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Editor’s Note: This opinion piece calls for transparency from Fannie Mae on AQM, on behalf of appraisers.
Troubling Times at Fannie Mae
by David Brauner, Editor
Appraisers should be concerned by Fannie Mae’s lack of transparency about its Appraiser Quality Monitoring system (AQM). In their published guidance and in various interviews, in the upcoming print edition of WRE (January 2015) and elsewhere, they remain mum on the specifics of a process that can potentially end an appraiser’s career.
If they have rules, procedures and guideless in place to evaluate the work of appraisers in a fair and consistent manner, they are not making the details public. We believe it’s time that they do so.
This is from the cover story in the upcoming print edition of WRE, now in production:
Just as Fannie Mae promised in their July 2014 AQM FAQ, appraisers are now beginning to receive warning letters that their appraisals contain inconsistencies, inaccuracies, or data anomalies that may warrant “further action” should such behavior continue. Fannie Mae says that the intent of these communications is for “training and educational purposes” and to provide appraisers with an opportunity to improve their work before Fannie places them on the AQM (do not use) list. Appraisers across the country are receiving such letters from Fannie currently.
In their written response to WRE, Fannie Mae seems to be saying “trust us.” Simply follow Fannie Mae requirements and you will have nothing to worry about.
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To its credit, Fannie Mae has laid out examples of unacceptable appraisal practices in their published guidance; FNMA’s 16 Deadly Sins, as Richard Hagar, SRA calls them in his WRE/OREP webinar Keeping off Fannie Mae’s New Appraiser Black List. But who is making the often subjective determinations on these infractions and using what criteria? How does the review process work? Who sits on these ominous sounding “review panels/management committees”? These folks may hold your career in their hands someday- do you blindly “trust them” to be fair? What are their credentials? Do they have local competency? How qualified and experienced are they? What’s the mix of automation and human review? How are appeals handled? As this process kicks into high gear, will Fannie Mae have sufficient staff to review every rebuttal thoroughly, fairly and in a timely manner- while you wait with your livelihood on hold? Is the process open, fair and consistent? If it is, please show us.
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We know of at least one appraiser who had to sue HUD to get the agency to follow its own guidelines to give him due process. Fannie Mae has yet to publish guidelines: how will they be held accountable? Meanwhile, the process is moving forward with appraisers getting warning letters every day. Fannie Mae is running AQM in secrecy and with no accountability to appraisers. Fannie Mae continues to hold its cards close to the vest and the career ending consequences of running afoul of AQM make it incumbent upon them to open up about the specifics of how this process works. If their aim is truly to correct bad appraising, this should be a no-brainer.
On Demand Webinars: Professional Appraiser Series
Improve Quality and Avoid Trouble with Fannie Mae
“Thank you. I really enjoyed the webinar and put the information from it into immediate use. Now I have all kinds of graphs and charts in my workfile.” – S. Forstner
Part 1: How to Support and Prove Your Adjustments
Richard Hagar, SRA explains the most common appraisal pitfalls when determining adjustments and shows you how to provide the proper support, analysis and documentation for adjustments in your appraisal report and workfile. This course will help you understand and utilize quick and simple methods for proving adjustments and help you avoid problems, blacklisting and legal actions. Watch Now!
Part 2: Fannie’s AQM: Understanding Quality and Condition Ratings
In 2014 so far, Fannie Mae has issued numerous “updates” and changes to their AQM policies, including additional requirements with respect to its Quality and Condition Q&C ratings. In this webinar, Hagar provides a blueprint for staying on Fannie Mae’s good side by understanding how to determine Q&C ratings and adapt to Fannie’s changing requirements. Watch Now!
About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states (OREP.org). He has covered the appraisal profession for over 20 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.
We’re always listening: Send your story submission/idea to the Editor: dbrauner@orep.org.
by RJ Knapp
Michael,
-I have written to the NWMLS until my fingers bled. They do nothing! I remember way back over 15 years ago when I was getting my MLS Orientation as an Appraiser having the instructor, way back then, making the statement not to consider any information on the listings as being accurate! It’s not changed and it’s worse as ever here in Washington. The DOL is as useless as the MLS…deaf ears and no $$$ behind we Appraisers. We’re fighting a lost battle before we can even assemble our troops. Appraiser’s, like musicians, are the most spineless group of individuals when it comes to uniting behind anything! There’s always someone who will “play for free/pay to play” aka do an appraisal for peanuts and/or not bother to write the MLS about bad data because all they want to do is fly through their report. The AI…useless, the ACOW (Appraisers Coalition of Washington)…more useless. Just like the MLS, send us $$$ and we’ll make sure we don’t do anything but line our own pockets. Am I jaded? Yes! I got my first RE License in 1983 and have been in this industry long enough to see it do nothing but go down hill. Unless Appraisers get off their collective rear ends and get some kind of serious ‘Union’ (OMG…the ‘U’ word…gasp!!) going, nothing will change. EVERY one of us needs to be unified or we’re destined to complete failure. Oh well, looks like the appraisal industry is going down the tubes! Pitty
by Alan G
These and related issues were raised at a recent AI conference presentation by Fannie Mae’s Robert Murphy. Mr. Murphy is the Director of Property Valuation & Eligibility at Fannie Mae. The audience attendees expressed their concern with Fannie Mae improperly blacklisting Appraisers and ending their career. The Appraisal User Community members have already documented Fannie Mae improperly blacklisting Appraisers.
Mr. Murphy’s response was to try to ignore the issues. When the audience pressed the issues, Mr. Murphy became upset and refused to respond.
All Appraisers should be concerned with Fannie Mae’s blacklisting and career ending actions.
-by Ken Smith
All appraisers should decline any assignments that are going to Fannie/Freddie until
-we can get this problem of blacklisting cleared up.I believe Fannie is also corrupt and should be disbanded.
by Michael F. Ford
RJ-Most boards in California appreciate emails letting them know about listing errors. One Board Official recently told me that getting their agents trained to properly fill out MLS forms is among their toughest challenges. Maybe WE need to be doing more to help them in that area.
-by Michael F. Ford
Hi Edd,
We should never be doing “gotcha” reviews in the first place, but your point is well made.
I helped an appraiser write a 13 page reply to a ‘gotcha’ desk review from a well known lender. The desk review was not signed. It was a proprietary form format that PURPORTED to comply with USPAP, or at least it claimed it did.
It didn’t comply with anything, except perhaps for the lenders desire to enhance the LTV by cutting the appraised value. It was obviously a “gotcha”, though in the end the only thing that will be getting sent to the folks at the State BREA is the review appraisal. The original appraisers work was fine. He was not charged one penny for the rebuttal help. THAT appraiser joined the AGA, OPEIU the same night.
-by Michael F. Ford
Nico, I agree. Reasonable and customary remain a ‘hobble’ on appraisal quality. The article points to another issue though. Equally important. Each of your points are valid. One also has to ask whether the long term treatment of appraising and appraisals is really designed to create the governmental equivalent of “benign neglect”.
Instead of turning off street lights to foster blight conditions so that a redevelopment agency can be found to be “necessary”, they are creating bureaucratic blight to first eliminate qualified appraisers so that they can then argue that ONLY the cheaper AVM alternatives are available to them; and that those value indications are statistically ‘close enough’. Perhaps they will get an MIT economist just like Gruber to testify as to how sound their thinking is.
One way of achieving that ‘goal’ is to promote substandard work by encouraging (accepting) far below reasonable or customary fees. Eventually, the good appraisers will abandon loan production work and FNMA will be left with only the novices or those who take unacceptable short cuts. FNMA can then ‘fire’ (blacklist) them all for legitimate cause; and if the reduction in approved appraisers is still not high enough they can accelerate the culling process though these CU UAD reviews.
They’ll ignore the fact that the creation of the UAD format itself lead to unavoidable diminished appraisal quality. Coupled with the meaningless 1004MC mandated analysis of “fictional markets” the whole FNMA dictated process is now rife with built in appraisal errors and reduced reliability.
Instead of worrying about whether my report conforms or is a match to some other unknown appraisers previously “accepted” appraisal of a property, I should be spending my time on supporting ONLY my own analysis.
Certainly if FNMA finds specific fault with my work, they should demand a correction OR sanction me by putting me on an unacceptable appraisers list (blacklist). However, Appraisal Reviews are ALSO appraisals that MUST conform to USPAP. As long as FNMA is a GSE, it cannot waive the MINIMUM REQUIREMENTS dictated by USPAP for appraisal review. FNMA cannot simply say my work varied from some database info derived from other sources. It needs to show where MY work is in error or otherwise deficient. The CU system has raised legitimate industry wide concerns that FNMA will no longer obey FIRREA-1989 and USPAP dictates for determining what constitutes a proper appraisal, or not.
Nico, your last question is really the most pertinent one. Where HAS the AI been since 2008 when the sky fell in on appraisers? From the feedback Im getting from even their own members, the AI SUPPORTS “appraiser assisted” AVMs in the mistaken belief THAT will be maintained and be another profit source for appraisers. THAT was a mistake. If FNMA dumps appraisers, why do they need appraiser assisted AVMs? It will already have been made clear they don’t CARE about the nuances of value. Even AI members will suffer.
I encourage all to join or form state coalitions for the long term battles ahead. In the meantime, there is only ONE organization that already exists that can effectively reach Members of Congress from both parties to hear our concerns.
That is the American Guild of Appraisers of the OPEIU, AFL-CIO. Look them up and give serious thought to joining them. They are NOT your grandfather’s labor union anymore. They represent professionals and take a professionals view toward solving problems.
My fellow appraisers, we MUST stop fighting each other and work together collectively to survive and prosper. Lets also use frameworks that already exist rather than reinventing the wheel.
-by Nico@visionz.com
Until customary and reasonable fees are paid to the appraiser the industry is doomed.
-No one can afford a trainee based on the fees being paid for reports assigned by AMC’s.
Until the local offices of US Attorney General’s are told when a $200 FHA appraisal is offered by an AMC and prosecution for Dodd-Frank violations occur, then the industry can look to the future. All article writers talk about transparency. How about breaking out the fee paid the appraiser and the fee paid to the AMC on the HUD 1? Wasn’t anyone at the AI doing any thinking in 2008?
by RJ Knapp
Always look forward to Working RE…keep it up Dave!
Again I say, when are Agents going to be held accountable for their inept, incomplete, and down right erroneous listing data that is apparently going to be the basis for we Appraisers getting thrown under the proverbial bus?!? Of every report I type and the 3 to 6 comps I generally use I can guarantee that there is at least one and sometimes more incomplete listings or wrong data! Wrong square footage, incorrect bedroom/bathroom count, wrong style code, they can’t tell the difference between a patio or a deck, every place has a “Territorial View”, and on REO or short sales most agents don’t even bother to complete the listing let alone actually go inside the house but just throw a lock box on and call it good….It’s endless and the local MLS doesn’t do a thing except collect their dues from us and sell tickets to its golf tournament!! We have to base our reports on GARBAGE!! And we’re getting slammed by HUD for incorrect data/reporting?!? According to a person I spoke with at the ASC in Washington regarding this very issue it’s because Appraiser’s have next to zero representation in DC whereas Agents have the NAR and lots of $$$ going into Lobbyist pockets. Oh, that’s right we have the Appraisal Institute…LOL!!! I retire this year, thank God, but I think all Appraiser’s need to start looking for other ways to make a living…real soon!
-by Edd Gillespie
Amen brother. Maybe Fannie will die if we don’t work for her.
-by Edd Gillespie
Thanks Dave,
While you are speaking of Fannie’s failures I propose that the appraisal industry in its quest to become professional completely abandon all official activities that have to do with “gotcha.” Somehow the practice of “throwing appraisers under the bus” has become routine and it, among other things, is an embarrassment to the profession.
As for Fannie, your suggestion that become transparent is well taken. I asked 20 years ago (when it was actually still possible to cold call to Fannie staff who had something to do with appraising on forms) if they could supply me with some specific data. The answer was no, Here you are twenty yeas later making a completely reasonable suggestion that Fannie be transparent about her activities.
There seems to be a pattern Davis, but it is not Fannie’s alone. Much is hidden by con men and women under the Confidentiality Rule and it was never intended for that.
So I agree with your sentiments. Let’s stop the “gotchas” and start using review for legitimate concerns such as expanding the bodies of knowledge.and information.
-by J Desi Groover
You know I hate bullies, and that is what Fannie & Freddie have become! They are clients, not a regulatory appraisal authority. They’ve imposed so many client requirements that the appraisal process in many cases is compromised. Personally it is a client I don’t want, and I will no longer perform appraisals for the GSE’s. My appraisal life became so much better when I put them on my blacklist! There are many other clients!
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