BBG Appraisals Blacklisted
https://commercialobserver.com/2024/05/freddie-ma…
Meridian, Riverside/Madison Title, now BBG - who's next?
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So many details missing from these reports so far and the 5/13/24 FNMA Blacklist makes no reference to BBG/DiPietra so nothing has been independently confirmed either. But will be a very interesting story to keep an eye on as more details come out.
Ultimately though, I blame lenders for having inadequate appraisal review and flawed bid processes.
I've always found BBG to have the widest coverage & loosest report quality. I agree that we as lenders should do more as a check & balance, but the whole appraisal process needs a rework. I personally think 2-week turns shouldn't be allowed or deemed feasible for a certain type of transaction.
This sounds like a lender trying to push off responsibility for doing their jobs appropriately to someone else.
Look, the problem with the appraisal industry is that lenders decided it was cheaper and faster to outsource that work and have the borrowers pay for it, than to do it in house. Either do the appraising yourself, or actually push back on assumptions to get to a realistic appraisal. There is no "rework" necessary, unless the idea is that the entire industry exists to benefit lenders. What needs a major overhaul is the entire real estate lending process in general; lenders need to reevaluate the criteria on which they lend and the compensation that gets paid out as a result. Until that happens, these problems will continue to recur, because everyone will be complicit in exactly the kind of shit BBG got in trouble for. If no one has a vested interest in making sure appraisals are realistic, and everyone has an interest in inflating those numbers so more and bigger loans get made, then of course we'll just repeat all this again in a few years.
The responsibility for sane and conservative lending standards lies 100% with the people doing the lending. Not the lawyers, not the appraisers, not the borrowers, not God himself. But that fact doesn't facilitate the ability of bankers and mortgage brokers to buy second homes or take expensive vacations, so they blame the appraiser.
I don't have context for what happened with BBG, but considering they're in hot water with Freddie lets view this through the context of Agency CMBS. I don't think it should be the lender's responsibility to backstop / determine value in an off-balance sheet execution. In these securitized transactions, the appraiser's main purpose is to provide the loan aggregator (at a final level, the trust pool) with a basis for LTV sizing.
The waters have historically been murky regarding how we as mortgage bankers provide feedback to appraiser's due to the inherent conflict of interest, but I don't get how you think that internalizing the process solves for this. As long as non-bank lenders are responsible for both sourcing clients and trying to act in the interest of the loan purchaser, there's going to be an unavoidable conflict of interest. The way we solve that is by having a trained, certified, and unbiased 3rd party determine value. IMO, the fix for this is that the loan purchaser should be the party picking the appraiser, not the mortgage banker.
Ozy, I'm anxiously awaiting...
Agree something needs to change, but due to conflict of interest, lenders can’t appraise or be seen to influence an appraisal; similar to the bright line rule - anyone involved in originations, profiting from the loan, can’t be seen to have an influence over UW.
IMO, appraisals have gotten sloppier and appraisers lazier to some extent. Reports are automated and it’s faster to plug in comps from a database and have the report essentially write itself, versus an appraiser spending actual time determining the best comps, and putting together a fair, unbiased value, cap rate, and proforma. There are some good appraisers out there, but again, good reports take time and that cuts into the bottom line as those firms aren’t doing the number of reports other firms can do.
The lender should be asking questions and back checking, but it’s not the lender’s responsibility to do the appraisers (independent) job. Not sure what BBG got caught up in, but it sounds like Freddie has been building their case for a while.
Echoing this, I've always found BBG to be very flimsy as a 3rd party
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