Compliance: Why would it take so long to get it right? - by Wayne Valliere

July 13, 2018 - Appraisal & Consulting
Wayne Valliere, Barnstable
Plymouth Appraisal Services

As a field practitioner, I have often wondered, about the Federal National Mortgage Association (FNMA) forms not being USPAP compliant (Why aren’t FNMA Forms USPAP compliant?). I guess FNMA, either hasn’t heard of USPAP; or like most federal and state government agencies, just don’t care. You must understand, a government enterprise that is in conservatorship like FNMA must be pre-occupied with bigger issues than the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).

I remember when licensing and certification was mandated. A brave new world would be ushered in, a new beginning that would change the way appraisers did business. Prior to mandatory licensing, clients would call the regionally appropriate offices and say, “what’s your fee and turn time.” Now that would stop and third party intermediaries as clients would email several regionally appropriate offices and say, “what’s your lowest fee and fastest turn time.” We would all have to be licensed professionals, except the requesting user, they were just a conduit, adding cost to the process.

Even FNMA changed their forms in 1993 to comply with USPAP: but they didn’t. Must have been an over-sight on their part. Still, USPAP was changed yearly to try to make it make it more understandable, though, it never really was, and appraisers continued to supplement the forms with either lengthy or obtuse addenda to comply. Appraisers continued to take USPAP update classes yearly where we were told that the appraiser was responsible for compliance, no one else. That appeared to be right because of all the mistakes in the deeds, listing sheets, and assessors’ records made verifying all this data difficult.

Why, I even found a deed where its meets and bounds were for the adjacent property! Do lawyers make mistakes? 

Well 1996 rolls around and the 704 report is gone, welcome the 2055. Still not USPAP compliant, but, oh well, just keep supplementing the form to comply and soldier on. You would have thought by now that FNMA would have caught on, or that the regulators would have said something, or maybe even the Appraisal Foundation. I love that name–Appraisal Foundation–it sounds so permanent. I mean, after all, a house is built on a foundation, but I digress. In 1998 we have a newer, better 2055 form report that will solve all the woes of the appraisal community, but it’s still not USPAP compliant. What’s going on, are appraisers the only ones that know about USPAP? I remember a USPAP instructor telling the class that USPAP was the appraisers Bible, yet the powers that be don’t seem to know about it. Appraisal forms stayed the same for quite a while until 2005 FNMA changed both the 1004 and the 2055 reports for more clarity and understanding. But they forgot about USPAP, don’t all FNMA reports have to be USPAP compliant? Doesn’t it say that in Chapter B4-1, Appraisal Requirements of the Selling Guide? I think so, but I’m not an English major. The new 2055 had a second page added for more information, and more work. 

Strangely, none of the lenders or end users of appraisal services wanted to pay more for the added work and they all set the same fee, what a coincidence. Appraisers were forbidden to discuss fees among themselves. Pricing stability to clients could never be achieved internally within the profession, due to fear of collusion. The double standard of double standards.

Concurrently, the foundation, I love that word, decided that the 2005 – 2006 USPAP update classes would be on a year and a half time frame. That was kind of weird, but transitioned to a two year USPAP update starting in 2008. The USPAP is still difficult to understand and they have continued to change it to make it easier to read. One cranky old appraiser told me it was good bedtime reading–it cured his insomnia. 

Then in 2008 the Dodd/Frank act went into effect stripping all appraisers of their clients and putting us at the mercy of big government. Now a new, old player came into the arena with a vengeance, the AMC. All appraisers doing lending work had to sign up with these faceless, soul less, entities who asked, “what’s your fee and turn time.”

The next big change came in 2011 with the UAD, the infamous uniform appraisal dataset from FNMA. Now all appraisers would be on the same page using preset codes for a super computer, probably named HAL, to scan and grade. This meant new forms for UAD compliance: but what about USPAP, still not compliant, I don’t get it. Haven’t they got the memo? Irrelevant data applied to any identified problem will yield irrelevant results. It been true from the beginning–garbage in; garbage out or restated big garbage in: big garbage out. 

We are now at that time when FNMA has announced that they are going to change the forms again. I guess it’s because they haven’t changed them in a long time and they are a government agency and they have to demonstrate to the people that they are doing something. I only hope that they include appraisers in the development of the new forms, because as a colleague of mine stated, “Architects of schools never ask school teachers how they will use the building,” so why ask the appraiser what is needed in an appraisal form. At least now it will be USPAP compliant, right, and USPAP will be understandable, and there will be a usable document to express relevant information to an “interested party.” Communication is the goal of an appraisal, maybe the form should be developed to facilitate that goal. Then there will be a beautiful rainbow on the road for all appraisers to follow.

As Charles Akerson once said after presenting a class to neophyte appraisers during the S&L bailout, “This is nothing, wait until the next one, it’s going to be a doozie, the banks never learn. ” (Hello 2008). 

Wayne Valliere is the principal of Barnstable Plymouth Appraisal Services, Buzzards Bay, Mass.


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