Mejappz
Elite Member
- Joined
- Dec 16, 2005
- Professional Status
- Certified Residential Appraiser
- State
- Florida
Now NAR has fired off its letter critical of some aspects of ‘Appraisal Modernization.”
Modernization and Diversity at Odds NAR joined the Appraisal Diversity Initiative in 2022 to help develop a more diverse appraisal profession. This engagement is in addition to NAR’s own NAR Spire program that educates aspiring real estate professionals from communities of color on opportunities in real estate and partners them with mentors through local workshops. These efforts garner promise, but the automation of the valuation profession raises questions about the viability of the career opportunities for these candidates. Furthermore, it does not appear that appraisal trainees were considered for any of the data collection pilots. Appraisal trainees have passed extensive course work and examinations. The work of data collection would further their knowledge of the data needed for appraisals, how it is collected, and if the Appraisal Foundation could be persuaded, it might be used to satisfy experience requirements for licensing. And, given that the work of an appraisal trainee is unpaid, the salary for data collection would be a critical form of support for these candidates.
Reduced Competition Hurts Consumers and Investors Fannie Mae recently announced its new Value Accept program which includes appraisal waivers for qualifying properties, but also authorizes the use of data collection by qualifying third parties. Lenders are required to vet the third parties for compliance with Fannie Mae’s requirements. This program was development in pilot with six AMCs but excluded several hundred AMCs and many more independent appraisal companies. While in pilot, these companies were able to develop proprietary 3-D technology for collecting metrics and pictures of properties interiors and exteriors. While the technology has clear potential to raise the quality of data collection, providing six large companies with a competitive starting advantage is concerning given the potential impact on consumer choice and overall market competition. The Enterprises and the FHFA took great strides to increase competition among its credit risk counterparties, first building the credit risk transfer market, then implementing the Private Mortgage Insurers Eligibility Requirements (PMIERs), and most recently creating boards of reinsurers under the Integrated Mortgage Insurance (IMAGIN) program. The FHFA clearly looked to expand competition among its credit risk counterparties and to improve the resilience of their practices, rather than reduce it in favor of those with the financial resources to develop new technology. The FHFA should develop similar best practices for their AMC counterparties and work to expand competition in this space
GSE Reform and Appraisal Modernization As de facto utilities, Fannie Mae and Freddie Mac support liquidity in the secondary market as well as other charter duties as mandated by Congress. In return, they are allowed to spread their costs across large market shares and over time due to their unique accounting structure, tax preferences, and access to Treasury funding. Appraisal modernization and the technological innovations being brought to bear present real opportunities to improve data quality and safety and soundness. In the long-term, proponents argue these innovations could reduce valuation delays and reduce costs. However, the process for their implementation so far is problematic. Fannie Mae and Freddie Mac both use internal AVMs to vet loans and grant waivers. Those AVMs may work very well, or not. The market is still waiting on a full regulatory review of AVMs, which should include those used by Fannie Mae and Freddie Mac. Yet AVMs are and have been used to grant waivers at the Enterprises for years. This lack of transparency and accountability runs counter to the critical checks for any public utility, let alone two worth nearly $6 trillion. The Enterprises are limited in the size of their portfolios and mandated to externalize credit and other risks as a means of limiting their ability to internalize risk and become a systemic threat. To the extent that the Enterprises are internalizing this new valuation risk, it presents a threat to their charter duty of supporting liquidity in the market at all times. Furthermore, given the limitations on Enterprises’ portfolios, a pull back by PMIs, reinsurers and CRT investors hurt by poor valuations practices, could limit the Enterprises’ ability to issue new mortgage-backed securities and thus to support market liquidity. It is in the interest of all parties that depend on these utilities to have full transparency on the valuations underlying the GSEs’ activities
Modernization and Diversity at Odds NAR joined the Appraisal Diversity Initiative in 2022 to help develop a more diverse appraisal profession. This engagement is in addition to NAR’s own NAR Spire program that educates aspiring real estate professionals from communities of color on opportunities in real estate and partners them with mentors through local workshops. These efforts garner promise, but the automation of the valuation profession raises questions about the viability of the career opportunities for these candidates. Furthermore, it does not appear that appraisal trainees were considered for any of the data collection pilots. Appraisal trainees have passed extensive course work and examinations. The work of data collection would further their knowledge of the data needed for appraisals, how it is collected, and if the Appraisal Foundation could be persuaded, it might be used to satisfy experience requirements for licensing. And, given that the work of an appraisal trainee is unpaid, the salary for data collection would be a critical form of support for these candidates.
Reduced Competition Hurts Consumers and Investors Fannie Mae recently announced its new Value Accept program which includes appraisal waivers for qualifying properties, but also authorizes the use of data collection by qualifying third parties. Lenders are required to vet the third parties for compliance with Fannie Mae’s requirements. This program was development in pilot with six AMCs but excluded several hundred AMCs and many more independent appraisal companies. While in pilot, these companies were able to develop proprietary 3-D technology for collecting metrics and pictures of properties interiors and exteriors. While the technology has clear potential to raise the quality of data collection, providing six large companies with a competitive starting advantage is concerning given the potential impact on consumer choice and overall market competition. The Enterprises and the FHFA took great strides to increase competition among its credit risk counterparties, first building the credit risk transfer market, then implementing the Private Mortgage Insurers Eligibility Requirements (PMIERs), and most recently creating boards of reinsurers under the Integrated Mortgage Insurance (IMAGIN) program. The FHFA clearly looked to expand competition among its credit risk counterparties and to improve the resilience of their practices, rather than reduce it in favor of those with the financial resources to develop new technology. The FHFA should develop similar best practices for their AMC counterparties and work to expand competition in this space
GSE Reform and Appraisal Modernization As de facto utilities, Fannie Mae and Freddie Mac support liquidity in the secondary market as well as other charter duties as mandated by Congress. In return, they are allowed to spread their costs across large market shares and over time due to their unique accounting structure, tax preferences, and access to Treasury funding. Appraisal modernization and the technological innovations being brought to bear present real opportunities to improve data quality and safety and soundness. In the long-term, proponents argue these innovations could reduce valuation delays and reduce costs. However, the process for their implementation so far is problematic. Fannie Mae and Freddie Mac both use internal AVMs to vet loans and grant waivers. Those AVMs may work very well, or not. The market is still waiting on a full regulatory review of AVMs, which should include those used by Fannie Mae and Freddie Mac. Yet AVMs are and have been used to grant waivers at the Enterprises for years. This lack of transparency and accountability runs counter to the critical checks for any public utility, let alone two worth nearly $6 trillion. The Enterprises are limited in the size of their portfolios and mandated to externalize credit and other risks as a means of limiting their ability to internalize risk and become a systemic threat. To the extent that the Enterprises are internalizing this new valuation risk, it presents a threat to their charter duty of supporting liquidity in the market at all times. Furthermore, given the limitations on Enterprises’ portfolios, a pull back by PMIs, reinsurers and CRT investors hurt by poor valuations practices, could limit the Enterprises’ ability to issue new mortgage-backed securities and thus to support market liquidity. It is in the interest of all parties that depend on these utilities to have full transparency on the valuations underlying the GSEs’ activities
