3.6 Crunch Time

[George Hatch]

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who are they going to blame this time...because the mortgage broker has been cut out of the loop so i was told even though that is wrong

Good question: if there are big losses (which I assume there will be), will they attribute those losses to the appraisals and other valuations being grossly overstated en masse? Will the waivers play an outsized role in those losses, or will they play a smaller role than the conventional 1004s?

Sooner or later the answers to these questions will become self-evident.

 

[chad hampton]

Actually only market participants buyers and sellers determine true market value.

If they pay in cash. If they want to borrow money that is backed by the US taxpayer then they have to jump through a few more hoops.

If an organization wants to lend their own money, I could care less if they order an appraisal or not. But when organizations like the GSE get to socialize all of their losses, they should be held to a much higher standard. And they certainly shouldn’t be the ones setting the rules.

 

[J Grant]

We operate in the economic environment which exists. Not the environment which doesn't exist.

As for GSE usage of their AVMs, what else do you think they are referring to when they use the term "data driven" analytics prior to making their decision? Why would they build an AVM and then not use it?

One more thing to keep in mind; when we say they need accurate Market Value that doesn't actually mean the same thing as when they say they need a supportable Mortgage Value. Especially when they structure their arrangement on deferring responsibilty for the loan decision away from them and onto the originating lender.

Sift the verbiage a little:

My AVM = My responsibility for the decision​

Your estimate = your responsibility for the decision (even if I first ran it through my AVM before accepting the deal)​

IDK . I do not work there. I assume they use AVM's for many different things, including, at times, comparison to an appraisal

However, they are very aware of their verbiage, and they refer to data analytics performed to greenlight a Waiver. I believe they have also stated that no valuation was performed with a Waiver, and an AVM is a valuation.

 

[djd09]

Good question: if there are big losses (which I assume there will be), will they attribute those losses to the appraisals and other valuations being grossly overstated en masse? Will the waivers play an outsized role in those losses, or will they play a smaller role than the conventional 1004s?

Sooner or later the answers to these questions will become self-evident.

it was like a casino...for the mortgage brokers

 

[George Hatch]

As long as the appraisers aren't on the hook for it, who cares if the MBs can cheat the lenders they're doing business with?

 

[djd09]

oh im sure dw has no problem with the mb estimating value...but i will give the mb some advice...wire fraud is a serious offense including prison time

 

[J Grant]

As long as the appraisers aren't on the hook for it, who cares if the MBs can cheat the lenders they're doing business with?

Appraisers lost their livelihood or suffered great economic harm because the HVCC and Dodd-Frank regulated it so that appraisals were supposed to be separated from loan officer selection in order that the "care" of public trust be protected with respect to loans, since they are taxpayer-backed, to avoid the big bad loan officer pressure to value hit.

First, the AMCs, which were supposed to be the firewall, never eliminated the target-hit pressure; they silently passed it on by not sending orders to appraisers who came in "low." .

That wasn't enough; lenders wanted 100% target hitting. So the GSEs did an end run around Dodd-Frank by figuring appraisals are regulated to avoid target hitting by the appraisers, so we will just skip the appraisal, and use a WAIVER and let the lender, or owner, target hit it or use the target sale price as the value. The appraisers who lost the volume are collateral damage. .

As long as appraisers aren't on the hook for it, it means appraisers are not on the hook because no appraiser was used, meaning they lost their job and livelihood; that is, who cares. . And it is not like the WAIVER (now called value acceptance) happened for an ethical or protective cause wrt borrowers and markets; it happened to allow target values. Their lame rational is look how much money borrowers saved. They saved perhaps $500 but lost the protection of an appraisal in the financing clause for a sale, or can overborrow in a refi and lose equity. The we saved the borrowers money level of hypocrisy is ironic, because the big loan expense cost to borrowers is thousands to tens of thousands in loan points and fees, or tens of thousands in RE broker fees, (which Fannie protected with their letter to lenders that seller-paid broker buyer agents were not considered a concession)

I am aware of the fact that Fannie or Freddie performs data analytics before saying ok, lenders, we green light a WAIVER, so go forth and target hit the value. IDK how large a value range results from their data analytics; do you? Does anybody? It is not made available. Perhaps you can ask and find out.

If there was a 500k loan submitted by a lender for a WAIVER, and the sale price is 550, how large a range around that sale price is allowed by the data analytics before green-lighting a waiver?
A data analytics value range of 540-570k is a different set of potential than a range of 500-600 k.

 

[ilsindaco2628]

My latest thoughts regarding 3.6

-I just had an AMC ask me if I would do a 3.6 single family purchase with rental comparables (previously 1004 w 1007) for $325.
I told them $650 and never heard back.

- I use TOTAL. It IS getting better... mixed with me having done more 3.6 work I have cut down on reporting time however I have only completed single family and condo reports. No exterior, no 2/4 unit (TERRIFIED OF THIS) and no supplemental forms (rental comps, operating income statement). Having a functioning mobile app will certainly cut down on time back at the computer but I haven't tried it yet for 3.6.


-All I hear from my AMC contacts is that appraisers are not ready, many haven't completed any 3.6 orders and say they will "figure it out when it launches" which I have tried to use to my advantage. I am trying to be opportunistic and have enough experience where AMCs would rather auto assign me the work knowing it will get done in a timely fashion versus give to to another appraiser who is going to try to figure it out on the fly. HOWEVER the AMC model of sending out quote requests to find the fastest and cheapest appraiser is going to further complicate things. We're all going to have to learn how to describe the 3.6 debacle to realtors who will have no idea why their purchase appraisal is going to take 2 weeks to turn around after inspection.

I am still holding out hope this will get delayed again.

 

[George Hatch]

Appraisers lost their livelihood or suffered great economic harm because the HVCC and Dodd-Frank regulated it so that appraisals were supposed to be separated from loan officer selection in order that the "care" of public trust be protected with respect to loans, since they are taxpayer-backed, to avoid the big bad loan officer pressure to value hit.

First, the AMCs, which were supposed to be the firewall, never eliminated the target-hit pressure; they silently passed it on by not sending orders to appraisers who came in "low." .

That wasn't enough; lenders wanted 100% target hitting. So the GSEs did an end run around Dodd-Frank by figuring appraisals are regulated to avoid target hitting by the appraisers, so we will just skip the appraisal, and use a WAIVER and let the lender, or owner, target hit it or use the target sale price as the value. The appraisers who lost the volume are collateral damage. .

As long as appraisers aren't on the hook for it, it means appraisers are not on the hook because no appraiser was used, meaning they lost their job and livelihood; that is, who cares. . And it is not like the WAIVER (now called value acceptance) happened for an ethical or protective cause wrt borrowers and markets; it happened to allow target values. Their lame rational is look how much money borrowers saved. They saved perhaps $500 but lost the protection of an appraisal in the financing clause for a sale, or can overborrow in a refi and lose equity. The we saved the borrowers money level of hypocrisy is ironic, because the big loan expense cost to borrowers is thousands to tens of thousands in loan points and fees, or tens of thousands in RE broker fees, (which Fannie protected with their letter to lenders that seller-paid broker buyer agents were not considered a concession)

I am aware of the fact that Fannie or Freddie performs data analytics before saying ok, lenders, we green light a WAIVER, so go forth and target hit the value. IDK how large a value range results from their data analytics; do you? Does anybody? It is not made available. Perhaps you can ask and find out.

If there was a 500k loan submitted by a lender for a WAIVER, and the sale price is 550, how large a range around that sale price is allowed by the data analytics before green-lighting a waiver?
A data analytics value range of 540-570k is a different set of potential than a range of 500-600 k.

The qualifier "besides fee appraisers (only)" would logically go without saying but apparently not. You routinely load all kinds of unspoken and contradictory meanings into my comments when it suits you, but not this time.

I meant what I said and if you compartmentalized your own observations from your feelings you would have no room to disagree. Nobody else cares what happens to fee appraisers. Nor should they except to the extent they value what the fee appraisers want to sell to them.

 

[J Grant]

The qualified "besides fee appraisers (only) should go without saying but apparently not.

Nobody else cares what happens to fee appraisers. Nor should they except to the extent they value what the fee appraisers want to sell to them.

I don't believe the nobody cares what happens to fee appraisers line. Nearly every RE agent I see at inspections complains about an AMC appraiser sent from 3 counties away who does not know the area and is happy when I tell them I am local and know the area well.

The better lenders and others in the RE field care. Even Fannie and Freddie, despite their many moves to award work to AMCs and use waivers, etc care to the extent that they know they need appraisers for the difficult orders and for a % of regular orders to have MV on some kind of established standard course.

In the public realm, people are leery of AI and hate the data centers and job losses that might accrue to it. The anger and resentment of the public, as evidenced in the consumer lawsuits in the courts wrt the AMCs where the lawyers refer to the amount of the appraisal fee the AMC keeps as "unjust enrichment," is an example.

None of it might affect decisions in the near future that affect our industry. Will see... I am not, of course, recommending anyone enter the res side of the profession, and wish any newbies brave enough to try it the best. Maybe the new generation can effect change. IDK. They have a social media awareness that our generation lacks.