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Concerning the full disclosure bill

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Mark to market

Thread Starter
Junior Member
Nov 14, 2004
Professional Status
Certified Residential Appraiser
New Mexico
Hello all, I would like to pass on some thoughts on AVMs and the full disclosure bill.

Concerning full disclosure, the first issue in my mind would be privacy. Why should everyone be able to see what I have paid for my home? We do not do that with cars or education bills, why do we need to do it with homes?

The answer would be GSEs or Government Sponsored Entities such as FNMA. Full disclosure would make it easier for GSEs and other mortgage entities to do loans which are in house thru AVMs or Automatic Valuation Models, (as some of you may recall FNMA has openly said that they are pushing for full disclosure in New Mexico because “machines do not lie”).

Many AMVs work on a Hedonic Model, which allows for a value based primarily on GLA and lot size. Once the value is established comps are brought in for the subject based on sales price, not attributes. Imagine the result if we as appraisers tried to explain to the Appraisal Board that we were picking comps on sales price instead of attributes.

AVMs do not account for seller concessions, sales that are not arms length or sold under duress, interior or exterior condition, unique features, school districts or other variances in location. Markets that quickly change to declining from stable or appreciating will be behind the curve and AVMs will show them as trending in the opposite direction.

The states that are facing the largest declining markets and contributing the most to one of the largest financial debacles in American history all have opened their doors to AVMs. Although many AVM supporters will say that the crisis is due to mortgage brokers, it cannot be denied that AVMs were used to close large amounts of loans in states facing high foreclosures. Risk managers in the banking industry are questioning the role of AVMs in the sub prime crisis and it would seem ill advised for nondisclosure states to change horses before the facts are fully known. As an FYI, nondisclosure states appear to be facing very little foreclosures compared to full disclosure states.

FNMA has long been a political contributor. That a bill in which they are one of the primary beneficiaries would come up in an election year should be raising some eyebrows.

As appraisers our first duty is to the public. Opening the door for AVMs to create value throughout the state without any oversight and eliminating the subjective scrutiny of local appraisers will only benefit GSEs and lending giants.

Mark Raney
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