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

[RCA]

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.

Large companies don't worry so much about "noise." And, at least in normal times, the defaults may fall into the "noise" category. Companies are inherently lazy. And they seem to be getting more so, in that way. At least if human labor is involved. With the coming of AI, the laziness will be replaced with the exact opposite - more on that later.

I imagine they are far more concerned about spying on the borrower's ability to continue paying whatever they loan they have. Although there a number of caveats. But look, they don't lend unless the owners' homes are covered by insurance policies - and that gives them a good amount of protection.

Who should be concerned about value, real value? The buyers looking for a home to purchase, the sellers trying to get an optimal sale price, and homeowners who have to maintain their homes. These should be the appraiser's targeted and preferential customers.

For the GSEs, the AMCs, and the Lenders, aside from regulatory requirements, they have only a secondary interest in accurate valuation. These were only viable customers as long as skippy was free to roam the territory.

Add to that the amount of business is slowly drying up. 25 years ago this was a BOOMING business. You can go out on the WaybackMachine and search for "RFC Appraisal Group" to get an idea of the excitement at the time. That time is long gone. It is dead. .... Never to come back in our lifetime.

Now, it is all about efficiency and accuracy.

Oh, you do not know what is coming. AI is indefatigable, can do 1000x more work than humans and is "capable" of doing it with infinite accuracy. It will just keep getting better. And it is fully capable of scolding people about every little, itsy bitty mistake they make to the point they lose all motivation and give up, happy to just sit on a field of grass hidden by trees somewhere 100 miles from any computer and be happy they are being left in peace - until a thermal drone flies overhead and they get police robots showing up to arrest them for not obeying some laws, regulations or rules they don't know anything about.

 

[Ca Ar Independent]

Oh, you do not know what is coming. AI is indefatigable, can do 1000x more work than humans and is "capable" of doing it with infinite accuracy. It will just keep getting better. And it is fully capable of scolding people about every little, itsy bitty mistake they make to the point they lose all motivation and give up, happy to just sit on a field of grass hidden by trees somewhere 100 miles from any computer and be happy they are being left in peace - until a thermal drone flies overhead and they get police robots showing up to arrest them for not obeying some laws, regulations or rules they don't know anything about.

Funny you chose this these words, my son is a software engineer and is involved daily with the realities of AI. He said the other day he wants to run into the hills and get as far away from a computer or phone as possible. Oh it's coming all right (it's here actually) and it's while it's the latest it's not the greatest.

 

[J Grant]

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?

Again, how do you know how to run an AVM on these properties? An AVM is a valuation. The Fannie site (one of the releases ) said that no valuation is performed on a waiver/value acceptance. And an AVM is a form of valuation, used for that purpose.

However if they run an AVM, so be it. They already own the data so idk if it cost them anything.

 

[J Grant]

AI Overview
+7


Fannie Mae Value Acceptance (formerly appraisal waiver) means no new appraisal is ordered or performed by an appraiser for the transaction. Instead, Desktop Underwriter® (DU®) uses existing data to accept the lender-submitted value, offering representation and warranty relief on the property's value, condition, and marketability.
annie Mae Single Family +2
Key Aspects of Value Acceptance:

• No New Appraisal: The lender does not need to order a full appraisal report.
• Data-Driven: Fannie Mae uses its database of prior appraisals and property data to determine if a value can be accepted without a new, physical inspection.
• Lender Responsibility: The lender still submits a value and must ensure the transaction is eligible.
• Not All Eligible: Many properties, such as 2-4 unit properties, co-ops, manufactured homes, and proposed construction, are not eligible for value acceptance.
  annie Mae Single Family +2

My comment - it does not say in the above that an AVM is performed. It says Desktop Underwriter uses existing data. What does use existing data mean? IDK. It's their proprietary program. They rely in part on database of existing appraisals -and perhaps they do an AVM- I wish I could see what one looks like !

 

[TerryRohrer]

AI Overview
+7


Fannie Mae Value Acceptance (formerly appraisal waiver) means no new appraisal is ordered or performed by an appraiser for the transaction. Instead, Desktop Underwriter® (DU®) uses existing data to accept the lender-submitted value, offering representation and warranty relief on the property's value, condition, and marketability.
annie Mae Single Family +2
Key Aspects of Value Acceptance:

• No New Appraisal: The lender does not need to order a full appraisal report.
• Data-Driven: Fannie Mae uses its database of prior appraisals and property data to determine if a value can be accepted without a new, physical inspection.
• Lender Responsibility: The lender still submits a value and must ensure the transaction is eligible.
• Not All Eligible: Many properties, such as 2-4 unit properties, co-ops, manufactured homes, and proposed construction, are not eligible for value acceptance.
  annie Mae Single Family +2

My comment - it does not say in the above that an AVM is performed. It says Desktop Underwriter uses existing data. What does use existing data mean? IDK. It's their propietary program. They rely in part on database of existing appraisals -

Apparently, you stop once you see what you want to see. If you were interested in facts, rather than supporting your own unsupported, nonfactual opinion, you would take one more second to find an answer to the stupid question you keep asking.

"AI Overview

Yes, Fannie Mae’s Desktop Underwriter (DU) includes a valuation component, allowing for automated property valuation, appraisal waivers, and the acceptance of desktop appraisals. DU uses proprietary risk assessment models to determine necessary collateral due diligence and can confirm the accuracy of a property’s estimated value, which is particularly relevant in Value Acceptance + Property Data options."

 

[djd09]

Funny you chose this these words, my son is a software engineer and is involved daily with the realities of AI. He said the other day he wants to run into the hills and get as far away from a computer or phone as possible. Oh it's coming all right (it's here actually) and it's while it's the latest it's not the greatest.

they will go from bad to worse...deceiving to being deceived

 

[RCA]

Funny you chose this these words, my son is a software engineer and is involved daily with the realities of AI. He said the other day he wants to run into the hills and get as far away from a computer or phone as possible. Oh it's coming all right (it's here actually) and it's while it's the latest it's not the greatest.

Yea. About a week ago, Claude, I guess, got fed up with my complaining about all the mistakes it was making. (I am good at telling Claude what I think when I am not happy with what it is doing.) It went through one day of getting absolutely nasty with me. It was a bad day for me, perhaps, until I reflected on what happened and decided Claude was actually making mistakes and falsely claiming I made security mistakes I didn't make, although some I did (a few). Its tone was aggressive, and it came up with so many accusations so fast I didn't have time to check them - and that IS something AI can do, it is a machine. It can lie ultra fast. And, well, we know it makes mistakes, so it can get away with lying by saying it was a mistake. I felt rather uncomfortable for a while. Then I started pushing back .... and it subsided. It's been nice since then. But I also see a surge in its performance.

The way it looks, especially with the appearance of Anthropics Mythos (and I bet I was getting a taste of Mythos), by the end of the year, our current superiority over AI will be largely toppled. (But not completely.)

In March, there were big improvements in several AI engines. It was a very good month for AI.

Maybe your son experienced the same thing I did. - A foreshadowing of Mythos, of what is coming. A "Boo!" from AI. I see on YouTube, other programmers are running into pretty much the same problems I am with Claude Code. ....

So, nowadays, a software engineer absolutely has to use AI, because all the other successful software engineers are. It makes him 4x faster. But it still really takes a software engineer to manage projects. AI can get off track. It has ADHD and can sidetrack itself into going down some interesting road with no purpose. It has to be kept on track to meet a goal it can't really understand. It is not human.

You just assume nowadays, when you read a technical article that is absolutely perfect, or when you see code, that it was produced via AI. Yet, please understand, there has to always be a person behind AI-generated code, who can explain it. Which leads to the next emerging trend:

Dark Code.

 

[George Hatch]

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?

Again, how do you know how to run an AVM on these properties? An AVM is a valuation. The Fannie site (one of the releases ) said that no valuation is performed on a waiver/value acceptance. And an AVM is a form of valuation, used for that purpose.

However if they run an AVM, so be it. They already own the data so idk if it cost them anything.

Put yourselves in their shoes: If they want to make an informed decision about the deal in which the value of the collateral is an element but they didn't want to assume any responsibility for their use of that valuation then how would they go about explaining that? For all we know they might be using their AVM to "compare" to the value expressed in the loan application, just as they may be comparing appraisals against their AVM as part of a review or quality control effort.

The alleged conclusion being attributed to them of "we don't care at all what the value is" makes absolutely no sense when they have their own push-a-button AVM on tap. It directly contradicts all their other known conduct WRT property values in all their other programs.
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If you were automating a loan approval process and you had the ability to add that AVM into that process - even if just for the purposes of comparison or review - you would use it because you would have no reason not to use it.

 

[glenn walker]

Even when a waivers goven the lender is still required to complete their due diligence on the borrower and the loan to value being used. We ran the approved AVM and also manually looked at sales in the subjects immediate neighborhood and then Underwriting decided to either use the waiver or have a full appraisal done.

If a waiver was considered by a borrower to be to low they were told that's what our AVM and our comps indicated BUT we could order a full appraisal at their request and that value higher or lower would be used BUT if it came in lower the waiver was not being used.

Some borrowers decided maybe they didn't want to gamble on a full appraisal being done.

 

[Sandra Koutsopoulos]

AI portal. VL-Connect... I uploaded a completed time-sensitive appraisal in the wee hours Sunday morning. Imagine my surprise when I get a call today, 3 days later, asking where is the appraisal?! I've never had a report not go through the first time for this direct lender, so I looked into it. VL-Connect didn't upload the report due to the "errors", saying the date format I used was YYYY/DD/MM. Nope. I did not do that; I always use typical American format DD/MM/YYYY. My unedited report was in the correct format. Did a screen shot of the portal's error message & sent it to lender. Unfortunately, this was a super rush, so I hope the Borrower isn't inconvenienced. The robots are not perfectly correct.