Freddie Mac, Fannie Mae Update HVCC FAQs

The government sponsored enterprises (GSE), Fannie Mae and Freddie Mac, recently updated their Home Valuation Code of Conduct (HVCC) frequently asked questions (FAQ).  Both GSEs state that while there may be some differences with two sets of FAQs in terms of style or structure, they present no substantive differences in interpretation or implementation of HVCC.  Nor do they impose any different operational requirements.  The FAQs include new questions and are also organized by subject area.

NAR has called on both GSEs to coordinate their FAQs and codify them into existing appraisal policy.  In 2009, then NAR President Charles McMillan attended a series of appraisal summits sponsored by the National Association of Home Builders where he asked both GSEs to work together to ensure the FAQs are coordinated and do not result in greater confusion for stakeholders in the real estate industry.

The Freddie Mac FAQs can be found here and the Fannie Mae FAQs can be found here.

FHA Offers Education Session for Appraisers

The Federal Housing Administration (FHA) announced that on April 21, 2010, in Atlanta, GA they will hold an education session for appraisers. This is a full day, live course that offers instructions on most recent changes and updates to FHA procedures and guidelines for FHA Appraisers.  The session will take place at the Richard Russell Bldg-Strom Auditorium, 75 Spring Street SW, Atlanta, GA 30303.

The topics discussed will include; Appraiser Portability, Appraiser Independence, Appraiser Sanction Process, Declining markets and 1004MC form, Case Transfer Responsibilities, HUD REO Appraisals, MPR/MPS-Property Inspections, and other related topics.

Registration is required but there is NO FEE.  More information is available here.

Round 2 of the Heavyweight Fight: Calling in the Big Guns

On January, 16, 2009, we brought to you the valuation fight that is appraisals vs. broker price opinions (BPO).  Today we bring you Round 2 – and this time it’s personal.  Well, it’s not really personal but there is a clear difference of opinion.

Last week, the Appraisal Institute (AI) sent a letter to Treasury Secretary Geithner expressing concerns about the use of BPOs in the HAFA loan modification program.  In the letter to Treasury, AI states that BPOs are likely to exacerbate mortgage fraud.  Further, real estate agents who perform BPOs are not independent, not properly trained, have a bias towards quick results  for a fee, and have little or no regard for the other parties of a short sale transaction (lenders, servicers, investors, property owners, etc).

Within days, the National Association of REALTORS (NAR) responded to AI comments in letters to Secretary Geithner and Housing and Urban Development (HUD) Secretary Donovan.  In the letter, NAR recognizes the need for flexibility in any mortgage modification program and notes the importance of the appraisal for purchase money mortgage transactions. However, NAR believes an appraisal may not be the best tool for all real estate transactions.  BPOs are widely accepted in the real estate industry and there is no evidence that their use results in mortgage fraud.  NAR also argues that there is no evidence to support the idea that appraisers are more or less likely to engage in mortgage fraud than real estate agents.

Does AMC Survey Shed Light on “Propoganda”?

The Maryland-based Coester Appraisal Group recently released its annual survey on appraisal management companies (AMC).  According to AppraisalNEWSCAST.com (the Coester blog), the survey sheds light on industry propaganda.  “After further analysis of the data from the Annual Coester Appraisal Group Vendor Survey, it seems like many of the implications made regarding the state of the mortgage industry as a whole have been debunked.”

Here are the highlights.  You can tell us in the comments section whether or not common AMC complaints have been “debunked” by the survey.

The Coester results state that one third of respondents travel 15-20 miles to complete an appraisal (an additional 31.4% travel 10-15 miles).  Regardless of where the order comes from (AMC or a lender) the average appraisal turnaround time is 4-5 days from the receipt of the order.

According to the survey, AMCs are not earning a huge profit margin on the backs of appraisers – they are only taking 30 percent of the independent appraisers fee.

Finally, the survey  noted general concerns of appraisers.  The most prevalent concerns focused on set or reduced fees.  Other concerns include turnaround time and pressure; poor communication from AMCs; and lack of expertise/uneducated AMC personnel.

Freddie Mac AVM to Assist with Appraisal Reviews

Freddie Mac announced that starting February 28, 2010, Home Value Explorer (HVE) will assist lenders in reviewing appraisals.  Loan Prospector will provide a point value estimate for the property address from HVE, which is Freddie’s AVM.  The use of HVE, along with appraisal best practices, can be found in Seller/Servicer Guide Bulletin 2009-18.  Loan Prospector will return the HVE point value estimate that can then be used to determine whether an appraisal requires additional review.

Freddie Mac recommends that if the variance between an appraisal and the HVE point value estimate is more than 20 percent then: 1) the appraisal should be considered for additional review by a senior underwriter or in-house appraiser; 2) obtain a review appraisal or a second appraisal; 0r 3) reject the appraisal.

Freddie adds that the HVE point value estimate from Loan Prospector should not be shared with the appraiser of the subject property; and all HVE data should be treated as strictly confidential and appraiser independence should be maintained.

How Lenders Work Within New FHA Appraisal Rules

The Federal Housing Administration (FHA) implemented new appraisal rules yesterday.  Mortgagee Letter 2009-28 focuses on appraiser independence and Mortgagee Letter 2009-51 focuses on the Appraisal Update and/or Completion Report.  As AppraisalInsight reported, the rules were originally to be implemented on January 1, 2010.

Lenders will  secure a case number assignment in FHA
Connection via the Case Number Assignment Screen but will not input the
appraiser information. The Case Number Assignment Screen will no longer
capture the assignment choice, license ID and assignment date. Instead,
lenders will be required to enter all appraisal data, including the
appraiser ID, in the Appraisal Logging Screen once the completed appraisal
is received by the lender and prior to closing the loan.

Appraisers Hinder ROI on Green Retrofits

Improving the energy efficiency of one’s home is beneficial for a variety of reasons but one may not include improving the home’s value.  Most agree that energy retrofits are good for the environment and save homeowners on utility bills but a recent article by CNNMoney indicates that appraisers are not well versed in valuing these features.

This is heady stuff considering cash for caulkers may be coming soon.  Legislation, if passed, would give homeowners up to a $12,000 tax credit for energy retrofits.  According to the article, this legislation will help the environment, increase energy efficiency of homes, and put contractors back to work.

Rather than defining utility savings, the ultimate question may be how does this impact value?  Two Realtors interviewed for the article said some value is added but not much.  This is due, in part, to the fact that most appraisers are not yet adequately trained to appraise these features in homes.  It’s not clear if the Appraisal Institute would agree with the statements in the article but the trade association has been offering training on appraising green features for some time.  You can get more information on the course, which counts as AI continuing education, here.

REALTOR® Leader Appointed to RPR Advisory Board

Dick Koestner, a 32-year veteran real estate professional and past president of the Iowa Association of REALTORS® and the Greater Davenport (Iowa) Association of REALTORS®, has been named to the REALTORS® Property Resource (RPR) advisory board. RPR is set to launch in the second quarter of this year and will be a REALTOR®-owned online real estate library and archive containing data on every property in the United States.

Koestner is chairman of the Quad City Area (Iowa) REALTORS® Association and a past NAR regional vice president and past NAR Appraisal Committee chair. He is a past REALTOR® of the Year for his state and for the Davenport association, and is a past member of the Iowa Real Estate Appraiser Examining Board and a past chair of the Board’s Ethics Committee.

AMC Reaches Goal, Drives Down Turnaround Times

Coester Appraisal Group, an appraisal management company (AMC) based in Gaithersburg, MD surpassed its goal of averaging less than 4 days total turnaround on appraisals nationally for two consecutive months. According to reports the firm averaged 3 days,19 hours, 48 minutes and 47 seconds.

This is part of a larger goal to remain below the 4 day mark for a full calendar year. Frank Novak, Coester Operations Manager said “we are extremely excited about all the hard work and dedication our team put into the goal. We consider this a stepping stone in the right direction of achieving our ultimate goal of 4 total days turnaround or less for a year and ultimately continually.” Each appraisal is manually reviewed by Coester staff to ensure compliance with HVCC and USPAP.

Coester has been providing appraisal services since 1970 and also offers BPOs, AVMs, and other valuation services.

Appraisal Foundation FAQs

2010-01: ETHICS RULE – CONDUCT

Question: If I have appraised a property multiple times within the previous three years, do I have to disclose the number of appraisal services? (e.g., “I have appraised the subject property three times during the previous three years.”)

Response: Yes. Each prior service must be disclosed to the client and included in the report certification. This disclosure is similar to when an appraiser has any current or prospective interest in the subject property or the parties involved, which requires that each interest be specified. Therefore, each service must be disclosed to the client and appear in the certification. (See lines 231-241 in the 2010-11 edition of USPAP)

2010-02: ETHICS RULE – CONDUCT

Question: If I have performed a service other than appraisal practice, such as acting as a general contractor within the prior three years, do I have to describe the specific service or merely state a service was performed?
Response: You must disclose to the client the type of prior service you performed regarding the property and this must be included in the report certification. This disclosure is not limited to services provided as part of appraisal practice. Therefore, each service must be disclosed to the client and appear in the certification.

2010-03: ETHICS RULE – CONDUCT

Question: The Comment to the Conduct section of the ETHICS RULE states, in part, “If an appraiser has agreed with a client not to disclose that he or she has appraised a property, the appraiser must decline all subsequent assignments that fall within the three-year period.” Does this really mean that the appraiser could not be engaged by this same client, on this property, within the three-year period?

Response: Yes. The agreement not to disclose that he or she has appraised the property is between an appraiser and the client. It is possible that a qualified legal opinion might conclude that a confidentiality agreement between an appraiser and a client does not preclude disclosure between the same parties. However, the ASB is not qualified to make such a determination. Without such a legal opinion, the requirement precludes an appraiser from disclosing the prior service and from appraising the property again during this three-year disclosure period.

However, there is nothing that prohibits a client and an appraiser from modifying the prior agreement to allow disclosure. If the confidentiality agreement is amended, the disclosure could be made and an appraisal could be completed for the same client. It must be made clear that if a client releases an appraiser from such a confidentiality agreement, services performed within the previous three-year period must be disclosed in the certification of the subsequent report, even if the client is the same for both assignments.

2010-04: ETHICS RULE – CONDUCT

Question: I am a staff appraiser for a company and only complete appraisals for my employer’s (the company’s) internal use. Am I required to inform the company that I have previously completed an appraisal within the three-year period when the company is already aware of it?

Response: If you consistently correspond with the same person in the company when completing subsequent assignments regarding the same property, the risk of misleading that person is probably minimal. However, your prior services must still be disclosed. When you are working with the same person and they understand your professional responsibilities, it is unlikely this will be a problem.

It is also possible that the specific person you deal with from one instance to the next may change. In this case, the new contact must certainly be informed if you have performed services regarding the subject property within the last three years.
While it is not included in your question, there is also the possibility that you may have performed services regarding that property for a different client within the three-year period, or performed another type of service.

2010-05: ETHICS RULE – CONDUCT

Question: I am aware of the new disclosure requirements in the Conduct section of the ETHICS RULE for the 2010-11 edition of USPAP that requires me to disclose any services I performed regarding the subject property within the prior three years. If I have not performed any such services, am I required to make that disclosure as well?
Response: No. USPAP does not specifically require disclosure when no prior services were performed by the appraiser within the last three years.

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