Thursday, December 17, 2009

On “Geographic Competency”

“Geographic Competency” is a recent buzz word in our industry, most often used as an accusatory slur by market participants who are upset that a deal did not close. Supposedly, this is because the appraiser was not geographically competent to appraise the property, because s/he came from a considerable distance away.

The Appraisal Institute rightly reminds us about the appropriate USPAP Competency requirements, and the issue was covered in the Appraisal Foundation's USPAP Q&A last June.

To pick one AMC as an example, FNC also has a blog, and a recent post describes the rules regarding this issue as well, and they go on to describe how they intend to insure geographic competency in their job assignment process. I think it is helpful to know how this is regarded from the standpoint of our clients, whether we believe "geographic competency" is really at the root of failed loans or not.

"Geographic competency" was never mentioned by lenders in the halcyon days when they were busy shoveling money out of helicopters to satisfy Wall Street's ravenous hunger for Mortgage Backed Securities. Many of us were asked to step out of our usual areas of expertise more times than we could count.

Suddenly, because deals aren't closing, "geographic competency" is a convenient straw man that is easy for the public to grasp, and an effective vehicle to shift blame to appraisers. Lenders have removed over 85% of their products and enacted onerous restrictions that have shut out a stunning amount of people who want to buy a house, but it's still the appraiser who is at fault, somehow, some way.

We are easy to blame because we are a fractured group. The DOL has approximately less than 1/3 of Washington's appraisers on its email list, so even Washington State is not reaching all Washington appraisers with important information. It cannot be overstated that we, as a professional group, need to stand together in order to resist and counter the defamatory slurs that too easily gain traction in today's soundbite media.

We perform a service that is not easily understood by the public, and therefore are susceptible to being misrepresented by other, more politically powerful groups with an agenda and a need for scapegoats.

In the last few months, AMCs have unilaterally demanded as much as 2/3 of appraiser's fees in order to hide their cost from the public, and with impunity, force appraisers to sign contracts (You wanna work? Sign this.) with indemnity clauses that all but guarantee the appraiser will be bankrupted by any legal action. FNC, our example from above, is no exception in this latter regard.

The crowing about "geographic competency" is largely a smoke screen to distract everyone from discussing the devastating effect AMCs have had on appraisers and the real estate industry in general. But until we stand, as a group, with one voice, and counter these accusations effectively, we will continue to be dictated to by others.

The most efficient way for you to make a difference is to join ACOW. It's inexpensive, and in return for your support, you get access to the people who are representing us in Olympia, writing the proposals and modifications to bills that directly affect every one of us. You get input into that process, and to be heard by your colleagues about whatever is on your mind.

Come on! We'd love to meet you!

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