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Posts Tagged ‘Jonathan Miller’

[In The Media] Neil Cavuto/Fox Business News 3-27-09

March 28, 2009 | 8:50 am | | Columns |

Friday morning I was invited to be a guest to talk about appraisers and how they are impacting the flow of housing sales. I was initially concerned that this would be an appraiser slam piece, blaming our industry for killing sales, causing global warming and low salaries of central bankers but it wasn’t and I think I covered the bases. Kinda surreal – met and spoke briefly to Dick Morris in the green room. Cavuto was very personable before the segment, we talked about the issue before we went on.

  • Sellers are generally a year behind the market
  • The ranks of good appraisers were decimated by the mortgage boom
  • Appraisers have long been the “punching bag” of blown deals
  • Lack of data is a huge issue

Connie De Groot, who was the Beverly Hills real estate agent who is a regular on FBN recommended that buyers get an appraisal when pricing their property for sale – as Cavuto commented on my neutraility point, a “Swiss Appraiser.”

Watch the clip here or you can watch it here.


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Another Way To Look At What You Are Saying

February 22, 2009 | 9:31 pm | | Columns |

I was reading TechCrunch, an essential resource on technology. The post was about a service called “Wordle” which is described as

a toy for generating “word clouds” from text that you provide. The clouds give greater prominence to words that appear more frequently in the source text.

It takes feeds from a blog to create the graphic.

I thought it would be a good way to check out Matrix periodically to see what I am emphasizing at the moment.

Apparently my word of the day seems to be “rights”.

See the redux on Matrix.


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[Sounding Bored] Get An Edge!

February 4, 2009 | 12:25 am | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. There have been more changes made to the profession in the past several years than in the entire history of the profession, and most of the changes have not resulted in a more credible service. Still, I’d like to hope that the latest financial services sector turmoil will bring a clean slate approach to better regulatory oversight (devoid of insanity).


Sent from a reader of Soapbox – from a college course offering book. Competitive and rewarding field?


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[Sounding Bored] “V” Also Stands For Vindictive and Vicious: Why Can’t Professionals Get Along?

February 3, 2009 | 2:01 pm | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. There have been more changes made to the profession in the past several years than in the entire history of the profession, and most of the changes have not resulted in a more credible service. Still, I’d like to hope that the latest financial services sector turmoil will bring a clean slate approach to better regulatory oversight (devoid of insanity).


A few weeks ago I was asked a question by a local real estate agent referencing something my local appraisal competitor was doing. The agent was wondering if our firm could do the same thing for her. This same matter had been brought up to me before by another agent from a different brokerage firm so I didn’t think it was simply a misinterpretation by the agent.

Alarmed, I dropped my colleague a quick email mentioning what the last agent had told me and suggested they look into it and see if one of their employees might be doing something they shouldn’t. I wasn’t accusitory (I didn’t think) and thought tone was more like “I’m sure it isn’t true but you might want to check into it.”

Literally, a minute later I got a flurry of emails, viscious in tone, attacking me and to “get over myself.” This is from the same person who goes out of his way to say hi to me at appraiser functions. I can’t wait to see him at the next one – should be interesting.

This vindictive tone has been played out in the review appraisal scenario across the entire appraisal profession for years and perhaps this is why the appraiser was so sensitive – some appraisers feel the need to unreasonably criticize another appraiser’s work when reviewing a report for a client – in hopes of winning over the client. Nothing wrong with legitimate criticism but often times the line is crossed.

It looks like a private comment to alert someone of a possible transgression is on par with ripping someone to pieces for no legitimate reason.

I’m no Victim here, but why do we as a profession do this?

Professional mores indicate I was wrong so I won’t make that mistake again.


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[Of Mice and RE Bloggers] The New York Times covers 6 of us

January 25, 2009 | 10:30 am | | Columns |

Also posted on our Matrix blog.

It was fun to open the New York Times this morning and see Samantha Storey’s well written real estate cover story And the Blog Goes On on 6 real estate bloggers – with the added bonus of an above the fold photo. Even better that I was one of the bloggers profiled.

Aside from moi, others covered include Lockhart Steele of Curbed, Jonathan Butler of Brownstoner, Doug Heddings of TrueGotham, Noah Rosenblatt of UrbanDigs and Property Grunt of PropertyGrunt are all long time bloggers who have been on my blog roll nearly since day1 and continue to provide their unique take on all things real estate and whatever else is on their mind. All of us have different approaches, purposes, styles and audiences… thats what makes the blogosphere so cool.

On a personal note, I’ve never been superimposed on a mouse, especially as a long time trackpad user. I wonder if the “upside down” position of my photo could have some sort of hidden meaning? Like… “turning real estate on its head”, “being upside down on a mortgage”, “looking at things in a different way”?

Probably not.

Ok, back to work.

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[Sounding Bored] Appraisal Management Companies are enabled but not required

January 22, 2009 | 1:44 am | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. There have been more changes made to the profession in the past several years than in the entire history of the profession, and most of the changes have not resulted in a more credible service. Still, I’d like to hope that the latest financial services sector turmoil will bring a clean slate approach to better regulatory oversight (devoid of insanity).


While appraisers face tough economic conditions in 2009, there is a lot of nervousness invading the insulated land of adjustments and contributory value. I can’t tell you how many people and several clients we have are under the impression that lenders are required to order appraisals through appraisal management companies effective May 1, 2009 under the new Cuomo/Fannie Mae Deal. Related news coverage makes the whole thing sound very scary.

Here’s the Fannie Mae Home Valuation Code of Conduct Frequently Asked Questions (FAQs) on Fannie Mae’s web site that answers many of the questions currently on appraiser’s minds. Here are the comments specific to AMCs:

Appraisal Management Companies
Q25. Is a lender required to use an appraisal management company for ordering appraisals?

No. A lender may order appraisals directly from an individual appraiser.

Q26. May an appraisal management company affiliated with, or that owns or is owned in whole or in part by the lender or a lender-affiliate, order appraisals?

Yes, an appraisal management company affiliated with, or that owns or is owned in whole or in part by the lender or a lender-affiliate, may order appraisals if the appraisal management company meets the criteria of Section IV.B. of the Code.

Q27. When a lender uses an appraisal management company, the appraisal management company is responsible for retaining and paying the appraiser. Is it likewise permissible for a mortgage broker to use an appraisal management company, since the mortgage broker does not technically retain or pay the appraiser?

No. The Code prohibits lenders from relying on an appraisal where the broker had a role in selecting, retaining, or compensating the appraiser.

Q28. May a mortgage broker provide the lender with an approved appraiser list for the lender to use when ordering appraisals for that particular broker?

No.

Please read the entire FAQ. There is a lot of useful information.

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[Sounding Bored] Mortgage Appraisal Havoc – Of AMCs and Code of Conduct

January 14, 2009 | 9:23 pm | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. There have been more changes made to the profession in the past several years than in the entire history of the profession, and most of the changes have not resulted in a more credible service. Still, I’d like to hope that the latest financial services sector turmoil will bring a clean slate approach to better regulatory oversight (devoid of insanity).


Also posted on Matrix

The appraisal world changes on May 1, 2009.

I have been on a mission over the past year to creat awareness of the continuing issue of appraisal pressure and to prevent the enabling of appraisal management companies via the Cuomo/Fannie deal to dominate the mortgage appraisal business. It appears a foregone conclusion that appraisal management companies will dominate the mortgage appraisal process and as a result, will end up with a system worse off than before the credit crunch began.

Earlier this year, Mr. Cuomo threatened to sue government-sponsored mortgage investors Fannie Mae and Freddie Mac for allegedly failing to ensure that appraisers were shielded from pressure to inflate their estimates. Appraisers have long maintained that many loan officers or brokers, whose pay depends on how many loans they complete, pressure them to come up with value estimates high enough to ensure approval of the loans.

In March, Fannie and Freddie, eager to avoid a legal battle, agreed with Mr. Cuomo on an appraisal code of conduct. That plan drew fire from mortgage-industry groups and some federal regulators. Among other things, they said the code could raise costs for consumers and cause unnecessary disruption in the appraisal business.

One of the key issues facing appraisers was the pressure we were placed under to “hit the number” during the recent mortgage/housing boom. 20 years ago our clients were stodgy financial institutions with a separate appraisal departments surrounded by a firewall to keep loan officers away from the appraiser. Just before the onset of the credit crunch, the mortgage system originated something like 3/4 of its volume via mortgage brokers, who are paid when the loan closes. They select the appraiser {red flag} to perform the appraisal for the mortgage. If the appraiser comes in low, eventually, maybe not initially, the mortgage broker would find someone “better” {wink}. I can tell you, 75% of the appraisals completed for mortgage purposes are not worth the paper they are written on.

New York State Attorney General Cuomo opted to start with the appraiser and follow the mortgage. He ended up striking a deal with then GSEs Fannie and Freddie to curtail some past practices called Home Valuation Code of Conduct or HVCC. Some appraisers lovingly call the agreement “Havoc” because of the chaos it created. It enabled appraisal management companies.

One of the main changes was removing the ability of mortgage brokers to order mortgage appraisals directly if the mortgage was to be sold to Fannie and Freddie. If a mortgage application has an appraisal order through the mortgage broker, then Fannie Mae and Freddie Mac won’t buy it from the bank. This is a significant incentive for a lender because many banks need to sell their loans rather than retain them in portfolio in order to recapitalize and lend more.

I thought this was a terrific idea because stopped this tainted relationship structure between the person setting values and the person being paid on a commission if the value was high enough. But with this solution, a problem was created and that new problem outweighs the former problem.

Because of the way the HVCC is being implemented, most lenders are effectively incentivized to order appraisals through appraisal management companies. The best way I can describe much of this cottage industry is:

a centralized appraisal ordering and management organization run by 19 year old kids without any real estate experience who focus nearly exclusively on turn time and half market rate appraisal fees.

Kenneth Harney, of the nationally syndicated column, The Nation’s Housing in the Washington Post writes in his article: An Appraisal Upheaval

When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less than the $300 to $600 you’re charged, perhaps half?

Should you know who pockets the rest, or that cut-rate fees are too low to attract the most experienced appraisers?

Should you care that the appraiser might be pushed to come up with a number so quickly — almost overnight in some cases — that he or she doesn’t have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends?

Without realizing it, Cuomo has moved the problem from “values biased high” to “values unreliable”

But some prominent appraisers are scathing in their criticism of management firms. “Their quality is terrible — all they want you to do is crank it out at the lowest cost,” said Jonathan Miller, president and chief executive of Miller Samuel, one of the largest appraisal companies in the New York City area. Only “the least experienced people” are willing to do the work, he said, “and the product is unreliable.”

In recent issue of American Banker, Kate Berry wrote an article Re-Appraisal: How Revision is Recasting Expectations

“You’re creating a situation where a lender is going to have to order a lot of appraisals from an AMC,” said Jonathan Miller, the president and chief executive officer of the New York appraisal firm Miller Samuel Inc.

Mr. Miller said, “Appraisal-management companies are subject to the same pressure as mortgage brokers; only there’s actually more at stake. They’re almost more vulnerable” because most of the companies depend heavily on a few lender clients.

Do you remember the AMC known as eAppraise-it?

Cuomo sued them for all the reasons this agreement shouldn’t be implemented without modification.


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[Sounding Bored] Interview With Jim MacCrate: proposed Interagency Appraisal and Evaluation Guidelines

January 10, 2009 | 4:14 pm | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. There have been more changes made to the profession in the past several years than in the entire history of the profession, and most of the changes have not resulted in a more credible service. Still, I’d like to hope that the latest financial services sector turmoil will bring a clean slate approach to better regulatory oversight (devoid of insanity).


On November 19, 2008, to little fan fare, a joint agency request for comments on proposed Interagency Appraisal and Evaluation Guidelines was made. Comments are due by January 20, 2009.

I called on Jim MacCrate to get his thoughts on this initial foray by the federal government to fix what is broken in the appraisal industry. Jim is a highly respected appraiser and teacher in the valuation community and who holds the MAI, CRE and ASA designations. He also contributes to this blog in his widely read “Straight from MacCrate” column.

Like many things in my life, I was delayed in posting his commentary to Soapbox.

I asked Jim to run down the document as presented and I throw in a few observations of my own:

Jim

First, the government has acted in haste with outlining the causes of the collapse in the credit markets. I believe, based on my experience, it was poor underwriting standards and lack of enforcement by the FEDS, state governing agencies, accounting firms and others who were responsible for sound underwriting practices. This was a repeat of the 1970’s but it will be far worse.

The OCC regulations and the regulations from the other duplicate agencies had similar guidelines after the bust of the seventies and eighties. Why were they ever changed?

Licensing weakened the quality of reports nationwide. It established minimum qualifications, not experience and expertise.

Jonathan I agree. Appraisal quality diminished with licensing because it was used as a placebo for competence.

Jim

Professional organizations, whether it be appraisers or lawyers or accountants, can not self regulate. That was a joke of the nineties and in to the 2000 error.

Jonathan I remember in 2005 when the Mortgage Bankers Association said there was no real issue with appraisal pressure and the solution was to have appraisers simply do a better job at self-regulation. Of course now 60% of mortgage brokers are gone.

Jim

My understanding is that the employees of the regulatory agencies have very little experience in valuation. For example, there is only one MAI at the Federal Reserve. Economists do not understand what we do. See article from the FED on the value of an acre of land in NYC in 2006.

Real estate lending was always a credit decision first. You look to the collateral when the credit fails.

Jonathan Exactly.

Jim

Personal guarantees are meaningless. AVMs are part of the problem. Economists and statisticians believe in them. The databases are screwed up. They are reportedly using BPOs and that further weakens the reliability. Brokers have a conflict of interest. See Wall Street for Support. Of course no conflicts of interest between Goldman, AIG and others.

Independence

Jim

You know ethics, honesty, etc. are more important than independence. It is this generation that has done anything for a buck and failed to consider the consequences.

Jonathan Absolutely, but if the appraisal industry can not work without being pressured to “make the number” as has been past practice, then honesty and ethics fade away as those individuals are driven out of business. How can I compete with someone who is fast, cheap and always comes in with the exact number needed to make the deal?

Selection of Persons Who May Perform Appraisals and Evaluations

Jim

There is no comment on years of experience. That is caused by the licensing. Back in the seventies (and there were problems too) appraisers were selected because they had the MAI or SRA. Those standards were way above today’s. States do not have the money, knowledge or resources to enforce compliance [with state licensing]. Folks who order appraisers should be knowledgeable and qualified to do the appraisal; otherwise how do they know who to hire?

Jonathan I agree with you – Take Appraisal Management Companies: We are often dealing with kids just out of high school who have no real estate valuation experience, let alone understand the problems with valuation. And revenue collected from state licensing boards for oversight is often diverted to other areas of the government. The problem with “pure” enforcement is that it becomes an argument of semantics because valuation is an opinion. Fraud aside, how legally viable is it for a state agency to reprimand an appraiser who estimated the value of a property as $500,000 when the state employees think its $475,000, especially when there is limited market data? It’s tough to say anything a certain percentage below or above the state value is unethical. And what if the state is wrong? It’s not a realistic solution.

Minimum Appraisal Standards

Jim

The Appraisal Foundation weakened its standards with the latest version and previous version. Economic principles drive valuations. Three approaches to value are the support to a supportable, defensible estimate of value. You knock off one leg of a three legged stool and what happens. The stool falls over.

The comment on AVMs should be stronger.

The Scope of Work is correct. It is up to the agencies and the financial institutions to determine the scope of work; not an appraiser. Risks are determined by the financial institutions who then should determine the scope of work required to protect the financial institution if the credit fails. The collateral is the default to protect from losses.

Tract Developments with Unsold Units

The appraiser should include and analyze the developer’s projections. The appraiser can not work in a vacuum. They need the information to properly analyze these types of projects. See what was written in the 1990’s by Prittenger and others for the OTS. Why are we reinventing the wheel? We spent tax payers dollars on this issue in the 1990’s and late 1980’s.

What happened to a market analysis? That led to failures in the 1970’s, 1980’s and now with REITs. I guess supply and demand are not important criteria that determine pricing.

market analysis should be performed by state-certified or licensed appraisers in accordance with requirements set forth in the appraisal regulation..

experience is the key. A license does not make you qualified.

Transactions That Require Evaluations

All transaction should be evaluated to prevent fraud.

the reputation and qualifications of the person(s) who perform evaluations are the key.

Reviewing Appraisals and Evaluations

Who is doing the review for the financial institution? A check is needed. They cut costs and relied on unqualified appraisers to the work. Knowledgeable folks in the appraisal process must do the review. I know it’s a pain but it is a safeguard that the system had and it was eliminated by many financial institutions. A loan officer has a conflict of interest because how they may be paid or compensated.

USPAP sets minimum standards. The financial institution must set the standards that exceed USPAP and they must be enforced at all levels, including the CEOs who tell lending officers oh, it is not necessary this time around..

Referrals

Jim

They will not do it. That is a joke. It is up to the regulatory agencies to sample the loan documentaion and if they see a problem, they should make a referral.

I think the first part indicates that the authors do not have experience or knowledge of the past or what has been written by the OCC, OTS, FDIC, etc. in their regulations. The real culprit was greed by CEOS and Wall Street who had no interest in the future but only current earnings now. The MBS market allowed lenders to off load loans without recourse by the investors in the final packages put together by the likes of Goldman Sachs, etc. who indirectly got bailed out by lending and supporting AIG.

This document does not address what has caused the problem and that is to hold those at the top, lending officers, accountants, etc. accountable financially and responsible over the life of a loan.

The Addenda

Jim

Item 2 Page 41- In today’s day and age with bankruptcies increasing appraisals are needed. Abundance of caution you need all the tools to be used to protect against defaults. In the current environment there is no certainty of repayment. Personal guarantees, etc do not exist once an individual or company falls on hard times. During audits at old PW the staff was directed not to consider personal guarantees at all.

Item 5 Page 43 same comments. Taxpayer funds are at risk. Fraud occurs at all levels. Appraisals should be required even on loans $500,000.

Item 8 Page 47 “These transactions should have been originated according to secondary market standards and have a history of performance.” Standards were not enforced so that’s a dumb statement. How does one know in the current environment without proper due diligence which would include a thorough review of all appraisals.

Item 10 Page 49 Freddie and Fannie made mistakes. Why should these transactions be exempt? Do not exempt them and it becomes a check of the system and does not cost the taxpayers a dime. There was fraud in the appraisal and lending process that Freddie and Fannie did not catch. Now it can passed on to others?

Item 13- Page 50 Same as above. Why? It is a check on the system. Fraud has occurred in the same organization transacting business with subsidiaries.

Page 52- AVM’s – The databases are not perfect. Statistics are not always correct – look at what the FEDS have done relying on statistic modeling. You know what is wrong with AVMs.

Now, good I see a definition of market value again and some other terms.

Jim

There ya go sorry I can’t spend more time right because no one is bailing me out and our retirement accounts. I guess I am small and can fail at no cost to society.

Jonathan Thanks Jim!


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[Sounding Bored] Mortgage Broker/Appraiser Relationship Still At Odds

January 10, 2009 | 2:24 pm | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. The more things change, the more they stay the same, mainly because no one outside our profession seems to understand what we do and their ramifications.

With all the credit upheaval, you would think that the relationship between the appraisal community and the mortgage brokerage community has changed (it will change on May 9th 2009).

Name one law, rule or regulation that has focused on appraisal pressure in place right now…

Nothing has changed. Perhaps the sharp drop in wholesale lending has had the effect of reducing the instances of it, but the pressure is still baked in. Here’s a recent experience:

One of my appraisers shared with me this phone call recap:

I just had a long conversation with a XXXXXX of XXXXX Mortgage. She has a client who owns an apartment at [omitted] who is interested in refinancing. He believes his apartment is worth around $XX million. I spoke to him yesterday and gave him some information about the appraisal process. His mortgage broker, XXXXXX, called today requesting a value range for the apartment. Our office politely indicated we could not give a range explaining that it is considered an appraisal. XXXXXX of XXXXX Mortgage would not accept this answer by XXXXX[our employee name] (after being on the phone with her for seven minutes) and she forwarded the call to me. I repeated our position and XXXXXX of XXXXX Mortgage still would not accept this answer. She needed a number from us before processing the order with her client. I tried to explain to her that this is unethical and that we can’t shoot for a value based on the loan application. She eventually threatened that we would not be receiving a number of other orders from the same building based on our not giving her a value. She also made a similar threat to XXXXX[our employee name]; basically saying we risk losing other work from XXXX Mortgage.

After receiving this information from my appraiser, I left a voicemail to XXXXXX of XXXXX Mortgage requesting a returned call and sent the mortgage broker an email with the following message:

I just received a disturbing recap of a conversation you just had with two of my staff.

Doesn’t it seem unprofessional to withhold work from an appraiser because they will not violate their license by issuing a pre-determined value? This is one of the reasons we are in a credit crunch.

Before I file a complaint with the New York State Banking Department, I would appreciate a call or contact from you for an explanation.

Perhaps you are having a bad day? Or perhaps this was simply a misunderstanding? Hopefully I hear from you no later than Friday.

To the mortgage broker’s credit, I got a call back in about 10 minutes To the effect of – complete misunderstanding. repeatedly extended apologies. Client was asking for a range. She had a horrible cold, maybe that was how she misunderstood. Has zero issues with us. Very, very sorry.

We got an appraisal assignment from them the next day. This firm gives us a few assignments per year. The assignment was cancelled 24 hours later.

I know this sounds like a heck of a way to interact with a “client”, but if we are pressured to break the law and/or be punished financially, whether or not the person is aware of what is going on now, then they can’t be my client.

It makes me wonder when things will actually change for our profession.


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[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.

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[Sounding Bored] Perfect Timing: WaMu Checks The Box With Power To Settle

September 14, 2008 | 6:14 pm | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week we get some good news about appraisers who do the right thing.

Earlier this year, I wrote a post about an appraiser, Jeniffer Wertz, who sued Washington Mutual for blacklisting her. She refused to allow the bank get away with directing her not to select “declining” property values on her reports.

I have written about this type of systemic appraisal pressure many times and we have also lost clients this way. It’s important that appraisers are allowed to be the eyes and ears of the lender or they are simply “form-fillers.” The Wall Street Journal covered this point well.

Well, there is rare but good news for an appraiser who did the right thing. Jenniffer told me (and others):

the case has been settled to the mutual satisfaction of the parties.

I am happy for her and proud of her for not accepting the status quo.

WaMu finally let their Chairman go and it has been reported that they are teetering so I suspect the timing of the settlement of this case has something to do with their current situation.

As they say, timing is everything so you can check that box.


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[Sounding Bored] Missing (And Surfing For) The Point: It’s Not About Getting The Story Right

September 3, 2008 | 11:42 am | | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. We are a complex cast of characters. Even the media doesn’t understand us…

Last week I was mentioned in a new New York celebrity type site called Cityfile. For gossip sites, it’s design and content is very good. They get a little creepy on some of the profiles – one of my friend’s past dating history was chronicled (incorrectly).

I traded a flurry of emails with the founder/editor Remy Stern after this post was published. Remy was responsive and tweaked the extracurricular stuff, save one. He finally cut me off after the last batch of emails despite promising to reconsider, likely because he was sick of me.

Here’s an excerpt from the post in question:

A reporter wants to know how much an apartment in so-and-so building in such-and-such neighborhood will fetch on the current market? Real estate appraiser Jonathan Miller can guesstimate the price of any residential or commercial Manhattan property based on public property info, as long as you squeeze his name and firm (Miller Samuel) in the paper.

I sent him this response (cut down to spare the drama):

I do not give reporters prices of apartments or someone who calls me. EVER!…You are clearly saying I am telling someone how much a specific apartment is worth and that is against my state certification indicating I break the law to people in my appraisal circles. It takes one crackpot to file a complaint…

He responded with a subtle rub using a recent quote of mine in FT:

Thanks, Jonathan. I actually do understand. That’s why is says “guesstimate” and not “will give you a number you can take to the bank.” You’re taking it a bit too literally. Just like I won’t assume that you’ve conducted extensive, quantifiable research on the future value of having Orlando Bloom as a neighbor when you give quotes like this to the FT.

Anyone who reads this post will realize that it’s intended to be humorous and is not intended to be a precise analysis of what you do day-in and day-out. If someone doesn’t understand, that’s their issue. Again, thanks for your email.

He’s a smart guy but didn’t get my point.

A reporter I know called me about their post, saying it came up on their google search. She said the original post was pretty mean (pre-tweak) but given the source, actually thought it was complimentary to be recognized.

Bottom line is Cityfile sees values and numbers as one big fuzzy picture.

I don’t give reporters market values of specific properties. Never have, never will…that would violate my license. While I am protective of my name (after all, Miller is the seventh most popular last name in the US) where does one draw the line with writing like this?

Friends of mine who run other sites are presented with cease and desists on a regular basis. I opted to take a pass since the source determines the damage. Besides, I like the site.

A few years ago, while surfing I came across a generic appraisal directory that listed me as “Member Appraisal Institute” or something along those lines that would give the impression I was an “MAI.” I don’t know where they got this information. My business partner in our commercial valuation company is an MAI. I am not an MAI (not smart enough) and don’t list that information anywhere. In fact, since I am a residential appraiser, I do not see that as an advantage if I had an ethical lapse. Some of the worst individual condo or co-op appraisals I have ever seen in litigation cases I have been on were completed by MAI’s who should have stuck to the commercial valuation assignments that they complete competently on a regular basis.

I digress

It was simply a mistake on the appraisal directory web site’s part. I sent repeated requests to the site to take it down or change the text but got no response. Then some anonymous (wacko) submitted a complaint to the Appraisal Institute (had to be an appraiser) and I got a terse form letter from the chair of “Ethics Administration.”

Gotta love our profession – like field reviews – many of us are dying to stick it to our colleagues. In other words, I was assumed “guilty until proven innocent.” I called AI and they were actually pretty nice about it. I had to send them a letter explaining my situation and all was fine again.

“I’ve just found the Internet!”

Sigh.


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