortgage Fraud Act, will be revised by removing the words “coercion, extortion, bribery” and is being replaced with the words “improperly influence”.

Revised Residential Mortgaged Fraud Act to read along the lines of:

“it is a prohibited activity to improperly influence the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan”.

In addition to informing us of rule changes, Mr. Fields took questions from the conference attendees. He even took under consideration Amanda Rivera’s suggestion that when appraisers were disciplined by the NCAB, that often education was part of the solution to correcting the issues. And that the Banking Commission should look into requiring brokers who have been found to not be in compliance with NCCOB regulations, that they be required to take continuing education concerning those issues.

Mr. Fields was also asked by another NCPAC member attending the conference if he considered it a form of influencing the appraiser when a mortgage broker includes an “estimated value” on the appraiser request form.

NCPAC President Doug Winner informed Mr. Fields that a real estate broker was looking into becoming an appraiser because she had done approximately 100 BPOs (Broker Price Opinions / CMAs) at $50 a report and was told that she could charge $100 per BPO if she were an appraiser. Doug reminded Charles that a real estate broker could only charge for a BPO in anticipation of a listing or for relocation and it was unlikely that this broker had 100 listings in a single month.

A solution to the above problem might be for the Banking Commission to have a meeting with the North Carolina Association of Realtors and the North Carolina Professional Appraiser’s Coalition to discuss these concerns and propose resolutions on how the three agencies can work together to protect the public’s best interest through better compliance via education.

Doug Winner also challenged Mr. Fields to take a serious look at the behind the scenes appraiser black lists which are routinely shared with other banks & lending institutions on which appraisers are not to be used for whatever reason. Doug stated that the problem this creates is that then the appraisers have no defense or due process whatsoever on bringing to fruition to solve issues or problems between appraisers & brokers/lenders.

Amanda Rivera started a discussion with Mr. Fields about banks selecting appraisers based on their fee only and no consideration or regard given to qualifications, such as being a member of NCPAC, an instructor, or holding a professional appraisal designation beyond being certified.

Another question was raised by Doug Winner regarding NCPAC’s position on some appraisers giving undisclosed discounts as the “procurement” of the assignment. One helpful suggestion was made that NCPAC help come up with an advisory opinion, since USPAP states in the Management section of the Ethics Rule, “competency, rather than financial incentives, should be the primary basis for awarding an assignment”.

Mel Black discussed that his position was that appraisers don’t have to have a base fee for their appraisal products. They can charge all their clients different fees without requiring any statements in the appraisal reports, but that the information might need to be in a client file.

Baldy Williams’ added that his position has been that the appraisers who discount their appraisal fee in exchange for business are required to disclose in the appraisal report that the procurement of the assignment was the result of the appraiser giving the client a discount (or something along those lines).

Regardless, the undercurrent in this discussion was that appraisers undercutting one another and being rewarded with appraisal assignments from clients is a common problem.

The purpose of this communication is not to alarm you but to alert you to drastic and irreversible changes currently taking place in the mortgage market. If you or anyone else you know will need mortgage financing in the next 18 months, you need to read this!

Just last week, American Home Mortgage and its wholesale counterpart, American Brokers Conduit, became the latest casualties of the credit crisis. Last year, this company closed over $58 billion in home loans. Despite being, by all accounts, a well-run business, market conditions forced them to file for bankruptcy, leaving billions of dollars in loans in their pipeline unable to close. Tens of thousands of borrowers have now been left without financing as a result of companies like this going under.

Clearly, with over 100 national lenders having now closed shop in the last eight months, this is no longer simply a sub-prime lending issue. The credit market is experiencing unprecedented turmoil. According to Federal Reserve Chairman, Ben Bernanke, "Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing."

What does this mean to consumers? Potential borrowers cannot wait any longer. For those who are considering buying a home, be aware that the volatile credit market can change overnight, leaving fewer options available to borrowers attempting to qualify for a mortgage. This is even more true for those looking to refinance. With decreases in home values and fewer available mortgage instruments, delaying any longer could get significantly more expensive.

Borrowers with applications in process must not delay. Applicants should work with their mortgage professional to complete all paperwork quickly, especially on non-conforming, stated-income, and stated-asset loans. Even minor delays can result in funds being yanked at the closing table!

Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national housing inventories, means now is not the time to hold out for the "best" price possible.

Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence. If market conditions change, buyers who qualify for a loan today may not qualify a few weeks from now for the same exact loan. Just this week, many lenders have stopped offering No-Doc loans, and some lenders have even pulled back on all forms of stated loans. As market conditions continue to change, a buyer's pre-approval status can disappear even more quickly, delaying or spoiling the deal.

by Oscar Davis www.davisappraisals.org

It is time for trick or treat. Here’s another Halloween horror story for you.

We did an appraisal in town, not rural by any means, but a 13 year old home on 2.06 acres. The loan officer, then the underwriter contacted us about the report and wanted more comps added. Mind you we had 4 on it already, 10, 13, 21 years old, and a new one for proximity.

The underwriter insisted that their “AVM” came back and said that they could not accept the report without two additional comps from the new s/d. We informed them that this was not within the original Scope of Work, but for argument’s sake we would comply.

The underwriter then called us back to let us know that “perhaps we did not understand,” she wanted us to take out comps 1-3 and leave in only the new comps. We let her know that was not ethical, it would make the report misleading, and not to mention was against USPAP. So she told us in no uncertain terms if we did not comply, that she would personally have us removed from their “approved appraiser” list.

Can you believe it?

So we turned them into to the NCCOB for coercion.

The good news, or treat, is that the underwriter in question was “let go”. Hopefully it was due to our insistence that she was not qualified to be reviewing appraisals.

The only trick is that the bank has recently declared bankruptcy, surrendered their NC license, and would not be held liable for fines or any disciplinary action by the NCCOB. It is too bad they no longer have any loan officers here in NC; we were really looking forward to the NCCOB letting them know we don’t put up with that here in NC.

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