Nothing has changed on the appraiser pressure front. with or without HVCC.

Appraisers are subject to the same sales force pressure as before. Here is a [redacted] email conversation with a loan consultant yesterday at a large national bank when the value was not high enough to their liking on a refi. We initially assumed this person from the bank was an underwriter, although in retrospect, it was obvious from the beginning he was not.

Bank (loan consultant): I really hope this is a joke he paid xx and put in xx milllion in work.

Appraiser: …if you have [new] data we can always take a second look.

Bank (loan consultant): please have [appraiser] call the client [actually it was the borrower!] to discuss asap the client [borrower] is furious

Appraiser: …have the head of your appraisal department call us. I didn’t realize you are the loan officer. It’s a violation of ethics law for you to be contacting us.

Bank (loan consultant): [Another bank] allows us to contact the appraiser.

Seriously.

Isn’t this an amazing conversation?

This practice continues to happen and we continue to be just as flabbergasted each time it does. The loan officer wants the appraiser to answer to the borrower [News flash: the appraisal was done for the bank].

Don’t lenders want the collateral assessed accurately? Are they even aware that this sort of thing remains fairly common?

The mortgage lending process continues to remain broken, a joke.


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5 Responses to “[Over Coffee] Morning Quote: I Hope This Is A Joke”

  1. Anal_yst says:

    Alas, those with the power to stop this don’t care (or worse, don’t know), and those of us who do care, well there’s only so loud we can shout, sigh…

  2. Edd Gillespie says:

    It is not just the mortgage lending process either, although the mortgage end is by far the worst of it in my experience. There are some dynamics at work out there that make appraiser abuse almost guaranteed.
    1. For the most part when people hire a professional, it is to obtain help with their valuation problem.
    Appraisers are supposed to be independent from that. Indeed, we may create the problem. 2. People who hire appraisers already have in mind what the appraiser is supposed to say. Appraisers are supposed to be independent from that. 3. Appraisals are often needed in situation where there is a chain of client relationships, such as the one you describe. If the appraiser’s client can’t make the deal work then there is a good chance the guy who is the first client in the chain will go elsewhere. Appraisers are supposed to remain independent in spite of that. My friend in Tennessee says the way to be securely independent as an appraiser is to be independently wealthy. 4. Appraisals are often obtained after the rest of the deal is put together and the appraisal is viewed as a sort of unwanted tax. If they didn’t have to get the appraisal, they wouldn’t. Appraisers are supposed to be independent. 5. Appraisers are not well equipped to deal with these conflicts and operate their businesses. Basically it boils down to who wants to hire an appraiser to tell them the truth when paying for the truth is a waste of time and money? Many clients operate under the belief that truth is in the eye of the beholder. Why pay for that?

    I think it is of critical importance to the profession to deal with these issues. We need to accept the fact that our insistence on independence and credibility is our part of creating the conflict. Not that it isn’t an excellent idea to have complete support when an appraiser makes a valuation is made, we’ve sort of trapped ourselves in this conflict by not permitting a preliminary cursory report prior to proceeding with a full appraisal. And to do that professionally when you’ve got a ready made conflict with the client before the inception of the assignment, is to require the client to tell you the value.

  3. Chris Jones says:

    This is really a great post. Thanks for doing it.

    One caveat: if you have a really GOOD AMC, appraisers do get more protection than they used to. The one I use never discloses the name of the appraiser up front, and will cancel the appraisal if there is any contact AT ALL between the origination staff and the appraiser. The money is not refunded, either. They are very serious about this, and the appraisers on their panel (who get paid full fees, too) love them for it.

    Seems to me this is how it is supposed to work, but as you point out, it’s often not that simple.

    So what is the solution?

    • Thanks Chris. While you are right, a good AMC could offer more protection, i feel that is the extreme exception. As far as referring to the way it used to be, we need to look at the way it was done before the credit boom. I’m not saying we should emulate the past, but the lesson there can be drawn by the hands on approach by lenders to caring about quality because they had skin in the game. Allowing the appraiser to function can only work if the lender is incentivized to make it happen. ie through regulation and additional penalties for bad practices if the loan goes bad down the road in a meaningful way.

      There doesn’t seem to be a choice. If the appraiser is removed from the process no how badly we perform as an industry, then it is a free for all mushrooming into another lending crisis.

  4. Edd Gillespie says:

    Jonathan, The mortgage process was and is a free-for-all and we were and are in it. Nothing I have heard would indicate that it would have been any worse without us. Surely by now we know appraisers cannot be the cops. We don’t have the training, ability or authority. We kid ourselves about protecting the banks, the consumers and others. What a joke. Kind of like Little Red Riding Hood protecting the wolf, grandma and the village simply by being a good girl. If we are competent then we have an important function in mortgage work, if we can find anybody who wants it and will pay for it. My read is that most mortgage clients, if not all mortgage clients, don’t want honest, competent and independent appraisals, let alone wanting to pay for them. I mean, after all, these are the very guys who won’t “mark to market.” I’ve been following some recent press releases from AI and so far that part of the profession seems determined to continue on in denial about where we fit in. I called Bill Graber about his comment when responding to NAR and NAHB that appraisers protect the bank. Bull, I said, and not only that, who would want to be identified as a bank protector in this current environment of economic rip off by the financial industry? Kind of like working for the Mafia and insisting you’re honest. Haven’t heard from him since and probably won’t. I read Jim Amorine’s last missal to Congress and it too was full of appraiser the protectors stuff. You’d think appraisers leap tall building in a single bound. I haven’t sent him my thoughts yet.
    I seriously doubt when somebody else’s money is on the line that it will ever be left up to an appraiser to be the final word. Maybe I should keep all of this to myself.