Data Cancer Due to Waivers

[shrubberyvaluation]

Everybody screaming about waivers inflating prices but have little or no proof. How about during the most recent boom. How many offer 5,10,15% above list did you see. How many appraisals did you do with appraisal gap coverage and how many of those came in below contract and the borrower brought 5,10,15% cash to cover the "appraisal gap". Those type of sales were more common than not in many of my areas. How did you treat those sales?

Its hard to tell without being an agent. Did they reject offers of 20%+ because someone had an appraisal gap of 5%-10%? What if they knew they would get a waiver. In any case the easier it is to borrow money the more prices go up, we see it in college also.

 

[George Hatch]

We accept as a fact the talking point that the bubble from the last RE cycle was driven by the easy-financing and liar loans; and we accept that much of the slowdown from mid-year 2022 was the direct effect of the increase in interest rates. So yes, how these properties are underwritten and financed is of effect on the payments, which in turn is of effect on the pricing.

The question we're discussing here is whether or not the waiver program is adding to the pricing trends. Beyond what the cash buyers and appraisal-backed mortgages have been adding.

 

[shrubberyvaluation]

We accept as a fact the talking point that the bubble from the last RE cycle was driven by the easy-financing and liar loans; and we accept that much of the slowdown from mid-year 2022 was the direct effect of the increase in interest rates. So yes, how these properties are underwritten and financed is of effect on the payments, which in turn is of effect on the pricing.

The question we're discussing here is whether or not the waiver program is adding to the pricing trends. Beyond what the cash buyers and appraisal-backed mortgages have been adding.

Well a waiver makes it easier to get financing. How much of an effect is hard to measure without having the same market conditions without the waivers to compare it to.

 

[George Hatch]

The other thing DW mentioned repeatedly is that their decision is about risk management as a whole. He didn't say as much (perhaps he should have), but the same will be true WRT underwriting the appraisal-backed deals. They're trying to manage their risks. So that might be why it makes sense TO THEM to be comparing loss ratios even though that question doesn't explicitly touch upon the precision of either the appraisals or their AVM.

As the one moderator noted, trying to tally losses during an increasing market doesn't really say anything when considering what happens in a decreasing market. Will the losses during a bust from the waiver-group be similar to the losses from the appraisal-group? Nobody knows yet.

 

[J Grant]

ublin ohio said:
You are ignoring content by this member.
Everybody is screaming about waivers inflating prices but has little or no proof. How about during the most recent boom. How many offer 5,10,15% above list did you see. How many appraisals did you do with appraisal gap coverage and how many of those came in below contract and the borrower brought 5,10,15% cash to cover the "appraisal gap". Those type of sales were more common than not in many of my areas. How did you treat those sales?

When I had an appraisal with the contract stating the borrower would make up a cash difference if the appraisal was below SC price, I would appraise it below SC price,e if the price was not supported as the value - same as for any assignment.

When the appraisal value is below the SC price, the buyer can put up the difference and it closes at that price, however, the lender is better protected wrt equity because the LTV was based on the MV opinoiin (which was lower than the SC price in some cases.

During the craziness of the boom, my appraisal rate was in the 60% below SC range _ as I read, many areas were that high as due to SC prices vastly inflated due to bids and 3% interest rate affect - I wonder how many buyers are underwater as I see a decline in some cases from that time period, even if prices are still on the high side - it is not seen until some of these owners try to sell or refinance - if they have a low rate they might stay longer even with no equity because their payments are low

My normal Value below an SC price is nowhere near that high in normal market conditions -. Nobody would hire me lol.

Are waivers good for borrowers? Idk depends on how one looks at it. They will get the house at the SC price if the wavier comes in, so there is no "killed" deal. However, when I come in below SC price, I frequently see the price negotiated down or they meet in the middle. So the buyer gets the best of all worlds: they still got the house, and they got it at a reasonable price relative to an MV. Sometimes, they might lose a deal. I don't recall our constitution n gauranteeing that every financed deal goes forward.

 

[Surf Cat]

However, when I come in below SC price, I frequently see the price negotiated down or they meet in the middle

I saw an ROV....

 

[Dale Floyd]

I thought this VOA was excellent. Phil always tackles appraisal issues in a way that only he can. I’m a fan.

Wouldn’t it be fun to watch a round table debate involving Phil, Lyle, and DW? I would pay money to watch that.

BTW - Beating up on George or Phil is a waste of time. They are both big boys and can hash out their disagreements without our intervention. George had to smile just a little though, to have gotten Phil’s attention from a couple of posts out here.

 

[Dublin ohio]

Its hard to tell without being an agent. Did they reject offers of 20%+ because someone had an appraisal gap of 5%-10%? What if they knew they would get a waiver.

I did plenty of purchase with "gap" coverage and some came in substantially below contract. The first thing just about every agent did was give me a list of their competing offers. So unless I am prone to not believe the agents, I did have the information. As far as waivers go that is another discussion

 

[Dale Floyd]

It’s a little foolish to think waivers will not impact data, by sheer common sense. Not everything can be proven by citation or data alone, and we all know that.

How many times has your opinion of value slightly exceeded the sale price, and the closing actually reflected a new sale price matching your opinion afterward? And Wiley doesn’t think a waiver is going to impact things very much? I would say something about the average person disagreeing, but Wiley has already said they don’t understand what average means. lol.

 

[Non Sequitur]