Bifurcated appraisals are just one more step in a master plan to eliminate appraisers from the mortgage lending process. At the end of all the discussions, any changes to the appraisal industry are not about improving the process but about who profits from that process. It still comes down to money and profits. Banks want more and they decided the easiest place to bring in massive new revenue is from the appraisal industry. The motivation is simple – it’s the Golden Rule alive and well in 2019.
Let’s think about this logically. If you thought it was a good idea to have someone other than the actual appraiser complete the home inspection part of the appraisal, would you want to make sure that part was done as accurately as possible? If you are worried at all about quality, the answer would have to be yes. And, the people most qualified to complete appraisal inspections have been in the system for a very long time, they are called Trainees. They have taken advanced classes and spent time being properly trained by an appraiser. They would be the logical choice to complete inspections, if not done by the appraiser. But, for several years lenders have almost totally rejected Trainees. Just as a note here – I personally don’t believe there is any way to separate the appraisal process and retain true quality. Part of an appraiser’s knowledge base comes from doing inspections. If you remove that part of their ever changing market education, you lessen their ability to understand the total market. However, back to the Bifurcated process.
Consumer protection appears to be missing from this thought process. Now, Fannie Mae, Freddie Mac, and the VA still don’t want Trainees, but they will allow anyone (without any formal training) to perform these important inspections. This is nothing more than an attempt to weaken the already hammered appraisal industry and sadly, it all comes down to profits. The so-called “quality” big banks talk so much about is a myth. Big Banking Lobbyist have sold Fannie/Freddie/HUD/VA on a new and improved appraisal system, all designed to increase their control and lessen the hard-core truth and honest valuations the appraisal industry delivers. Is the appraisal system perfect? Certainly not and we can always increase appraiser education. But, the appraisal industry is not the only player in the mortgage lending process that could stand some extra education. If we want true quality and consumer protection, we should ensure every lender has at least a 25% investment (or more) in every loan. It’s just like home buyers. With no skin in the game, they are likely to walk away from a loan and have little incentive to make the best decisions. With nothing to lose, why not roll the dice? The same is true of lenders. Without any skin in the game, they make their money off the loan and move on to the next loan. Without any investment or risk in the loan, they have little incentive to make sure the collateral is solid and the loan secure. They’ve got nothing to lose and only more profits to gain. The whole lending system has gotten way off base and logic has left the system. From Wall Street to Main Street, they are so far removed, they have lost sight of the true definition of quality and the role of an appraiser in the home buying process. If they were invested in each loan, they would be working harder to increase appraiser training and Realtor® education. After all, Realtors® price homes with minimal education requirements. Then lenders expect appraisers to “prove” every adjustment (in a subjective business) where a Realtor® could flip a coin or just check Zillow® to come up with the price and no one questions their values at all. That’s a problem. And, since the appraisal is paid for by the buyer, lenders should only want to protect their clients by providing them the best product possible.
This Bifurcated process eliminates one of an appraiser’s main jobs and is one of the most important steps in the appraisal process. Then, it steps right past the most logical people to complete the inspection (if not the appraisers). It moves past Trainees to any person off the street they can get to do the job the cheapest. Not because they want to lower costs to consumers, but simply a method that allows them to make more money off of the appraisal fee for themselves. Consumers will pay no less for appraisals, yet get an inferior product and no one seems to care. It’s a sad process and one hard to understand from any perspective of wanting a quality appraisal product and protecting the home-buying public. It’s especially hard to understand how government agencies could be convinced this is all good for consumers.
However, if you follow the money and think about this entire process, it all makes sense, at least from the lender’s perspectives. They have convinced Fannie and Freddie it’s good for the process, helping to bring faster appraisal services. It’s all a smoke screen and a sales job. This new change is just another nail in the appraisal industry’s coffin. Using Bifurcated appraisals lessens the number of necessary appraisers, further reduces the number of appraisal Trainees, and if this trend continues, big banks will argue there are just not enough qualified appraisers. So they will make their case for using all automated valuations in mortgage lending. Consumers will pay more, get useless valuations, and banks will have achieved their final objective – eliminating those pesky appraisers from their lending process. A huge victory for big banks and a huge loss for appraisers, and especially consumers. It’s all happening right before our eyes.
I hope appraisers will just say “NO.” These appraisals have to have an appraiser’s signature to make this new process work. So, appraisers your future is up to you. It’s your choice to participate in the Bifurcated appraisal process. It’s never been more important to voice our opinions and stand up for our industry. Tick tock, tick tock…