Waivers 50%. Hybrids 30%.

[djd09]

Okay Robot dude.....I'm fixing your quote to align with Justin's answer....

'Fannie Mae does not warrant that the estimated value provided by the lender is the actual value of the subject property. The lender may not make any statements to any third party (including the borrower) that Fannie Mae performed any kind of appraisal or valuation of the property.'

...

 

[NC Appraising]

And that's the problem with all this. There's the data world and the real world. Everything is currently falling into the data world.

Appraisals used to be the barrier for all things to keep the real estate market in check. When lenders worked a loan, the one thing in the back of their mind was always, 'it has to appraise'. When realtors listed a home, the one thing in the back of their mind was always, 'it has to appraise'. When realtors made offers on homes, the one thing in the back of their mind was always, 'it has to appraise'.

Not anymore.

I'll give you a real life example that is happening over and over again where I'm at.

A house was listed near market value. First bid was $50,000 over list, which is about 10% higher than market value. But, they put down a very large downpayment. So, data wise, it met requirements, it was a safe loan. Low LTV, good credit, low risk. Making money for Fannie and the lenders. Closed within 3 weeks, no appraisal.

Problem is, this artificially inflates home prices. An appraiser would never allow that to be valued $50,000 over the list, because there was nothing that proved it. Now it becomes a market value transaction that all computers will take into consideration.

It's happening over and over. One development is going crazy like this right now. It's been about 5 sales in a row. Over list offer, large downpayment, no appraisal. Values get increased. Rinse and repeat. Next sale gets listed higher, same thing. Next sale gets listed higher, same thing. Appraiser's would get in trouble for allowing some of these home prices. But, it's ok for Fannie and these models because it's a safe loan.

It's not good.

Good post.

 

[Non Sequitur]

And that's the problem with all this. There's the data world and the real world. Everything is currently falling into the data world.

Appraisals used to be the barrier for all things to keep the real estate market in check. When lenders worked a loan, the one thing in the back of their mind was always, 'it has to appraise'. When realtors listed a home, the one thing in the back of their mind was always, 'it has to appraise'. When realtors made offers on homes, the one thing in the back of their mind was always, 'it has to appraise'.

Not anymore.

I'll give you a real life example that is happening over and over again where I'm at.

A house was listed near market value. First bid was $50,000 over list, which is about 10% higher than market value. But, they put down a very large downpayment. So, data wise, it met requirements, it was a safe loan. Low LTV, good credit, low risk. Making money for Fannie and the lenders. Closed within 3 weeks, no appraisal.

Problem is, this artificially inflates home prices. An appraiser would never allow that to be valued $50,000 over the list, because there was nothing that proved it. Now it becomes a market value transaction that all computers will take into consideration.

It's happening over and over. One development is going crazy like this right now. It's been about 5 sales in a row. Over list offer, large downpayment, no appraisal. Values get increased. Rinse and repeat. Next sale gets listed higher, same thing. Next sale gets listed higher, same thing. Appraiser's would get in trouble for allowing some of these home prices. But, it's ok for Fannie and these models because it's a safe loan.

It's not good.

Yep. And in the real world when a borrower has the choice between an $800 AMC fee or WAIVER after their loan officer tweaked/submitted the file multiple times, what do you think they will choose?

Here's a recent LinkedIn discussion:

**Name redacted for privacy--Boots on the ground appraiser***: have the systems been fixed to prevent loan officers from resubmitting multiple times to trigger a waiver?
During the refinance boom, I knew a loan officer who would submit the same file up to a dozen times — adjusting things like gift letters (to show larger borrower reserves) or the borrower’s estimated value — until a waiver appeared. He said it worked about 30–40% of the time back then.

Fannie Mae’s Selling Guide even flags “an unusually high number of submissions [that] may be the result of data manipulation,” so it seems the issue was recognized. Have those triggers or other safeguards been strengthened to catch this kind of resubmission-based gaming across the automated underwriting systems?

***GSE Guy*** I can't comment on our gaming controls, but gaming is not a common cause of the issue that XXXXX experienced. Keep in mind that lenders need flexibility to change loan parameters because their understanding of the borrower's financial position evolves as underwriting proceeds, so DU must accommodate changes in loan terms. It reassesses the loan application after every material change. This cuts both ways, offering value acceptance when loan parameters shift to reduce collateral risk (say, when the lender's estimate is decreased) but also withdrawing value acceptance (requiring the lender to obtain an appraisal) when the loan application becomes more risky (such as a reduced down payment or more cash out). This ensures value acceptance can only be executed when the loan parameters fall within our established risk tolerance. For the appraiser, this leads to the occasional cancelation but also results in some new appraisal orders for loan applications that lost value acceptance. The bottom line is that this flexibility is a necessary feature of underwriting and, while a cancellation is not pleasant, in general the cancellations are offset by new orders.

 

[NC Appraising]

Appraisals won't and don't stop what you describe. I have seen that first hand in my own culdesac. Just in the last two years two people have knowingly paid well over list price and well over the what the appraisers said the homes were worth. Both had appraisals. The buyers wanted the homes, did not care what the appraisers said, and had enough money to cover the difference. So, the sales went down and were recorded at what you would likely call inflated prices. The appraisers did not "get in trouble" for "allowing" those sales to close at that price, because it was up to the buyers, not the appraisers.

EDITED TO ADD: In both of the cases above an appraisal was done. BUT, if you talked to the agents they will say they had an "appraisal waiver" - what they mean by that is that the buyer waived the contract clause that said it had to appraise for at least the contract price.

Would you not agree we are in a atypical market?

Only in the past 5 years we had this level of cash buyers or people putting down this high % of a down payment. We are in a bubble. To much fake money going around.....halves and the halves not.

It will end for most and it has begun. Go on to other forums and speak with some agents and lenders. The increase in the number of appraisals coming in low are being reported.

Some Buyers are now depending on the appraisal to come in low in some situations so that they can renegotiate. Sellers are stuck in the 2022 mindset. Facts are: there are still a undersupply of housing, but people are broke and home affordability is at a breaking point for most, excluding most boomers and high income earners.

Yes, in NC we still have well off calis and NY coming here paying cash or not giving a dam about the appraisal. BUT that fact should not get in the way of watching out for the working class buyer or the clueless first time buyer.

 

[NC Appraising]

According to the AEI summary, their usage of waivers ends at 90% for purchases and at 90% for the no-cash-out refis where they already own the loan (and presumably have a prior appraisal on file).

Their use of waivers ends at 70% LTVs for the cash-out refis.

Prevalence of GSE Appraisal Waivers

The use of appraisal waivers at the GSEs has exploded in recent months and now accounts for over 40% of all valuations.

www.aei.org

Will someone answer this for me, please?

Now accounts for over 40% of all valuations.

Where did that number come from? Are they saying that in recent months, 40% were waivers?

 

[djd09]

Retirement of “Appraisal Waiver”To more accurately reflect the evolving role of our valuation solutions, the term “appraisal waiver” will no longer be used inconjunction with “value acceptance” in the Selling Guide. The legacy terminology no longer aligns with the product’s currentfunction within the valuation spectrum. Furthermore, the continued use of dual terms creates confusion, undermines productpromotion, and delays industry alignment around a unified term. As a result, the following updates were implemented:• instances where “appraisal waiver” appeared independently were revised to “value acceptance.”• where the term “value acceptance (appraisal waiver)” was used, the parenthetical reference was removed.These changes promote a more consistent and accurate message across the industry and reinforce our commitment to modernizing the valuation process.Effective: These changes will be implemented immediately.

...

 

[chad hampton]

Loan officers can be a crafty bunch. It’s not exactly a secret that they all are looking for creative ways to get that waiver. And there’s no way government workers can keep up with it.

At this point, it’s hard to argue that the markets aren’t juiced. Like many have said.

Don’t forget, these flexibility’s and others were supposed to be temporary. They were never meant to be long-term and they were certainly never meant for high LTVs. Unfortunately, it’s just like everything else in the profession, no oversight or worse, fox is guarding the henhouse.

 

[djd09]

you only need a couple bloated sales to set new market highs...i think they call them outliers around here

 

[chad hampton]

Retirement of “Appraisal Waiver”To more accurately reflect the evolving role of our valuation solutions, the term “appraisal waiver” will no longer be used inconjunction with “value acceptance” in the Selling Guide. The legacy terminology no longer aligns with the product’s currentfunction within the valuation spectrum. Furthermore, the continued use of dual terms creates confusion, undermines productpromotion, and delays industry alignment around a unified term. As a result, the following updates were implemented:• instances where “appraisal waiver” appeared independently were revised to “value acceptance.”• where the term “value acceptance (appraisal waiver)” was used, the parenthetical reference was removed.These changes promote a more consistent and accurate message across the industry and reinforce our commitment to modernizing the valuation process.Effective: These changes will be implemented immediately.

...

It’s what the snake oil salesman specialize in. Changing words and phrases to make **** sound better.

 

[gregb]

you only need a couple bloated sales to set new market highs

Or a couple of REO sales to tip over Humpty Dumpty...