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Guidance Document Change: Providing guidance to real estate appraisers and AMCs on the use of hybrid appraisals
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6/24/19  11:36 am
Commenter: Robert Engle / Rainier Appraisal

Hybrids are an Invitation to Mortgage Fraud
 

For well over a decade now, lenders would not accept a 1004 appraisal report where the home had not been "personally inspected" by the certified appraiser signing the report. Not only that, but it has also been required that the exterior of each comparable sale must be "personally inspected" by the signing, certified appraiser. 
These functions were considered to be "significant appraisal assistance". 
For years now, we appraisers have been complaining that these conditions make it impractical for us to hire trainees.... but no one listened... for YEARS. 

In addition, AMCs will oftentimes shop appraisal assignments for 2-3 weeks, seeking the lowest possible bid to maximize their profit. Then they complain about long turn-around times when most of it is on their end. 
For at least 3 years now, AMC & GSE leaders have been complaining about an "appraiser shortage", as they have pushed to create this 1004P hybrid appraisal.

So this purported shortage is most often due to the fact that AMCs cannot get a qualified appraiser to accept their low-ball, well below C&R (Customary & Reasonable) fees. 
What they will never admit to, though, is that this made up "appraiser shortage" is a phenomenon that..... They created! 

But NOW, all of a sudden in 2019 the AF/AQB turns on a dime and claims that the inspection of the subject property and the comparable sales exteriors is NOT "significant appraisal assistance"..... and now all the old rules and conventions are thrown out the window. 

In a traditional 1004 appraisal, a certified appraiser conducts a hands on inspection of the subject property, measuring the improvements, observing every side, soffit, window, downspout, door, deck board.....viewing every room and every wall, floor covering, fixture, bathtub, shower, toilet, cabinet, etc. 

In making judgments about the quality, condition and marketability of the subject of a federally regulated home loan, an inspection by an UNQUALIFIED person providing a few photos and their own sketch is NOT.... "the same thing" or an adequate substitute for the on-site obervations of an experienced certified appraiser.

The 1004P-Hybrid is NOT a streamlined form. It is not an alternative product like the 2055 or the desktop appraisal. The 1004P is nearly a carbon copy of the existing 1004 form.
Its very name (1004) describes its intended purpose - to replace the certified full appraisal with a product that claims to be the same thing - yet the field inspection is performed by an anonymous, unlicensed person who has no accountability to the signing appraiser. 

The 1004P has the exact same quality/condition ratings and descriptions as on the standard form (and physical deficiencies, needed repairs, structural integrity, etc). Yet appraisers will be expected to make these judgments, trusting a handful of photographs from an anonymous source. 

Here are a few other concerns I have with this hybrid appraisal process: 

* Even if an honest appraiser completes the inspection and a different honest appraiser completes the 1004P appraisal, the AMC can filter the data from the field appraiser, only forwarding to the signing appraiser what they want to be known. (i.e. - filter out any depreciation or negative info about the property) 

* If the field inspector is a minimally trained, low wage employee of the AMC, they will simply do what they are told, and speed (production) will be the primary goal. 

* If the field inspector is a new or not very busy real estate agent, they will simply do whatever pleases the listing agent - and both may work for the same brokerage! 

* Stories are already starting to come into online appraiser forums about how this minimally trained "inspector" is showing up to properties and identifying him/herself as an APPRAISER. Then the very subpar data that is noted is sent to the AMC who is then trying to convince certified appraisers to accept a 1004P assignment for locations 100+ miles away from the appraiser's home or office.... geographic areas in which they have little or often NO experience. 

The GSE's public relations campaign is claiming that the 1004P-Hybrid is somehow a "technology advance" or "modernization". 
As demonstrated, the 1004P has nothing to do with either of those buzz words. 
It is merely an attempt by the banks and their AMCs to eliminate certified appraisals and control the process of home valuation like they did before the post 2008 reforms passed by Congress.

If it comes to pass and the 1004P is widely adopted, the stage will be set for the next U.S. financial market crash, AGAIN caused by widespread mortgage fraud.  


CommentID: 72668