As predicted we are beginning to get a glimpse of the HVCC program; a double dip into recession led by another housing slump. It’s not like we couldn’t predict it. Run experienced appraisers out of the business and rely solely upon freshly trained experienced appraisers who have never seen a recession much less a major housing decline.rnrnI hate to say I told you so but I’ve been predicting this for over a year. Enjoy your new recession Andrew. It’s only a matter of time before it’s traced back exclusively to your greedy little scam.

Good appraisers will walk away from HVCC and leave the culls who are already in there hurting seniors with bad valuations. The lender UWs are devaluing homestead property appraisals and violating the law while they do it. Seniors don’t get to see the appraisal they paid for in most until the closing which prevents them from making clear decisions on whether the reverse is a good thing for them. Add to that the huge number of seniors who will walk away from reverse because they cannot pay for an upfront appraisal cost (a discriminatory policy) and it becomes an unworkable process. Every LO/Broker and Appraiser needs to be screaming at the top of his/her lungs to their congressional folks that they have lost their vote until this thing is fixed. You’d think the media would have picked up on this months ago.

This will not work for all the valid reasons listed above. In four years doing RM’s I have only had 4 deals fall apart due to under-appraisal…all with AMC’s…all with the same “Top 5 ” lender. I will leave the business before I will turn my financial future over to an appraiser who discount a fee by 50% just to find work. rnrnThis is causing a downward spiral of valuations further compounding the collapse of home values. Congress knows this and if the bureaucrats can’t fix it they will rewrite the rule themself.

James,rnrnThis practice has been in place for years. As the mortgage business began drying up, lenders began getting concessions.rnrnHere was the problem. Originators wanted more deals and had to reach out to seniors who were less and less afluent and were illiquid. These seniors were concerned that if they got the appraisal they could not afford to pay for it if the loan did not go through. These originators began promising seniors that if they went forward, there be no fees if the loan did not go thru (pre borrowers paying for counseling).rnrnSome originators (and brokers) negotiated deals that they would pay for the appraisals on loans that go thru but they needed to get a different compensation structure to offset those that did not. The agreement was that all appraisals would be charged the same, about $50 more than their current agreement per appraisal but on ones that did not, the originator would only pay $50. As appraisers saw the mortgage market drying up, some went along with these agreements.rnrnSuch arrangements made the appraiser a party to the transaction. In essence they were paid a small base and a bonus based on success. To many of us these appraisers lost their independence.

If a customer or lender orders an appraisal without knowing if it will qualify for a reverse mortgage in advance (the value is not high enough to cover their mortgage) then they will get stuck with the cost of an appraisal that was unnecessary. Seniors should not be subjected to this. HUD should allow appraisers to at least give a rough estimate of value otherwise the customer will be paying for an appraisal when they do not qualify for a reverse mortgage.

Important note: My last response was directed at The Cynic, not Appraiser_loft_Shane which RMD positioning made it appear. AMCs may work well, perhaps, if indeed the Senior Borrower interest is placed first. I’m just concerned how Loan Originators arrive at a reasonable home value prior to an expensive FHA Appraisal to ascertain whether the FHA HECM Formula will work for a young Senior with high mortgage debt. Many Seniors are in desperate financial situations: I would hate to raise a Senior’s hopes needlessly.

If AMCs are NOT used, the Lender would be responsible for all the tasks the AMC currently services. Lenders do not want to inherit these responsibilities because they will not be compensated. If AMCs are NOT used and Lenders are forced to integrate appraisal management into their day-to-day operations, then we would see prices rising substantially to offset the Lender’s inexperience, lack of personnel and undeveloped technology/platforms to deal with these new requirements. rnrnThere are AMCs out there like Landmark Loan Services who have already streamlined this process with borrower’s pocketbooks first in mind. The changes in price (as stated in one post) will remain largely unaffected. Static prices in ANY industry is an unrealistic expectation! rnrnIn these times of depressed values, borrowers need to understand the uncertainty that exists. It is the broker-lender’s responsibility to educate their clients to know the pros & cons of making a decision to proceed. HUD is being proactive to corral potential lawlessness before it can get started. Let us not forget values were given liberally in the traditional mortgage world putting our country into this housing market disaster. rnrnIf a reverse is a viable financial solution for a senior homeowner then an attempt at closing despite the appraisal cost is worth a try, is it not? rnrnSometimes results cannot be predicted unequivocally and costs rise — these are realities in our lives. Remember this change is intended to help our industry, not hurt it. There are plenty of other weaknesses in this industry that are far more pressing than this policy change. This is a move in the right direction.

AppraiserLoft is proud to say that we have been utilizing a powerful wholesale appraisal process for close to a year now. Our system allows the broker or originator to order and maintain status on each appraisal through an FHA compliant portal that is built custom to each lenders specific requirements and branding. rnrnConsidering our substantial experience in the Reverse Mortgage market and FHA loans over the last 4 years, we feel that our platform and support staff are a perfect solution for FHA wholesale lenders. In fact, we are currently applying this process to most FHA and Reverse Mortgage lenders nationwide. We know your market, your pain points and how to take great care of the senior borrower. It is what we have done for years. rnrnOur wholesale process is very smooth and although we expect the same sort of transition issues that came with HVCC, we feel that in the end the originator, lender and of course borrower will have a compliant and user friendly experience. Of course this will take give and take. We encourage our clients to suggest modifications and adjustments. rnrnFHA Invoicing and Cost Plus – Paying Appraisers WellrnrnAppraiserLoft has taken great pride in the fact that we pay our appraisers very well. Over the last year we have been using our “Cost Plus” process with appraisers nationwide. Under this process, we can guaranty a fee to appraisers that ensures they are well paid. Our reasonable management fee is simply applied as a separate item listed on the invoice. Not only does the “Cost Plus” process show great respect for our appraisers, it also assists in meeting the FHA requirements pertaining to distinction of actual appraisal fees vs management fees. We have been doing this for over a year as a national flat rate price and it works extremely well on a national basis. rnrnNot all AMC’s low ball the appraiser. Do your homework on this before making assumptions. True there are many AMC’s who sacrifice quality for margin, but that is not the case for all of us. In the end, it is essential that the appraisal be accurate to move your deal along. Through experience, we have learned that quality appraisers don’t work cheaply. You have pay for quality work. We feel that our “Cost Plus” process addresses this fact completely. rnrnBottom line is that you can have both compliance and excellent quality-service. It all depends on your appraisal partner and how willing they are to adjust and modify their process and pricing to meet your specific needs. As an appraisal partner, AppraiserLoft seeks to balance the compliance requirements with service and quality. You can have it all. rnrnPayment and CODrnrnUnder most of our client scenarios, the originator will be asked to pay for appraisal upfront with credit card, e-check or by allowing our team to collect from the borrower on their behalf. Our wholesale portal will allow the originator to order and collect through the same platform. Once again, this process has been in use with most of our clients for years and it works very well even in the Reverse Mortgage market. There are other ways to receive payment besides COD. We have seen it in action for years now. rnrnWe know that these appraisal adjustments be unwanted by some and overdue by others. If HVCC is any indication, we also know that with time and experience, the process will work smoothly. AppraiserLoft here to help with the transition. rnrnBest wishes to all. rnrnrn

jamesanelson,rnrnOne problem that has been showing up more and more is that appraisers have agreed to do appraisals at one price if the deal goes through and at a much lower price if they do not. This arrangement is despicable in that it encourages appraisers to be seen as an interested party in the transaction. This kind of arrangement puts the appraiser in a commissioned based arrangement with a minimum compensation base. Instead of rearranging the industry, those appraisers and originators/lenders should have been run out of their respective industries. Now we are all paying the price for their mischief.

Under the MetLife procedure, the applicant doesn’t have to pay up-front, so long as the broker is willing to pay. The broker then may be reimbursed at closing, from loan proceeds.rnrnIn better times, when our closing percentage was greater than 90 percent, our company did not require the applicant to pay for the appraisal up-front; we guaranteed payment if the loan didn’t close. Earlier this year, we made a business decision to require payment up-front for appraisals because of the declining percentage of applications that turned into closed loans. We don’t believe this is burdensome as credit cards may be used, and this up-front payment constitutes a gesture of good faith on the part of the applicant that he or she is serious about applying. rnrnAs an FHA-approved correspondent mortgagee, we do not look forward to our total loss of control of the case number assignment and appraisal process that will be the result of the implementation of HUD’s proposed rule that recently was published in the Federal Register. Like many of our colleagues who are similarly situated, we are exploring alternative business relationships that will preserve our ability to deliver comprehensive services to our customers.

James,rnrnThe issue is the lender. What will they require? rnrnIn any case, you will not be able to contact any appraiser for which you are the originator on any HECM. It does not matter if you work for the lender directly or a correspondent. Anyone generating income on the HECM on a commission basis is prohibited from dealing with the appraiser on all appraisals ordered after December 31, 2009 unless your lender requires an earlier application.rnrnIf your lender requires the use of a AMC, you are stuck; it does not matter what HUD says.rnrnYou may understand all of the foregoing but your comment seems to convey a different position. I apologize if I am trying to correct what you clearly understand.

The miost important statement in the article is: “FHA is not requiring use of an Appraisal Management Company.” Many of my FHA HECM loans just barely meet the FHA Formula. The Appraisal Fee has to be paid at closing; the Client has no excess funds. I always tell the Appraiser that I will personally see his fee is paid should the Borrower change his/her mind during the three day right of Ricission (Remember, Folks, that CAN happen.) I never want anyone to lose money on my poor work or inadequate judgement. I aways use local Appraisers who honestly know the market; I also try valiently to find mature Appraisers with as much experience as possible; and, those that are familiar with the FHA HECM process are even better. Most Seniors have had their home values whacked by the conventional mortgage crisis; in time those former values will hopefully return. One should also remember the FHA Formula is based upon Real Estate Values growing at 4% a year on average since 1929 in the United States, regardless of the ups and downs in the economy.

The cost will go up for the seniors, the more people who have a hand in the reverse mortgage loan the more the cost is. I have always used appraisers that I know are lower in cost and who seem to know how to fill out a FHA apprasial. I hated when i had to contact an appraiser and tell them the things that the lender is wanting comments on their apprasial. It seems like they were always hard to get in touch with and most of the time alway had something to say about the lender i was using. I dont use appraisers becuase I want them to get me a certain value. I use apraisers who I know will save my client money and help me get the loan closed quickly. Take that away and my senior clients will suffer.

Mackduckett, this must be a policy of the company you work for. HUD does not mandate how appraisal fees are collected by the lender. Some lenders do not collect anything at all. Some, like my company, allow checks or credit cards. Never cash. I believe it is illegal to collect cash.

Justiceforall123

I am fairly certain that Mackduckett was not referring to the lenders regarding the colelction of the fee for the appraisal but the AMC, which collects the fee for the appraiser up front and only with cash or credit card

Markjudge,

Again, this a procedure set by the specific lender. For instance, my company collects a appraisal deposit at application and the AMC or appraiser is prohibited from collecting any money from the client.

MetLife requires a credit card be used for up-front payment when submitting an appraisal request. If we can find another company that does not require payment upfront, then MetLife has lost another customer.

Many seniors will now have to gamble that the appraisal will be enough to pay off their existing mortgage. Many will lose that bet, and we will all lose.

Up until October 1, Bank of America never collected any fee from the customer. It was always “rolled in” to the loan amount. If the loan did not close, BOA ate the fee. On October 1 they began collecting an appraisal deposit. This is paid either by check or credit card. Never cash.

My company has used AMCs for our appraisals for three years. The information about underpaid appraisers, overpaid AMCs, and poor appraisal quality is not entirely accurate. If is a completely different case for non-FHA HVCC since you can hire someone off the street to become a licensed appraiser.

1. HUD's new appraiser certification which began two months ago is going to significantly help improve the quality of available appraisers.
2. Since appraiser's won't have a job if they don't sign up with AMCs, you will no longer have negative selection.
3. The costs quoted above and by all opponents of appraiser independence are inaccurate. The costs will increase marginally, if at all. Remember, the appraisers must accept lower fees slightly lower fees. FHA requires the amount actually paid to the appraiser him/herself to be listed on the invoice. If your appraiser is only being paid $250, go to another AMC.
4. If anyone finds a lender who will front the appraisal payment for the appraisals ordered by their correspondents, let me know. I'll start using them for my appraisals while simultaneously shorting their stock.

While I understand the intent of requiring AMC's from a risk management perpective, it will hurt consumers. The cost of appraisals will increase due to the AMC's involvement, the quality of appraisals will decrease as a result of a 50% pay cut for appraisers and a lack of incentive, and service levels that lenders are able to provide to consumers will decrease due to their inability to communicate with appraisers. Because lenders will likely end up eating the cost of many more appraisals, total loan costs will increase for consumers.

I have worked for brokers that, thinking it wise to be proactive, implemented the use of AMCs to be compliant with HVCC and a policy of pre-payment for appraisals to avoid non-payment issues they had from their forward business. If you're facing these for the first time, the notes below might help you prepare.

1. I had previously negotiated appraisal prices with several appraisers, but the AMC's contract charged the customer more and paid the appraisers more. The AMC did this to encourage appraisers to sign up with the AMC. It did, as the AMC had to charge a fee for their compliance work and filings. You'll have to change the default value of your GFE fee.

2. The up-front payment requirement really hurt our ability to help cash-strapped seniors roll the appraisal into the closing costs, but it did free us from a significant potential cost if the loan didn't close.

3. The LO or processor typically has to guarantee payment at the time of the order with a credit card information (either their own or the borrowers' or somebody else's) or the order will not be placed. That's been required even if you indicate that the actual payment is supposed to take place at the borrowers' door when the appraiser arrives. Sometimes I could take a paper order form to the borrower for them to fill out and fax to the AMC (so I wouldn't need use my own card or ask for theirs) but not always.

4. Slower turn and response times. No surprise here; the AMC is an entity designed to prevent some direct LO/appraiser communications. But sometimes the delay is for a day or more instead of hours, and this will make you miss normal submission target dates, which means delayed conditions from underwriting, which meant later closing requests. This could mean the funding happens later and possibly closer to a payoff expiration date for the borrower, or on the next but not the current pay cycle for you.

5. I hope you neve experience this one: the completely unexpected and sudden failure of the AMC. This AMC had collected appraisal fees from several borrowers but failed to pay the appraisers. I had to pay the appraiser for appraisals that had already been paid for before we could close the loans.

You'll have to change your process to accomodate the introduction of AMCs into your business for all the reasons described above. Just make sure you've got some accountability from the AMC for paying out what they collected.

The miost important statement in the article is: “FHA is not requiring use of an Appraisal Management Company.” Many of my FHA HECM loans just barely meet the FHA Formula. The Appraisal Fee has to be paid at closing; the Client has no excess funds. I always tell the Appraiser that I will personally see his fee is paid should the Borrower change his/her mind during the three day right of Ricission (Remember, Folks, that CAN happen.) I never want anyone to lose money on my poor work or inadequate judgement. I aways use local Appraisers who honestly know the market; I also try valiently to find mature Appraisers with as much experience as possible; and, those that are familiar with the FHA HECM process are even better. Most Seniors have had their home values whacked by the conventional mortgage crisis; in time those former values will hopefully return. One should also remember the FHA Formula is based upon Real Estate Values growing at 4% a year on average since 1929 in the United States, regardless of the ups and downs in the economy.

James,

The issue is the lender. What will they require?

In any case, you will not be able to contact any appraiser for which you are the originator on any HECM. It does not matter if you work for the lender directly or a correspondent. Anyone generating income on the HECM on a commission basis is prohibited from dealing with the appraiser on all appraisals ordered after December 31, 2009 unless your lender requires an earlier application.

If your lender requires the use of a AMC, you are stuck; it does not matter what HUD says.

You may understand all of the foregoing but your comment seems to convey a different position. I apologize if I am trying to correct what you clearly understand.

Under the MetLife procedure, the applicant doesn't have to pay up-front, so long as the broker is willing to pay. The broker then may be reimbursed at closing, from loan proceeds.

In better times, when our closing percentage was greater than 90 percent, our company did not require the applicant to pay for the appraisal up-front; we guaranteed payment if the loan didn't close. Earlier this year, we made a business decision to require payment up-front for appraisals because of the declining percentage of applications that turned into closed loans. We don't believe this is burdensome as credit cards may be used, and this up-front payment constitutes a gesture of good faith on the part of the applicant that he or she is serious about applying.

As an FHA-approved correspondent mortgagee, we do not look forward to our total loss of control of the case number assignment and appraisal process that will be the result of the implementation of HUD's proposed rule that recently was published in the Federal Register. Like many of our colleagues who are similarly situated, we are exploring alternative business relationships that will preserve our ability to deliver comprehensive services to our customers.

jamesanelson,

One problem that has been showing up more and more is that appraisers have agreed to do appraisals at one price if the deal goes through and at a much lower price if they do not. This arrangement is despicable in that it encourages appraisers to be seen as an interested party in the transaction. This kind of arrangement puts the appraiser in a commissioned based arrangement with a minimum compensation base. Instead of rearranging the industry, those appraisers and originators/lenders should have been run out of their respective industries. Now we are all paying the price for their mischief.