Following AP report, appraisers calls for reform

As an appraiser getting out of the business, the system in place was set up for collusion purposes for lenders to make loans and pawn them into complex securities- not responsible underwriting. Creative financing was the only way to mask a stag-flating, deflating economy. It was doomed to fail and everyone knows it. Looked good for gdp and homeownership numbers.

If you don't pre-comp- you don't get hired PERIOD.

STICK UP FOR WE FOOLISH TAXPAYERS FOR ONCE - Take away pre-comping and make lenders reserve capitol to personally buy back a percentage of every loan that goes bad for wreck-less underwriting and problem solved. Furthermore, require investors of any loan backed by any US Gov't institution, to reserve a per share percentage of profit withdrawn from equity investing until that period of originations loans have been allowed to season...I bet a few boards might actually be held accountable.

www.appraisers.in

Very good article. Many of us in the real estate appraisal industry saw the wreck coming and were powerless to stop it. Along with the Appraisal Foundation there are five federal regulatory agencies that are suppose to regulate the banking industry as well as the SEC which obviously monitors Wall Street. Where was the Office of the Comptroller of Currency or the Office of Thrift Supervision? These agencies have smart people, why were they not sounding the alarm? There is a great deal of blame to be shared from this mess. CEO's of major financial organizations that let greed overcome their fiduciary obligations to their shareholders, customers, and employees; Federal Regulators who did nothing. (it gives me no comfort that Treasury Secretary Paulson statement regarding regulators closely supervising Fannie and Freddie Mac as part of the bailout provision) These two GSE must be broken up. Greenspan in his Wall Street Journal interview has it right that these two organizations must be broken up into multiple entities. There is something inherently wrong when Fannie Mae has somewhere near 150 lobbyists pressuring capital hill. Combined with the banking lobby and National Association of Realtors(tm) meaningful reform will be gutted in a short period of time. Appraisers who inflated loans and succumbed to pressure must be punished and put out of business. The public deserves better from the real estate industry, banking, Wall Street and Government. The CEO's and senior management of the various banks, Wall Street Firms, Fannie and Freddie must be investigated for criminal misconduct, if inicted by a Grand Jury given their day in court and when found guilty be punished to the full extent of the law. What has transpired in all of this mess are that a number of well connected people made many millions of dollars conning the American Consumer. There is something inherently honest when a robber sticks a gun in your face and demands money versus the white collar criminal who steals your money while you think he is doing you a great favor.

As a loan officer with over 30 years experience, I never asked an appraiser to "hit the mark". I believe the responsibility lies with the underwriter. After all they approve credit, income and assets. I believe that the "New" regulation will put a stop on home buying. If the loan is originated by a broker, that appraisal now belongs to the ultimate lender. If the loan is not approved the borrower will have to pay for a second appraisal. Not many buyers will go for this. Values appear to be at 2004 level. Income has not increased enough to allow people to qualify for the current value. This will take some time to adjust.

There certainly is a big problem in the housing market today and rogue appraisers are one of the contributing factors. However, what is being done on the other side of the equation? Meaning the qualified home buyer who can't get a reasonable appraisal because the appraiser is "going by the book", not using real judgement and instead following guidelines that will protect him from being sued by the lender. My experience is that most appraisers feel no exposure when they undervalue a property. They are valuing the property at a certain price, not saying the property is worth at least so much.

You have missed one other culprit in the scam of inflated home prices. You local county assessor, who yearly make sure that the price on your home grows so that the politicians can assess a high tax on you. To illustrate just how bad it can be, they tried to triple my propriety tax, saying that it was a new home, when in fact, it was a rehab and update. The property had been on the books for 30 years but never let that get in the way. If I had not kept the blueprints showing the areas renovated they would have happily screwed me. It maybe just a coincidence but the county assessor's wife happens to own the largest real estate agency in the county.

You have missed one other culprit in the scam of inflated home prices. You local county assessor, who yearly make sure that the price on your home grows so that the politicians can assess a high tax on you. To illustrate just how bad it can be, they tried to triple my propriety tax, saying that it was a new home, when in fact, it was a rehab and update. The property had been on the books for 30 years but never let that get in the way. If I had not kept the blueprints showing the areas renovated they would have happily screwed me. It maybe just a coincidence but the county assessor's wife happens to own the largest real estate agency in the county.

As an appraiser closing in on twenty years I'v seen alot of changes in the industry and have noticed a lot of different problems with no easy fix. However, a couple of things are glaringly obvious to me. Appraisers are constantly being ask to "hit the mark", if you don't, nine times out of ten you will no longer get the client's work and probably won't get paid for the work that was done. Secondly, the review process on the appraisal should be done on the front end and not after the property is foreclosed on. Thirdly, pay the appraiser at the time of inspection so that he/she doesn't feel compelled to make the deal work in order to get paid. Fourthly, lets make it clear that sales price and value are not necessary one in the same. And lastly, make it a crime for the lender to dictate the appraisal process to the appraiser in order for them to sell the loan to an investor. I can't count the number of times that I have had to change the value, or use their specific guidelines to suit their investor's needs in spite of my protests. Let's quit blaming the appraiser for all the problems and start looking at lenders who were lending money to people who couldn'y pay it back in the first place. It doesn't matter what the appraised value of the collateral was at the time of purchase because once the property has been stigmatized with foreclosure, it will NEVER sell for what its worth.

As an appraiser for over 15 years I have lost many clients for not "hitting a value" that they wanted for loan purposes. In the past I have been pressured by many loan officers, mortgage brokers, real estate agents, homeowners, etc. to come up with a predetermined value and my ethics will not allow me to do this. While I turn down clients who want these predetermined values, they just go on to the next appraiser who will "roll the numbers". In my opinion, the majority of appraisers are honest, hard working professionals. One way to help fix this mess would be to require mortgage brokers to be licensed in the state they work and hold them accountable for inflated appraisals (along with the appraiser).

The house is worth what it can be resold for. If you buy it based on an appraisal you are a fool and you know what they say about a fool and his money. Ever buy a diamond for it's appraised price? Why not pay sticker for a car? People need to realize no one is responsible for preventing them from making dumb decisions, except themselves. Read material, make an informed decision.

Bodach is wrong.

In Tennessee at least. Generally, Assessors appraise property and some other government entity, such as City council or County commission, sets the tax rate. Were the Assesors to cut all appraisals in half, these other entitys would just double the tax rate to meet the budget requirements.

You appear to be re-appraised every year. If your appraisal is based on current market value, and sales have been going up in your area, then it would be un-realistic to expect your appraisal to remain unchanged. If they are declining your area, then you should see a coresponding decline in your appraised value, and possibly an increase in the tax rate, set by some other entity, to meet their budget requirements.

While I'm not claiming your house is brand new, it is certinally not the same age as it was prior to the remodeling and renovation. The remaining ecnomic life / effective age has changed. This change alters the appraised value using the cost approach, and effects the comparables sales selected and the adjustments made to those comparable sales in the market approach. Any appraiser would be totally justified in making an adjustment in your properties effective age, and fairly criticized for not doing so.

Very good comments! I have been an appraiser for 15 years and I see many issues and problems going forward. My concern is people are looking for scapegoats for these problems, just like the S&L problem, and it seems like appraisers are going to be the ones blamed. I know there are bad appraisers, but I feel it is a small percentage of us and they make it seem like it is most of us. An appraisal is an opinion of value. So if I say a property is worth $114,500 and another appraiser says $98,000, does that mean I inflated the value? Did the other appraiser come back overly conservative? All desk of field reviews come back really low. As appraisers, we have been told and taught that our review value is liable just as if we entered the property. So we better be "conservative" on our value. I just feel that if an appraiser does something fraudulently, it will be fairly obvious to a trained appraiser. You can't really have another appraiser second guessing my value by not seeing the entire property and then I get disciplined due to a difference of opinion. That is wrong in my opinion. Sorry to rant but I have already lost half my business due to lenders who gave bad loans people could not repay and then they decide then that they do not agree with my opinion and blacklist me. I did my job to the best of my ability, with no influence, and they give a 500 FICA score borrower with no documented income a $300,000 100% loan. Come on.

My husband and I have lost our business to a failed economy, we personally filed bankrupcy, we haven't made a mortgage payment in 9 months, I have tried to carry a educational conversation with Wells Fargo on how to keep me in the home, they want all of the late payments or get out. I can now begin making my regular mortgage payment now that my husband and I have new careers but they are just being unrealistic. Do I just walk away and give someone else my money? I still love my home.

Anybody out there have any inside advice on where there head is at ??? I have always made my payments on time for the eight years we have had the mortgage. Thanks Teri

Why should it be anyones fault except for the people that made the poor decision?
If the appraiser inflates the value they should be liable, but only to the mortgage holder. Why blame the broker? A house is worth what it can sell for. If someone pays too much for a house, that was their decision. Do you think a diamond is worth what it is appraised for? Do you pay sticker for a car? If you do not look around and decide what a house is worth to you, then you are a fool. You know what they say about a fool and their money! It is no ones responsibility to protect you from making a poor uninformed decision except your own. I hate articles where people whine that "no one protected them" from their own bad decision. We live in a free country, you are free to make a decision, good or bad.

I have purchased four dwellings, in various part of the nation, with employment changes over the past 25+ years. Each experience left me unsure that my interests were given priority during the process.

We should be concerned when the appraiser is able to take the real estate contract with them when doing the appraisal of a property. Also, their employment is through the bank. Why would an appraiser need to know the offer price on a home, isn't that what they are to determine in an unbiased fashion? At best it has the appearence of a conflict of interest against the buyer. It can be seen as the ability of the buyer to meet mortgage requirements is the only consideration.

Simply, let the buyer either hire the appraiser or require a firewall to prevent the appraiser from knowing the terms of the offer. The appraisal of the property should come earlier in the process.

AssessorTN is wrong also.

In Florida there is a preset tax and Bodach said the values are purposely inflated by the connection of government and licensing agents who decide who will work the field and give the county or state what they want. Higher property values so they can tax higher. Here in S.Florida politicians are so eager to tax that they haven't left a road untaxed by tolls now that they know the real Estate market is going to kill their income.

I'm an appraiser with 21 years experience. The Real Estate Boom & Bust was a LEGALIZED PYRAMID SCHEME.

This scheme was fueled by the creation of bogus mortgages that people could not afford and would have never qualified for using time-tested traditional lending standards. The regulators knew about it and did nothing to prevent this from happening.

The problem was compounded with highly leveraged Credit Derivatives (Collateralized Debt Obligations, Structured Investment Vehicles and Credit Default Swaps) with a notional value estimated to be in the hundreds of trillions (with a T) of dollars. These are now a threat to our entire financial system. If Freddy Mac and Fannie Mae and Bear Stearns were not bailed out (with taxpayer and printing press money), out system would have already failed. These bailouts however have only postponed the invevitable and may very possibly lead to a hyper-inflationalry economic collapse. $4 gasoline is just the first stages of this.

The finger pointing is now taking place and rightfully so for so many dishonest appraisers, lenders, and mortgage brokers. It will bring a much needed shake-out to our industry. The problem is that those who created this scheme who made millions and in some cases billions of dollars will get away scott free as an estimated 2-6 million people lose their homes and the middle class dissolves in our country.

the "Final Jeopardy Answer" is to follow the model already in place!... AT the VA!! they put appraiser's on a list and all lenders submit appraisal request to this central distribution point, if its your turn to take an assignment in this particular area the job is faxed to you, and you collect your fee at the door; cash or Money Order Only! This solves the problem of pressure to "hit the mark" cuz no one but the market determines whether the sale price is reasonable or not! I had one appraiser sashay on thru the property I sold with a VA loan, and with a wave of her hand commanded, "fix dis, fix dat and call me for da re-inspection when its dun!!" Beautiful!! Now that's appraisin'...No pressure, no fuss, no muss!! If the value is there, fine! If not well you'd better re-negotiate or someone has to pay for a re-appraisal!

An appraiser's first job is.....to FEED their family! So if stretching the value just a tad, will keep your kid fed.... So of course you've gotta remove the possibilty of co-ersion by "Interested Parties"!!

Wasn't this whole thing known as "Biting off More than you can Chew??

As a Realtor I would like to add that I agree with these seasoned appraisers. Their job guidelines are ever-changing and complicated at that. I live in a community of about 40k and each market across the U.S. is different but the only time I have seen inflated appraisals is in home equity loans. I go in with a market analysis for possible clients and find out they owe more than what I think the market value of the home is. So, unfortunately the people who got got burned are trying to find people or a chain of people to blame. I have seen too many sellers take out home equity loans and use that money towards anything but improvements on their home and in turn are pissed when the value didn't skyrocket when the amount of money they owe did. In my opinion it truly comes down to buyer beware! If I were to purchase ANYTHING especially a 300,000 home I would make DAMN SURE I knew what I was getting into. Before signing off on 300k it might be worth reading the small print. It is a fact not everyone is caring, honest and open. You can hope to do business with those that are but people need to look out for themselves first. Its all in writing, have we forgot how to read?!?! It's almost ridiculous. I'm not trying to blame buyers - there are definitely crooked people out there and it drives me insane. But consumers have got to look out for themselves and make good decisions with their finances.

As an Appraiser for 19 years, father was an appraiser and county assessor. I know the system. It has been a major problem for years that the Mortgage brokers are not state licensed, or held accountable. As far as being Blacklisted. I have net been blacklisted in 19 years. I DO NOT do comp checks. USPAP, dictates that a direction of value is an appraisal. Those who do comp checks are giving appraisals. You want my unbiased opinion, pay the fee, and I will give you my opinion. AND i will not buckle for pressure. There is some mortgage brokers in town that will not use me or my office because we don't "hit the value" but even in this economy that is fine with me. I would rather loose money in this market than give up my ethics.

Now comes in Cuomo, Who was complaining that appraisal management companies were pressuring appraisers, then turns around and says appraisals should be ordered through them. I don't get it. These are the companies that charge the typical appraisal fee in that area, then wants to pay the appraisers half to two thirds of what they charge everyone else. My biggest problem with this is that the Newbie appraiser who does not know the market is cranking out work as fast as he/she can to make a fast buck, and hitting the values so they keep getting the work. While those who are honest, may not hit the value all the time, just seem to quit getting orders. This seems to me to just make the problems worse. You get what you pay for, cheap appraisers equal cheap quality and cheap work, and are sloppy.

In short I know that when I lay my head down at night I gave my honest opinion. those who are getting rich and looking for the fast buck will get theirs. Need to look at the whole problem. Not just every time there is a crises, lets blame the appraisers. There is many good ones out there and the few "Skippy's" should be running for the hills, But giving control to the ones who help the problem instead of solve it, "all in the name of money" need to be held accountable. Mortgage brokers, management company's, banks, and loan officers should have to sign their name to each loan. Then maybe they would have some more liability.

Sorry for the rant, but this has been bugging me for years.

There's a house listed on our street for $139,000. A quick call to the county recorder revealed that the tax rolls show it valued at $109,000. People buying houses need to do their homework, pure and simple. For starters, what are similar houses in the neighborhood selling at? And another thing... I was just watching a show on TV last night about "rescuing" young couples from mortgage problems. When did it become commonplace for twenty-somethings to expect to own a $550,000 house with a $3800 mortgage payment? That's just plain nuts, and I see it all the time on these house-hunting shows. Who pays for these fools in the end, when one or both of them lose their jobs? The rest of us who live within our means, that's who!

Here we go again, blame the appraiser. The problem is in goverment and there poor laws. Also to blame are the builders who pushed a program with out documentation and sold the new house with "0" down at 1.5% interset rate for 3 years. Another problem, I was faxed a document by mistake which shows a gardener making $145,000 per year, he had no employees just a man mowing lawns. No versification on the employment or income. WHO fault none? After 35 years appraising it is still the same thing, blame the appraiser.

I feel that the real estate salespeople, along with their brokers and the mortgage companies and the home inspectors we pay for and the real estate appraisers, who are supplying their information upon inspection to the government loan agencies, are all in the fraud business together. They all work in unison with each other to see how much money they can screw out of the consumer and the government. I am sitting in a house right now that is a perfect example of a scam and also interstate fraud and not only am I a victim of fraud, but the government is an even bigger target for these scums. I will be glad to show you all pictures, documents, inspections (on a house that was not even inspected, which I had to pay for through the lender) and also fraudulant contracts that were not followed and am still fighting the system to help me recoup some of my losses in my home purchase.

And now the government is wanting to give extra money to these people, so they can stay in their scam and frauding businesses.

We all need help right now to get these people stopped.

Federal Reserve cheap money allowed all this to happen. Interest rates were not, are not, allowed to fluctuate as the market requires. Greater demand for credit, higher interest rates, etc.

Commissioned individuals and badly managed banks would have the market as their watchdog, especially if banks knew a bank-run would never be "insured" by the government, and they would have to face the consequences of their mismanagement. Rather than the banks being insured, the management should be arrested, tried for fraud, and jailed for breaking their contract with their depositors, like any of us if we commit fraud.

Just think, if a bank knew, like you and I do when we break the law, that their might be a penalty or individual loss of freedom, don't you think a bank would have their own people checking newbie appraisers and spot check their old standbys? Isn't that just plain good business practice?

This is one of George W. Bush's dirty deals — and make no mistake about it. Do not regulate anything so as to let his greedy, money hungry pigs steal big money. Georgie Porgie has done everything he could possibly do to destroy our country since being appointed pResident.