Fannie Mae Tries to Ease Appraisal Issues with a new memo, but will it work?
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Appraisal Issues, CFPB, Fannie & Freddie
Fannie Mae Tries to Ease Appraisal Issues
admin - Friday February 3, 2017
The guidelines we “now” have on the books allowing trainees to inspect properties unoccupied by a supervisory appraiser will never be realized. Investors pull all of the lenders strings and will never go for it. Thus we are right back to where we started. It would be dangerous not to set a standard minimum number of properties which a trainee should be required to inspect prior to going it alone.
The real reason you see costs that high is something called scope creep. I am an appraiser in Texas. My appraisals for conventional loans run from $400 to $500 unless there is some freaky stuff at the property. When we move over to FHA, the fees go way, way up. This is because FHA has imposed so many “must do” items that to properly do one requires me to be a home inspector and my site visit goes from 30 or 40 minutes to 4 or 5 hours. It also at least triples the desk time to complete the report. That means I miss out on doing 3 or 4 conventional appraisals while I’m screwing around with the FHA. Add in the pain in the ass factor and I can’t see doing an FHA for less than $2,000. Of course, that means I don’t do them. It also means that those appraisers I know who actually do do them aren’t actually doing them fully according to FHA guidelines, but fudging it quite a bit. At least that is the case if they aren’t charging at least $2,000 to do FHA. See, there is your real problem. Too much scope creep. Too much government involvement.
Yup, exactly right! FHA is so time consuming and risky it’s worth at least $1200 an appraisal.
Lenders have no one to blame but themselves for any and all situations. The appraisal requirements rise dramatically every time lender greed tanks the market. The appraisal reports are now longer than they have ever been in my 28 years. Appraisal fees have to rise as in any other business. Time is money. It is also not unreasonable to charge $2,000 for extremely complex, multi-million dollar properties which take a complete day to measure and sketch. This should be obvious. The lender makes a fortune on these deals anyway and can afford to pay for the report. All properties are NOT equal. As for turn times, why all the fuss? In my area, lenders were taking 2 months or more to close loans while appraisers were delivering reports in 3 weeks or less. Why would they need appraisals any faster? It would seem lenders should worry about their poor back-end loan servicing. Faster appraisals have never translated to better lender service. Appraisers are currently chasing over 3-4 counties, and completing the longest, time-consuming appraisals in history. We are doing this faster than loan servicing moves about cubicles shuffling documents in the same building all day long.
Wow! I guess things have really changed since Jan. 20th. Now Fannie is tweeting out policy with no discernable forethought…….I know I won’t be putting my license on the line for a trainee, or an “unlicensed appraiser”. Way too much liability in an era where one complaint to the state can cause you to lose your ability to get E&O, without which you are dead in the water in this biz. Speaking of which, our E&O carriers will probably have something to say about this. I’m pretty sure that there was something in our E&O application where we had to certify that we do not use unlicensed people….. What is an “unlicensed appraiser” anyways? An unlicensed appraiser is not, by definition, an appraiser…….
This will not change the way any credible and professional appraiser does business, but will probably give rise to some of the appraiser puppy mills that we saw back in the late 90’s/early 2000’s. One appraiser, 5 flunkies, churn & burn…..we know where that got us…….Lets just cut to the chase shall we? Since the realtor is already on site at the time of the listing and has “inspected” the property, just let them do their own appraisal. That should speed things up a bit. No realtor involved. No problem. Let the homeowner do their own. They should know their home better than anybody…….. Really, if you want to speed up the process, get rid of the AMC model where they spend the first week, or longer, shopping the order around to get the cheapest fee. Me? I’m moving to Oregon……
The lenders have no one to blame but themselves. Every time they tank the market in greed and incompetence, the appraisal report becomes longer with more requirements. Enter the AMC and it got worse. STREAMLINE the appraisal reports. Bad loans were not made because there was not enough info in the appraisal report. The lenders missed everything and didn’t read them anyway. Regarding fees, extra work means charge more money. Business 101. $2,000 is not unreasonable for complex, large, million dollar homes. It takes all day to measure and sketch. Turn times? In my area it was taking appraisers 2-3 weeks to complete appraisals, and lenders 2 months or more to close them. Faster appraisals have never translated to better loan servicing. Appraisers chase all over 4 counties and deliver the longest reports in history faster then loan servicing moves about cubicles shuffling papers and documents out of the same building.
Reducing the quality of an appraisal is not the answer, and this will happen. Underwriters will catch the lack of supporting comps for example, and will either require additional comps, better explanation from the unqualified appraiser or decline the loan. This would cause delays and added expense and more declined loans. Possibly FNMA would be better off going back to accept the 2055 to lower the cost. Reduce regulation so the appraisal report itself doesn’t take so long, not reduce the quality. Garbage in is garbage out.
The reality is that the inspection is mostly monkey work…so is taking Comp photos. The supervising appraiser would and should take the responsibility for the final opinion of value. It’s a waste of time for a seasoned appraiser to inspect properties IF he/she can send out someone who they find qualified to complete the inspection. Appraisal costs could ease some, but more importantly, this would allow an appraiser to expand and contract their volume during market swings. It would most certainly make it more attractive for a veteran appraiser hire the next generation.
The high cost of appraisals in some locales is largely attributable to the add-on fees charges to the borrower by AMCs. In a situation where a borrower is charged say, $1000, for an appraisal, the appraiser is probably getting paid somewhere around 500 bucks (usually a reasonable fee) with the AMC tacking on an additional $500 for minimal value-add. Blame Dodd-Frank and the destructive AMC model for both “high” fees and longer turn times.
Thanks for the info. I can see my future looks rewarding as in $$$$. As now I will have the same volume of appraisal work as I currently do PLUS I can see more review work of other peoples appraisals. Oh and the other appraisers will also have their same volume or work plus they too will have review work of my appraisal. It is a win win for all appraisers. I’m sorry this will make the process of closing loans longer and more expensive. Long live the appraisers.
appraisers in tx are underpaid for the $hit they have to deal with and amount of time they have to spend on reports these days. appraisals would not seem to be “taking so long” if TRID didn’t cut off almost a full week of processing time. contract dates have NOT been extended since implementation of TRID. also, trainees are required to be licensed with the State so not just every schmuck off the street (or your 17 yr old son) can go do the inspection.
Shortages of appraisers willing to work for less than customary and reasonable fees is the problem. I have many emails with proof from AMC’s that they can get appraisers here in Florida for $240-270.They “blast” orders to unknown recipients. Quality and credibility of the appraiser is out the window. And since the fear of possibly have to pay a customary and reasonable fee to an appraiser when the borrower has paid a substantially higher fee to have an appraisal, has triggered some to try and hire staff appraisers.
Do you really think appraisers are getting the whole $2000 for an assignment? And if they are, it’s well outside the norm. As for long turn times, lenders and AMCs’ do not allow appraisers to discuss delivery dates and therefore will often sit on a file for weeks before ordering the appraisal. You guys know this. I can remember you being a lot more objective about the appraisal process.
I am an Oregon appraiser ready to semi retire after 43 years. I checked with the Oregon ACLB recently on this subject and was informed that the supervisor is not required to inspect the subject, however it is still required by many lenders. Elimination of this requirement would allow the training of new appraisers to be more agreeable and economical for the supervisor and hopefully the product will not suffer.
Working in a rural community commands a higher fee and it’s about time we get an increase after all these years. The reports of $2000 fees is grossly exaggerated and probably associated with a very remote property. That’s not very responsible reporting you guys!
Why are agents and title companies and AMCs the only valuable services in the transaction and the valuation of a possible lifetime investment considered to be optional or unnecessary?
Lending from a Local credit Union in Arizona our appraisal fees run from $400 to $500 and because of the shortage of appraisers, costs did not go up, but turn times were hitting up to 3 weeks in some circumstances thus effectly losing people their homes.
If the underwriters can over look that the experts are not taking the photos and they are snapping a ton of photos they can sift through I don’t have a problem with it but at the same time I don’t know how much of a solution it makes as far as costs, but should lower turn around times.
Please tell me folks where is the separation of loan broker and appraiser when these amcs hire staff appraisers? If an appraiser only has one client who is only interested in two things, making money and making the loan broker happy, I wonder who will be the first to give in if there is a problem w/ value. I’ll betcha it won’t be the amc or the loan broker who takes the dirty end of the stick!!!! If amcs are allowed they should only be able to hire review appraisers!!
Eliminate AMCs, improve underwriting of appraisals, a function that already exists in the loan process. Much less cost and disruption to the process. If AI/HVCC was such a good idea, shouldn’t we also have “Application Management Companies” to be intermediaries between applicants and unscrupulous Loan Originators? Ridiculous AI/HVCC it was ever created.
The licensing required by most states is simply beyond belief. Hair dressers, massage therapists, nail salon employees, mortgage originators, appraisers, and the list goes on ad nauseam. Why should an appraiser require training for three years? It isn’t exactly air traffic control in the scope of life threatening importance. Why should governments have licensing requirements as a hidden form of taxation and limiting participation? Why do the agencies require buy backs for errors that are obviously typos? Many more questions with few good answers. Greed is involved in all of this.
I love these comments. We appraisers have a job to do. The job changes on each appraisal. Research is needed. 100’s of interior photos are reviewed on MLS.
AMC’s destroyed the business model of the appraisers. Appraisers left the business, moved to accounts and lawyers. AMC’s are your problem for turn times. AMC’s try to protect themselves by adding everything they can to the reports. Take a picture of the street sign, take a picture of the lights on, the water running, the smoke and carbon detectors, each room, the heater, water heater, fuse box, the well, the septic and ya both side of the street and rear and the front properties….the list goes on and on and on.
Time, our most precious resource, is wasted adding pics to the reports, verbiage that really no one cares about……..and ya…don’t forget, they shop the deal around for days to find the cheapest appraiser to add to their profit margins….sometimes for $10.00.
So in the end, Everything takes longer these days….and don’t forget, we appraisers are held accountable for 10 years now on these loans….
Cant reach an over blown sales price takes 3 times longer to write….why…because we will have 10 people, who are NOT appraisers, take a fine tough comb to our reports to find mistakes so they can yell “its a bad appraisal.” Most realtors work with price per square foot data derived by using superior properties to the subject. And then here comes the appraiser who factors everything in…good and bad.
Want faster turn times……forget it. Blame the appraiser for a foreclosure….when the owners sat there for years not making payments….ya right.
The industry got what it deserves….better appraisals with over sight.
All those banks, mortgage companies and funders in this country who knew what appraisers, by name, were committing fraud…should have turned them in to the state boards….But NO…..no one did.
So here we are…..suffer bitches !
Chris,
You raise a very good point. If, as you mention, appraiser fraud was so rampant, then why were no appraisers punished? How can we let these unscrupulous appraisers continue working in the business? Regulation is fine if it addresses a carefully identified problem, if it doesn’t then you get the regulation we have which impairs an industry and is very unfair to honest appraisers while raising the cost to consumers. Only better underwriting will identify bad appraisers so they can be dealt with individually. The current regulation punishes all parties with only AMCs benefiting.