Appraiser Income

Kentucky Passes Legislation Helping Appraisers Harmed by AMCs

On March 21, Kentucky Governor Steve Beshear signed into law House Bill 120, which created a new appraisal management company recovery fund to replace its current surety bond requirement.

The Kentucky Real Estate Appraisers Board will establish procedures for making claims against the fund and will administer the funds in order to provide restitution to licensed or certified real property appraisers who have suffered pecuniary harm by an AMC. Appraisers will be able to seek reimbursement for “reasonable and appropriate court costs.”

The legislation also extends the Kentucky AMC registration requirements to “portals” that “fulfill requests for appraisal management services on behalf of clients, whether directly or through the use of software products or online.”

The recovery fund is supported by an annual surcharge of up to $800 on each AMC registered in the state. The fund has a cap of $300,000, at which point the surcharge will be suspended until the fund needs to once again be replenished.

View details of the bill.

Republished from the Appraisal Institute

Hey Everyone, Fans, Appraisers and Haters.

My April 1st, 2013 (Aprils Fools Day) blog post that was a parody interview with fictitious AMC owners / CEO’s was not liked by all.

Although all the emails I received from appraisers stating they realized this was a joke, there was one AMC that threatened legal damage if the post remained up to readers.

Furthermore, I do believe in freedom of speech, but I do not have the time or money to fight this issue so I have decided to take the post down.

Next year I will produce a better ‘joke’ for us appraisers! I hope they don’t take me off their appraisal panel (new joke). 🙂

Take care,

Bryan Knowlton
http://www.appraiserincome.com

Editor’s Pick: One Appraiser’s Solution to Getting Paid
by Isaac Peck, Associate Editor

Here is one answer to “show me the money.”

The practice of appraisal management companies (AMCs) slow paying appraisers or not paying at all continues to be a problem for the industry- to the tune of millions of dollars in unpaid invoices as a result of recent bankruptcies of three prominent AMCs. As a result, appraisers are looking for ways to protect themselves and their businesses.

One appraiser has a solution that has worked for 20 years: she combines commonsense screening techniques, before taking on a client, along with the imposition of liens against deadbeat payers.

Property Liens
…continue reading the rest of this post: One Appraiser’s Solution to Getting Paid

By Hugh Son – Mar 13, 2013 8:50 AM PT

Bank of America Corp., the second- largest U.S. lender, cut an appraisal unit’s staff by about 5 percent last month as the firm rid itself of overdue mortgages, said two people with knowledge of the move.

The dismissals from LandSafe’s workforce of more than 1,000 employees began Feb. 22, said the people, who requested anonymity because the matter is private. Those affected include appraisers, who estimate the market value of properties, and regional managers, according to a Feb. 25 staff memo from Tracy Sanderson, a LandSafe senior vice president.

“While we have known we were overstaffed since the fall, we did everything we could to delay impacts as long as possible,” Sanderson wrote. “We were hopeful that our volume would return and potentially reduce the number impacted.”

The bank has scaled back in mortgages after being saddled with more than $40 billion in costs tied to defective home loans. Most of those came to Bank of America through its 2008 takeover of Countrywide Financial Corp., whose operations included LandSafe.

Bank of America, once the biggest U.S. home lender, fell to No. 5 in the fourth quarter and has been eclipsed by competitors including Quicken Loans Inc., according to newsletter Inside Mortgage Finance. The field is now dominated by San Francisco- based Wells Fargo & Co. (WFC), which accounted for almost 1 in 3 U.S. mortgages last year.

Distressed Borrowers

About 70 percent of work done by LandSafe appraisers was related to transactions for soured loans, including the auction of bank-owned properties and short sales in which a borrower’s home is sold for less than the amount owed, said one of the people. The bank’s expected increase in originations this year isn’t enough to offset the drop in work resulting from having fewer overdue loans to service, the person said.

Bank of America had about 773,000 mortgage customers who were at least two months behind on payments at the end of 2012. That figure will drop to 400,000 by the end of this year, fueled by the sale of mortgage-servicing rights on $306 billion in loans announced in January, the firm said.

Terry Francisco, a spokesman for Charlotte, North Carolina- based Bank of America, confirmed the company was cutting LandSafe personnel and placing some elsewhere in the firm. The current staff will be able to handle an expected surge in new mortgages in 2013, he said.
Origination Outlook

“If they do more loans this year than last, I’d be surprised,” said Paul Muolo, managing editor of Bethesda, Maryland-based Inside Mortgage Finance, who predicts Bank of America’s refinancing revenue will drop. “They’re not competing aggressively on rates, they take a long time to close loans, and they’re living off refis that will decline when rates rise.”

Bank of America’s home lending dropped by half last year to $78.7 billion after Moynihan shuttered its correspondent business, which bought mortgages marketed by third-party lenders. Wells Fargo, JPMorgan Chase & Co. (JPM), Quicken Loans, and U.S. Bancorp originated more than Bank of America’s $22.5 billion in fourth-quarter loans, according to Inside Mortgage Finance.

Eliminating workers who served delinquent borrowers is part of Chief Executive Officer Brian T. Moynihan’s plan to pare expenses. Bank of America dismissed 3,000 such employees and 6,000 contractors in the fourth quarter, he said. About $3 billion of quarterly costs tied to legacy asset servicing eventually will fall to $500 million, Moynihan has said.

“There’s nothing more important in our company than to get this done as quickly as possible,” Moynihan, 53, told analysts during a Jan. 17 conference call.
Lenders Retreat

Some of his biggest competitors have said they will pull back in home lending. JPMorgan, the largest U.S. bank by assets, will cut as many as 15,000 mortgage-related jobs through 2014 as fewer employees are needed to service soured loans, the New York-based company said last month.

Rising interest rates may discourage refinancings, which accounted for 71 percent of originations last year, and new loans for home purchases probably won’t cover the shortfall, according to a Mortgage Bankers Association forecast. Total lending will slide 20 percent to $1.4 trillion in 2013, and 24 percent to $1.06 trillion in 2014, the group said.

Remaining LandSafe appraisers may see a “slight increase” in workload because of the adjustment, Sanderson told employees in the February e-mail.

Staffing is “at the right level for our expected volume,” she wrote. “Our hope is that we will get through this challenging environment and then start to grow again.”

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

National Association of Home Builders recommends reforms of residential appraisal system

Serious problems in the residential appraisal process must be addressed in order to restore confidence in the residential real estate market and to establish a foundation for sustainable growth of the U.S. economy, according to a new white paper from the National Association of Home Builders (NAHB).

Appraisals are regulated by the states, so standards and requirements vary greatly, resulting in a system that is inconsistent, confusing and does not serve consumers well. The white paper, “Comprehensive Blueprint for Residential Appraisal Reform,” addresses these perceived problems.

It is the work of an Appraisal Working Group formed by NAHB last year to develop recommendations for comprehensive residential appraisal reform. The group consists of homebuilders and representatives from the financial and appraisal sectors. The Appraisal Working Group sought input from representatives of all stakeholders in the residential appraisal process, and the white paper offers specific recommendations for changes to all aspects of the appraisal system.

“Even as the residential construction industry shows signs of recovery, housing activity is thwarted by an appraisal system that remains dysfunctional and is a major impediment to a stable housing finance framework,” said Rick Judson, NAHB chairman and a homebuilder from Charlotte, N.C. “Until we see meaningful appraisal reform, the U.S. housing finance system will be operating under unprecedented uncertainty.”

Judson praised the efforts of Appraisal Working Group co-chairs Barry Rutenberg, NAHB’s immediate past chairman, and Joe Robson, who served as NAHB chairman in 2009, for their leadership.

The Appraisal Working Group addressed the need for reform in four broad areas:

• Regulatory framework and oversight
• Data and technology
• Professional standards
• Practice, process and procedures

“The states are responsible for oversight of appraisal practices, but many states do not provide the funding necessary to perform this function adequately,” Rutenberg said. “A modest investment in appraiser licensing and certification would go a long way toward improving the appraisal system.”

In its white paper, the Appraisal Working Group states that the regulatory framework for real estate valuation needs to foster more effective oversight of standards, guidance and enforcement.

The goal is to better integrate and streamline the jumble of existing requirements set forth by various entities to ensure that residential appraisals occur in a coordinated and effective manner and are subject to uniform and consistent standards. A more unified and functional system is required to:

• Establish ethics and uniform standards
• Promulgate best practices
• Monitor the activities of state appraisal boards
• Establish licensing and certification standards
• Set minimum education requirements
• Support independent education and training programs
• Create policies to ensure appraiser independence
• Enforce and oversee authority for anyone who engages an appraiser
• Establish a standards body responsible for setting data and technology standards

“We believe the white paper has many good ideas that stakeholders can agree on, and we are hopeful that policy makers will move forward soon on many of these proposals,” Robson said. “We look forward to working with our many partners to achieve meaningful reforms.”

The white paper can be found online at www.nahb.org/appraisalwhitepaper

Source: http://www.valuationreview.com/VR/ArticlesVR/Report-recommends-reforms-of-residential-appraisal-57315.aspx

Member Spotlight
Dan Drelich, New Jersey Appraiser, Chapter President of the NJ Chapter of the AGA
AGA Member Spot-light Interview
February 14, 2013
With Dan Drelich, New Jersey Appraiser, Chapter President of the NJ Chapter of the AGA
And Leo Regensburger, AGA National Member Coordinator

Interview:

Leo: Please tell me about your experience in the appraiser industry. Why did you come into the profession?

Dan: I had a passing interest in real estate ever since college, but ended up owning small retail businesses for about 15 years instead. Sick of high overhead it was time to investigate other career paths. I attended an Appraisal Institute meeting and spoke with appraisers to learn a bit about the profession. Looking around at all the old men in attendance led me to believe I’d have the field to myself in a few years. I can’t figure it out, but as a group, we’re still in our 50’s!
Since my entry into the profession was post FIRREA, apprenticeship was a requirement. I was fortunate to find a good (ethical) residential mentor and even luckier to hook up with a commercial appraiser during this time. It was in the mid 90’s when I started working on my own. General Certification in hand, residential practice appealed to me (still concerned with overhead). I’ve always worked from home as an appraiser, eventually building a separate office on my house.

Leo: Please tell me if your expectations of the industry have been satisfied. Are there areas in the profession that have been gratifying? What would you like to see improved?

Dan: I was satisfied as an appraiser doing typical lender work for 15 years. Then came HVCC. The loss of hard earned clients combined with low fees and inappropriate demands by Appraisal Management Companies caused me to consider leaving the profession. Since HVCC and Dodd-Frank, I’ve limited my lending work and moved toward attorney based assignments. It’s still a work in progress, but I’ve been successful enough to not look back. Fees are considerably higher and the work is more rewarding. I’ve become an appraiser again….no stipulations or call backs from AMCs. I’m able to produce appraisals using paired sales analysis that don’t need to conform to FNMA and FHA parameters….real appraisal work!

How can we change the industry? Our last chance is to band together. All current organizations need to work in tandem in order to be successful. In New Jersey, the IFA has been great to work with. We’ve been partners on an AMC bill (in progress) as well as BPO issues. We’ve reached out to The Institute, but with less success. Still, there is potential for a NJ coalition which could include the AGA, IFA, Institute, and ASA…..I’m still hopeful.

Leo: Would you recommend the Professional Appraiser industry to someone looking for a good profession to enter?

Dan: I have a son who graduated college with a business degree a few years ago. We discussed the possibility of his entering the field. The ability (and future ability) to earn a decent living in almost any other field outweighed his move toward appraising. Would I recommend appraising….No.

Leo: You are an appraiser and the Chapter President of the NJ Chapter of the AGA. Please tell me about how the NJ Chapter has helped you personally and influenced the industry in general.

Dan: In 2003 I decided to get politically involved and was able to find some likeminded appraisers who formed a loosely based group of rebels. We hooked up with a mostly dormant AGA and started a NJ chapter. We’ve been instrumental in developing AMC legislation, attacking the BPO issue, and staying in the public eye. Along with another AGA member, we’ve attended about 90% of our monthly Appraisal Board meetings. This commitment has given the AGA some respect from the Board….very important as we move forward with legislation.

Leo: Please tell me about your experience within the AGA. Why do you think it is important to be a member of AGA? What do you feel are our priorities for continuing to improve quality, service and making the Appraisal Profession stronger in the industry?

Dan: The AGA’s relationship with the AFL-CIO in New Jersey will be key to any success appraisers hope to have in fighting for our rights. Strength is measured by membership and lobbying efforts. Dollars spent by the AFL-CIO allow access to decision makers. A meeting with a Commissioner, Executive Director, or Legislator, is just a phone call away. (The IFA, Institute, and ASA are always invited to attend and participate in meetings the AGA initiates….we are inclusive in all our efforts.)

Is it important to be a member of the AGA? You bet! Without members, we’ll lose influence with our state AFL-CIO chapter.

Leo: Thank you Dan. It is a pleasure talking with you and I am sure the American Guild of Appraisers members will enjoy reading the great feedback you have given to us.

Appraisal Institute Wants Details on ‘Appraisal Hotline’ Operations

The Appraisal Institute and the American Society of Farm Managers and Rural Appraisers jointly sent a letter Feb. 12 to the Appraisal Subcommittee asking that it make its proposed protocol for operating the “appraisal hotline” available for public comment prior to its March 29 implementation.

In the letter, AI and ASFMRA said that while the concept of a hotline is sound, there exists almost no understanding among state appraiser regulatory officials, practicing appraisers and real estate and mortgage professionals as to how the hotline would function or even of its intended purpose.

The ASC announced its intent to consider (and potentially approve) a draft protocol to provide contact information for regulatory agencies related to complaints regarding appraisal independence issues and concerns over the Uniform Standards of Professional Appraisal Practice.

AI and ASFMRA requested that the ASC refrain from approving the protocol and instead release it for public comment similar to the process used by the ASC in drafting Policy Statements.

Read the joint AI-ASFMRA letter.

You received a letter in the mail informing you that your client has filed for bankruptcy. It is this moment you realize that this bad news just became your problem.

Many of us are familiar with the recent bankruptcy filings of Evaluation Solutions and its subsidiary ES Appraisal Services. Peter Christensen, attorney and general counsel to LIA Administrators & Insurance Services, shared in his blog that the total unpaid fees to appraisers, agents, and brokers as listed in bankruptcy documents is $11,048,411.97! This is a remarkable amount. Evaluation Solutions’ bankruptcy documents accounted for $9,349,612.97 of the total amount and a separate filing of its subsidiary was for $1,698,799.

I Received A Notice… Now What?
If you received a notice regarding Evaluation Solutions/ES Appraisal Services’ (I will refer to them as ES) bankruptcy you may be wondering what the next step is to try and recover money owed to you. Yes, a client’s bankruptcy can be costly for you, but most importantly, not adhering to the rules of the bankruptcy process can cost you significantly more.

Knowing the types of bankruptcy, how to play by the rules, and what you can (or can’t do) will help you understand the scope of your problem and ensure you don’t get in trouble.

Types of Bankruptcy
There are lots of information you can gather from the bankruptcy notice from ES to help you understand the nature of this problem. But first you must recognize the type of bankruptcy ES is filing.

Chapter 7 – This type of bankruptcy is the liquidation of remaining assets to distribute among its creditors.

Chapter 11 – This a financial reorganization of a business, which allows your client to function while they follow court ordered debt repayment plans.

Chapter 13 – Similar to Chapter 11, but rather than a business filing bankruptcy it is the individual reorganizing and following a debt repayment plan.

Ideally, it’s more favorable on your end if your client files for either Chapter 11 or 13. These types of bankruptcy give your client a breather until they figure out how to repay.

If your client however files for Chapter 7, which is what ES filed, not only will your chances of getting paid be reduced, but also you may be waiting a long time (even years) for this type of case to be completed.

Take A Number
At this point you are probably frustrated and would like to call someone to attempt to collect your money. Stop right there! Your actions can get you in deep waters. If you attempt to make phone calls to ES’s accounting department, send nasty letters, or try to file a lien (which some appraisers have done in other instances and is not recommended), you will face penalties.

Assuming you do get some money owed to you, you will have to wait in line. This is the second item you must understand. Here’s the payment order:

Lawyers, administrative expenses, and other professional services that are involved with the work of filing the bankruptcy.

Secured claims, including mortgage holders.

Priority claims, including wages and taxes.

Unsecured claims, which is where you as an appraiser may be categorized.

Equity claims, including stockholders.

So curb your frustration because all you can do at this point is wait.

What Can You Do While You Wait
Sure you have to wait for ES’s bankruptcy process to take its course, but there are some things you can do in the interim. Since this case can drag for a long period of time, you can do the following:

Consult with your CPA about taking a deduction on your taxes for the bad debt. If you manage to receive some money owed to you after the bankruptcy case is settled you can claim it as income at that time. See your accountant for more details.

It does not apply in this case, but if you have a future instance where your client files for Chapter 11 or 13 and wants to continue a working relationship, it may be to your advantage. Of course your immediate reaction is to quickly say “no way!”, but understand that Chapter 11 and 13 require debtors to stay current on all accounts moving forward. This means you can add a fee to your appraisal fees to recover what was lost, stricter payment time frames, and maybe exclusivity as other appraisers may not take another chance. Keep in mind that the best way to reduce or eliminate risks is to get paid up front.

Improve And Move On
Now that you’re somewhat familiar with the types of bankruptcy, payment pecking order, and what you may be able to do as the bankruptcy takes its course, it is important prepare for the future. This means assessing your appraisal business and how to prevent this problem from happening again.

First, create a process on how to screen new clients by knowing their payment history. There are many tools and resources you can use online that are free or for a small fee. Second, improve your accounts receivable aging management procedures. Just because they are still “current” doesn’t mean it does not require all of your attention. Current receivables can quickly turn into problems if you don’t pay attention. Last but not least, be persistent and tough but professional with your collections.

If you have an AMC bill in your state, read it and educate yourself on how it can help your appraisal business. There are sections in most AMC bills that require AMCs to pay by a certain time frame. For example, Texas AMC bill requires AMCs to pay appraisers within 60 days.

Also consider resources available to you such as factoring your receivables where the risk of non-payment is transferred to the factoring company. In this case, you can get paid quickly without the responsibility of collecting and liability of non-payments.

No small business is immune to the unexpected, but you can certainly minimize your risks as you work towards a successful 2013.

Ramir Rodriguez
Treasure Valley Factors
E: rrodriguez@treasurevalleyfactors.com
P: 888.777.9881 ext. 5037
C: 208.250.7676
F: 888.777.9538