Matrix Blog

Showing Results for "amc"

[Sounding Bored] Valuation Review Interview: “Tightened Appraisal Guidelines”

October 5, 2008 | 10:18 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. Valuation Review gets me to spill the beans on the Brave New World our profession has entered. Believe it or not, I am optimistic.

Here’s my interview with Matt Smith, managing director of Valuation Review, one of the best real estate appraisal publications out there, IMHO:

As Valuation Review has reported, lenders have grown much more conservative in underwriting, and appraisers are feeling it in the form of growing demands for more in-depth market analysis and the inclusion of more recent comps in reports (see “Conditions, stips reach fever pitch for appraisers“).

“I hope it continues forever. It should never have gone away,” said Jonathan Miller, president and CEO of appraisal firm Miller Samuel. “The appraisal profession from 2004 to 2006 which was when the bar for underwriting dropped to the floor became an army of form fillers. The people who were competent either did not fare well during the housing boom or were effectively shut out of their trade. It’s a shame. That will take a while to rebuild.”

He estimated that the appraisal industry has fallen from “80 percent competent to just the opposite.” Miller recently shared his thoughts on how the GSE conservatorship and Wall St. crisis might mean for appraisers.

The most important factor, he said, is the housing market won’t get better until credit is fixed.

“The GSE takeover, in the long run, is a good thing for two reasons. One is they no longer serve two masters — the taxpayer and the shareholder. So they may be able to work out some of the foreclosure volume,” Miller said. “There may be more empathy.”

Also, no one knew how much of their balance sheet contained overstated assets.

“Until all the dirty laundry comes out, you’re not going to see much of a resolution of credit,” Miller said. “There’s no trust in the market whatsoever.”

What’s it all mean?

As the industry purges itself of unscrupulous practices and “professionals,” mortgage lenders might place a new premium on skilled, experienced appraisers at least temporarily.

“I’m skeptical that lending institutions are going to find the new religion tasteful for an extended period of time because it means lower revenue,” Miller said.

In addition, many of the executives and leaders who pushed for reckless behavior are still in place. There’s also another wildcard appraisers must face: The Home Valuation Code of Conduct.

Miller offered no guesses at a possible outcome for the HVCC, but said, “The biggest concern I have in all this and I can tell because I’m being heavily marketed to by them is the proliferation of appraisal management companies.”

Representatives from the mortgage broker industry have reported that with new rules preventing them from ordering an appraisal directly, 60 percent of their members will go under, according to Miller.

“Yes, because that is part of the systemic problem with valuations,” he said. “Lenders have essentially severed their relationships with local appraisers. They’ve gone national (with AMCs). You’re moving from an appraisal product that is biased to make the deal to one of incompetence. Generally, the appraisers willing to work for appraisal management companies are those willing to work for half or less than the market rate and therefore cut corners and turn the product around in 24 hours. The reviews I’ve done for banks suggest those reports generally aren’t worth the paper they’re written on. So how are we better?”

There has been no great solution for making sure appraisers are protected but viable, he said. Real improvements to the system would have to incentivize quality and trust.

“That won’t be accomplished by just making a new laws or regulations saying you can’t pressure appraisers. That’s been the tact in the past, and that really does nothing,” Miller said.

Rather, there has to be incentive on the demand side so that loan products aren’t purchased and securitized until they meet rigorous new standards. The larger trend in the appraisal community is that the intellectual knowledge base is leaving mortgage business for other types of valuation work.

“At some point, you decide whether you’re going to sell your soul or not. I don’t want to sound too cynical, but once you make the business decision to say, ‘I’m going to push the number,’ it’s over. You’re going to be doing that the rest of your career, because that’s what your reputation will be,” Miller said.

His own business has evolved in recent years from 50 percent mortgage-based to just 20 percent or work coming from mortgage companies.

“People that take the long-term view will probably leave the mortgage business as an appraiser and certainly are doing little work with mortgage brokers,” he added.

Tags: , ,


[Sounding Bored] Not All Of Us Are The Square Round Peg

July 15, 2008 | 9:57 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. Righteous USPAP indignation runs rampant in the appraisal profession and I worry it is leading to our demise as an industry.

Update: “This commentary was NOT submitted by Adam Johnston as originally presented in the post on July 15, 2008. He is not the author of this commentary. I regret the error and any inconvenience it may have caused.” Jonathan Miller

Let’s put things into current affairs, this profession is changing, unfortunately. The federal government is overtaking the profession and we all know they will mess up the profession.

Allowing AMC’s to control the mortgage lending area will be the downfall of the independent appraiser. The AMC’s will feed their staff, which is primarily made up of appraisers that cannot compete in the profession or have no outside experiences to survive outside of mortgage work. I am trying to get out of the mortgage affairs and diversify as most of the mortgage review appraisers probably have never written an appraisal. These reviews are typically out sourced. Who are these reviewers? and who oversees the AMC’s and how they conduct their appraisal affairs?? NO ONE.

All the small appraisal shops and good appraisers are giving up. Just like the small hardware stores or small grocery stores are giving up to the larger, corporate owned Home Depot, Lowes or Cub.

Personally, this profession needs to go back to old way of doing business where all appraisers can complete with the AMC’s. This current mess is not totally an appraisal problem. Who allowed no doc refinances?, Who allowed interest only loans?, Who oversees predicator lending? Who governs the mortgage brokers? The mortgage brokers have ruined the mortgage profession as they have abused most all responsible lending practices, and the big banks buy these sub-prime loans. WAKE UP.

The big banks are controlling the AMC’s as they also have a vested interest in these companies to make additional profits off the consumer. Some of the big banks own and service some of these sub-prime lenders. Pay the appraiser a proper fee for their work and spend the additional costs on reviews of their work. If the appraiser provides poor appraisals, remove or suspend them from the panel.

As a former staff appraiser, I guarantee the staff appraiser gets more benefit than an independent. I have NEVER been asked by the clients I work for to inflate an appraisal to make a loan. There are still some of us doing a responsible job in appraisal work for my clients. Yet I am being lumped into being that all appraisers being controlled by the loan officer to get business. I don’t fit this image, so why do I need to suffer? A lot of this is due to poor state licensing and supervisor appraisers role by signing off on work they review. I’ll bet better than half of the distress home loans fall into this situation. This is where the true problem is.

The passing or consideration of the current HVCC policy will demise the appraisal profession. Is their no consultation with the working professionals in the appraisal business. The professional and responsible appraiser knows the real problem with the mortgage lending profession, yet we are never consulted as to our opinion. The future lending practices are being depicted upon the major lenders in the industry and the federal government.

From 2003 to 2006 shown times of excelled home values and the lending requirements were relaxed. Home and town home prices were rising faster than the appraiser could keep up with, especially in new construction. People were willing to pay for these new homes and builders responded by increasing their prices.

Mortgage brokers capitalized on this and now where are they?? Easy, file bankruptcy and start a new company and let the larger mortgage company they sold the loan to struggle to find a buyer for the sub prime loan.

Just my thoughts.


Tags: , , , ,


[The Homeownership Preservation and Protection Act] Dodd Bill Places A “Hit” On Good Appraisers, With Bondage

June 6, 2008 | 5:07 pm |

This post was also presented on Matrix.

Back in September 2007, US Senator Dodd from my home state of Connecticut submitted what appears to be hastily conceived legislation to solve the mortgage crisis in response to the prior month’s credit market meltdown. I believe it was created to address subprime lending, but because it was so loosely presented, it casts a wide blanket over the lending process to little effect and likely causes more problems because it embraces conventional wisdom rather than actual practices. As far as appraisals go, it clearly doesn’t recognize the fundamental problems that New York AG Cuomo has already recognized.

The appraisal related language in the bill is sloppy and contains slang, suggesting that someone with little experience drafted it or the the bill was not understood by the Senator. I am very disappointed. It found co-sponsors because it contains buzzwords like “appraiser”, “mortgage” and “meltdown”.

In fact, the language of the bill was so vague and misdirected (the appraisal part) that most appraisers never took it seriously, instead focusing on efforts by Senator Frank and NY AG Cuomo. However, it still has life and is being taken seriously.

The bill is now in the Banking, Housing and Urban Affairs Committee.

I think Senator Dodd’s introduction of the concept of bonding was to incentivize the appraiser to do good by having “skin in the game” but it does nothing to solve the current lending problem. Is this the best that can be done by Congress? It’s damaging to the lending industry and poorly written and thought out, and in my opinion, it allows Congress to say this takes care of the problem, when in fact, it makes it worse.

Here is the appraisal-related content summary provided by Senator Dodd’s web site.

V. Require good faith and fair dealing in appraisals.
– Prohibit pressure from being brought to bear on appraisers.
– Hold lenders liable for appraisals to avoid the appraisal problems created in the current climate.

Here’s the actual language of the appraisal related portion of the bill:

Title IV Good Faith and Fair Dealing In Appraisals

Requirements for Appraisers

  • Appraisers owe a duty of good faith and fair dealing to borrowers.

My comment: Generic boilerplate that probably needs to be said. On that note I propose legislation that government officials never abuse their power, the public shouldn’t commit crimes and all school kids show do their homework. In other words, its an ideal, but it has nothing to do with addressing the core systemic problem – remove the possibility of collusion from the process.

  • No lender may encourage or influence an appraiser to “hit” a certain value in connection with making a home loan. In addition, a lender may not seek to influence an appraisers work, nor select an appraiser on the basis of an expectation that he or she will appraise a property at a high enough value to facilitate a home loan.

My comment: They actually use the word “hit” in the legislation. Who wrote this? How is a lender prevented from attempting to “seek to influence an appraisers work.” These are just words.

  • A crucial cause of the current mortgage meltdown has been inflated appraisals. Many ethical appraisers complain that lenders will only use appraisers who consistently value properties at the levels necessary to allow the loan to close. Appraisers who do not cooperate simply do not get hired. This is particularly detrimental to the homeowner because it leads the homeowner to believe he or she has equity where little or none may exist.

Comment: “A crucial cause” implies appraisers initiated the problem. Wrong. They were the enabler of the lenders and the bad ones were rewarded for unethical practice. They actually use the word “meltdown” in this bill? This paragraph also infers that good appraisals are always low. You can say stuff like this all day long but that doesn’t stop it from happening.

  • Appraisers must obtain bonds equal to one percent of the value of the homes appraised.

Comment: “How do the costs of the bonding enter into this? I am not familiar with getting bonded I assume that means appraisers would file for a bond with a predetermined amount so we get enough coverage. That violates federal licensing law (USPAP). This does nothing to fix systemic fraud and burdens the appraisers that do the right thing with additional costs. How does it keep a bad appraiser from doing bad work? They charge the bond costs to their unwitting (or not) clients and it’s no skin off their back. Good grief.

  • Remedies available to borrowers

— Lenders must adjust outstanding mortgages where appraisals exceeded true market value by 10 percent or more.

Comment: Can you imagine the litigation costs that would result if this passes? Who determines whether the value is off by more than 10%? Another appraiser who is hired by the homeowner? An AMC? A real estate broker? Zillow? A lender using an Automated Valuation Model? What is “True” market value? Is this a new definition of market value and all other forms like “Fair” used by GAAP are “False”? I find it hard not to say the word “true” in this application without sounding sarcastic.

— When an appraisal exceeds market value by 10 percent (plus or minus 2 percent) or more, a borrower has a cause of action against the lender. A consumer who is awarded remedies under this section shall collect from the appraiser’s bond.

Comment: Can you imagine the the costs that will be endured by the consumer? I understand that bonding costs for the typical appraiser would be $10,000 to $40,000 per year (per appraiser). For what? Appraising is already a razor thin margin business. Two things are going to happen: appraisal services are going to probably double, and many good appraisers will be forced out of business.

— Actual and statutory damages up to $5,000.

Comment:The further destabilization of the lending industry is worth $5k?

Here are the Senators who think this is a good idea:

Sponsored by Christopher Dodd(D-Ct), with co-sponsors: Sen. Daniel Akaka [D-HI]
Sen. Barbara Boxer [D-CA]
Sen. Sherrod Brown [D-OH]
Sen. Robert Casey [D-PA]
Sen. Hillary Clinton [D-NY]
Sen. Richard Durbin [D-IL]
Sen. Dianne Feinstein [D-CA]
Sen. Thomas Harkin [D-IA]
Sen. Edward Kennedy [D-MA]
Sen. John Kerry [D-MA]
Sen. Amy Klobuchar [D-MN]
Sen. Frank Lautenberg [D-NJ]
Sen. Claire McCaskill [D-MO]
Sen. Robert Menéndez [D-NJ]
Sen. Barbara Mikulski [D-MD]
Sen. Barack Obama [D-IL]
Sen. John Reed [D-RI]
Sen. Charles Schumer [D-NY]
Sen. Sheldon Whitehouse [D-RI]

I’ll bet if the situation was explained to the Senators with clarity, they would have issues with the bill as written. Time is of the essence, but the solution needs to solve the problem. The problem is about self-dealing and allaying investor’s concerns with the products they are purchasing.


Tags: , , , ,


[The Homeownership Preservation and Protection Act] Dodd Bill Places A “Hit” On Good Appraisers, With Bondage

June 6, 2008 | 3:22 pm |

Back in September 2007, US Senator Dodd from my home state of Connecticut submitted what appears to be hastily conceived legislation to solve the mortgage crisis in response to the prior month’s credit market meltdown. I believe it was created to address subprime lending, but because it was so loosely presented, it casts a wide blanket over the lending process to little effect and likely causes more problems because it embraces conventional wisdom rather than actual practices. As far as appraisals go, it clearly doesn’t recognize the fundamental problems that New York AG Cuomo has already recognized.

The appraisal related language in the bill is sloppy and contains slang, suggesting that someone with little experience drafted it or the the bill was not understood by the Senator. I am very disappointed. It found co-sponsors because it contains buzzwords like “appraiser”, “mortgage” and “meltdown”.

In fact, the language of the bill was so vague and misdirected (the appraisal part) that most appraisers never took it seriously, instead focusing on efforts by Senator Frank and NY AG Cuomo. However, it still has life and is being taken seriously.

The bill is now in the Banking, Housing and Urban Affairs Committee.

I think Senator Dodd’s introduction of the concept of bonding was to incentivize the appraiser to do good by having “skin in the game” but it does nothing to solve the current lending problem. Is this the best that can be done by Congress? It’s damaging to the lending industry and poorly written and thought out, and in my opinion, it allows Congress to say this takes care of the problem, when in fact, it makes it worse.

Here is the appraisal-related content summary provided by Senator Dodd’s web site.

V. Require good faith and fair dealing in appraisals.
– Prohibit pressure from being brought to bear on appraisers.
– Hold lenders liable for appraisals to avoid the appraisal problems created in the current climate.

Here’s the actual language of the appraisal related portion of the bill:

Title IV Good Faith and Fair Dealing In Appraisals

Requirements for Appraisers

  • Appraisers owe a duty of good faith and fair dealing to borrowers.

My comment: Generic boilerplate that probably needs to be said. On that note I propose legislation that government officials never abuse their power, the public shouldn’t commit crimes and all school kids show do their homework. In other words, its an ideal, but it has nothing to do with addressing the core systemic problem – remove the possibility of collusion from the process.

  • No lender may encourage or influence an appraiser to “hit” a certain value in connection with making a home loan. In addition, a lender may not seek to influence an appraisers work, nor select an appraiser on the basis of an expectation that he or she will appraise a property at a high enough value to facilitate a home loan.

My comment: They actually use the word “hit” in the legislation. Who wrote this? How is a lender prevented from attempting to “seek to influence an appraisers work.” These are just words.

  • A crucial cause of the current mortgage meltdown has been inflated appraisals. Many ethical appraisers complain that lenders will only use appraisers who consistently value properties at the levels necessary to allow the loan to close. Appraisers who do not cooperate simply do not get hired. This is particularly detrimental to the homeowner because it leads the homeowner to believe he or she has equity where little or none may exist.

Comment: “A crucial cause” implies appraisers initiated the problem. Wrong. They were the enabler of the lenders and the bad ones were rewarded for unethical practice. They actually use the word “meltdown” in this bill? This paragraph also infers that good appraisals are always low. You can say stuff like this all day long but that doesn’t stop it from happening.

  • Appraisers must obtain bonds equal to one percent of the value of the homes appraised.

Comment: “How do the costs of the bonding enter into this? I am not familiar with getting bonded I assume that means appraisers would file for a bond with a predetermined amount so we get enough coverage. That violates federal licensing law (USPAP). This does nothing to fix systemic fraud and burdens the appraisers that do the right thing with additional costs. How does it keep a bad appraiser from doing bad work? They charge the bond costs to their unwitting (or not) clients and it’s no skin off their back. Good grief.

  • Remedies available to borrowers

— Lenders must adjust outstanding mortgages where appraisals exceeded true market value by 10 percent or more.

Comment: Can you imagine the litigation costs that would result if this passes? Who determines whether the value is off by more than 10%? Another appraiser who is hired by the homeowner? An AMC? A real estate broker? Zillow? A lender using an Automated Valuation Model? What is “True” market value? Is this a new definition of market value and all other forms like “Fair” used by GAAP are “False”? I find it hard not to say the word “true” in this application without sounding sarcastic.

— When an appraisal exceeds market value by 10 percent (plus or minus 2 percent) or more, a borrower has a cause of action against the lender. A consumer who is awarded remedies under this section shall collect from the appraiser’s bond.

Comment: Can you imagine the the costs that will be endured by the consumer? I understand that bonding costs for the typical appraiser would be $10,000 to $40,000 per year (per appraiser). For what? Appraising is already a razor thin margin business. Two things are going to happen: appraisal services are going to probably double, and many good appraisers will be forced out of business.

— Actual and statutory damages up to $5,000.

Comment:The further destabilization of the lending industry is worth $5k?

Here are the Senators who think this is a good idea:

Sponsored by Christopher Dodd(D-Ct), with co-sponsors: Sen. Daniel Akaka [D-HI]
Sen. Barbara Boxer [D-CA]
Sen. Sherrod Brown [D-OH]
Sen. Robert Casey [D-PA]
Sen. Hillary Clinton [D-NY]
Sen. Richard Durbin [D-IL]
Sen. Dianne Feinstein [D-CA]
Sen. Thomas Harkin [D-IA]
Sen. Edward Kennedy [D-MA]
Sen. John Kerry [D-MA]
Sen. Amy Klobuchar [D-MN]
Sen. Frank Lautenberg [D-NJ]
Sen. Claire McCaskill [D-MO]
Sen. Robert Menéndez [D-NJ]
Sen. Barbara Mikulski [D-MD]
Sen. Barack Obama [D-IL]
Sen. John Reed [D-RI]
Sen. Charles Schumer [D-NY]
Sen. Sheldon Whitehouse [D-RI]

I’ll bet if the situation was explained to the Senators with clarity, they would have issues with the bill as written. Time is of the essence, but the solution needs to solve the problem. The problem is about self-dealing and allaying investor’s concerns with the products they are purchasing.


Tags: , , , ,


[Sounding Bored] Negotiating Appraisal Fees, Staring In The Headlights

June 4, 2008 | 9:32 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. I was particularly annoyed about getting pressure to drop my fee this week, so I turned on my headlights.

I was highly recommended by several sources to perform an appraisal in a sticky legal matter. We delivered an engagement letter. After a few days the client left a message saying the proposal looked good “but see what you can do about the fee” in a slightly sarcastic tone.

I winced when I heard the message because this was a complex matter involving litigation and court testimony and I quoted what I thought was a fair fee. Of course I may not have been in sync with expectations or this individual simply expected to negotiate.

There is nothing wrong with negotiating a fee up or down if the ultimate assignment, once defined, is not what was originally expected. However, I am particularly sensitive to the commoditizing of appraisal services (ie AMCs) that has occurred over the past decade.

…that we are just a bunch of form-fillers.

I tend to see our industry as a deer in headlights when negotiating fees and turn times.

In other words, as an industry we are way too happy to accommodate (I guess that correlates well with the credit crunch) the client whether it is fair or not.

Of course I am being very idealistic here but why not?

I don’t to be in the game of quoting a very high fee building in the expectation of negotiating downward. I quote what I am willing to work for. That seems to be more a professional approach to me. Avoiding being:

  • defensive.
  • condescending.
  • showing righteous indignation.

It sounds pretty basic but I am often amazed at how many of us (I ahve had my moments) have acted that way to a client.

We don’t need any more apologists for our worth as experts. Of course it ultimately is what the market will bear but why automatically negotiate?

Suggest that the client looks elsewhere if they are uncomfortable with the fee.

It has been my experience that the client doesn’t always go elsewhere if they were handled professionally in the past.

Incidentally, that particular client ended up calling back and hiring us for the assignment and expanded the engagement for a higher fee.

You get what you pay for.


Tags: , ,


[Capital Reflection] GSE/NY AG Comment Period Over, Political Maneuvering Remains

May 6, 2008 | 12:01 am | |

Did a lot of painting inside my house this weekend so I apologize if some of the paint ended up on this post.

The comment period has ended but the debate rages on within the appraisal profession: the new mortgage process that does not allow appraisals to be ordered by mortgage brokers will have the effect of enabling appraisal management companies and end up with an unreliable appraisal product. Two different paths taken to the same end: crummy collateral asset quality.

I am guessing the OCC is going to get busy, gaining back the limelight on the mortgage lending process from the NY AG’s office.

James Hagarty wrote a nice piece in the Wall Street Journal called Who Should Profit From Home Appraisals? about the political storm that has only just begun. What I find disappointing is how self-serving the players have become. Nothing wrong with advocating for your constituents, that is their job. The part that rubs me wrong is that it has become so predictable. The trade groups seem to be saying the old system worked just fine. Of course that is a complete disconnect from reality.

How does one explain how we got here? And are we going in the right direction?

  • Appraisal Management Companies (Title/Appraisal Vendor Management Association) – banks pay them about the same fee as the appraiser would get but they keep 30% to 60% of the fee and work hard to find appraiser (form-fillers) who will work at fees that don”t allow them to do research in the appraisal process. It’s laughable that the trade group contends they pay market rate to appraisers. Market rate for AMCs, I think is what he means. The AMC model doesn’t work paying market rates. It has been my experience that most appraisals I have seen done for AMCs are usually not worth the paper they are written on. The lower caliber appraisers they are forced to use experienced a flood of business during the housing boom. It is going to be interesting to see how that caliber of appraiser fares in a tighter underwriting environment.

The AMCs keep a big share of the fees consumers pay, typically at least 30% and sometimes more than half, appraisers and AMC executives say. The AMCs say they provide a valuable service by maintaining networks of local appraisers and controlling quality. “The AMCs pay market rate” to local appraisers, says Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association, a trade group.

  • Mortgage Brokers (National Association of Mortgage Brokers) – they want the appraisal industry to self-police and get rid of appraisers who turned in falsified work. Yes that has worked so well already (sarcastic emphasis). While we are at it, let’s tell mortgage brokers not to press appraisers for a higher value than they know is right or withhold payment from an appraiser for not making the number. Unbelievable. This mortgage brokerage group should be ashamed of themselves for taking the scare tactic approach that consumers will be forced to pay much higher fees. How much has the current mess already cost consumers?

  • Appraisers (Appraisal Institute) – Appraisers have flip-flopped on this issue. Initially they applauded the Cuomo agreement but were disconnected from what the industry wanted. The industry has been roiling for the past month over the empowerment of AMCs. I think this trade group, which is inherently commercial appraiser centric rather than focused on the plight of residential appraisers, is so worried about AMCs that they are willing to accept the lesser evil of allowing mortgage brokers to control the appraisal (bingo!). Loss of competent appraisers versus standing up to intense pressure to play ball. Not much of a choice.

  • OFHEO (HUD) – They seem to be detached from this whole situation yet they are the oversight agency for the GSEs. Amazing.

  • FDIC – No comments submitted (yet they insure lenders and provide bank oversight).

  • Federal Reserve – No comments submitted (yet they manage the health of the banking system).

  • Congress – proposing lots of ideas but most of them of no real help or will provide a benefit after it is too late. Hard to parse out grandstanding from heartfelt concern. I’d like to think they are really trying to fix it.

  • OCC (Treasury Department) – No comments submitted and boy are they pissed off. Their turf has been stepped on. Actually, it has been stomped on. I’d expect a lot more statements from the OCC in the near future.

Bottom line: If we want the lending system to have the collateral value estimate free from corruption and influence, then appraisal management companies, bank loan officers and mortgage brokers have no business whatsoever, ordering appraisals directly because they have a vested in their outcome. I believe it is called commingling interests.

Comments or no comments, I find it hard to believe that OCC will allow this to happen without making their own agreement. Otherwise, they will become as non-existent as OFHEO was during the housing boom.

Also check out: The Housing Crisis & The Plague of Potomac Fever


Tags: , , , , ,


[Matrix Zeppelin] a hefty profit, take your family out to dinner, Prolonging, rather deal with higher interest rates, greed and dishonesty, cliches, They are the worst, “fix” value, staight out liar, muck up the works

March 3, 2008 | 12:01 am | |


Well, the Matrix Zeppelin needed repairs, but the turmoil in the credit markets made it difficult to get a loan to make the repairs. But with the stimulus plan rebate check on its way, I decided to put the repairs on my credit card. Here’s a selection of recent comments on Matrix, whose readers cut to the chase:

  • Eliminate AMC’s and their high pressure tactics. They muck up the works mostly, get the instructions wrong, order 1004’s for condo units, forget to give you a unit number, or sales contract, contact phone numbers, etc etc.

  • Who has been a lender for 15 years is just a straight out liar. Terry comments that he or she has not yet to find an appraiser who will fix value. That means that he or she has tried, therefore the problem does exist. I believe Terry is just mad because now he or she will not be able to control a appraiser or appraisal value on a property. I have had on numerous occasions mortgage people call to see if I would push value. I never did and never will.

  • I’ve been a table funding correspondent lender for 15 years and I’ve yet to find an appraiser who will “fix” value for me. Your premise that mortgage brokers are pushing appraisers to set value, in my opinion, means the appraiser is the one to blame, not the mortgage broker. Certainly, there are “crooks” in every aspect of every business. Maybe you should get rid of them and not penalize those that have never had an issue following the lending guidelines.

  • Unless there is a minimum appraisal fee then I see more problems coming from this then good. How is the government going to order an appraisal? What would be different from whats going on with AMC’s now? They are the worst of the worst in terms of pressure and poor training. Somebody better clarify this quick because there is no such thing as a disinterested business

  • When we start to see lots of job listings for asset managers and work-out professionals on monster.com et al we’ll know this thing is getting understood and we’re there. Until then we hang in

  • There’s been a paradigm shift in cliches

  • the banks lent 100%+ on the appraised value of the home without looking at ANY supporting documentation. The model is flawed because it does not account for greed and dishonesty.

  • As a buyer, I’d rather deal with higher interest rates and less innovative financial products along with a lower house price. My property taxes will be lower, and I can always refinance if interest rates drop in the future.

  • What’s the point if they’re just going to default a few years later due to ARM resets? Note that I’m not even talking about the abuse from liar loans. If the conforming limits varied by region years ago, I would not have a problem with that. However, introducing this right now (and temporarily at that) will have the effect of prolonging the housing crisis more than necessary.

  • Jon Stewart summed up the “too little too late” observation on the Daily Show last night with the following (paraphrased) quip: “Look, we know your house is in foreclosure … and you lost your job … and you don’t have health coverage. But listen, here’s $400. Take your family out to dinner at a nice restaurant and try to forget we destroyed your economy.”

  • This video makes it seem like all the people who got mortgages needed to refinance or had rate adjustments. While in fact most people never needed to refinance nor did they have rate adjustments. Additionally, of those people that needed to get out of their sub-prime mortgages, a large portion were able to sell their property, which appreciated enough to yield them a hefty profit.

Tags: , ,


Appraiser Clearinghouse Concept Is Not A Clear Picture

March 2, 2008 | 4:35 pm |

In a recent post on Matrix, [Talking Points] The National Appraisal Clearinghouse I published the memo text in full for the first time in public domain (that I am aware of). I got a lot of calls and emails from appraisers, organizations as well as links from other sites with a slew of commentary.

The focus of the feedback seems to be on the “clearinghouse” concept in the talking points memo by Fannie Mae. The clearinghouse has the potential to be a huge morass of bureaucracy because it is presented as vague in purpose.

The common perception by most within the appraisal industry that I have spoken with or have provided commentary is that the clearinghouse will become:

  • a giant appraisal management company-like entity that will essentially prevent appraisers from establishing relationships with clients. The appraiser becomes a number in an automated system based on whether or not the appraiser holds a valid license and turns around the report in a required period of time (sounds like an appraisal management company).
  • appraisal management companies [AMC] would become enabled as a result of this talking points memo because lenders went to mortgage brokers and appraisal management companies to begin with to reduce overhead. By eliminating mortgage brokers from the appraisal ordering process, they would be forced to use appraisal management companies since they do not want to manage appraisal panels like they did before. They shifted mortgage origination to mortgage brokers to reduce overhead cost and risk and attempted to shift collateral risk to third parties in the process.

I’d say that both of these issues expressed by the appraisal industry are absolutely of significant concern if AMCs become enabled as a result of the implementation of this memo, it spells disaster for any sort of relevant solution to the problem of disconnect between the valuation of property and the mortgages that are lent against them.

Here’s the specific text from the memo on the clearinghouse and some thoughts on each point.

3. A CLEARINGHOUSE of appraiser information, conduct and activity will be established.

my comment: The purpose seems to either overlap or supersede the function outlined in FIRREA for the licensing of appraisers to be managed by each state. At the state level, budget constraints do not allow them to go much beyond managing license compliance. After all, it is not practical, fair or realistic for a state to tell an appraiser, “Gee, you overvalued this property by $12,000.” State agencies are not given adequate resources to be able to police all appraisers. It has been my experience, at least in New York, that the Department of State has been competent and fair, despite the lack of resources. The function for each state is to provide oversight to make sure appraisers are correctly licensed, their courses taken are approved and to answer complaints by consumers for shoddy appraisal practice. That means dealing with legitimate complaints as well as those from crackpots hoping to smear an appraiser because they were unhappy with a value conclusion. However, that does not address the quality problem with mortgage brokers and AMCs.

a. All lenders will be required to provide post-purchase copies of appraisal documents to the Clearinghouse.

my comment: Of course, with digital documents and scanning capabilities, this process is fairly simple (we’ll get to who pays for this later).

b. It will be an independent entity with an executive and board of directors (no Fannie Mae employee involved).

my comment: This point is important, and as an independent entity, it should include majority representation by appraisers and appraiser organizations as well as lender representation. No mortgage broker or appraisal management company representation since they are part of the reason for the need for this entity to begin with.

c. It will staff a hotline for industry and consumer complaints.

my comment: I see this as redundant to the state function and not able to serve much of a purpose that will prove effective in resolving problems. I think this should remain on the state level and the clearinghouse aggregates complaint data from the states as part of its reporting function. Remember that this organization is essentially one step removed from the state level and could really only refer complaints to each state to handle.

d. It will provide annual reporting publicly.

my comment: From the stand point of summarizing aggregate data, this is an effective tool to create awareness of progress with this serious problem with the mortgage industry. However, it should not be used to publish complaints about individual appraisers unless it can publish complaints about lending institutions, mortgage brokers and AMCs.

DISASTER WAITING TO HAPPEN

Appraisal management companies [AMC] should be pretty happy about their prospects if the talking points memo as presented, becomes standard practice, because they become essential to lenders if mortgage brokers are not allowed to order appraisals for lending purposes. The same quality problems with appraisals will remain, if not get worse.

In other words, the appraisal quality produced by AMC’s is just as bad as the work generated for mortgage brokers. I think it would be a disaster and a monumental waste of energy, given all the progress that New York State Cuomo has made in correctly identifying the real issues at hand if AMC’s become more relevant.

Ideas for consideration

  • If appraisal management companies [AMC] are contractually given incentives for handling a higher volume of appraisal orders by lenders, they are automatically ineligible to manage appraisals that are sold to Fannie Mae.
  • Cap the AMC participation to a nominal percentage (ie 10%) of mortgages accepted by Fannie Mae.
  • Create a national consortium of review appraisers who do not work for AMCs that would review AMC product. Perhaps this could be an offshoot Quality ratings could be established to determine whether the AMC product meets standards for Fannie Mae.

Other ideas or suggestions welcomed.

Aside: I would love to be officially part of the government clearinghouse effort because, as someone recently told me, “the devil is in the details” and I think it is important to have appraisers on the front line actively involved in fixing the disconnect problem.


Tags: ,


[5% Holiday Update] Declining Markets Get Smaller Mortgages

December 24, 2007 | 5:58 pm |

One of the problems with lack of transparency, is that people…errr…don’t know what you are thinking. Just like the fact that I have been weak in my quantity of postings as of late. I can’t explain it, because, well, I got tired of being, uhhhh…transparent. Needless to say, I am again transparent, and even more superficial.

One of the rumors floating around the appraisal/mortgage world for the past few weeks, covers the topic of Fannie Mae’s restriction on loans in markets they designate as declining. It was even suggested that a restriction in one market versus another, suggests redlining. However, I don’t see that correlation.

but i digress…

In a market that is declining, Fannie Mae will have a 5% higher loan to value ratio so instead of requiring 20% down, it might be 25% if the local market is declining. So markets with average mortgage amounts below the $417,000 conforming limit, this could have quite an impact.

>Current home price trends indicate that home values continue to decline in many markets across the country. As a result, and based on our continued monitoring of loan performance, Fannie Mae is reinstating a policy to restrict the maximum loan-to-value (LTV) ratio and combined loan-to-value (CLTV) ratio for properties located within a declining market to five percentage points less than the maximum permitted for the selected mortgage product.

Notice the use of the word reinstating. This is a recurring theme in mortgage lending these days. Its not the introduction of new lending guidelines, its simply the enforcement of existing guidelines.

In theory, the appraiser gets to lead the way in determining declining markets (in sarcastic tone: shocking!, amazing!, incredible!)

>Fannie Mae strongly encourages lenders to use supplemental sources and tools to independently assess current housing trends, unless the appraisal indicates that the subject property is located within a declining market. When the appraisal notes that the subject property is in a declining market, the maximum financing policy must be applied. When the appraisal does not indicate that the subject property is located within a declining market, Fannie Mae strongly urges lenders to implement processes and apply supplemental sources and tools to validate current housing trends and not rely solely on the information reflected in the appraisal.

But the appraisal industry has been neutered so severely by the mortgage brokerage and mortgage lending industry with pressure to “play ball” that I am not confident the appraisal industry is able to have this responsibility in the first place until proper regulatory restrictions protecting appraisers are in place. No more than a small percentage (you know who you are) of appraisers would be brave enough to show a negative time adjustment for fear of losing a client. I hope recent enforcement actions by the NY Attorney General and the SEC will make a difference.

Still, its a prudent and thoughtful first step for Fannie Mae to take. One of the things that drove me crazy in prior periods of market decline, lenders would send out policy notices saying they would not allow negative time adjustments. We would argue back, saying that this was an underwriting issue and it was simply a matter of adjusting the loan to value ratio, not to mandate rose colored glasses and ear plugs for the eyes and ears of the lenders. We either dropped them as a client or they changed their mind.

The byproduct of this action in declining markets will likely be even lower sales volume via stricter credit, placing more price stress in already distressed markets.

I can’t help but see the irony here: the reduction of Fannie Mae’s loan to value criteria in declining markets could actually lead to more foreclosure volume and more exposure for lender’s collateral. But in the long run, its a prudent action.

This restriction in declining markets should never have been lifted in the first place. It is better for the stability of the lending system by re-introducing the concept of risk awareness to lending decisions.

Now thats a concept I think we can risk having.


mp3 mp3 download buy mp3 download mp3 download mp3 online free download mp3 buy music buy music online buy mp3 music mp3 music map mp3 music map movie movie theater movie download dvd movie rental adult movie free porn movie epic movie movie showtimes free sex movie movie trailer free movie downloads porn movie free movie dans movie movie review transformer movie yahoo movie movie listing xxx movie new movie free adult movie britney spears video myspace music video daddy video video of saddams execution amateur video video youtube video download free lesbian video video daniela cicarelli hanging live saddam video clip clip video clip free sex clip free porn clip free sex video clip funny video clip mini clip great clip porn clip free video clip sex clip youtube clip sexy clip sexy video clip deviant clip funny clip movie clip free movie clip utube video clip sex video clip free porn video clip free movie porn art clip image art clip valentine big booty clip clip game mini clip porn video clip free clip sound clip movie porn clip xxx clip earring clip free video xxx clip paper art clip dover clip lesbian clip gay movie gallery free xxx movie watch movie online new movie release scary movie celebrity movie archive lesbian movie disney movie gonzo movie upcoming movie watch free movie online movie rental amc movie theater gay movie free online movie psp movie movie soundtrack transformer the movie trailer movie phone free big movie horror movie free gay movie harry potter movie movie cinema

Tags: , , ,


[Palumbo On USPAP] You Can’t Wing It

November 13, 2007 | 11:52 pm |

Palumbo On USPAP is written by Joe Palumbo, SRA, a long time appraisal colleague and friend who is also an Appraisal Qualifications Board (AQB) certified instructor and a user of appraisal services. Joe is well-versed on the ever changing landscape of the Uniform Standards of Professional Appraisal Practice [USPAP].

This week Joe recalls his time at WAMU. It looks like the stock price could use a wing or two. …Jonathan Miller


October 6th 2006 was my last day as a First Vice President and NE area Manager at Washington Mutual. It was bitter sweet, having attained what I desired all my professional life: a high visibility, well respected position in a major company where I could be an appraiser and a manager all in one. With the help of my staff we managed appraisers both in house and on our vendor list. We had proven efficiencies with regard to cost of service, turn around and quality. We were appraisers talking with appraisers, solving problems, getting the business done while never compromising our standards or ethics. We had the numbers to prove it and the plan “b” solution as well if “cuts” needed to be made. No one was listening, minds were made up.

Still, the bank had grown very fat over the “boom years” and the efficiencies got lost in the fact that we “cost too much”, especially since mortgage volume was way down. Hey what do you do when it stops raining? Yeathrow out your umbrella? The solution was supposed to be simple: replace 323 staff appraisers including management with two large behemoth outsource companies (that take a slice of the action on the APPRAISER Side, while charging the lender even MORE than typical). Why not? Appraisals are all the same, appraisers are all the same and as long as you can get someone to sign the form you can make a loan. Who needs management of appraisals?

Well well, now the bank is in the headlines for collusion with the very business partners that were supposed to save the day. Something about “things wrong with these values: fix it or no more work” per the New York Attorney General. As a result there were “inflated appraisals”.

Some of the appraisals I saw from the Appraisal Management Companies were a far cry from inflated but rather conservative. What happened on October 7th to change all that? Nothing. What did happen was that Washington Mutual decided to remove an integral communication piece within the banking operation that made sense out of these “value” things and replaced it with a “message service”. The AMC “clerk” leaves the appraiser a “message”: “The bank does not like the value.please call us back”. No translation of information or discussion on the complexity of the issue.

Today as I see the WAMU stock price I can not be so naïve as to think it is ALL attributable to the demise of the in-house appraisal department. I do think that there are some things in business that you can not try to “wing”.

Like my friend, (also an appraisal manager for 17 years there) at a major national lender says. those in the ivory tower sure know the cost of everything..and the VALUE of nothing.

Tags: , , , , , ,


[Sounding Bored] Managing To Give The Industry The Eye

May 23, 2007 | 5:07 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week, the subpoena issued to eAppraiseIT generates some general thoughts about appraisal management companies.

New York State AG Cuomo has now added eAppraiseIT to the list. I thought it was curious that the president of eAppraiseIT was quoted saying: It’s a very good thing, what the attorney general is doing,” Merlo said. Cuomo’s office was focused on “who’s exerting the pressure” on appraisers, he said.

As an appraisal company, we made a “business” decision not to work for appraisal management firms like eAppraiseIT because their appraisal fees were roughly half that of market levels and the turnaround requirements were 2-3 times faster than the norms. It was a “business decision” on our part. I don’t see how appraisers who work for the majority of appraisal management companies don’t need to cut all corners to make it cost effective.

When Washington Mutual closed their in-house review function last year (the last national lender to do so), they went with eAppraiseIT and Lenders Service to manage the appraisal process. Unfortunately, Washington Mutual did not refer their approved appraisers to these two AMC firms and basically cleaned house after torturing all of us that were loyal to them for five years with an appraisal ordering system that did not work (remember OPTIS?). I had heard that they were having quality problems and sure enough, some of the formal panel members got calls from both firms. We didn’t bite.

US Trust Company, who is being purchased by Bank of America was a great client of ours for years. Two years ago, UST senior management decided to dump all the appraisers they worked with to save money and hired AMCO, an appraisal management company. Many firms like us, who had been working for them for 15 years since they entered the mortgage business, were talked into working for AMCO, because our same fees and turn time requirements were mandated by UST. However, AMCO eventually ignored the mandate and stopped paying our outstanding invoices. Recently, with the previous senior managers gone, UST dumped AMCO and we were eventually able to recover nearly all our accounts receivable and were back to direct ordering from UST. AMCO seems to be out of business and someone is reportedly shopping their assets. We will see if Bank of America plans to go with credible appraisers in the markets they cover. I believe they too were burned by the appraisal management company process and reverted back to in-house ordering.

With all the focus on appraisal pressure these days, I can only hope that something is done to correct the flaws in the lending system and someone actually wants an unbiased collateral assessment. Thats the goal here and hopefully the regulatory agencies won’t lose sight of that.

Until then, I’ll have to manage.

Tags: , , ,


[Fee Simplistic] The Perfect Storm: Is Appraising the New Sweatshop Profession?

March 22, 2007 | 9:01 pm |

Fee Simplistic is a regular post by Martin Tessler, whom after 30 years of commercial fee appraiser-related experience, gets to the bottom of real issues by seeing the both the trees and the forest. He has never been accused of being a man of few words and his commentary can’t be inspired on a specific day of the week. In this post, he chews the fat with us about the easy credit syndrome and begs the question: “Do you want fries with that?.” …Jonathan Miller


This past Wednesday the Wall Street Journal reported on how US auto parts suppliers were successfully resisting the price-cuts demanded by Detroit’s Big 3-GM, Ford & Chrysler. The article explained how attrition among the US parts suppliers through bankruptcies, consolidations, etc. had resulted in giving the remaining survivors the necessary leverage to resist Detroit in price reductions demanded by the Big 3 in their attempt to lower costs. Thus with fewer plants, smaller operations and lower overhead the suppliers did not have to take on unprofitable contracts in order to keep their plants busy as they were now more efficient than in the past.

Compare this to the current state of the appraisal industry and you will find the exact opposite in terms of the relationship between supply and demand. The appraisal world has burgeoned over the past decade as a result of the vast residential and commercial CMBS market that has sopped up the investment capital pouring into US real estate. Preceding this boom, however, the supply side of appraisers had already expanded thanks to the enactment of FIRREA in 1989 in answer to the savings and loan debacle in the mid- late 1980’s when state certification enabled every Tom, Dick and Harriet to take a core of appraisal courses, pass a test and hang out their shingle as either a residential or general property appraiser. Moreover, and equally as important, many of these newly hatched appraisal savants were single practitioners operating out of their basements with no staff and little overhead. This is not meant to belittle the capitalistic society in which we operate but merely to set the competitive scene.

To handle the growing volume of deals and the expanding need for appraisals as well as keeping their overhead costs low the financial institutions commoditized the appraisal process and resorted to on-line standardized engagement letters that gave almost no information to the appraiser as to the number of tenants on the rent roll other than being told it was an office building or single-user industrial building, along with the property’s address and a contact name and telephone number; organized the lending process into a production line so that the loan officers had little knowledge of the collateral. Anecdotally, in the large bank that I worked for I found myself fielding requests for appraisals from our out-of-state branch offices whose customer/borrower may have banked at that location but whose property was somewhere back in the New York area (when I requested information about the property, its gross building area, rent roll, leases, etc. so that I could talk intelligently to the various appraisers in order to obtain a fee quote and timing in many instances the field office had no basic property information). To handle either appraisal reviews and/or engagements (especially by the smaller institutions) banks retained appraisal management companies (AMC’s) to administer the process. And thus conditions for the PERFECT STORM in the appraisal world were set in motion:

  • growing appraisal volume
  • growing appraiser supply
  • 3rd party AMC’S under orders to obtain lowest bid fees
  • newly minted appraisers eager to obtain work
  • AMC’s & institutions able to exploit the appraiser oversupply
  • contented client-lenders able to comply with FIRREA/USPAP minimum standards where any appraisal mistakes were bailed out by geometrically rising sales prices

Fast forwarding to the present and the various SOAPBOX articles of my fellow bloggers reporting manifestations of today’s appraisal business world: lenders shopping to see if the appraiser can support the loan/value amount; a quick “verbal” value before the written report arrives and any other quirky requests to prevent the deal from being lost due to the appraisal and it is apparent that business can be rough.

There is no question that today’s appraisal world has been transformed into a high volume rush business stoked by Wall Street’s need to keep the bonfires of CMBS in ample supply to sop up the large capital flows seeking investment outlets. The vast volume of business means that the originators, lenders and underwriters are the bosses while the appraisers have become the sweatshop workers if they want the business. State certification of appraisers has raised the supply of people willing to work at sweatshop fees. As often cited in SOAPBOX commentary, appraisers have become “form filler-outers” and downloaders of web-based data, sales comps and practitioners of applying sales price or rental rate averages to subject properties. Lucky is the appraiser if Co-Star has a photo of the selected comps. If not, a trip to the field may be mandatory if the reviewer does not accept the caption: “no photo available”. Gone is the appraiser who can look his client in the eye and say-“you know what, my experience tells me that market value is not represented by the average of the sales comps and here are the reasons why”.

If I have given the impression that appraisers are being paid for their production and not for their ability to discern market value based on market dynamics you are not mistaken.


Tags: , , , , ,

Get Weekly Insights and Research

Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

Follow Jonathan on Twitter

#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
NYC CT Hamptons DC Miami LA Aspen
millersamuel.com/housing-notes
Joined October 2007