Collateral Underwriter "suggested Comparables"

[Meandering]

I agree on the surface, but you are assuming that some highly skilled appraisers have not reviewed some appraisals based on the indications revealed from UAD analysis. That is not a reasonable assumption, which also means we don't even know the half of the story.

I'm not assuming anything. Fannie's Lender Letter says:

"Analysis of appraisals submitted to UCDP made it clear that many appraisal reports never exceeded the 15% or 25% guideline – the focus of many appraisers had become keeping the amount of the adjustments within the guidelines instead of reflecting actual market reaction for specific characteristic(s). "
To support the decision-making process to remove this guideline, Fannie Mae analyzed 700,000 appraisals submitted to Fannie Mae in Q1 2014, including analysis of more than 2.5 million comparable sales. The charts below reflect the results of the analysis. Nearly 95% of comps analyzed had net adjustments less than 15%, suggesting that appraisers strictly adhered to the net adjustments guideline. Fannie Mae’s concern is that the adjustments might be artificially low.

My suggestion is that this is Bull Do Do, and is the result of appraisers using the best comps, not making artificially low adjustments.

Do you think that 95% of appraisals should have comparables that adjust with HIGHER PERCENTAGES OF THE SALE PRICE than 15%? Well, according to this inference, Fannie does.

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[Eli]

Right, I posted because of Fannie grousing about net adjustments being less than 15% across the country and price ranges.

Their inference from their chart is that adjustments are too low, when actually, it shows appraisers are using the best comps.

This has nothing to do with differences in sale prices, because the gross and net are a percentage of the sale price, so the dollar amounts of the gross and net would change with the sale price changes, not the percentages.

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I agree on the surface, but you are assuming that some highly skilled appraisers have not reviewed some appraisals based on the indications revealed from UAD analysis. That is not a reasonable assumption, which also means we don't even know the half of the story.

I'm not assuming anything. Fannie's Lender Letter says:

"Analysis of appraisals submitted to UCDP made it clear that many appraisal reports never exceeded the 15% or 25% guideline – the focus of many appraisers had become keeping the amount of the adjustments within the guidelines instead of reflecting actual market reaction for specific characteristic(s). "
To support the decision-making process to remove this guideline, Fannie Mae analyzed 700,000 appraisals submitted to Fannie Mae in Q1 2014, including analysis of more than 2.5 million comparable sales. The charts below reflect the results of the analysis. Nearly 95% of comps analyzed had net adjustments less than 15%, suggesting that appraisers strictly adhered to the net adjustments guideline. Fannie Mae’s concern is that the adjustments might be artificially low.

My suggestion is that this is Bull Do Do, and is the result of appraisers using the best comps, not making artificially low adjustments.

Do you think that 95% of appraisals should have comparables that adjust with HIGHER PERCENTAGES OF THE SALE PRICE than 15%? Well, according to this inference, Fannie does.

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What I think we heard is what they wanted us to hear. I think they have highly skilled professionals and I think when they say some appraisers are using unsupported adjustments like the same line item adjustments in all appraisals, then I think they have a problem that they are serious about correcting.

 

[Eli]

Gross/net (25/15) is major factor in lower income housing especially, which is reasonable considering the foreclosure/condition factors impacting many lower/middle income housing. It is a bad guideline. Market based adjustments on condition alone demonstrate that fact in low/middle income housing especially. Or maybe I should say lower priced housing to be more politically correct, or correct in general. The price of someone's home doesn't always indicate their income.

 

[Meandering]

I agree on the surface, but you are assuming that some highly skilled appraisers have not reviewed some appraisals based on the indications revealed from UAD analysis. That is not a reasonable assumption, which also means we don't even know the half of the story.



What I think we heard is what they wanted us to hear. I think they have highly skilled professionals and I think when they say some appraisers are using unsupported adjustments like the same line item adjustments in all appraisals, then I think they have a problem that they are serious about correcting.

Any assumptions I am making I'm not posting them.

All I can say, and you can correct me if I'm wrong, but won't the "best comps" reflect adjustments of less than 15% net 25% gross, and to go over 15% net and 25% gross would require using less comparable comps, so in essence according to what Fannie is saying, that once properties become more expensive, your net and gross adjustments would be higher, because you should be using less comparable comps.

This has nothing to do with skill sets.

It has to do with FREAKING MATH AND PERCENTAGES.

 

[Eli]

Any assumptions I am making I'm not posting them.

All I can say, and you can correct me if I'm wrong, but won't the "best comps" reflect adjustments of less than 15% net 25% gross, and to go over 15% net and 25% gross would require using less comparable comps, so in essence according to what Fannie is saying, that once properties become more expensive, your net and gross adjustments would be higher, because you should be using less comparable comps.

This has nothing to do with skill sets.

It has to do with FREAKING MATH AND PERCENTAGES.

I don't think so. The gross/net percentage is rarely a factor on higher priced housing. On lower priced housing the market indicated adjustments for differences in condition alone can exceed those guidelines. It (market derived adjustments 15/25) also can be a factor in middle priced housing comparing renovated vs non renovated properties. they did the right thing, and I don't have the data they have to know it.

 

[Meandering]

I don't think so. The gross/net percentage is rarely a factor on higher priced housing. On lower priced housing the market indicated adjustments for differences in condition alone can exceed those guidelines. It (market derived adjustments) also can be a factor in middle priced housing comparing renovated vs non renovated properties.

Look again what Fannie is saying.



"Analysis of appraisals submitted to UCDP made it clear that many appraisal reports never exceeded the 15% or 25% guideline – the focus of many appraisers had become keeping the amount of the adjustments within the guidelines instead of reflecting actual market reaction for specific characteristic(s). "
To support the decision-making process to remove this guideline, Fannie Mae analyzed 700,000 appraisals submitted to Fannie Mae in Q1 2014, including analysis of more than 2.5 million comparable sales. The charts below reflect the results of the analysis. Nearly 95% of comps analyzed had net adjustments less than 15%, suggesting that appraisers strictly adhered to the net adjustments guideline. Fannie Mae’s concern is that the adjustments might be artificially low.

Here is the website, see how they charted it.
http://www.sfrep.com/resources/Fannie_Mae_Lender_Letter.pdf

They expect your percentages to go up when the sale prices go up. It has nothing to do with relevance of a sale price to adjustments, because adjustments are based on compatibility between comparables and the subject.

So if your subject is a $60k home you would expect all adjustments to be over 15-25%? and no adjustment percentages to occure if the subject is a $600k home? Eli, pay attention to the math.

 

[Eli]

If adjustments are market based, they shouldn't be limited by percentages.

 

[Eli]

Look again what Fannie is saying.



"Analysis of appraisals submitted to UCDP made it clear that many appraisal reports never exceeded the 15% or 25% guideline – the focus of many appraisers had become keeping the amount of the adjustments within the guidelines instead of reflecting actual market reaction for specific characteristic(s). "
To support the decision-making process to remove this guideline, Fannie Mae analyzed 700,000 appraisals submitted to Fannie Mae in Q1 2014, including analysis of more than 2.5 million comparable sales. The charts below reflect the results of the analysis. Nearly 95% of comps analyzed had net adjustments less than 15%, suggesting that appraisers strictly adhered to the net adjustments guideline. Fannie Mae’s concern is that the adjustments might be artificially low.

Here is the website, see how they charted it.
http://www.sfrep.com/resources/Fannie_Mae_Lender_Letter.pdf

They expect your percentages to go up when the sale prices go up. It has nothing to do with relevance of a sale price to adjustments, because adjustments are based on compatibility between comparables and the subject.

So if your subject is a $60k home you would expect all adjustments to be over 15-25%? and no adjustment percentages to occure if the subject is a $600k home? Eli, pay attention to the math.

Ok,but keep in mind percentage correlations to sales prices number 1. Market derived adjustments on lower priced housing tends to be higher in percentage.. Number 2 is they have strong evidence of unsupported adjustments period.

 

[Meandering]

Ok,but keep in mind percentage correlations to sales prices number 1. Market derived adjustments on lower priced housing tends to be higher in percentage.. Number 2 is they have strong evidence of unsupported adjustments period.

That is not correct.

In residential reports, adjustments are $ based. The amount of $ goes like this.

Appraisal 1 Comp 1
Sale price $60,000
Extra bedroom adjustment +$5,000
Adjusted sale price $65,000
Gross Adjustment = 8.33%

Appraisal 2 Comp 2
Sale price $600,000
Extra bedroom adjustment +$50,000
Gross Adjustment = 8.33%

What Fannie wanted to reference, in relation to sale price, was the $ amount of the adjustment, not the percentage amount, because the percentage amount is relative to the sale price. It would be different if both of the comps in the above example were adjusted by $5,000. Then the more expensive comp would have a lower gross adjustment than the less expensive comp. It would still not have a higher gross adjustment, due to a higher sale price.

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[timd354]

Right, I posted because of Fannie grousing about net adjustments being less than 15% across the country and price ranges.

Their inference from their chart is that adjustments are too low, when actually, it shows appraisers are using the best comps.

This has nothing to do with differences in sale prices, because the gross and net are a percentage of the sale price, so the dollar amounts of the gross and net would change with the sale price changes, not the percentages.

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Your conclusion is not neccesarily supported by the data. The data could also lead to the conclusion that appraisers artificially manipulated adjustments to fit within the guidelines. Unless one did an in-depth analysis, which I am sure that Fannie did, they could not determine the correct conclusion. Obviously, Fannie has concluded that the data show that adjustments were manipulated and changed their guidelines as a result. Whatever you think of Fannie, I can tell you that the people who analyze appraisal data are very intelligent and very talented and I really doubt that their conclusion is incorrect.