Who is watching you?

[Richard Ferris]

The Federal Reserve has recently reiterated that "financial institutions must have an effective, independent real estate appraisal and evaluation program," and that appraisers performing reviews should "have the knowledge and expertise to assess compliance with the Federal Reserves appraisal regulations and guidelines."

Appraisal reviews "should determine whether the appraisal or evaluation is appropriate for the transaction, the risk of the transaction, and whether the process by which the collateral valuation is obtained ensures independence and quality," the Fed says.They "should also indicate whether the appraisal or evaluation report is consistent with the engagement letter, which sets forth the scope of the appraisal assignment."The Fed also notes that "some banks supplement routine reviews with post-funding evaluations of appraisal quality for some of their higher-risk or greater-value transactions as a control to assist in detecting valuation problems."





In the course of my career, I have reviewed multiple reports by appraisers who have not been consistent with the scope of their assignment. I typically do not have the engagement letter sent to me along with the file - but just the scope of work for example - has been deviated from due to one simple item in the report......

BOILERPLATE

I recently reviewed an FHA appraisal where the appraiser indicated "I did not activate or test any of the mechanical systems"

This is a specific requirement of FHA - to test the air conditioning and heating (simply - do they turn on and off?), and to run the water to see if the hot water works.

Very simple stuff!

Yet because of BOILERPLATE text - this appraiser has violated FHA rules and will likely face sanctions. Perhaps they did actually test the systems....but they stated otherwise in the report and that, in the end, is all the lender (and HUD) has knowledge of.

Another example of not following our own reporting standards can be found on page #5 of the URAR in the "Appraiser's Certifications"...specifically #2:

I cannot even recount how many appraisals I have reviewed where the appraiser stated:

"The improvements appear to be in average condition at the time of inspection. No functional or external obsolescence observed upon inspection."

What does that mean? That is ALL there is to be said about the property? Is this factual? Sure. Is this specific? Far from it. What type of cabinets are used? Are there granite counters or just laminate? What does "Average" mean in this market?

Appraisers need to know that there are not only reviewers looking over your past files, but perhaps now bank regulators, portfolio reviews for mortgage backed securities, and even government task forces. Just perform a Google Search for "Appraiser indicted" and you should find enough reading material to encourage you to reconsider the use of boilerplate.

My purpose here is not to throw our profession under the bus. There are certainly enough GOOD appraisers along with many BAD ones in our profession. My purpose is to rally the call to those who either don't know any better or perhaps have just fallen into a path of laziness in reporting. WE have to raise the standards of what ought to be expected from our reports. Because if we do not...there certainly are other agencies watching our profession now who will.

Make it a productive day




Richard D. Ferris
AMCAppraisalsinc.com
[e-mail]
[phone]
One # Does It All - Voice/Fax

Residential Appraisals in Lake, Orange, Osceola, Polk, and Seminole Counties.

Also servicing Deltona, Deland, and Orange City in Volusia County.

Florida State Certified Residential Appraiser #RD4088

FHA Certified : Associate Member Appraisal Institute

[Cynthia]

Hi Richard
Amen! I can tell you the OCC is watching you. They have mandated that the lender/funders turn in appraisals to the state that do not meet guidelines for further investigation.
I recently reviewed an FHA appraisal that also said they did not test the utilities in one part of the job and on another page had conditions to be met because not all the utilities were on. There was so much "boiler plate" in the report you couldnt tell what really happened or what condition the property was in.

Cloning reports and boiler plate is risky, you have to be in the practice of reading your own reports to see if they make sense and not just assume it all applies.