20 Minute AI Appraisals Are Coming

[glenn walker]

But how will the 0 know the house is next to a nuclear waste dump without an appraiser?

It will have a Google Hi Res 360 degree camera mounted on it's head and down load a complete video in 3 seconds. The zeros are just code . It could also have Geiger Counters and Carbon Testing equipment mounted. An appraiser and Phaze 2 environmental inspector all in one Robot. The appraiser just drives it around and certifies it's OMV.

 

[Mike Ault]

No you may have red flagged potential fraud but most is committed in underwriting not inflated values. But Mortgage Backed Securities are not a single loan and managing a 500 $ billion dollar fund the biggest risk is in changes in interest rates.

The 0.5% risk from over values or fraud is pretty much meaningless when looking at the portfolio as a whole. The problem is old appraisers live in a risk model that's been mostly gone since Savings and Loans closed in 1989 era.

Quit thinking about a loan and A property and think A million loans whereby the risk is bundled.

I think you need to check your history. Interest rates brought down the S&Ls, but that's old news. Sometime shortly after 2007 2008 one of my bank clients who happens to be a Fannie Mae direct seller wanted me to go to lunch with the head of the mortgage department & their Fannie Mae rep to discuss their appraisal policies and ensure they aligned with GSE expectations. The conversation eventually got to "risk exposure" and I asked them how they evaluated everyone's diligence who sent them originations in small towns which all of a sudden experienced a major economic disruption. She told me, "you just described the entire state of California". There were many causes of that crisis, but chief amongst them were lax underwriting and appraisal policies with Wild West DPA programs, doc shops, liar loans, and egregiously poor appraisals. We almost tanked the entire world economy with our "financial engineering projects" and new ideas regarding credit focused instead of collateral focused underwriting. Given the chance, almost everyone wants to use the power of leverage to borrow the maximum amount at 5% and reinvest the proceeds into something that will return 15%, and there will always be plenty of commissioned based lending professionals eager to help. 95% of Americans will not walk into a convenience store and shoplift but the same 95% have no problem committing mortgage fraud because after all, "they're going to pay it back". Independent appraisals are an essential part of keeping everyone in the mortgage business honest.

 

[Mike Ault]

 

[glenn walker]

I think you need to check your history. Interest rates brought down the S&Ls, but that's old news. Sometime shortly after 2007 2008 one of my bank clients who happens to be a Fannie Mae direct seller wanted me to go to lunch with the head of the mortgage department & their Fannie Mae rep to discuss their appraisal policies and ensure they aligned with GSE expectations. The conversation eventually got to "risk exposure" and I asked them how they evaluated everyone's diligence who sent them originations in small towns which all of a sudden experienced a major economic disruption. She told me, "you just described the entire state of California". There were many causes of that crisis, but chief amongst them were lax underwriting and appraisal policies with Wild West DPA programs, doc shops, liar loans, and egregiously poor appraisals. We almost tanked the entire world economy with our "financial engineering projects" and new ideas regarding credit focused instead of collateral focused underwriting. Given the chance, almost everyone wants to use the power of leverage to borrow the maximum amount at 5% and reinvest the proceeds into something that will return 15%, and there will always be plenty of commissioned based lending professionals eager to help. 95% of Americans will not walk into a convenience store and shoplift but the same 95% have no problem committing mortgage fraud because after all, "they're going to pay it back". Independent appraisals are an essential part of keeping everyone in the mortgage business honest.

But if 97% plus of all appraisals on purchases come in on the Bulls Eye and on refinances, most get what they need then that's indicitive of how people in transactions are mostly honest.

But the appraisers job is not to keep people honest it's to value property. The average appraiser is no more honest than the people he works for. In fact many stupid ones have made value decisions that were too low and hurt people.

 

[J Grant]

ccording to Fannie Mae, the vast majority of appraisals come in at or above the sale price. In balanced markets, appraisals come in below the contract price less than 10% of the time, according to Marketwise. This means that roughly 90% of appraisals confirm the contract price, says Curbio.
Here's a more detailed breakdown:

• Balanced Markets:
  In a typical market, Fannie Mae research indicates that about 8% of appraisals may be below the contract price.
• Market Conditions:
  Factors like rapid price increases, bidding wars, or a lack of comparable sales can increase the likelihood of low appraisals.
• Correcting Low Appraisals:
  If an appraisal comes in low, there are several options available, including renegotiating the purchase price or the buyer financing the difference.

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More often than not, an appraisal comes in around what the seller expected. According to Fannie Mae, the vast majority of appraisals confirm contract price, with the share peaking at 98% in 2007. Following increased appraisal scrutiny, the share dropped towards 90% and is now closer to 95%.

 

[glenn walker]

So 95% of all come in at Contract IE the Sales Price. That means 95% of all buyers and lender's wasted their money. That's pretty compelling evidence for lenders to use waivers and desktop reports.

 

[Vermonter]

So 95% of all come in at Contract IE the Sales Price. That means 95% of all buyers and lender's wasted their money. That's pretty compelling evidence for lenders to use waivers and desktop reports.

Right? This is not the W she thinks it is

 

[J Grant]

But if 97% plus of all appraisals on purchases come in on the Bulls Eye and on refinances, most get what they need then that's indicitive of how people in transactions are mostly honest.

But the appraisers job is not to keep people honest it's to value property. The average appraiser is no more honest than the people he works for. In fact many stupid ones have made value decisions that were too low and hurt people.

And the stupider and crooked ones came in at values too high which hurt people, markets, and lenders.

It is pretty hard btw to understand how a so-called "low " appraisal hurts anybody. The borrower is free to pauy the higher price using their own funds to make up the difference. And some choose that path. Other sellers choose to reduce their price. Other deals go off and die- so be it .

 

[glenn walker]

Right? This is not the W she thinks it is

Actually the AMCs can get that 95% up
to 99% in less than 6 months.

Every report that comes in low that appraiser is secretly moved to the bottom of the rosters fee panel. After 6 months only the secrete code -friendly appraisers get work. It's brutal out their in the real world.

 

[J Grant]

So 95% of all come in at Contract IE the Sales Price. That means 95% of all buyers and lender's wasted their money. That's pretty compelling evidence for lenders to use waivers and desktop reports.

90-95 %, and the percentage is less in hot markets - during the height of the boom, stats in FL and other states were that 60% came in under SC price. The values would be better if there were true appraiser independence, but Fannie does not REALLY want that, which might mean RR ordering, such as VA has or the former FHA panel had.

It is not a "waste of money," because for the 5-10%., it saves them from over paying or per the financing clause clause can withdraw from the deal with no penalty. That is a lot of people and for th emarekt, a lot of loans - and allowing all properties to have a WAIVER or desktop can see close to 100% close which can skew markets - a few sales a month at higher prices forms the next set of comps for an AVM or appraisal -% is