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Virginia Regulatory Town Hall
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Department of Professional and Occupational Regulation
Guidance Document Change: Providing guidance to real estate appraisers and AMCs on the use of hybrid appraisals
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6/18/19  10:20 am
Commenter: Lori A. Noble, WVCAP

Real Estate Appraiser Board Proposed Guidance Document regarding Hybrid Appraisals
 

Dear Committee:

Bifurcation is not “modernization” of the appraisal process. The bifurcated model has been in place since licensure and the implementation of FIRREA for appraisers to train and apprentice new up and coming valuation professionals. Those appraiser apprentice/trainees are registered and regulated by the state. The apprentice/training to become an appraiser is how appraisers replace their credentialed ranks, serve consumers and protect the public trust. Replacing the apprenticeship programs with lender/AMC owned bifurcation models not only undermines the appraisal process, it undermines the ability for up and coming new professionals to share in the full scope of training typical of credentials and licensure. We are unsure what the long-term effects will be but anticipate a loss in appraiser numbers throughout the state and country due to the bifurcated/non-licensed inspector model.

How did this happen?  Lenders and AMCs took a fully functional apprentice and training program that’s worked for decades and scaled it to a fault for profit, to serve shareholders. It is apparent the goal is to break the appraisal process into smaller pieces to profit more from each piece. The end results will be less credible appraisals, higher cost to consumers, and no regulatory policies or consumer protection for so-called inspectors. The worst-case scenario is someone will be harmed or hurt. We believe this is inevitable with no training, regulation or accountability of said “inspectors.”

The irony of the model program from the top at the GSEs down to the local lender is that lender/AMCs forbid apprentice appraisers who are trained, regulated and accountable to regulators from performing the same processes. Yet, the lender/AMC model will allow untrained, unregulated, and unaccountable individuals to provide critical and pertinent information for the appraisal process. How is this even logical?  

Diminishing growth potential and restraining trade from those who are licensed and registered professionals in our respective states to grow our businesses honorably, respectfully, and with accountability are the results of these AMC/lender bifurcated being pushed into the housing valuation process.  

The bifurcated programs allow lender/AMCs to circumvent laws and control the valuation process that goes against the intent of FIRREA and Dodd-Frank and consumer protection. Lender/AMCs are not doing this to help consumers, they are doing this to increase profits because they can make more money off the consumer by breaking down each segment of the process.

Lender/AMCs stole billions from consumers with no accountability for decades because of the lender/AMC model. Unfortunately, consumers do not know better because full disclosure to consumers is not being met by regulators or the CFPB. We need strong agencies like Virginia to take a stand against change for the sake of change and keep consumer protection and the public trust the priority.

My personal experience with hybrids includes but are not limited to:

  • Misleading property reports. Inspector referred to the subject at the end of the street. The subject was physically located on the corner of the main road with commercial influence. No disclosure of commercial influence or views in the inspector’s report.
  • Misleading property reports. Inspector refers to all properties as “excellent” condition and quality. The properties reported as excellent are all over 25 years old.  
  • Inspector Training. I spoke to an appraiser apprentice who is also a home inspector. He explained he received one hour of training for hybrid inspection. He further explained he immediately saw the pitfalls and decided not to participate.
  • Misleading property reports. Photos provided in the inspection reports are not enough and the quality of the photos are less than stellar. Several omissions were discovered in my research.
  • Software Problems. Although companies promoting the bifurcated/hybrid appraisals have invested millions in creating apps, software, and online reporting, the software is not user-friendly.
  • Software Problems. The designed software makes it very difficult for appraisers to comply with Standards 1 and Standards 2 in USPAP.
  • Software Problems. After working on a report, data is lost, can’t be saved and all hours of work are lost.
  • Consumer Protection and Transparency:  there are no REQUIRED disclosures to consumers that bifurcated/hybrid appraisals are not completed by the regulated and credentialed appraiser.
  • Fees. Trip fees for various reasons range $75-$150.
  • Yet, fees for bifurcated appraisals range $60-$125 for the actual analysis. This is a huge problem and should raise a red flag to regulators just how convoluted and misleading the hybrid/bifurcated lender/AMC model is.
  • GSE 1004p, although not publicly reported by the GSEs, the rumors in the valuation sector is the GSE bifurcated model is a dismal failure and is not working the way they intended. The GSEs, however, has not made a public statement and likely will not.
  • The liability and long-term damage do not outweigh the benefits of any short-term gain.
  • Bifurcated/hybrid appraisal serve only a very select few and shareholders. They are not designed to serve the public, public trust, or save consumers money.

In closing, I respectfully hope the Virginia DPOR looks deep into what’s presented on the surface as talking points by AMC/lenders who are pushing the bifurcated model as a solution. We hope the long-term picture will defer any short-term decisions. It is imperative appraisers not be restrained from replacing our numbers and training the new valuation professionals of tomorrow as “independent”. Leaving the valuation process solely to banks, AMCs, and aggregators fueled the credit crash in 2008 because of conflicts of interest. The same leaders who took us down that devastating path are the same leaders pushing bifurcation.

We work diligently and honorably to avoid that same mistake from happening again. There is no appraiser shortage but there will be if the bifurcated model is allowed to go unchecked,  unregulated with unlicensed inspectors and out of state appraisers. How does this protect the public?

The only solution is clients allow appraisers to manage their licensed and credentialed trainees to perform inspections and reports as the intent of the bifurcated process and model was designed to be used. Allow apprentice appraisers to participate and sign in the appraisal process. We do not understand why we are being restrained while non-licensed individuals are being allowed to proceed.

Respectfully Submitted, 
WVCAP

CommentID: 72592