Wednesday, November 29, 2023 | The Latest Buzz for the Appraisal Industry

“P”s in a Pod

I am with Suzy Orman on this… people come first. In our world we have a lot of Ps–People, Policy, Practice and Product. I think we just need to realign our priorities. As an industry we have invested millions in automated scoring systems of the appraisal report. I personally do not believe a bot can score an appraisal report very well. That would be akin to a computer reading “Fifty Shades of Grey” and comparing it with “Lolita”. Which is the better novel? Ultimately could it ever be done? Yes, but not with the appraisal report in its current form.

The biggest complaint coming from the appraisal community is an ever -expanding scope of work. I read the blogs regularly. My analysis is this– the current set of rules was created to stop appraisers from certain bad behaviors. The problem of course is that the bad actors still behave badly and honest, competent appraisers are punished. The end result is that only a fraction of the activities of the appraiser are left to focus on important processes like verification of the transactions and data analysis.

So what is the solution? It is a very simple one. Fannie Mae and Freddie Mac should not permit known bad actors to submit appraisals to UCDP. This corrupted data becomes a part of the peer data against which your appraisal report will be scored. I have a problem with that. The GSEs have fraud departments and repurchase departments. They should certainly be able to identify who are the repeat offenders. I don’t know how many appraisers fall into this category. Let’s just say it is 1% of approximately 50,000 appraisers who have submitted appraisals to UCDP on Fannie Mae’s behalf. (This number comes for the FHFA OIG Report). Right now Fannie Mae has approximately 12 appraisers on their AQM list. There are no hard stops for reports from these known appraisers from being submitted to UCDP.

Would the 49,500 remaining appraisers be willing to throw 500 of their brethren under the bus? Heck yes, if the process was fair. In the present state good appraisers are suffering and that indeed clearly is not fair. It is completely insane, as opposed to just a little bit crazy, to be concerned about hurting anyone’s feelings. How many trillions must be lost before we take a rational and simple approach to the problem. Remove the bad actors. It’s simple.

I know what the GSEs response will be “our lenders are responsible for the appraiser selection process”. Yes they are. But most of us recognize that mortgage brokers are still ordering appraisals and it is also likely the poor quality is being generated through that channel. Lenders buying loans originated through a broker channel cannot ensure that AIR has been respected. The GSEs would appear to have few controls, if any, in place to ensure that their AIR policies are being enforced.

Appraiser selection is the single most important part of the appraisal process. And it is the simplest part of the appraisal process. This year you will see more and more lenders focused on the due diligence process. To learn more about what regulations and guidelines drive this process please read the white paper Fee Panel Management. While these rules are in place for lenders and their third parties, a read of this paper will help appraisers understand the drivers of these new due diligence standards.

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Mark Buhler

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