The allowance of broker price opinions (BPOs) in the administration’s Home Affordable Foreclosure Alternatives (HAFA) program has created a major controversy.
As DSNews.com previously reported, four appraisal organizations recently wrote a letter to Treasury Secretary Timothy Geithner, voicing concerns over the use of BPOs for short sales under HAFA. In response to this opposition, Vicki Cox Golder, president of the National Association of Realtors (NAR), wrote her own letter, supporting HAFA and its allowance of BPOs.
The letter, which was addressed to both Treasury Secretary Geithner and HUD Secretary Shaun Donovan, was written on behalf of the 1.2 million members of NAR.
Golder said NAR recognizes the need for flexibility in any mortgage modification or short sale program to ensure all parties are treated fairly and appropriately. While an appraisal is a very important part of a purchase money mortgage transaction, it may not be the best tool for other real estate transactions, she said. NAR believes that in many cases, a more appropriate and cost-efficient measure is the BPO.
“BPOs are completed by licensed real estate agents with a detailed knowledge and understanding of real estate pricing and local market trends developed through active participation in the listing, negotiation, and sale of properties,” Golder wrote. “This perspective offers a unique viewpoint that supports sound real estate decisions with accurate estimates of the value of real estate.”
According to NAR, BPOs are widely accepted in the real estate industry, due to their established reliability and accuracy. Fannie Mae and Freddie Mac permit BPOs in certain circumstances, the FDIC and the Federal Reserve Board permit the use of BPOs in various programs, and BPOs are also accepted by banks, lenders, and all major loan servicers for a number of purposes.
Golder said the use of BPOs to analyze mortgage loan portfolios for risk management, due diligence, and fraud detection purposes is an important part of the mortgage
lending industry. BPOs are viewed as a valuable tool to assist lenders, loan servicers, and investors in making decisions related to refinances, home equity loans, and secondary market transactions related to loan portfolios, and the use of BPOs in these situations benefits borrowers through increased efficiencies and reduced servicing costs, she explained.
The appraisal organization’s letter noted that law enforcement officials have highlighted loan modification fraud-including fraud involving short sales-as a new form of mortgage fraud. To mitigate such conflicts, the coalition of appraisal organizations urged the department to reestablish independence in the valuation process.
“Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists,” the letter said. “They have an inherent bias towards quick results and actions which produce a fee for themselves, irrespective of whether the lender, servicer, investor, property owner, and/or borrower gets a fair return on the short sale.”
In her letter, Golder said there is no evidence to support the assertion that appraisers are more or less likely to engage in mortgage fraud than real estate agents. She said many of NAR’s members conduct BPOs, and to do so, they must adhere to a rigorous code of ethics.
This code requires a Realtor to complete a BPO within a specified framework. In addition, Realtors have a fiduciary responsibility to their clients and are required to perform their duties consistent with “the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage.”
Additionally, Golder said there is no evidence that a BPO exacerbates mortgage fraud or abuse. The appraisal organizations cited a recent study from Interthinx, which specifically mentioned property valuation fraud. According to the study, bank-owned fraud attributed directly to schemes involving shorts sales and REO inventories increased by nearly 50 percent over the past year and 100 percent over the past two years. However, Golder said the study did not consider the method of valuation used for transactions that may be fraudulent.
The coalition of appraisal organizations also claimed that in at least 23 states, the ability of a real estate agent or broker to perform a BPO is specifically limited to assisting a buyer or seller, or a potential buyer or seller, in establishing a listing or offering price for a property. Golder said this assertion is simply incorrect.
“We urge you to examine the relevant state statutes and not accept this argument at face value, as we believe the use of BPOs for short sales and other purposes is clearly permissiable in most, if not all, states,” Golder wrote.
Promote your business and services online and offline, find out when our next mixer is.
Connect with other successful women
Real Estate Investing Education, take advantage of today's real estate market
Build Your Business-Drive Your Dream Promo Code: legend
www.TotalSolutionsAlliance.com
No comments:
Post a Comment