Fannie, appraisers move to the back of the bus.

[J Grant]

In order for a 90% LTV to become a gross overencumbrance the waiver+AVM combo being used in the underwriting would need to be at least 15% overvalued. I know you're passionate on the topic but how common do you believe that scenario could possibly be? The price was established between the buyer and seller (and not by an appraiser) prior to applying for the financing.

Think it through.

And regardless if the negative results accrue in the RE economy, it's STILL not the role of the lenders - or the appraisers - to manage those markets. The line of reasoning you're using is an off-label use of the role of the lenders and the appraisers, both of whom are operating on only one transaction at a time.

You have your opinion and I have mine.

If a loan at 10% down is overvalued by 10%, the buyer now has zero equity. If it is 15% overvalued, the owner or buyer now is in negative equity. Either situation creates a higher risk. That is true whether the overvaluation is in a purchase or a refinance.

The reason that appraisals exist is to provide a check and balance of MV vs price so "managing markets," while not the appraiser s job description, is a byproduct of their role.
It is for lenders to prudently vet borrowers. As I tried to explain before, overvaluations and bad loans occur one transaction at a time, and that can pile up to a critical mass tipping point.

 

[George Hatch]

I'm talking about how a lender sees a loan encumbrance. A loss is when they can't recover the principal in the event of a foreclosure.

5% overvalued (15% higher than the 90% financing) before we can even start to call it grossly overencumbered. That's how far off their AVM has to be before we can say its less usable than an appraisal that is 5% overvalued.

 

[alebrewer]

For Freddie, ACE increased from 80% to 90%. ACE + PDR increased from 80% to 95%.

 

[George Hatch]

They've been watching these things so they know what they're getting. I think that provides some context for how they're acting. They wouldn't act this way if they didn't trust in their program.

Obviously

As I say, at the rate the technology is evolving the REL for the mtg lending portion of my own book of work is probably only a year or two longer than for the SFR appraisers. Maybe less. I'm in the same situation as you guys are in and the GSEs have nothing to do with my situation.

 

[J Grant]

I'm talking about how a lender sees a loan encumbrance. A loss is when they can't recover the principal in the event of a foreclosure.

5% overvalued (15% higher than the 90% financing) before we can even start to call it grossly overencumbered. That's how far off their AVM has to be before we can say its less usable than an appraisal that is 5% overvalued.

well that stinks for the buyers, the RE markets and tax payers.

 

[alebrewer]

well that stinks for the buyers, the RE markets and tax payers.

How does that stink for the buyers? All the buyers I'm aware of have opted for the waiver when offered...

 

[chad hampton]

123456788

 

[shrubberyvaluation]

My neighbor two doors down paid $50,000 over list. No appraisal. No waiver. Just good ole cash Is that also "data cancer"??

No because hes putting his money down, can't default on that.

 

[Terrel L. Shields]

Either situation creates a higher risk.

Only for the bank. The borrower is playing double or nothing. Nothing invested, nothing lost.

 

[chad hampton]

I think it should be pretty clear to most professional appraisers the difference between a cash deal and a mortgage that has received a waiver.