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CUOMO ANNOUNCES AGREEMENT WITH FANNIE MAE, FREDDIE MAC, AND OFHEO

Click here to read the full agreement: http://www.oag.state.ny.us/press/2008/mar/mar3a_08.html

High points:

Mortgage Brokers will no longer have authority to select appraisers;

Lenders will be prohibited from using "in-house" staff appraisers and

Lenders will be prohibited from using appraisal management companies that they own or control.

Personally, I have mixed feeling on this issue. Yes, I agree that the lack of appraiser independence has been a major problem affecting our industry and I also agree that some of the points in this agreement have merit.

But I also have concerns. The common prediction is that it will spawn a new array of independent appraisal management companies competing against each other for the largest shares of lending business. Especially since most lenders prefer using AMCs vs. maintaing their own approved appraiser panels and ordering systems. AMCs have long since tried to reduce fees paid to appraisers as a way of maximizing their own profits. This will be a huge adjustment for the better appraisers throughout the industry that refused working with AMCs for this reason.

Also, this will eliminate appraiser's marketing to most local mortgage participants. Long term relationships that I have made with local clients may be lost, at least on a professional level.

Overall, I think we are on the right path but I don't think this will be final. I will be looking for new amendments over the coming months.

Posted by Benjamin Smith - Atlanta Area Appraiser on 03/03/2008 01:53 PM

Comments (13)

Post is included in group: Mortgages
Post is included in group: Realtors Needing the services of the Lending Powers
Post is included in group: Georgia Real Estate
Post is included in group: Appraisers
Post is included in group: True Mortgage Professionals

13 Comments on CUOMO ANNOUNCES AGREEMENT WITH FANNIE MAE, FREDDIE MAC, AND OFHEO

MAR

2008

If they want full independence and no worries of corruption, then they need to set up their own department... easy as that - Isn't that what the VA has done for years?

************* I just posted this:

I'm surprised no one else has been commenting on this (although our community has been a bit sleepy this week) - Please see appraisalscoop.com new articleon it today and listen to Cuomo speak.

Here are some key points that affect every one of us (appraisers):

Mortgage Brokers will be prohibited from selecting appraisers;
Lenders will be prohibited from using "in-house" staff appraisers to conduct initial appraisals and
Lenders will be prohibited from using appraisal management companies that they own or control.

Banks will be required to adhere to Code. Beginning January 1, 2009, Fannie Mae and Freddie Mac will require that lenders represent and warrant that appraisals related to mortgage loans originated on or after January 1, 2009 conform to the code or they will not be purchased.

Next year will be a new world, people...

************** here on Patrice's blog *** and then on Michael's blog **********

It's good to see we're all paying attention now :-)

Sara, thank you for replying. I do agree that one of the biggest loopholes in this agreement is that they never identified who is allowed to order the appraisals. Will it now be a responsibility of the underwriter, as if they didn't already have enough to deal with? I don't think that a rotational system similar to the VA would work, maybe for FHA/HUD but not for Fannie/Freddie. The reasoning is that it would put an end to appraiser shops with several appraisers especially if some of those appraisers are registered trainees. Also you have to consider that not all loans are sold to Fannie Mae or Freddy Mac. For large portfolio lenders, this may not have any relevance at all and it will be business as usual. For other lenders, this may only impact the wholesale and correspondent divisions.

You are correct...Next year will be a new world

MAR

2008

Benjamin, you made a point in your post that I took offense to. Yes, I have accepted a reduced fee on 1004's but all the other fees are consistent with my existing fee schedule.

" This will be a huge adjustment for the better appraisers throughout the industry that refused working with AMCs for this reason. "

I work for an AMC as well as with small brokers in my area. I do not think that I am a bad appraiser, I just need to feed my family and they had more work to offer me. I used to hate the thought but now that I am doing it, it is working well.

*They allow me the flexibility to do my job without pressure.

* There is no contact with the loan officer

*There is no "estimate of value" so I don't have to try to shoot for anything

It allows me to be the appraiser I am proud to be, a good one.

Patrice

Patrice, I am sorry that you took offense to that statement. That was not my intention. I wrote that statement based on the fees presented in my local area. It is my understanding that in some areas the fees are reasonable or only slightly reduced which will still attract good appraisers. In my area, the fees presented are typically 50% of normal fees across the board. Personally, I think it would be difficult to make a decent living with the costs of running a business at those fees. I was making more than that much as a registered trainee several years ago working for my mentor, and he provided all the software and data.

Benjamin,

Thank you, apology accepted. I agree that if it were 50% of what we were accustomed to, it would not be possible to make a living...I just want it to be clear that there are some good appraisers who are just trying to make ends meet...thank you

APR

2008

Benjamin,

Good post. It will be interesting to see the final outcome upon completion of the 45-day write in period. I do not expect the language to change too much in the favor of appraisers as any change to the language regarding who can and cannot order an appraisal would more or less destroy the spirit of the agreement. It is sad that appraisers who have spent many years cultivating and buidling a client base will no longer be able to work directly with customers. I own an appraisal firm in Minneapolis, MN and after assessing the current environment, I believe there will be ia void in the small-to-mid-sized local and/or regional lender space for a middle person such as an appraisal management company or some type of appraisal clearinghouse. Consequently, I have decided to jump in and test the waters and have spent much time conducting research with appraisers and lenders across the country. Where there is turmoil, opportunity exists for the person who is willing to pound the pavement and dedicate the time and energy to service the needs of this space. My model, while not offering appraisers 100 percent of the fee, is a lot better than most of the AMC's I presently work with.

David,

Thank you for your comment. I have already seen similar operations starting up from all over the country. Some are offering cooperatives while others are just trying to establish themselves as an independent AMC. It may be somewhat premature given the IVPI proposal. I am curious to see how that works out. Good luck with your venture and if you need someone in the Atlanta area, let me know. I may not be as flexible on fees as you are looking for, but I may be able to give you a few names.

APR

2008

Benjamin,

Thank you for your response. I agree, my decision to move to a management style company may be premature but if the intent is to get back to a true independent appraisal, then any changes to the current language of the Code would be contrary to the spirit of the agreement and move it away from its primary objective - true independent appraisals without any opportunity for undo influence or pressure to inflate value. I am also a little sceptical about the IVPI proposal - my main questions: Who is going to pay to set up this structure? Who is going to manage its ongoing operation? Who is going to pay for ongoing operations? No matter which way you slice and dice this proposal, the basis premise in business is the money has to come from somewhere.

On a side note - I am interested in establishing coverage for Georgia and would like to take you up on your offer to provide a few names, if possible. I appreciate your assistance.

Stay in touch.

MAY

2008

Benjamin,

Its very interesting to hear about this new agreement. I apologize, but I am not familiary with Cuomo... is this some type of legal appraisal entity. I have a few friends here in Orlando that are appraisers. Thanks for the post.

Benjamin,

Hey Chad,

This is pretty old news, but to answer your question, Andrew Cuomo is the NY attorney general. He lead the suit against WAMU and E-appraisit (Appraisal Management Company). As a result of his investigation for the suit his next target was going to be the GSEs. Part of this agreement includes the end of the investigation by Cuomo in exchange for their compliance.

It is apparent that when forming this agreement they did not consider some of the consequences. I am sure there are several more recent posts about this since they allowed a comment period which just ended on April 30th. The response has been overwhelming from all sides of the industry.

I attended a conference with with Dave Biggers, CEO of A LA MODE software company. He put together a huge amount of letters, over 130,000 in all, and hand delivered them to the GSEs. At the conference, he basically felt pretty confident that the agreement was dead in the water, at least in its current form.

We will just have to wait and see what happens. I do know that several lenders have already started taking steps to prepare for this, whether changing the ordering process or looking into AMCs as an alternative.

MAY

2008

As if the AMC fee cuts aren't enough, there now seems to be a tend for the AMC's to contract out much of the processing where the appraiser is expected to pay several dollars per report to utilize the system. Where's it going to end - the pie only has so many pieces!

Richard,

I assume you are referring to Landsafe now utilizing Appraisalport. One of my best clients uses Appraisalport and the fee is not that much, like $12, and the additional fee is built into my invoice. My personal view is that I will NOT reduce my fee for any AMC just to help them increase their profits nor will I just have to eat the additional fees. If they want to increase profits, they can charge more to their client.

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