Warning - Chase Bank's 1004D requirements

From Dave Towne, some information about Chase's new (as of 6/16/2010) requirements:

"Appraisers...

This is a drive-by appraisal report for a (probable) 1004D fee, typically much lower in price than the drive-by fee would normally be.

Nowhere on the 1004D form Update does it indicate this level of reporting. The form says the appraiser must ‘summarize’ the info reported. There is no Fannie requirement (that I know of) that ‘new’ comps be driven and photo’d. But…you’d better damn well have a complete work file and data to justify how you answer the 1004D Update ‘Yes/No’ question. Fannie’s instructions to lenders say that if the question is answered ‘Yes’ then the lender must order a new appraisal.

This Chase requirement circumvents that process, and forces the appraiser to do a basically full blown appraisal prior to completing the 1004D.

What you do with this type of assignment is of course your own business decision. What you charge is your decision also. You do not have to accept the fee OFFERED by Quantrix (the senders of the Chase requirements). And you do not have to do the 1004D, even if you were the original appraiser.

This is just another recent example of escalating order and inspection requirements (probably) without properly compensating appraisers for what is being requested.

I hope you will make the correct decision for yourself and for appraisers nationwide when/if you get one of these new Chase 1004D requests.

(My BOLD below)

Dave Towne


Chase’s NEW Appraisal Requirements for the following 2 products: 1004D-Appraisal Update and 1004D-Final Inspection and Appraisal Update. The requirements apply to the “Summary Appraisal Update Report” section of the 1004D. These requirements are in effective as of (6/16/2010).

Chase Appraisal Requirements for a 1004D-Appraisal Update

Note: These requirements apply to the “Summary Appraisal Update Report” section of the 1004D form when either of the following products is ordered:

• 1004D-Appraisal Update
• 1004D-Final Inspection and Appraisal Update

The appraiser performing the Appraisal Update must, at a minimum:

• Perform an exterior inspection of the subject and new comparables from at least the street.

• Research, verify, and analyze current market data in order to determine if the property value has changed since the effective date of the original appraisal.

• Include an extraordinary assumption that the interior finish and condition are the same as the original inspection.

• Indicate on the 1004D form if the market value of the subject property has declined since the effective date of the original appraisal report.

• Provide a new sales grid with three new comparable sales that have closed since the effective date of the original appraisal to support your conclusion. Note: Listings may be included as a 4th, 5th comp, etc. if needed to support your conclusion. (We do recognize that the additional comparables being supplied with the Update may not be better, or more indicative of value, than the comparables used in the original report. Regardless, Chase underwriting needs to account for market activity occurring in the period since the original report date, so new comparables which closed after the effective date of the original appraisal must be provided.)

• Provide a new original front photo and a new original street scene photo of subject.

• Provide an original front photo of all new comparables provided on the grid.

• Provide a location map showing the subject property and all new comparables. Note: the neighborhood boundaries must be clearly visible on the location map.

The financial reform bill and appraisers

From Appraisal Today, Ann O'Rourke, Editor/Publisher:

The official name, as of today, is "Dodd-Frank Wall Street Reform and Consumer Protection Act." It passed a joint house/senate 20-hour conference Friday and is sent to Congress for voting. Of course, if it was just about appraisals, it would not have moved so fast.

If you have any other versions of the bill, don't use them as there have been some changes.

Hopefully, the bill will be approved by Congress this week. Lots of HVCC content such as no value pressure, etc. It requires AMC regulation and registration. The bill makes changes to FIRREA, RESPA, and other regulations.

Here's an excerpt:

From the Dodd bill "(i) CUSTOMARY AND REASONABLE FEE.-

"(1) IN GENERAL.-Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. Evidence for such fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments ordered by known appraisal management companies."

It is the biggest federal changes for appraisers since FIRREA in 1989. FIRREA had many major requirements, such as appraiser licensing. I don't know what that means for appraisers and federal regulations.

The full Dodd Bill (appraisals start on page 2205)



Also of interest, Alamode publishes an Appraisal Fee Reference, which gives shows the median and average fees of reporting appraisers. So if you are not sure what the 'customary and reasonable' fees are in our area, you can look here. At least it gives an idea of what is happening, and is a little more reliable than individual anecdotal evidence...

Appraisers lose out in Wells Fargo lawsuit

Wells Fargo and its appraisal management subsidiary Rels Valuation won an important lawsuit this month when a [ U.S. ] district judge granted the company's motion to dismiss. The lawsuit was filed by two residential appraisals who claimed that Rels Valuation had pressurized them into reaching inflated values on appraisal reports and then subsequently blacklisted them when they did not comply with demands.

Granting Wells' motion to dismiss, District Judge Claudia Wilken opined that ...to be held liable for violating the right to fair procedures, a private entity must have the power to “significantly impair” the individuals' ability to work in a particular field. “In essence,” she wrote, “the law concerns exclusion or expulsion from membership by a gatekeeper organization, like a union or an insurance company,” which she determined did not apply to Wells Fargo.

“Wells Fargo's extensive national involvement in originating and servicing mortgages does not necessarily mean that it wields significant power over the appraising profession in the geographic areas in which plaintiffs work,” wrote Wilken.

“It is especially important to note that, while loss of income after exclusion by a private entity is relevant, it is not 'conclusive proof' that the exclusion impaired the plaintiff's ability to continue in the profession,” she continued. In the judgment of the court, the percentage of business lost by Pearsall and Savage following their blacklisting was not enough to establish a duty to provide fair procedures. In addition, the blacklisting didn't affect Pearsall or Savage's ability to receive work from other mortgage companies.

“No authority requires the imposition of the fair procedure doctrine simply because removal from a single company's list of appraisers it chooses to retain substantially affects the economic interest of a removed appraiser. Defendants simply made a choice not to do business with plaintiffs; they did not exercise power as a gatekeeper of a profession nor did they prevent plaintiffs from pursuing employment by others,” said Wilken. On this reasoning, she dismissed the claim against Wells Fargo with prejudice, saying that any further amendment would be “futile.”

Source

No June ACOW Board meeting planned

I have not called for, and am not planning an ACOW Board meeting for this month (June), unless someone asks that we specifically consider some business element. There are various items “ in process” (such as the Summit, membership drive, inactive license research, etc), but nothing to report or act on at this time.

Thx.

Stan Sidor
President ACOW

Register today for ACOW at the Summit XII

Register here.

Location:
Howard Johnson Summit Inn at Snoqualmie Pass
(formerly known as Snoqualmie Summit Lodge)
603 SR906
Snoqualmie Pass, WA 98068

Reservations at the Lodge: A block of rooms will be available at the Howard Johnson Summit Inn. Rooms are $80 for 1 king and $90 for 2 Queens.

ACOW at the Summit XII Schedule
Friday August 20, 2010
12:45 PM – 1:30 PM ACOW Summit registration
1:30 PM – 4:30 PM Session I - Washington’s New AMC Licensing Law: What It Does, What It Does NOT Do, and What You Need to Know To Ensure AMCs Are In Compliance and What To Do If They Are NOT!
Presenter: Stan Sidor, ACOW President
6:00 PM Poolside Barbecue
3 hours of continuing education credit from Washington State

Saturday August 21, 2010
8:00 AM – 8:30 AM ACOW Summit registration
8:30 AM – 11:30 AM Session II - AMC Problems: How to identify and resolve them
Presenter: Richard Hagar, SRA, Appraiser, American Home Appraisals
11:30 AM – 1:00 PM Lunch Buffet/ACOW Meeting - ACOW’s Lobbyist, TK Bentler, will be there to provide a brief overview of the last legislative session, and what might lie on the horizon.
1:00 PM – 4:00 PM Session III - Defining Market Value and How to Adjust for Concessions
Presenter: Richard Hagar, SRA, Appraiser, American Home Appraisals
6 hours of continuing education credit from Washington State

ACOW at the Summit XII Cost
Friday August 20, 2010
Seminar $75.00
Poolside Barbecue $30.00

Saturday August 21, 2010
Seminars and Lunch Buffet $165.00

Complete package for all events $249.00

PLEASE NOTE:

Washington State Real Estate Appraiser Commission Meeting - CANCELLED

Due to state budget constraints, all commissions and agencies are being prohibited from holding public meetings in private facilities. For this reasons REAC will have to reschedule their August meeting to a public facility, and will not be able to hold it at the ACOW Summit at Snoqualmie. The ACOW Board is working to substitute the planned REAC meeting time with another seminar for Friday morning, August 20. Watch for details, coming soon.

.

Other Appraisal Organizations?

Would someone please volunteer to investigate whether or not any of the following appraisal organizations have chapters/members in WA, and whether they should thus be included as a part of ACOW?

AAA – the Appraisal Association of America

NAREA – the National Association of Real Estate Appraisers

NSREA – the National Society of Real Estate Appraisers


Thx.

Stan Sidor
President ACOW


Stan,

According to their websites:

1)AAA has no real estate appraisers.

2)NAREA has some Washington appraisers (see http://sb.narea-assoc.org/landing.aspx?cf=ALL)

3)NSREA had no members shown in Washington (WA was not an option).

Gretchen M. Young



Stan et al –

I am not familiar with the Appraisal Association, but NAREA is part of what used to be called the “ Scottsdale group” – two cereal box tops and $150 to obtain their designation. The National Assoc of Review Appraisers & Mortgage Underwriters, the Assoc of Construction Inspectors and other groups all share the same address and phone number.

I believe the National Society is an organization of African-American appraisers, originally formed because they could not join any of the other organizations. Ira Oakes, one of the original Appraisal Advisory Committee members, was a leader in that organization, but I have not heard anything about them since he passed on.

And by our charter, membership in ACOW is limited to ‘sponsoring organizations’ of the Appraisal Foundation.

Barry C. Wilson

ACOW Summit - Volunteer(s) needed

For this year’s ACOW Summit scheduled for August 20 – 21 again at the Howard Johnson Inn at Snoqualmie Summit, we will need a couple volunteers to assist with registrations for the Summit… checking attendees in and collecting any fees still owed. This will be just prior to the Friday afternoon session, and also first thing prior to the Saturday morning session. Please let me know if any of you are interested and available to help, and/or pass the word around and drum up a volunteer or two, ok?

This year, as our budget is so tight, I have instructed Seaops that there are to be no comp’d rooms, meals, or registrations….everyone (excepting the presenters) attending will need to pay the full cost (even I will be foregoing a comp room and BBQ dinner).

Stan Sidor
President ACOW

Are appraisal brokerages the new real estate villain?

The Devil You Know: Are appraisal brokerages the new real estate villain?

WA Appellate Court Decision

If interested, there was an opinion passed down recently by the WA Court of Appeals involving a case that included an issue about appraiser liability. One of my attorney clients sent it to me today as an “FYI”, and if you want I can send you a copy. The citation is under WA Appeals Div. II, No. 37596-6-II, Borish v. Russell.

In a nutshell, what the court ruled was that only in the case where there is a contractual relationship can the “economic loss rule” be applied, with compensation limited based on the terms of the contract. Without a contract between the appraiser (Russell) and the litigants (Borish) that defines and/or limits damages (since in this case the appraiser was engaged by a lender to appraise the Borish property), then the litigants may sue the appraiser based on a tort claim of fraud or misrepresentation, which fraudulent appraisal the Borishes relied upon to close the purchase of a home, and seek damages against the appraiser to compensate them above and beyond what the P&SA contractual terms may have been the buyer (Borish) and seller.

In this case, claims against the sellers were dismissed, as the limiting terms of the P&SA prevailed; the buyers are still going after the appraiser, however, and this ruling allows them to do so, even though the appraiser was not directly engaged by the purchasers, and included limitations on who could rely on and use the appraisal within the report. The buyers did rely on the appraisal to proceed with closing the sale, and it apparently included some incorrect property information that, had the correct information been known, would apparently have impacted the valuation, and thus the buyers may have had a chance to walk away from the deal.

Stan Sidor
President ACOW


There has been a requirement in Washington law for at least 10 years that the lender provide the purchaser with a copy of the appraisal three days prior to closing. Many mortgage brokers only provided the report if the purchaser knew to ask for it.

I believe the RCW is strong enough that if the buyer asked for the appraisal report and did not receive it at least 3 days prior to closing, they could delay closing and the lender must maintain any rate locks that might have expired.

The appraiser was found not liable in Shaaf v. Highfield (WA supreme court, 1995) because the buyer had not seen the appraisal report prior to closing, but the decision did say the borrower could have relied on the information in the appraisal if he had seen it. And the current Fannie/Freddie certification has a list of parties who, although not intended users, have a right to rely on the report.

I know we discussed this at some of the ACOW @ The Summit sessions and at REAC meetings, but I also know that many appraisers were shocked when HVCC required the same. The RCW only applied to purchases in Washington , HVCC extended that to all Fannie/Freddie appraisals .

Barry C. Wilson
Residential Reviewer & Training Supervisor
Lamb Hanson Lamb Appraisal Assoc., Inc



Barry,

There is more to that Shaaf v. Highfield than what you have stated. The Judge ruled that the buyer is a party and gets a copy of the appraisal and is an intended user (Washington only). Just remember that USPAP makes the appraiser hold to confidentiality and the appraiser CANNOT give a copy of the appraisal to the borrower. That copy must come from the lender, unless the lender has given the appraiser permission to provide a copy to the borrower (I would sure have it in writing).

Woody Woodworth
Appraisal Foundation approved USPAP instructor


All,

In this particular case, the buyer did receive a copy of the appraisal prior to closing, and – here is the crux for the liability issue/question – RELIED ON IT to proceed with the closing. Afterwards, it was apparently discovered that there were factual errors/inaccuracies about the property in the appraisal report that, if correct in the first place, would likely have resulted in a lower value (below the agreed upon purchase price), and thus the buyers would have had a chance to walk away from closing the sale.

Stan Sidor

Appraiser Coalitions in Other States

From T.J. McCarthy, SRA, a list of appraiser coalitions by State.

"I'm sure this list will continue to be updated on a fairly regular basis. The website is now up in a Beta format. Please feel free to send any suggestions regarding the site to me at tj@tjmccarthy.com. We probably won't be making major changes because of the cost involved, but we will create a wish list. For now we are looking at errors or parts of the site that may not be functioning correctly.

We would also like to get any news of legislative issues in your home state to post...Bills, Laws, Rules, etc.

Presently the coalition is a network of states working together to share and disseminate appraisal industry legislative and newsworthy issues. I'm sure we are all hopeful it will be a success and perhaps grow into a strong professional organization working to protect appraisers and users of appraisal services...that's a fancy way of saying consumers."

T.J. McCarthy & Associates, Ltd.
7903 W. 159th Street, Suite B
Tinley Park, Illinois 60477
Phone: (708) 614-7200
Fax: (708) 614-7228
Email: tj@tjmccarthy.com

Kenneth Harney: Mortgage and appraisal fraud spiked

Perfect timing for the article by Ken.

On Tuesday I'll be the speaker on a conference call with law enforcement officers across the US discussing this exact issue.

http://www.washingtonpost.com/wp-dyn/content/article/2010/04/30/AR2010043000041.html

In the class How to Identify and Avoid Real Estate and Mortgage Fraud I'll tell appraisers what I told the cops and what they will be looking for in appraisal reports.

If you are interested in attending a class, let me know and I'll schedule one locally. 6 hours of CE.

Richard Hagar, SRA

Bank Failure #64: Frontier Bank, Everett, Washington

Frontier Bank, Everett, Washington, was closed today by the Washington Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of December 31, 2009, Frontier Bank had approximately $3.50 billion in total assets and $3.13 billion in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $1.37 billion. ... Frontier Bank is the 64th FDIC-insured institution to fail in the nation this year, and the sixth in Washington. The last FDIC-insured institution closed in the state was City Bank, Lynnwood, on April 16, 2010.

Source

"Green" Value Increase Formulas

From Dave Towne:

For your reading pleasure, you may want to read this blog about how to calculate the ‘increase in value’ for a “green” property:

I present this only as information... ...this is the first time I’ve seen ‘numbers’ applied to the green revolution.

There are assumptions made in this blog presentation, and direct comparison to ‘non-green’ comparable homes is barely made … only the perceived increase in value based on the installation costs, or on the utility cost savings.

...The danger of applying this kind of methodology is the energy costs or savings and green revolution energy-efficient installations within the comparable properties is not generally known to the appraiser. Without specific information, the appraiser must report a giant extraordinary assumption that the comparable properties do or do not have similar green revolution features if suggested formulas are used to give a value increase (via adjustments) to the subject property.


From Stan Sidor:

Dave, yes, this is a concern that I have: that the “green revolution” advocates are developing or creating these “formulas” for “cost savings” (such as on utilities), and suggesting that these cost savings should (not “could”) be capitalized to reflect an increase in “value” based on this factor; however, the key issue is whether or not BUYERS are actually electing to pay MORE for these properties based on this factor ….or any other energy-related factor.

It is not enough that energy efficient features will help the homeowner save money, but rather if they transform that perceived (or known) cost savings into a higher sale price.


From Michael Imes:

Follow the money!

Look at who is presenting this info also. They are not appraisers, and they have an obviously biased interest.

.

Washington State Politics

Correction on tax initiatives. Initiative sponsor par excellance and alert reader Tim Eyman points out an inaccuracy in last Saturday's item about the tax increases Gov. Chris Gregoire signed. He and other tax foes in his camp have filed initiatives to repeal six of the taxes passed by the Legislature in its special session. The story said they had filed initiatives to repeal most of the taxes, and that's numerically incorrect. The Legislature raised 17 taxes, so their initiatives only cover about a third of them. Spokesman-Review. -- 4.29.10

Priest will run for Federal Way mayor, leaving the Legislature. Rep. Skip Priest has decided to enter the race to become Federal Way's first elected mayor. Priest, R-Federal Way, said he made the decision Monday and won't be running for a fifth consecutive term as a representative from the 30th Legislative District. STEVE MAYNARD in the News Tribune. -- 4.29.10

Lack of endorsement could signal trouble. The Olympia-based Washington Federation of State Employees has snubbed all of the incumbent Democratic lawmakers running for re-election this fall. The union, one of the largest state worker unions in the state, withheld endorsements for many majority Democrats in the House, too, sending a message that state workers are angry with the way Democrats have dealt with state budget and state worker issues over the last two years. Olympian opinion -- 4.29.10

Other Legislators dropping out:

State Senator Dale Brandland, a Republican who represents the 42nd District, has announced his decision to retire from the Senate. He has held the seat since being elected in 2002. The 42nd Legislative District encompasses most of Whatcom County. It includes northern Bellingham plus all of Whatcom's other incorporated cities: Lynden, Ferndale, Blaine, Everson, Sumas, Deming, and Nooksack. The district's two Representatives are Doug Ericksen and Kelli Linville. Linville is a senior member of the House Democratic caucus; she currently chairs the House Appropriations Committee. She now has the option of running for the position Brandland is vacating; but if she does, House Speaker Frank Chopp would need to find a viable candidate who can hold the chairman’s seat. Rep. Ericksen, a sixth-term Republican, has indicated he will be seeking the Senate seat.

Sen. Bob McCaslin’s return to the Senate following heart surgery is uncertain. McCaslin, R-4, Spokane Valley, had hoped to make it through session before the operation; however, he was experiencing difficulties and had to be hospitalized during the session. McCaslin has been ranking minority member on Judiciary and a member of the Economy Trade Committee.

Sen. Darlene Fairley, D-32 Lake Forest Park, Chair of Government Operations and Elections has decided to step down after 16 years saying it’s no longer fun.

In a surprise announcement at Sine Die, Rep. Lynn Kessler, D-24, Majority Leader in the House said she is retiring and will not seek a 10th term. She has served as Speaker Frank Chopp’s second in command for many years.

Rep. Mark Ericks, D-1 representative since 2005, will be appointed to a U.S. Marshal position and leave the Legislature. He was previously Bothell Police Chief for 12 years. He has been serving on House Finance and is vice chair of Ways & Means Committee. District 1, northeast King County and south Snohomish County, which includes Bothell, Maltby, Mountlake Terrace, Brier and parts of Lynnwood and Edmonds, will be losing both its Representatives.

Rep. Al O'Brien, D-1, also will be leaving the legislature after 14 years. He is a retired Seattle Police sergeant and served five years on the Mountlake Terrace City Council. He is vice chair of the Public Safety & Emergency Preparedness Committee.

Rep. Dave Quall, D-40. Skagit, Whatcom and Island counties will be retiring after 18 years. A retired teacher, counselor and coach, he is chairman of the House Education Committee. Mount Vernon Democrat Thomas Boucher, a member of U.S. Rep. Rick Larsen’s district staff, has announced he is seeking the 40th Legislative District seat being vacated by Quall.

Rep. Alex Wood, D-3 Spokane, a former broadcast journalist and radio and television talk show host, will retire after his seventh term in the House of Representatives. He has served as vice chair of the House Commerce and Labor Committee.

Rep. Deb Wallace, D-17 in Clark County, former Director of Business Expansion for the Columbia River Economic Development Council and current Chair of the House Higher Education Committee, has stated her intent to not run for re-election after eight years in the Legislature.

Also leaving office is Rep. Brendan Williams, D-22 Olympia, Lacy and Tumwater, who is vice chair of the Audit Review and Oversight Committee as well as a member of Commerce & Labor. Williams is one of only five legislators with a 100% scorecard from the Washington State Labor Council, AFL-CIO. An attorney, business consultant in private practice and past executive director of the Washington Health Care Association, he says he’s considering a run for the state Supreme Court.

Rep. Dan Roach, R-31 Bonney Lake, will be leaving the House to run for Pierce County Council. Replacing him as ranking Republican on the House Transportation Committee will be 12th District Rep. Mike Armstrong. Armstrong spent 21 years with WSDOT and has been in the Legislature for ten years…eight on the Transportation Committee.

At the Federal level, Congressman Brian Baird, 3rd Congressional District Representative for six terms, will be retiring and has endorsed former Democratic legislator and State Capitol figure Denny Heck to take his place. State Rep. Jaime Herrera, R-18, has stated her intent to vie for the congressional seat, as well as Sen. Craig Pridemore, D-49 Vancouver.

No May ACOW Board Meeting

At this time, I have decided to NOT hold a May ACOW Board meeting, as I do not feel we have anything of significance that the board needs to address immediately.

We are still planning for the August Summit, and I have been in touch with Dave Towne who is working on the membership drive. I recently spoke with Ralph Birkedahl of DOL about the rulemaking process for the AMC bill, but there is nothing that has to be done on this at the moment. I am watching and monitoring issues nationwide in terms of BPOs, other AMC laws and issues, and the possible “financial reform” from Congress, but nothing for us to act on now. If anyone has any issues that they feel we need to address, please let me know.

Thx.

Stan Sidor
President ACOW