Fannie's Own Statement About Waiver /value Acceptance;

[George Hatch]

Here's a serious question:

Based on what you know of the GSEs, do you think they have developed an informed opinion about how the accuracy of their AVM compares to the reasonableness of the appraisals?

Resulting from extensive head-to-head comparisons on the same properties. Receive an appraisal, run their AVM to see how close/far it got to the appraiser's conclusions. Repeated 10,000x across 10,000 different appraisal assignments?

Or do you think they are just guessing at it or are doing anything less that a full analysis on how these compare?

 

[alebrewer]

Then stop with the insinuation that appraisals do more than they do. The roles appraisals play in a mortgage lending decision are: (1) helping establish LTV, which could be done using any valuation proxy, and (2) establishing the magnitude of loss in the case of default. In the case of the 2nd role, I'd submit that the appraisal serves as a gauge of magnitude of loss only for about the first 6 months - less in a rapidly changing market.

 

[J Grant]

Here's a serious question:

Based on what you know of the GSEs, do you think they have developed an informed opinion about how the accuracy of their AVM compares to the reasonableness of the appraisals?

Resulting from extensive head-to-head comparisons on the same properties. Receive an appraisal, run their AVM to see how close/far it got to the appraiser's conclusions. Repeated 10,000x across 10,000 different appraisal assignments?

Or do you think they are just guessing at it or are doing anything less that a full analysis on how these compare?

I do not think they are guessing.

I am not an insider there, so my answers, as most of ours are, would be based on what I observed. I observe that they seem to be catering more to getting loans passed than protecting the collateral value - and we have no idea how wide their analytics range is for the acceptance of the borrower, or lenders' value estimates.

 

[George Hatch]

There you go again: "protecting value" as a public service.

As usual, there's a marked distinction to be made between the GSEs' stated role of providing liquidity to the lenders vs "protecting the collateral value of the masses". One is closer to dollars/cents capitalism and the other is closer to social engineering.

 

[J Grant]

There you go again: "protecting value" as a public service.

As usual, there's a marked distinction to be made between the GSEs' stated role of providing liquidity to the lenders vs "protecting the collateral value of the masses". One is closer to dollars/cents capitalism and the other is closer to social engineering.

The GSEs are where they are becaue they are the gateway to lenders for taxpayer-backed loan backstops, and thus they have a stated mission statement of public trust. Which might mean they have to balance their capitalism with that mission unless the public trust aspect is window dressing.


If you think they have no such obligation, you are entitled to your opinion.

 

[George Hatch]

Nobody is denying the "taxpayer backstop" aspect incurs its own level of responsibility and accountability. That doesn't justify basically accusing the GSEs - on the evidence-free basis - of cheating their own borrowers via market manipulation. I note that we haven't even been seeing any whistleblower reports from the insiders as to them manipulating their
"data driven analytics". Not yet, anyway.

On the conceptual basis, providing liquidity to the market and enabling more purchase and refi transactions to occur without being starved for mortgage funding resources is very much a stabilizing factor in the market. Putting their thumb on the pricing - if they're doing that - is very much a destabilizing factor.

 

[TerryRohrer]

The GSEs are where they are becaue they are the gateway to lenders for taxpayer-backed loan backstops, and thus they have a stated mission statement of public trust.

Other than in your mind, where is this stated? You keep repeating it, but I have never seen it anywhere else.

 

[J Grant]

Nobody is denying the "taxpayer backstop" aspect incurs its own level of responsibility and accountability. That doesn't justify basically accusing the GSEs - on the evidence-free basis - of cheating their own borrowers via market manipulation. I note that we haven't even been seeing any whistleblower reports from the insiders as to them manipulating their
"data driven analytics". Not yet, anyway.

On the conceptual basis, providing liquidity to the market and enabling more purchase and refi transactions to occur without being starved for mortgage funding resources is very much a stabilizing factor in the market. Putting their thumb on the pricing - if they're doing that - is very much a destabilizing factor.

Imo, they are putting their thumb on the pricing with respect to waivers, per a SC price or a vested party's value estimate, being the value of the property

I did not accuse them of manipulating the market.

 

[Mike Ault]

From ChatGPT (although I've stated the exact same thing ad nauseum). For some reason, folks believe AI, so I'm posting:

View attachment 111853

For those folks who believe the silly narrative that appraisals somehow stabilize markets or prevent defaults, please, please, please share with me how the appraisal does that?

One scenario is when someone needs to sell due to a life event and finds themselves substantially upside down. Such unfortunates have amptly demonstrated that they will simply walk away from those scenarios. The AI published an article back in the late 90s or early 2000's showing how a single 10% overvaluation and subsequent default can lead to a cascade of repossessions in the neighborhood.

 

[J Grant]

Do GSEs Have a Mission of Public Trust?​

Yes — Government‑Sponsored Enterprises (GSEs) are created by U.S. Congress with a public mission, and their legitimacy depends on maintaining public trust, even though they are privately owned corporations.

Public Mission and Trust Role​

GSEs such as Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Farm Credit System were established to enhance the flow of credit to targeted sectors (primarily housing and agriculture) and to make capital markets more efficient and transparent Wikipedia+1. While they are privately held, their charters come from Congress, and their operations are tied to national policy goals American Enterprise Institute - AEI. This means their directors have a duty of loyalty that extends beyond shareholders to include the public mission they were created to serve American Enterprise Institute - AEI.

Because of this public mission, GSEs are expected to act as trustees of the public’s confidence in the housing and agricultural lending systems. Their influence on mortgage markets, the scale of their holdings (trillions of dollars in mortgages), and the implicit expectation of government support in crises all make public trust central to their role U.S. Government Accountability Office (U.S. GAO)+1.

Governance and Oversight Expectations​

The U.S. Government Accountability Office (GAO) has stressed that GSEs should “lead by example in connection with governance, accountability, integrity, and public trust issues” U.S. Government Accountability Office (U.S. GAO). This includes:

• Model corporate governance with independent boards.
• Transparency in financial and performance reporting.
• Compensation structures that balance short‑term and long‑term results.