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ARE MORTGAGE COMPANIES ENGAGING IN STOVE PIPING? ARE LOAN OFFICERS NOT PERMITTED TO TALK TO APPRAISERS?? MORE FALLOUT FROM THE MORTGAGE MESS??

This post inspired by Janet Guilbault's excellent and informative description of the changing world of mortgage underwriting, Time Wasters and Heart Breakers: The End of Loans That Blow Up?

A comment on Janet's post by Melina Tomson got my attention. Melina's comment is very timely for me these days. I have a contract in underwriting but we have not yet received the appraisal. It's now 3 days past the appraisal contingency. Thanks Wells Fargo.

The excuseswe're getting from the loan officer with Wells Fargo is that the appraisal has taken more time than most because of the acreage. Because of the acreage?? The property is 3 stinkin' acres in horse country. I didn't have any trouble finding comps when we wrote the contract and the listing agent didn't have any trouble finding comps when he listed the property.

IS THERE A STOVEPIPE SYNDROME WITH MORTGAGE COMPANIES THESE DAYS?? The loan officer with Wells Fargo says she's not permitted to communicate directly with the appraiser. GEEZ!!!!

PLENTY OF TIME FOR EVERYTHING. The appraiser visited the property last Thursday at 8:00 a.m. I was there to meet the termite inspector and the appraiser was there along with the listing agent to give access and comps. Since the appraiser didn't get to the property until the 22nd, I'm suspecting that the appraisal was ordered late by the loan officer with Wells Fargo. Of course, we'll never know.

The deadline for the appraisal contingency is clearly in the contract for 10 days. The loan officer with Wells Fargo said that it was ordered the day she got the contract which was on the 16th. With so few sales out here these days, one would think that there shouldn't be any delays with an appraisal. Why did the appraiser not get to the property until the 22nd???

All I can say at this time is THANK GOODNESS THE BUYER SELECTED THE LENDER BASED ON THE RECOMMENDATION OF A FRIEND. The buyer does have a good rate, but what's the use of a good rate when the appraisal comes in late and past the appraisal contingency deadline?? If the appraisal is low, my buyer could be faced with paying $Thousands of Dollars over appraisal. For many buyers, this could easily mean a loss of financing. Paying cash above appraisal doesn't give any buyer a feeling that the property they are buying has good value. How much cash we're talking about??? We don't yet know, if or how much. However, my experience over the years is that a delay in the appraisal has almost always resulted in a low appraisal. The appraiser can't find comps to justify the price. We have a contract for about 90% of list and my buyer is very comfortable with the price. In fact, I fully expected an appraisal above contract.

Needless to say, this delay will cost this loan officer with Wells Fargo future business. It will cost her lots of future business. The loan officer with Wells Fargo admitted to the buyer that she didn't see the appraisal contingency in the contract, which I called her about before the deadline and she ignored my call. But, then, why should a loan officer pay any attention to a mere buyer's agent???

When the buyer contacted the loan officer about the deadline, the loan officer's comments were something like "I can't be expected to read every word of a contract:." True, but it would seem that the appraisal contingency would be one thing a loan officer would read. Dates are critical in a Time Is Of The Essence contract, which ours are. It would seem that a loan officer would at least look at the parts of a contract that are affected by financing. Especially if these dates were pointed out by the buyer's agent. But then, why should a loan officer pay any attention to a mere buyer's agent???

THE STOVE PIPE SYNDROME. Are we entering a time when the appraisers are going to be so isolated that the appraiser or the loan officer can ignore dates in a contract??? Is this the beginning of a period where no one can communicate with anyone else because of the undue influence on appraisers by loan officers in the past??? Are present and future home buyers and sellers going to have to pay for the problems of the past with poor service today and into the future????

IS THIS ANOTHER RESULT OF THE MORTGAGE MESS?? Just how isolated are appraisers these days??? I realize that some appraisers were involved in bad loans during the past few years, but I've never considered the appraisal to be the real culprit of the mortgage mess. They, appraisers, were not nearly as involved in profiteering or manipulating mortgage loans to the extent of the Wall Street gangs and the regulators and overseers that enabled them. Listing agents have always been able to communicate with appraisers. Are they now going to be ignored because the appraiser is in one stovepipe and the listing agent is in another??

WHAT ABOUT TRANSPARENCY?? If loan officers with Wells Fargo are not permitted to communicate with appraisers, how will the mortgage company or the buyer or seller ever be able to have any confidence in the loan processing or underwriting process??

I would greatly appreciate any comments reflecting your experience in these matters of:

communication between listing agents and appraisers
communication between loan officers and appraisers.

Or, is the experience above simply related to one loan officer with Wells Fargo?

mortgage mess

"Honey, are we going to be able to close on the contract on our home?"

"I don't know Dear, the appraisal is overdue and there's a chance the buyer may not be able to close".

Courtesy, Lenn Halrey, Broker, Homefinders.com, 800-711-7988, E-Mail.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 01/28/2009 06:49 AM

Comments (65)

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Originally posted at: MD, VA Foreclosures, First Time Buyers Grants, CDA Loans MD, Rehab Loans MD & VA: ARE MORTGAGE COMPANIES ENGAGING IN STOVE PIPING? ARE LOAN OFFICERS NOT PERMITTED TO TALK TO APPRAISERS?? MORE FALLOUT FROM THE MORTGAGE MESS??

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65 Comments on ARE MORTGAGE COMPANIES ENGAGING IN STOVE PIPING? ARE LOAN OFFICERS NOT PERMITTED TO TALK TO APPRAISERS?? MORE FALLOUT FROM THE MORTGAGE MESS??

JAN

Lenn, low rates caused a min refi boomlet in late December and early January. In addition to being a real estate broker, my husband and I run an appraisal shop and we were swamped. Typically we turn appraisals around in 2 to 3 days but because of the volume coming in, we were running 5 to 7 days and that was with us working 14 plus hours a day as hard as we could. Out of all the orders we've done in January only 2 were purchases and we do give prefrence to those because we are aware of the time deadlines, though the mortgage brokre often doesn't realize it.

The HVCC slated to begin in May is already starting to affect many lenders and will completely isolate the appraiser if it actually comes to place. So the answer is yes, your contact/lender will no longer be able to communicate with the appraiser. Sucks doesn't it! Because of the lenders who pressured appraisers in the past, all honest lenders, appraisers and agent will suffer.

I have seen lenders who have no idea about getting appraisals in the mountains and lenders who want to wait until after the due diligence to get an appraisal. It is in a state of flux. We are guiding lenders in some cases now too

Lenn,

If they are not able, or willing, to meet the critical dates in a contract, than that should strike fear in the hearts of all agents and brokerages.

Rich

I have heard that too, from lenders with large companies. They have to go down a list and the next in line. Some appraisers are out of area and they don't understand the dividing lines for school districts, elementary. So they draw their so many mile radius if they can't find comps in a neighborhood, which is sometimes hard to do only going back 3 months.

That is probably a Well Fargo Bank rule that their employee can't communicate with the appraiser. It is probably ordered from a central source after the loan officer puts it in. Then it sits there for a few days. Who knows. I had one bank that the appraiser had to wait 7 days for a FHA number from the bank. They ordered the appraisal but no FHA number to get it fixed.

Michelle. Thank you so much for your helpful comment. This just sucks. Poor service for home buyers and sellers from now on because of past abuses by a very, very few operators.

Charlie. Thanks. I've never had these problems in the past. I've sold only new construction for several years. Now that I'm writing resale contracts, this will have to be a matter of focus.

Richard. Indeed. Of course, there is no recourse when a lender defaults.

Missy. Comps were available for this property. I found them. The listing agent found them. With fewer closed sales it will be a problem, but I don't see it in this case.

I was talking to a favorite lender last week and we were discussing the new way the lenders are going to have to chose an appraiser. Something like, a pool of appraisers will exist and instead of calling the local man/woman the lender knows to be good, efficient, truthful honest and all other qualities, the new system will be they are assigned an appraiser from the pool. My lender is distraught I was appalled and the whole thing looks like a bad train wreck about to happen.

IMHO, another example of government telling an industry how to do its job. And what a good job they are doing with TARP.

Russ. That doesn't portend well for the future does it??

With an extremely well qualified home buyer, an extremely desireable property, you'd think this would be routine, wouldn't you.

Unfortunately, we need a loan officer that will communicate. If the appraiser wasn't going to meet the deadline in the contract, we could have amended the dates. We were assured that it was "fine".

Mmmmm.

Gail. You're preaching to the choir. However, the "pool" for appraisers has always worked just fine with VA appraisals. They have 10 days and in many, many years I've never had one be late. If Wells Fargo has gone to a "pool" and they are STOVEPIPED, then the loan officer should have warned us about that early on when the buyer contacted her about the loan.

I never put less than 14 days for an appraisal contingency these days and if I can get away with it 21. I've always found it interesting that every lender says a satisfactory appraisal is a requirement for financing and agents put two different dates in the financing and appraisal contingencies. You can't successfully remove the financing contingency without the appraisal so why would an agent say 10 days for financing and 14 for appraisal as an example?

I have found that the appraisers and the loan officers are now at arms distance from each other.

Ohio implemented a predatory lending law that changed the communication that can (or cannot) take place with appraisers, so as to not influence them. Generally, a lender doesn't order the appraisal until the inspection phase contingencies have been removed to avoid the buyer paying for an appraisal if later the contract falls apart due to the inspection.

When I fax or email the contract to the lender, I always include a message of the actual dates the lender must meet because I know they might miss something. I also add a term to the Contract that the home must be appraised at or above the purchase price or the contract is null & void OR the parties can renegotiate the purchase price.

Lenn--Do you have stipulations in your contract asking for a Final Approval? Have you seen LO's starting to send out final underwriting approvals to meet the dates in the purchase agreement but they haven't really received all the documentation from the underwriter? I have seen more than a few of these...Caught the LO when they tell the closer that the package won't be sent without additional documentation. Wonder if this is a nationwide trend? Meeting dates on a contract AND understanding what the contract is asking for is critical...If they ever want my business again, anyway.

Cinda. Sounds like a good plan, but when you want a property off market, we negotiated the time. I know 21 days is recommended but when the loan officer says "no problem" getting the appraisal, stuff happens.

Elaine. That makes no sense. Just because of the history of the mortgage mess, we suddenly have our brains removed???? This is a disaster just waiting to get worse.

Every time there is a disaster, some (*%%$&( government entity comes along to make it worse with their "cure".

Teri. I plan to survey the agents and brokers in my network about this matter in the next few days.

You are so right. This would be a disaster waiting to get worse.

Lenn - Lack of transparecy is a real scary trend. Recent story. As a listing agent I kind of communicate with the appraiser. All this communication was about re-scheduling her arrival to my clients' property due to bad weather, or any other excuses. After appraiser finally got there, all communications stopped. It's been about two weeks ago - no report yet! As a listing agent I have no chance to even get a sound response from LO about the results despite all my efforts and reputation of being a control freak.

When I represent the buyers, at least I can ask the buyers to call the appraiser directly. After all, they pay for it! They have right to receive a report.

Looks like the RE agents should document their right to coordinate the transaction. We are not prohibited by law from any communications with LOs, appraisers, title agents, etc, are we?

"The loan officer with Wells Fargo says she's not permitted to communicate directly with the appraiser."

I've heard hints of that being a regulatory feature mandated going forward. Imagine that, the thought of not being able to communicate with an important other entity in the transaction? We'll see how that goes. I haven't bore witness to it just yet, though I do fear it happening. Unfortunately, the regulations (for the most part) are already in place, they just weren't enforced... so we add new regulations to the mix. And that will always turn out a mess in the long run.

Svetlana. Indeed. "Lack of transparancy" is counter to everything we need in this industry. If there is no communication between the loan officer and the appraiser, how will we ever know if the appraisal pool is tainted with some really bad players.

Wasn't it a "lack of transparency" with the hedge funds, off balance sheet entities, etc. that caused the investment bankers to be able to do what they did to create the mortgage mess?

Jason. This post has been very revealing to me. We learn as we do.

Lenn: Most of your comments here are about the appraisal issue. Please know that this will continue to be at the heart of many discussions here in the Rain as this new era unfolds. However, I would like to comment about the Wells loan officer who will unfortunately never get a referral from Lenn again.

Reading a contract carefully and marking contingency deadlines on the timeline of the loan is a big deal. Your loan officer should have done this.

But this much is true: very soon you will not have the loan officer to blame for this. Either the bank will be in charge of the appraisal, or the appraisal will be asked for up front. That is the direction of our business.

We as loan officers can only communicate with you to the best of our ability how long that appraisal will take. And our ability there may be very limited when it comes to knowing when the bank"s appraisal will arrive (as you are painfully aware)

It is also clear that the loan officer will soon not have any contact with the appraiser.

Honestly I think the smartest thing would be for sellers to pay for the appraisal before the house is even listed. Then have the buyer re-imburse the seller at the closing.

Personally, I welcome this because it takes the burden and liablity of the appraisal off of our shoulders.

And to all Realtors I would suggest this: ask for a copy of the appraisal order. That way you never have to wonder if it was ordered on time, and it will be a clear signal to the LO that you expect the deadline to be met.

I found most real estate agents very "loose" about these deadlines, although obviously this is a dis-service to your sellers to have this attitude.

Janet. Thanks. I credit ActiveRain for this forum to keep agents and loan officers on the same page with the ever changing world we are dealing with for contracts/loans, etc.

Appraisal before listings???? Interesting idea. Might end the overpriced listings too.

If agents are "loose" about deadlines, we all doomed. How can an agent be "loose" about deadlines? We're the ones who write the contract. We are the first to know the dates. We write the dates, then negotiate the dates if necessary but we are always knowledgeable about dates.

I have known for years ow hard it is to get a "written loan commitment" from many loan officers, as is provided in the Maryland contract, but not in the Virginia contract. However, we do have a date for removal of the financing contingency. If we are not on top of these dates and we get notice that the seller is voiding the contract, I would think an agent would pay attention.

I have already warned my buyer that she will probably not get final loan approval until the morning of settlement, to which she is quite kerschmunkled, but accepts. We'll be three days between the date for the removal of the financing contingency and close, but I can deal with that.

From this experience, I will surely be writing in longer appraisal periods in offers, but we still have to negotiate these dates between buyer and seller. If a seller requires a shorter appraisal time than I believe can be met, perhaps we just will not buy that property.

Very interesting conversation.

Missing critical dates could be a disaster! We too have recently had situations where the LO's didn't care whether things got done in time or didn't pay close enough attention to the deadlines (this after us calling numerous times in advance to make sure everything was ok). These were appraisal issues as well.

What really was upsetting is that it was no big deal to the LO. Who cares attitude - you can push dates back etc. And this is even happening with them thinking we can just keep moving the closing dates - because a day before the closing now the suddenly they can't get docs together, it's still held up in underwriting etc. Shaking head.So they want the buyers to live in the Uhaul for a week or two before it gets sorted out?

One of the LO's actually just shrugged and said "oh, well they can just go find another house."

This has been occurring more and more, and even with lender that we know and have worked with. We are always calling lenders, etc. several times before the deadlines etc. making sure things are where they need to be. Now it takes 3x as much work as it used to and we still can't be sure things are on schedule, even when we are told everything is taken care of.

One more thought - we have in the past requested sellers to get an appraisal just before listing the home. Most are very reluctant to do that...

Lenn, you must have hit a nerve with this post :) ~Rita

Thanks Kenna. I'm sure I hit a nerve but the credit goes to Janet Guibault who wrote about the changes in underwriting, etc. that we're all going to have to deal with.

This exchange is very good for agents.

Cant read every word of the contract INDEED! Give me a break. As for not being able to talk to Appraisers - I have had this issue last fall. It seems every company, Lenders and Brokerages alike dont want anyone calling the APPRAISER. But its OK; if they call us. Go figure?

@Janet "Honestly I think the smartest thing would be for sellers to pay for the appraisal before the house is even listed. Then have the buyer re-imburse the seller at the closing."

Sorry, Janet, that won't work either. As written currently the only one who can order or PAY the appraiser for the appraisal in the future will be the final/secondary market lender. Nothing local, no pay at the door....this is supposed to be to remove the confusion as to who is the "client" of the appraiser.

Lenn, I've not had my lenders say they can't speak to the appraisers...they have taken longer because of the refi boom, however :( Took a VA appraiser 8 days to get to a home after it was ordered. He said he is swamped with refi's... I'm going to start allowing more time for my financing contingencies just in case!

Wells fargo is currently on 18 business day(yes you read that correct) turn time

I do bisness w them as well as many other lenders(im a broker) and i have to avoiude sending loans to them right now until they can get their act together

i know that due to low rates the submissions have skyrocketed but with other lenders at 5-7 day turn time how are they at 18?

LO should have been upfront though.............honestly just sounds like he was making up excuses not to tell you the real reason-----trun time-----im sure if you heard how bad turn time was he'd lose the deal

my opinion---use broker.........we have ability to shop loans around...not just for rate and product(and today all lenders have same rates and products for the most part) but also for turn time

DOMINICK GACCINO

ABC123 Mortgage Corp

914-391-2388

Lenn,

More of this is coming if one of the worst things to come from the mortgage mess really sticks later this year. Brokers will not be able to talk with appraisers or even order appraisals. Lenders will have to order from appraisal management firms. This is going to take large cuts from the appaisers pockets as most management companies pay half of the fee they receive to the appraiser who actually does the work. It is going to mean random appraisers will be assigned on loans much later in the transaction. While I want to say everyone is the business is a top drawer professional, some are not and we have all seen what a hack can do to a transaction no matter what they are appraiser, LO, agent, or lawyer. We will have no way of knowing who might be assigned to do the appraisal. Consumers will lose further in that things that used to be free like a value check will be no more. No more, "hey this deal is a little tight and they are some really nice people trying to buy their first home, could we cut $50 off to save them a few bucks?" No we'll got some hourly call center person with no real commitment or incentive who is going to handle this important part of the transaction.

I see the reason for a change like this, heck I'm all for changes that reduce or eliminate the opportunity for fraud. It has no place in our business. But this is not helping consumers. There has to be a way that the current system could be improved. Heck let's start with taking the anticipated value off the appraisal order forms. Let the appraiser come up with their own number, not feel like they need to find a specific number we gave them.

Once this is fully put in place there are going to be a whole lot of everyone unhappy with how transactions go.

Good luck getting your deal done!

Jon

As Vice President of Mortgage Professionals LLC in Charleston, SC I can tell you this is by far one of the most ridiculous things to hit our industry but unfortunatly it looks like it will pass in MAY and many lenders are already taking the steps to conform to the new policy..Wells Fargo and Fifth Third Bank have already made the change.They are telling us to let our appraisers know they should sign up with their preferred network and then there is a chance that they might be able to do the appraisal....Well needless to say with 15 day underwriting turntimes and horrible service over the past month, I have made the decision to use other lenders. My suggestion is to let your buyers know these circumstances, Again just another good reason to work with a broker instead of a bank with its own rules. We have the flexibility to find the right lender for the right situation....I am starting to shy away from the big banks and using some of the smaller lenders...better service, quicker turntimes, and employees that seem to actually care about their job..I had a file today in underwriting with Wells Fargo and could not get it cleared because both underwriters that were working on the file were out sick...common sense would say, Hey, I should reassign this to somebody that is actually here to keep our turntimes on key, but no..the underwriting manager has to wait for me to call and explain this is what needs to be done so my client does not lose his rate lock....its just unbelievable, things unfortunatley are not going to get better until these banks and lenders alike start taking some responsibility..Maybe since they are the ones being bailed out and are so shorthanded, they could hire some people that lost their jobs recently..I know what a Crazy idea, Right??

Lenn, I wrote you a book and then deleted it all. I'm so mad about issues like this and the heavy hand that is being placed on mortgage brokers.

Here's my summation:
1. This will cost consumers a TON in lost rate locks on refinances, late fees paid to sellers for not closing on time (I've got two REO contracts right now that state my buyer has to pay $100 per DAY for not closing on a certain date), and the loss of a $425 non-refundable appraisal fee when they find out their home doesn't appraise for enough to complete the refinance.

2. There will ALWAYS be appraisal fraud. The crooks always find a way to make it happen.

3. Thousands of hard working appraisers across the country will now have to give up a portion of their paycheck to work under whatever clearinghouse agency will be ordering the appraisals.

4. Bank and credit union loan officers are EXEMPT from state lending licensing laws and are typically spoon fed bank business. There are some great loan originators working for banks (I know because I used to work at a bank!) but they do NOT have the same small business owner motivation that independent brokers have.

5. Good loan originators read EVERY line of EVERY document in the loan file - that was a ridiculous reply, although you knew that.

Whew! I'd better stop before I say something I might regret having in print...

An excellent post. What is going to be really bad is the fact when they change the rules and make everybody use appraisal management companies. Do we really need all of these people in the loop.

JAN

Interesting, Lenn, how heated this topic always is. The 'blame game' is still alive and well. Where IS the accountability factor with lenders? And now that they have yet another excuse for delays (the poor appraiser), how and when are the LO'sof the world EVER going to be accountable for ANYTHING?

Its going to get worse as time goes on with this. You will see appraisers search MLS for comps but if its a tough deal for them then no more county records searches to make sure of the values.

One more reason for buyers agents to do their research before submitting an offer. (We can surely see if there are good recent comparable sales to justify a purchase price before an appraisal is ordered.)

I think we're also going to have to really stay on top of mortgage lenders in regards to contingency dates on our contracts. Perhaps a cover letter (in large font) outlining specific dates on the contracts submitted...it can't hurt.

Things are so whacky Lenn that I wouldn't be suprised if banks start using Zillow or one of the other online valuation companies for their determination of value..

As an appraiser, let me tell you that the appraiser you saw may well have been the Low-Price special from waaaay out of town.

Appraisers are being "selected" by AMCs (Appraisal Management Companies). These folks make their living by taking 30-50% of the appraiser's fee for the service of picking an appraiser. Who do they select? Cheapest banana in the bunch, no matter that he's been in the business for 3 months and has his office 2 hours away.

Oh, and since he's cheap, he gets lots of work.... one reason for the sloooow response. Another reason might be no access to the local MLS system.

Lenn, I always look forward to your blogs to see how you've bashed the mortgage industry. As I said in an earlier response, the whole industry is responsible for this bubble bursting and over-correction. I do agree with you on this appraisal issue though. I'm with the 5th largest bank in the US and we recently switched to a centralized appraisal ordering firm an it's been a miserable failure. This firm increased the appraisal cost from $350 to $435 because they we supposedly going to underwrite the appraisal which we found to be a lie. They aren't underwriting them and they are forcing the appraisers to cut their fee down to $185 to be on their approved list. What we're finding is that the appraisers don't want to do the appraisals for that fee and are declining the request. The loan officers aren't being told that the appraiser declined the request for about 10 days which delays the process drastically. The few appraisers that are willing to accept the requests are appraisers that no one has ever heard of or part-timers .One of them had numerous Bible quotes and ads for selling her puppies. I'm all for religion but it doesn'tneed to be on their work website. As far as not being able to talk to or know who the appraiser is????? that's ASININE!!! The loan officer needs to be involved as does the agent. Who do they think organizes the whole transaction?? I don't think the CEO's or politicians have any idea how our industry works or what's involved to close a transaction. Our experience was so bad that even our upper management saw the affects and went back to our original way of ordering appraisals.

I always offer the agents the ability to speak directly with the appraiser if they so desire. As a loan officer I have no reason for them not to speak. I want all involved to know that they are getting true values and if the agents can shed some light on something that the appraiser didn't know he is grateful as well. All LO's should have multiple appraiser to work with so if one has a large work load which would cause a delay they can contact another to expedite the process. The above mentioned LO must be very green. I always read the entire contract then contact the listing agent to introduce myself and give them my contact information as well as ask them if there is anything in particular that I need to be aware of so as to avoid any delays or miscommunications.

Bottom line, find a new LO. I'm sure you already know that but there are good ones out there that care about your transaction - the one above gives us a bad rap.

Jennifer Riley, Supreme Lending, Dallas

Randy, I can't believe your line - "The 'blame game' is still alive and well. Where IS the accountability factor with lenders? And now that they have yet another excuse for delays (the poor appraiser), how and when are the LO'sof the world EVER going to be accountable for ANYTHING?" DUDE! Aren't we all professionals and friends here on the RAIN? You do realize that you could replace the word lender and LO in that sentence for real estate agent and I'd get thousands of consumers to agree with me! Let's keep it real - SOME loan originators will never bee accountable, just like SOME Realtors will never be accountable.

David - your post terrifies me but your "real world" experience is appreciated. We have not yet been hit with the changes but I expect it to come down any day. Looks like I need to fire off a warning to my local agents.

Lenn,

I feel your pain, as I have been in the mortgage industry since 1992 and now an agent since 2007. I will say that the Mortgage company I work for has gone to an automated sytem for ordering appraisals as well, and I as a Loan Officer, cannot order the appraisal but I can talk to the appraiser once one has been randomly selected....I also will give the Agent the number of the appraiser once they have been selected..I agree with some of the above comments that the service for clients will suffer due to these new regulations. It is a visous circle that of no fault to most loan officers, appraisers, agents, and clients, the bad ones have made it bad for us all!! The only thing to do now is find a Loan Officer and company that has found a way to work within the circle.

Macy Babb Amerisave Mortgage Re/Max 400 North Georgia

Wow Lenn, the only time that this has happened to me in the past indeed with Wells Fargo was that the buyer did not pay the app fee for the appraisal so it was ordered when the buyer paid. Made sense to me & I contacted the buyer to tell her that she delayed her own closing. When can't the listing agent talk to the appraiser? In fact I send them comps NO MATTER WHAT THEY SAY. Half the time when I check they don't use the current comps right in the same neighborhood. Go figure. Out of area appraiser, not using subdivision comps. Like you said, you didn't have a problem finding a price why should they? Sounds like Wells Fargo is paranoid with every loan they get! What's the business maturity level of the loan officer?

Lyn, I'm no supporter of Wells Fargo but in fairness to them the appraisal issue is a Fannie and Freddie REGULATION. Since they control almost all the loans made in this country we're all going to have to play along.

So far it appears that FHA and VA loans are not effected. That's because the appraisal issue relates to a legal settlement between Fannie, Freddie and the State of New York. Blame the NY Attorney General for this one!

The regulation was set to take effect Jan 1st, 2009 but was postponed to May 1st. Wells and other large lenders had to plan for the Jan 1st date so that's probably why they have switched over while brokers have not - LONG LIVE MORTGAGE BROKERS! We're fast, nimble, and effective.

The crime the Wells loan officer committed against Lenn and her clients was in not telling the truth, and not understanding her own company's systems. DOOM on her.

Have a great day!

As a professional loan officer for over 12 years, most realtors don't fully understand the magnitude of what we do. We are the middle man. We have to organize and communicate with about 20 people to get just one loan to the closing table. If we run into just one party that can't hold up to their part of the transaction then in many cases this can delay the loan. Sometimes it is at the fault of the inexperience LO. But mostly now days it is the lenders or the schedule of the appraisers. Guidelines are changing faster than we can keep up with. FOR SOME REASON THE LO ALWAYS IS THE BAD GUY. Please remember we are truly trying to help everyone!! Loan Officers ordering appraisals will be a thing of the past, thanks to all the Fraud and Con Artist in the industry. We have to TRUST this will make things better for everyone!! We can't fight it!! We can only try to embrace the changes!!

VA transactions have been doing this for many years. All the appraisals have to be ordered through the lender. I have always had good luck with this process. Don't get me wrong, I truly respect my business relationships and loyalty that I have with my appraisers. But this is no longer about me. Its about finding better solutions for the INDUSTRY in whole to make it better for all us in Real Estate Profession!!

Donna

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.

One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. The down side of such a process is that lenders will have little to no communication with the appraiser, which means there won't be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house. The new code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations.

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.

Now that I have listed the facts, I must say I am disappointed to read the comments by Realtors that point the finger of all our problems at lenders. The reality is, as Donna states above, guidelines are changing EVERY DAY. Processors and underwriters are working mandatory overtime and take files home every night and every weekend. Title companies and appraisers are backed up. Closing departments are overwhelmed.

Those lenders who have survived that past two years have had to cut back staffing in response to the lack of volume. The refinance boom of the past 30-45 days has completely inundated every aspect of the system.

The only solution is that we must all be patient and work together, as a team. Blaming and arguing with each other solves nothing. All of our jobs are harder as a result of the changes being made. We all need to understand this and do our due diligence to keep everyone involved in the loop. Explain to your buyers and sellers what is going on and why time frames need to be extended (contingency dates, lock periods, etc.). If you have trouble doing this, refer them to some of my recent blogs.

Real life update from a broker buddy of mine in Calornia who has a loan with Wells Fargo Wholesale Dept. (Lenn's post was about Wells Fargo Retail).

The appraisal report took 15 days (normal in my market is 2-3 days), was $100,000 SHORT of what my buddy expected, and cost $50 more than anticipated.

I'm more concerned with the 15 days than I am the actual valuation. This is going to make it very important for ALL of us to properly educate our clients. My suggestion is to have a copy of the Home Valuation Cod of Conduct (easily found via Google) to give to your clients as PROOF of what you are telling them.

How am I going to phrase it? "Mr. and Mrs. Client, the entire industry has a new law to comply with and frankly the systems and structure are not yet in place to handle compliance. There is the distinct possiblility that escrow may be delayed due to the uncertainty around the appraisal timing."

I said "may" because lenders should still be able to close a purcahse transaction if appraisals really take 15 days. What concerns me is that this just started - who knows how long these time frames will stretch.

Karl, nice post. We're all partners and we'll get throw this. It's all about client expectations and we'll be fine if we are clear and honest with them.

I have heard that appraisers are swamped but not reading the contract or knowing the contingency dates is inexcuseable behaviour by the LO. It seems like we are headed down a path were LO's and appraisers cannot communicate and I do believe this is fallout from the mortgage mess. Good luck and I hope this deal closes successfully.

JAN

Sonya. I fear that you are correct about what is likely to happen. I don't look forward to it.

Michael. Thanks. This experience has been an eye-opener for me. The feedback I've gotten from friends in the industry about Wells Fargo is enough to cause me to stay away from me.

That said, the conduct of the loan office is my biggest gripe because she could have helped early on when she got the contract. Or, when the buyer made loan application, she could have simply have warned us that 10 days for an appraisal was not likely. We would have been prepared and could have handled it.

Instead, she went into hiding, didn't communicate by phone or e-mail about the appraisal and left us all hanging. If the appraisal had come in low, my buyer would have been in a position to have to pay Thousands of Dollars over appraisal to complete the sale.

Karl. You wrote:

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.

Fine. I'll be prepared. However, if the appraiser is still going to get access to the property, a copy of the contract and meet the listing agent at the property and received comps, it appears that the only changes will affect the loan officers and appraisers.

This entire STOVEPIPING concept is not going to work. There will be no transparency and no accountibility on the part of appraisers, the clearinghouses, etc.

GEEZ. How much worse can they make things?????

Michael M.

You wrote: Lyn, I'm no supporter of Wells Fargo but in fairness to them the appraisal issue is a Fannie and Freddie REGULATION. Since they control almost all the loans made in this country we're all going to have to play along.

There is no regulation in effect today that prevents a loan officer from advising a borrower that they cannot provide an appraisal report in 10 days.

Further, there is no regulation in effect today that prevents a loan officer from returning phone calls or e-mails.

Further, there is no regulation in effect today that prevents a loan officer from reading a contract of sale and an appraisal contingency.

Len,

Well said. I have been meaning to read this post and I am so glad I did. I had a similar experience with Wells Fargo. Late appraisal and the loan officer telling me they can not communicate with the appraiser.

I was the listing agent following up on the mortgage since the buyers agent was a little too passive about sticking to deadlines and dates stipulated in the agreement of sale. When the mortgage rep. said he was not allowed to make contact with the appraiser I took matters into my own hands. After the mortgage rep. ignored me when I reminded him about the dates his client promised to meet, and after several phone calls I spoke to the appraiser and managed to make things happen.

I was a tad resentful that I was like a dog catcher chasing mutts around the neighborhood. And I love mutts but my patience was worn thin.

Your post makes me think it might be a good idea to include a cheat sheet with the agreement of sale contract when it is submitted to the mortgage company. The cheat sheet should have a summary of the important dates they need to honor. If they got the contract they will have had to see the cheat sheet.

It would be a great world if everyone would be accountable for their actions and when we fall short, just choose to do the right thing.

This trend that no one can speak to the appraiser when we all need to work together to make the machine work... it is just a complete cop out. Do you know what Wells Fargo is saying when they do not allow their own to speak to eachother regarding a critical part of the transaction? In my opinion, they are saying to their employees, "WE DO NOT TRUST YOU !" And do you know what that says to me? "I DO NOT TRUST THEM EITHER !"

Steph

Christopher and Stephanie.

Thanks for your thoughtful comment. You can bet your boots that I will include a DATE CALANDER with every contract I send to a loan officer from now on. Great Idea.

I'm having a meeting with agents in my network today and this is going to be #1 on my list of topics.

I would like to leave a comment on this as well. I had a listing interview with a seller a few weeks ago and provided her with a CMA. She chose to list the property approx. $10,000 below what the CMA came to. I found a buyer that made a good offer due to the listing price. The buyer started the loan process and an appraisal was ordered (in a timely manner I might add) but here is where my issue starts. The appraiser called to schedule the appraisal and ask me for a copy of the contract. We have worked with this company in the past and found that they are very conservative on their appraisals. Anyway I ask why they needed a copy of the contact and all I was given is "We need it for our file and will not schedule the appraisal until a copy is received". I felt like a hostage. When the appraisal came in it was just as I figured, only $2,000 above the contract price. I have spoken with other Realtors about this issue and a few have said "They need it for a base". Well here is my opinion. I did not have a base for my CMA. I do my job, and use the best information available to provide a seller or buyer with quality information to show a market value. I believe that the contract price has nothing to do with market value. If the appraisal comes in below the contract price then the contract should be re-negotiated or cancelled. If the price comes in above the contract price then the buyer got a good deal. But the appraisal should not be based on the contract. The appraiser is using the same MLS comps that I have, but do to the contract price used comps that were as different as night and day and should not have been used. I spoke with the lender about this and they totally agree that neither one has anything to do with the other. Back when I started in Real Estate my broker stated more times than I can remember, the value is only what a buyer is willing to pay. But that is not how things work. I believe that if the appraiser does their job and shows what they believe to be a good sales value based on the subject property and comps we would not be in this housing mess. People would not have given more for properties than they could have paid for because it most likely would not have appraised out to begin with. I live in the state of Missouri, can anyone tell me if I am required to give a contract to an appraiser before they can do the appraisal. I have ask several people and no one can tell me. If I ask an appraiser they say sure!!
Barbara Head
RE/MAX Farm & Homes Realty
Houston MO
barbarahead@remax.net
www.farmhomesrealty.com

Barbara. I believe that it is helpful, in the interest of providing the appraiser of a full picture of the transaction, for the appraiser to have the contract.

I am always happy to give them a copy and I know that most loan officers are too.

There is a lot more to appraising a property than comps although they are an essential. However, the contract may involve significant closing cost contribution from the seller to the buyer.

Anything that affects the net proceeds to the buyer is important information.

Condition is also important. Reviewing comps representing foreclosures may give insight to an appraiser.

I wouldn't discourage anyone from using an objective appraisal for pricing a property prior to listing, but when the appraisal for that specific property is done, the appraiser needs to know more than the address.

He Lenn ... Thanks for this good article, and I am also concerned about TRANSPARENCY needed in the mortgage and real estatebusiness. Our client consumers need to have confidence in the entire lending experience, and loan officers should be permitted to communicate with appraisers if the situation requires it. Best wishes. Harrison

I too had a very poor experience with Wells Fargo last JUNE! They took forever to order the appraisal, then even longer to review it. We had to keep getting extensions. Finally I got an email from the loan officer that the appraisal was okay - then literally 5 minutes later they yanked the commitment. "They changed underwriting guidelines - I'm sorry there is nothing I can do" was the response! After many calls and upset buyers and sellers, we got commitment from our local in-house mortgage officer who saved the day. I will not work with Wells Fargo again if I can help it - the service was sub par to say the least.

Harrison. It was a shock to my client in this case to learn that neither the loan officer nor the mortgage company had any responsibility to meet dates, close on time, etc. Worse, when I told her that there was no recourse if they pulled the approval, there was nothing she could do.

Lisa. My thoughts precisely.

Lenn,

I agree that it will only cause more problems than it will solve. These changes are not being made by us (lenders), they are being imposed upon us by Fannie Mae and Freddie Mac (the government).

As far as your question "How much worse can they make things?????"... That's a question I'd rather not even ponder, not that I even have the time to think about it. This new mortgage world of ever-changing policies has taught me to simply learn the rules as they change, explain them to the best of my ability to my clients and referral partners, and do my due diligence to prevent the changes from creating too big of a problem.

Karl. Indeed. It would have helped if the loan officer had given us a "heads up" when I wrote the contract.

Be thankful - it was just the appraisal contingency date. We had a closing delayed for 30 days because an appraiser allegedly couldn't find comps for a property. I mean how hard is it really to find new, attached townhomes in an urban environment filled with - you guessed it - attached townhomes. In reality, the underwriter put on his or her appraiser's hat and red pencilled the report requesting multiple revisions. They didn't want comps from the project because they were 6 mos. old. They didn't want comps more than 1/8 mile away from property. If you have new in-fill construction in an established market, you aren't going to find an exact match. You may have to look at existing homes or adjust your time frame or adjust your geographic scope. It seemed like the underwriter at that WEST COAST BANK wanted a picture perfect comp. Buyer didn't understand why they were being charged a per diem for the delay in closing (as provided by the contract) when they timely applied for the loan and were pre-appoved. By the way, the buyer's agent contacted us, it was sent to our preferred lender who used Citi and it closed in 2 weeks.

JAN

Ryan. Any underwriter who continues to request more comps for a contract should be sent to appraisal school.

Fact is, the jerks writing these regs do not know what they are doing.

Lenn, this is all pitiful. I must say that I did enjoy the cartoon though.

Lisa. Pitiful is the word. Irresponsible is another. Negligent is another.

FEB

I'm sorry this problem threw a wrench into the works. When this law goes into effect, it will also have an impact on the refinance market as well. How am I supposed to structure a loan that will meet the needs of the homeowner without knowing the appraised value of the property? At this time, we structure a loan with approximate numbers, advising the clients that we'll tighten up the details after the appraisal is complete. When the lender orders the appraisal, I'll then have to wait until they tell me what the appraised value is before structuring the deal. There will be times when the customer will withdraw their application, after the appraisal fee has been spent. It's a shame that those who are trying to legislate our industry don't understand our industry.

Adrian. Thanks. You make excellent points.

Unfortunately, those in control of making these critical decisions are so divorced from the real world, they can only "make busy", not developing helpful programs.

Ah, the runaway freight train of bad business. We shall call it "Congress".

FEB

As an anal retentive personality, I've started sending all my docs to the lender (and all other pertinent parties) as .pdf files with an email that has a full large print/bold timeline of the transaction including amounts/dates, etc.

I've had a very good response to this as it lays it out in a very readable formata for everyone. You cannot do enough (even if it's their responsibility) to ensure that your transaction stays on target.

As a Mortgage Originator I have heard the scenario you describe many times. Actually, it's music to my ears because it allows me to demonstrate how I am different.

How many times have you been solicited by a Loan Officer claiming to have

The best rates
The best service
The best donuts
Yada, yada yada

After my first year in the business, I tired of trying to crack the "Iron Curtain". I currently do not directly attempt to recruit new Real Estate Referral Partners. Remember. its not what you say, but what you do. My motto is "Underpromise and Overdeliver".

Here's how I do it. It doesn't matter whether it's a buyer I generated or a referral from a Realtor, the process is the same.

The first day, as soon as the Purchase Agreement is sent to me, a Thank You and Welcome" letter goes out to the Buyer's Agent and the Listing Agent. The letter clearly describes all the steps I will take to get the loan closed on time.
In the letter I promise to keep both agents in the loop - comunication - once a week until closing.
Here's where it gets good. They will receive updates at least 2 to 3 times per week - every time something happens - appraisal ordered, title ordered, insurance received etc. By the way, I've never had an agent complain about too much communication, even if it's bad news. I also keep the Title/Closing Attorney advised.

Listing agents almost always say, "No one has ever done this for me before". They are so amazed that many have started sending me business.

I don't mind sharing my "secret" with other Loan Originators because most of them won't follow through. I consider myself service oriented not sales oriented, but the end result is sales.

Hal Tennant, MMC Mortgage in MIddle Tennessee

Anita. Good for you. One thing I learned a long time ago is that, as soon as a loan officer get's behind or their processor gets behind, that dang "black hole" opens and . . . . . . . well, you know.

Hal. Good for you. I have never received an update from the loan office with WF that inspired this post.

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