Collateral Underwriter "suggested Comparables"

[libertarianapp]

The word egregrious occurred three times in the final four paragraphs of the Fannie Mae letter. It was not placed there accidentally. It is a code word. If you do not know what it means, then you will pay the consequences.

 

[libertarianapp]

The word egregrious occurred three times in the final four paragraphs of the Fannie Mae letter. It was not placed there accidentally. It is a code word. If you do not know what it means, then you will pay the consequences.

What they said was:
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.

Appraisers also appear to adhere to the 25% gross adjustment guideline, with nearly 94% of comps having gross adjustments less than 25%. Again, this raised concerns with the accuracy of these adjustments

So if net is less than 15% it is pretty rare that gross would be more than 25%. But here it is, the sentence above and below their 1st chart.

http://www.scribd.com/doc/254761393/FNMA-Lender-Letter-LL-2015-02-About-CU#scribd

and,

The next chart shows the median amount of an adjustment for GLA by state. Analysis shows little variation in the median GLA adjustment despite significant variation in price. Only in Hawaii does the median GLA adjustment break $50 per square foot, even though median GLA price exceeds $50 per square foot in all 50 states and is significantly higher in certain market areas.

Again, this is not portrayed by their charts, which use medians, instead of averages, therefore the outliers are not counted, but the obvious trend line of the GLA adjustment in their state price chart is a definite upward trend from the low <$100k to the lower than Hawaii, >$900 homes, from $15 a square to $ 56 a square with the medians flattening between $303k and $320k, which, given the prevalence of new tract homes during the boom years, might just be accurate with the price differences reflected in 2 versus 3 car garages with little differences in GLA. Because the data is not presented by different sized homes, but rather is presented as price. So $303k and $320k might just be the same sized homes, but with some with views, or extra garages or built in pools, therefore the GLA adjustment does not account for any size difference.

They infer that because the majority of comps are below the net adjustment guidelines they created, that appraiser's are wrong and are making low adjustments, even though, the adjustments are within the Guidelines they wanted.

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[Peter LeQuire]

This is all pretty amusing. For a couple of decades appraisers were pressured, hammered, pushed, cajoled etc. to not deliver reports having adjustments that exceeded FNMA "guidelines". Whether this pressure was from Fannie herself, from lender management, from underwriters, from mortgage insurance companies - it doesn't matter: the pressure was there, it was real, and came with the implied (or spoken) threat of non-payment and removal from appraiser panel.

 

[Eli]

If you think about it, it is not surprising. For example, if I have labor working for me that has no professional appraisal education, then what are they going to do if I tell them the guidelines say comps within 90 days and gross/net percentage limits of 25/15? Keep in mind that unskilled/educated/unlicensed labor may not be geographically competent, and obviously from FNMA analysis they have followed guidelines to the letter in some cases. It is a direct slap to management. Some management way up the ladder is being slapped. That low skilled worker at the bottom will be the least hurt from CU/UAD, because that unlicensed and skilled person can go somewhere else in a heartbeat with the improving job market. That licensed or unlicensed manager may have to go elsewhere for a job also, which might not be as easy for them. That licensed person does not have an excuse. If they did, the licensing exam would have been composed of only a few questions which would have been related to making sure FNMA guidelines were always followed. It would have been an easy, peasy exam to get an appraiser's license and no experience needed.

 

[timd354]

How much tax payer $ went into bailing out these "very intelligent and very talented" folks?

Zero, Zilch, Nada, Nothing

Fannie Mae (and Freddie Mac) have already paid more money back to the federal treasury in the form of preferred dividends than it received during the bailout, so taxpayers have made a profit on the bailout. The federal government disbursed ~$187 billion to bail out the GSE's and the GSE's so far have paid back ~$225 billion, making for a tidy $38 billion profit for the taxpayers which will continue to increase as treasury will continue to receive a nice 10% preferred dividend for the foreseeable future.
http://projects.propublica.org/bailout/list

Additionally, the workers at Fannie were simply paid the salaries that were owed to them for the work they did an continue to do. They obviously continue to have jobs at Fannie because Fannie was not allowed to fail by the government, but most of the people I know working on CU and the UCDP would have little trouble finding good jobs elsewhere.

It is more than a little bit ironic that a residential appraiser would question whether Fannie employees are beneficiaries of the government bailout of the GSE's when most of the income made by a typical residential appraiser is due to the demand for appraisals generated by GSE, FHA, and VA requirements. I wonder how much work you and most other residential appraisers would have been left with the past 7 or 8 years if the government had simply let GSE's go under and let the entire secondary mortgage market system in this country collapse (the answer is not much). I also wonder how much less work most residential appraisers would have had over the past few years if not for several refinance runs that would not have occurred if the Fed had not subsidized mortgage rates through multiple rounds of quantitative easing (QE). Whether or not one thinks that the GSE bailouts and QE were good policy, few benefited more from these programs as a group than residential appraisers.

 

[Eli]

Removing the 15/25 guideline confirms that some have gamed the system for financial reasons, and it is coming back to bite them as a result of UAD indicators relative to credibility/reliability. Keep in mind those UAD indicators are just like market indicators we see and analyze on a daily basis and are undeniable. I've known it by looking at a few questionable reports in my small little world. Removing that guideline just indicates it is a more wide scale problem. Some people made sure to meet the guideline by choosing their comps and performing their analysis to meet the guideline, not to solve the appraisal problem using the valuation process as they were trained, or not trained in some cases.

 

[residentialguy]

Unless one did an in-depth analysis, which I am sure that Fannie did, they could not determine the correct conclusion.

LOL...yeah, like they do on our appraisals?

 

[Eli]

LOL...yeah, like they do on our appraisals?

It's working....I know you see it. Right now it is like the ripples from a big rock thrown in the pond. But it ain't over imo. Exactly where it will end up, Idk, but I'm glad it won't be where we are now. I find comfort in that, and knowing some of the gamers are gonna lose at the table. Kenny Rogers said you gotta know when to fold em and know when to walk away, and know when to run. LOL

 

[Eli]

Kenny Rogers says "there will be time enough for count'in when the dealin's done". The dealing ain't done. We just got a new dealer with a bad**s deck. LOL

 

[Rich LeMond]

$38 billion profit for the taxpayers

It's not a profit, it's a revolving door of boom and bust. Also, I can't find the section of the Constitution where it says the taxpayers are running a for-profit business.