A Little Push Can’t Hurt Right? Wrong!!

Well, here we go again.

In my previous blog posts titled “Round and Round” and “Pressure My Story”, I spoke to examples of how lenders and/or AMCs have been pushing and pressuring appraisers to hit certain values on transactions. If an appraiser did not hit these numbers, or make changes to make the transaction work in the lender’s favor, the appraiser would be threatened with non-payment, removal from appraiser panels, and/or blacklisted. If you haven’t read those blog posts, feel free to go back and have a look. This post, however, is about another issue that has recently come to light.

Let me set this up for you. A consumer is looking to refinance their home. They get everything set up on their end and ready to apply for the loan. But as the process with the lender gets going, they get a letter like this one below from the loan officer or banker:

I don’t know about you, but in my opinion, this violates Dodd Frank, Appraiser Independence. It clearly shows that issues of the past are still being presented today, just in a different way. It’s not necessarily the lenders that are directly trying to influence values (although many still act as described in previous blog posts), but they are instructing the homeowners to exert influence, and as this person said, “PUSH” the appraiser for a certain value because the lender is prohibited from doing so. The very person the consumer is trusting to do what’s right on their loan, is now instructing the prospective borrower to “SELL YOUR HOME to the appraiser” to achieve the magic number that will close the loan. Forget ethics, forget trying to do what’s right, and forget the risky position foisted on the consumer by the loan officer. Have we as members of the national economy not learned anything from ten years ago?

Since the crash, laws have been put into place to protect Appraiser Independence and YOU as the consumer. The Dodd Frank law specifically spells out what must not happen among lenders, AMCs and appraisers. 

The following is directly from Dodd Frank:

Dodd-Frank and discussions between appraisers and agents

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) prohibits “any act or practice that violates appraisal independence…” It also states:

It shall be unlawful, in extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the consumer, to engage in any act or practice that violates appraisal independence as described in or pursuant to regulations prescribed under this section.

For purposes of subsection (a), acts or practices that violate appraisal independence shall include—

‘‘(1) any appraisal of a property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, appraisal management company, firm, or other entity conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser;

‘‘(2) mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit;

‘‘(3) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and

‘‘(4) withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties

Now that you have read the above excerpt from Dodd Frank, notice that in #1 the word INSTRUCT shows up twice. The example provided here appears to be a clear violation, by the loan officer, of the law as it’s written.

Now read #3 again. Yet another clear violation of the law as it’s written. This is a perfect example of the collusion that still goes on today, besides other indirect ways that lenders influence value and violate appraiser independence.

Consumers already face many challenges when obtaining a loan. They shouldn’t have to face another with loan officers’ unethical and illegal practices. Influencing a value just to make a loan is not protecting you the consumer. The consumer shouldn’t be directed to influence the appraiser in order to get a professional opinion of the value of their home. The loan officer shouldn’t have to instruct the consumer to influence the value because he “can’t talk to the appraiser.” If the value is there to make the loan, then great. If it is not, the lender should move on to the next loan and the consumer should move on to their own next step. 

This is why appraisers exist: to provide an unbiased and honest opinion of value of a property. Where are the ethics and laws to protect the consumer from these types of lenders? Today’s lenders want fast and cheap and will do anything they can to close a loan. They will use desktops, appraisal waivers (which the consumer should never agree to without an independent appraisal as well), AVMs, and yes, they will do exactly what this person did in the example above. Is the consumer protected? Does the consumer’s confidence in the integrity of the loan process improve because the loan officer is asking them to press the appraiser for a value? My answer is NO

The only unbiased part of the process is the Appraiser and it should remain that way. The Appraiser should not be influenced in any way at all in order to give you the consumer the best professional opinion of your home as possible. The Appraiser has no interest in the transaction, is the expert when it comes to the valuation process and is bound by USPAP (Uniform Standards of Professional Appraisal Practice) as well as state and federal laws. Consumers should remember this and remember that Appraisers are not trying to screw you out of a loan or make things difficult for you. Appraisers are there to protect the public trust, you the consumer and provide the lender with an accurate opinion of market value.

I suggest to any consumer reading this to remember that your home is most likely your biggest asset and that obtaining a loan based off an overvalued valuation set forth by influencing the professional appraiser may come back to bite you in the end. All because you were instructed to do so by the loan officer or others wanting to make your loan close and pad their pockets. Do you really want that issue later on?
Think about it…

Planet Of The Cheapskates

Where to start with this? Do I have to refer you back to my past articles like “What’s Not in Your Wallet or Appraisers Outraged?” Where do we even begin….

We begin here. Another story of an Appraisal Management Company going out of business owing tons of money to appraisers for services they provided. Coester VMS that was once one of the biggest players in the game closed its doors recently. They closed them leaving appraisers with thousands of unpaid invoices for services that who knows if they will ever be paid for. As stated in previous blog posts, these amcs are acting as agents of the lenders that choose to use them. The lenders sign contracts with the AMCS to provide a service to them in order to help keep Appraiser Independence as stated in Dodd Frank legislation. So who is really responsible for payments to appraisers. The Lenders? The now out of business AMCS? Who? Who do appraisers turn to when the AMC goes out of business owing them money? Many states but not all require a surety bond in order for an AMC to do business in that state however as was the case in NC, the bond amount was only $25,000.00 and appraiser claims exceeded the amount in 4 days leaving most appraisers to be paid on a pro rated basis. So who else is responsible? Maybe you the Borrower? Do we really know? The laws are so vague it’s actually quite disturbing.

So lets start with a good story. A story of a lender named Sierra Pacific out of CA that has been bombarded with requests from appraisers to pay fees owed due to the now defunct Coester VMS appraisal management company. Sierra Pacific was the lender using Coester VMS as their AMC. When Coester decided to close its doors and leave appraisers unpaid, Sierra Pacific stood tall and has since been doing the right thing. They are paying appraisers for work done for them even though Coester VMS took the money from borrowers and ran. They have stepped up to pay appraisers for fees owed to them for prior appraisals. So bravo to you Sierra Pacific. We thank you for doing the right thing. See the letter below and know that Sierra Pacific is a quality Company.

Now we get to Planet Home Lending.

This was another company that had entered into a contractual agreement with Coester VMS. They are the Lender that hired Coester to be their agent and provide a service to them. Appraisers have contacted Planet Home Lending demanding payment for appraisals done for them. Unlike Sierra Pacific, Planet Home Lending decided to take a different route as seen below:

So what does this all mean??? You have one lender paying appraisers due to their admission they used a deadbeat AMC to represent them and want to do what is right. Yet another flat out states they don’t care nor will they pay due to not having an agreement with the Appraiser directly.

Here is the ultimate question? Who is responsible? The lender doing the loan or the AMC representing the Lender? Does it matter If the lender collects the fee for the appraisal from the borrower and passes it along to their agent to pay the appraiser or if the agent or AMC charges the borrower the fee directly? Good question. Why? Because this is the only profession and industry where there is a third party making contracts, taking payments on behalf of others, and making decisions with your bank or lender, while the actual entity that performs the service is left out. So another question? Why are AMCS taking payments directly from the borrower? What about Escrow accounts like Realtors have to use or how about the borrower pays the appraiser directly. We are in a day and age where borrowers can pay the appraiser directly via numerous avenues due to technology, Apps on devices, PayPal, credit cards or yes even cash or check. Why for the nth time do we have to have appraisers go unpaid for services due to an AMC failure? WHO MADE THESE TERRIBLE AND RIDICULOUS LAWS? You guessed it. Our government, who is indifferent to small businesses, the backbone of the economy but they sure will support the banks and lenders.

Enough is enough and as consumers you should be outraged as well. You could one day wake up with a lien on your home. Maybe a lien on an investment property? Maybe you just get calls from the appraiser who wants his payment. Are you ready for all of that?

Your money is not going where it should but instead enriching the lives of others at the expense of real estate appraisers and small business owners due to these poor laws, legislations and the blind eyes not paying attention.

It’s time for a change. It’s time to have lenders pay AMCS separately from the appraiser . Its time for TRANSPARENCY and ACCOUNTABILITY! It’s time for appraisers to be paid fairly, rightfully and on time. It’s time to change the poor laws.