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Get The Information You Need From Tax Agencies, When You Need It

Obtaining accurate information from the various taxing agencies can be, in itself, taxing. Each agency operates differently, with some handling real estate taxes from end-to-end, while others manage only a portion. When taxes become delinquent or go to tax sale for example, many agencies will send the bill to a third party to be collected. To further cloud the waters, the different agencies may also use their own specific terminology for what happened to the taxes or where to locate the appropriate information. However, servicers can help expedite and streamline the information gathering process.

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When trying to obtain accurate and current tax information, servicers should prepare and organize what information is needed before calling the agency. This will prevent wasted time for everyone involved. Also, keep in mind that most tax agencies are extremely busy around collection time and are less willing to work with companies if they call without adequate preparation or a clear understanding of what is needed. Some agencies can go so far as to block a company from calling again. When this happens, companies lose the ability to gather the required material and must go through other, less efficient routes such as mailing the request in or even making an in person visit to the agency.

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Streamline, Don’t Complicate

By being proactive and working closely with the taxing agencies, companies can prevent an information bottleneck and ensure that communication is being fostered. Most importantly, it ensures that the information obtained is correct and up-to-date. Here is what you do before contacting an agency:

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1.) Gather all tax information available, such as the parcel number, homeowner’s name and address.

2.) If possible, familiarize yourself with some of the specific agency’s terminology. For instance, some other common terms for “tax sales” are lien, tax title, tax taking, in rem, tax foreclosure, forfeiture, tax deed, certified sale, tax suit, upset sale, judicial sale. Its important to stay abreast of what an agency uses to prevent miscommunication.

3.) Perform any website searches first to see if it can help you in the information gathering process. Be prepared to have information ready to validate with the tax office. When using a website, do not assume that all information is listed and up to date. It may be necessary to contact the tax office and ask:

>>Does the website provide delinquent tax and tax sale information? If the answer is no, you need to always call to verify delinquency/tax sale details.

>>If taxes are listed as paid, does the website provide the payers name? If the answer is no, you need to call to verify who paid the taxes.

>>How often is the website updated?

>>Are there other websites you should reference to obtain delinquent or tax sales information?

4.) Prepare a script to direct the conversation in order to get all the data needed in the most efficient manner. When calling an agency for the first time, open the conversation by being professional, positive and polite. If you can build a relationship with the person you speak to at the agency, it could result in help with future inquiries and a more streamlined process.

5.) Have questions prepared such as why are you calling and what you need from the agency? Try to stay away from stand-alone “yes” or “no” questions, and instead, ask leading questions for more detailed answers, such as:

>>Do you collect your delinquencies? If not, then you must get the name and phone number of the appropriate party to contact. If the agency does collect delinquencies, then the next question should be, “Are the taxes delinquent?” If you are told all taxes are paid, make certain to ask if taxes were paid at tax sale or by a third party.

>>Were taxes paid at tax sale?

If they were, then when were taxes sold?

Can we still redeem taxes?

When does the redemption period end?

What is the redemption amount?

6.) If time allows, and if the agency will comply, request that the agency send you a document that breaks out any amounts owed so that there is no room for error with the amounts being obtained.

There are a number of unique challenges when working with the different taxing agencies around the country, but understanding the organizational nuances and procedures can help to overcome these hurdles to ensure cooperation and success.

About The Authors

Louise Byrnes (left) and Shelley Lucas
(Left) Louise Byrnes, vendor manager, is responsible for the research of claims and lost properties at LERETA, a leading national real estate tax and flood service provider. (Right) Shelley Lucas, vice president, Tax Operations, has more than 25 years of industry experience. She currently oversees the management of agency and other proprietary information for LERETA, a leading national real estate tax and flood service provider.

LERETA University Offers Virtual Tax Service Training

LERETA, a national real estate tax and flood service provider, has created LERETA University, a web-based training platform to support and assist servicers in navigating in-depth tax servicing information.

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LERETA University is virtually led by instructors who assist servicers and their staff in real estate-specific tax servicing. Accessed through LERETAnet, the company’s existing hub and customer information portal, the LERETA University platform serves as an extension of on-site training and is focused on helping companies avoid risks that are caused by common mistakes and oversights. Inaccuracies in real estate tax servicing have the potential of costing servicers in penalties, interest and property loss not to mention having a negative effect on borrowers.

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“Training is particularly critical for staff in these roles due to the function’s inherent risk,” said Jonnine Eras, vice president of client relations at LERETA. “Tax servicing is an intricate and specialized function that requires employees to have thorough and specific knowledge. LERETA is in a position to share our resources to better equip our customers and their staff with knowledge, understanding and skill that can protect them against possible risk.”

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Since 1986, LERETA has provided a full suite of national real estate tax services for residential and commercial loans, including automated online research and certification, tax bill processing, a suite of delinquent tax services and customized tax outsourcing service programs. In addition, LERETA provides real-time flood zone determination services that include flexible levels of service based on customers’ needs.

“Sharing our resources in this area is just another way that LERETA is redefining what tax service means and what servicers should expect from their partners,” John Walsh, CEO of LERETA, added. “Our innovative technologies and dedicated team of real estate tax and flood service professionals provide our customers with the service and ongoing support they need to succeed.”

Progress In Lending
The Place For Thought Leaders And Visionaries

Vendor Launches Comprehensive Additional Parcel Search Solution

LERETA, a national real estate tax and flood service provider, has launched its Additional Parcel Search Solution, a proprietary new solution that materially improves identification of additional parcels at the initiation of tax service. This solution reduces portfolio risk associated with penalties and interest and potential loss at tax sale.

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One of the biggest challenges in tax service has been identifying additional parcels associated with an address without going through the expense of using a legal description on every loan. Missing parcels when a property is set-up for tax service exposes the servicer to both potential losses from penalties, interest and lost properties as well as borrower dissatisfaction. Despite the importance of identifying additional parcels, the industry has relied on the same tools and methodologies for decades.

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“Over the past 30 years, mortgage servicers have had to rely on virtually the same tax service solutions without significant enhancement or product innovation,” said John Walsh, CEO of LERETA. “LERETA has been aggressively working on methods to reinvent tax service technology and processes. Additional Parcel Search Solution is just one initiative in that agenda, and it’s an important solution that can reduce servicers’ financial risk and increase borrower satisfaction.”

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LERETA recently ran a test for a top five servicer that included a subset of approximately 16,000 loans that had been parceled by another tax service vendor. LERETA’s Additional Parcel Search Solution found 11 properties that had previously been unidentified. Although 11 loans is only 0.1 percent of 16,000, it does represent $2.4 million of potential losses or 10 basis points of MSR value.

“We understand the importance of identifying these parcels and the difficulties created from the inability to discover them,” Walsh explained. “This is an area in the tax service landscape that needed an injection of innovation, and we are proud to provide a solution that can bolster tax service and provide servicers materially better solutions.”

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Tax Line Audits: The Benefits To Servicing Operations

Industry professionals still cringe a bit when they hear the word audit. However, that should not be the case with a tax line audit. This is an audit that can not only save in fees but time as well as improve customer service.

A tax line audit reviews of all tax line data elements that could affect the timely payment of real estate taxes or a correct escrow analysis. This audit should be completed 60 days before the real estate tax cycle begins. Since servicers are required to complete an annual escrow analysis on all loans in their portfolio, it is crucial to ensure that the data used to complete the analysis is accurate. The aforementioned is just one of the many benefits of auditing tax line data.

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The annual escrow analysis is a calculation required under Real Estate Settlement Procedures Act (RESPA) and determines whether the escrow account is in balance and if the borrower needs to pay more money to make up a shortage or if the lender has collected too much money and the borrower is entitled to a refund. If the tax data reviewed within this analysis process is incorrect, the monthly payment information provided to the homeowner will be incorrect causing overage or shortage conditions in future escrow analysis.

Servicers over time have experienced an increase in calls related to the escrow analysis and the subsequent increase or decrease in the homeowner’s monthly payment. Most often the tax payment made from the homeowner’s escrow account is the cause of concern. Completing a tax line audit annually will provide the answers to those difficult questions related to real estate taxes paid from the homeowner’s escrow account. The questions from the homeowner could now be resolved with only one call.

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The three key tax line identifiers that require the most attention and have the most impact on the tax paying process are the payee information (including where the homeowner’s tax payments are sent), the due date and frequency of the real estate tax payments and the tax amounts. All of these factors affect a true and accurate escrow analysis.

Payee – The U.S. has more than 25,000 tax agencies collecting real estate taxes for homeowners’ properties. These agencies, at times, will relocate changing where tax payments should be sent. The address information has to be audited annually to keep the lender’s records accurate to ensure future timely real estate tax payments.

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Payment due date and frequency – Tax collecting entities can change the due date and/or frequency of real estate tax payments that they expect to receive during a calendar year. The homeowner’s data also has to be updated to properly calculate the monthly collection of taxes during the annual escrow analysis.
Tax Amount – The annual real estate tax amount is the last vital field that will also require review to determine if there has been an increase or reduction in the amount of taxes the homeowner is responsible for paying. This amount could be affected by a homeowner’s exemption status or a reassessment by the real estate tax agency.

Although servicers will not see an immediate change from completing a tax line audit, the savings will show up during year two of implementing the audit process. Servicers will experience a reduction in customer service inquiries related to real estate taxes, as well as a reduction in staffing for the processing of real estate tax payments due to fewer exceptions during a tax payment cycle and the penalty loss liability will also lessen because of timely and accurate real estate tax payments. The additional work related to completing a new escrow analysis or repaying a tax payment that was incorrectly processed will also significantly diminish.

While this is one of the last operational changes that most servicers implement, there are substantial financial benefits and an overall improvement in customer satisfaction. It proves to be a win for the servicers as well as the customers.

About The Author

Dionne McBride
Dionne McBride has more than 20 years of service with LERETA working in various departments from training, tax operations and customer service. In her current position, which she has had for four years, is responsible for performing audits using the lender’s tax line data and completing a comparison to our tax tables to identify exceptions. The conversion/acquisition function takes on the responsibility of bringing on large acquisitions for lenders and integrating the new loans into their existing portfolio to begin tax servicing. She can be reached at dmcbride@lereta.com.

New LERETA Tax Information Identifies Habitually Delinquent Properties Nationwide

LERETA, a national real estate tax and flood service provider, has identified 167,112 parcels as habitually delinquent across 39 states nationwide. These findings are from the company’s most recent tax data analysis of its proprietary property tax database.

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The analysis includes 575 jurisdictions with an outstanding delinquency amount of $725,488,886. The average delinquency amount per parcel is $4,341.

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“Unpaid taxes as reflected by these parcel records can have serious ramifications and are subject to tax liens that may ultimately result in property loss,” said Terry Cason, data modeling analyst at LERETA. “The bottom line is, the mortgage lien is subordinate to a tax lien and places substantial risk on the mortgage holder. This is an area lenders should follow more closely.”

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In order to be considered habitual, a delinquent property must have 10 or more years of unpaid taxes recorded. Additionally, a delinquent review must be representative of an entire jurisdiction being analyzed in order to be included in the company’s analysis. Data made available between October 2015 and October 2016 were reviewed.

Since 1986, LERETA has provided the mortgage and insurance industries fast, accurate and complete access to property tax data and flood hazard status information across the U.S. LERETA’s services are designed to increase efficiency, reduce penalties and liabilities and improve processes for mortgage originators and servicers.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Using Data To Confirm Facts

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A recent LERETA study analyzed property tax bills across 33 states from January 2015 through April 2016 to determine which states and regions of the country had the highest property taxes. In total, LERETA reviewed 89 million parcel. In order to ensure a sufficient statistical review of the data, the existence of a minimum of 500,000 parcel records by state were required for that state to be included in the study. For analysis purposes, tax collection data were aggregated to the county level so that areas where tax collection is made at multiple levels could be accurately compared.

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LERETA studied 8.5 million parcels in the Northeast, 12 million in the Midwest, 42 million in the South and 26 million in the West. As depicted by the graphs, the data revealed that the Northeast region of the country has the highest property tax bill average at $4,991. The Western region had the second highest property tax average at $3,673 followed by the Midwest at $2,864 and the South at $2,267. The average tax bill across these regions was $3,026, and the total tax digest was close to $269 billion.

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The second graph shows a more detailed breakdown of the data by region, including the total number of parcels reviewed and the total number of exempt parcels. Also provided is a quartile grouping where tax data is segmented into four buckets to reflect the overall distribution of taxes. This is useful when analyzing the average bill amount to a specific distribution range. It also reflects how clustering in a specific quartile will affect that quartile’s position in the region. The table suggests that the average tax amount falls into a higher quartile based on the number of commercial and affluent residential properties “pulling” the average, and that the average is found in a lower quartile where the opposite is true.

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New York, largely due to commercial properties in the Manhattan area, and Connecticut had the highest billing averages at $11,482 and $6,794 respectively. California ranked third with an average of $5,156 and Minnesota was fourth highest at $4,022. According to the data, Alabama had the lowest average at $619 followed by Arkansas at $791 and Mississippi at $936.

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LERETA’s dataset will become more comprehensive as information is posted to its proprietary property tax database through the fourth quarter of 2016. This data is available at the state and jurisdiction levels as well.

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This information helps lenders accurately confirm average tax billing facts and be aware of how these averages compare and correlate with their individual portfolios. Summarized billing information is useful for measuring against a lender’s established footprint, and if needed as a means to collect data in its most efficient form as a service. The more data lenders are armed with, the more proficient they can be in serving borrowers.

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Progress In Lending
The Place For Thought Leaders And Visionaries

Which Six States Have A Higher Than Average Delinquency Rate?

LERETA, a national real estate tax and flood service provider, found that six states had higher than average delinquency rates. New York was the highest at 11.5 percent delinquencies followed by Texas at 10.9 percent, Tennessee at 9.9 percent, North Carolina at 9.3 percent, Massachusetts at 9 percent and South Carolina at 8.2 percent.

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To be included in this review, a state must have at least one million parcel records available for analysis through LERETA’s proprietary property tax database. Also a delinquent review must be representative of an entire jurisdiction being analyzed. The company reviewed 59 million parcel records in 45 states with source dates ranging from October 2015 to October 2016.

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“It is important to understand that unpaid taxes as depicted by these delinquency rates are subject to tax liens against a property and may result in property loss,” said Terry Cason, data modeling analyst at LERETA. “The mortgage lien is subordinate to a tax lien and places risk on the mortgage holder, typically a lender.”

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The regional breakdown of this review consists of 6.5 million parcel records in the Northeast, 8 million in the Midwest, 36.5 million in the South and 8 million in the West. There were 13 states reviewed that have delinquency rates below the national average and they included: Florida, Georgia, New Jersey, Washington, Arizona, Michigan, Ohio, Minnesota, Oklahoma, Arkansas, Iowa, Maryland and Virginia.

“It is noteworthy to disclose that delinquent data is made more readily available from jurisdictions after the final installment of bill collection in that area,” Cason explained. “As such, a second analysis that will be performed at the end of the fourth quarter this year will offer additional data to compare against the baseline in this review.”

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

The Truth About Taxes

Some of you may be familiar with the old adage, you only have to do two things in life, die and pay taxes. While some people might add working out and watching your gluten intake, paying taxes still remains very true. For property taxes to be paid correctly, it is crucial for servicers to set up loans correctly on their system during the boarding process. Not doing so could lead to penalties or even the loss of a property.

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The tax line is a record in a loan servicing system that includes all the data needed to identify when property taxes need to be paid, the amount of payment and what jurisdiction receives the payment.

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The following charts represent the monthly number of items and dollar amounts for occurrences of paying the wrong amount of property taxes. The information is based on LERETA national data from prior servicer/lender acquisitions from July 2015 through April 2016.

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One important area to be cognizant of is the tax line, which includes all the data needed to identify when property taxes need to be paid, the amount and the jurisdiction to receive the payment. The line includes:

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>> The tax payee code is the unique number assigned to identify the tax collection jurisdiction on the servicing system. This code cross-references to another file that includes the taxing jurisdiction name and mailing information.

>> The tax identification number is the actual number assigned to the property by the taxing jurisdiction and is required when obtaining any information from the taxing jurisdiction about the property.

>> The disbursement amount or last amount paid is the last amount paid to the taxing jurisdiction for this tax line (can be an annual or installment amount) and is updated with the current amount to be paid when new taxes become due.

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>> The due date is the date the servicer assigns to this line to alert them to an upcoming payment requirement (this date is based on business rules and is generally 15 to 30 days before taxes are due to the taxing jurisdiction).

>> The type is a code that identifies the type of taxes due, typically county property taxes, city taxes, school taxes and some non-standard payees, such as sewer taxes, garbage taxes, ground rents, etc. Servicers are required to report escrow payments annually to borrowers, and the tax type is used in preparing tax deductions on the borrower’s income tax return.

>> The term is used to identify the frequency the taxes are being paid, for example a Term of three indicates the annual taxes are being paid every three months, or quarterly (three months x four installments = 12 months).

>> Other codes as determined by the business rules of the servicer.

Servicers cannot rest on their laurels once the tax line is set up on a loan. It is extremely important that tax lines are monitored and maintained to ensure the accuracy of the data due and to any potential changes. Those changes could include new payees or the consolidation of taxing jurisdictions that no longer collects taxes, and how they are now collected by the county or separating taxing jurisdictions (a city decides to collect its own taxes instead of them being included by the county). There could also be changes in the due dates, contact information or tax identification numbers.

Servicers can either take on the responsibility of managing this process or work with a tax service vendor that can offer and facilitate the tax line setup and tax line audit services on behalf of the servicer. Either way, the taxes have to be paid correctly, else penalties will be incurred, which no one wants to happen.

About The Author

Ted Smith
Ted Smith is a vice president and client relations manager at LERETA. He has been with the company for nearly 17 years. Since 1986, LERETA has provided the mortgage and insurance industries the fastest, most accurate and complete access to property tax data and flood hazard status information across the U.S. LERETA is committed to giving customers extraordinary service and cost-effective property tax and flood solutions. LERETA’s services are designed to increase efficiency, reduce penalties and liabilities and improve processes for mortgage originators and servicers. LERETA’s dedicated teams of real estate tax and flood professionals along with LERETA’s experienced management team allow the company to lead the industry in service and technology.

Getting The Lines Straight

website-pdf-download

Some of you may be familiar with the old adage, you only have to do two things in life, die and pay taxes. While some people might add working out and watching your gluten intake, paying taxes still remains very true. For property taxes to be paid correctly, it is crucial for servicers to set up loans correctly on their system during the boarding process. Not doing so could lead to penalties or even the loss of a property.

Featured Sponsors:

 

The tax line is a record in a loan servicing system that includes all the data needed to identify when property taxes need to be paid, the amount of payment and what jurisdiction receives the payment.

tme916-your-voice-chart-two

The following charts represent the monthly number of items and dollar amounts for occurrences of paying the wrong amount of property taxes. The information is based on LERETA national data from prior servicer/lender acquisitions from July 2015 through April 2016.

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One important area to be cognizant of is the tax line, which includes all the data needed to identify when property taxes need to be paid, the amount and the jurisdiction to receive the payment. The line includes:

tme916-your-voice-chart-one

>> The tax payee code is the unique number assigned to identify the tax collection jurisdiction on the servicing system. This code cross-references to another file that includes the taxing jurisdiction name and mailing information.

>> The tax identification number is the actual number assigned to the property by the taxing jurisdiction and is required when obtaining any information from the taxing jurisdiction about the property.

>> The disbursement amount or last amount paid is the last amount paid to the taxing jurisdiction for this tax line (can be an annual or installment amount) and is updated with the current amount to be paid when new taxes become due.

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>> The due date is the date the servicer assigns to this line to alert them to an upcoming payment requirement (this date is based on business rules and is generally 15 to 30 days before taxes are due to the taxing jurisdiction).

>> The type is a code that identifies the type of taxes due, typically county property taxes, city taxes, school taxes and some non-standard payees, such as sewer taxes, garbage taxes, ground rents, etc. Servicers are required to report escrow payments annually to borrowers, and the tax type is used in preparing tax deductions on the borrower’s income tax return.

>> The term is used to identify the frequency the taxes are being paid, for example a Term of three indicates the annual taxes are being paid every three months, or quarterly (three months x four installments = 12 months).

>> Other codes as determined by the business rules of the servicer.

Servicers cannot rest on their laurels once the tax line is set up on a loan. It is extremely important that tax lines are monitored and maintained to ensure the accuracy of the data due and to any potential changes. Those changes could include new payees or the consolidation of taxing jurisdictions that no longer collects taxes, and how they are now collected by the county or separating taxing jurisdictions (a city decides to collect its own taxes instead of them being included by the county). There could also be changes in the due dates, contact information or tax identification numbers.

Servicers can either take on the responsibility of managing this process or work with a tax service vendor that can offer and facilitate the tax line setup and tax line audit services on behalf of the servicer. Either way, the taxes have to be paid correctly, else penalties will be incurred, which no one wants to happen.

About The Author

Ted Smith
Ted Smith is a vice president and client relations manager at LERETA. He has been with the company for nearly 17 years. Since 1986, LERETA has provided the mortgage and insurance industries the fastest, most accurate and complete access to property tax data and flood hazard status information across the U.S. LERETA is committed to giving customers extraordinary service and cost-effective property tax and flood solutions. LERETA’s services are designed to increase efficiency, reduce penalties and liabilities and improve processes for mortgage originators and servicers. LERETA’s dedicated teams of real estate tax and flood professionals along with LERETA’s experienced management team allow the company to lead the industry in service and technology.

The Disappearance Of Appraisers

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There is a common misconception that AMCs are unconcerned with the problems affecting appraisers. AMCs should be viewed as business partners for appraisers, offering appraisal assignments and ready to assist the independent appraiser to better understand the regulations and rules that are constraining the business and provide guidance on how to better navigate those challenges. AMCs are a part of the industry as a whole and we believe they share in the responsibility to reverse the declining number of appraisers. AMCs can, and are, taking action to both change restrictive policies and increase the number of licensed appraisers. There will be dramatic consequences for all in the mortgage appraisal industry if the number of appraisers continues to decline at the same rate. Through lobbying, education and policy change, AMCs believe they should help reverse the trend of appraisers leaving the business.

Strain on Appraisers

The decline in appraisers over the last few years has been steep. The average annual rate of decrease is approximately three percent – a cumulative decline of 22 percent since 2007 (Appraisal Institute Research Department). As large of a decline as this is, there is the potential for these numbers to become even more dramatic in the future. More than 62 percent of appraisers are over the age of 51, and only 13 percent are younger than 35. The lack of youth in the profession and the decline in appraisers can both be tied to increased barriers of entry into the profession.

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Currently, certified level appraisers are expected to have a four-year college degree, two additional years of apprenticeship and pass certification requirements. The four-year college degree does not need to be in a field of study relevant to appraising and some suggest a school for appraisers would impart more relevant and valuable skills than an unrelated four-year degree. What’s making the apprenticeship period more difficult is that many lenders refuse to accept appraisals that include the signature of a trainee on the left side, though the supervisory appraiser does take full responsibility by signing on the right side. It’s incredibly difficult to find people to train as potential new appraisers because they’re being asked to work and train for some 2,500 hours without being able to establish their own reputations by signing their own work.

Appraisers are backlogged in work and some try to complete 2-3 appraisals a day, on top of making corrections to any existing appraisals and submitting their work through multiple systems to multiple companies. The workload and demand on their time has risen sharply. Appraisers are under immense pressure to be organized, efficient, adaptable, and accurate despite the increasing workloads. With only 24 hours in each day, those appraisers who fall behind suffer from stress, long hours driving and exhaustion. While many would benefit from an apprentice or trainee appraiser, many appraisers are not sure how to manage that situation to the ultimate benefit of both parties. Many appraisers strive to minimize risk and asking an individual to risk his hard-won reputation and business by using unseasoned appraisers is a risk many are not willing to accept.

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What can AMCs do to provide assistance to bridge this chasm? It’s an issue which needs an immediate solution. Time is not on our side. Given that it takes two to three years to move from trainee status to fully licensed appraiser, the industry requirements have guaranteed there will be no quick relief for several years. While some argue technology is the future, AMCs believe there will always be a need for human appraisers in the real estate business. Technology can change the way appraisers offer services, but can never replace the need for an unbiased, talented and experienced appraiser.

Strain on AMCs

The same strain impacting appraisers is occurring at AMCs. With the decline in overall numbers, there are less qualified appraisers able to take on the burdening expectations. AMCs are forced to search harder for qualified appraisers. The means more time and resources are allocated to dig deeper into databases to find the most qualified appraisers. This forces AMCs to search for appraisers who are further away from the property to be appraised. In some circumstances AMCs may have to search for appraisers outside the county, and even, very rarely, across state lines. While these problems may be less visible in more urban areas where there are still many appraisers to choose from, the shortage is impacting the more rural or isolated areas the hardest.

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Effects on Appraisals

AMCs worry that if the decline in appraisers continues, it will have a negative effect on the quality of appraisals. AMCs strive to find the most qualified and informed appraisers to make decisions on properties. The further away from the subject property an appraiser is, the larger the possibility for potential error based on lack of geographic competency. Although many AMCs currently have large vendor networks and are currently able to find the most qualified leads, in time, with fewer appraisers offering services, it will potentially affect the accuracy, turn time and quality of the appraisal market as a whole.

Another substantial goal AMCs have is to protect the value of appraisals over cheaper alternative valuation products such as AVMs. The time needed to complete an appraisal would increase with the continued decline in the number appraisers. This increasing wait could come with mounting pressure for appraisals to be substituted by other valuations products, which do not have the insight, accuracy or accountability of an appraisal. In this area, AMCs can help ensure the value of the appraisal product while fighting for more appraiser friendly regulations and policies. Ultimately AMCs need to work with appraisers to change the overly restrictive regulations surrounding the sector.

Potential Solutions

The current environment needs to change to better protect the appraisers at the center of the industry. In order to reach solutions it is up to the mortgage industry to increase its voice to influence policies. AMCs are taking action to change the current environment. Many AMCs are joining the Real Estate Valuation Advocacy Association (REVAA) who lobby for positive change for the industry. REVAA and other non-profit trade associations monitor public policy and serve as an important resource to federal and state regulators and policymakers. They work on creating solutions with policy makers about the attrition of appraisers and ensure the movement to halt the decline is a top agenda item.

There are many innovative ideas on how AMCs can help combat the decline in the number of appraisers if policies were changed. This includes AMCs starting their own training programs, but these ideas are often limited by existing rules and regulations. As long as AMCs’ ability to affect change is limited by government regulations and existing lender policies it is harder to address the root causes of the lack of appraisers. Outside the policy sphere, more information needs to be published for potential recruits on the benefits of working as an appraiser. The ability of appraisers to work their own schedule, own their own shops and the flexibility of working for themselves are major draws for younger people interested in the profession. More potential recruits need to know that an appraisal career can offer security, stability and has the potential to be lucrative if well-established.

The final way AMCs can help reverse the decline of appraisers is to take responsibility over their operations and relationships. AMCs need to do more to directly help the profession become stronger and better. AMCs need to treat their appraisers right; with respect, reasonable turn times, and fair and adequate compensation. AMCs must be held accountable for their part of the relationship. The healthier a relationship that can be formed between AMCs and appraisers, the more attractive it will be for future appraisers to join the field. Simply by acknowledging and guaranteeing that AMC s value the work of appraisers, AMCs can help attract more people to the field.

From Discussion to Action

AMCs are very aware of the decline in the number of appraisers, and have been feeling the same strain that appraisers are all too familiar with. AMCs are having the hard discussions of what can be done to support the appraisal profession and are working towards finding solutions to reverse the decline in the number of appraisers. While the lack of appraisers is fundamentally affecting the length of time to acquire and fund financing in several states, if the current rate of decline continues, there will potentially be very big problems soon. While there are still many discussions to be had on how to fix the problem, AMCs and appraisers must work together to correct current trends before it’s too late.

About The Author

Wynetta Byers
Wynetta Byers is Chief Appraiser at LRES, a national residential and commercial real estate services company providing valuations, REO asset management, HOA and technology solutions for the mortgage and real estate industry. For more information about LRES, visit its website at www.lres.com.