Appraisal News and Business Tips

lender appraisals

AMC asks appraiser to remove photos of black cat

black pantherHow the AMC  (maybe) saw the cat

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Fair lending violations per AMC.

This first circulated on the Internet in September. I finally found the original source!!

This was from the famous/infamous real estate and mortgage news and commentary videos with Frank Garay and Brian Stevens.

I love the “Frank and Brian” video show!! It is mostly about mortgage lending but is sometimes about appraisers. They used to have an appraiser version, but one of the two appraisers went to work for the CA state regulator, so it was discontinued.

Foto of the The Two Guys
http://tbwsworkshop.com/unm/wp-content/uploads/2011/03/Picture-8.png

Here’s link to the video to see them in action!!!
http://tbwsdailyshow.com/2012/09/18/real-estate-deal-delayed-by-a-cat/

AMCs and confusion about Chase and 30 mile limit

One of my readers contacted Chase after reading my email sent yesterday. The reader said that Chase question mark why?does not have any 30 mile limit. Per the email from an account executive at JPMorgan Chase in Florida: “No we do not have any such guideline or requirement like that.
Sounds suspect!”
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My original source for the info was Doug Smith in Montana, who received an official letter with a letterhead from Equifax stating that Chase has a 30 miles limit. Here is the emailed letter he received on 11/16/12:

“Attention all Chase Appraisers:

Effective orders assigned tomorrow, Friday November 16th, 2012, all Appraisers completing orders for J.P. Morgan Chase Bank must be within 30 miles of the subject property.“

“You will be asked during the assignment call from Equifax Settlement Services to confirm that the appraiser completing the order is within 30 miles.  Any assignment exceptions to this requirement will be noted in the Equifax order notes.“

“Please note, for both Equifax and Chase audit purposes it is IMPERATIVE that the appraiser’s address stated on the report is within 30 miles of the subject property address.“

“We thank you for your compliance with this new Chase requirement.“
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Afer inquiring about an order for an appraisal 100 miles from his office (not unusual in Montana), Doug also received an email from Servicelink saying that their contract with Chase did not have that requirement.

What’s happening? I have no idea. The emailed letter sent to Doug from Equifax is very clear.

Appraisal Today newsletter

Chase has a new appraiser requirement – appraiser must be located within 30 miles of the subject

AppraisalPort Poll Results – 5/14/12Stop sign

In the past 6 months how many appraisals over 50 miles away from your office have you completed?
0 to 5, 3377 votes – 62%
6 to 10, 539 votes – 10%
11 to 15, 296 votes – 5%
16 to 20, 245 votes – 5%
More than 20, 985 votes – 18%

Total Votes: 5,442

My comments: Very interesting results!! Although the poll is for only over 50 miles, I would expect that more appraisers are traveling 30 miles or more. I guess Chase won’t be lending in rural areas or parts of large counties. I am 32 miles from the farthest city in my county. I am in the San Francisco Bay area, and most appraisers who work multiple counties travel over 30 miles one way regularly. Of course, the more time you spend driving, the less appraisals you can complete. Cutting driving time is the best way to increase productivity.

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Appraisal Institute – Evaluations for Lenders by appraisers

Appraisal Institute – Evaluations for Lenders by appraisers

Excerpt:

The Appraisal Institute’s “Guide Note 13: Performing Evaluations of Real Property Collateral for Lenders” addresses how appraisers should prepare an evaluation for a lender and comply with the USPAP.

The Guide Note states, “For lending transactions involving real estate, a lender must obtain an appraisal from a state licensed or certified appraiser. There are 12 exemptions from this requirement. For three of these exemptions, in lieu of an appraisal by a licensed or certified appraiser the lender may obtain an evaluation.”

The Appraisal Institute’s Guide Note states that USPAP allows an appraiser to adjust the scope of work for a valuation assignment as long as the resultant value opinion is credible, given the intended use. When preparing an evaluation, the appraiser may consider narrowing the scope of work as appropriate.

According to the interagency guidelines, a lender may obtain an evaluation in lieu of an appraisal when the loan transaction:
– has a transaction value equal to or less than $250,000; …
– or involves an existing extension of credit at the lending institution, provided that: there has been no obvious and material change in market conditions or physical aspects of the property…
“The degree of property inspection, the extent of the data collection process, and the type and level of analysis can vary as needed, as long as the resulting opinions and conclusions are credible in light of the intended use.“

Click here to download the Appraisal Institute’s six-page “Guide Note 13: Performing Evaluations of Real Property Collateral for Lenders.” http://www.appraisalinstitute.org/PPC/downloads/guide-note13.pdf

My comment: This is an old issue, from the FIRREA days of over 20 years ago. There are some proposals for what appraisers can do, but there are not many details. A licensed appraiser is the “Gold Standard” but the appraisal methods used today are not always needed. For example, a tract home in a large conforming tract.

Lots of appraisers seem to forget about the $250,000 deminimus. The only reason licensed appraisers are used by Fannie Mae is that they still require them. Other purchasers and investors in mortgages also require them. I suspect that many commercial loans also require appraisals by licensed appraisers, but some use commercial BPOs.

Who can do the evaluations is not very clear. However, they must have specific requirements. A person with no related education or experience would not qualify. BPOs done by real estate agents are not allowed for loans, only for REOs.

For example: an appraiser uses an inspection prepared by someone else such as a real estate agent and uses an AVM which provides comps and other data. Or, a previous appraisal report is used.

Lenders want to use licensed appraisers for evaluations. Be sure to read this Guide Note, which is well written and useful, especially if you are requested to do evaluations. It includes a list of what is required in the report.

I will be writing about this evolving issue, and what is being proposed by lenders, in an upcoming Appraisal Today paid newsletter.

Appraisal Today newsletter

Disaster appraisal form reports – be careful!! – from 11/12/12 email newsletter



DO NOT FILL OUT ANY PART OF ANY FORM ASKING FOR YOUR OPINION OF VALUE (INCLUDING DIRECTION IN VALUE) AND/OR REPAIR COSTS. DO NOT INCLUDE ANY OPINION OF MARKETABILITY.

Forms that are being used

1. You are working for a lender who allows you send a letter. That’s what I did in 1999-2000 disaster inspection reports in my area. BEST OPTION.

2. FANNIE FORM 2075 OR FREDDIE FORM 2070. THIS FORM IS THE ONLY APPROPRIATE STANDARD FANNIE MAE FORM. This was used for many years for exterior inspections with no appraisal (comps, value, etc). You can discuss the condition of the home in a comments section.

3. Catastrophic disaster area property inspection report. I have seen these from three software vendors. All were different. Unfortunately, some of them have sections for reporting “cost to cure” and/or opinion of direction in value. You will have to modify them, similar to the discussion below on the 1004D. See what it looks in your forms software.

4. Fannie form 1004D – Appraisal Update and/or Completion Report. available 3/05. This form has been widely used by lenders, starting in 2005. See below. THIS FORM IS FOR AN APPRAISAL, NOT INSPECTION-ONLY. EVERYTHING BELOW THE TOP OF THE FORM (address, client, etc.) IS NOT APPROPRIATE. YOU MUST WRITE UP YOUR OWN SCOPE OF WORK, INTENDED USE, ETC. PUT THE APPROPRIATE INFORMATION IN NARRATIVE FORMAT IN A TEXT ADDENDUM. BE SURE TO PUT DISCLAIMERS ON BOTH PAGES OF THE REPORT IN THE COMMENTS SECTION PLUS THE ADDENDUM See below.

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Fannie form 1004D – Appraisal Update and/or Completion Report. available 3/05. This form has been widely used by lenders, starting in 2005, for appraisals “subject to completion”, typically new homes. These reports are done by the appraisal who did the original appraisal. THIS FORM IS USED BY AMCS AS IT CAN BE TRANSMITTED AND IS A STANDARD FORM.

THIS FORM IS FOR AN APPRAISAL, NOT INSPECTION-ONLY. ALL THE FORM BELOW THE TOP OF PAGE 1 IS INAPPROPRIATE AND MISLEADING.

Below that section, the only item that can be used is the Intended user. YOU MUST HAVE AN ADDENDUM DISCUSSING WHAT THE LENDER/CLIENT WANTS.

– You can put text comments info Conclusions on Page 2. Do not check any boxes. Do not fill in any repair estimates. Write up your description in the comments. Such as: None apparent (do NOT discuss affect on collateral or marketability). Or, home has been completely destroyed, except for foundation. No roof, walls, etc.

– DO NOT FILL OUT ANYTHING IN THE RECOMMENDED INSPECTION SECTION. Repeat the above disclaimer. You can include a brief, general, description of the home in the comments section. Even if is there is no damage apparent, you did not previously appraise the home. Be sure to explain this. For example: subject and nearby homes do not appear to have been affected by Hurriane Sandy.

NEIGHBORHOOD DESCRIPTION IS NOT INCLUDED IN THIS FORM AND IS A SIGNIFICANT FACTOR. The disaster forms and the 2075 form include a neighborhood section. Optionally, you may include a statement on neighborhood/nearby homes, such as “Almost all the homes within 2 blocks of the subject are almost completely destroyed” Or, the subject is 1 mile from any apparent storm damage.

You MUST write up your own addendum/letter, covering:

– Statements that:

THIS IS NOT AN APPRAISAL AND IS PROVIDED TO ASSIST THE LENDER AFTER A DISASTER. THE SCOPE, INTENDED USE, CONTINGENT AND LIMITING CONDITIONS, AND APPRAISER’S CERTIFICATION ARE SUPERCEDED BY THIS ADDENDUM. THE SIGNATURE PROVIDED ONLY INDICATES WHO DID THE EXTERNAL INSPECTION. ALSO PUT THIS STATEMENT BELOW “HAS THE MARKET VALUE DECLINED” SECTION. DO NOT CHECK THE BOX.

– Intended use. Do NOT include “To determine if the property has declined in value since the date of the original appraisal for a mortgage finance transaction.”

– Scope of work. ONLY include “perform and exterior inspection of the subject property from the street”.



BE SURE TO INCLUDE THE DISCLAIMER BELOW

“While the appraiser noted no VISIBLE damage, the appraiser is neither an engineer nor a contractor and is not qualified to comment upon whether or not damage may be present which was not apparent from a visual, exterior inspection.”

Source: Liability Insurance Administrators

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REFUSING TO FILL OUT THIS FORM. Some appraisers are refusing to fill out this form. This has the same problem since 2005. Nothing has been done about this. It is your decision. As you can see, it is not appropriate and only the first section of the form can be filled ouit.

If you choose to fill out this form, it is your choice.

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WHAT’S THE ANSWER? A standard disaster inspection report, used by all lenders.

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My last local disasters were in 1989/1990 – Oakland firestorm and Loma Prieta earthquake. I did re-inspections on properties I had previously appraised for lenders. No values or estimated costs, etc., of course. Most of the appraisal work was for insurance companies to determine the value of the property previous to the disasters.

The most recent large disaster was Hurricane Katrina in 2005. This was pre-HVCC and lenders ordered the property inspections as AMCs were not predominant. Many lenders ordered 1004D forms and many appraisers refused to fill them out.

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Be sure you can find the subject!!

GPS is not exact. A subject can be hard if there is nothing there and all the nearby homes are gone. I know from experience!! I had previously appraised the homes after a disaster and had difficulty finding them!!

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What about fees?

The primary factor is how much time it will take. You can work for any fee you choose, even $1, for any report.

Since you will not be providing any opinion of repair estimates, direction in value, etc. look at how long it will take you driving, research (finding the subject), writeup, and transmitting the report. Also, if you can do lots of them on the same day, in the same neighborhood.

I’m hearing from a minimum of $75 (low Fannie 2075 fee) to $200+ each.

If you are doing interior inspections, be sure someone accompanies you. Be very, very careful. Don’t do them for a low fee. They are probably ok in areas with minimal damage, such as broken windows, etc.