Retyping or readdressing an appraisal
Summary -
1. The retyping or readdressing of an appraisal is illegal.
2. Changing the clients name, on a completed delivered appraisal, is illegal.
3. Any lending institution can use an appraisal that was created for another lender.
4. There is no reason for a lender or mortgage broker to ask for a “Retype or readdressing” of an appraisal from one lender, or mortgage broker to another.
What's Possible?
5. Lenders/Brokers can ask for a new appraisal, by the same appraiser, on the same property. This new appraisal may, or may not, be supplied at a discounted fee to the new user.
The Long Version -
Since the passage of the FIRREA laws in 1989/1990 retypes of appraisals, or the readdressing of an appraisal to a different user or client is not allowed under State and Federal Laws.
Over the past decade numerous lenders and mortgage brokers have not followed this law and as a course of daily business, regularly demanded that appraisers “retype, or readdress” appraisals from one lender’s or mortgage brokers name into a different lenders name. Ignorant or unethical appraisers have blindly followed the wishes/demands of their client in readdressing appraisals.
The FIRREA laws, Uniform Standards of Professional Practice (USPAP), Federal and State Laws allow appraisals that were created for one lender or mortgage broker to be utilized by a different lender, without the need for changing the name on the appraisal. Some individual lenders/brokers policy of retyping/readdressing appraisals appears to have been started out of ignorance on the part of the lender/broker.
Federal Government - Banking Agencies
In a joint statement issued last fall by the federal financial institution regulatory agencies (the Office of the Comptroller of the Currency, the board of governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration) -
“... retypes violate the regulations of not only USPAP but those of the federal agencies listed above”.
The ASB’s January clarification on USPAP, in the form of the addition of Advisory Opinions 25, 26 and 27, stated, in part, “The intent of USPAP has never been to allow an appraiser to simply change the client’s name on a completed report and send it to a new client. These new Advisory Opinions underscore that any such report must be treated as a new assignment.”
The Advisory Opinions followed a joint statement issued last fall by the federal financial institution regulatory agencies (the Office of the Comptroller of the Currency, the board of governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration).
“Since the inception of our ‘Retype Campaign,’ we have seen a dramatic drop-off of requests for ‘retypes’ from lenders. They now understand that for appraisers changing the name of the lender constitutes a new appraisal and implies all the requirements of a new appraisal. They also realize they may have additional options they were not aware of before,” he said.
Appraisal Institute
"Retypes were never allowed,” stated Stephanie Coleman, MAI, SRA, the Appraisal Institute’s Director of Screening. “There is no new ‘law’ or ‘regulation’ or change to USPAP, for that matter. The Appraisal Standards Board clarified, in an Advisory Opinion issued in January, that the practice is improper.”
Coleman explained the fundamental confusion comes from the fact that “an appraisal assignment is about a relationship between an appraiser and a client, and about the service provided by the appraiser to that client (i.e., the right for the client to rely on the appraiser's expertly developed opinion of value). It is not about a report. The report is merely the means by which the appraiser communicates his or her conclusions.”
Washington Mutual
Sue Potteiger, independent consultant and former Chief Appraiser of Washington Mutual, Inc., said, “This isn't a new regulation or a change. This is a clarification of FIRREA (Financial Institutions Recovery, Reform, and Enforcement Act of 1989) and USPAP.”
Potteiger said, “All that's being done by requesting a retype is avoiding the regulatory review that's required in order for the lender to accept the report or to cover up the fact that the borrower ordered the report.“
Why The Request?
Appraisal Institute member Pete Haginas, MAI, queried: “Why is there a need to retype anyway unless the lender is trying to hide something? If the lenders do not need it retyped (FNMA, OCC, FDIC etc.), why do the mortgage brokers?” In answering the question, he surmised, “Because they need to hide the fact that there was no independence in the appraisal since the borrower ordered the appraisal.”
Potteiger added, “Until brokers are regulated there are no consequences. This puts appraisers once again in the position of having to be ‘enforcers’ as opposed to service providers.” She asserted that appraisers who perform the ‘retype’ are perpetuating the problem. “It would really surprise me if the lenders are requiring the retype. They should have lending policies in place that support compliance with the regulation. Brokers must change the way they do business. Changing won't cost more money or time, but will enable the process to proceed in a timely and cost effective way. Circumventing the regulations is what costs time and money.”
As to who pays the costs, Potteiger says it all depends on the policy of the lender whether or not the borrower is going to pay for the review or the reappraisal.
Coleman said that charging the new client a second, or additional, fee, is a business decision on the part of the appraiser. “Considering the appraiser is now responsible for providing expertise to another party – thereby essentially doubling his or her liability – I'd argue that additional compensation is justified. It's up to the lender if they want to pass that charge along to the borrower. But why should the appraiser be expected to bear the cost? After all, the appraiser has no interest in the outcome of the loan process.”
For more information on the USPAP clarification, visit the January 2004 Summary Report from The Appraisal Foundation at www.appraisalfoundation.org/html/pdf-images/2003summaryreport.pdf
It is strongly advised that copies of appraisals should NOT be given to the borrower, buyer, agent, or seller. The appraisal is for the internal use of the lending institution. Copies of the appraisal have been used against the lending institution in frivolous and/or needless lawsuits. If, for any reason, a lawsuit is instigated due to your granting of credit or a loan to a borrower, and American Home Appraisals becomes involved, any additional charges incurred by us will be billed to your company or institution and will become immediately due and payable.
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