Overheard the other day: a young person telling a friend, "Why should I get a loan now? I am going to wait for negative rates here in the U.S. so banks will pay me to borrow the money!"

Anyone investing in mortgages, whether they are whole loans or securities, wants to make sure that the property's value is correct. And when you're dealing with pools consisting of thousands of loans, validating those numbers can be daunting. Appraisal news continues to evolve.

The federal banking regulatory agencies issued an advisory to clarify expectations for the use of property evaluations by banking institutions. "The advisory describes the agencies' existing supervisory expectations for the use of an evaluation instead of an appraisal to estimate a property's market value for certain real estate-related financial transactions. Unlike an appraisal, an evaluation does not have to be developed by a state-licensed or state-certified appraiser. The advisory also addresses the use of alternative valuation approaches, methods, and other information that financial institutions may use to develop an evaluation in areas with few, if any, recent comparable property sales in reasonable proximity to the subject property. Regardless of the approach or method used to estimate the market value of real property, an evaluation report should contain sufficient information and analysis to support the value conclusion and the institution's decision to engage in the transaction.

A while back Peter Gallo sent along a story written by Isaac Peck about how an AMC was fined over C&R fees. "The Louisiana Real Estate Appraisal Board (LREAB) has again taken action to ensure that Customary and Reasonable (C&R) Fees are being paid by AMCs and lenders in the state...the Board ruled against iMortgage Services, LLC and issued a Final Order that included a fine of $10,000 and a six-month license suspension. The suspension was stayed, provided that iMortgage provides a C&R compliance plan to the Board no later than March 21, 2016.

"In contrast to Louisiana's previous C&R enforcement action involving Coester VMS, where there was no admission of guilt by Coester, this is the first judgment against an AMC that leaves no question on the determination of guilt. The Board's final order establishes that iMortgage failed to comply with Louisiana law and violated the C&R fee requirements set in place by the Board.

"Demonstrating the glacial speed at which many state board investigations operate, the initial complaint against iMortgage was filed two years ago in January 2014 after iMortgage sent out an appraisal order for a full 1004MC FHA appraisal with a fee of $200. The investigation was not opened until May 2014, with the hearing taking place in December 2015.

"In its written response to the initial investigation letter, iMortgage's Chief Risk and Compliance Officer, Dean Kelker, explains that iMortgage's fees were based, in part, on a fee survey that iMortgage was given by one of its large origination clients (later revealed to be Flagstar Bank), and that he 'can't speak to the details of the survey because it was conducted without our involvement.'

"Kelker writes that iMortgage works on a cost-plus basis, having been provided a minimum fee for each geographic market by Flagstar. iMortgage then adds a "service fee" to the appraiser's fee in order to develop a final borrower cost for the assignment.

"In addition to the Flagstar fee survey, Kelker says that iMortgage also determines fees based on its 'experience in the market' and the fees that appraisers quote and accept within particular local markets. Kelker argues that iMortgage complies with both C&R presumptions of compliance, as it relies on what he says is an independent third party fee study (Flagstar's study), as well as iMortgage's internal market data regarding what it has been paying appraisers and what appraisers have been accepting.

"...The language of the C&R fee provision of Dodd Frank states unequivocally that 'Fee studies shall exclude assignments ordered by known appraisal management companies.' Because iMortgage, however, did not know the details of the fee survey, it is unknown whether the Flagstar survey, which served as iMortgage's first line of defense, used AMCs fees in its determination that $200 is C&R for a 1004MC FHA appraisal order.

In his letter to the Board, Kelker raises his objections with Dodd-Frank, writing that iMortgage's problem with "broad fee studies," possibly referencing the Louisiana Board's fee study, is that they are "general in nature and do not specifically encompass the scope of work associated with an individual mortgage assignment." Furthermore, Kelker writes that any fee studies that "specifically exclude appraisal management companies in their composition create a potential bias due to the significant participation share of AMCs in the mortgage market." While contrary to the wording of the Dodd-Frank C&R fee provision, this sentiment echoes many other AMCs that insist that the fees they pay should be included in fee surveys and that fees consistently paid by AMCs constitute C&R fees because appraisers are accepting them."

While I'm pontificating on appraisal news, Michael Simmons with Axis AMC wrote, "I admire a system where how critically important it is for loan officers to embrace a culture of integrity and to recognize that their role was to serve their customers first. Having spent 25 years in a previous life working in the lending industry, I found that this is absolutely correct. And I have seen recent criticism of bidding assignments to get the lowest fee for an AMC's benefit. Again, spot on. In my opinion, selecting an appraiser for an assignment based on the lowest bid has no place in appraisal management. I've listened to the OCC's Appraisal Policy Specialist speak multiple times at appraisal conferences on the topic that choosing an appraiser based on their making the lowest bid on an assignment has no place in an appraisal management company's decision to select an appropriate and qualified appraiser. Neither does who can deliver a report in the fastest time frame relate to who is best qualified. Now I'm not so naïve as to think that time isn't often a critical factor, but good appraisers need a reasonable amount of time to produce a credible report - and that should always be the guiding factor, both for lenders and their customers.   

"As far as paying appraisers a rush fee, most appraisers would prefer not to have to work under that pressure (or through the night or on every weekend) to solve someone else's emergency. As a lender, if you needed your team to work over a weekend to get a file to docs in time to save a close date or save a lock rate, wouldn't you have to pay (and want to pay) your staff overtime? No difference really than paying an appraiser a rush fee. But when it comes to appraisers not knowing the neighborhoods or not understanding the markets they accept assignments in, that's always unacceptable. It is bad enough that an appraiser would take an order like that, but far worse that an AMC would hand out an assignment to such an appraiser. That's not appraisal management - and lenders should complain.

"So here's my question: there are AMC's that always use local appraisers, always do a quality job of communicating with the lender and appraiser, always work diligently to support and protect all parties to every transaction and ultimately are a valuable resource to the lender, the originator and the borrower ... aren't they a product of the same regulations that are being demonized? Could it be that the problem lies more with bad actors than, if you'll pardon the expression, a bad ACT (as in Dodd Frank). Maybe we need to spend our energy identifying and supporting those AMC's that embrace a culture of integrity ... just like we should gravitate to lenders and loan officers who mirror that same culture of integrity. The CFPB says borrowers should 'Know before you owe.' Experienced LOs know they need to serve their customers first. Ask that your lenders 'Know before they order' - and only work with AMCs that make best practices the core value of their culture and serve their customers first. Then and only then will the tone of the conversation change."

Franklin American Mortgage (FAMC) announced that a lender certification may be used in lieu of a disaster inspection performed by a licensed appraiser, licensed inspector, or nationally recognized field company.

NewLeaf Conventional guidelines have been updated to reflect the newly announced Fannie Mae elimination of the continuity of obligation requirements. Also, age of appraisal, retirement and social security policies have been updated to align with Fannie and Freddie Mac guidelines.

Lakeview and Bayview Loan Servicing have temporarily eliminated the following products in the County of Genesee, Michigan: Conforming Fixed or Arm and High Balance, FHA Mortgage Program Full Doc (Non-Streamlined) and All Portfolio Products. Lakeview will continue to originate all FNMA DU Refi Plus, FHLMC LP Open Access and FHA Streamlines. In addition, it has updated the Early Access Product guidelines to now permit gift funds, and reduced the required reserves. Also noted, As of March 1, 2016 it is adding two new appraisal management companies (AMC), Axis and ProTeck.

Jobs and Announcements

Under "tools for lenders," VidVerify is pleased to announce its partnership with Bankers Insurance Service (BIS), a leading insurance provider in the mortgage industry. Recognizing the importance of consumer education and awareness in a tightly regulated environment, Bankers Insurance Service will now offer incentives to its lender clients that implement VidVerify's video communication tools. "Learn more about the expanding presence of video in consumer use, marketing & mortgages; join a 15 minute weekly webinar. VidVerify is a system of automated videos delivered throughout the loan process, assuring that a consistent, compliant message is sent to every borrower and tracked so you are audit ready with reporting. The entire video library is accessible for internal and external usage. Additionally, the ability to record personal video is also available with compliance controls. For questions contact Laura Hopkins314-853-0121."

CMG Financial Correspondent Lending continues to grow! After a very successful 2015, AJ George, Senior Vice President of Correspondent Lending at CMG Financial, is proud to announce the promotions of Ron Harrison, Mary Nguyen, Brian Hilberth and Ralph Ippolito to National Sales Managers. The National Sales Management Team is responsible for developing relationships with new and existing correspondent sellers throughout the Pacific Northwest, Southwest, Central, Southeast, Mid-Atlantic and Northeast regions. With this announcement, CMG Financial is looking for 2 (two) qualified and highly ambitious Sales Associates, preferably located in the East San Francisco Bay Area, but would consider a remote location. For more information, email careers@cmgfi. com or clink the link above to view the career post. CMG Financial supports multiple business channels and is uniquely positioned to provide competitive products and services being an approved Fannie, Freddie, FHA, VA, and USDA direct lender and mortgage servicer which allows TPO-originated business from its sellers. CMG Financial is headquartered in San Ramon, California.  For more information about CMG Financial Correspondent Lending, click here.

In retail news Stearns Lending LLC continues to grow rapidly in its retail channel. Stearns is looking to add to its sales force by hiring Retail Branch Managers, Sales Managers, and Mortgage Loan Originators in key markets across the United States. "The top privately held mortgage lender has experienced 909% growth in their retail channel since 2011, based on funded loan volume. The company broke records in 2015 with back-to-back record funding months and $25.3 billion in total funded volume. Contact Brad Hoke to learn about Stearns' career opportunities.

And what are all of these production folks going to be paid? According to the most recent STRATMOR Compensation Connection survey, approximately 20% of the respondents did not pay a Base Salary to Loan Officers. If a base is paid, however, the average isapproximately $24,000. How does your compensation compare to your peers? Participate in STRATMOR's annual compensation survey to gain valuable insights on not only Loan Officer compensation but for key positions across all departments. This year's survey includes enhanced tools to make the data collection easier and faster for participants.  Each one of our modules (Executive Management, Retail Sales, Consumer Direct Sales, TPO Sales, Fulfillment and Production Support) have been updated to collect additional data elements including frequency of payouts that provide you with actionable information as you analyze and administer your compensation plans. Join us for this exciting new year of Compensation Connection. For full details, visit the 2016 STRATMOR Compensation Connection  website or email compconnection@stratmorgroup. com.