3.6 The promises, the predictions, the panic and the fight for the dwindling appraiser dollars

[George Hatch]

Why would they do that (nerf their technology) if they think their existing program is an improvement for them relative to their usage?

Their their underwriting programs and appraisal policies are based on their expectations. Whether they're right or wrong about it, they're TELLING appraisers what they consider to be "meaningful and not misleading" to their usage.

 

[George Hatch]

Fannie Mae is on a journey of continuous improvement to make the home valuation process more efficient and accurate. We provide a spectrum of options to establish a property’s market value, with the option matching the risk of the collateral and the loan transaction. The spectrum balances traditional appraisals with appraisal alternatives.

Value acceptance is Fannie Mae’s offer to accept the lender-submitted property value in Desktop Underwriter® (DU®) with no appraisal requirement for eligible transactions. The value submitted must be based on the contract price for a purchase transaction or the lender’s or borrower’s estimate of property value for a refinance transaction.
My comment - the lender or borrower or contract price did not even need a robo program pick of 3 comps
Having a lender pick the value - wasn't that what the HVCC and Dodd Frank seek to eliminate via stopping mortgage lender pressure to hit values in an appraisal! The GSEs had the idea to cut out the appraisal and thus the regulations around appraisal predetermining value, to allow the lender to estimate the value to hit X number. The HVCC and third-party AMC buffer against value hitting in appraisals - the GSE solution was not to use an appraisal, and regulators went along with it.

When this is what appraisals compete against on the res lending side, no wonder some shortcut appraisers use a software program to pick comps. I won't do it and others won't do it, but others will, and who is going to stop them? The same folks who decided dropping appraisals was fine in order to allow a lender to estimate the value?

​

View attachment 108483
Fannie Mae
https://selling-guide.fanniemae.com › sel › representatio...


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 ...Read more

I'm not even going to address the sequence of their use of the "data-driven analytics" in their process because we've already beat the bones on that. Instead, I'm going to stick to appraisals and appraisal practice.

Their value acceptance (waiver) program doesn't use appraisals. Appraisal standards don't apply to the people operating to them nor do appraisal standards act as a benchmark for any of the workproducts they use in that process.

 

[J Grant]

Value acceptance program doesn't use appraisals. Appraisal standards don't apply to the people operating to them nor do appraisal standards act as a benchmark for any workproducts in that process.

I understand that value acceptance programs don't use appraisals !!! Why do you continually make points contingent on an assumption that I do not understand something?

Read my post where I said the GSE's avoided the problem of appraisal regulations by not using an appraisal!

The point was made that a value acceptance is the appraiser competition - a program allowing the lender to estimate a value to make the deal work. To point out the irony of it.

 

[J Grant]

I'm not even going to address the sequence of their use of the "data-driven analytics" in their process because we've already beat the bones on that. Instead, I'm going to stick to appraisals and appraisal practice.

Their value acceptance (waiver) program doesn't use appraisals. Appraisal standards don't apply to the people operating to them nor do appraisal standards act as a benchmark for any of the workproducts they use in that process.

Appraisers: "We will not be replaced"
Users: "Challenge accepted"

d, I have indicated numerous times that their value acceptance does not use appraisals, and I realize appraisal standards don't apply to non-appraisers. Must that be repeated in every post?

Q- Do you think it is a positive that Fannie admits the value used in a value acceptance might not be the value of the property?

The users, if regulators allow it, can do whatever they want. Just as the lenders in the last market crash, when regulators allowed it, decided not to use credit scores, require down payments, etc., in the no income doc loans, 125% LTV loans, etc.

 

[George Hatch]

A lender doesn't need "value acceptance" to be market value. They only need a value that's sufficient to meet their loan criteria .

Do I think it's positive? Depends on whose perspective we're judging that on, doesn't it?.

It's definitely not a positive for appraisers because their use of the AVM cuts into the appraisers' book of work.​

It *might* be a positive for the lenders if the AVM isn't grossly overvaluing the properties are worse than the appraisers have been doing​

It *might* be a positive for the lenders if their AVM is outperforming the appraisers (speaking in terms of group vs group)​

It *might* be a big negative for the lenders if the AVMs is grossly overvaluing the properties worse than the appraisers have been doing​

​

I think it would be foolish to disregard the probability that they've been actively comparing their AVM to the appraisals on those same properties. That they haven't already developed an informed opinion from that comparison. That they don't already have an established track record for how these things perform WRT gross overvaluations.

Just because we can't see the results of their analyses and comparisons doesn't mean they haven't been making those comparison or that they don't already know what those results look like.

 

[RCA]

Fannie Mae is on a journey of continuous improvement to make the home valuation process more efficient and accurate. We provide a spectrum of options to establish a property’s market value, with the option matching the risk of the collateral and the loan transaction. The spectrum balances traditional appraisals with appraisal alternatives.

Value acceptance is Fannie Mae’s offer to accept the lender-submitted property value in Desktop Underwriter® (DU®) with no appraisal requirement for eligible transactions. The value submitted must be based on the contract price for a purchase transaction or the lender’s or borrower’s estimate of property value for a refinance transaction.
My comment - the lender or borrower or contract price did not even need a robo program pick of 3 comps
Having a lender pick the value - wasn't that what the HVCC and Dodd Frank seek to eliminate via stopping mortgage lender pressure to hit values in an appraisal! The GSEs had the idea to cut out the appraisal and thus the regulations around appraisal predetermining value, to allow the lender to estimate the value to hit X number. The HVCC and third-party AMC buffer against value hitting in appraisals - the GSE solution was not to use an appraisal, and regulators went along with it.

When this is what appraisals compete against on the res lending side, no wonder some shortcut appraisers use a software program to pick comps. I won't do it and others won't do it, but others will, and who is going to stop them? The same folks who decided dropping appraisals was fine in order to allow a lender to estimate the value?

​

View attachment 108483
Fannie Mae
https://selling-guide.fanniemae.com › sel › representatio...


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 ...Read more

You know what? This is probably for the better. If I had to buy a house, typically a very expensive lifelong investment, I would consider paying an appraiser for an accurate appraisal, if he/she could convince me they know how to do accurate appraisals. For this, the appraiser needs to develop a sound pricing formula based on estimated building area and lot size.

Keep in mind that, for the buyer, there is a constraint: he cannot assume he will buy the house. If the appraisal comes in below the seller's asking price, the sale fails. And he has to look for another house, which will require an appraisal.

THEREFORE, it makes more sense for the seller to hire an appraiser to appraise his house for any potential buyer as of a specified effective date. With that understanding, in writing and signed by the appraiser, buyers will be interested. The downside is that the seller might have difficulty selling at a price higher than the appraised value. So, a seller could "waste" his money on an appraisal that comes in substantially lower than his desired selling price. However, in a market with an oversupply of listings, or where the seller is in a rush to sell, it makes a lot of sense.

NOW, for a savvy appraiser to agree to appraise an house where the users of the appraisal are potential buyers, he better have his i's dotted, his t's crossed and be absolutely sure he can do a good job of supporting his value conclusion in a court of law.

BEWARE: Clearly Fannie Mae and Freddie Mac are showing a complete disdain for the value of appraisals - by. their actions. I would guess only a small percentage of potential buyers have much confidence in appraised values over Zillow estimates, as well.

 

[glenn walker]

The only person coming to save you is the version of yourself thats tired of your current situation !

 

[J Grant]

A lender doesn't need "value acceptance" to be market value. They only need a value that's sufficient to meet their loan criteria .

Do I think it's positive? Depends on whose perspective we're judging that on, doesn't it?.

It's definitely not a positive for appraisers because their use of the AVM cuts into the appraisers' book of work.​

It *might* be a positive for the lenders if the AVM isn't grossly overvaluing the properties are worse than the appraisers have been doing​

It *might* be a positive for the lenders if their AVM is outperforming the appraisers (speaking in terms of group vs group)​

It *might* be a big negative for the lenders if the AVMs is grossly overvaluing the properties worse than the appraisers have been doing​

​

I think it would be foolish to disregard the probability that they've been actively comparing their AVM to the appraisals on those same properties. That they haven't already developed an informed opinion from that comparison. That they don't already have an established track record for how these things perform WRT gross overvaluations.

Just because we can't see the results of their analyses and comparisons doesn't mean they haven't been making those comparisons or that they don't already know what those results look like.

How do you know that Fannie or Freddie performs an AVM on a value acceptance offer property?

On a former fannie site disclosure, I read that they state no valuation was performed for a value acceptance property. Their use of "Data analytics," whatever that is comprised of, is not necessarily an AVM. I'm sure they run some kind of analysis and compare to an X-year-old appraisal, but does anybody see it outside the GSE ?

You decided somehow that "gross overvaluation" is the bridge too far, but anything else is acceptable, which is fine if you think that, but I have not seen that officially stated on the Fannie or Freddie websites. They use slick corporate buzzwords like accurate and efficient

I agree with you that a lender does not need "value acceptance" of the property to be market value - they only need a value sufficient to make their deal work. If this were not a risk, why did the HVCC and DF forbid predetermined values ( to make a mortgage loan work) in appraisals? In fact, the language of that is part of the certs in the 1004. If no taxpayer backing was involved, letting the lender's needed number be the property value - no biggie. But the taxpayers are backing these loans, and investors might assume the collateral value of the property is "market value" -and the borrowers are risking overpaying or overborrowing relative to MV, even if not by a "gross " overvaluation.

 

[Digger88]

From what I've seen from the AIVRE app/program (I used it for a sample to test) and others like it coupled with Spark doing what they do nothing is really going to change for me. Going mobile seems like it would take way too long to do this in the field so I'm just going to focus what's expected on site. Once I get that down I can return to my normal, cram as many walkthroughs as you can over the weekend and type the rest of the week MO.

 

[George Hatch]

How do you know that Fannie or Freddie performs an AVM on a value acceptance offer property?

On a former fannie site disclosure, I read that they state no valuation was performed for a value acceptance property. Their use of "Data analytics," whatever that is comprised of, is not necessarily an AVM. I'm sure they run some kind of analysis and compare to an X-year-old appraisal, but does anybody see it outside the GSE ?

You decided somehow that "gross overvaluation" is the bridge too far, but anything else is acceptable, which is fine if you think that, but I have not seen that officially stated on the Fannie or Freddie websites. They use slick corporate buzzwords like accurate and efficient

I agree with you that a lender does not need "value acceptance" of the property to be market value - they only need a value sufficient to make their deal work. If this were not a risk, why did the HVCC and DF forbid predetermined values ( to make a mortgage loan work) in appraisals? In fact, the language of that is part of the certs in the 1004. If no taxpayer backing was involved, letting the lender's needed number be the property value - no biggie. But the taxpayers are backing these loans, and investors might assume the collateral value of the property is "market value" -and the borrowers are risking overpaying or overborrowing relative to MV, even if not by a "gross " overvaluation.

You can tell yourself whatever you want about the term "data-driven analytics". The Occams Razor explanation is pretty straightforward: If they can run their own AVM at the same time the rest of the application is being loaded into their program and if it only costs them $7 to run it then why WOULDN'T they run it?

If they already have the capability on tap then why would they nerf that capability? Regardless of what they're telling the public.

Do you think the "accept" rate for the value related aspects of their program is 100%? I sure don't think so. How could that accept rate be less than 100% if the only "valuation" is being done by the loan originator?

How else do you think Fannie caught those LOs at Wells a couple years ago - in real time - when they were lowballing property values in an attempt to sneak in under the maximum limits of the waiver program? So as to avoid triggering the requirements to get an appraisal. How did they do that? By using psychic crystals + astrology + burning sage at a drum circle?