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#2164156 - 02/12/18 05:08 PM Borrower Requested Appraisal
JPC Offline
Diamond Poster

Registered: 10/22/15
Posts: 1084
A Bank generally relies on a drive-by appraisal, which they lender pay, for qualifying certain home equity transactions. If a borrower wanted to qualify for a higher loan amount or better terms by hoping for a higher appraised value with a "full" appraisal, would you allow this as a valid CoC (borrower requested) to include the full appraisal fee on the revised LE? What section would you disclose it on in the LE, Section B or H? Is it still "required" because it was required to get the higher amount/better terms, or is it "Other" because the lender generally wouldn't require that type of appraisal?

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#2164160 - 02/12/18 06:09 PM Re: Borrower Requested Appraisal [Re: JPC]
rlcarey Offline
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Registered: 07/16/01
Posts: 67314
Loc: Galveston, TX
The bank determines the value of the property according to your appraisal policies. There is no longer such a thing as a "drive by" appraisal and hasn't been since 2010. If you are doing evaluations and those evaluations are not accurate, then you have an evaluation problem.
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#2164173 - 02/12/18 09:13 PM Re: Borrower Requested Appraisal [Re: JPC]
JPC Offline
Diamond Poster

Registered: 10/22/15
Posts: 1084
Not too hip on all the investor requirements, but if I'm not mistaken, in some situations they don't even require an appraisal at all right? They just get automated scores sometimes. Or, even when an appraisal is required, I believe it is common for them to be drive-by only. At the end of the day, there are occasions when an appraiser just can't get into a property.

But, appraisal considerations aside, would you consider this a valid CoC, and would this be a required service or an "Other?"


Edited by JPC (02/12/18 09:14 PM)

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#2164184 - 02/13/18 07:22 AM Re: Borrower Requested Appraisal [Re: JPC]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 67314
Loc: Galveston, TX
A borrower cannot influence the valuation assigned by the bank. If they are not happy with the value assigned by the bank they have one choice - go see another lender. If you allow the borrower to help determine how the creditor values the property, then you have basically violated the appraisal/evaluation independence principles. You can't shop for values. You are asking a question for which there are no answers.
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#2164185 - 02/13/18 08:00 AM Re: Borrower Requested Appraisal [Re: JPC]
Skittles Offline
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Registered: 09/10/02
Posts: 13181
Loc: TN
The 2010 Interagency Appraisal Guidelines do not allow banks to use either a borrower ordered or an appraisal received from a borrower. Here is a snippet:

An institution or its agent must directly select and engage appraisers. The only exception to this requirement is that the Agencies' appraisal regulations allow an institution to use an appraisal prepared for another financial services institution provided certain conditions are met. An institution or its agents also should directly select and engage persons who perform evaluations. Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation. Independence is also compromised when loan production staff selects a person to perform an appraisal or evaluation for a specific transaction. For certain transactions, an institution also must comply with the provisions addressing valuation independence in Regulation Z (Truth in Lending).17

An institution's selection process should ensure that a qualified, competent and independent person is selected to perform a valuation assignment. An institution should maintain documentation to demonstrate that the appraiser or person performing an evaluation is competent, independent, and has the relevant experience and knowledge for the market, location, and type of real property being valued. Further, the person who selects or oversees the selection of appraisers or persons providing evaluation services should be independent from the loan production area. An institution's use of a borrower-ordered or borrower-provided appraisal violates the Agencies' appraisal regulations. However, a borrower can inform an institution that a current appraisal exists, and the institution may request it directly from the other financial services institution.
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#2164222 - 02/13/18 10:05 AM Re: Borrower Requested Appraisal [Re: JPC]
JPC Offline
Diamond Poster

Registered: 10/22/15
Posts: 1084
Sorry, I guess I am not being clear. Yes, I understand a borrower cannot select the appraiser. The Bank will still engage the appraiser as in any other situation. The borrower is just "hoping" the full appraisal will come back with a different (higher) value than the drive by appraisal. For all anybody knows, it could come back lower. The borrower will not be influencing the valuation.

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#2164226 - 02/13/18 10:22 AM Re: Borrower Requested Appraisal [Re: JPC]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 67314
Loc: Galveston, TX
You are being clear - maybe it is us. The borrower in this case would be influencing the evaluation method used by the bank, which is not allowed. If an appraisal comes back and it does not match closely your current evaluation, then that says your evaluation processes are lacking and are not producing reliable data. If your evaluation processes are solid, you are doing nothing but wasting both the bank's time and the borrower's money.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2164243 - 02/13/18 11:43 AM Re: Borrower Requested Appraisal [Re: JPC]
Tracey, CRCM Offline
Platinum Poster

Registered: 07/06/15
Posts: 515
Loc: Gorham, ME
I would also have a concern with allowing a customer to do this for their loan and not allowing others to do the same.
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