Friday, October 09, 2009
Appraisers and others ignored rules and laws
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Beverly T. Davis
Davis is a certified residential real estate appraiser in Vinton.
Re: "Appraisals are hurting housing recovery," Oct. 2 letter:
Based on Ronald J. Boothe's comments, I can only surmise that he does not know much about the appraisal process. He would like Congress to pressure the housing agencies in Washington to "adopt and enforce guidance that will halt inappropriate appraisal practices."
There is currently a very rigid set of rules and regulations that appraisers are supposed to abide by called the Uniform Standards of Professional Appraisal Practice. These rules came about as a result of the savings and loan crisis in the 1980s and have been in place and in force since 1989. Appraisers had to get licensed because of the need to have more regulation and control of the appraisal process.
Even with these strict regulations and guides in place, lenders, realtors, builders and appraisers found ways around the laws. Realtors sold homes to people who had no savings to make a down payment, houses were over-appraised through the urging and threats of mortgage brokers and others, loans were made to people who did not have to invest as much as $1 in the property.
All of a sudden, these poor souls were living in their American dream and they couldn't pay for it -- they lost a job, didn't get anticipated raises, didn't set priorities ... whatever the reason. Some tried to sell their homes and discovered they owed more on the house than the house was worth. Then the ball starts going down hill.
Loans are foreclosed. Values are driven down by the market, which includes the foreclosed properties. (Who's going to pay $300,000 for a house if they can get one just as good for $150,000 because it's been foreclosed on and is available?) Builders can't sell their inventory. And on and on.
The appraisers who were actively engaged in the process of over-appraising homes to meet the requests of realtors or mortgage brokers or builders were breaking the law. Some would defend these law-breakers with the fact that they were threatened with a cut-off of business if they didn't comply with the wishes of their clients (mortgage brokers, lenders, etc.). That doesn't excuse the shoddy practice, but I can truly empathize with a man or woman trying to earn a living and being threatened with a cut-off of income if they don't toe the line.
Last year, as a result of the increase in foreclosures and apparent fraudulent practices, the New York attorney general got together with Fannie Mae and Freddie Mac and came up with another set of rules and guidelines. Enter the Home Valuation Code of Conduct, which went into effect May 1. These rules and guidelines don't really affect the appraisers as much as they do other third parties who would try to influence the outcome of an appraisal -- i.e. mortgage brokers, loan officers, realtors, builders or developers, anyone who had an interest in the result of the appraisal.
The appraisers most affected by HVCC are those who didn't know how to appraise a property unless someone gave them a figure to work from: You know, start with the result and find a way to justify it. The client is no longer allowed to suggest or tell the appraiser what value to put on a property they are appraising. For anyone who is interested, this link, www.tinyurl.com/6drp36, will take you to the Freddie Mac Web site that will give you all the information you need about the HVCC and the correct way lenders and third parties should have been acting toward the appraisal process from the beginning.
Perhaps if Boothe would take a look at that and stop to consider what has gone on in the past, he might figure out that it isn't just appraisals that have slowed down the housing market recovery process. And it isn't more pressure from Congress that is required to get it moving again. It will take time and a lot of honest, hard work.
Good luck to him and to all who are trying to earn a living in the real estate industry. I know it's not easy.
