Fannie Mae Changes for Lenders and Appraisers

Comments (57)

I put the majority of the blame for the present mortgage crisis on greedy real estate agents, the lenders themselves (for making loan programs available that were, on the face, shaky and encouraged buyers to lie about income, etc) and, finally, on the borrowers...because many knew damned well that they could not afford the loan they were getting. But, because they thought they had an "out" in a rising market, it did not matter. Many honest appraisers have been black-listed because they came up with honest values that were lower than requested. Putting the choice of appraisers in the hands of the lenders creates a duplicate of the horrible VA appraisal system. I have never seen more incompetance than in that specific group of appraisers...sorry if I have offended those VA appraisers who are competant experts. The solution, in my opinion, is to make it illegal to disclose the proposed mortgage amount or sale price to the appraiser. After all, what a person wants to borrow should have no affect on the real market value. Without that preliminary information, the appraisers would have to determine value on the market data only. It is simple, really!

Above Posted By: Olen Soifer | Tue, 8 Apr 2008 13:24:51 EST

HVCC - The NY Attorney General in his own words "BELIEVES" a private investigation of Fannie Mae has discovered wide spread inflated appraisal values. The source of the inflated values are corrupt appraisers and mortgage brokers. The last time I checked mortgage brokers don't apply their signature as the primary or review appraiser. If the investigation found fraudulent appraisals why aren't the offenders being prosecuted? If the investigation found mortgage broker bribery why aren't the offenders being prosecuted? Isn't the NY Attorney General responsible for prosecuting criminals. What every happened to the phrase "innocent until proven guilty". The new code will allow the so-called corrupt appraiser and so-called corrupt mortgage broker to continue doing "indirect" business. Sounds like the NY Attorney General is more interested in making a name for himself than carrying out the duties of his office "PROSECUTION". With every new crisis in America elected and appointed officials broad stoke the public with new feel good codes / laws. I for one say enforce existing law. If an industry has wide spread corruption what better way to rid the bad element than prosecution. The back room closed door process in which this agreement has been struck is further suspicious. Apply the smell test. STINKS! Contact congress and oversight committees. I trust if nothing else the arrogance of congress will play a role in shutting down this one man show. The consequences will have far reaching negative consumer impact.

Above Posted By: Chris matthews | Tue, 1 Apr 2008 15:09:28 EST

Fee Appraisers already know who the "bad" appraisers are. Appraisers already have their work reviewed by other appraisers in the current course of business. If the licensing agency in each state just followed up on the complaints, the bad appraisers would have lost their licenses long ago. Bigger, fatter regulation has never worked and won't work here. Focus on the problem appraisers and take their licenses away. Do normal QC on the rest and the problem is solved.

Above Posted By: Kurt | Sat, 1 Mar 2008 15:32:18 EST

I'd rather see the root of these problems eliminatedthe "relationship" that some Realtors have with mortgage co's. Desk rentals? please...Marketing agreements?? Try "Pay me and I'll give you business" which is the bottom line here. I work a bank that participates in CRA lending. In one local RE office, the broker, his partner, and their relatives who either lived or purchased in this town qualified for substantial discounts on their own mortgages thru our CRA program. Then along came Countrywide with a "Marketing agreement" and the broker begins referring exclusively all new business to them..ignoring the fact that buyers could obtain lower cost financing thru us. (a few agents in the office follow the high road and refer to outside lenders with CRA). One particular buyer I spoke to was not qualified due to lack of income & credit issues. He did get a loan though thru the RE Brokers "preferred lender" Countrywide, and within two years was foreclosed on byyou guessed it! Countrywide. So whose interests were being served here? the Realtor sez "get my guy qualified" and no one else will do the loan, Countrywide shoves it thru u/w and everybody's a winner!! Except the poor guy who's credit is worse now than it was when I spoke to him two years ago. Was this an appraiser's fault??? No-the contract was created by a willing buyer & seller and supported by recent sales data. Get the realtors out of bed with their "desk rental" mortgage broker. Let the free market function instead of sending unsuspecting buyers to the highest bidder. Heck they're already getting 6% of the transaction..far more than any mortgage brokers or appraisers.

Above Posted By: New Jersey Shore Banker | Sat, 1 Mar 2008 13:43:44 EST

Please let us be rational about all of this. Every segment of the industry is at fault. Poorly trained appraisers with no morals or ethics, lenders flushed with greed, buyers that thought tomorrow would never come...in the form of re-set interest rates. What is not being told to anyone at any level, is that 50% (FIFTY PER CENT) or more of first mortgage appraisals done in this country over the last 3 years have been done by Automated Valuation Models....no appraiser involved at all. AVMs are convoluted mathmatical BS reports based on data that would NEVER fly with an appraiser using that data and those adjustments. BUT because the lender could charge $350 to $400 for a $20 document, they all LOVED it!!!!!! And Fannie and Freddie led that charge. Why do we not hear ONE COMMENT about these fraudulent estimates of value being discussed????? Can you say the lenders want to protect that profit center for when we DO get out of this mess?? Billions of dollars have been swindled from borrowers who paid for a full appraisal and got NOTHING. Yes there are appraisers who need to come under a full microscope and get everything they deserve. However, it is time for the truth, the whole truth, and nothing but the truth. Lenders, Banks, Brokers, Agents also need to be examined as well. They steered, they cajoled, they prodded, they explored....til they found the lender, appraiser, and attorney needed to make the deals work.

Above Posted By: Annonymous | Sat, 1 Mar 2008 04:30:43 EST

There are already laws on the books that stipulate that a regulated financial institution is required to directly engage the appraiser. These regs include instructions that are intended to isolate the engagement of the appraiser from any employee who is involved with the origination of the loan. Unfortunately, that regulation also includes the loophole that allows the lender to use appraisals engaged by outside mortgage brokers, which basically guts the intent of the regulation itself. Also, that regulation does not apply to mortgage lenders (like Countrywide and Ameriquest) that are not regulated by the federal banking regulators. Eliminate the mortgage broker exemption, bring all mortgage lenders under the same regulatory oversight that the banks answer to, and then enforce the damn law. It's a lot easier to keep track of and regulate the limited number of direct lenders than it is to try to regulate the mortgage brokers and their dialing-for-dollars telemarketers. The use of ANY appraisal management companies only provides these lenders and their mortgage brokers with a veneer of respectability. It is a layer of plausible deniability that they use to avoid responsibility for dealing with appraisers they don't know. The problem with the national clearinghouse is that not every appraiser who is on an approved list for a given geographic area is technically competent to appraise every property in that area that their license will allow them to appraise. Some appraisers are better than others, some are worse. The federal banking regs already hold the lenders accountable for the appraisals they use. It's not fair to a lender to hold them accountable under the law for the selection of the appraiser and the review of the appraisal without also giving them the discretion to make those choices. Regulate ALL the lenders and then enforce those regulations with an iron fist. Once we get the abuses down so that some lenders aren't unfairly profiting over others, the forces of the market will kick in and make it worth everyone's while to play it straight. Backing away from holding these lenders responsible for their decisions is the very worst thing we can do.

Above Posted By: Anonymous | Fri, 29 Feb 2008 22:15:38 EST

Ignorance prevails in our consumers. All appraisals have been reviewed by the lenders for several years now. A friendly appraisal would be scrutinized and the value adjusted downward if the lender disagrees. I have seen a number of appraisers get dropped from lender approved lists for only two disagreements with the lender (not fraud or inflated values). However, Washington Mutual is in trouble now due to their in house inflated appraisals back east. Lender ordered appraisals should be the safest route but they proved me wrong on that point.

Above Posted By: Dennis | Fri, 29 Feb 2008 10:03:46 EST

I agree with Troy about many Realtors also being equally guilty. As I blogged yesterday, greed is THE motivating factor. I'll admit, I benefitted from the soaring valuations and access to easy money when I sold my home in 2005. I proposed what I thought was a fair price (based on my own look at comps) but my Realtor was eager to push the price an additional 25k and sure enough - she was able to get an appraisal for that exact amount of money (wow - she must be good...). Although I am a Land Surveyor, I used to be involved with home inspections as well and lenders would ask to tweak reports as to not blow the deal - the main reason I discontinued providing the service. Again, as I mentioned yesterday, rid the system of those opportunities for greed to flourish... 1) regulate the lending standards so that they are in keeping with sound economical practices, 2) limit the banks to offerring loan packages that support that policy, 3) do not allow the "partnering" or "controlled business agreements" that allow people/businesses to get in bed with one another, 4) do not allow any agents to tack on additional fees to an Appraiser's fee or a Surveyor's fee as "processing" or "handling" fees - causing brokers and title agents to pressure those of us offerring these services to decrease our fees (in the hopes of sustaining repeat business) just so they can pad the closing costs, 5) ensure that anyone involved in any aspect of the industry is properly trained and/or licensed, 6) require any borrowers to pay for ALL ancillary services - not only if the deal closes, 7) let small businesses do what they do best - after all, it is small business and fair competitive business practices that is best for our economy! I have been in Land Surveying for 22 years with the majority of my work involving existing home sales and in that time I have yet to really see anything done - either on a local or federal level - to rid the system of coruption... it requires a comprehensive look at all aspects of the system - no bandaids or piecemeal approaches. It is a damned shame because there are a great many ethical and professional businesses out there that are damaged by the bad apples... I am very pleased to see so many bloggers providing their opinions, but I would much rather see some more informed possible solutions from those of you who know the intricacies of the overall system.

Above Posted By: Andrew Snyder | Fri, 29 Feb 2008 09:57:37 EST

I would like to reply to a comment from Gigi. One simple question...... you mentioned "Discusting "Broker" that choose the loan program for you, did that same "Discusting Broker" sign docs for you at the closing as well???? Resposibilty starts at home! A huge part of this mortgage mess is all the victims crying foul. When your buying the biggest item of your life you need to make an educated decision not point the blame. Ignorance is never a good defense.

Above Posted By: Anthony | Fri, 29 Feb 2008 09:43:11 EST

As a mortgage broker, I understand what is happening with all the late payments, defaults, and foreclosures. Every party involved needs to take some of the blame, including the homeowner. There already are rules against myself and any other broker/loan officer putting a value needed on an appraisal order form. On top of that, every appraiser knows what they are and are not permitted to do. It's very unfair for brokers to take all the blame on every issue surrounding every foreclosure in America.

Above Posted By: Jeff | Fri, 29 Feb 2008 09:38:54 EST

Anything less than an appraisal clearinghouse like VA will not work. Otherwise, lenders will find loopholes. Hurray!! Hope it happens. No more mortgage brokers with their pet appraisers. No more appraisal management companies with their "preferred or proven" appraisers. Hard to believe it could happen. Necessity is the mother of invention I guess.

Above Posted By: Roger | Fri, 29 Feb 2008 09:20:17 EST

in regards to the "appraisal clearinging house" , hummm.., I wonder if First American will own that company too?? It seems like the big keep getting bigger and us small independent companies will be out the door!

Above Posted By: Anita | Fri, 29 Feb 2008 09:18:40 EST

it's quite easy to solve: mortgage brokers do not choose the appraisers, instead, they present 3 appraisal companies to the borrower and let them pick and pay the appraisal company directly. the broker should not tell the borrower which one otherwise it would be a violation.

Above Posted By: noslen | Fri, 29 Feb 2008 09:01:05 EST

It has always seemed odd to me, that not everyone in this industry is required to have a license from the state that they do their work in. To sell Real Estate, not only does the Broker but the individual agents need to have a license. To appraise Real Estate, the appraiser has to have a license. But they people handling the money don't? This has NEVER made sense to me. Sure, Mortgage Brokers need to have a license, but the individual originators don't. One Mortgage Broker in my area went out of business for his fraudulent practices. He went to work for another Broker, still originating loans, making money, and pressuring appraisers for specific values. These people need to have something to lose, just like Appraisers and Realtors. Everyone was quick to blame Appraisers for the S&L problems in the 80's. But to get crooked appraisers, first you need to have crooked banks and mortgage companies. Everybody needs to have a license and therefore something to lose if they are caught in unethical practices. So that if they are caught, they can't just leave and to back to work somewhere else. Why do we have locks on our doors? Do keep the crooks out? A crook will get in regardless, if he really wants to get in. Locks are mainly to keep the honest person honest. Even with licensure, we will still get crooks. But you will be keeping those people who ARE honest, honest. And when the crook is found out, you revoke thier license so that they can no longer continue their practice. ANYWHERE, whether their own company or somebody else's.

Above Posted By: Anonymous | Fri, 29 Feb 2008 08:50:37 EST

First to comment on the topic: This is downright silly and will add significant and cumbersome regulation to an already ailing real estate market. What is the problem with having a stringent appraisal review process for parties that are buying the paper (as due diligence for their investment?!), along with holding appraisers accountable (perhaps by mandatory E&O/bond coverage) for fradulent values. Appraisers comments that they receive no business unless they create fraudulent appraisals, is akin to saying a mortgage originator gets no business unless he/she fraudulently helps borrowers qualify for loans that they don't qualify forits just shifting blame and accountability. Hold the vendor accountable for their product and establish standards and penalties if said product is not within acceptable boundaries established by investors and meeting to URAR guidelines.

Above Posted By: Anonymous | Fri, 29 Feb 2008 08:37:12 EST

Banks have been trying for YEARS to get into the Real Estate Business, and they've been trying for years to get rid of Mortgage Brokers. I firmly believe that this "Credit Crunch" was planned. I don't think what has resulted was planned. I think that the banks got together, knew that the rates were going up on all these sub prime loans, and decided, together, that they would take away the programs that these people could qualify for, so that the banks could earn more money with the rise in rates. I don't think that the Banks figured that people would walk away from the houses. This "Credit Crunch" is of thier own making, and it's thier way of getting into Real Estate, and getting rid of Mortgage Brokers. Banks, in the near future will be the only place to go to buy a house. They WILL get rid of all the Real Estate Agents, Appraisers, and Mortgage Brokers.

Above Posted By: Tracie | Fri, 29 Feb 2008 08:12:10 EST

I think this is a fantastic idea....get off your high horse and take a look around. Housing prices have gotten out of control. It needs to be corrected. And fraud is not going to help us out of this mess. Fair appraisals protect the buyer and lenders. Do you realize how many shortpays are required today due to fraud? I dont think we're talking about 5k here nor there. We're talking about inflated values of $20k+. We all hurt by this type of fraud. All they are proposing is a honest value. If you can't play by those rules, get out of the business.

Above Posted By: Robin | Fri, 29 Feb 2008 07:56:30 EST

All this talk about brokers is short sighted. To help avoid over valuation of real estate, "All" purchases should be public record! Brokers should be able to look up comps long before an appraisal is ordered. The appraiser should be REQUIRED to give you an estimated value BEFORE they take a borrowers money...only to give the broker a low appraisal. If we all can see the comps in the beginning, we would know if the deal was dead and move on. However, lets not stop there...REALTORS are just as if not more guilty in this economic crises. REALTORS have helped to falsely inflate the values of real estate...supply and demand my @%!, they want the commissions that comes with high dollar sales for their OVER VALUED SERVICE. Our government is just as bad too...”everyone should one their own home” is crap. The sub prime programs were encouraged by the government, put in place, and designed to break the economy. Brokers, while some are over zealous in there action they are only a pawn in the game of blame...BRILLIANT! Fannie Mae...who would order they appraisals? Not Fannie Mae, they dont have the resources and they are too slow.

Above Posted By: Troy | Fri, 29 Feb 2008 07:44:13 EST

This is a complex issue. Ethics courses are not taught to appraisers. No one wants to pay an appraiser for the 8-16 hours to do a fully USPAP compliant report with real verification of data. Often the appraisers E&O insurance is used instead of good underwriting practices. In the rush to get more licensed appraisers (that is, to get shorter turnaround times), many appraisers were taught to put in the 3 highest sales prices reported (without checking for non-market conditions, nor incentives, nor using the procedures that quality appraisers use). The lenders and their underwriters often put ridiculous demands on appraisers, asking for data that does not exist, or asking the appraiser to hide information by using the wrong checkbox or changing the wording in the report or even deleting that the appraiser saw a building, junk yard, or toxic chemical pit on the property or in proximity. (Take the picture the OTHER way.) There is direct, overt, subtle, implied, and imagined pressure on the appraisers. The appraisers aren't stupid. If the loan officer calls them up, berates them and say "Now I just have to get another appraiser to 'do it right.' I'm never hiring YOU again!!!," even over something minor (like missing the needed value by a few thousand), they won't make that mistake again if "feeding their family" is more important than total honesty. The bottom line is that what ever rules they (the feds, the GSE, the lenders, etc.) put into place, sharp persons WILL figure out a way to get around them, find unethical business partners, and induce others to imagine that the business practices they are then engaging in are not unethical. It WILL be figured out by skullduggery, by accident, or by trial and error. Then it will be applied by people who stand to gain. FNMA used to have an approved appraiser list, but it got "too expensive." They know NOW, which zip codes have the most fruad, the most foreclosures, which loan brokers and appraisers are most problematic. A recent problem (now going away because they are becoming unemployed) is the appraisers and loan staff who have had NO or bad training get little feedback (besides the pressure to do whatever makes the loan go through), so they don't know that they made a mistake, a series of mistakes, are flat out doing-it- wrong, or their work can't be used because it is somewhere in the range of in error to fraudulent. Instead the honest lenders and the lenders who are angry over having too many deals killed just put the appraiser on the blacklist. The blacklist has a combination of good and bad appraisers on it, especially if it is mindlessly combined in the following mergers, buyouts, and data sharing. There is plenty of blame to go around here and most of it lies in the area of greed. People were making giant bucks for doing it the quick and dirty way (and appraisers were making small bucks for their part, compared to what the lender, loan broker, loan company, and their stockholders were making). Of course there is a long tradition of blaming appraisers. "Oh, the appraiser delayed it, came in too low, screwed up, doesn't know what he's doing." So instead of trying to fix things correctly paying for good quality work, demanding mentoring instead of some $1,200 correspondence school and fudged experience (for both appraiser and lending personell), paying for the risk of not having a good, qualified, experienced staff, licensing everyone in the process and regulating even those who are unlicensed you all (we all) are going to see similar problems at the beginning and end of every boom. Bigger boom? Bigger bust. (The most profitable litigation will be when people are still around and still have money.) Big bust? Everyone moves to where they can feed their family, setting up the shortage of qualified staff for the next boom.

Above Posted By: Anonymous | Fri, 29 Feb 2008 06:33:44 EST

WOW - active blogs on this one. Now, I am a 22 year appraisal veteran. Weren't we all told that LICENSING would fix all these dirty, filthy no good appraisers....... So instead nothing changes but more fees, state and federal operations and the lowly appraiser is left to fend for themselves. 1. first and foremost, we need laws to ensure we get paid. I spend too much time chasing bad checks, deadbeat or bankrupt lenders for my fee. 2. agreeing TOTALLY with another anonymous post, this will make the biggest AMC of ALL FNMA, they will use the federal appraiser registry ( which appraisers pay for ), to establish a list, appraisers are DONE working directly with brokers. Before this is done, we will have federal licensing for ALL mortgage loan officers ( with personal fraud liability ), brokers will be out and if they survive, they will not order, speak with or touch and appraiser or appraisal ( see current regs in OCC & OTS which are law now ), FNMA will pimp out appraisers to work for 60% of the fee, the remaining will go to "maintaining" the program. The onlky people left doing loans will be the big banks. Now, if you like total separation, fine, but who gets the work, work is banned by FNMA, does an appraiser with 6 months of experience rotate with a guys 25 years in this. Frankly, this is a mess of epic proportions. This industry is a modern version of a buggy whip maker, we are done. There are suggestions on capitol Hill to not have an appraisal at all but have each borrower pay into a federal insurance fund $ 350.00 ish for every loan made. Who thinks its a good idea for FNMA to do anymore that they already do, they just lost nearly 4 billion in 3 months, but hey, THEY ARE OUR SAVIOR. Someone prior is correct, Andrew of NY wants to be president someday, so lets make alot of proposals that sound good and make more work for less money for a group so scorned over the years it amazingly stupid that we still do it. I am not here to overly defend and or critisize my industry or banking brokers. But, the loans we were doing for the people who were borrowing on the places they wer buying at the prices they were paying WAS SO STUPID! It had to end, now just like in the Savings and Loan problen, we need to blame someone and set up' a complicated system. Once this is done, FNMA and Freddie will be a direct lending and the appraisers of the work will dance for them at low fees like court jesters. Further, do not forget the 1/1/2008 law changes for appraisers making it way harder to get in. Now who as an appraiser wants to get in now and or stay, we all need to find something else to do to augment income and if the government and GSE's get a hold of all of this, we will need to replace our appraisal income. I do not know a happy appraiser anywhere and this horse crap is only going to make it worse. FNMA will be the new "huggy Bear" of AMC's. It is only a matter of time.

Above Posted By: anonymous | Fri, 29 Feb 2008 05:34:42 EST

Wow, where do I start, I currently own and operate a mortgage company in PHX, AZ one of the hardest hit city's in the country and labled a soft market by Fannie and Freddie and every other possible outlet a loan could be brokered thru. First of all, Fannie and Freddie are reducing the lending by 5% across the board as we are considered a soft market...example we can't lend more than 85% on a cash out transaction. In addition, they have now implemented fico restrictions as well...like 680 to qualify for a cash out transaction to 85% on a conventional loan eg...Fannie, Freddie. Also, the appraisal requirements by the lenders are as follows: All comps need to be no later than 90days, must be a 1/2 mile or less from the subject property..the appraisal must include 1 pending sale in the same subdivision and or an active listing...keep in mind houses are not exactly flying off the market! So frankly, in my humble oppinion I think the existing inventory will take roughly five years to get thru not 18 months! I am not saying brokers did not contribute to the problem...but lets keep in mind we BROKER our loans thus allowing the BANK'S or BANKER'S the priviledge of underwriting each file, including but not limited to reveiwing appraisals! While mortgage bankers and banks with retail divisons that lend direct to the consumers...grade their own paper so to speak(underwrite their own loans)! So all this regulation comming down and all the finger pointing at the broker is not only absured its really annoying. Those of you who honestly read these posts and actually think an appraisal clearinghouse will solve the problem you are way off base! Any independant appraiser that would like to see that occur I would suggest they are lazy and horrible at developing business and relationships. I can specifically recall every appraiser in 2005 doing "time adjustments" on the appraisal in order to adjust for the rapidly increasing market in the metro PHX area...not once did the bank that we submitted the loan thru object!. Sorry my job was to get the loan done, I did not have to put any pressure on the appraiser, comps were easy to find and the homes increased at an insane rate...frankly when that started to occur the banks should have institued, the guidelines they now have in place to slow down the steaming hot market! Yet none of them and I mean none of them could get enough! I have never commited fraud on any loan closed in my office nor have any of my employees...I know this becasue I review and audit every single file that goes thru my office...you see in Arizona we have a word called R.I.(responsible individual)..that would be me! So any illegal activity happening under my watch and my license I would be responsible for it, and ..Fact is everyone is to blame. I would suggest that the Banks and the Bankers actually were in a much better position to cheat the system...as previously stated they underwrite their own loans, with that being said...skeptics would say that the Banks and Bankers have more skin in the game as they are lending from their own pool of funds, thus have a great incentive to write a loan that is compliant enough to be sold to secondary market so as the are not stuck with a loan that can't be sold. Let me dispell the myth...there was no risk then...loans were purchased with little or no due diligence. Think about it...how many of the Bankers/Banks were caught with a bunch of loans that they could not sell when the market turned and the guidelines chagned in mid stream! Sure some of the loans the lenders purchased thru brokers could not be sold either but at the end of the day the were underwriting our files and had every opportunity to turn it down due to appraisal or any other reason. So by all means lets have an appraisal clearinghouse...lets bring an extremely challenging market to a complete stop by jumping thru more and more hoops to get a loan completed...that will help solve the problem. Bottomline...nobody wants to take ownership of the problem, specifcally the lenders...lets just point the finger at the Broker I mean after all we only originate and close about 70% of all mortgage loans originated...and underwrite exactly 0% of them...that makes perfectly good sense! Shame on the lenders for not doing a better job of grading papers, shame on the lenders that approved a stated income loan for a Day Care Provider who claim's she makes 125k per year working out of her house or the 1st year school teacher making 50k per year. Shame on the ignorance of the media that actually write about the mortgage industry and lead a story with BROKER'S are to blame! Get the facts understand the industry do your homework!

Above Posted By: Anonymous | Thu, 28 Feb 2008 22:25:55 EST

christine said: "The story references the fact that the BROKER doesn't get paid until the loan closes. Not the appraiser." many times the appraiser also doesn't get paid until closing in the form of closing costs. This new law is good for all appraisers. They can all do honest appraisals and not worry about being blacklisted by brokers if they don't inflate the value. We also need all LOs to be licensed like RE agents in every state. Here they don't need a license and fraud is rampant.

Above Posted By: james - RE, LO, investor | Thu, 28 Feb 2008 21:47:40 EST

Reminds me of my kids at the dinner table when I asked "who did it?" They all pointed at their syblings. I will agree that greed is at the root of the problem. AMC's and lenders control the appraisal process and the appraisal fees. That needs to be fixed.

Above Posted By: Rick | Thu, 28 Feb 2008 20:37:55 EST

I have read many posts that this would be eliminated if borrowers paid up front. That is completely UNTRUE! I am an account exec from a major bank. Most of my brokers have appraisers collect at the door. That does NOTHING for the value pushing. The broker still complains that they need more value, and the borrowers complain if they cannot get the value they think. Underwriters DO make adjustments, and the broker will no longer use the lender. They will no longer use the appraiser. The brokers controlled the industry in a sense that then had "20 different lenders" who will do this loan. That was always hung over the lenders head. As far as the programs go, yes, lenders had them, but there is always someone looking to manipulate the rules. a no doc loan was put in place for EASE of documentation, not for people without jobs! People with multiple entities, hard to document interest income, unverifyable second jobs, etc. not for the unemployed. There is always a scam, a way around the rules. There are borrowers who still ask for those programs to this day!

Above Posted By: anonymous | Thu, 28 Feb 2008 18:10:47 EST

Wall Street and the Feds knew this was going and said nothing. Because the lobbyist had there nose so deep in it. Wall Street had such high profit margins and were making billions. So everyone looked the other way. If the appraiser wants to eat they play the game. If they try to regulate it good luck it won't play. This is how it is and still is. So the Feds can stop screwing with the little guy because they are easy targets they should nail the big whales. Look at their own loser oversight. Everyone one was on the take!

Above Posted By: joe | Thu, 28 Feb 2008 17:41:15 EST

Most everyone knows that when people climb into bed with eachother - chances are someone is going to get screwed.

Above Posted By: A. Snyder | Thu, 28 Feb 2008 17:28:15 EST

I am an appraiser and have been for the past 9 years. The appraisal profession has been at the root of valuation bubbles before...circa 1989. Greed by both parties pushed values higher. The homeowners were not complaining when they recieved their funds from a "pushed" appraisal during the house is not just a home but an ATM years. I have lost clients due to my NOT pushing the values higher and it hurts me to see my industry behaving this way. I believe there needs to be some sort of checks and balances in place for the appraisal side of the lending business. My home state of GA has limited resources and manpower to go after bad appraisers and only the most obvoius and larger dollar amounts in fraudulent appraisals/loans can be investigated. The state cannot police the industry as there are limited it available funds. This is an oversight that was ignored on both the Federal and State levels. Ther should have been funds set aside to staff a larger department for this issue on both levels. The atty general is overwhelmed with this as the main topic of investigation right now and can only do so much. The appraisers themselves are fearful of turning another appraiser in. I don't know if it is a loyalty among thieves or fear of getting blackballed in the lending community as a whole. There needs to be change. The licensing of appraisers after the S&L crisis did nothing to improve the quality of the appraisals. Somthing has to be done to attract better people to the appraisal side of the lending business. Our appraisal fees have not changed since the 80's and the work required to complete a thorough report has doubled and the data resources required is going up almost quaterly. More work....more cost... same fee=not a good combination. Good quality work has not been rewarded in the marketplace and until it is you will not see one thing change. The most successful/profitable appraisers I have known are in tight with the bank/broker or lender. These appraisers have no trouble getting whatever number is desired. It is a shame it is this way and the public is suffering again for it, just like the late 80's.

Above Posted By: Brian Jarrard | Thu, 28 Feb 2008 15:49:19 EST

Eugenia, the reason why your house was forclosed upon was because you couldn't pay your bills. Stop blaming the appraiser. Many buyers want a house so bad that they will over pay for the house because they are emotional. Then they sue the appraiser. Nice. Eugenia, values fell and it is typical for the market to fluxuate to some degree. Who thinks that in this day and age you will be able to get the same for a home when it is now a buyers market and people are just dumping their homes because they have over extended themselves. Wake up and recognize who has the issue. You just overextended yourself. Period.

Above Posted By: Anony | Thu, 28 Feb 2008 15:33:50 EST

i'm pretty sure that allot of people have benefitted from getting a healthy appraisal as opposed to a conservative one. i'm tired of hearing about how people are being taken advantaged of, get some common sense and take responsibility for your actions. THERE WILL ALWAY'S BE SCAM ARTIST. SO STOP CRYING AND LEARN HOW TO BE A RESPONSIBLE ADULT....

Above Posted By: Joe | Thu, 28 Feb 2008 15:29:45 EST

I am a Professional Land Surveyor in South Florida and have witnessed a dizzying number of unscrupulous brokers and appraisers and title agents. Not having dealt with lenders directly, I cannot speak to their integrity. Integrity - now there is a novel idea! I have prided myself on running a firm whereby integrity and professional ethics were the foundation. This idea of ANYONE providing ancillary services not being paid unless the deal closes is absurd. Laws governing Surveyors in Florida now specifically state that "washouts" are prohibited, yet many surveyors still offer them - even in print. (this used to be inferred by means of a no kickback clause - as in RESPA). If an architect is hired to design a home, but the home is never built, the architect is still going to demand payment - right? I offer great service for a competitive rate and I have to suffer because of unscrupulous surveyors dealing with unscrupulous agents. Bottom line is: Rid the system of opportunities for greedy people to exploit and protect both the consumer AND the small business owner.

Above Posted By: A. Snyder | Thu, 28 Feb 2008 15:29:15 EST

"Also, we paid the appraiser, not the lender - lender was not even involved at that point. If the appraiser had done their job and not fudged the size"...whomever posted this comment sounds like a complete idiot. Must be a homeowner. The reason for the real estate turmoil is because of fraud on all parties, lenders, mortgage brokers, appraisers and realtors.

Above Posted By: Anony | Thu, 28 Feb 2008 15:21:27 EST

As a appraiser, this is a joke..This will only leave AMC's to work with and they will only want to pay the local guy 100-175 per appraisal. At that fee, the competent appraiser will be gone and all that is left is the guy who can't even run a cash register at Burger King... The average appraiser has never been asked for a way to solve this problem, the only people at the table are the big lenders and AMC's who are creating the problem... EAppraiseit is listed for a reason,,GREED The average Honest Appraiser is screwed,,Just wait and see

Above Posted By: Danny | Thu, 28 Feb 2008 15:06:16 EST

Five thoughts. 1)Having worked for banks and wholesale lenders both as a loan officer and as an appraiser I think in house appraisers tend to be as realistic in their opinions of value as most fee appraisers. I reviewed appraisals for a living and my appraisals were reviewed by in house, by outside reviewers and by underwriters when I appraised. My goal was to be able to support my value to the reviewer, and I never knew which appraisal I might get a call on. More review by review appraisers, not more rules are needed. 2) Uniform Standards of Professional Appraisal Practice (USPAP) governs all apprasals that go to the GSEs. If there are problems there are cures that don't require amputation. In my opinion, the problem has always been enforcement at the state level, and lax requirement in education and experience. 3) And let's just say it, Andrew Cuomo is an ambitious politician that wants to make a name for himself. Anyone recognize the last name? Is her wrong in going after WaMu? No, but WaMu's problems are not necessarily the whole industries problems and everyone shouldn't be punished. 4) If my memory is correct, First American was a management company, not a wholly owned subsidiary. If I am wrong, someone please correct me. 5) This is my 3rd time to go through a major downturn in the real estate industry. The easy answer is always to blame the appraisers. What about the wide open underwriting guidelines at some of these lenders? A blind, and deaf clearinghouse will not take into account the experience of the appraiser and the level of complexity of the appraisal. Again, the states need more enforcement in the field to ferret out the bad apples and the stong arm lenders whoever they may be and maybe the GSEs need to help fund it.

Above Posted By: Rodney | Thu, 28 Feb 2008 15:04:50 EST

Also, we paid the appraiser, not the lender - lender was not even involved at that point. If the appraiser had done their job and not fudged the size of the home and value the deal would not have gone through. That is exactly why there are tons of foreclosures out there now and it starts with the appraisal!

Above Posted By: Gigi | Thu, 28 Feb 2008 14:32:42 EST

Nathan, what are you smoking? The broker chooses what loan program because the crappier the program, the bigger their fee. We qualified for a fixed rate mortgage, had over 720 credit and our disgusting broker put us and chose the 2/28 ARM package because she got a much higher fee, and she did not tell us a thing until we got to closing! All the brokers who were raking in the money a few years back are out of business and they should be. They worked for themselves, not the borrowers!

Above Posted By: Gigi | Thu, 28 Feb 2008 14:30:21 EST

I remember a friend who happened to have an important position with one of Chicagoland’s more important lender/thrifts. At church, he told me how redlining was being eliminated. Lenders would be required to make a certain percentage of their loans in areas which were not considered to be good locations. The thinking at the time was (and I quote): “We have a national marketplace. Even if we lose 100% of the money we put in these tougher areas, the loss will hardly be a blip on the total balance sheet.” A logical extension of this thinking would be CDOs and other securitizations designed to spread risk as far as possible. “The Kool Aide” people drank may have been a condition for doing business in a tightly regulated environment. Federal regulations may have pushed lenders into lending in areas which really needed extra appraisal and underwriting care. Was there pressure to treat all areas the same, even if they were patently NOT the same? “Uh huh!” Credit scoring was bearing nearly the entire burden of discernment among various potential borrowers. Talk about driving a spike with a tac hammer! Appraisals of collateral need not be strenuous nor accurate, since short term market changes far exceed limits for appraisal accuracy. (I found that in a banking industry report to a Senate Banking Committee.) Accurate underwriting and appraising could be illegal!? Well, perhaps not, but certainly less accurate and more speedy valuation products could be used. It’s all just a ride in the park, a Woodstock, 1969-style weekend. Wonderful, memorable, crazy . . . you don’t need a real job to get the high! Drugs are banned, but smoke what you like if you’re in government, trying to please everyone. If the corporate lender/investor wants to make and keep money, and investing rules are based upon such willful lack of awareness of basic investing concepts, perhaps one might say investing in the United States has become insupportable. My my!! Where will the money go, if not here? Can real estate recover if lending investors shield themselves against risk as they should? I begin to see that perhaps the government SHOULD buy all that waste paper. Loans mandated by the Fed should be bought by the Fed. That’s justice, and taxpayers who vote and demonstrate for this kind of Democratic regulation pay the costs. Fair, right? This is a collapse of a thought regime which has been developing ever since 1968.

Above Posted By: anonymous | Thu, 28 Feb 2008 14:29:40 EST

I was the victim of a bogus appraisal, and the appraiser shared office space with the broker. The appraiser inflated the square footage of our land by 700 sq. ft., the sq. ft. under heat and air by 228 sq. ft. and the value by $25,000.00. We had a contract on a home prior to this purchase, and we were working with the broker and this same appraiser correctly tolfd us that home was over-priced and the deal fell through. However, the 2nd time was definitely not a charm. We did not know any of this until we went to refinance and the new appraisal was off by so much. We filed a complaint against the appraiser with the State, and they found they violated numerous Statutes and USPAP rules. They will most likely suspend or revoke their license. The broker was found guilty by the State for violating Statutes (switch terms and rate without notifying us and no broker contract), and the lender is under investigation by the State & F.B.I. There were far more corrupt brokers, appraisers and lenders than honest ones a few years ago. It has taken a while, but they all should get slapped up and down for what they did.

Above Posted By: Gigi | Thu, 28 Feb 2008 14:27:39 EST

Huh? The appraisers paid up front would fix this? Are you kidding me? The broker orders the appraisal, the appraiser goes to the property, gets a check and does the appraisal. Value comes up short, do you really think that broker is going to order another appraisal from the appraiser? NO WAY!! He's going down the street to the next appraiser and try him. There should be national clearinghouse run by appraisers and funded through the HUD as a separate line item. Or the lenders should fund it out of their pocket. The last thing anyone needs is another AMC throwing orders out to the appraiser who will accept the lowest fee while taking a lion's share of the appraisal fee for "overhead".

Above Posted By: Anonymous | Thu, 28 Feb 2008 14:23:03 EST

HA!! I used to work for WaMu. The WaMu appraisers were a bunch of tight a**es who couldn't add. Trying to get a "push higher" on the appraisal was like french kissing my grandmother (impossible for most of you that aren't sickos). WaMu needs to be commended for holding their side of the transaction. BOTTOM LINE - kick the crap out of the unethical brokers (the market is doing that by itself) and reward those that do - goes back to basic parenting skills... and treat mtge brokers like children (most of them are). Also, get the gov't out of the lender's pockets and let local businessman come to the rescue. IMHO!!

Above Posted By: mike from s fla | Thu, 28 Feb 2008 14:18:28 EST

Hello, I believe that this will help. I cannot say how much, but appraisers should be honest and not have to be referred by a mortgage or loan officer. When I bought my condo in Atlanta, the price was $178,000. Later I learned that this wasn't true. If I wanted to sell it, the most I could get was around $140,000-145,000. It foreclosed. Eugenia Renskoff

Above Posted By: Eugenia Renskoff | Thu, 28 Feb 2008 14:17:57 EST

The Industry problems still need to be fixed. We probably have seen the largest part of industry job fall-out and mortgage foreclosure rate that we will see going forward. Now its just getting down to what brings back confidence and stability back to the RE Market. Guidelines were stretched well beyond history. Investors, lenders, banks, and money houses (like Fannie Mae), approved these "open" guidelines and the market grew beyond most peoples comprehension. And, a lot of money was made by a lot of people. Then, the market changed, like it always does. Just like when the Venture Capital/Start Up Companies/New Issue Securities market changed on Wall Street in the mid to late 90's, the RE market changed too. A bubble, if you will, can only expand so far. With little "slowing" of money rates for almost a decade by banks who wanted to keep lending and making money, and didn't necessarily focus on compliance procedures for valuating these properties or buyers, and the Fed who felt pressure to keep rates low without regard to what longterm effect it would have on the RE market. It's simply just time to take a step back, analyze, review, and rewrite RE Industry protocol across the board for longterm growth and longterm job and price stability. Not only for the people in these jobs, but for the banking industry that is now feeling the pain of mortgage fall-out in their own portfolios, as well. And unfortunately, there will not be a lot of "easy" answers out there. Nor will the answers necessarily include or allow for 2 week closings any longer or a single household, triple refinancing within a year. My question is, since we have had 2 decades of bubbles one in the Securities Market (mid 90's), and then one in the RE Market (2005-2006 ish), what will be the next market to make money in for the next decade? Maybe us unemployed RE Industry people should focus on that.

Above Posted By: Anonymous | Thu, 28 Feb 2008 14:10:33 EST

Right here Chistine! I'm one of the good guys that never got recognition for borrowers that i helped out of an neg. am. arm. by covering their pre pay penalty. It's funny how doing it right has more value than our weak dollar.

Above Posted By: Dano | Thu, 28 Feb 2008 14:04:50 EST

I agree Anonymous 11:59 Another knee jerk reaction to an old problem that is well covered at the moment with "adverse market" and "declining market adjustments" to FNMA interest rates as punishment. Appraisals are so closely scrutinized for market trends these days that it has become "guilty until proven innocent" for home values. With another layer of protection comes serious negative economic consequences. We're not likely to see the qualified home owner cheering on regulation from their apartment living room.

Above Posted By: Dano | Thu, 28 Feb 2008 13:55:00 EST

The Industry problems still needs to be fixed. We have seen the largest part of industry job fall-out that we will see going forward. Now its just getting down to what brings back confidence and stability back to the RE Industry. Guidelines were stretched well beyond history. Investors, banks, and money houses (like Fannie Mae), approved these "open" guidelines and the market changed, like it always does. RE is not an exact science. But it's still time to rewrite RE protocol across the board.

Above Posted By: Anonymous | Thu, 28 Feb 2008 13:33:42 EST

I do not think prohibiting brokers from ordering appraisals will solve the greater issue raised. There are complexities as to why overvalued appraisals were created that will never be addressed by the recommendation proposed by Fannie Mae. The complexities come from various parties outside of the loan transaction. Let's examine loans for purchases during our real estate boom times: We all know that there are mortgage loan originators (aka officers or solicitors), realtors and appraisers that did push value beyond the value even a high growth period indicated. And, we know that buyers in certain situations CHOSE to pay over appraised value with additional monies out of their own pocket. We also know there are many loan officers and realtors who lost deals when they worked ethically with appraised values from appraisers that did NOT partake in grossly estimating market value. These professionals, of which I am proud I am one of them, kept my fiduiciary duty to protect my client and inform them of what was happening in the market so they could make their own decisions. I selected appraisers who worked ethically and I worked with realtors that put their clients first. I've experienced many a realtor who pulled a client away from me because I didn't have the 'right' appraiser in a purchase transaction. The 'right' appraiser was accessible to the realtor and loan officer who needed the money so badly they couldn't survive without a transaction closing. I didn't forget that my fiduiciary duty to my client came first, regardless of my personal finances. What happened to my counterparts throughout the country?

Above Posted By: Christine | Thu, 28 Feb 2008 13:24:35 EST

The story references the fact that the BROKER doesn't get paid until the loan closes. Not the appraiser.

Above Posted By: anon | Thu, 28 Feb 2008 13:21:22 EST

This is crazy. Make harsher penalties for those who commit fraud. Ethics is up to the individual. Even if we get a clearing house there could be bad apples in that bunch as well. They might as well go to one big national lending center as well to get loans done. Give the underwriters more training to review comps etc. That is the reason appraisers have to be trained experts and get a license isn't it? I wish the people making these decisions would have actually done a loan in their life to know what is realistic and what is not. If it hadn't been for the investors offering the loans the sales force would not have sold them and none of us would be in the credit crunch crisis that we are currently in! It starts with those offering it so shame on them!!!

Above Posted By: Stacy | Thu, 28 Feb 2008 12:44:28 EST

Clearinghouse, what, their own inhouse appraisers now. why don't they just have the appraisals ordered up front with no reference to a pre-established value which tries to swing an appraiser's opinion. That's more of a solution to inflated appraisals, i'm sick of losing orders to some so-called better appraiser (in a loan officer's mind) just because he's willing to ignore the best comparables and use the highest ones they can find to inflate the appraisal to make the deal work.

Above Posted By: Anonymous | Thu, 28 Feb 2008 12:43:28 EST

I agree that this new proposal would only worsen things. There would be tons of appraisers, who are already going out of business due to the housing crisis, who may be forced out of work completely. As a broker we are not the one who has the authority to approve or deny any loan. I am sure there are brokers who try to push the value on homes, but not all of us do.....we don't get paid on a loan until it closes, funds, and then we still have 2-3 weeks for it to go through payroll before we see a dime....this new proposal could dramatically increase the length of time it takes to close a loan. Right now, I can close in 2 weeks or less....why you ask?? Because I can get my appraisal back within a week of requesting it. Let's face it....appraisers earn money by making "friends" per say in the mortgage industry....if we are no longer allowed to chose our appraiser, there won't be any more loyalty to your broker/appraiser. It could take several weeks to get the appraisal back, which would increase the closing times, and I would have to go longer without a paycheck! I hope they think this thing through THOROUGHLY!

Above Posted By: Mrs. Smith | Thu, 28 Feb 2008 12:39:08 EST

There are people out there who don't have the clients pay up front for appraisals? I always do that, the appraiser is already paid most of the time.

Above Posted By: ANONYMOUS | Thu, 28 Feb 2008 12:35:25 EST

its very simple all you have to do is make it mandatory that the appraiser ios paid at the door up front. it would be foolish to take bread out if the moths of theese appraisers the majority left are goos ones anyway beacuse the lenders are not excepting from the appraisers who where red flagged

Above Posted By: MAURICE | Thu, 28 Feb 2008 12:28:00 EST

I always wondered how the major players, Remax, Coldwell Banker, Wm Ravis, Prudential, all had their own title companies and appraisal divisions and got away with it and it wasn't called a conflict of interest. Hummmmmmmmm. No wonder all their deals flew, even if the property wasn't worth the purchase price.

Above Posted By: Diana/ CT. | Thu, 28 Feb 2008 12:20:47 EST

Hey, I have an idea let's make the economic situation at hand even worse by eliminating hundreds of thousands of jobs. What socioeconomically challenged idiot came up with this one?

Above Posted By: Anonymous | Thu, 28 Feb 2008 11:59:17 EST

Yes we push to get the TRUE VALUE... We don't push to get excessive values.. Also allot of the time if the lender thinks the appraisal that we have ordered was "PUSHED AS THEY SAY" They will order there own review and make there decision based on there review.. We the BROKER on the loan are the workhorse to find a lender that will accept the loan..WE ARE NOT THE UNDERWRITERS!!!!! The lender and the underwriters are the people who make up the programs and the product for us to sell for them.. The LENDERS are the ones who are at fault on all this.. The BROKER finds the lenders that OUR BORROWERS fit into... We don't approve all of those BS programs NO DOC. .... STATED... We sold them for the bigger lenders .. Don't push that crap on the BROKER for PUSHING the value.. the lender decides to accept that value or not...

Above Posted By: Nathan | Thu, 28 Feb 2008 11:51:33 EST

These changes = 8% - 15% drop in real estate values across the nation.

Above Posted By: anonymous | Thu, 28 Feb 2008 11:48:34 EST

Great honest brokers, appraisers and consumers screwed by politicians again. Clearinghouse = 8 week wait for an appraisal. Brokers penalized because WAMU pressured it's own inhouse appraiser, that makes a lot of sense. It's lenders responsibility to weed out fradulant appraisers and appraisals

Above Posted By: Richard Wolff | Thu, 28 Feb 2008 11:45:24 EST

This wouldn't present a problem if all appraisers were paid upfront by the borrowers

Above Posted By: Anonymous | Thu, 28 Feb 2008 11:37:24 EST

Huge Changes May be Coming for Lenders and Appraisers

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