Hybrid Appraisals

[Zoe]

May I ask what these people did for a living in upper management at a GSE?

How many head honchos are there at the top of a GSE?

What did they do for a living before they became head honchos?

 

[Zoe]

FYI:

Definition of HONCHO

boss, big shot; also : hotshot… See the full definition

www.merriam-webster.com

 

[CGinMN]

My concern with fees is that they are at a level that supports continued viability for residential appraisers. The GSEs use residential appraisals in support of the vast majority of loans they purchase, and that seems unlikely to change any time soon. Hence, the viability of residential appraisers is also a risk management concern. Having said that, I still maintain the position I have held for 30+ years - it is the appraisers who set the fees.

I am glad to hear you say this. I believe it is not communicated often or very well. But I agree it is a big concern going forward.

I think if you were to scale hybrids broadly, you would find that the data showing differences will being to change. The median performance of the data collector and appraiser performing the hybrids would drop and whatever difference you are seeing between hybrids and traditionals wouldn’t be as pronounced.

Meanwhile, the other part of collateral risk management, the value, isn’t something that is being emphasized. Certainly you have studied whether hybrids result in greater amount of undervaluation or overvaluation relative to your AVM, or how hybrid perform in refinances relative to traditionals. So what does that data say?

 

[Zoe]

Be careful on your answer to my questions.

 

[Zoe]

I am glad to hear you say this. I believe it is not communicated often or very well. But I agree it is a big concern going forward.

I think if you were to scale hybrids broadly, you would find that the data showing differences will being to change. The median performance of the data collector and appraiser performing the hybrids would drop and whatever difference you are seeing between hybrids and traditionals wouldn’t be as pronounced.

Meanwhile, the other part of collateral risk management, the value, isn’t something that is being emphasized. Certainly you have studied whether hybrids result in greater amount of undervaluation or overvaluation relative to your AVM, or how hybrid perform in refinances relative to traditionals. So what does that data say?

Yeah, there is a big difference valuation in very heterogeneous market vs a very homogeneous market. Your on track.

 

[Zoe]

Commingling of fees is bad because ethics are involved with the borrower. It has far reached impacts beyond ethics to borrower. It impacts the whole appraisal process.

 

[Zoe]

Danny?

youtube o danny boy - Search Videos

www.bing.com

 

[DWiley]

I am glad to hear you say this. I believe it is not communicated often or very well. But I agree it is a big concern going forward.

I think if you were to scale hybrids broadly, you would find that the data showing differences will being to change. The median performance of the data collector and appraiser performing the hybrids would drop and whatever difference you are seeing between hybrids and traditionals wouldn’t be as pronounced.

It is my hope that publicizing and socializing the hybrid results will inspire appraisers to (1) pay more attention to condition ratings and make sure the ratings are consistent with the UAD definitions, and (2) be more diligent in making appraisals subject to an inspection/repair, when appropriate.

As to how the data would look with broader use of hybrids, I will not speculate on that - I will just look at the data as it comes in. It is certainly possible that the data will shift/change, and that will certainly be monitored.

 

[CGinMN]

If you want appraisers to condition for repairs and inspections, you should give more examples. That would give appraisers the confidence to submit reports with required repairs.

The problem is that these guidelines have been subjective and left open to interpretation, with appraisers and lenders determining their tolerance and their own risk appetite. If you want more objective results, you have to provide more objective guidelines. Again, Freddie’s guide is better than Fannie’s.

Why do you want to see more “subject to” appraisals? It is because this is one of the reasons lenders won’t adopt hybrids, because they are more problematic? Or are you actually seeing a lot of omitted repairs/inspections that increase loan defaults? If we’re talking about minor issues, such as the appraiser not calling for a 2nd level sliding door to nowhere being blocked off or permanently secured, how does this impact your risk?

 

[Terrel L. Shields]

2) be more diligent in making appraisals subject to an inspection/repair, when appropriate.

Do that too often and the pushback results in losing a client. Isn't that what happens? The cruel pinch of want is created by clients holding work over the heads of appraisers who, frankly right now, are basically working part time in a slow sales environment. It's easy to be noble when one has a well-padded bank account, but I see folks that are struggling to make 50%-70% of the income they were making in 2021-22.

So, why is FNMA / FHA et al such sticklers for rather nonsensical repairs? Painting dilapidated outbuildings, fences, or worrying about having a handrail on 3 step 6' wide entry stairs, etc. Ordinary loans (non-conforming conventional) don't require that. In fact, they do require an "as is" value that does not require the appraiser to fantasize some extraordinary touchstones to meet some sort of MPRs few borrowers were aware of.

And the nature of many of these "requirements" serve what purpose? We see borrowers forced to rip out 2nd cooking stoves like a canning kitchen as an example (surely you've seen those in Tennessee) or some other bizarre modification of the property to meet these Minimum Requirements. And wink wink, as soon as the appraiser is gone, we drag that stove back out of the garage and re-install it.

IF these requirements are so absolutely necessary, then perhaps the government should require FHA and FNMA to pre-inspect every proposed property using a HUD employee for violation of MPRs and permanently ban lending to them if they don't qualify. Just build an exclusionary list of ineligible properties that buyers could check to see if they can even get these loans.

I find it utterly inscrutable that OTOH the appraiser must inspect with a fine-tooth comb and point out all defects no matter how trivial, but a hybrid or drive by is fine on other properties where we have no clue if there are serious violations of those MPRs.