Appraisal Procedures Manual

Transcription

1 Appraisal Procedures Manual Updated: 04/06/2016

2 Table of Contents Appraisal Department Independence... 2 Appraisal Ordering for Conventional and HUD (FHA & USDA) Loans... 2 Appraisal Distribution... 5 Appraiser/Appraisal Management Company Communication... 7 Appraiser Roster... 7 Remote Appraiser... 9 WMC and Appraisal Management Companies... 9 Transactions that Require Appraisals... 9 Minimum Appraisal Standards... 9 Mortgage Specifications Review of Received Appraisals Appraisal Appeal for Reconsideration of Value Requests for Real Estate Appraisals Borrower Receipt of Appraisal Program Compliance Appraiser Compensation Quality Control Appraisals Performed for an Outside Lender Appraisals Assigned to an Outside Lender Appraisal Misconduct Representations and Warranties... 16

3 Appraisal Department Independence The Waterstone Mortgage Corporation ( WMC ) Appraisal Department reports directly to the Director Mortgage Banking Finance, and the Appraisal Department does not have any influence over it by any members of WMC s loan production staff, as well as any person who is compensated on a commission basis upon the successful completion of a loan or who reports, ultimately, to any officer of the lender not independent of the loan production staff and process. The Appraisal Department is composed of employees appropriately trained and qualified in the area of real estate appraisals, with training being all required education and experience for state licensure and qualification being accomplishment of a state license or certification. WMC will maintain a roster ( Appraisal Roster ) of approved appraisers. This roster includes approved Roster appraisers and approved Remote appraisers for areas of limited loan volume. WMC employs the services of various appraisal management companies, as necessary. WMC does not have an ownership or financial interest in any of the appraisal businesses on the WMC Appraiser Roster, or in any of the appraisal management companies contracted for appraisals. Furthermore, none of the appraisal businesses on the Appraiser Roster or any of the appraisal management companies contracted for appraisals have an ownership or financial interest in WMC. Any appraisers employed by WMC will not have an interest, financial or otherwise, in the property or the transaction. Part of the Appraisal Department s purpose is to enforce compliance with appraiser independence protocols. In this document any reference to appraiser independence protocols is referring to documents such as (but not limited to) Fannie Mae s Appraiser Independence Requirements, HUD Mortgagee Letter , the 2010 Interagency Appraisal and Evaluation Guidelines (Section V. Independence of the Appraisal and Evaluation Program), and of Truth in Lending (Regulation Z) on Valuation Independence. If WMC is aware of any violation of appraiser independence standards or a prohibited conflict of interest at or before consummation of the transaction, it is prohibited from extending credit based on the appraisal unless WMC documents that it has acted with reasonable diligence to determine that the appraisal does not materially misstate or misrepresent the value of the collateral. Appraisal Ordering for Conventional and HUD (FHA & USDA) Loans All ordering will be performed by the applicable loan origination staff, through the WMC approved communications compliance system (Encompass, Streetlinks Lender X, or other approved system). The WMC approved communications compliance system (Encompass, Streetlinks Lender X, or other approved system) allows for the loan origination staff to order appraisals without any influence on the selection of said appraisers. 2 P a g e

4 All appraisal requests, once ordered by the loan origination staff, will proceed to the Appraisal Department (or to the Senior Vice President of Mortgage Operations, Quality Control Manager, or Operations Support Associate, who receive a salary and do not receive bonus for loan origination, if no members of the Appraisal Department are available), and will be distributed to an appraiser from the Appraiser Roster if within the Primary Lending Territory, to an appropriate Remote Appraiser or Appraisal Management Company if within the Secondary Lending Territory, or to an appropriate Appraisal Management Company if in the Primary Lending Territory and no one on the appraiser roster can service the appraisal request. i. The Primary Lending Territory is defined as counties in which WMC routinely conducts business. The Secondary Lending Territory is defined as counties in which WMC does not routinely conduct business. All new requests will be checked for appraisal payment exception form or credit card information for the good faith deposit prior to assigning the appraisal order by the appraisal department staff. If there is an appraisal payment exception form, the appraisal order will be assigned to an appraiser. If there is credit card information, appraisal department staff will check the loan in Encompass to make sure the intent to continue has been given by the borrower(s). If there is intent to continue, the appraisal order will be assigned to an appraiser. If there is no intent to continue, the appraisal department will the loan officer, field support and compliance that there is no intent to continue and there is credit card information in the appraisal order and will not assign the appraisal order to an appraiser. Once appraisal department has verified the intent to continue from the borrower the appraisal order will be assigned to an appraiser or the branch can provide an appraisal exception form and the credit card information will be removed from the appraisal order. Appraisal orders submitted to the WMC Appraiser Roster Appraisers, Remote Appraisers, and Appraisal Management Companies will only provide the following information: i. The borrower s name(s), i iv. The address of the property to be appraised, Contact information for the person who will provide access to the property for the appraiser, WMC s name and address, and contact information for the Appraisal Department, v. A purchase contract if the appraisal is for a purchase transaction as required by USPAP Standards Rule 1 5(a), and vi. Appropriate financing data and/or sales concessions that may affect marketability of market value according to Fannie Mae Selling Guide, Chapter B4-1. Appraisal orders submitted to the WMC Appraiser Roster Appraisers, Remote Appraisers and Appraisal Management Companies will not provide the following information: i. An estimate of value for the property, i iv. A borrower s loan amount, An estimated loan to value, and Any contact information at WMC outside of the appraisal department or any names of the loan officers who originated the mortgage. 3 P a g e

5 All appraisal orders will prohibit the appraiser from attempting to obtain loan amount or home value estimate information from the homeowner or access person. Exceptions to the appraisal ordering process 1. Appraisals for VA-guaranteed loans are ordered from the VA TAS (The Appraisal System) and appraisers are selected by the Department of Veteran s Affairs from their own rotation. VA Appraisal Invoice Policy & Procedure Background WMC has experienced significant problems with VA appraisal invoices getting paid within a reasonable time, especially when the loans do not close. As a result, we are facing significant risk to the company. If WMC gets reported to the VA repeatedly for late payments, we may potentially be put on a late payer list, which would result in WMC being required to pay the appraiser upfront on all appraisal orders. Policy No VA Appraisal Invoices should be paid at closing; instead, they should be paid directly by WMC Accounting Department. WMC has established a new process for paying all VA appraisal invoices, regardless if the loan closes effective immediately. The invoices will be paid on time directly from the accounting department and we can avoid any complications from late payment. Procedure 1. VA Appraisal is received by the WMC Loan Processor. He or she should create a new message to: VAAppraisals@waterstonemortgage.com & attach the appraisal invoice only. 2. In the subject line of the please type: Borrower Last Name, First Branch (City & State). 3. In addition to the attached invoice, please provide the following detail in the body of the Loan Officer First & Last Name and the Loan Number for reference. 4. Please see Screenshot: 4 P a g e

6 2. Appraisals intended for investors that require use of particular independent Appraisal Management Companies will be ordered from said Appraisal Management Companies as necessary. Appraisal Distribution Distribution within the Primary Lending Territory will be according to the following criteria. Geography Appraisal orders will only be distributed to appraisers who are licensed or certified by the state in which the property to be appraised is located. Appraisal orders will be distributed, if possible, to appraisers on the WMC Appraisal Roster with primary servicing in the county of the property to be appraised, or if necessary in one of the secondary counties serviced by said appraiser (See Appraiser Roster Section for further notes on Primary and Secondary Servicing Areas). Performance Appraisers on the WMC Appraiser Roster will be constantly monitored in two primary areas, quality and service. Quality Appraisal quality is defined as conformance to the following: 1. The current version of the Uniform Standards of Professional Appraisal Practice (USPAP). 2. The current Fannie Mae Selling Guide, Chapter B4 1, Appraisal Guidelines, and any modifying Lender Announcements, Lender Letters, and the Guidance for Lenders and Appraisers, dated April HUD Handbooks and all modifying Mortgagee Letters. 4. State licensing standards. 5. Generally accepted quality standards and practices of the appraisal industry. Quality will be on a 5 point sliding scale, with 1 being the lowest level of quality and 5 being the highest level of quality. All appraisers will be given a quality level of 3 when first added to the appraiser roster. Quality will be reviewed by the appraisal department and, if appropriate, performance that consistently demonstrates a high or low level of quality can result in a Quality Level Change, moving the appraiser up or down as many points as determined by the Appraisal Department. Appraisers with higher quality levels will be given preference in appraisal distribution over appraisers with lower quality levels. Appraisers with a quality level of 1 will be removed from the WMC Appraiser Roster. 5 P a g e

7 Service Appraiser service consists of multiple factors as follows: 1. Turn Around Time (TAT) a. The amount of time between an appraiser s receipt and acceptance of an appraisal order to placement of a finished appraisal on Encompass or to the Appraisal Department. 2. Customer Contact a. It is expected that all WMC Appraiser Roster appraisers will contact the individual who will provide access to the property within 24 hours of receipt and acceptance of the appraisal order. 3. Inappropriate Contact a. It is expected that appraisers will not contact anyone at WMC outside of the Appraisal Department. Inappropriate contact may result in direct removal of the appraiser from WMC s Appraiser Roster. 4. Customer Service a. The appraiser is expected to act in a professional manner with the customer and any other persons while performing an appraisal under contract with WMC 5. Change Request a. The appraiser is expected to provide additional information or make corrections to factual errors when requested by the WMC Appraisal Department that does not impair or attempt to impair an appraiser s independence, objectivity, or impartiality or violates law or regulations. Service will be on a 5 point sliding scale, with 1 being the lowest level of service and 5 being the highest level of service. All appraisers will be given a service level of 3 when first added to the appraiser roster. Service will be reviewed by the appraisal department and, if appropriate, performance that consistently demonstrates a high or low level of service can result in a Service Level Change, moving the appraiser up or down as many points as determined by the Appraisal Department. Appraisers with higher service levels will be given preference in appraisal distribution over appraisers with lower service levels. Appraisers with a service level of 1 will be removed from the WMC Appraiser Roster. Appraiser Backlog Appraisal orders will be distributed as evenly and randomly as possible after accounting for geography and performance. Distribution within the Secondary Lending Territory will be on a rotating basis among Remote Appraisers or Appraisal Management Companies. 6 P a g e

8 Appraiser/Appraisal Management Company Communication Communication is approved between the WMC Appraiser Roster/Remote Appraisers/Appraisal Management Companies and: i. The WMC Appraisal Department throughout the process. i The WMC Underwriting Department after receipt of the appraisal. The WMC Processing Department after receipt of the appraisal, and only by written communication through the WMC approved communications compliance system (Encompass, Streetlinks Lender X, or other approved system). Communication is not approved between the WMC Appraiser Roster/Remote Appraisers/Appraisal Management Companies and: i. Any WMC employees outside the Appraisal Department, and Underwriting and Processing Departments (after receipt of the appraisal). At no point will any appraiser be asked to provide an estimated, predetermined, or desired valuation in an appraisal report prior to the completion of the appraisal report, or request that an appraiser provide estimated values or comparable sales at any time prior to the appraiser s completion of an appraisal report. At no point will an appraiser be coerced to base the value of the property on factors other than the appraiser s independent judgment. WMC employees are responsible for following all internal controls (procedures and processes). Noncompliance can result in disciplinary action up to and including termination. Appraiser Roster Potential Roster Appraiser will contact the appraisal department directly or be contacted directly by the appraisal department for interest in being reviewed for addition to the roster. The Appraisal Roster will be created by: i. Appraiser submission of work samples to be reviewed and approved by the Appraisal Department. The Appraisal Department, when necessary, may also review: 1. The appraiser s education 2. The appraiser s experience 3. Professional affiliations 4. References from prior clients 7 P a g e

9 i 5. References from prior employers The criteria for said approval will be as follows: 1. Absence from any WMC Investor ineligible appraiser lists. 2. Appropriate results of review of education, experience, professional affiliations, and references, if such review is deemed necessary. 3. Appraisal sample conformity to the Uniform Standards of Professional Appraisal Practice (USPAP). 4. Appraisal sample conformity to the current Fannie Mae Selling Guide, Chapter B4-1, Appraisal Guidelines, and any modifying Lender Announcements, Lender Letters, and the Guidance for Lenders and Appraisers, dated April HUD Handbooks & and all modifying Mortgagee Letters. 6. Appraisal sample conformity to the generally accepted quality standards and practices of the appraisal industry. 7. A copy of the appraiser s license from the state in which the appraiser is doing business. 8. A copy of the Declarations page of current Errors & Omissions Insurance for the designated appraiser. 9. Appraisers must meet the legal requirements of the state in which they practice. 10. A copy of a W-9 completed by the appraiser. 11. A clear OFAC check. All appraisers will be designated with primary and secondary counties that they regularly service. Addition to the WMC Appraiser Roster i. Further addition to the WMC Appraiser Roster will be by submission of work samples, to be approved by the Appraisal Department. Removal from the WMC Appraiser Roster i. Any appraisers whose quality or service levels drops to 1 by a Quality or Service Level Change will be automatically removed from the appraiser roster. i Any appraiser who displays illegal conduct or improper or unprofessional behavior of any other substantive reason will be automatically removed from the appraiser roster. Any appraiser who is removed from WMC s Appraiser roster will receive prompt written evidence of reasoning for the appraiser s dismissal. Servicing Areas i. Primary Servicing Areas are the territories the appraisers are most familiar with, competent in, and service most regularly. 8 P a g e

10 Secondary Servicing Areas are the territories the appraisers are familiar with and competent in, but do not service regularly. Remote Appraiser In the Secondary Lending Territory Remote appraisers will be added to the WMC Appraiser Roster as needed. These appraisers will be approved in the same manner as the Roster appraisers except for review of work samples. This is to facilitate the acquisition of appraisals in a timely fashion in areas in which WMC does not consistently have a high order volume. Special emphasis will be placed on collecting resumes, and conversations with the appraiser to ensure they have the relevant experience and knowledge for the market, location, and type of real property being valued. A questionnaire will help support the appraiser s experience in the market, location, and type of property. WMC and Appraisal Management Companies WMC will use Appraisal Management Companies in all previously defined Secondary Lending Territory as deemed necessary. i. Said Appraisal Management Companies must provide written assurances that they follow appraiser independence protocols with each appraisal report. Transactions that Require Appraisals WMC will require an independent appraisal for all real estate-related transactions, unless specifically exempted under the terms of an approved, government-sponsored loan program. Real estate-related transactions include: i. Sale, lease, purchase, investment in, or exchange of real property, or the financing of these transactions. Refinancing of real property or interests in real property. Minimum Appraisal Standards Upon receipt of the written appraisal, it will be reviewed to determine whether it meets the six minimum standards for the preparation of an appraisal. The six minimum standards required by the banking regulators state that the appraisal must: i. Conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board (ASB) of the Appraisal Foundation unless principles of safe and sound banking require compliance with stricter standards. 9 P a g e

11 i iv. Although the USPAP does not prohibit an appraiser from appraising any property in which he or she has any interest, direct or indirect, financial or otherwise, banking regulations prohibit the use of such an appraisal. WMC will not engage an appraiser to appraise any property in which he or she has any direct or indirect interest. Be in written form and contain sufficient information and analysis to support WMC s decision to engage in the transaction. 1. Not all appraisal development and report options available to appraisers are appropriate for all transactions. The WMC will only accept an appraisal report if it contains sufficient information and analysis to support the WMC s decision regarding the transaction. Analyze and report appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units. 1. For federally-related transactions, the appraisal must include the current market value of the property in its actual physical condition and subject to zoning in effect as of the date of the appraisal. v. Use the definition of market value found in 12 CFR and agreed upon by all regulatory agencies. vi. Be performed by a state-certified or state-licensed appraiser in accordance with appraisal requirements. In addition to the minimum standards set by the Regulators, WMC will require that acceptable appraisals contain the following information: i. Description of the property, including the most recent specifications and plans (if under construction or to be constructed). i iv. Description of appraisal procedures, including data, analysis, and support for any opinions. Existence of any potential problems, including environmental hazards, soil conditions, flood hazards, problems in accessibility, defects in construction, style, or layout of entire site, and any possible increase in production costs. Description of the competitive market, particularly for development and income-producing projects, to include current and projected supply of similar properties; favorable or unfavorable trends in growth, the economy, and the demand for such properties; and other factors that may affect market entry. v. Economic feasibility of the project, including zoning problems or restrictions, environmental restrictions, or other legal impediments to the project. vi. v vi Summary of operating statements if required by an investor s underwriting guidelines, including forecasts of expected future income and current and projected cash flow, highlighting any vacancy problems, ability to rent, and other relevant financial information, if income-producing property. Sufficient documentation and support of comparability if comparable sales data are used. Sales history of the property (three years). All appraisals will contain a summary of assumptions and any limitation on the opinions expressed. All appraisers must certify that the appraisal submitted complies with the Uniform Standards of Professional Appraisal Practice (USPAP), Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and is independent. This certification provides assurance that the appraiser has no interest in the property or in 10 P a g e

12 the parties involved in the transaction (borrower, broker, developer, etc.). The appraiser must also certify that he or she has made an interior and/or exterior physical inspection of the property and disclose whether anyone provided significant assistance to the person signing the appraisal report. Mortgage Specifications Appraisals for the purchase or refinance of single-family homes must support the value of the home, state whether the property is located in a floodplain, and identify the as is value and, if included in the loan proposal, a prospective value based on proposed improvements. Appraisals may also be subject to inspections or repairs and state a hypothetical value assuming inspection results are positive or repairs are completed. These contingencies will be the result of issues that affect the safety, soundness, or structural integrity of the property. Appraisals must describe the specific aspects of the property, both desirable and undesirable, and provide specific notations concerning the stability and concerns of the neighborhood in which the property is located. Valuations should contain a market value based on comparable properties within the same neighborhood, quality of construction, and condition of the current building. Review of Received Appraisals Underwriters located in the Underwriting Department (which is independent of Loan Origination Staff and reports to Senior Vice President of Mortgage Operations) have authority to review and accept appraisals on transactions within their individual lending authority. The Chief Appraiser, Senior Vice President of Mortgage Operations, or President will review any appraisal for transactions over the underwriter level to ensure it conforms to the WMC s requirements. Individuals responsible for appraisal reviews must evaluate the accuracy, quality, completeness, and conformity to investor guidelines for each appraisal received. Completed appraisal reviews must be documented and stored in the loan files. Appraisals will be used for the following: i. To document collateral value and support the loan to value ratio. i iv. To provide support and verify financial projections and information that the borrower has provided. To identify both the property and market risks of the proposed loans. To provide evidence that the property conforms with the investor s underwriting guidelines. If a WMC Mortgage Underwriter feels factual errors have been committed in a report, a request for corrections will be delivered to the appraiser either through the Appraisal Department, directly the appraiser, or through the WMC approved communications compliance system (Encompass, Streetlinks Lender X, or other approved system). 11 P a g e

13 Appraisal Appeal for Reconsideration of Value WMC has developed the following policy to address lender and borrower requests for reconsideration of value based on noted inaccuracies or weaknesses in an appraisal report, or additional facts not considered in the original appraisal. An Appraisal Appeal for Reconsideration of Value is a request made of the appraiser from WMC to reconsider the analysis and conclusions of the original appraisal based on information that was not presented on the appraisal report, but may have been relevant to the appraisal; and available to the appraiser in the normal course of business as of the effective date of the appraisal. Appraisal Appeal Procedures: 1. An Appraisal Appeal form must be completed and signed by the WMC employee, branch manager, and the Underwriter, if the appraisal has been reviewed in underwriting. 2. A list of noted deficiencies of the subject and/or comparable sales and/or listing for the appraiser to review must be included in the Summary of the Appeal section. 3. Alternate comparable sales and/or listings that have been researched, and appear to be more suitable than the comparable sales and/or listings used in the original appraisal report, should be submitted. A detailed explanation is required for each sale explaining why this additional sale(s) is superior to the comparable sales included in the original appraisal report. No more than five comparable sales and/or listings may be included. 4. The Appraisal Department will analyze the data presented on the appeal form, and if found to be compelling, will submit the information to the appraiser. The appeal form will not be provided to the appraiser to ensure that the appraiser is not subjected to undue influence. 5. The appraiser will be asked to evaluate the additional data. The appraiser may submit a revised appraisal report using some or all of the additional data. Alternatively, the appraiser may reject some or all of the data and provide a brief explanation as to why the additional data was not included in the original appraisal report. 6. Only one Appeal will be permitted per appraisal order. WMC recognizes that legitimate inconsistencies may appear in an appraisal report. Often, an additional explanation or clarification from the appraiser can resolve the issue. An appraisal, for whatever purpose, represents the opinion of appraiser performing the work. There are three possible outcomes to the appeal: 1. Value remains the same. 2. Value increases. 3. Value decreases. In all cases, it is the presence of compelling, supportive additional data that determines if an amendment to value is warranted, and never coercion or undue influence from the requester. 12 P a g e

14 Requests for Real Estate Appraisals Effective June 14, 1994, applicants are entitled to obtain a copy of any third-party appraisal performed in connection with their loan requests. This appraisal must be signed and must include all supporting documentation that the lender used to determine the value of the property. The applicant may not obtain a review appraisal or state-issued statement of appraised value. On loans originated by WMC, each applicant will be notified of his or her right to receive a copy of the appraisal report used in evaluating an application for credit that will be secured by a lien on a dwelling, or provided a copy of an appraisal report (whether credit is granted or denied or the application is withdrawn). This includes all applications secured by a one-to-four family residential structure, regardless of the purpose (e.g., personal or business). The notification must take place at or before WMC takes action on the application. A copy of the appraisal can be included in the adverse action notice, with the application, or with other required documentation. The notification will specify that the applicant s request must be in writing and must be received within 90 days of WMC s notice of action taken or within 90 days of the withdrawal of the application. The notification will also specify that the WMC will charge the applicant for the actual cost of the appraisal. However, if WMC collected an application deposit, and those funds are applied toward the cost of the appraisal, it will not charge the applicant again. WMC may still require reimbursement for copying costs and postage (unless state law prohibits this reimbursement). WMC will provide a copy of the appraisal report within 30 days of receipt of the request, the report, or reimbursement from the applicant for the report, whichever is last to occur. Borrower Receipt of Appraisal All incoming appraisals will be attached to the WMC approved communications compliance system (Encompass, Streetlinks Lender X, or other approved system). The system will notify the Appraisal Department; or appraisals will be ed directly to the Appraisal Department, following which the Processing Department will as promptly as possible submit said appraisals to the respective borrowers. All appraisals for conventional loans will be delivered to borrowers no less than three business days prior to the closing of the loan, unless the borrower waives this requirement and if the investor allows. A dated Acknowledgment Letter will be sent to the borrower with the report and must be signed by the borrower to verify compliance. Appraisals for all other loan types will be delivered at closing or earlier. 13 P a g e

15 Program Compliance The Quality Control Department will conduct a periodic review of loan files and/or procedures to ensure that WMC has sufficient internal controls in place to comply with appraisal regulations and requirements. Appraiser Compensation All WMC Appraiser Roster appraisers will be paid directly by WMC, and not by the borrower, seller, or any other party. All Appraisal Management Company appraisers will be paid by WMC, or the Appraisal Management Company, as the situation dictates. Payment from the borrower will be collected in accordance with timeframes allowable under RESPA through the WMC approved communications compliance system (Encompass, Streetlinks Lender X, or other approved system), through a good faith deposit, or through another method as the situation warrants. Exceptions may be granted under certain circumstances. Fees paid to fee appraisers will be reasonable and customary in the geographic market in which the property is located. i. A fee schedule will be created by the Appraisal Department for each market in which WMC originates loans. i Fees will be based on: 1. Recent rates paid for appraisal services in the relevant geographic market. 2. Fee surveys made by the Appraisal Department of independent appraisers in the relevant geographic market. 3. Third party fee surveys from sources such as, but not limited to, the VA fee schedule, the A La Mode median fee survey, and the WorkingRE fee survey. Fees in the fee schedule will be modifiable based on the type of property, scope of work, complexity of the assignment, etc. Compensation will not be denied to appraisers for not providing a valuation that meets a sale price, targeted value, or any other artificial value. Compensation will not be denied due to a loan not closing or any other lending milestone. Quality Control/Panel Management There is a process for panel management. Systems are in place to ensure that licenses are checked routinely for expiration, appraisers are checked against investor scrub lists, and appraisers cannot receive new assignments unless licensure can be validated as current. As part of the process, the Appraisal Subcommittee online 14 P a g e

16 database ( is checked to confirm the appraiser holds a current license. The Chief Appraiser subscribes to the daily updates provided by the ASC that notifies subscribers of license suspensions, revocations and expirations. Lender X is used as the appraisal portal for appraisal assignment and management. If the appraiser s license is not current, the appraiser is ineligible to receive appraisal assignments in Lender X. Lender X continually monitors the approved appraiser s licenses. Investor scrub lists are also continually monitored in Lender X and if an appraiser is added to one of our investor scrub lists, the appraiser is ineligible to receive appraisal assignments. Appraisers with low service ratings and low quality ratings will be reviewed by the Chief Appraiser. Warning letters will be sent if deemed necessary and appraiser will be monitored for improvement. Appraisers will be removed as deemed necessary. The Chief Appraiser and Director of Mortgage Banking Finance will review the findings of the Chief Appraiser s review of the appraiser and determine if an appraiser is to be removed from the approved appraiser list. Appraiser will receive a removal letter from the Chief Appraiser clearly explaining the reason for the removal. As deemed necessary, the Appraisal Department s Chief Appraiser will quality control test appraisals or valuations that are used by WMC by desktop and if necessary field evaluations. The purpose of evaluations is to determine conformity with: i. The Uniform Standards of Professional Appraisal Practice (USPAP). i iv. The current Fannie Mae Selling Guide, Chapter B4 1, Appraisal Guidelines, and any modifying Lender Announcement and Lender Letters. HUD Handbooks and all modifying Mortgagee Letters. The generally accepted quality standards and practices of the appraisal industry. WMC will provide Fannie Mae, Freddie Mac, or HUD a report of any adverse, negative, or irregular findings of such quality control testing, and any findings indicating non-compliance with any provision of appraiser independence. Ordering of multiple appraisals is not prohibited, but WMC Underwriting or the WMC Appraisal Department will be tasked with selecting the most reliable valuation. The highest valuation is not a criteria for most reliable. Appraisers may be expected to provide additional information or make corrections to factual errors when requested by the WMC Appraisal Department that do not impair or attempt to impair an appraiser s independence, objectivity, or impartiality; or violate any laws or regulations. Appraisals Performed for an Outside Lender All appraisals prepared by an appraiser for a different lender will be accepted by WMC provided the outside lender provides written assurances that the outside lender follows appraiser independence protocols in connection with the loan being originated and that the appraisal conforms to WMC s appraisal standards. 15 P a g e

17 Appraisals Assigned to an Outside Lender Appraisals prepared for WMC will be assigned to other lenders as necessary with an assignment letter prepared by the Appraisal Department. Appraisal Misconduct If there is a reasonable basis to believe an appraiser or appraisal management company is violating applicable laws, or is otherwise engaging in unethical conduct, WMC will refer the matter to the applicable state appraiser certifying and licensing agency or other relevant regulatory bodies. This includes violations of the Uniform Standards of Professional Appraisal Practice of a material nature, such as if the violation significantly affects the value assigned to the property. Representations and Warranties WMC will certify, warrant, and represent that any appraisal report completed following the aforementioned appraiser independence protocols will have a Waterstone Mortgage Certificate of Appraiser Independence. 16 P a g e