FHFA to make desktop appraisals permanent for purchases in 2022

[J Grant]

"If they become popular any of us in mortgage work will be doing some of them because will be impossible to avoid if we want to keep a client."

Your customer service/income supersedes your HIGH personal standards/beliefs/concerns/ethics/etc.....
It's a business decision, understandable....

"Luckily I do very little AMC work so my income won't drop as dramatically but desktops are going to pay less no matter who orders them."

I'm not disagreeing with you about a possible reduction in fees....
Hopefully your non-AMC clients will continue to pay current fees once the record volume of appraisals drops back to normal or below....

Non AMC clients pay the same C and R regardless of appraisal volume, which is why the AMC model stinks.

 

[Overimprovement]

I skimmed through the thread thus far, but isn't the main issue the fee(s) with Desktops? Are AMCs paying legit fees now for these?

I offer desktops for private/non-lending often (even started a thread about it).
I have no issues with doing them and only give about a 20-25% discount on my normal full inspect fee

I think if we go back 24 months, and if were just talking about desktops in general, I would agree with your post completely. But it looks like things are changing in a pretty big way.

Just speaking personally, here are my issues with these proposed changes at Fannie are:

1) Fannie is of course the 800 pound gorilla. They set policy that strongly influences all other players, including smaller direct lenders who keep most of their paper in house (a shrinking component). WE back Fannie. I am not comfortable with the thought that any significant portion of Fannie originations will be supported by photos provided by a homeowner wanting to sell their home and/or an agent who needs the commission check to feed their family. The riskiness of this is pretty large IMHO. As stated already, desktops were NOT designed for new money originations. I don't want to trigger anyone here, but yes, the potential for fraud does increase quite bit.

2) Fees are certainly an issue, but the bigger issue is simply amount of available work. I really see this as another large step in the eventual elimination of the traditional appraisals for mortgage originations. Once everyone gets comfortable with NOT having an appraiser go into a home that is being purchased, its a pretty slippery slope to eliminating us altogether. As fiercely competitive as banking is currently, even saving a few hundred bucks will be a big deal to lenders.

I can put on my hat as an outsider/investor and see some problems with the current model, but the hat I prefer to wear is that of an appraiser, who will then be forced to find another career to feed his family. I am not getting blinded by the current rush, there are certainly headwinds which foretell a pretty significant reduction in work for us RES mortgage appraisals. There simply is not enough not-mortgage work to keep much more than 20% of current RES appraisers above water.

3) This is more of a rant, but I continue to wonder why appraisals, in the $350-$750 range over most of the country, are being nitpicked to death, when title work and insurance tends to cost 5-10 times the appraisal cost if not more. Real estate commissions can easily be 5-10 times as much as well. Surveys, if required, are usually 2-3 times the cost. Home inspections, while not required yet by lenders, cost similar to appraisals. All these items can derail a potential purchase as easily as the next. Realtors hate them all, I would argue home inspections even more than appraisals. Are homeowners really more concerned with leaky faucets and the age of their mechanicals more than overpaying for a home by 5 digits (6 in many parts of the country)?

I think part of the problem is the appraisal profession has never had any REAL advocacy. No group or entity attempting to educate the public on why the things we do are so important. Who is going to be more mad, the person who didn't get a home inspection and 12 months into their loan the furnace goes out, OR the person who got a desktop for their origination and 12 months in tries to get a HELOC and finds out they are 10% of their loan balance underwater, because an appraiser never stepped foot inside or even drove by their home, and didn't notice items which would have affected value?

The big difference is the buyer is NOT being protected by anyone in this new Fannie world. We have come back full circle to caveat emptor. I think home inspections will increase, which is good for home inspectors. But alas, I have little interest at this stage of my life in crawling under 20" high crawlspaces and climbing around 2nd stories rooftops for a living.

 

[ucbruin]

Non AMC clients pay the same C and R regardless of appraisal volume, which is why the AMC model stinks.

You'll get no argument from me about the AMC model when it comes to fees during period of low volume....

Where I'll push back with you and others who maintain the same opinion of AMCs as you but still accept assignments from AMCs....
Why do you accept the assignments....
As per CGinMN's sentiment (posted earlier, albeit for a different examples)....
By accepting AMC assignments you "reward" them....
Stop accepting all AMC assignments....

Don't give me that it's not practical or you have to earn an income....
Just stop lowering your HIGH standards and stop rewarding the AMC model....

 

[J Grant]

I think if we go back 24 months, and if were just talking about desktops in general, I would agree with your post completely. But it looks like things are changing in a pretty big way.

Just speaking personally, here are my issues with these proposed changes at Fannie are:

1) Fannie is of course the 800 pound gorilla. They set policy that strongly influences all other players, including smaller direct lenders who keep most of their paper in house (a shrinking component). WE back Fannie. I am not comfortable with the thought that any significant portion of Fannie originations will be supported by photos provided by a homeowner wanting to sell their home and/or an agent who needs the commission check to feed their family. The riskiness of this is pretty large IMHO. As stated already, desktops were NOT designed for new money originations. I don't want to trigger anyone here, but yes, the potential for fraud does increase quite bit.

2) Fees are certainly an issue, but the bigger issue is simply amount of available work. I really see this as another large step in the eventual elimination of the traditional appraisals for mortgage originations. Once everyone gets comfortable with NOT having an appraiser go into a home that is being purchased, its a pretty slippery slope to eliminating us altogether. As fiercely competitive as banking is currently, even saving a few hundred bucks will be a big deal to lenders.

I can put on my hat as an outsider/investor and see some problems with the current model, but the hat I prefer to wear is that of an appraiser, who will then be forced to find another career to feed his family. I am not getting blinded by the current rush, there are certainly headwinds which foretell a pretty significant reduction in work for us RES mortgage appraisals. There simply is not enough not-mortgage work to keep much more than 20% of current RES appraisers above water.

3) This is more of a rant, but I continue to wonder why appraisals, in the $350-$750 range over most of the country, are being nitpicked to death, when title work and insurance tends to cost 5-10 times the appraisal cost if not more. Real estate commissions can easily be 5-10 times as much as well. Surveys, if required, are usually 2-3 times the cost. Home inspections, while not required yet by lenders, cost similar to appraisals. All these items can derail a potential purchase as easily as the next. Realtors hate them all, I would argue home inspections even more than appraisals. Are homeowners really more concerned with leaky faucets and the age of their mechanicals more than overpaying for a home by 5 digits (6 in many parts of the country)?

I think part of the problem is the appraisal profession has never had any REAL advocacy. No group or entity attempting to educate the public on why the things we do are so important. Who is going to be more mad, the person who didn't get a home inspection and 12 months into their loan the furnace goes out, OR the person who got a desktop for their origination and 12 months in tries to get a HELOC and finds out they are 10% of their loan balance underwater, because an appraiser never stepped foot inside or even drove by their home, and didn't notice items which would have affected value?

The big difference is the buyer is NOT being protected by anyone in this new Fannie world. We have come back full circle to caveat emptor. I think home inspections will increase, which is good for home inspectors. But alas, I have little interest at this stage of my life in crawling under 20" high crawlspaces and climbing around 2nd stories rooftops for a living.

Agree with most of your post, but would like to add -
WRt a buyer protected by MV appraisals, they are in a sense but one could argue they are not the client - however the secondary market INVESTORS are intended users of an appraisal and they ( backed by taxpayers are NOT protected with a system favoring hit value orders /pressure for time lack of inspection appraisals.- skewed inflated prices also affect entire markets.

I can understand banking industry dismay at delays caused by appraisals. But there are other ways to fix that, primarily remove the payment model linked to AMC, if AMC;s paid same full fees as direct orders the appraiser population would swell. Also RR ordering could greatly enhance appraiser efficiency

The fee is a big deal because the appraisal fee is the only larger $ amount fee that is pre paid by a borrower, aka their own real money out of pocket compared to them paying higher $ fees for such as title or origination or commission fees, which can rolled into a mortgage or be paid out of proceeds at a closing on seller side.

But the objection by lending industry is not about fees since those are covered by borrower, it is that having appraiser crucial to the process can mean some of their deals are "killed", and they want almost no deals killed - waivers, value automation and neutering / marginalizing the appraiser accomplish that. Appraisers if in future are mostly at a desk and rarely interacting with market participants will become ghosts, functioning more like clerical help than a professional with an independent role - by intention and design.

 

[J Grant]

You'll get no argument from me about the AMC model when it comes to fees during period of low volume....

Where I'll push back with you and others who maintain the same opinion of AMCs as you but still accept assignments from AMCs....
Why do you accept the assignments....
As per CGinMN's sentiment (posted earlier, albeit for a different examples)....
By accepting AMC assignments you "reward" them....
Stop accepting all AMC assignments....

Don't give me that it's not practical or you have to earn an income....
Just stop lowering your HIGH standards and stop rewarding the AMC model....

I accept at most 10-15% AMC assignments as a filler, and would accept none but for the fact that it is unknown how long the independent direct order clients will survive as they have to fight the internet Quicken Loan Model sharks just as we have to fight AMC's-though soon it will be no AMC work as getting irritated even at the small amount from the "better" AMC;s I accept. They are just awful to deal with, even the better ones now are operating like bullies pestering for TT so soon it will be none for me anyway.

 

[ucbruin]

Agree with most of your post, but would like to add -
WRt a buyer protected by MV appraisals, they are in a sense but one could argue they are not the client - however the secondary market INVESTORS are intended users of an appraisal and they ( backed by taxpayers are NOT protected with a system favoring hit value orders /pressure for time lack of inspection appraisals.- skewed inflated prices also affect entire markets.

I can understand banking industry dismay at delays caused by appraisals. But there are other ways to fix that, primarily remove the payment model linked to AMC, if AMC;s paid same full fees as direct orders the appraiser population would swell. Also RR ordering could greatly enhance appraiser efficiency

The fee is a big deal because the appraisal fee is the only larger $ amount fee that is pre paid by a borrower, aka their own real money out of pocket compared to them paying higher $ fees for such as title or origination or commission fees, which can rolled into a mortgage or be paid out of proceeds at a closing on seller side.

But the objection by lending industry is not about fees since those are covered by borrower, it is that having appraiser crucial to the process can mean some of their deals are "killed", and they want almost no deals killed - waivers, value automation and neutering / marginalizing the appraiser accomplish that. Appraisers if in future are mostly at a desk and rarely interacting with market participants will become ghosts, functioning more like clerical help than a professional with an independent role - by intention and design.

"I can understand banking industry dismay at delays caused by appraisals. But there are other ways to fix that, primarily remove the payment model linked to AMC, if AMC;s paid same full fees as direct orders the appraiser population would swell. Also RR ordering could greatly enhance appraiser efficiency"

From the threads/comments regarding the reason(s) for the lack of trainees....
#1 - liability
#1A - don't want to train competition
#1B - don't have time to train
2 - fees

Paying higher fees is not going to eliminate reasons 1-1B....
Especially for those who believe there is an over-supply of appraiser which have historically kept fees depressed....
Why would they want the "appraiser population" to swell....

I accept at most 10-15% AMC assignments as a filler, and would accept none but for the fact that it is unknown how long the independent direct order clients will survive as they have to fight the internet Quicken Loan Model sharks just as we have to fight AMC's-though soon it will be no AMC work as getting irritated even at the small amount from the "better" AMC;s I accept. They are just awful to deal with, even the better ones now are operating like bullies pestering for TT so soon it will be none for me anyway.

In other words....
Principles/standards be damned....
Don't you think accepting work from AMCs and then bad mouthing them makes both the AMCs and you look bad....

 

[J Grant]

"I can understand banking industry dismay at delays caused by appraisals. But there are other ways to fix that, primarily remove the payment model linked to AMC, if AMC;s paid same full fees as direct orders the appraiser population would swell. Also RR ordering could greatly enhance appraiser efficiency"

From the threads/comments regarding the reason(s) for the lack of trainees....
#1 - liability
#1A - don't want to train competition
#1B - don't have time to train
2 - fees

Paying higher fees is not going to eliminate reasons 1-1B....
Especially for those who believe there is an over-supply of appraiser which have historically kept fees depressed....
Why would they want the "appraiser population" to swell....


In other words....
Principles/standards be damned....
Don't you think accepting work from AMCs and then bad mouthing them makes both the AMCs and you look bad....

I could care less how it makes me look, am being honest., anyway your posts just seem to be arguing for the sake of arguing so this will be last one on topic with you on it for me

 

[ucbruin]

Don't blame me for pointing out your inconsistence on this topic....

 

[glenn walker]

In my opinion and our real estate attorneys the product with the least liability is the desk tops and drive byes-appraisals. The ones with most liability are Full 1004 interior & exteriors. I have no opinion on "hybrids"

One thing we found after the 2007 meltdown was appraisals are worthless the day they are completed and do little to nothing to protect a client or lender from a default or repossession. as either the borrower has become unemployed or the market turned and sucked up all homes equity within 12 to 24 months. The "Wash Rinse-Repeat model is here to stay and it will be easier and faster for them to clear out their pipelines by not having to look at worthless full 1004s that are nothing but 40 Page-Paper weights full of almost nothing that would have had any effect on whether the borrower defaulted or not. Also the 3% to 5% down Conventional-The Zeros Down to 5% down FHA and the Zero down VA are all upside down the day they close escrow anyway. In any kind of a serious downturn 20% will come off the top real fast . Therefore almost all of these full appraisals are ridiculous and just costs the consumer more money and do nothing to protect either the borrower or lender. On a refinance the owner knows what condition his/her/Its house is in and a Buyer can always engage their own home inspector--and no I do not want to see a copy because I dont want to have any knowledge nor try to adjust for what may or may not even be correct.

When I re-fire up in February 2022 I am going to do Desktops and 2055s only and no Full URAR-
My new limited menu is like In & Out Burger- simple and limited. Private and Non-Lender COD and cherry pick which ones I will or won't do. There are plenty of appraisers out here who will not even do desk-tops or 2055s and so they can do all the grunt work. 35 plus years of measuring houses-reporting things that are non-sense and buyers and sellers who dont care what the appraiser says its market value is.

 

[J Grant]

The problem was in the meltdown that mortgage lenders and mortgage brokers directly got to pick the appraiser - the format had nothing to do with it, if majority of work went to number hitters whether a long form or short form or inspection or not doesn't make a difference