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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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6/24/19  11:24 am
Commenter: Denis DeSaix, MAI, SRA

Hybrids- Where do we draw the line?
 

I am an appraiser in California but like other appraisers from states outside of Virginia, I am a stakeholder in the decisions you make.

The significant concern of appraisers is how a bifurcated appraisal reduces the reliability of the findings when used for a consumer's mortgage-finance process.  Therefore, whatever decision Virginia makes, I hope it is limited to consumer mortgages (1-4 residential units) because outside of the residential mortgage arena, there are a number of scenarios where a hybrid-type process is acceptable and reliable given the client's needs, scope of work, and can produce credible results.

With regard to consumer mortgages, here is how I see it.  Question:  All other things being equal, is a bifurcated appraisal (the inspector is not the appraiser who is doing the valuation analysis and the appraiser relies on the inspector's results for significant elements of the valuation analysis) equally reliable as a traditional appraisal (the appraiser inspects and values the property)?  Answer:  Maybe, but I think it is fair to say there is more downside risk (lower reliability) than otherwise would exist.  Question:  If the hybrid appraisal is inherently more risky than the traditional appraisal, then is it appropriate to use in a residential mortgage-finance transaction?  Answers:  Certainly not when the value of the collateral is an important/major factor in the lending decision... or (I would argue) if the transaction is for a purchase.  But maybe it is appropriate for a non-purchase transaction when the value of the collateral is not a significant factor in the lending decision.  Determining that boundary is what banking regulators are supposed to do.  If the Virginia Board is going to make that call, then it has become a banking regulator in addition to an appraiser regulator.  I think it is safe to say that the Virginia Board will not dig into what risk factors (loan-to-value, credit scores, cross-collateralization, etc.) need to be met in order for a hybrid to be acceptable.  The Board is going to make an all-or-nothing decision ("We are going to allow state licensed & certified appraisers to complete these... or.... No way are we going to allow this!"). 

So here is my advice:  If you believe these products are detrimental to the safety of consumers in Virginia then forbid Virginia state licensed and certified appraisers from completing them and mandate that such products cannot be called "appraisals".  In addition, you should lobby Virginia's banking regulators to disallow these products for consumer mortgage loans for any institutions that fall under their jurisdiction because these products will likely make their way into the market and we could have a situation where an appraiser is not involved at all in valuing a home for a consumer mortgage loan.  Also, you should use your influence with the federal banking regulators to disallow these products as well.

And, please, limit the decision to consumer-mortgage related appraisals. 

Thank you!

CommentID: 72666