Time to hold brokers and appraisers accountable: MBA panelists
Appraisers are a fundamental part of the loan origination process. Unfortunately, deceptive appraisal practices are part of what caused the current housing crisis. Now, said firms at the Mortgage Bankers Associations’ Quality Assurance and Residential Underwriting Conference in Grapevine, Texas, it’s time to hold them accountable. During a panel Thursday, representatives from PCV Murcor and FNC Inc. spoke to lenders about enacting personal quality control when choosing an appraiser. “Just because an appraiser is licensed does not mean they are qualified,” said Kathy Coon, chief appraiser and director at FNC. The two firms -- one an appraisal management company, the other a leader in mortgage technology -- use the same set of guidelines to ensure qualified and honest appraisers serve their clients. They look, for instance, at where the appraiser is located and make sure they assign properties in that area. According to the panelists, if an appraiser tries to value a property outside where they are familiar with, they lack geographic competence and will provide an inaccurate appraisal. Another key factor is to track an appraiser’s comparable sales. Coon showed a map that FNC uses as part of its QC Vigilance platform to track all properties that were used to in comparable sales to a specific property. The appraised home sat in the bottom right corner with one other compared property. The rest were about a half mile away in a subdivision next to a country club. “Does that make you question the appraiser,” asked Coon. “Why did he do that? I’ll give you the answer: the properties next to the home were valued at $700,000. The homes in the country club were valued over $1 million.” She pulled the map from an actual filing. Jacqueline Doty, director of credit risk at Freddie Mac, stressed how important comparable sales are, reiterating that overstating and understating an appraisal is against the law. “Freddie Mac is not looking for a low appraisal. We’re not looking for a high appraisal. We’re looking for an accurate appraisal,” she said. Quality control vendors at the conference discussed how QC should begin at the start of origination and extend post-closing at a private Fannie Mae summit on Tuesday. They said it’s time to look to the sellers and servicers to abide by compliance. “Traditionally, brokers and TPOs haven’t had QC post-close on conforming loans and that shifts the burden onto the lenders,” said Tommy Duncan, executive vice president of Quality Mortgage Services. “I think we all realized at the summit the importance of post-close QC at the broker level and they should report that to the seller/servicer to monitor.” Quality control is a review file that corresponds to a loan origination. Vendors make sure the terms follow regulatory compliance, perform quality assurance credit and collateral analysis, and look for red flags to indicate fraud. Coon believes appraisers must be evaluated before a lender can determine if their appraisal is valid. “Value is not an opinion,” she said. “In appraisal practice, value must always be qualified.” Write to Christine Ricciardi.