ACE

[djd09]

TESTIMONY TO APPRAISAL SUBCOMMITTEEDANNY WILEY, SENIOR DIRECTOR, COLLATERAL RISK POLICY, FREDDIE MACNovember 1, 2023

Introduction and summaryThank you for inviting me to testify before the Appraisal Subcommittee. I am Danny Wiley, Freddie Mac’sSenior Director of Collateral Risk Policy. I am a state certified residential appraiser, and I have worked inthe appraisal profession since the early 1980s. I spent over 25 years as an independent fee appraiser. Ialso worked as the Chief Valuation Officer at a national appraisal management company for severalyears. I have been in my current position at Freddie Mac for four years.Appraisals play a critical role in the residential real estate purchase and financing processes.Homebuyers, lenders and investors rely on appraisers to develop credible, professional opinions ofproperty values in an independent, objective and impartial manner. Accordingly, the appraisal professionand process are regulated at the state level to ensure appraisers are properly trained, credentialed, andindependent.Freddie Mac has been asked to address four topics in our testimony. I’ll briefly summarize our responsesto each. We provide our detailed answers beginning on page 5.

The first topic is Freddie Mac’s role and responsibility in addressing appraisal bias.

In 2017 Freddie Mac introduced Automated Collateral Evaluation (ACE). ACE leverages our proprietarymodels, along with historical data and public records, to assess the value, condition and marketability ofa property. When a loan qualifies for ACE, lenders are not required to obtain a traditional appraisal, andin lieu of the appraised value, we accept the contract price on a purchase loan or an estimated value ona refinance loan submitted by the lender. For loans acquired via ACE, loan performance exceeds theperformance of loans with similar risk characteristics but funded based on an appraisal.3 Because ACE ismore efficient and reduces costs to the consumer, we think this is a great development

ConclusionOn behalf of Freddie Mac, I wish to express my appreciation to the Appraisal Subcommittee for invitingme to testify today – and for your close attention to this important area. As I have detailed in my remarkstoday, Freddie Mac has taken several concrete steps to help improve the accuracy, fairness andcredibility of appraisals. We remain fully committed to working with the appraisal industry, lenders andadditional stakeholders to help continue improving the appraisal process. Thank you again, and with thatI am happy to answer your questions.

https://www.ASC.gov/sites/default/files/2024-06/Freddie Mac.pdf

ouch...im guessing you didn't vote for trump

 

[jay trotta]

"ACE is more efficient and reduces costs to the consumer, we think this is a great development. I

MO-there is no cost saving to the consumer, after all the Investment the bank/GSE etc. make, who pays for all the R&D??

 

[George Hatch]

Doesn't alter their explanation that they are using their AVMs in their approval process and they aren't approving all the applications that get submitted to them.

 

[djd09]

The third issue we were asked to discuss is the results of Freddie Mac’s “appraisal gap” research. Inrecent years, there has been extensive discussion as to whether bias in the appraisal process is a drivingfactor in the price differential between similar homes in differing locations. In 2018, Freddie Mac beganexamining data on home purchase transactions to compare the results of appraisal value opinions tocontracted sales prices. Unlike value, the contracted sale price is a readily available and verifiable factualdata point.In 2021, we published a research paper in which we identified an “appraisal gap” where a higherpercentage of appraised values in Black and Latino neighborhoods were lower than the sales pricescompared to white neighborhoods. The data showed that as the concentration of Black or Latinoresidents in a census tract increases, the appraisal gap increases.In May 2022, we published a follow-up research note that built on the prior research with a modelingapproach. The model results indicate that, even after controlling for important factors that affect housevalues and appraisal practices, appraisal outcomes still differ for properties in predominantly Black andLatino tracts relative to those in predominantly white tracts.Freddie Mac’s research contributes to an ongoing national conversation about the causes and frequencyof undervaluation. Freddie Mac continues research to identify causes and explore potential solutions tothe appraisal gap. In the meantime, we established the aforementioned AQM framework to help addresspotential bias by identifying patterns in appraisal reports. We also are developing alternative valuationmethods to bring greater standardization and increased objectivity

...

 

[George Hatch]

The GSEs have responsibilities to the federal govt which has been chasing the SJW agenda which has prevailed during the current administration. Neither GSE is in any position to tell the feds they won't cooperate.

Do you think the GSEs have any right to not disclose their findings on this issue? Do you think they have some moral obligation to appraisers to withhold their observations? Exactly what do you want them to do for appraisers?

 

[djd09]

Ongoing engagement with the appraisal industryFreddie Mac also goes beyond setting our appraisal requirements by working collaboratively withstakeholders to help address bias. We also have long supported efforts to partner with the industry tostrengthen collateral evaluations. For example, in recent years we have partnered with the AppraisalInstitute, the National Urban League, and Fannie Mae to lead the Appraiser Diversity Initiative (ADI), agroup focused on attracting new entrants to the real estate appraisal field while fostering diversity in theprofession.ADI offers workshops virtually, and at locations around the country, where interested people can learnmore about the appraisal profession and what it takes to become a credentialed appraiser. The programincludes scholarships to cover the educational costs, additional training and mentorship from appraisersemployed by Freddie Mac, Fannie Mae and others, and regular meetings with scholarship recipients forprogress updates and sharing of industry news. A stipend is also provided to allow attendance at anindustry conference for educational and networking purposes.More than 500 people have been awarded scholarships through ADI, with many actively working tocomplete the education requirements before finding positions of employment.ADI also constantly evaluates the program to look for opportunities for improvement. It currentlyfocuses on increasing the percentage of scholarship recipients who complete the educationalrequirements and possibly expanding economic aid and other support offered to those who do completethe training.

...

 

[George Hatch]

Again, they're in no position to tell the politicians "no" on any of this. Not only because of the politics but because the very nature of the allegation puts the burden of proof on the accused, not the accuser. That's why the accusers use it. They only way they can deny the allegations is to actively disprove them via the comprehensive analysis.

"I feel the appraisers are being fair" doesn't cut it. They can't say that unless/until they can prove that with the data. In the meantime all they CAN say is that they're studying the problem, some preliminary analysis reveals certain findings and they're working on doing more analysis and taking more steps to minimize whatever the extent really is of the problem.

The GSEs are not an appraisal entity. Their job is to buy loans and sell off MBS in order to make money. It is not to defend appraisers on the knee jerk basis. Why do you expect otherwise from them?

 

[djd09]

...so roll over lap dog and get your treat

 

[George Hatch]

Don't you have some $225 AMC assignment to be scurrying off to?

 

[djd09]

dont you need to log in to the unethical stakeholders private email forum to get their latest propaganda...