Give me a break

[Joe Flacco]

The house on Buckelew is superior in the original build quality. Pacheco didn't even have an enclosed garage. Look at the other sales on the list that have the similar design - they're all priced lower than the better quality homes. The further up the hill you go the more of a view amenity and the difference in your proximate homes.

I'm just saying there are sales in that location west of 101 in the $1.5 range which you said there is not.

I agree that they are better original build quality. 20 Pacheco has newer finishes after the renovation. The big difference is those lots might be better and those houses have the big windows taking advantage of the view. I don't know what category the windows get reflected in but that would be a big difference to buyers. I'm just saying with what we know one value doesn't have to be right and the other wrong. With that kind of spread they could both be wrong.

 

[Mike Ault]

Waivers have existed much longer than that. We have data on Waivers back before the big crash.

That is true, after the crash lenders needed to refinance properties that they had gotten waivers on before or ordered one of those FNMA 2075's with the value substantiated by an AVM. I was amazed by the amount of nonconforming properties out in the middle of nowhere with no comparables within many miles that were deemed eligible for a "Property Inspection Waiver" during those times. I can only imagine how the AVM arrived at its value, poorly I suspect. A lot of those formerly "secondary market eligible" loan files turned into bank loans that were not eligible for securitization when the actual collateral started to matter again. I chuckled every time I needed to actually appraise one of those and give them the news.

 

[DWiley]

That is true, after the crash lenders needed to refinance properties that they had gotten waivers on before or ordered one of those FNMA 2075's with the value substantiated by an AVM. I was amazed by the amount of nonconforming properties out in the middle of nowhere with no comparables within many miles that were deemed eligible for a "Property Inspection Waiver" during those times. I can only imagine how the AVM arrived at its value, poorly I suspect. A lot of those formerly "secondary market eligible" loan files turned into bank loans that were not eligible for securitization when the actual collateral started to matter again. I chuckled every time I needed to actually appraise one of those and give them the news.

I cannot speak to the Fannie AVM or the methodology that is uses or used back then. I can say that Freddie data on waivers during that period shows fewer defaults and lower default costs on loans with waivers as compared to similar loans supported by appraisals. I would also add that data also shows that appraisal quality has increased since that time period.

i would not question that you might be able to find examples of homes left underwater after AVM use during that time period. But, would you not also admit that some loans based on appraisals shared that characteristic?

 

[David S. Roberson]

I think most appraisers would be shocked at the type and extent of data that is available. I know I was

Shock me. I'm curious.

 

[Mike Ault]

i would not question that you might be able to find examples of homes left underwater after AVM use during that time period. But, would you not also admit that some loans based on appraisals shared that characteristic?

Yes, I'm sure Fannie Mae could fill a very long boxcar train full of defective appraisals. But at least they were performed by someone who is theoretically an independent, unbiased third party. When you start allowing the GSE's to value their own collateral using their own mysterious methods with no oversight then it doesn't take much imagination to see the potential for abuse. Despite all the assurances to the contrary the GSE's operate under the public trust and appropriate safeguards should be in place before endangering everybody's pension plan with cheaper and faster valuation methods. I know you have performance data that shows that appraisals are a waste of time however do the GSE's actually have the right to make multibillion-dollar decisions like that which pose systemic risk? I know they clearly have the ability, have done so numerous times in the past and appear to be preparing to do it again in a major way with the hybrid valuation concept.

 

[J Grant]

I cannot speak to the Fannie AVM or the methodology that is uses or used back then. I can say that Freddie data on waivers during that period shows fewer defaults and lower default costs on loans with waivers as compared to similar loans supported by appraisals. I would also add that data also shows that appraisal quality has increased since that time period.

i would not question that you might be able to find examples of homes left underwater after AVM use during that time period. But, would you not also admit that some loans based on appraisals shared that characteristic?

were waivers back then used for origination loans ( purchase or cash out refinance) or for equity lines of credit /similar ?

 

[Mike Ault]

were waivers back then used for origination loans ( purchase or cash out refinance) or for equity lines of credit /similar ?

Waivers were widely used for origination loans, that's how the banks ended up with all sorts of weird properties on their books that they never would've made a loan on had they ordered a full appraisal. When interest rates dropped and everybody wanted to refi those 5% loans they had gotten under the property inspection waiver program some them could not get refinanced due to appraisal issues.

 

[J Grant]

The last crash had so many weird things, adjustable interest rates, LTV 150% no doc loans etc would be hard to separate out what caused a default-

I do know that back in that crazy era I owned a villa ( not the one I have now) and applied for a refinance - since I already had the mortgage the lender said they could use an automated value - the value they came back with was worth twice what I thought my villa was worth per similar comp search. When I mentioned that I was an appraiser and could not understand the value, he went over it with me and turns out the auto AVM used SFR mixed in with villas. DOH. (I did not go ahead with the loan for personal reasons).

I know AVM's have gotten better since then but even now, when I do an appraisal and get CU "comps" sent via lender from fannie, half the time they are not relevant/terrible. If they can't even get the comps right it's hard to understand how their waiver valuations are "that good" -but if they get to judge their own product ...

 

[RCA]

The last crash had so many weird things, adjustable interest rates, LTV 150% no doc loans etc would be hard to separate out what caused a default-

I do know that back in that crazy era I owned a villa ( not the one I have now) and applied for a refinance - since I already had the mortgage the lender said they could use an automated value - the value they came back with was worth twice what I thought my villa was worth per similar comp search. When I mentioned that I was an appraiser and could not understand the value, he went over it with me and turns out the auto AVM used SFR mixed in with villas. DOH. (I did not go ahead with the loan for personal reasons).

I know AVM's have gotten better since then but even now, when I do an appraisal and get CU "comps" sent via lender from fannie, half the time they are not relevant/terrible. If they can't even get the comps right it's hard to understand how their waiver valuations are "that good" -but if they get to judge their own product ...

The problem with AVMs is the same problem appraisers have in their analysis: rubbish data. It will lead to models that fail miserably from time to time. Then there are collinear relationships that cause the AVM to think some feature is worth much more less than it actually is because it just happens to be related to a crossover to a much different type of property. E.g. jumping from 3 to 4 baths is correlated with much higher quality homes in some area. So, the AVM thinks that 4 bath is worth $250,000.

 

[J Grant]

The problem with AVMs is the same problem appraisers have in their analysis: rubbish data. It will lead to models that fail miserably from time to time. Then there are collinear relationships that cause the AVM to think some feature is worth much more less than it actually is because it just happens to be related to a crossover to a much different type of property. E.g. jumping from 3 to 4 baths is correlated with much higher quality homes in some area. So, the AVM thinks that 4 bath is worth $250,000.

The reasons for a bad AVM vs a bad appraisal imo would be different. The AVM and the appraiser both have access to the same data. The appraiser qualifies the data, the AVM can not do that on a personal each one analyzed basis, but by a rote programming basis. And the rote part is the flaw...maybe in future years AI will replicate human experience and judgement but we are not there yet .For example, the fannie CU comps satisfy their rote within a mile within X % sf, but can range from good to mediocre to terrible comps due to various reasons.

If an appraisal is bad, other than a one off event, it is either the appraiser was not competent for the assignment or the appraiser set out to mislead/ inflate value - either way especially the second the clients should not be using that appraiser -

The other flaw with an AVM is the AVM concludes X $ value, is that a range or a point value with a confidence score around it ? Either way, who on the client or user end gets to choose the value from that AVM or whether to rely on it, order another one? idk but seems a murky area..