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Beware of AMCs Pushing AVMs

April 18th, 2017

AMCs (Appraisal Management Companies) and “Asset Monitoring Companies” Pushing AVMs (Automated Valuation Models)

These are unquestionably uncertain times for appraisers with many projections of declining mortgage appraisal volume.

On March 20th, the Federal Financial Institutions Council (FFIEC) met its every 10 year obligation under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) and reported to Congress on regulations considered “outdated, unnecessary or unduly burdensome”. While they did not address the lengthy and burdensome name of the council and act, they announced their intention to propose an increase in the appraisal threshold level for commercial real estate loans to $400,000 from the existing $250,000. It is not their intention to propose an increase in the residential threshold.

Last December, Freddie Mac initiated its program whereby appraisals were waived in various instances where it deemed alternative products to be satisfactory. Fannie Mae will be instituting a similar program soon. Both government-sponsored enterprises will have their very futures debated by Congress this fall.

The Chairman of the House Financial Services Commission, Jeb Hensarling, will be unveiling an updated version of his bill to change and replace the Dodd-Frank Act by the end of this month. Lots of uncertainty here as to what changes might mean to appraisers.

Veros, a self-described “asset monitoring company” has ramped up promotions of its AVM and “predictive analytic” products. Recent posts in Housing Wire sponsored by Veros have been entitled “Automated Valuation Products Provide an Answer to Appraiser Shortage” and “AVMs Make a Comeback”. They concluded one article by saying “With no end in sight to this (appraiser) shortage, when is it time to bring appraisal alternatives to the forefront?” For those not familiar with the so-called “appraiser shortage” let’s cut to the chase: there is no appraiser shortage, only a shortage of appraisers willing to work for less than customary and reasonable fees offered by many unsavory AMCs.

On April 4th, a House Subcommittee addressed the topic “Assessing VA Approved Appraisers and How to Improve the Program for the 21st Century.” While Michelle Bradley (appraiser and NAR 2016 Real Property Valuation Committee Chair) accurately described the smooth functioning VA appraisal system, Russell Johnson (Chief Revenue Officer of the AMC Clear Capital) described to Capitol Hill lawmakers how Clear Capital’s automated valuation products can bring “efficiency utilization” to the VA. The basic model he described involved a limited role for appraisers reviewing the output of computer generated “appraisals” along with “inspections” completed by non-appraisers.

AppraiserNews has previously discussed the hearing by the House Financial Services Committee titled “Modernizing Appraisals: A Regulatory Review and the Future of the Industry” and our concern as to what “modernizing appraisals” might mean. As Voice of Appraisal’s Phil Crawford said recently “lawmakers don’t understand the nuances of the appraisal process”.

AppraiserNews has serious concerns that not only do lawmakers lack understanding of the appraisal process but they do not understand the critical role that “boots on the ground” professional appraisers play in assuring the quality of the real estate used as collateral in mortgage origination. In the rush to deregulate, to bring about change, we are fearful that systems which are functioning smoothly or that might need minor tinkering will be abandoned and replaced by questionable pseudo-valuation products pushed by powerful interests with friends in high places. 

Appraiser Coalition Movement News

We are pleased to announce that membership in NY-CAP, the New York Coalition of Appraiser Professionals, has tripled to 35 since our report in the last newsletter. NY-CAP is one of the newer state appraiser coalitions which now number approximately 30. New York appraisers interested in joining can go to the Facebook Closed Group, NY-Cap.  Please note that this is open to New York licensed and certified appraisers only, membership is granted upon verification of license information. Those not on social media (really, not on social media at this point!) can email their contact info to nycoalitionofappraisers@gmail.com.  This will allow them to receive periodic updates on issues of concern to New York appraisers.

As New York appraiser Becky Jones noted in our last newsletter:

“What is the appraiser coalition movement?  The Coalition is a network of appraisers who are seeking a healthy future for the “boots on the ground” appraiser whether that be an individual appraiser working from a home office or in a larger appraisal firm.   We need to be heard and we need to know what is happening across the country that will affect our businesses and ability to feed our families”.

The next New York State Appraisers Board Meeting is May 4th in Albany, Buffalo and New York City and is open to the public, the meetings are linked together. Link

The Network of State Appraisal Organizations

As we discussed in our last newsletter, the Network of State Appraisal Organizations was formed to facilitate communication between state appraisal organizations across the country.  This group is also in the early stages of development but has already has made its mark with their successful January webinar with TAF (The Appraisal Foundation) and ASC (The Appraisal Subcommittee).  Links to their Facebook page and Q & A from their January webinar are found below.

Network of State Appraisal Org. Facebook page

Link to Webinar Q & A

Appraisers: Beware of Bait and Switch on your E & O Renewal

Appraisers renewing their Errors & Omissions insurance should be cautious about your insurance agent placing your policy with a new insurer without your permission. It is generally illegal and/or against insurance regulations to have coverage switched from one policy to another without explicit permission of the policy holder. There are legitimate reasons why one might move a policy to a new insurance carrier, including better coverage, price or service. Your agent should carefully review these options with you to make you aware of any advantages or disadvantages in switching. If your policy is moved to a different carrier without your awareness or permission, that agent may be making the change for their own benefit, such as a higher commission or other financial advantage. It is recommended, especially at the time of renewal, that an insured appraiser monitor their insurance policy placement and any communications from their agent. Should there be any concern about your agent’s actions regarding coverage, renewal issues or any other aspect of the E&O program, a policyholder can contact the carrier or the program administrator for the carrier for assistance. If you have questions or comments, please contact John Torvi at 781-292-5417 or at johnt@landy.com.

AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.

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Rates & Dates

Freddie Mac and the Mortgage Brokers Association (MBA) reported slight downward movement in mortgage interest rates last week.

In their survey on April 13th, Freddie Mac reported that 30-year fixed-rate mortgages fell from 4.10% the previous week to 4.08%. They also noted that one year ago, the 30-year rate was at 3.58%.

Sean Becketti, the chief economist for Freddie Mac noted:

“Following a weak March jobs report, the 10-year Treasury yield dropped about 5 basis points. The 30-year mortgage rate fell 2 basis points to 4.08 percent. Not only did the average 30-year fixed-rate mortgage decline for the fourth consecutive week in our survey, it also fell to a new 2017 low.”

The MBA reported on April 12th (for the week ending April 7th) that 30-year rates with conforming loan balances ($424,100 or less) declined to 4.28% from 4.34%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) was unchanged from the previous week at 4.24%.  Rates for FHA backed mortgages moved down from 4.15% to 4.14%.

Mortgage applications rose by 1.5% from the previous week.  Refinance applications as a percentage of all applications fell from 42.6% to 41.6%, the lowest level since September 2008. The FHA share of applications decreased from 11.1% to 10.7% while the VA share rose from 11.1% to 11.3%.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Ask Angie

Angie would first like to acknowledge the winners of her last contest: New Jersey appraiser Louis Retort of Duncan Appraisals; California appraiser Lynne Johnson of Lynne Johnson Appraisal Group; Colorado appraiser Scott Hammond of Hammond Appraisal Services; Connecticut appraiser Larry Kelly of Larry Kelly Appraisals; and Florida appraiser Julie Hall of JD Hall & Associates. They were the first to answer correctly that Yogi Berra was the author of all three quotes in the last newsletter: ““Baseball is ninety percent mental and the other half is physical”; “A nickel ain’t worth a dime anymore”; and “The future ain’t what it used to be”.

Today’s questions:

Who said all of the following:

1. “Every night when I go out on stage, there’s always one nagging fear in the back of my mind. I’m always afraid that somewhere out there, there is one person in the audience that I’m not going to offend!”

2. “I never could tell a joke. I just started talking to the audience, and when the drunks would yell, ‘Hey, when do the broads come on?’ I got good at saying ‘Relax. Clear your skin up first.’ They called me ‘the insult guy’, but it’s never mean-spirited. I’m just exaggerating everything about us and about life”.

3. “Once in a while, when I’m alone, I think about my age. I think, How many more years do I have on this earth? But I can’t really conceive of dying. Somehow, in my head, I don’t think I’ll die. I know that everybody dies, of course. I just think that it’ll never come to me. It’s crazy, but there it is”.

a) Prince
b) Don Rickles
c) Alan King

d) Chelsea Handler
e) None of the above

The first to respond with the correct answers wins:

One Free Regular Listing on AppraiserHelp.com

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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