Waiver Stats

[Tom D]

The problem is the misleading narrative that says things like appraisals have a higher default rate than WAIVERS as if the valuation itself made the default rate greater or lesser, when it was in large part the borrower strength in both credit rating, downpayment and other factors

The better way to state is would have been that Waiver approved borrowers have a lower default rate

yea yea yea. Waivers are for the best credit and high equity borrowers, so lower defaults. And another yea yea yea, appraisals have a higher default? What aspect of the loan does the appraisal have any aspect causing a loan default.

Well, according to some, the appraisal is a "risk management tool".

Yea, it is a $ lost management tool when there already has been a default. We are not process involved at all, in the borrower falling behind after settlement.

I love these threads. It's like watching the evening news to see how many were shot dead, and who were they. 2 years at most left walking dead.

 

[alebrewer]

Scott Adams would wryly observe upon reading this thread & the attached documents that any time someone is paid $$$ to do research on a particular topic, their results will ALWAYS go in the direction that the person who ordered the study wants them to go. In this case, this study was commissioned by the forces of the "new appraising tech", looking to find reasons to indicate that tech is better than the existing system.

That's why I approach any 'studies' proffered by the GSE's with a healthy dose of lack of trust. Kind of like if I did a study on my wit and charm - of course the data would support the same conclusion(s) I already hold...

 

[The Bob]

It is a risk management tool. It provides the lender (or should) with a sense of their collateral exposure in the event of default. The valuation is not a predictor of default, nor does it influence the potential for default - AT ALL. In fact, the only time a valuation product is necessary is if there is a default. If there is no default - it's a signature loan. The appraisal (if one was procured) would have been a waste of money.

That's really not managing risk...that's more like defining your potential risk. Is the appraisal well supported, or has it been goosed?
It's kinda like with stocks. A prospectus can give you an idea of the risk (industry, competitors etc...), but when that stock goes south, nothing in that prospectus is going to prevent or limit your loss. You would need to hedge (buy a put, or inverse ETF) in order to limit your risk.
An appraisal is similar...it only tells you what the value is today.

 

[alebrewer]

That's really not managing risk...that's more like defining your potential risk. Is the appraisal well supported, or has it been goosed?
It's kinda like with stocks. A prospectus can give you an idea of the risk (industry, competitors etc...), but when that stock goes south, nothing in that prospectus is going to prevent or limit your loss. You would need to hedge (buy a put, or inverse ETF) in order to limit your risk.
An appraisal is similar...it only tells you what the value is today.

The risk of default is associated exclusively with the credit side of the underwrite. DTI, asset reserves, credit scores, length of time on job, payment history, etc. All of those are factors that influence the risk of default. The valuation of the property is performed solely as a basis for estimating exposure in the event of default. If there is no default - there is no need for an appraisal. Period.

It is improper to allocate any value to our services other than what the value actually is. We are NOT providing any analyses related to the borrower's risk of default. That's not what we do. We are providing analyses about the collateral for the loan for the express purpose of estimating exposure in the event of default. The valuation product and the risk of default are mutually exclusive things.

 

[Tom D]

Just too funny. I can see us all yelling at the tv when the news says appraisals have a higher default, than waivers.

Now also realize. it's the perception fannie wants, not the reality. Fannie want the public to believe that waivers are safer. Bye bye, you bad risky default appraisers. Think about it.

 

[Alsie35]

The risk of default is associated exclusively with the credit side of the underwrite. DTI, asset reserves, credit scores, length of time on job, payment history, etc. All of those are factors that influence the risk of default. The valuation of the property is performed solely as a basis for estimating exposure in the event of default. If there is no default - there is no need for an appraisal. Period.

It is improper to allocate any value to our services other than what the value actually is. We are NOT providing any analyses related to the borrower's risk of default. That's not what we do. We are providing analyses about the collateral for the loan for the express purpose of estimating exposure in the event of default. The valuation product and the risk of default are mutually exclusive things.

Correct. If I recall correctly, that is why WSB had to generate a special form that we always put in the first page of the appraisal report, where we gave our "risk evaluation" - keeping in mind that we were in-house appraisers at the time, and were employed by the client. Not appropriate in other employment circumstances.

 

[Alsie35]

Just too funny. I can see us all yelling at the tv when the news says appraisals have a higher default, than waivers.

Now also realize. it's the perception fannie wants, not the reality. Fannie want the public to believe that waivers are safer. Bye bye, you bad risky default appraisers. Think about it.

The fact is that we are just observers of this process - we have no influence, so there is no point in getting spun up about it.

Of course we don't want the system to change too fast because at this stage of the game we are "at the top of our game" and were looking to ride it into the sunset, not having to re-learn how to do our jobs and accept doing the same amount of work, time-wise, at half the fee (because it is likely to be far more time consuming and difficult and fees are not likely to reflect that).

The new appraising system will seriously eat into our "profit margins". I anticipate doing maybe 1 appraisal in the same time it took to do 2, or even 3, in the past, for 1/3 or 1/2 of what the fees would have been.

C'est La Vie.