Warning to Appraisers: AMC asking Appraisers to Violate State Law

By | January 19, 2019

Appraisers Beware!

VaCAP has been informed an email has been sent to Virginia Appraisers from Xome Vender Manager, Adam Burg. The email, addressed to “undisclosed recipients,”  starts with  “Dear Virginia Appraisers.” The body of the email announces that SunTrust Bank has begun ordering a bifurcated valuation product with an interior inspection.   The appraiser is to use information from a third party property inspection for subject property data.

VaCAP cautions appraisers on this product. Virginia Statutes and Regulations are very clear the appraiser who signs the appraisal report must have complete direction and control over the appraisal. The Virginia Real Estate Appraisal Board held a committee meeting November 28, 2018 on this very topic.   See the minutes of the hybrid committee meeting here. . The committee will report to the full Board at the February 12th meeting  a recommendation of any action to be taken.

If you choose to complete this product, or any product similar to it. We encourage you to be familiar with the below statutes and regulations. We also encourage you to  have a discussion with your E & O company, specifically, if you violate state law are you covered under your policy. We also encourage you to think about the value of your  license and the consequences of a disciplinary action against you.

Take a look at the various statutes and regulations that maybe impacted by these products.

As the Appraiser…

54.1-2009 Definition of appraisal

“Appraisal” means an analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects of, identified real estate or identified real property. An appraisal may be classified by subject matter into either a valuation or analysis. A “valuation” is an estimate of the value of real estate or real property. An “analysis” is a study of real estate or real property other than estimating value. The term “appraiser” or “appraisal” may be used only by a person licensed or certified by the Board.

54.1-2011 Necessity for license

C. Notwithstanding subsections A and B of this section, an individual who is not a licensed residential real estate appraiser, a certified residential real estate appraiser, or a certified general real estate appraiser may assist in the preparation of and sign an appraisal if:

1. The assistant is under the direct supervision of a licensed residential real estate appraiser, a certified residential real estate appraiser, or a certified general real estate appraiser; and…

18 VAC 130-20-180 Standards of professional practice.

C. Use of signature and electronic transmission of report.

1. The signing of an appraisal report or the transmittal of a report
electronically shall indicate that the licensee has exercised
complete direction and control over the appraisal. Therefore, no
licensee shall sign or electronically transmit an appraisal which has
been prepared by an unlicensed person unless such work was
performed under the direction and supervision of the licensee in
accordance with § 54.1-2011 of the Code of Virginia.

And if you are an appraisal management company soliciting these products…

18 VAC 130-30-160  Prohibited Acts

The following acts are prohibited and any violation may result in disciplinary action by the board:

1. Violating, inducing another to violate, or cooperating with others in violating any of the provisions of any of the regulations of the board or Chapter 20.2 (§ 54.1-2020 et seq.) of Title 54.1 of the Code of Virginia, or engaging in any acts enumerated in § 54.1-111 of the Code of Virginia.

10. Failing to act as an appraisal management company in a manner that safeguards the interests of the public.

What about the lenders that are using this product?

Do they have an obligation to obey state laws?  Will the auditors have issue with a product in their files that violates state laws? What action could the Attorney General take?

But the bigger question in all of this, What does the consumer think of this product?


Thank you for being a part of VaCAP!




27 thoughts on “Warning to Appraisers: AMC asking Appraisers to Violate State Law

  1. Ron Cloninger

    I sent an immediate message back basically telling them to go to hell
    I agree complete BS, their quote, “this will take 30-60 minutes to complete” garbage it is an appraisal with sales
    “in areas they cannot find adequate on line info”

  2. Mike Ford, AGA

    I simply refuse to undermine my own profession. Sun Trust may be content to show the same lack of integrity as the likes of Wells Fargo. I’m not. No reputable bank or trust should be either.

  3. Teri Robinson

    This is another clear case of a grave misunderstanding of the Appraisal process – the Site visit is THE FOUNDATION (no pun intended) of the process and is NOT the time consuming portion. Many features and characteristics of a property are not apparent in photos – it takes an experienced listener to sound (walking on floors, etc), nose to smell, and eyes for DETAILED viewing of areas/items (like a locked closet in a basement with an electrical chord running under the door) to trigger further questions leading to better information. Photos can be taken in very creative ways and grossly misinterpreted – anyone who rents vacation homes online knows this – why don’t the Largest stakeholders get it ?

    1. Tammi Loving

      What about the 2055 ext, has none of what you’ve mentioned..?

      1. VaCAP Board

        Tammi, The 2055 exterior is done 100% by the appraiser. The report is based on what the appraiser sees and discovers in their own research. The hybrid appraisal is a completely different product in which a third party, who is not known to the appraiser provides the data. It is about credibility and protecting the public.

  4. Tammi Loving

    My feeling is that we appraisers are spitting in the wind, that the powers that be – the lenders, mortgage brokers, and their lobbyists- are hell bent on eliminating us from the process. Therefore, and also, we have no power. The AF does not have our best interests at heart. The states will look the other way.

    Sadly for us, as I see it, these products will continue, there’s no going back.

    1. VaCAP Board Post author

      We understand your frustration. But these products will only continue if the appraiser allows them. It is your license and only you can decide what is right for you. Keep in mind, many of the hybrid products being introduced in the marketplace today do not comply with Virginia laws. There are about 20 other states that are also seeing issues with these products. The TAF webinar on hybrid appraisals also raises some question of compliance with USPAP. The answer to many of the questions regarding these products was “it depends”.

      1. Tammi Loving

        That’s a good point, and I question WHY there has never been addressing of these issues since the advent of these products. There is history, these products are not new. I have been solicited to perform these appraisals for four or five years or more, and, to my knowledge, not one governing entity has held the lenders feet to the fire, or otherwise had any interest in protecting the appraiser, nor the consumer. That speaks volumes, does it not?

        1. VaCAP Board

          Tammi, that’s an easy question to answer. First, these products were being done on a very limited basis so the exposure to the market has been less. It was not until recently that they have gained traction. VaCAP is very active in our legislature and we do go and read our laws from time to time. It was then, by accident, it was discovered there may be a problem. with compliance. We started asking around and with a little due dilligence, discovered these laws were put in place with licensing and FIRREA back in the early 1990’s., They were a direct response to some of the issues with the S&Ls back then. At the AARO conference in November, we started talking to the Regulators from other states. Many of them said, yes there may be an issue with these products. A presentation was presented on these products, and the looks of disbelief on the regulators faces was extremely educational. Everyone keeps saying they are USPAP compliant, well the ones we have seen are anything but. If there is one that is USPAP compliant, it is because the appraiser made it so. USPAP clearly states you must follow state law and that is what has moved our concern forward. Keep in mind the states issue the license and also enforce USPAP. There are about 20 other states with similar language and are having similar discussions as Virginia.

  5. Teri Robinson

    I don’t perform 2055 Exteriors in rural areas for that reason, but the one thing 2055s have versus the Bifurcated is that the Appraiser DOES see the exterior and surroundings first hand, not through a dated satellite or unknown source images. To go further, why are first hand Comp photos required but NOT first hand knowledge of the large asset the Lender is selling to stockholders on the secondary market?

  6. Jon Green

    Does anyone know how this specific product will be used by Suntrust? I really don’t see an issue with this as long as the appraiser clearly discloses the scope of work, limiting conditions, and/or any other assumptions that are made. The appraiser still has complete direction and control over the assignment, if they’re signing the report and attesting to the report’s stayed certification. They can easily conclude the use of the 3rd party inspection will result in a misleading conclusion and reject the assignment, or they can request revisions or additional information. Also, USPAP doesn’t even require an inspection by an appraiser unless the client requests one, so the point is moot. We’re only required to disclose the extent of the inspection. Regardless, appraisers have been completing restricted use/desktop appraisals for a long time, this is no different.

    Lastly, my interpretation of Virginia law 54.1-2011 will allow this product. The law doesn’t define supervision, which doesn’t necessarily mean the appraiser needs to accompany the inspector. I also feel “assistant” here refers to someone developing an appraisal like a trainee, not a non-appraiser gathering information.

    C. Notwithstanding subsections A and B of this section, an individual who is not a licensed residential real estate appraiser, a certified residential real estate appraiser, or a certified general real estate appraiser may assist in the preparation of and sign an appraisal if:

    1. The assistant is under the direct supervision of a licensed residential real estate appraiser, a certified residential real estate appraiser, or a certified general real estate appraiser; and

    2. The appraisal is reviewed, attested to be accurate and complete, and signed by such licensed residential real estate appraiser, certified residential real estate appraiser, or certified general real estate appraiser in accordance with this chapter.

    D. This chapter shall not prevent or affect the practice of any profession or trade for which licensing, certification, or registration is required under any other Virginia law.

    E. A corporation, partnership, or other business entity may provide appraisal services if each appraisal is prepared and signed by an individual licensed in accordance with this chapter and such corporation, partnership, or other business entity has registered with the Board. However, any appraisal management company that is required to be licensed under § 54.1-2021.1 shall not be required to have an additional license under this section.

    1. J. C

      Jon Green- You are certainly entitled to your opinion, but rest assured those who are entrusted with protecting the public and those that are employed to enforce the laws of Virginia may very well have a different opinion.

      1. Jon Green

        I appreciate your response, J.C., and I concur that the courts could see things differently if this were to ever be litigated.

        Also, I don’t understand the assertion of appraisers as protectors of public trust, seems like a dishonest claim to me. If that were at all accurate, then appraisers wouldn’t have played a role in the S&L crisis or recent housing debacle, regardless of how large or small that role was.

        1. VaCAP Board

          Appraisers are licensed to protect the public. This happened because of the S&L crisis. The financial meltdown of 2008/2009 did not happen because of appraisers. It happened because lenders were playing fast and loose with credit. Not sure where you are getting your information from, but appraisers warned of the financial crisis many years prior to it happening and are once again warning of another financial disaster. Have you seen the mortgage fraud report? This might shed some light on the real issues at play.

          1. Jon Green

            Yes, I’ve read that report. Mortgage fraud can encompass a number of different characteristics, but the fraud associated with property is nominal (and decreasing). Income, identity, and occupancy are the biggest risk factors, per CoreLogic.

            I never said the S&L or housing crash were Because of appraisers, but rather, appraisers were negatively implicated also. It’s dishonest to suggest appraisers weren’t involved. Either way, in each crisis, a symphony of issues/players caused the crash, and appraisers were one of them. There was rampant fraud and malpractice that appraisers were part of and/or helped facilitate. As a result, USPAP, AQB, ASC, licensing, Dodd-Frank, the proliferation of AMCs, UAD/CU, and other controls were implemented because of our involvement.

        2. VaCAP Board

          Jon Green – ” I don’t understand the assertion of appraisers as protectors of public trust,”

          Seriously? Please refer to the very first sentence in the Preamble of USPAP. Then pick any state and read their laws for appraisers.. It is all about public trust!

          1. Jon Green

            First line of USPAP….“The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers.”

            The standards to which appraisers have to adhere, of which were born out of the S&L crisis appraisers were part of, were developed for the purpose of maintaining a high level of public trust in the appraisal profession. Appraisers aren’t tasked with protecting the public, which is what I was commenting on initially, but rather protecting the public’s trust in the appraisal.

            I understand why appraisers interpret this the way the do, but it just doesn’t seem accurate or honest to me in the context the saying is often used.

  7. Mike

    This is about public trust and credible results. The samples of the hybrids that we have seen are laced with fraud. Virginia ‘s Laws protect the public.and have been on the books since licensing started with FIRREA.

    No amount of disclosure will change the fact they are worthless pieces of garbage and are harmful to the consumer, investor and real estate markets.

    1. Jon Green

      The typical hybrids mentioned in this thread, and in other blogs, are a bifurcation of a BPO and an appraiser reconciling the data within that report. In that context, I completely agree that the product has a lot of flaws, regardless of the disclosures. However, this blog post suggests the appraiser is to develop their analysis as normal, but will be using an interior inspection to do so. I don’t see the problem in that at all. In fact, it could likely speed up the process as the appraiser can spend more time analyzing the market rather than coordinating inspection times and driving all over the place.

      1. VaCAP Board

        Jon, Are you an appraiser? One of biggest hold ups we see as appraisers is the inspection being delayed because of the borrower. This will not change with another person completing the inspection. Appraisers also start to analyze neighborhoods and properties when driving to the appointment. This is a very important part of the process as it sets the foundation of the appraisal. Even in areas that we have appraised in for years the neighborhoods change and sometimes in a very short time. You are naive if you think taking the appraiser out of the inspection/ neighborhood is a wise choice. Hybrid appraisals came about because of greed. Greed from the AMCs nothing more. It plays into the false narrative of an appraisal shortage. This has been proven false numerous times. Now the narrative is Millenials demand it. This is not only absurd, but completely in accurate.

        1. Jon Green

          Yes, I’m an appraiser, but I work at an institution now, so I’m also a user of valuation services. The only full appraisals I complete these days are private jobs for court.

          I’ve tested/used all of the products out there, some are really good, some are really really bad. I wouldn’t say any one product came about because of greed, but rather of necessity because the market demanded more solutions to select from, based on the risk they needed to mitigate. It’s the same as an appraiser being able to offer a client a full appraisal at $450, or a driveby at $250. A full appraisal will be more costly and take longer, but there can be more confidence in the end product. A driveby could be cheaper and faster, but there are some known uncertainties/limitations to get comfortable with, which may not really matter if the entire loan’s risk profile is low. If I were trying to grow an appraisal practice, I would start offering my clients different products and even inspections. If they get an appraisal waiver, why not tell them you have a short form you created that can help them make their decision and it’s cost effective.

          That said, I know for a fact an appraiser doesn’t always have to complete an inspection to render an accurate and reliable value. Some complex markets or property types, yes, a full appraisal is the best way to go, but in many instances, an alternative product can just as effectively mitigate risk. I used to work in the loss mitigation department at one of the GSEs. The execution for our internal team valuing a property from their desk were more often superior to that of the local appraisers and brokers in the field.

  8. J.C.

    Mr. Green, you have used the term dishonest several times in your comments. To be clear, the dishonesty is not coming from appraisers. The dishonesty is with the lenders.

    I had not seen the mortgage fraud report prior to now and property fraud is stable. This means appraisers are doing their jobs. No dishonesty there. The increase in the other categories are all the responsibility of the lender. If you want to talk dishonesty, take a close look at the lenders.

    There is a reason 20+/- states are questioning hybrid appraisal. There is a reason appraisers are saying no to these products. Appraisers are the only unbiased party to a transaction. These hybrid products open the door very wide for fraud. You stated lenders want this product and you are correct. They want these products because of there own greed. Your statement to mitigate risk is simply not believable. If risk mitigation was the motive, this conversation would not be happening as the lenders would be ordering full appraisals.

    1. Jon

      Hi J.C,
      I don’t disagree that states and financial institutions are, and should be, scrutinizing the quality of hybrid appraisals and alternative valuation solutions. They’re new products that have yet to be fully vetted, so it’s inevitable they’ll be met with resistance on all sides. However, I don’t see how a hybrid appraisal opens a very wide door for fraud, or at least any more or less so than a full appraisal. Fraud has an element of intent, malpractice would be a way more common occurrence.

      To say the stability in the property component of mortgage fraud is attributed to appraisers doing their job is somewhat misleading. CU and the increased availability of data continue to play a huge role in controlling property related mortgage fraud and malpractice. There are less places to hide and our profession has had to step up quality.

      Risk mitigation is absolutely a motive for lenders, whether they’re securitizing or packaging to sell. Since 2008, there have been far more controls set in place for lenders to improve loan quality and mitigate credit risk. That’s not to say lenders aren’t greedy, they obviously want to make money, but there are more controls and checks in place today.

      Do you feel a full appraisal always needs to be ordered on every loan and there is no place for alternative valuation solutions?

      PS- I used the term “dishonest” only once and it was in a very specific context.

  9. Pat Turner

    I just spoke to a staff appraiser at SunTrust last night. A longtime trusted friend. He says this bs is just that bs. Even bad hybrids are being forced down the reviewers throats to let go be funded. They are not just being used on HELOCS either.
    Defend this modernization all you want.
    But which of the two words Direct Supervision does one NOT understand.
    Try to objectively present this process to any intelligent person, and they begin to laugh hysterically at the level of insanity.
    Also, millennials have not and do not expect to close on a house purchase in 7 days. They are more astute than that. It’s the lenders that want to speed the process to obscure it from scrutiny.
    Also, if you don’t like pen names…stay out of this blog. Who invited you anyway?

    1. Jon

      Hi Pat,

      I’m not sure if your post was directed to me, but I’ll respond….respectfully.

      I’m not debating the definition of “Direct Supervision”, I’m debating the term assistant. The law states: “C. Notwithstanding subsections A and B of this section, an individual who is not a licensed residential real estate appraiser, a certified residential real estate appraiser, or a certified general real estate appraiser may assist in the preparation of and sign an appraisal if:”

      I interpret this as, an unlicensed person can assist AND sign an appraisal only if they were: under direct supervision, the report was reviewed, et Alia. In a hybrid product, the only signature is the appraiser, and the inspector/broker is reported as a contributor and includes their scope. The “assistant”, or unlicensed person, isn’t preparing the appraisal report or doing any analysis, they’re only gathering information for the appraiser. For these reasons, I feel this type of hybrid report doesn’t violate the Virginia state laws presented in the blog posting.

      Anyway, it will be interesting to see how things shake out for the profession. Appraisers will always be needed, but our workflow will likely continue to change with the times.

      Best of luck!

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