You get to play god for a day. What aspects of due diligence in the appraisal process for either appraiser or lender would comprise your ten commandments.

#1) Thorough sales history of subject and comps.

Disreguarding sales that are truly comparable but ignored to make a specific value. Really gets my goat. See a TON of it in my review business.

Money Man, what 'Thou Shalt' would you invoke for lender due diligence to address that issue.

Did I mention that new or innovative concepts will be compiled and exposed to a peer at the national appraisal fraud level.

Appraiser due process is already on the table.

How about doing something about appraiser shopping,

Actually make the Neighborhood the subject S/D or 1 mile from the subject. Not both,,if it is in a S/D,,that is the comps...Make overlooking these sales to hit a number a lose your license offence..

Make not paying a appraiser because a value was low or the deal did not close because of value a loose your license type of thing for the lender - LO..

Make appraisals COD - must be paid by the borrower and no other third party.

Make the lender actually disclose how much they are paying to third parties such as a appraiser....
They do it for Attorneys but lump the appraiser fee into a misc catagory or another catagory..
If wells fargo wants to pay the appraiser 100 for a appraisal, it must state it on the Hud 1...

Would a national registration of mortgage applications with assigned case numbers valid for a specific time frame not unlike HUD chums address appraiser shopping?

I would have the lender enstate a review process that looks for these issues and does somthing about it, like removing the appraiser for their acceptance list. If the problems persist with certain brokers who find another "rubber stamp" appraiser, then I would have the lender barred from any further funding. I have personally see the inside operations of a local lender. This lender had a portfolio of loans that they could not broker due to this issue. The issue was mainly from one large local mortgage broker. I am talking about over 100 bad loans a month. The end result was that the lender did not want to cut off funding as the volume produced by the broker was so large. This lender said that they would pressure the broker to refi those bad loans in 12 months so they could move the paper. I'd be willing to bet that the volume has plummetted and the portfolio has turned out to be worse than 1st expected. I was offerred a review position and turned it down because if you disagreed with a value, it did not matter the management could override your opinion and do the deals anyway. Serves em' right-I hope they go belly up!

I was really hoping to solicit more ideas relating to both appraiser and lender due diligence. Surely some among you have enough experience to contribute something meaningfull, particularly those touting their review expertise. There's no such thing as a dumb idea until it's thoroughly vetted. Spanx proved that.

A third-party payer system for appraisals.

Lender orders appraisal from favorite/convenient/devil he knows" appraiser comapny. This is automatically routed through FNMA, HUD, WHOMEVER, website to register the transaction.

Borrower pays for appraisal in advance, funds to third party/ reimbursement upon transmission of appraisal. That payment in entered national register.

Appraisal paid from closing funds, that payment comes from escrow amount mandated by HUD, whomever, paid directly to appraiser by third party and entered in national register.

Benefits: lenders/appraisers deal with whom they want. Payment guaranteed by third party that either collects escrow or advance payment from homeowner.

Yes, there are many potential problems with this. But it would still leave appraisers free to set their own fees.

Youse Pappy, Spanx is a very good example of "What the HECK were they thinking?"

I don't understand what Katrina is saying at all

1) "Lender orders appraisal from favorite/convenient/devil he knows" appraiser comapny.".. Standard operating procedure

2)"Borrower pays for appraisal in advance, funds to third party/ reimbursement upon transmission of appraisal" ??? the appraisal was ordered from favorite appraiser as per first statement, why give money to third party?

3)"Appraisal paid from closing funds"... Aginst USPAP, we aren't supposed to work contigent on getting paid at closing. Why involve a third party if the appraisal was paid for in advance.

4)"Benefits: lenders/appraisers deal with whom they want."????? Standard operating procedure

5) "Payment guaranteed by third party that either collects escrow or advance payment from homeowner.
" How much are we going to pay these third parties?

My question about the procedure is WHY do we care about the anticipated value?? It is not our problem!
Our job is to protect the man that is lending the money and not anyone else! If the borrower cann't afford a $350 appraisal how in hades is he going to be able to afford the payment? In fact it is better that someone knows up front that the home they want to buy is not worth what they are planning on paying.

Flame suit on, fire away.

No disrespect to Katrina but Randy I agree. Any connect between fees and due diligence was lost on me.

You however have piqued my interest. Are sale prices or refinance amounts relevant to value? In the early days this info was never disclosed or even considered. The value of the property was what it was, unaffected by external economic forces relative to a transaction. We really don't appraise property anymore. We appraise transactions. Is the there any due diligent change here that would render better credible opinions.

I'm of the opinion that since the lender has the biggest financial position in the purchase of a property they're really the buyer........comments.

Pappy, based on everything I have ever read we are supposed to be independent and "objective" when determine our opinion of value. I also discovered very early that this is not the truth, 98.5% of the appraisers that read this board will accept or turn down assignments based on the requested number being met. I am fortunate in that I am retired and do have another income coming in so I am not going to starve. It is my opinion, and I know how little that is worth, that as long as work is being accepted based on the fact that the appraiser thinks he can make the number the situation will not ever get better.

I am simply proposing a third-party payer system that would be able to control quality by controlling payment.

Appraiser doesn't have to collect at the door, is always sure of getting paid. OK, no payment at closing (just thought that would be reasonable if payment were legally-mandated part of escrow). But I would like to point out that there IS a difference between "payment CONTINGENT upon closing" and "payment AT closing." Appraisers would be paid by third party whether or not closing took place.

The role of a third party in this would be a spot check of random appraisals BEFORE closing---and before the appraiser was paid. Or a check of red-flag appraisals in fraud-ridden zip codes, or a check of red-flag appraisals by an appraiser who has failed the due diligence random scan before.

No one would ever know when his or her appraisal would be selected to be checked BEFORE payment, and payment wouldn't be made (and closing delayed) until the errors were corrected.

All appraisers would be rated for their accuracy by this third-party entity. This list would be available to everyone----lenders, other appraisers, potential employers of appraisers, etc.


Randy---don't worry about hurting my feelings---YP said to throw out the ideas, and this is one that may deserve to be thrown away. But I strongly believe that some sort of method to keep people on their toes is needed.

Who would pay for this third party?

Good question! What if $1 or fifty cents of every appraisal fee that runs through it is assessed for the creation and maintenance of the third party entity.

Yes, it's money out of our pockets. Or we can add $1 to our appraisal fee to cover it. But this could also fund fraud investigations, as well.

I'm also thinking that participation in the third-party entity could be completely voluntary. Lenders could have their choice of appraisers who were willing to be vetted BEFORE payment, or those who weren't.

If there were such a registry/third party payer system, it would need to be a NON-PROFIT in order to keep it from looking like an AMC.

And those who were willing to participate could possibly charge higher or full fees. And cut out the AMC's in the bargain.

And if that became the industry standard, lenders would almost be forced to use those appraisers and not go to AMC's for cut rates.

How would this non-profit differ from what we are trying to aviod here? Who would control the "do not use list" of this new entity? Why not let lenders have a fee panel of appraisers like it was in the good ole' days. I mean, with actual oversight of their business practices by the feds. I hate gov't regulation but someone has to watch the bankers. Every 10-15 years they seem to have a reoccuring theme-bad loan practices leading to collapse of partial or the entire real estate lending industry. I don't have the answer and don't know how one could. The real problem being avoided is the never mentioned ethical delima of GREED.