As most of you know by now, the Home Valuation Code of Conduct went into effect on May 1st. Its primary purpose is to insulate the appraiser from outside influences that would apply pressure to the appraiser to inflate values.
Unfortunately, I have been receiving complaints from our members (ICAP) regarding lenders and AMC’s asking appraisers to reconsider their values. Some of the lenders and AMC’s have even created a form for this purpose. It appears that these forms are being completed by lenders agent or the borrower in most instances. Clearly the borrower is unhappy with the value conclusion and they are looking for a higher value.
QUESTION: HOW IS THIS NOT PRESSURE
ANSWER: IT IS!
The HVCC allows the homeowner to now receive a copy of the appraisal before the closing. I’m afraid this has added fuel to the fire. In some instances, the homeowner has a legitimate complaint if they feel the appraiser made an error or omission regarding the improvements, but others are going so far as to rewrite the appraiser’s sales comparison analysis to show the appraiser how to get a higher value. Although as appraisers we appreciate all the help we can get when gathering data, this is going a little too far.
I am also being told that certain AMC's are sending the appraiser a list of sales, calling them comparables, and asking the appraiser to write an explanation as to why they did not use any of these in the appraisal. This list usual shows up after the appraisal has been completed not before, so it is not part of the original scope of work, such as in relocation appraisals.
I have been corresponding with Fannie Mae regarding some of the new problems that the HVCC has created.I would like to provide them with examples of this latest form of pressure aimed at appraisers. I can only assume that lenders are trying to skirt around the requirements of the HVCC by having their agents or their clients (the borrower) engage the appraiser. In politics this is known as plausible deniability.
The lender should be filtering this information and determining what should be passed along to the appraiser. Requests to an appraiser for corrections, additional comments, more explanation and additional market data in the form of sales, listings, etc. has always been acceptable practice.
However, I am concerned about the lender, AMC or homeowner who is sending the appraiser sales data and asking the appraiser to consider using them in the appraisal and if not, provide an explanation as to why the appraiser did not use these sales instead of those reported in the appraisal.
Please email any value dispute/reconsideration of value forms you have received to firstname.lastname@example.org and I will pass them along to Fannie Mae. We need to work together as an industry to stop this before it gets out of hand.
AUTHOR: TJ McCarthy, SRA - Tim (TJ) McCarthy serves on the Illinois Real Estate Appraisal Board This email was originally sent to members of the Illinois Coalition of Appraisal Professionals – ICAP.