Tuesday, April 26, 2011

Short-term Compensation and Banking Failure


Short-term Compensation and Banking Failure

A study of stock option transactions reveals a link between the financial institutions most battered by the crisis and sales of shares by CEOs and other executives.

Title: Bank Executive Compensation and Capital Requirements Reform (PDF)
Authors: Sanjai Bhagat (University of Colorado at Boulder) and Brian Bolton (University of New Hampshire)

"This paper represents the analysis of billions of dollars’ worth of stock trades made by the CEOs of some of the top financial institutions in the U.S. in the years leading up to the 2008 economic crisis. Highly lucrative compensation programs encouraged many of the CEOs to sell their company stock, researchers found, raising the possibility that higher sales were associated with greater levels of imprudent risk-taking.

"…the study focused on the CEOs’ buys and sells of company stock in the eight years before the downturn. During this period, the CEOs collectively exercised stock options 470 times, purchasing a total of US$1.66 billion in shares. They made direct purchases on their own 73 times, for $36 million. But they sold their shares nearly 30 times as often — on 2,048 occasions. Overall, the sales came to $3.47 billion, netting them $1.77 billion after the cost of their options and direct purchases was subtracted. That works out to almost $16 million per year, on average, for each of the CEOs. They also received cash compensation of $891 million during these years, or another $8 million annually, on average.

"… The problem with all this, according to the researchers, is that many executive compensation programs allow top managers to own significant amounts of vested shares and options while they are still on the job and making decisions that affect company strategy and risk levels. In the run-up to the financial crisis, some of the CEOs made an abnormally high number of trades, the researchers reported, indicating a deep lack of confidence in their own firm’s future. Indeed, the researchers concluded, some CEOs were acting as if they knew that the performance of their institution could decline precipitously and were pulling their money out while they could.

"…If the trading levels before the crisis had been normal, the researchers said, it would have implied that the CEOs did not know that serious trouble was looming. In that case, the executives could have been seen as diligently working in tandem with the interests of their long-term shareholders and as being taken by surprise by 'unforeseen risks' in investments and trading strategies that plunged the institutions into crisis."


[Ed. - Over and over, we see that a primary cause for the "economic crisis" was the absence of "moral hazard" and/or meaningful consequences for violators.]

Sunday, April 24, 2011

Landsafe Agreement: Added Perspective

I would like to share the following that was sent to me…. for a more “legal” perspective about agreements such as the Landsafe Agreement…. Hope this helps!

I have added some on my own comments in parentheses and italics….

"This contract taken in totality is likely not enforceable because the effect of its terms is overly oppressive and does not create for even bargaining positions, but rather creates what amounts to servitude. It seems to create a contract of adhesion (take it or leave it terms), for which there is no opportunity to counter, and has terms that attempt to cover for potentially illegal acts as well as some level of unconscionability to it (by its terms it 'shocks the senses').

"A simple solution if you wish to do business with Landsafe is to establish a separate entity from your existing one, for the sole purpose of dbw Landsafe (yeah, but how many appraisers either would know they could do this, think to do it, or want to have to set up a separate operating entity?).

"Assuming the disclosure rule is even enforceable, then all they really could demand info on is what they have in terms of their relationship with you... and that is a specially created entity that merely discloses what they already know. To be able to do otherwise puts them in jeopardy of an employer/employee relationship. Doubtful they'd ever demand on that.

"Section 7.1 is absurd. Any first year law student could tell you that you cannot draft private agreements around your duty to follow laws now or in the future... If the government makes a law, you have to follow it, plain and simple, and no amount of contract law between private parties can speak otherwise. This would be tantamount to saying, for instance, if they insisted you violate a law based on this clause, how then, would they be able to enforce it? Go to court and tell the judge to enforce a contract clause that then has the appraiser breaking the law?

"Sections 8.1/2: Ethically, appraisers more or less imply they are competent in accepting assignments, and really, who can decide? What of someone who appraises resorts, or hotels, or golf courses? Where does 'regional competency' play into that?

"If you become a whistle-blower on Section 13.3 you are usually protected. Attorneys are barred from disclosing what a client says if it is in violation, and they cannot counsel someone to break the law. You cannot be sued for violating an agreement that says you will not disclose the illegal acts of another - see 7.1. (above)

"You have not violated anything you have not signed.

"As for Texas, assuming they seek enforcement on a contract clause they may have a shaky leg to stand on, however, you could always file to seek removal on hardship grounds, that for you to go to Texas in order to enforce on them violates due process. They cannot have a contract enforceable in Texas for which Washington has licensure jurisdiction... Will the Texas appraisal board investigate your bad appraisal? Not hardly. Besides, the property that is the subject of the contract is in Washington, and services performed in connection with this may well dictate where the proper forum is.

"Better yet, make it really dicey: Try filing in federal court and state court simultaneously, having the first court to hear have removal to the other if it is deemed proper. The federal courts would be proper due to diversity of citizenship if they are a Texas corporation doing business in Washington, assuming you can establish minimum contacts here (might be tough but not impossible). But you could also file under violation of some federal banking law, in which case federal courts would have jurisdiction. And if you get this contract entered in, you can be sure the judge will not consider them in an unsympathetic bent. BofA has enough problems already."

Stan Sidor, MAI
Kidder Mathews
Valuation Advisory Services

Landsafe Contract

Ok, here is my “two-and-a-half cents” take on this, based on a very quick overview of this “agreement”:

First and foremost, entities such as Landsafe represent large corporations, and are operating and developing complex internal controls and procedures consistent with large, bureaucratic companies. Thus, LOTS of “legalese” and layers of controls, perhaps – at least to some extent – not even caring about the business model (appraisers) they are dealing with. They do not care…they are looking after and operating from their own vested self-interest point of view, and have the resources to do so.

Second, I think it is safe to assume that they do understand and recognize that most appraisers, historically, are small business owner/operators, usually working by themselves, with many working from their homes, and that these appraisers are not likely trained or experienced in understanding either these complex agreements, or they are not equipped to counter them in any effective way – either you “play their game,” or you do not. I believe they are banking (no pun intended) that appraisers will likely just accept these agreements in order to do business, or those who DO understand them and do not like them will NOT agree and thus will not be able or willing to do business with them. So, they are left with those appraisers who are willing to play by their rules.

Further, I also believe they likely recognize (and do not care) that most appraisers will not likely have the financial resources to challenge agreements like this. They are also expecting appraisers to now set up and operate a business model that will require a LOT more internal controls and procedures….at a lot more cost. How many appraisers either can do so, or will be willing to do so? and, those that go along with this put themselves at risk for repercussions if they do not.

Ironically, too, while these requirements will increase costs of running a business, AMCs like this are paying appraisers (and too many appraisers are accepting) dramatically lower fees…. Not a very good business model, ya think?? So, appraisers, IF you want to work with AMCs like this, with all of their requirements, then you darned well had BETTER expect/demand higher fees… or, go out of business very quickly (of course, I also believe that they are likely counting on this, or salivating over the fact that those who do stay in and work with them will likely be operating at the TOTAL control of the AMC!).

As for their “rules,” wow…. Appraisers had better pay close attention to these agreements, and understand what they may be getting themselves into… It appears that entities such as Landsafe are posturing themselves to totally take over the control and functioning of the “independent appraiser’s” business.

Do you really want someone else to take over what you do, and how you do it?

For example, Section 6.6 says they can audit all of your financial records at any time! Who in their right mind gives another business the right to audit how much money they make, where it comes from, etc. – other than say, the IRS??? Why should Landsafe have the right to know what you earn and how much from any source, and/or also what you are spending the money on!!!??

Section 7.1 says that, if you agree to this agreement, you (and they) are not subject to any pending governmental action which could interfere with the performance of obligations under this agreements….but, if you (or they) have already signed this agreement, my take on it is that you (or they) have ALREADY then VIOLATED this agreement, because the agreement appears to be in conflict with at least some provisions of our state’s new – pending – AMC law!

Sections 8.1 and 8.2 basically say that if you agree to accept any assignment, that you are confirming that you ARE competent to complete the assignment, geographically and property type-wise, which effectively removes any responsibility from them for having to ensure that you are competent, and putting all of the liability onto the appraiser.

Here’s a good one: Section 13.3 – you are not allowed to disclose any communications from Landsafe. So, does that mean that if you receive an email or letter from Landsafe instructing you to do something that would violate our AMC law (or any other law or USPAP rule), that you cannot disclose that to any other party, including the DOL? And, if you do, does that make you in violation of their agreement, and thus subject to a lawsuit from them for disclosing “communications” from Landsafe???

Section 13.5 also says that you are not to disclose THIS AGREEMENT to anyone either….so, for those of you who forwarded copies of this agreement to me and to any others, you are ALREADY in violation of this agreement, assuming you have agreed to/signed it.

Section 17.1 says you must maintain copies of records for 10 years!...and, an additional 10 years beyond that if involved in any litigation! This is at least twice as long as USPAP requires…so, be prepared to incur higher storage fees/costs!

Section 19 pertains to the venue for dispute resolution or any trials or legal interpretations….. TEXAS! Texas is usually a very “corporate” friendly environment…. Do they even have any AMC laws at this time??? Does this mean that they cannot be compelled to adhere to WA law (I do not know the answer to this…I am not a lawyer).

So, there is my “take” on this issue….

Stan Sidor, MAI
Vice President, Manager
Kidder Mathews
Valuation Advisory Services

Landsafe at it again.

Landsafe at it again. Looks like we need attorneys like they have.

It appears there is an indemnity clause that our law will not allow once it goes into effect.

Why do appraisers sign this crap and work for these people? Why can’t they just say no?


Michael Imes, IFA

[Ed. - The contract, in all its rapacious, predatory glory, is posted here.]

Urgent Message to ALL Appraisers (Re Landsafe)


Recently, LandSafe released its latest “Appraisal Service Agreement,” which requires signatures from LandSafe appraisers. This 21 page document goes further than ever before in its attempt to get LandSafe appraisers to willingly agree to certain terms and conditions.

The agreement includes, but is not limited to, terms regarding representations and warrantees of the appraiser, indemnifications of LandSafe, fees, audits, mandatory training, dispute resolution, and rights to the appraiser’s work product, among others.

It is highly recommended that no licensed appraiser agree to these terms before consulting with an attorney. The impact of signing this agreement is substantial to the appraiser, to say the least, and it is advisable to fully read and understand the implications of signing the agreement.

Please note appraisers have the right to refuse to sign this document, thereby rejecting what could be harmful terms. Appraisers need to stand together on this issue!

We believe this agreement may be a “trial balloon” for other Appraisal Management Companies. Others may follow LandSafe’s lead and produce their own versions of “appraisal service agreements” in the near future.

It is incumbent upon every licensed appraiser to take the time to educate themselves, consult with other appraisal professionals and seek legal counsel, to fully understand the personal and professional impact of signing any such agreements.

Thanks, Ian Coates
NAIHP Vice President
(National Association of Independent Housing Professionals)

Thursday, April 21, 2011

AMCs, Banks May Be Misinterpreting “Customary and Reasonable”: Fed Staff

AMCs, Banks May Be Misinterpreting “Customary and Reasonable”: Fed Staff

Excerpted from the Appraisal Institute.

"Some banks and appraisal management companies may be misinterpreting Presumption 1 of the Federal Reserve’s Interim Final Rule “customary and reasonable” fee language, the Fed’s staff said April 10 at the Association of Appraiser Regulatory Officials spring conference in San Antonio.

"...representatives from the Federal Reserve indicated that utilizing AMC-involved assignments when assessing fees as part of a six-part test under Presumption 1 may be inconsistent with the Rule, which became effective on April 1. Federal Reserve officials indicated that AMC fees were not to be included in any assessment of recent fees paid to appraisers.

"...the provision of the Interim Final Rule that states that just because an AMC requires an appraiser to sign a document indicating that the fee that they are paid for an assignment is customary and reasonable does not necessarily satisfy the AMC’s responsibility to ensure that an appraiser is actually paid a customary and reasonable fee.

"...In determining [C&R fees] under Presumption 1, a creditor or its agents shall review the factors and make any adjustments to recent rates paid in the relevant geographic market necessary to ensure that the amount of compensation is reasonable. These factors include the type of property, the scope of work, the time in which the appraisal services are required to be performed, the fee appraiser qualifications, the fee appraiser experience and professional record and the fee appraiser work quality.

"..Some have speculated that creditors and their agents may not be interpreting the lengthy explanation in the preamble for the customary and reasonable fee rule. Doing so may be place the creditor at risk of significant fines and penalties. Unfortunately, it is up to an appraiser to proactively rebut Presumption 1, and it’s not clear what information is necessary for a satisfactory rebuttal.

"...Federal Reserve staff indicated they take complaints on this issue seriously, although no word was given on whether the Fed plans to issue any clarifying guidance regarding Presumption 1.

"There are two websites that appraisers can use to find the federal regulator for a creditor. Visit the Federal Reserve System – National Information Center website at www.ffiec.gov/nicpubweb/nicweb/nichome.aspx and the FDIC website at the “Bank Find” webpage at www2.fdic.gov/idasp/main_bankfind.asp.

"Questions regarding the appropriate interpretation of the Truth in Lending Act, including those on customary and reasonable fees, should be directed to the Federal Reserve Board at www.federalreserve.gov/feedback.cfm".


Senate Panel Report on WaMu Failure Highlights Appraisal Role

[Ed. - This is a post from AI Forum, submitted (with his commentary in blue) by Michael R. Cartwright, CMA, RPG, C/QP.]

My goodness, what a misleading headline that is after perusing this 'news' item.

"The U.S. Senate Permanent Subcommittee on Investigations released a 650-page report April 13 that included a case study on Washington Mutual’s failure, highlighting the role of unsound appraisal practices (not exactly) in the bank’s collapse.

The report chastised the Office of Thrift Supervision for failing to force WaMu to come into line with its appraisal practices, many of which were inflating home values and leading to risky lending practices. From 2004 to 2006, for example, while WaMu was conducting its own appraisals in house, OTS persistently chastised the lender for allowing sellers to estimate the value of their properties and directed WaMu to stop allowing an Owner’s Estimate of Value to be included in documents sent to appraisers. However, WaMu did not address the issue until the end of 2005.

OTS also concluded that WaMu’s use of automated appraisal software failed to comply “with standard appraisal practices” and showed “highly questionable value conclusions.” Yet WaMu continued using automated software until the end of 2006 before OTS took any enforcement action against the lender, the subcommittee report said. (Again, not exactly, since under FIRREA those AVM programs actually are not appraisals but 'estimations', if I recall correctly)

In an effort to address the issue, WaMu began outsourcing its appraisal functions to two vendors, EAppraiseIT and Lender Service Inc., and reduced its in-house appraisal staff from 400 to 30, while the two new vendors began conducting appraisals on homes purchased with WaMu financing, according to the report.

At the same time, WaMu assigned oversight of the outside appraisals to its newly developed in-house Appraisal Business Oversight group. An OTS appraisal expert advised the Senate subcommittee he saw no evidence to suggest WaMu could not handle a large appraisal outsourcing project, and WaMu management said it felt it had full approval from OTS for outsourcing.

However, WaMu faced even more problems once outsourcing began, according to the subcommittee report. After an OTS appraisal expert reviewed 225 loan files, he found several instances where home values had been inflated without documentation to support the increased value. OTS also discovered WaMu had failed to comply with appraisal independence procedures after outsourcing appraisal functions and that they (WAMU?) were also not in compliance with the Uniform Standards of Professional Appraisal Practice (However, USPAP does not apply to the lenders and their agents, only to appraisers!).

OTS was sluggish in taking enforcement actions against WaMu ('non-existent' would be a more correct word and that applied equally to each and every single lender that the federal government was supposedly regulating!), according to the report. OTS prepared a draft cease and desist order to stop the lender from making any further appraisal regulations violations, but the order did not come before the bank collapsed and was sold in October 2008.

Source: http://www.appraisalinstitute.org/ano/newsletter/DisplayNwsLtrArticle.aspx?volume=12&numbr=7/8&id=14029

OK, boys and girls, lets have a round of applause for yet another failure by all of the regulatory agencies to even begin to try to perform the tasks they were mandated to do.

Michael R. Cartwright, CMA, RPG, C/QP
Mineral Business Appraisal
[Solid Mineral Property Appraisal and Mining Business Valuation]

Wednesday, April 20, 2011

A Normal Appraisal Fee Is:

A "Customary and Reasonable" appraisal fee is the fee the borrower paid for the appraisal service.

Not the fee from the appraiser's fee schedule, but the "appraisal fee" the borrower/buyer paid.

This fee is always specifically identified on the HUD-1, a Federally required form, as "the appraisal fee." [Ed. - Line 804]

So the fees are already known and the market has been paying them, and the market (and appraisers) have third-party proof.

Now do the AMCs understand what kind of hole they are in?

Richard Hagar SRA

Monday, April 18, 2011

Budget Bill Language Update--Appraiser License Fees

Hello everyone:

I just heard from ACOW's lobbyist, TK Bentler, that the Senate Ways & Means Chief of Staff just said that appraisers are out of the bill and that the language was fixed!!!

Great job to all who contacted your legislators. We really hit this hard from both the legislative side and the policy side (due to the language being left in error) and all of our efforts paid off!

Thanks again for your continued support!

Justin Slack, SRA
President, ACOW | Appraisers' Coalition of Washington

Wednesday, April 13, 2011

ACOW - April meeting date has changed!

Board of Directors Meeting – Preliminary Agenda

Thursday, April 18, 2011, 6:00 p.m. – Please Plan to Begin Promptly

Lamb Hanson Lamb Office – Seattle
4025 Delridge Way SW, Suite 530
Seattle, WA 98106 (206.903.1500)

Tuesday, April 12, 2011

ACOW Action Alert

To all Washington State Appraisers:

Please contact the State Senator below TODAY to let them know wording in the House budget bill is incorrect. Voting on this will be this afternoon (due to a glitch with the ACOW servers, this is going out later than hoped for). Do so even if you are NOT in their legislative district. Just click on the e-mail link with their name below, or call their office.

ACOW has received info that the Licensing Fees paid by appraisers could increase – again – unless that provision is stricken from PSHB 1087, the pending 2011-13 budget bill which says:

(1) Pursuant to RCW 43.135.055, the department is authorized to increase fees for collection agencies, cosmetologists, funeral directors, cemeteries, court reporters and appraisers. These increases are necessary to support the expenditures authorized in this section, consistent with RCW 43.24.086.

This provision is in PSHB 1087, on Page 90, in Section 401, lines 12, 13 & 23.

The wording is apparently ‘left over’ from a previous budget bill, included accidentally.

Reminder: we had our license fees increase 30% in the last budget cycle. And…the Appraiser Section budget is not dependent 100% on State General Funds for its operation.

Talking points:

* Please ask legislators to remove the fee increase authorization in the Department of Licensing Appraisal Program [this would be by ‘amending’ the current bill]

* The DOL did not ask for this increase. I personally spoke to Ralph Birkedahl, Program Manager of the Appraisal Section of DOL last week and he indicated that this was accidentally left over from the last budget (he told me that the person physically drafting (writing) the bill was new and it was accidentally left in there). You can tell them that an ACOW representative spoke to the DOL.

* In 2009, a fee increase was authorized in that biennial budget; appraisal license fees increased 30.2% or $123 to $530 from $407. There is no reason for another increase.

Washington State Senators (Ways & Means Committee)

Ed Murray, Chair (D) 43rd Legislative District (Seattle) 360-786-7626 murray.edward@leg.wa.gov

Joe Zarelli (R) 18th Legislative District (Ridgefield) 360-786-7634 zarelli.joseph@leg.wa.gov

Lisa Brown (D) 3rd Legislative District (Spokane) 360-786-7604 brown.lisa@leg.wa.gov

ACOW's lobbyist sent a memo to the House Committee last week asking for this to be removed from the bill; at this point, we are unsure if that was successful. The house voted for the bill on 4/9 (and passed it) and it was forwarded to the Senate for a vote today! Please contact your senator and ask them to remove it.

Unsure? Click here to Find Your Legislator

Link to the bill: http://leap.leg.wa.gov/leap/Budget/Detail/2011/HOBill0404.pdf

Please Note: due to schedule conflicts, the ACOW meeting has been changed to Monday, 4/18 @ 6:00pm

Justin Slack, SRA
President, Appraisers' Coalition of Washington | ACOW

Monday, April 11, 2011

Appraisers to Unionize?

Regarding a recent email: "Maryland Appraiser Union Joins American Guild of Appraisers/OPEIU"

Any "unionization" attempted by appraisers will not survive a legal challenge.

Appraisers cannot unionize because it would be a violation of the Sherman Anti-Trust Act. Appraisers are independent contractors, and any discussion of setting uniform or baseline fees is price-fixing, and therefore illegal.

Consider that the Appraisal Institute must remain silent on the topic of fees for this reason. Also consider that the NAR has been threatened with multi-million dollar fines by the FTC for publishing fee percentage recommendations for member services.

We don’t need a union. We need fellow appraisers to stop sabotaging our profession by working for free.

"Customary and Reasonable" fees

There are a number of emails circulating regarding the issue of "Customary and Reasonable" fees, and the topic is becoming more indistinct with the aggregation of opinions.

1. The "Part 1 Provision" that AMCs and CoreLogic are talking about is a misrepresentation. AMCs must be in compliance with all 6 parts of the presumption, or they are not in compliance at all. They cannot break out one or two sections and claim exemption while disregarding the rest of the law.

2. Your appraisal fee is reported on line 804 of the HUD-1. Or, it is the fee you charged before AMCs began skimming your fees. It's really that simple.

3. If you are still being pressured by an AMC, report them to the Fed here, and the FTC here.

4. In the meantime, stop agreeing to work for less than your normal fee!

5. Richard Hagar has an online class about this, "Appraiser Independence and Mandatory Reporting of USPAP Violations." Part 2, "Appraiser Independence," includes a discussion about the "Customary and Reasonable" provisions.

Friday, April 8, 2011

ACOW Needs You!

ACOW, the Appraisers’ Coalition of Washington, is your statewide organization for all appraisers. ACOW’s primary purpose is to monitor the state legislature with our paid lobbyist for any activity affecting our profession. This happens more frequently than you may know. The secondary purpose is to hold an annual event where several state approved CE seminars are presented over two days. This is an excellent venue to fill your CE requirement dance card, and to mix and mingle with your peers.

It has become apparent that the level of enthusiasm among statewide appraisers to support and promote ACOW membership ($45 annual) is less than hoped. ACOW may not be able to continue to be your eyes and ears in Olympia. And the annual event (August 19-20) may be affected, forcing cancellation. ACOW is managed by a dedicated group of appraisers who volunteer their time and effort. A small portion of dues income is used to pay a professional support staff for limited ancillary services.

ACOW is fortunate to have one of the finest lobbyists in Olympia, at a fee far less than he normally charges other groups. And at a fee much less than other lobbyists for other organizations charge their clients. I’ve checked. But due to lack of ACOW membership, we risk having that relationship end. Without his services, we appraisers may face some serious negative consequences when we are not directly and continuously represented.

So my questions to you are these:

1- If you are not now an ACOW member, will you commit today to log onto the ACOW web site and select the best payment option (credit card or mailed check) for you? www.acow-wa.org (Apologies to those ACOW members who received this msg. No time to sort out current membership due to urgency.

2- Please respond to this message and let me know if you will commit to attend ACOW at the Summit, Aug. 19 & 20, 2011 – Howard Johnson Inn at Snoqualmie Pass.

Thank you for your support.

Dave Towne

A Serious Warning for Appraisers about E&O Insurance

Excerpted from this article by Peter Christensen

"… No one can deny that appraisers, and the AMCs and lenders who hire them, are the subject of record levels of appraisal liability claims. The most frequent source of claims as a group continues to be financially troubled borrowers, who collectively account for more than 50% of appraisal-related claims, and the single biggest source of claims continues to be the FDIC. Most claims also continue to relate to appraisals delivered between 2004-2008.

"The reaction to this crisis by some E&O insurance providers has been to pull back from the risk faced by appraisers and severely limit appraisers' insurance coverage. This reaction is exposing many appraisers and the parties who hire them to risks for which the appraisers have no coverage. In the most extreme example, the Five Star Appraisers E&O program and certain underwriters at Lloyd's of London decided in late 2010 that they would not renew any insurance policies for appraisers who needed coverage for appraisal work they did in the past (aka "prior acts") and discontinued their existing policy. Instead, appraisers were offered the chance to purchase a new "no frills" policy which does not cover any of the appraisers' "prior acts" before the date of the new policy. This means that appraisers who choose this policy have no coverage under that policy for any appraisal work they have done in the past.

"…The new Five Star/Lloyd's is cheap -- and can be cheap -- because it provides no coverage for most of the claims that appraisers are now experiencing…"

The article includes a list of some of the most worrisome exclusions in the new Five Star coverage.


Thursday, April 7, 2011

April 14 Meeting Agenda

Board of Directors Meeting – Preliminary Agenda

Thursday, April 14, 2011, 6:00 p.m. – Please Plan to Begin Promptly

Lamb Hanson Lamb Office – Seattle
4025 Delridge Way SW, Suite 530
Seattle, WA 98106 (206.903.1500)

For the Lamb Hanson Lamb Office, the building elevators close at 5:30pm; for the Lamb Hanson Lamb offices at 5:30pm.

If attending and plan to arrive after this time, please call ahead of time to arrange for access

(For directions, go to: http://acow-wa.org/MtgDates.html)
To attend the meeting via phone conference: -dial 1.218.339.4300 -when prompted dial access code: 872158#

Call to Order

1. Establish Quorum: Justin Slack, President
2. Approval of Agenda: Justin Slack, President
3. Approval of Prior Meeting Minutes: Justin Slack, President

Officer Reports

1. President’s Report: Justin Slack, President
2. Treasurer’s Report: Joe Creech, Treasurer
a. Monthly and Current YTD Status

Committee Reports

Ad Hoc Membership Committee Dave Towne
Summit (Topics) Dave Towne

Old Business:

1. Legislative/Regulatory Issues:

a. WAC Rulemaking for new WA AMC law
b. HB 1371 REAC/ Advisory Committee

2. Administrative Topics:

a. Chapter Member outreach
b. Paying Lobbyist in 2011
c. Fundraising Ideas for remainder of year

New Business:

1. Administrative Topics:
a. Green Rountables (Olympia/ Bellevue—March 2011)
b. 2012 ACOW Status


1. Next ACOW Meeting Date: May 5, 2011

Adjournment: Justin Slack, President

For more on ACOW, click: www.acow-wa.org

Board of Directors
Justin Slack, President
Mark Noble, Vice President
Joe Creech, Treasurer
Michael Imes, Secretary
Jodi Standaert, Director
Barry Wilson, Director
George Nervik, Director

Tuesday, April 5, 2011

SEC Proposes Credit Risk-Retention Rules

MARCH 30, 2011


WASHINGTON (Dow Jones)--The Securities and Exchange Commission voted unanimously Wednesday to issue draft proposals forcing firms that package loans and other assets into securities to hold a portion of the credit risk on their balance sheets.

The "risk-retention" rules, mandated by the Dodd-Frank financial law, will hit every corner of the securitization markets, from car loans to mortgages. The law requires banks and other issuers of securitized assets broadly to retain 5% of the credit risk on the theory that they will adopt more prudent lending standards because they will have "skin in the game." Issuers that pool assets that meet certain conservative lending standards will be exempted from the risk-retention requirement.

Wednesday's proposal is identical to draft rules issued by five other regulators, including the Federal Reserve and the Federal Deposit Insurance Corp., earlier this week. The Dodd-Frank law directs six federal regulators to write the rules jointly.

Under the proposal, certain "safe" residential mortgages that meet a 20% downpayment requirement will be excluded from the risk retention rules. Issuers of securitized assets backed by certain commercial loans, commercial mortgages and car loans that meet underwriting standards set forth by federal bank regulators will also be exempted.

In remarks at the meeting, Commissioner Kathleen Casey, a Republican, said she wanted to see stakeholders and the public comment on whether the requirements are too restrictive or permissive and whether the exemption for certain residential mortgages is appropriately crafted.

"This proposal cannot be the final word on risk retention regulation," she said. "This market is too fundamental to our economy to get risk retention wrong. Thus, the rules that we ultimately adopt must support or, at a minimum, not unduly hinder the securitization market."

Meanwhile, Commissioner Luis Aguilar, a Democrat, requested that people comment on whether securitizers could skirt the proposed rules.

The proposal is now open for public comment until June 10. A second vote by the commission and approval by the five other regulators is required before it can be made final.

-By Jessica Holzer; jessica.holzer@dowjones.com

License Fee Increase?

I have just been notified there is a provision in the new budget which will raise appraiser licensing fees. ACOW is working on it.

If you object to this provision, you should get a note off to your reps ASAP. You need to also be calling both the House and Senate Ways & Means Committee to oppose.


Michael Imes, IFA

Sunday, April 3, 2011

Fee Pressure From Law Firms

BV firms seeing more fee pressure from law firms

It’s a sentiment offered by a number of BV (Business Valuation Resources) firm insiders who completed our short survey on law firm clients. The respondents also indicated that law firms are getting worse at explaining the scope and legal issue of the engagement.

These trends indicate a need to educate your attorneys. Don’t take on a litigation engagement without sufficient time to prepare and disclose your expert opinion pursuant to the applicable rules. Make sure to get all the timeframes and deadlines in a case as soon as possible, so that you can send your “wish list” (document/discovery request) to the attorney with ample allowance for responses.

Make sure the scope of your expert designation fits your experience and proposed testimony. Lastly, be realistic about costs and don’t whittle the scope of the engagement to fit the client’s budget if it compromises your ultimate opinion and/or compliance with professional standards.

BVWire Issue #102-5, 29 March 2011

Friday, April 1, 2011

Let The Whining Begin

Guess what day it is? That is correct, DF is now in effect. Granted there is still a lot of legal rambling out there, but now is the time for all of you to stand up and be heard! Below Valocity has sent out a notice that pretty much says you aren’t in control, they area. Well…Blahh Blahh Blahh.

When is everyone just going to say, “no”? If we all did, they would be forced to play by our rules. All of our fellow peers that aren’t aware should be reminded how much power we have working together! It is our profession, not theirs. Urrrr. Just say, no!

Michael Imes
michael at appinc dot net

[Check out this hogwash - AMCs can certainly be depended upon to struggle valiantly to be allowed to continue skimming their fees from our work. M. Tabor]

An Important Message from Valocity Regarding Dodd-Frank

With the April 1st deadline for full implementation now just hours away, we wanted to reach out to every affiliate appraiser on Valocity's panel to bring you up to speed on the Dodd-Frank bill. We know how important this is to all of our appraisers and we have spent great effort over the past year to see that appraisers receive higher compensation for their work.

Dodd-Frank was signed into law in July of 2010. If you have been following the news on this saga, you are aware that the original intent of Title XIV covering Customary and Reasonable Fees, was based on the presumption that AMCs should pay appraisers "retail" fees or fees calculated absent AMC involvement.

We were disappointed that at the 11th hour certain lobbyists and others with influential voices were able to add an additional "presumption" that allows Customary and Reasonable to be calculated with the inclusion of fees historically paid to appraisers by AMCs. To add insult to injury, this newly-added method of calculating Customary and Reasonable was referred to as Presumption 1, while the original method, which excluded historical AMC fees, was suddenly being referred to as the "alternative" presumption.

Valocity has been actively involved in monitoring the progress of Dodd-Frank from its inception all the way to today. We have been doing everything in our power to strongly recommend to our lending clients that the safest and best path to take is to adopt Presumption 2. We recommend it not just because it offers them the best chance of avoiding any regulatory entanglements, but quite frankly, because it's the right thing to do for the industry as a whole and for appraisers in particular.

Valocity has always prided itself on its commitment to appraisal quality. And that begins with attracting and retaining the best and most experienced appraisers to our nationwide panel. We try very hard to operate in the most appraiser-friendly manner we can. To accomplish that, we have been working with our lending clients and promoting a "Cost - Plus" approach where they pay customary and reasonable to the appraiser based on Presumption 2, and then pay a management fee for all of the other services that Valocity provides as their AMC.

Many lenders continue to be extremely tight-lipped about which Presumption they will adopt, and how they feel about the cost-plus approach. But they ultimately drive the decision because they bear the burden of potential exposure to significant fines by the Federal Reserve if they are deemed to be paying fees that are not Customary and Reasonable.

Some of our clients have already indicated that they will modify their fees. Some of them have indicated that they feel they were already in compliance with Customary and Reasonable. And still others, even at this late hour, have yet to fully communicate with us what their intention is. Some clients have come right out and asked us what they should do. For them, we have of course, advocated a Presumption 2 approach.

We should know within a week which direction virtually all of them will go. But with the April 1st deadline looming, we felt it was important to make all of you aware of the many variables that are still in play.

Valocity has vehemently lead the charge with our clients in promoting Dodd-Frank's original intent of paying "retail" fees. Clearly lenders realize there are now two distinctly different options. We are awaiting client decisions as their legal departments weigh the options and give us final direction. At the end of the day, we have to do what we can to stay competitive and to continue to provide you with a steady flow of work at the best fees we can possibly offer. Right now, we continue to be staunch supporters of Presumption 2. But like any organization in any mortgage industry sector, we have to be flexible and willing to adapt to ever-changing circumstances.

We are aware of how important this is for all appraisers, and we will do our best to keep you informed as we gain further clarity in the coming days and weeks. We encourage you to keep a good outlook and to focus, as you always have, on continuing to produce the industry's very best appraisals. We are hopeful that there will still be some positive adjustments by lenders as they begin to receive negative feedback from appraisers.

As always, if you have any questions or concerns, please contact Valocity directly at 866.367.8611 or infoval@valocity.com.


The Valocity Team

Note: A comment was submitted to this post that I will not publish with the vulgar reference. If you want to resubmit without the obscenity, I'll post your comment. It would also be nice if you had more of the courage you demand of the rest of us, and did not hide behind "Anonymous."