Compass Mortgage Offering Conventional Purchase No Appraisal

[Michigander]

Just got a letter from them that they are offering the ability to complete conventional loan purchases with no appraisals in many scenarios (not all).

Seems every day there is another one popping up so I am sharing for those of you who are keeping track of these.

 

[TRESinc]

according to their site they are doing conventionals with 3% down as well...

 

[Salty]

Inventory for the REO appraisal orders of the future.

 

[Deleted member 134708]

Inventory for the REO appraisal orders of the future.

Doesn't an REO happen from breaking a moral obligation and not overpaying?

Just checking how an REO happens.

 

[Mark K]

Doesn't an REO happen from breaking a moral obligation and not overpaying?

Overpaying has nothing to do with it.

It happens when a borrower breaks a contractual obligation to make payments and this occurs if there is no appraisal, a flawed appraisal, or a perfectly credible appraisal.

 

[hastalavista]

From a lender/mortgage broker perspective, advertising this as a possibility to entice a potential borrower to sign-up with the entity seems like Basic Marketing 101.

I would expect many, if not all lenders who offer GSE-purchased loans, to start to highlight this option.
And, as more lenders become comfortable about the process, and (in the case of purchases) more agents become knowledgeable about its potential, expect these programs to start to register on the average borrower.



What I wonder is, if somehow the per-approval for this program is structured that I can repeatedly enter in different loan amounts on the same property to determine its eligibility, it becomes more of a primary filter in refinancing and purchase-price decisions.

Think about it:
A buyer runs several numbers through the no-appraisal program and is able to determine the highest number the program will accept.
The buyer goes to the seller and says, "Look; we have per-approval with no appraisal at this price. The loan is effectively guaranteed to close without any hassle. Let's seal the deal at this price."
This would be a similar dynamic as an all-cash offer if the per-approval system can be manipulated in that fashion.

I say "manipulated" but I used that term intentionally; it has a negative connotation of gaming the system.
On the other hand, a counter argument could be:

This isn't gaming the system. This is providing buyers and sellers very specific and meaningful information. A buyer and seller can, based on this program, agree to a price that (a) is consistent with what the lender will value the collateral and (b) the loan's terms will be structured such that the buyer can adequately service the debt. The collateral value is right-sized and the loan terms are within the wherewithal of the borrower. If they don't like what the program indicates, they can go a traditional route. But, this offers them an opportunity to agree at a price and complete the transaction with a high degree of closing-certainty and at a lower transaction cost.
​

I've said before that I don't believe a best use of resources is to try to squash this program; for some loans/transactions, it will work with no harm to the safety and soundness of the banking industry and result in some marginally lower transaction cost for the consumer. I think the best use of resources is to try to set limits of such a program. What those limits are (LTV ratios, credit scores, maximum loan amount, etc., etc.) is the battlefield to fight on (IMNSHO).

But for now, advertising this program is a marketing tool, regardless if the borrower/property qualifies or not.

 

[Carnivore]

Years ago many people could only purchase a home with a higher interest rate because their credit had some marks on it. Then Prez Bush jr came along and loosened it all up on credit and everyone got a low interest rate loan. Additionally we had low/no doc/even no appraisal loans. Several years later as the forum originated petition predicated prior to 2007 and boom the crash hit us. So if the current tax reform goes thru I predict we will have a lot of growth in the economy. So add in looser home loan requirements, repatriation of overseas money a big surge in economy and boom Inflation is going to go up significantly. Interest rates will follow right along with it, the feds will make sure of that.

Denis made a good comment about lenders advertising this no appraisal to attract borrowers. - To me that means stellar borrowers ONLY- But the hook is out there and slick talking Loan officer now will convince you to accept your credit history as a disqualifier and since your here we can still do your loan by getting an appraisal. BOOM.

FTR many people have been getting homes loans without an appraisal for a long time. This is not new, its apparently being expanded or there is just a larger pool of well qualified buyers.

If you think about it the appraisal fee is a small part of the total cost. AMC's revenues will shrink causing many to go out of business remember they rely on appraisal fee's in their revenue stream. Banks don't have to increase their staff because AMC's took over that part. Meaning - Banks don't have the overhead.

So whats going on is the Big Box lender Bean counters are telling the Brass that profit can increase if we can create more loans over a shorter period of time. Meaning we can grab a larger slice of the pie. Smaller lenders like CU's or more localized banks slice will shrink. Maybe...unless the pie grows larger which it likely will. There are a whole lot of millennial crawling out of the mama's basement and wanting a actual home for themselves.

Who else is a looser - in part the GSE's will gain a little in more loans, but they do loose something without an appraisal. They loose Key data about physical/economic/locational factors that effect an individual home. Which by the way they track thanks to UAD and more honest(forced in some cases) appraisers.

We have seen all this before. History repeats itself.

 

[Carnivore]

From a lender/mortgage broker perspective, advertising this as a possibility to entice a potential borrower to sign-up with the entity seems like Basic Marketing 101.

.

That's all this is about. There is one aspect you did not bring up. Yes the GSE is involved, because it provides liquidity to the lender(source of the loan).

Another part you have not mentioned is the originating lender services the loan for the GSE even though their money is not involved. Its a profit center.

You mentioned gaming by looking at different down payments for the borrower to see what effect that has on his financial position. Higher payment less cash needed. Lower payment more cash up front. OK, I see a sophisticated borrower doing this.

The no appraisal requirement is nothing more than enticing well qualified buyers into the risk pool.

I never liked the credit only risk management part of the loan process. Credit can literally change over night. All it takes is for your Panty size 10 wife to find a size 2 panty in your cars glove box. LMAO

 

[glenn walker]

Old news Fannie-Freddie have been offering the waivers for over a year. Up to 85%-90% LTV property must have been previously appraised after UAD because the GSE uses the last report for running their CU AVM Thingy.

If the home has been updated or remodeled since the last appraisal the buyer or seller can request a full appraisal but most don't and It's a win-win for the lender because Fannie -Freddie relieve the lender of any possible buy-back based on a poor quality appraisal and it gets rid of those pesky nit-picky deal-killing appraisers .

 

[TRESinc]

FTR many people have been getting homes loans without an appraisal for a long time. This is not new, its apparently being expanded or there is just a larger pool of well qualified buyers.

where did you find this data? i would like to know more about it. can you clarify "many" and "long time"?