February 12, 2015
Editorial by Woody Fincham, SRA
Over the next several days I will be posting up my thoughts on the recent Fannie Mae Lender Letter Lender Letter LL-2015-02. This is part 1.
On February 4, 2015, Fannie Mae released a new Lender Letter. This was a full week and two days after they kicked off the Collateral Underwriter (CU). Many things in the residential valuation profession can create a stir, but few things create quite the clamor that a major government sponsored entity (GSE) policy change creates. I helped co-write an article on depreciated cost to support adjustments last week. As always, there are interesting comments on anything that gets published in our profession. Most have been very supportive, a few less so.
In the comments for that article, a pro-appraiser commenter was defensive of appraisers regarding the balance of how much work that can be done at such low fees for the mortgage clients. His supposition is that the topic of the article was great but that appraisers could not possibly be expected to do that much work for the fee levels that are so common in the profession. I share that empathy for fee appraisers. I truly do. I came up through the fee side of things, it is in my DNA and I will forever think of myself as an appraiser from that light.
I also share in the reality that some of my colleagues in the residential mortgage space are not doing much of anything to support adjustments. Many have relied on “professional judgment” and “experience” when it comes to addressing adjustments, and sometimes that is offered in lieu of actual support. I agree that both of these things have some merit, but often they are used in lieu of doing deductive research to support how much something is adjusted for in the grid. They both can work when it comes to knowing something should be adjusted or not, but how much is sometimes thumb nailed or otherwise guessed at with no real support. Before that sets off a bunch of personal barbs towards me, if you are doing your job in a manner that you are happy with, then keep doing that.
Of course if someone is reading this and my comments offend you because you do not support your adjustments; please be aware that my intention was/is not to do so. I tend to be a bit of a purist when it comes to developing and reporting valuation services and that is for me and those that I manage. What works for you is between you and the USPAP police.
I realize as a businessperson, there has to be a sweet spot between quality, speed and price. That can be a hard thing to figure out. If you focus on speed too much, quality tends to decrease. The same is true of price, if you can only get a low fee for your work; it becomes more difficult for some to rationalize not cutting corners to do it for less money. If you focus on writing a demonstration-quality report each time out of the gate, you will go broke because you take too much time and if you charge at a commensurate level, you cannot be but so competitive. Balance is key in this space, and it will vary from practice to practice and market to market.
When we wrote that piece, it was a suggestion to ferret out support by using something many of us are familiar with but may have not used in a while. It was also written to introduce the topic to folks that have never used it or thought to use it. This approach was offered in because many colleagues were being pushed towards alternatives that are being sold as expensive “wonder approaches”. Rather than seeing honest people buy a bag of magic beans, we offered another less expensive alternative. So the article was written with empathy towards fee appraisers.
So as these few pieces roll out over the next few days, I hope that my perspective adds some food for thought. This is certainly not an attack piece on Fannie Mae. Fannie Mae work is an important part of residential valuation, one that is much too big to shrug off and say, “Well, smart appraisers shouldn’t do lender work.” This sentiment is simply not possible for everyone, and we need to all voice our concerns for all of our colleagues in the profession. Residential lending work is a lucrative part of the valuation profession, a low hanging fruit if you will.
This will also not be an attack piece on AMCs as they serve a function to our mutual clients. Whether we like or dislike AMCs, they are here and will remain a part of the landscape for the foreseeable future. Instead of wallowing in the pig pen of discontent, we need to figure out how to make the best of the situation. There has to be some sort of symbiosis attainable, so that everyone can get what they need and can reasonably attain some of what everyone wants.What I hope this is seen as is a common sense observation based on how all three entities, appraisers, AMCs and lenders can coexist. No one has the perfect answer but I hope this might add some positive discourse.
Stay tuned more to come over the next week. If you have any suggestions or want to share some war stories, please send them over to firstname.lastname@example.org.
 “Lender Letter LL-2015-02,” Fannie Mae, https://www.fanniemae.com/content/announcement/ll1502.pdf (February 2015)
 Rachel Massey, Woody Fincham, and Timothy Andersen, “Depreciated Cost, a Test of Reasonableness,”