hastalavista
Elite Member
- Joined
- May 16, 2005
- Professional Status
- Certified General Appraiser
- State
- California
OK, I just spent 4 grueling days in Southern California attending a “all work/no play” conference known as PMC- Predictive Methods Conference. Its main sponsors are Veros (an AVM company) and First American Real Estate Solutions (an “everything real estate related company). This was my second time attending (last time 2004).
PMC is a conference/forum that puts AVM vendors in contact with AVM users. But, I wouldn’t describe it as a “trade show” (although, there are vendor booths). Most of these players know each other very well, so I think the event is more accurately described as an “idea-exchange” environment rather than a new products showcase.
For me, as just an average “Joe appraiser”, it is a rare opportunity to hear live and meet in person some of the real movers & shakers in the lending, banking, regulatory, private rating company, secondary market and investment banker world.
I did want to share three significant themes that repeated themselves throughout the event that I believe have a direct impact on the Appraisal Industry:
Appraisals remain the “gold standard” of valuation.
It was clear, whether it was the representatives from
The number one reason why an appraisal is considered to be the most reliable valuation product available (in general) is because no other current process has the ability to fully consider condition (interior and exterior) and location influences (positive & negative). And, there is no likely replacement seen on the near-term horizon.
The number one concern these parties have is the ability of the appraiser to maintain his or her independence. All noted that value pressure applied in the market by loan agents to appraisers to “make the deal” is a real issue. In fact, although mortgage fraud is a significant problem, I felt they almost segmented appraiser’s pushing the value due to client pressure out of the “fraud” arena and into its own category.
So, the good news is that we still have high regard. The bad news is that we are our own worst enemies when we succumb to the pressure to please a client or push a value.
AVMs are here to stay
I’ll have to double-check my stats, but I believe I heard that 90%+ of all 2nd mortgage liens are based on AVMs. This is not going to go away. AVMs have taken over the 2nd position.
There is a concern by regulators and rating agencies that the AVM system can be “gamed” too! “AVM independence” was a new term I hadn’t heard before:
“Cascading” is the use of multiple AVM products to arrive at a value. The process (in general) is that an AVM process will run through various AVMs until the valuation confidence is high enough to “stop” and go with what you have. This is good idea because not all AVMs are created equally; some work best in certain markets, some work best in other markets, and few (if any) work good in all markets. A concern is that the cascading process will be “tweaked” not to result in the “highest confidence” valuation but to conclude the highest AVM valuation.
These are issues that are under review; there resolution will weigh heavily on AVMs breaking into the 1st lien mortgage market.
AVMs are all seen as a quick, cheap, and independent valuation validation tool to the appraisal. They are becoming our “quality check”. Those appraisal reports that don’t fall within the AVM window will get kicked into a next-level review.
2007 is going to be an “interesting” year
Like the Chinese toast/curse “hope you live in interesting times” that may be the best way to describe how everyone- from originators, regulators, investors, credit agencies & Wall Street are viewing 2007. Why? Because it is in 2007 that most of the “exotic” Interest Only and Neg-Am loans are going to see significant payment adjustments. The sentiment I felt was that it is going to be a very busy period of refinancing (or, restructuring) existing mortgages. How this is going to be done (one can restructure a loan by refinancing or by writing down) remains to be seen. As said by one Wall Street Banker (I paraphrase) “Wall Street and the originators will figure out a way to package a product that can re-adjust the current debt into something that will be acceptable to both the homeowner and the investor” (Yes, the term “40-yr mortgage” was used more than once).
My short summary is this:
I was professionally proud to hear that appraisals and appraisers (in general) are still held in esteem.
AVMs are going to be a part of the appraiser’s environment. It will be up to us as an industry how we want to integrate with them, but AVMs are here to stay.
Although it is slim-picken’s right now, I believe 2007 is going to be an extremely busy year. I also believe that there will be tighter controls on valuation accuracy.
Sounds to me like the near future (6-9+ months?) will be “interesting times”.
Lastly, on a personal note, I was able to meet fellow Forumite Brad Ellis. I had seen Brad before at different events, but didn’t know who he was then, and didn’t make the connection until he came up and introduced himself to me. It’s funny; when you talk to people on the forum, you have a certain “mental picture” you draw.
I can tell you that Brad was much more dashing, engaging, fashionably dressed, highly respected, and had many more women in his entourage than I would ever have guessed based on his posts!!!
PMC is a conference/forum that puts AVM vendors in contact with AVM users. But, I wouldn’t describe it as a “trade show” (although, there are vendor booths). Most of these players know each other very well, so I think the event is more accurately described as an “idea-exchange” environment rather than a new products showcase.
For me, as just an average “Joe appraiser”, it is a rare opportunity to hear live and meet in person some of the real movers & shakers in the lending, banking, regulatory, private rating company, secondary market and investment banker world.
I did want to share three significant themes that repeated themselves throughout the event that I believe have a direct impact on the Appraisal Industry:
Appraisals remain the “gold standard” of valuation.
It was clear, whether it was the representatives from
- Freddie Mac (investor)
- The OCC (regulator)
- Standard & Poor (rating agency)
- ABN AMRO or ING (wall street)
The number one reason why an appraisal is considered to be the most reliable valuation product available (in general) is because no other current process has the ability to fully consider condition (interior and exterior) and location influences (positive & negative). And, there is no likely replacement seen on the near-term horizon.
The number one concern these parties have is the ability of the appraiser to maintain his or her independence. All noted that value pressure applied in the market by loan agents to appraisers to “make the deal” is a real issue. In fact, although mortgage fraud is a significant problem, I felt they almost segmented appraiser’s pushing the value due to client pressure out of the “fraud” arena and into its own category.
So, the good news is that we still have high regard. The bad news is that we are our own worst enemies when we succumb to the pressure to please a client or push a value.
AVMs are here to stay
I’ll have to double-check my stats, but I believe I heard that 90%+ of all 2nd mortgage liens are based on AVMs. This is not going to go away. AVMs have taken over the 2nd position.
There is a concern by regulators and rating agencies that the AVM system can be “gamed” too! “AVM independence” was a new term I hadn’t heard before:
“Cascading” is the use of multiple AVM products to arrive at a value. The process (in general) is that an AVM process will run through various AVMs until the valuation confidence is high enough to “stop” and go with what you have. This is good idea because not all AVMs are created equally; some work best in certain markets, some work best in other markets, and few (if any) work good in all markets. A concern is that the cascading process will be “tweaked” not to result in the “highest confidence” valuation but to conclude the highest AVM valuation.
These are issues that are under review; there resolution will weigh heavily on AVMs breaking into the 1st lien mortgage market.
AVMs are all seen as a quick, cheap, and independent valuation validation tool to the appraisal. They are becoming our “quality check”. Those appraisal reports that don’t fall within the AVM window will get kicked into a next-level review.
2007 is going to be an “interesting” year
Like the Chinese toast/curse “hope you live in interesting times” that may be the best way to describe how everyone- from originators, regulators, investors, credit agencies & Wall Street are viewing 2007. Why? Because it is in 2007 that most of the “exotic” Interest Only and Neg-Am loans are going to see significant payment adjustments. The sentiment I felt was that it is going to be a very busy period of refinancing (or, restructuring) existing mortgages. How this is going to be done (one can restructure a loan by refinancing or by writing down) remains to be seen. As said by one Wall Street Banker (I paraphrase) “Wall Street and the originators will figure out a way to package a product that can re-adjust the current debt into something that will be acceptable to both the homeowner and the investor” (Yes, the term “40-yr mortgage” was used more than once).
My short summary is this:
I was professionally proud to hear that appraisals and appraisers (in general) are still held in esteem.
AVMs are going to be a part of the appraiser’s environment. It will be up to us as an industry how we want to integrate with them, but AVMs are here to stay.
Although it is slim-picken’s right now, I believe 2007 is going to be an extremely busy year. I also believe that there will be tighter controls on valuation accuracy.
Sounds to me like the near future (6-9+ months?) will be “interesting times”.
Lastly, on a personal note, I was able to meet fellow Forumite Brad Ellis. I had seen Brad before at different events, but didn’t know who he was then, and didn’t make the connection until he came up and introduced himself to me. It’s funny; when you talk to people on the forum, you have a certain “mental picture” you draw.
I can tell you that Brad was much more dashing, engaging, fashionably dressed, highly respected, and had many more women in his entourage than I would ever have guessed based on his posts!!!
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