Written By: Bonnie Wilt-Hild, Op-Ed Writer
I am sure that most of you realize that I am not a big fan of anything. I determine to be inefficient, cumbersome, pointless or just generally a waste of time and based on previous blogs I know that everyone understands that the entire concept of HVCC among various other things, is at the very least, all of these things. I have previously stated what I considered a few of the pitfalls of the practice but have never really discussed how one might overcome them or if it was at all possible. So in the spirit of Charles Darwin who once famously said, “It is not the strongest of species that survive, nor the most intelligent, but the one most responsive to change,” I have decided the best approach here is to be responsive to change because lord knows HVCC wasn’t intelligent.
Over the past few months I have had several underwriters ask what to do in situations when they could get no cooperation from the AMC’s or appraisers or worse still, what to do when the appraiser’s simply refuse to talk to you as the DE underwriter or in my case, tell you that you have no idea what you’re talking about and hang up on you. In these cases underwriters have found serious deficiencies within the appraisal report which may very well affect the fair market value of the property as well as the integrity of the report and because of an uncooperative appraiser, are unable to complete underwriting which results in the case falling apart which penalizes the borrower. Need an example? No problem.
Very recently I was underwriting a 203k with a very large rehabilitation piece on a 4 unit property. In this particular case, the appraiser did not provide an operating income statement, indicated that “after completion of repairs” the exterior and interior elements of the property such as flooring, exterior siding etc. would be in poor condition when the 203k work write clearly included repairs to these items and among other things, did not address the fact that the property was a leasehold property when providing the fair market value. In short, he refused to give me the leasehold value of the property. When I contacted the AMC, it was over their heads and they had a difficult time conveying exactly what I needed corrected so they agreed that it would be best if I talked to the appraiser.
When I contacted the appraiser, he was nothing less than belligerent telling me I had no right to speak to him, wasn’t allowed to call him and in short refused to make any of the corrections I asked for. After making an exhaustive effort to explain to him that I had an obligation as the direct endorsement underwriter on this case to insure the product provided to HUD, and that being the appraisal, was sufficient in information and integrity I was able to get him to agree to provide the operating income statement. This took three phone calls and my EVP. The rest of the stuff I handled myself and by that I mean I was responsive to change. How so you ask?
Very simply put everyone, HUD does in fact hold the lender ultimately responsible for the final product submitted to them for mortgage insurance and that includes the appraisal report. HUD is very clear in the fact that they hold the lender more so accountable for the appraisal than they do the appraiser, hence our obligation to sound underwriting practices. From an underwriting standpoint we do have the ability to make logical adjustments to any appraisal report based on our knowledge and understanding of the market area of the subject property, as well as to rectify incorrect or insufficient information as to the reports’ quality and completeness using the FHA Direct Endorsement Underwriter/HUD Reviewer Analysis of Appraisal among various other methods.
In the particular instance discussed above, I simply capitalized the ground rent myself (6% in the norm) and indicated on the DE Analysis of appraisal that the repairs to floor coverings, exterior siding and the like were included in the work write up under the rehabilitation. I also noted on this document that the appraiser was unresponsive to my requests therefore the changes to the appraisal were made at an underwriting level as this was acceptable to HUD. .
For those of you underwriters who are having a particularly difficult time with your appraisers and possibly even your AMC I would first and foremost suggest trying to find another AMC. If this is not possible, try to gently explain to your AMC/Appraiser that as the intended user of the appraisal and yes even on assigned appraisals, you have the right to request that errors and/or omissions be rectified. If this fails, use the DE Analysis of Appraisal and note what deficiencies you have found, how they were rectified and why you feel the fair market value as indicated or restated is correct. Whatever you do, don’t just close the loan with the errors thinking that you have no recourse, remember HUD will come back to you as the lender/underwriter if the appraisal is insufficient or unacceptable. Remember when there is a lack of intelligence be responsive to change, even if you have to create it. Have a great week!
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie holds mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".