Appraisal Waiver (Explosion)

[J Grant]

As I told you before, when I say that I am comparing loans with similar characteristics (anything else would be an unfair and invalid comparison) - that is, holding all variables equal, except for the methodology used for collateral analysis (appraisal or something else).

It should come as no surprise that the performance of the risk tools used is analyzed quite thoroughly. The goal is to always use the risk tool that works best for the situation at hand. There are many cases where appraisals perform better, and that is why they are the most used tool. But, there are cases where one can easily document that alternatives work better. That is not an opinion, it is just what the data shows.

Yes, performance is measured on the back end, but the risk analysis is done at the front end. Performance data is used to measure how good the risk analysis was.

Ok, I like your reply except the last sentence

The risk analysis is the lender onus. When we do an appraisal, it does not say as assignment purpose to present a risk analysis. Assignment purpose is o provide a market value opinion on the property ( not the risk associated with the property)

On the subject of risk - they want to reduce risk wrt to the collateral, make a home inspection mandatory for UW. Make a repair fund in escrow for a mandatory. Loan at preferred rates to borrowers who promise to maintain a property , Educate borrowers how to maintain a property. A lot of buyers have no clue -one can say that is not the lender's responsibility but -borrower put down 10k, lender put down 100k - think it might benefit the lender to have educated borrowers or a program for inspections or repair escrows ...

 

[DWiley]

The risk analysis is the lender onus. When we do an appraisal, it does not say as assignment purpose to present a risk analysis. Assignment purpose is o provide a market value opinion on the property ( not the risk associated with the property)

Risk analysis is not limited to the lender.

Suggest looking at the intended use statement . It says that the intended use is to evaluate the property. What do you think it is evaluated for? Risk management.

 

[J Grant]

Risk analysis is not limited to the lender.

Suggest looking at the intended use statement . It says that the intended use is to evaluate the property. What do you think it is evaluated for? Risk management.

What it says on the URAR:

INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction. I

We can not stop them ( lender, investors etc ) from taking that as of eff date appraisal and turn it into a multi years out risk management -but risk management is not found on URAR form or any statements we sign that we did it for the appraisal for that purpose. I have never seen "risk management " in an engagement letter. It is not what they engage us to provide . We appraise a property ( rights ) - we do not appraise the risk a lender takes loaning money on it or investor or agency takes either. What gall they have to piggyback that on-

Using an appraisal for/ tying it in to a performance of borrower for life of loan for risk management is an off label use -we have no control over it, but not fair to be judged for it either.

 

[DWiley]

What it says on the URAR:

INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction. I

We can not stop them ( lender, investors etc ) from taking that as of eff date appraisal and turn it into a multi years out risk management -but risk management is not found on URAR form or any statements we sign that we did it for the appraisal for that purpose. I have never seen "risk management " in an engagement letter. It is not what they engage us to provide . We appraise a property ( rights ) - we do not appraise the risk a lender takes loaning money on it or investor or agency takes either. What gall they have to piggyback that on-

Off-label use !?! Gall?? LOL. Seriously? You have looked at the bottom edge of your appraisal reports, right? You know who designed the format? Who wrote the very text that you cited above? Why did they do that? It certainly wasn't to make origination decisions, since neither of those entities originates.

 

[Terrel L. Shields]

Assignment purpose is o (sic) provide a market value opinion on the property ( not the risk associated with the property)

I think we do have some obligation to consider the risk and market acceptability of a property regardless its MV. And I am more obliged to consider the risk to the lender than the lender considers the risk to me... one way street. Play ball with me or I cram the bat up your ***. I've argued before that the appraiser should be given the credit score and credit report of the borrower as part of the engagement letter so we can evaluate OUR risk in doing the job.
How would we approach or even accept a report if we knew the borrower had filed a complaint or sued an appraiser before?
How many of us would see a low credit score and realize this property is likely to go into foreclosure in the future?
How many of us get blind sided when we don't realize the borrower is a real jerk to deal with, folds and then the lender, Fannie, or FHA blame us?
I would never do an FHA report or Fannie report on a rural property because the property by its very nature, is higher risk in the eyes of the lender, even when there is less risk on the part of the borrower. Your comps are more distant and varied. It's the nature of the beast, so you get one of those low 2.5 scores and the lender squalls like a big baby. Those scores are used against appraisers when they have nothing to do with the appraiser or their appraisal, only the higher risk associated with the less abundant data. And that "risk analysis" IS beyond the ability of the appraiser to control.

 

[djd09]

yep the dump all the high risk mortgages to the appraiser and then cleverly claim that waivers perform better. insanity.

 

[ucbruin]

I think we do have some obligation to consider the risk and market acceptability of a property regardless its MV. And I am more obliged to consider the risk to the lender than the lender considers the risk to me... one way street. Play ball with me or I cram the bat up your ***. I've argued before that the appraiser should be given the credit score and credit report of the borrower as part of the engagement letter so we can evaluate OUR risk in doing the job.
How would we approach or even accept a report if we knew the borrower had filed a complaint or sued an appraiser before?
How many of us would see a low credit score and realize this property is likely to go into foreclosure in the future?
How many of us get blind sided when we don't realize the borrower is a real jerk to deal with, folds and then the lender, Fannie, or FHA blame us?
I would never do an FHA report or Fannie report on a rural property because the property by its very nature, is higher risk in the eyes of the lender, even when there is less risk on the part of the borrower. Your comps are more distant and varied. It's the nature of the beast, so you get one of those low 2.5 scores and the lender squalls like a big baby. Those scores are used against appraisers when they have nothing to do with the appraiser or their appraisal, only the higher risk associated with the less abundant data. And that "risk analysis" IS beyond the ability of the appraiser to control.

"I think we do have some obligation to consider the risk and market acceptability of a property regardless its MV. And I am more obliged to consider the risk to the lender than the lender considers the risk to me... one way street. Play ball with me or I cram the bat up your ***. I've argued before that the appraiser should be given the credit score and credit report of the borrower as part of the engagement letter so we can evaluate OUR risk in doing the job."

Wow....
Talk about the ultimate scope creep....

How about appraisers become responsible to review, understand and compare HOA financial budgets, not just for subject but for competing development????

Now appraisers should "verify" (HAHAHA) borrower's ability to earn income and to repay the loan????

 

[J Grant]

Off-label use !?! Gall?? LOL. Seriously? You have looked at the bottom edge of your appraisal reports, right? You know who designed the format? Who wrote the very text that you cited above? Why did they do that? It certainly wasn't to make origination decisions, since neither of those entities originates.

The agencies designated as intended users and thus can use our appraisals for building their own data base/ other , including CU scores/risk analysis of loan performance. But their using it for risk decisions has has nothing to do with the appraisal itself, just as the outcome of a divorce situation-, which party wins $ or custody had nothing to do with an appraisal done for a divorce case.

What is disturbing is blaming appraisals for a risk performance of a loan - borrowers perform, collateral does not perform, it just sits there, the anchor which investors have as a safety net and reason for the investor participation at lower interest rates to the borrower.

 

[J Grant]

I think we do have some obligation to consider the risk and market acceptability of a property regardless its MV. And I am more obliged to consider the risk to the lender than the lender considers the risk to me... one way street. Play ball with me or I cram the bat up your ***. I've argued before that the appraiser should be given the credit score and credit report of the borrower as part of the engagement letter so we can evaluate OUR risk in doing the job.
How would we approach or even accept a report if we knew the borrower had filed a complaint or sued an appraiser before?
How many of us would see a low credit score and realize this property is likely to go into foreclosure in the future?
How many of us get blind sided when we don't realize the borrower is a real jerk to deal with, folds and then the lender, Fannie, or FHA blame us?
I would never do an FHA report or Fannie report on a rural property because the property by its very nature, is higher risk in the eyes of the lender, even when there is less risk on the part of the borrower. Your comps are more distant and varied. It's the nature of the beast, so you get one of those low 2.5 scores and the lender squalls like a big baby. Those scores are used against appraisers when they have nothing to do with the appraiser or their appraisal, only the higher risk associated with the less abundant data. And that "risk analysis" IS beyond the ability of the appraiser to control.

Heck no !
PS why are they whining about risk, they have PMI and bailouts. There is no way to lend $ without some risk of repayment since humans take out loans ...whine whine whine...

 

[DWiley]

yep the dump all the high risk mortgages to the appraiser and then cleverly claim that waivers perform better. insanity.

Yes, such an approach would be insanity. That is why when we compare, we compare things that are similar, controlling for all other variables and then examining the tool used to evaluate the collateral.

But, some have a preconceived notion that the appraisal will always be the best tool, and they cling to that (unsupported) view, no matter what the data shows.