Mister Peabody's compressed timeline would look something like: Crooked LOs and appraisers get caught, > HVCC; HVCC didn't work, > DF; DF has muddied the waters > CU.
All of us get that there was collusion between lenders (processors, closers, LO's, branch and regional production managers etc.) and appraisers to move loans through a system that coveted the implied federal guarantees that removed (most of) default/foreclosure risk to the Feds. We're also aware that appraisers who balked at this pressure soon got bypassed. But I think that if anyone looking at the residential mortgage loan production system and the investment community hungry for some level of interest return above the T-bill rates - if anyone thinks that the drives have changed is looking for the Jim Jones Kool-Aid recipe. Yep, we've got a pretty effective firewall between commissioned loan hacks and appraisers. But what we still have is a system that - at some point - will not tolerate appraisers who do not, at least most of the time, produce the results that the lenders require. (Yep, there's still cleaning up to do on appraisals/appraisers; yep appraisers have been allowed to submit a lot of white bread (non-substantive appraisals) for GSE work for decades; yep appraisers need to do a better job of telling what they've done.
But, lenders still control the approval of appraisers on their approved rosters, and while the assignment of particular appraisals to particular appraisers is out of the LOs' control, appraisers who refuse to produce the desired result will lose assignments and will (probably) be removed. Five years ago, it was the number and the lack of appraisal-related requirements that were the trigger. Perhaps tomorrow it will be really thorough appraisal reports with cogent explanation of every pertinent part of the process that conform to mandated descriptors.
At some point up the food chain in the lenders' corporate structures there is a point at which quality control and production/profit mandates meet. There is an inherent institutional bias to maximize profit and minimize risk, and while there may be a weighting of incentive compensation for quality issues, production and profit incentives are primary. This production/profit mandate is ubiquitous, and at the top of the pyramids is (still) the federal government as the ultimate guarantor of the incentive comp generated throughout the MF system (that would be the mortgage finance system).
And, yep, we're back to high ratio loans, eased federal loan standards and all the rest. (I'm not aware that we're back to no-doc loans), but we continue to hear that credit and income standards are inherently discriminatory. There's no conspiracy - but the legislators and regulators don't understand that those who are profiting in the current environment are still way ahead of them.
