Two weeks ago HUD posted national appraiser rankings online, a registry which attempted to measure appraiser skills according to "claims" and "defaults." The registry page disappeared almost immediately after coverage by Realty Times, but you have to wonder if it will soon return.

What's troublesome about appraiser rankings is that appraisers have nothing to do with either claims or defaults. A "default" in this case means a mortgage which has been unpaid for at least 90 days while a "claim" means foreclosure.

Appraisers provide an independent estimate of value at a given time. They do not underwrite loans, approve borrowers, or collect monthly mortgage payments. They see no mortgage applications and they do not check credit records or tax returns. For these reasons it makes no sense to then say there is any relationship between borrowers who don't pay and a property's appraised value. Using HUD's logic, one could equally blame termite inspectors, carpet cleaners, or settlement agents for loans gone bad.

HUD first attempted to pass off appraisal rankings at the start of 2001 under then-HUD Secretary Andrew Cuomo. The rankings were pulled immediately after being disclosed by Realty Times.

The real problem is that somewhere in HUD headquarters there is a dusty computer with the names of some 22,502 appraisers nationwide that HUD has ranked according to claims and defaults. This is useless information, but it is information that has been assembled, merged, and purged and so it remains possible that without announcement or fanfare the very same numbers may once more appear online to unfairly and unreasonably besmirch appraisers whose only "crime" has been to appraise FHA properties.

HUD ought to know better -- and it does.

According to HUD's Semi-Annual Report to Congress, it told Capitol Hill on March 31st that the Federal Housing Administration (FHA) Appraiser Watch Initiative would:

Provide a fully computerized Appraiser Watch monitoring system, and establish a performance standard that appraisers would be required to meet to maintain their status on the Appraiser Roster. Appraisers would be removed from the Roster if the rate of defaults and claims on closed mortgages linked to their appraisals exceed the rate established in this rule.

We nonconcurred with this proposed rule because we did not agree with removing an appraiser from FHA programs based solely on the default/claim rate of loans that the appraiser was involved in processing. This may, inappropriately, hold the appraiser responsible for defaults that are the result of poor underwriting practices by the lender. We recommended, instead, a closer examination of the work performed by appraisers on loans with high default/claim rates.

You can see the problem here. It's communication.

Since a typical human being does not use the term nonconcurred in daily conversation, it's clear that bureaucrats across the organizational chart were simply unaware that the Department's current plan to measure appraisers according to claims and defaults has been dumped.

But now they know.

For more articles by Peter G. Miller, please press here.

Published: July 9, 2002

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .