News By Edition

Quality control appraisal reviews are often a tension point in the appraisal relationship. It’s a topic that is often heated. To bring some clarity to the process, Valuation Review talked to valuation professionals from all walks of the appraisal industry. From an appraisal firm’s point of view of appraisal review to tips from the top appraisal minds, no quality control topic was left unchecked. 

In the wake of the housing market crash, the public has been inundated with stories of homeowners facing foreclosure, banks closing and once-successful real estate agents and appraisers struggling to make ends meet. As the government and media strive to determine who and what is to blame for this country’s financial crisis, the professionals who continue to work in the real estate industry find themselves operating in an ever-increasing litigious environment. Real estate appraisers, specifically, are routinely expected to sign engagement agreements with lending institutions containing indemnity provisions.

A common indemnity provision looks like this:

With the growing cost of appraisal management company (AMC) registration state laws, many AMCs are hanging it up, unable to front the money to stay in business. While appraisers rejoice, the consolidation of AMCs put lenders in a tough spot. To get the lender view of the appraisal industry, Valuation Review talked to Christopher Cash, senior operations manager at Envoy Mortgage, a mortgage bank based in Texas that has branches across the country.

Valuation Review: From the lender’s point of view, what does the consolidation of AMCs and appraisal firms mean to your business? 

Metro-West debuted five national branches, including offices in Albuquerque, N.M., Buffalo, N.Y., and Philadelphia. With the new expansions, our company has more than 175 staff appraisers in over 50 metropolitan markets in 30 states. These moves are reflective of our company’s growth and solidify Metro-West’s position as the largest independent appraisal firm in the nation. 

In tackling one of the most problematic points in the appraisal industry — appraisal review — Valuation Review asked appraisers what their most common stress points are in a quality-control review process. In the second part, appraiser pros sound off on what firms can do to improve their appraisal processes and how technology impacts the process.

CoreLogic released new analysis showing approximately 200,000 more residential properties returned to a state of positive equity during the fourth quarter of 2012. This brings the total number of properties that moved from negative to positive equity in 2012 to 1.7 million and the number of mortgaged residential properties with equity to 38.1 million.

The analysis also shows that 10.4 million, or 21.5 percent of all residential properties with a mortgage, were still in negative equity at the end of the fourth quarter of 2012. This figure is down from 10.6 million properties, or 22 percent, at the end of the third quarter of 2012.

The Appraisal Foundation is conducting its annual search for qualified candidates to serve on the Appraisal Practices Board and the Board of Trustees. The deadline for completed applications is fast approaching on April 2. Take note, however, that an individual may submit an application for the Appraisal Practices Board or the Board of Trustees, but not both boards at this time.

It was part of the scheme for the co-defendants to cause to be submitted false appraisals for some of the properties. One defendant usually recommended an appraiser to the mortgage broker for the loan approval. He supplied the appraiser with inflated values of comparable homes or omitted information concerning the home sales so the appraiser would overvalue the current home. At closing, through a grant program, the defendants funneled money back to the home buyer who was one of the defendants. They concealed from the lenders and other parties associated with the transactions that the home buyer was receiving a kickback for buying the home.

Mortgage applications decreased 7.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 15. The Market Composite Index, a measure of mortgage loan application volume, decreased 7.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7 percent compared with the previous week. The Refinance Index decreased 8 percent from the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 6 percent higher than the same week one year ago. 

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the February edition of the Obama Administration's Housing Scorecard — a comprehensive report on the nation’s housing market. Data continue to show important progress across many key indicators, as home prices ended the year with strong gains and purchases of new homes and sales of existing homes were also strong — although officials caution that the overall recovery remains fragile. 

“Low appraisal.” That’s a fairly subjective phrase. From the appraiser’s point of view, an appraisal is neither high nor low, it simply is. It’s the market value for the property. “Low appraisal” is a term thrown around by other industry participants who are looking to throw the blame on someone. It’s a topic that has seen a lot of headlines recently and everyone is weighing in on the issue. Now we have an AMC’s take on the issue.

An estimated 28,719 new and resale houses and condos sold statewide last month. That was down 0.5 percent from 28,871 in January, and down 3.1 percent from 29,630 sales in February 2012.

Sales are generally flat from January to February. February sales in California have varied from a low of 20,513 in 2008 to a high of 48,409 in 2004. Last month's sales were 9.9 percent below the average of 31,890 sales for all the months of February since 1988.

The latest FNC Residential Price Index (RPI) indicates that U.S. property values continued to recover through January — the 11th consecutive month of rising prices. Despite the uneven pace of price gains across different geographical markets, there are clear signs that the housing recovery is increasingly widespread.

Forty-two appraisal firms across the United States announced that they are now operating as Valbridge Property Advisors (www.valbridge.com), having combined to provide independent valuation and advisory services to local, regional, multi-market and national clients. The 42 firms are independent valuation leaders in their local markets, some having been in business for decades or more.

Under a mandate by the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) released a final rule on Jan. 17 on new mortgage servicing standards, amending Regulation X and Regulation Z. This rule was one of many released by the CFPB in January, and like the others, it requires training, retooling and the implementation of new policies and procedures this year.

No doubt that purchasing a home is an important life decision, and many factors can influence the home choices buyers make. Also not in question in the valuation world is that often, what the buyer might value differs greatly from what the appraiser values for the valuation. To give some insight into the headspace of buyers, The National Association of Realtors 2013 Profile of Buyers’ Home Feature Preferences examines the features buyers prefer when it comes to purchasing a home. 

Appraisal fees are always a big issue, with companies changing up their payment and transparency policies. In an effort to set itself apart in valuation space and provide the highest level of service and security, Landmark Network Inc. launched the PayView report.

On Feb. 1, the Appraisal Standards Board (ASB) adopted modifications to the Uniform Standards of Professional Appraisal Practice (USPAP). This action was the culmination of a period of 15 months and multiple discussion drafts, requests for comments, and three exposure drafts. Written comments were received in response to each document, and oral comments were provided at each public meeting. The ASB read and considered every comment, developed a work plan to address the issues brought forward, and adopted revisions for the 2014-15 edition of USPAP.

A New York broker has been indicted for conspiring to defraud 350 financially strapped customers of more than $1.2 million. Between June 2011 and August 2012, alleged the broker offered property buyers private lender loans of 105 percent of the property’s selling price at a 4.99 percent interest rate, regardless of the buyer’s credit score, as long as the buyers had jobs that generated enough income to qualify for the loan amount and monthly payments. 

According to court documents, the broker required the buyers to pay him an up-front fee of $2,500 per loan, which he claimed covered loan processing fees and the appraisal.

Mortgage applications increased 14.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 1. The Refinance Index increased 15 percent from the previous week and was at its highest level since mid-January. The seasonally adjusted Purchase Index also increased 15 percent from one week earlier and was at its highest level since the week ending Feb. 1. The unadjusted Purchase Index increased 18 percent compared with the previous week and was 17 percent higher than the same week one year ago.

The January Mortgage Monitor report released by Lender Processing Services (LPS) found significant differences continue in foreclosure pipelines between states with judicial and non-judicial foreclosure processes. Though both foreclosure starts and sales rates have been relatively volatile at the national level due to the effects of regional processes and compliance issues, the foreclosure inventory in judicial states remains three times that of non-judicial states. However, according to LPS Applied Analytics Senior Vice President Herb Blecher, even this now-familiar judicial/non-judicial dichotomy is not as clearly defined as it once was.

The Appraisal Institute released an updated form intended to help analyze values of energy-efficient home features. It remains the first of its kind intended for appraisers' use. The Appraisal Institute’s updated addendum allows appraisers to identify and describe a home’s green features, from solar panels to energy-saving appliances. Form 1004 devotes limited attention to energy-efficient features, so green data usually doesn’t appear in the appraisal report, or it is included in a lengthy narrative that often is ignored.

Fraud schemes involving appraisals continue to be a trend as the Federal Bureau of Investigation and U.S. Attorney for the District of Connecticut announced a trio of investment fraud schemers pleaded guilty to various offenses stemming from two separate investment schemes — totaling approximately $23 million in losses.

They victimized lenders by making multiple false representations in loan applications and other documents provided to the victim lenders. A trained mortgage broker was actively involved in the real estate transactions, including organizing and gathering many of the materials needed by the lenders, gathering certain information from the victim borrowers, providing certain comparables based on properties  to be used for purportedly independent appraisals, and a range of other background tasks necessary for the lenders to make the loans.