Posted by Jonathan J. Miller -Thursday, August 18, 2011, 9:59 AM
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actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
Conservative Appraisers Because Their Client “Likes It”
Here’s one broker’s experience:
A client…received an offer from an out of state office of their lender whose 5-year interest-only loan was soon to expire and agreed to allow an appraiser to visit the apartment; the appraiser told the client:
I measured the dimensions and also I can see from the floor plan
done by the architect in 1939 that the apartment is 950 square feet
but I am going to tell the bank that it is 850 square feet because
the bank will like that
The (My) client refused to proceed and ultimately the bank automatically converted the loan to 30-year fixed at a rate of 2 points over LIBOR at the time which turned out to be 3.75%, with no appraisal and no new application and no costs or fees.
My thoughts
Since when are appraisers supposed to take it upon themselves to modify the physical characteristics of the property? We are supposed to be the eyes and ears of lenders, not part of their sales force or underwriting team.
This appraiser’s behavior sickens me.
Posted by Jonathan J. Miller -Tuesday, July 5, 2011, 12:01 AM
6 Comments
actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
Errant Email Prompts Appraisers to Say What They Really Think
For two months Landsafe begged appraisers (why some of my appraisers are on the list will be explored in a future post in this series – it’s a doozy): The revamped a multi-page legal agreement without disclosing what prompted the change. Well, The Appraisal Institute warned us about signing the agreement but basically they are shifting the risk to appraisers when they shouldn’t be (more on this in coming posts).
Here’s the intro of the Landsafe request. I should be clear that they never set a deadline for signing until later on, called us and emailed us repeated to sign it.
You received an announcement from LandSafe Appraisal Services concerning
the Appraisal Services Agreement. This must be submitted electronically
to LandSafe in order to remain active in our system.
To date, we have not received a completed ASA agreement from you. If we
do not receive one from you then this could lead to an interruption in
the work you receive from LandSafe.
Of course, we weren’t receiving regular work from them so it fell on deaf ears.
In an email error, they sent this request to hundreds of appraisers but forgot to BCC.
Here’s a sampling from the appraisers who clicked “reply all”.
More after the jump…
Posted by Jonathan J. Miller -Tuesday, June 28, 2011, 12:01 AM
12 Comments
actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
The Good Appraiser AMC Bait And Switch Technique
I believe that there are generally 1-3 good appraisal firms in most markets. A “best and all the rest” list. (Blowhard hyperbole warning: I consider our firm to be one of the “good” firms in our market.)
The proliferation of AMCs used by lenders has exploded since HVCC came to be in May 2009.
AMC’s continue to fight their poor reputation for quality – they generally only require state licensing, inconsistent reviews of sample reports, agreement to fees that are half market rate, 24-48 hour turn times irregardless regardless of valuation difficulties, etc. In order to combat this AMCs use the following marketing technique:
Posted by Jonathan J. Miller -Tuesday, June 21, 2011, 3:38 PM
2 Comments
actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
A little background on Countrywide, creator of Landsafe: About a year and a half ago, we were approached a final time to provide appraisal services for Landsafe, one of the largest AMC’s in the US. Landsafe was founded in 1996 by Countrywide, one of the US largest mortgage lenders accounting for 20% of all lending at their peak. By forming an AMC, Landsafe was better able to control the appraisal process to handle more volume including selling mortgage paper to Wall Street for packaging into a number of exotic financial mortgage instruments.
Countrywide ran into financial trouble in 2007 along with other lenders like American Home Mortgage as the housing market began to collapse.
Think ‘Friends of Angelo’ VIP program, Subprime Lending, Bailouts, Hurricane Katrina, AG Lawsuits.” Among appraisers, Landsafe developed the same reputation over time that Countrywide developed and it wasn’t favorable – they were seen as a factory – only interested in cranking out reports at high volume. Like other financial institutions, the quality function had far less political clout than the sales function which is the basis for Landsafe’s poor reputation in the appraisal industry. I had at least a have dozen meetings with Landsafe senior executives and appraisers in my office to ask us to join them because the appraisal quality they oversaw was so poor. Nothing ever happened.
By 2008 when Countrywide was purchased by Bank of America, it’s name was so toxic it was changed to Bank of America Home Loans. I remember giving a speech at an awards luncheon and the event sponsor was a Bank of America Home Loans rep. When he announced they were no longer known as Countrywide, the audience of real estate agents broke out in spontaneous applause. It was an amazing moment. It remains a mystery why the Landsafe name wasn’t changed at the same time.
The Pledge
One other point and then I’ll get to my story:
In September 2007, after months of negative publicity and the announcement of a reduction of 20% of its workforce, Countrywide launched a public relations campaign aimed at demoralized employees. Employees were expected to sign a pledge to “demonstrate their commitment to our efforts” and “to tell the Countrywide story to all”. Those who signed the pledge received a green rubber Protect Our House wristband.
Landsafe has continued the tradition, requiring their appraisers to sign various draconian documents to pledge their allegiance. Of course the appraiser has the option not to do business with them, but they represent a huge percentage of mortgage appraisal volume. A new generation of appraiser has quickly replaced the more experienced appraiser. Thus the industry is now dominated by an army of form fillers.
Ok, finally – here is this week’s post:
More after the jump…
Posted by Jonathan J. Miller -Friday, February 4, 2011, 11:35 AM
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I am participating panel today that I am told is oversubscribed but I plan to share my thoughts here after the conference is over. Navigating Uncertain Waters: Mortgage Lending in the Wake of the Great Recession hosted by the Furman Center For Real Estate & Urban Policy and The Institute for Affordable Housing Policy.
The panel represents many perspectives on assessing collateral (translation: appraising!). It’s the first time that I am aware of where an event has been held to address the appraisal issue in a constructive way.
Feedback to follow.
Posted by Jonathan J. Miller -Thursday, June 17, 2010, 10:07 PM
3 Comments
Guest Columnist:
Joe Palumbo, SRA
Palumbo On USPAP is a column written by a long time appraisal colleague and friend who is currently the Director of Valuation at Weichert Relocation Resources and a user of appraisal services. He spent seven years at Washington Mutual Bank where he was a First Vice President. Mr. Palumbo holds an SRA designation, is AQB certified and he is a State Certified residential appraiser licensed in New Jersey. Joe is well-versed on the ever changing landscape of the Uniform Standards of Professional Appraisal Practice [USPAP] and I am fortunate to have his contributions. View his earlier handiwork on Soapbox and his interview on The Housing Helix.
-Jonathan Miller
The Fool’s Gold of AMC Licensing
Since I landed in the world of Relocation some three and a half years ago, I really did not pay much attention to what was happening in the trenches of the lending world. That changed when the concept of licensing appraisal management companies came about. My interest became more of an occupational study since these laws are so “broad-brush” and vague. As the manager an in-house appraisal arm of Relocation Management Company I was shocked and disappointed that that these laws cast a net on just about anyone who manages selects and retains appraisers for third party use. Clearly this type of legislation was created out of a knee-jerk reaction to one of the many “crisis-type” issues that came AT the appraisal community in 2008 and 2009. I am specifically referring to the attention to the “appraisal process” brought about by the ill-informed attorney general Mr. Cuomo of NY and the infamous HVCC. I agree with the basic the tenets of the HVCC and the AMC laws I just do not think there will be a net tangible positive affect and that the “real issues” are being conquered. AMC laws and HVCC are not the PANECEA. I WISH THERE WERE a panacea because some calm is needed. Being the realist and institutionally tenured manager of the appraisal process I just know reality of what happens VS what is supposed to happen.
For starters let me say that the relocation world has no direct OTS-like government oversight or appraisal requirements for the appraisals which are NOT intended for lending. The relocation industry is self- policing and we rely on what is set up by state licensing and our own quality control. Let me also say that while my department may perform some of the same functions that an AMC does, we do not TAKE ANY of the appraisers fee. We do select maintain, review AND USE appraisers as well as arbitrate valuation disputes. Also for the record I am not anti-appraisal management company.
Here is the issue: As pointed out by the OTS, last year FIRREA laws of 1989 already contain much of the language that the AMC Laws cite. States have also set up Appraisal Boards who are supposed to monitor fraud egregious issues and such. The problem with FIRREA and the State Boards is simple: money, resources and time. So along come laws that state it is unlawful to coerce an appraiser, unlawful not to pay them, unlawful to tell them which appraiser to use, unlawful to have people who select and review who are not “trained in real estate”, and so forth and so on. So the new laws are just restating the same of what we already had but we still lack an efficient mechanism to enforce. If the AMC laws are governed and enforced by the state boards who are short on cash and time then what makes AMC laws different? Currently 18 states have such laws on their books.
On top of the AMC laws many states are requiring AMC’s to be “registered”. This process is costly and requires plenty of paperwork. KUDOS to the Governor of Virginia, who signed his states law basically making it illegal to engage in the “appraisal nonsense” described above, but NOT requiring a registration process or fee. Also noted as being proactive is Arizona, which requires licensing and registration for AMC’s but which has a single line exemption for the relocation industry simply because: “we are not the problem” (the law reads the exemption for appraisals prepared for the purpose of employee relocation) .
Recently I was contacted by a state board attorney whose state passed AMC legislation in 2009; she stated “this law was not intended for your business model….because you use the appraisal with the client, whereas an AMC does not use…. it they get it…Q C it and pass it on”. It is great to see some realistic thinking for a change. The AMC- appraiser relationship is much like the HMO doctor relationship: mutual need mandated by external forces peppered with some mistrust. Don’t get me wrong there is a lot of merit to the underlying premise of HVCC and such I just do not think it is going to result in a changed world for the appraisal community. What the appraisers do not like about the AMC’s are the request for fast appraisals, some at a lower fee than they have seen in years, requests coming with numerous assignment conditions many of which are not realistic and unacceptable (3 comps within 3 months and 1 mile) the occasional “can you hit the number request” before the analysis gets done (comps checks)…among many others.
Many of the pressures ON AMC’s…yes I said ON AMC’S, are a result of what has transpired in the world: Increased competition, web-based valuation tools, fingertip internet real estate research, fraud, secondary market issues, and MISUNDERSTANDING of the appraisal process in general. I wonder what planet the “investors” live on that have guidelines they will not purchase loans in declining markets? I also believe that a lender than asks an appraiser to “remove a negative time adjustments” should be reported to the LVCC hot line” . Oh… that’s right there is none? Call your department of banking they say. Good luck. I had an appraiser the other day who did not read or adhere to the engagement letter I sent tell me “we have an AMC law here and you have to pay me regardless or you are breaking the law”. I stated, “great, I will take my chances since you signed the engagement letter but yet failed to meet the (simple) requirements stated in the letter, which is why I have called you three times ”. We’re not talking about value here we are talking about basic development and reporting issues that were not clear to me as user and client. Is this what the AMC laws are for?
Does anyone really think that the requirement of an AMC to fill out an application, pay a fee and require a few staff to take a 15-hour USPAP will stop the madness? Actually if the fees are an issue it could increase the cost of operating for the very folks that are presumable not paying a “fair rate”. Since the BIG 3 lenders (all using profitable AMC’s) have 60% of the market now via servicing or closing every US loan, I don’t see things changing until we see a UNIFIED industry, an industry that will unilaterally agree to push back on any conditions that are deemed to be unreasonable. It is very difficult to push back on three financial giants, but without a push, it will not happen. The other day a friend told me of a lender (his client) who is seeking to create a special list outside the AMC they use; their claim is poor service and product….betcha licensing that AMC would fix that! I also heard of a request coming from a AMC in a state that requires they be licensed and registered. The “caller” asked the appraiser if he could “hit the number”. He asked “isn’t that a violation of the HVCC and the AMC laws?”. The caller laughed…who is enforcing this stuff anyway..we do it all the time and we just send a text message to our appraisers telling them what they need”. There are approximately 97,000 appraisers in the US handling over 1 trillion dollars in mortgage money. Over 75% of the states require licensed appraisers for federally related transactions and 45% require for all appraisals. Imagine if ALL 97,000 decided to make change by just saying “no” on unreasonable compensation or assignment conditions. If we did not have state licensing there would be a clamor to get it. Remember what was stated twenty years ago? “State licensing will change everything” .
Maybe it didn’t because we didn’t MAKE it matter.
What we had already in FIRREA and state law is part of the mechanism to get us to the next level. The missing ingredient is unity. It does not mean abolishing the AMC’s or AMC laws either. Let’s look within and stop trying to reinvent the wheel with both the products and the process. We are miners of fool’s gold until we make real change happen from within, which while not easy is the only way for true meaningful change.
Posted by Jonathan J. Miller -Thursday, June 10, 2010, 10:04 AM
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Ahhh, 2007 seems like only yesterday when I wrote about NY AG Cuomo’s lawsuit against First American’s appraisal unit, eAppraisIT
Please note: eAppraisIT’s tagline is “redefining value.”
“The attorney general claims that defendants engaged in fraudulent, deceptive and illegal business practices by allegedly permitting eAppraiseIT residential real estate appraisers to be influenced by nonparty Washington Mutual,” presiding justice Luis Gonzalez wrote in today’s unanimous decision. “We conclude that neither federal statutes, nor the regulations and guidelines implemented by the OTS, preclude the Attorney General of the State of New York from pursuing litigation.”
The institutions in my 2007 post have seen change:
- WAMU…gone!
- OTS…soon to be gone!
- First American…renamed CoreLogic.
- eAppraisIT…business as usual.
New York can proceed with a lawsuit accusing title insurer First American Corp of colluding with Washington Mutual Inc. to fraudulently inflate home values, a state appeals court unanimously ruled on Tuesday.
Attorney General Andrew Cuomo had accused First American and its eAppraiseIT unit in a November 2007 lawsuit of having “caved” to pressure from Washington Mutual to use a list of pre-approved appraisers who provided inflated appraisals, in an effort to win more business.
I have to confess I’m not too neutral here on this issue – a few years ago, I decided not to renew one of our FirstAmerican subscription resources (floorplans) since we had access to more cost effective resources. Despite the cancellation at the end of the contract period, FirstAmerican continued to bill us every month for a year despite dozens of calls by me, then proceeded to threaten us with collection and then ultimately sent us to collection. This was because I opted not to renew my subscription. They couldn’t get us out of their billing system. Scary. On top of that, they never sent the product (they always send the product and then bill you).
I finally resorted to screaming and yelling until I finally got it resolved. I’ve never experienced anything like that before.
Double Whammy
So its hard to believe an appraisal management company owned by FirstAmerican was above reproach but the courts will decide, not a disaffected (you should see the emails between Wamu and FirstAmerican presented in the Cuomo lawsuit. The link to the original lawsuit document is broken now but trust me, the emails were a doozy – here’s the Wamu 10k filing).
A False Premise and a Certain Irony
Here’s irony I can’t shake. Cuomo’s Home Valuation Code of Conduct agreement between Fannie Mae and his office change the landscape of bank appraisal work forever. What started out as good intentions to stop the conflict of interest between mortgage brokers and appraisers, ended up enabling the appraisal management company (AMC) institution which is what eAppraisIT is. The lawsuit shows that AMC are MORE exposed to bank pressure than individual appraisers are.
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