Be the Driver, rather than just a passenger of your appraisal practice

[DWiley]

The amount of waivers per Fannie, states it will increase each year, this is what they estimate they were at before rates JUMPED up.....I have not clue and have not inquired as of today. https://appraisaltoday.com/2021/04/09/appraisal-waivers-almost-50-of-fannie-freddie-loans/

None of what you posted is sourced form either Fannie or Freddie. Yes, use of waivers exploded during COVID, primarily because rate/term refis exploded.

Riddle me this - If I am a lender or investor and I own your loan, and you want to do a rate/term refi to lower your payment, what would an appraisal report add to the risk management in that situation? Remember, I already have the loan.

 

[J Grant]

I read that after the refi boom, the use of FANNIE Waivers has decreased. Still, there is a use of WAIVERS - that does have an impact.

The problem with the article is because of the limits of the residential license, the bulk of work is mortgage work, because a need for appraisals in private sector is small relative to the # of appraiser. The author seems ignorant of the reality that the driver of a res license appraisal business is on a road to nowhere, with a big earnings suck from AMC tollbooths .

A way forward for Res license is to increase the pool of customers . The DPBR could establish a new limited commercial license category. Experienced Residential appraisers could earn it by passing a defined # of hours of commercial PAREA coursework. The limited commercial license could limit the practice to simple retail establishments, apartment buildings under 100 units or ag acreage below X etc. A res appraiser of X years experience to apply , pass any required credits in coursework and take a required commercial PAREA classes. Imo that could well prepare Residential license appraisrs with a knack for it the opportunity to competently do a segment of commercial appraisals. (not me, too old for it but I would love to see the younger generation succeed)

 

[Elliott]

Riddle me this - If I am a lender or investor and I own your loan, and you want to do a rate/term refi to lower your payment, what would an appraisal report add to the risk management in that situation? Remember, I already have the loan.

As an investor or lender, I would be concerned if the property was purchased for $1 million six months ago and is now worth $900,000 or less and headed downward at an accelerating rate, even if it was only a rate/term refi.

 

[J Grant]

Elliot-As an investor or lender, I would be concerned if the property was purchased for $1 million six months ago and is now worth $900,000 or less and headed downward at an accelerating rate, even if it was only a rate/term refi.

Here is the dirty little secret behind the Appraisal Waiver - lenders love it because they have NO, as in ZERO lability for /potential of a buyback for an over valuation of the Waiver. Who does absorb the loss ? THE TAXPAYER.
Whereas when an appraisal is used, the lender is responsible for an over valuation or flawed appraisal and can be forced into a buyback.

I am not sure which side of the liability pool the investor is on wrt a Waiver vs an Appraisal

 

[Zoe]

None of what you posted is sourced form either Fannie or Freddie. Yes, use of waivers exploded during COVID, primarily because rate/term refis exploded.

Riddle me this - If I am a lender or investor and I own your loan, and you want to do a rate/term refi to lower your payment, what would an appraisal report add to the risk management in that situation? Remember, I already have the loan.

It is called collateral risk management. I am not sure GSE's care about that. They got bailed out already.

 

[Zoe]

I'll try to compare me winning a billion dollar lottery ticket and loaning it all out on real property. Why do I care if I lose money if Govt is going to bail me out?

 

[DWiley]

As an investor or lender, I would be concerned if the property was purchased for $1 million six months ago and is now worth $900,000 or less and headed downward at an accelerating rate, even if it was only a rate/term refi.

Walk through the very scenario you present. You are the lender, and you have the loan on your books. You did the loan based on a value of $1,000,000, but the value is now $900,000. What the home is worth now does not change the fact that you already have a loan.

If you can do a rate/term refi and lower the payment, then you have lowered your risk - because now the borrower is less likely to default. If you get an appraisal and refuse to do the refi because the value is now only $900,000, you are just increasing your odds that the borrower defaults.

A cash out refi is a different story, as there is more risk involved, But for a rate/term on a loan that the lender already has, what does an appraisal report bring to the risk management table?

 

[Zoe]

Walk through the very scenario you present. You are the lender, and you have the loan on your books. You did the loan based on a value of $1,000,000, but the value is now $900,000. What the home is worth now does not change the fact that you already have a loan.

If you can do a rate/term refi and lower the payment, then you have lowered your risk - because now the borrower is less likely to default. If you get an appraisal and refuse to do the refi because the value is now only $900,000, you are just increasing your odds that the borrower defaults.

A cash out refi is a different story, as there is more risk involved, But for a rate/term on a loan that the lender already has, what does an appraisal report bring to the risk management table?

Okay, no, it does not change the fact you have the loan.

If you can do a rate/term refi and lower payment, and property has now gone to crap for all the influences on MV. You tell me for all the reasons you know very well on MV appraisals how it does not increase risk to GSE, lender, borrower?

Put sun glasses on borrower?

 

[J Grant]

Walk through the very scenario you present. You are the lender, and you have the loan on your books. You did the loan based on a value of $1,000,000, but the value is now $900,000. What the home is worth now does not change the fact that you already have a loan.

If you can do a rate/term refi and lower the payment, then you have lowered your risk - because now the borrower is less likely to default. If you get an appraisal and refuse to do the refi because the value is now only $900,000, you are just increasing your odds that the borrower defaults.

A cash out refi is a different story, as there is more risk involved, But for a rate/term on a loan that the lender already has, what does an appraisal report bring to the risk management table?

Correct me if I am wrong,-
But far as I know, in the above scenario, if the lender gets a waiver-it is a new new refi rate/term loan, (even though the the lender already had the loan. Now, with the new refi loan, because they used a Waiver, the lender has no liability for a buy back if the borrower defaults.

But If the borrower defaults on that same refi loan done with an appraisal, the lender can be liable for a buy back if turns out the appraisal was an over valuation/flawed.

 

[Zoe]

I digress. The system is hurting the homeowner, buyer, seller, investor, GSE. They all benefit from an appraisal by a qualified professional.