The group I am discussing here are those amoral, or is it immoral, or perhaps “unethical” is the right word, maybe all three? Anyway, these are those folks who actually have no problem paying their bills; no problem paying their mortgage, but they have decided, for strategic (read selfish) reasons, that they don’t want to pay their mortgage anymore. Maybe they are upside down in their house value, or maybe they just don’t feel like paying a large payment any longer, or maybe they don’t see it providing the outrageous returns (ROI) they think they are entitled to. When did our homes become investment vehicles anyway?

For the record, you home is not an investment; and its value is not guaranteed to go up. Ask any professional financial advisor, and they will tell you the same thing. Your home is your home, it is that safe, warm and friendly place where you keep your spouse and children (if any). Repeat after me, we do not gamble with our one and only safe, warm home. By definition our investments are risky that’s why we get a greater rate of return on them (supposedly) than on other, risk-free investments like U.S. Government Securities (Treasury Bills, Bonds and Notes). Your home is not an ATM. The goal is not to suck the equity-life out of it as if you were some sort of financial vampire and it your victim.

The goal is to pay-down or even, be still my beating heart, to pay-off the mortgage(s) and then and only then, when you are 62.5 years old, to refinance it with an FHFA insured Reverse Mortgage. Now you will get most of your equity back either in one lump sum (all cash) or as a monthly annuity AND you retain the right to live in your home, mortgage-free for the rest of your life! All you have to do is maintain it and pay the taxes and insurance and you will have a free place to live in and your equity in cash for the rest of your life. Is this a great country or what? However, you cannot do this as part of your retirement plan if you have no equity or if you walked away from your home in a strategic default that recently ruined your credit rating, nor should you be allowed to.

The semi-recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act includes a section on real estate appraisal reform known as the Mortgage Reform and Anti-Predatory Lending Act in Title XIV.  Subsection F institutes new real estate appraisal regulations.  Some of the more important changes include:

• First and foremost the “Sunsetting” of the Home Valuation Code of Conduct (HVCC) – that great agreement that created the AMC industry which then took as much as half of the appraisal fee for answering the phone and then calling a real appraiser.  [ This legislation will certainly be replace by other, similar law.  Let's just hope it is better written and that it might actually make sense. ]
• Appraisal Management Companies (AMC’s) are finally now required to be regulated by state appraiser boards.  [  They can no longer act like drunken cowboys running rough-shod over a helpless appraisal community?  Thank You, Dodd-Frank !
• Customary and Reasonable Fees must finally be paid to appraisers by lenders and AMC's - no more complex appraisal assignments for half the fee.
• Broker Price Opinions (BPO'S) can no longer be used as the primary basis for valuing residential property when the purpose of the valuation is for loan origination (new mortgage).  
• Subprime mortgages must have interior inspection appraisals now.
• Appraisers must me licensed in the state the property is in.  It is sometimes hard to believe these things must be spelled out, isn't this kind of thing fairly obvious?   
• The Appraisal Subcommittee (ASC) must establish a toll-free complaint line so that consumers of appraisal services have a way to file complaints that might actually be taken seriously.  The ASC must report violators to state governmental regulators who can sanction the offenders.
• All appraisal reviews are to be done by licensed appraisers. [ High school dropouts who worked at the car wash last month can't do appraisal reviews anymore? ]
•  Mandatory reporting of appraiser malfeasance.  [ Finally the fiction writers working within the appraisal industry have something to fear.  Now your absurd appraisal values and made-up market analysis will be subject to scrutiny by someone outside the self-absorbed lending community. ]
• Automated Valuation Products now have to meet quality control standards that include random sample testing and reviews. 

             The list continues but these are some of the more important points from the appraisers perspective.  All I can say is that it is about time these mistakes were rectified.  Of course we cannot legislate morality or ethics try as we might, after all this is not the first attempt to “fix” the appraisal-lending equation. 

             Reform Recovery and Enforcement Act of 1989 (FIRREA) which also tried to prevent the very things that contributed to our most recent financial catastrophe.  Things don’t seem to change much when the fox guards the hen house.  As long as special interest groups are “helping” to write the rules, the rules won’t stop the problems from recurring.  These types of problems have become so predictable that we can virtually put them on our calendars like Thanksgiving and Christmas. 

Click Here to Visit Patrick F. Casey Real Estate Appraisal Main Website

November 2011