FHFA Request opinions from Lenders & others on what the new version of an appraisal will be.

[Jim Scholl]

FHFA Request opinions from Lenders & others on what the new version of an appraisal will be. Click on the link then look at the number of respondents who are pushing bifurcated / hybrid appraisals.

Public Input | FEDERAL HOUSING FINANCE AGENCY

Instructions on use of the form: To submit your input on an open topic, please select a topic upon which you wish to comment from the table below.

www.fhfa.gov

 

[bnmappraisal]

I noticed a lot of names of lenders/AMCs that are often discussed in the Good, Bad, Ugly section of here

 

[George Hatch]

Some of the questions are explicitly soliciting input on those issues.

 

[Jim Scholl]

I noticed a lot of names of lenders/AMCs that are often discussed in the Good, Bad, Ugly section of here

What I did not see are comments from E & O companies, VA, State Boards etc. What I did see was the vast majority of submittals in favor of bifurcated / hybrids. Hager had a good letter against them.

 

[bnmappraisal]

That's a good point, Jim
Although in theory, I have no problem with hybrid/bi-furcated/desktop reports (I'll save that for another thread) I do have a problem with the fee(s) associated and the talk of being able to do 5, 7, 10 per day that has been thrown around

 

[The Bob]

The letter from Freddie is bizarre.

There's this...
Academic literature provides strong evidence that relying on properly designed and deployed Automated Valuation Models (AVMs) results in superior collateral valuation, lower defaults, and lower credit losses.

In the next paragraph this...
The traditional appraisal has proven to be reliable and useful and should remain an important part of the valuation spectrum. In fact, the traditional appraisal is the most common valuation method used for the mortgages we purchase today.

And then this nugget...
The authors go on to establish that some 30% of all appraised values are exactly the initial contract price; and only 10%—not 50% as would be expected if appraisals were unbiased—are below the contract price.

And wth would you expect 50% of appraisal's that are opining on MARKET value to be come in below what the MARKET is saying?

 

[Jim Scholl]

That's a good point, Jim
Although in theory, I have no problem with hybrid/bi-furcated/desktop reports (I'll save that for another thread) I do have a problem with the fee(s) associated and the talk of being able to do 5, 7, 10 per day that has been thrown around

Without a low fee to force on appraisers while still charging the homeowner a full fee why else would any lender or AMC want one? Also, the number of transactions will not grow to make up for the difference in fees. For instance, if there are x numbers of appraisals ordered over a year and you replace half of these with hybrids the appraiser's income will drop. Then add to this the GSE's using 49% appraisal waivers in February.

 

[Jim Scholl]

The letter from Freddie is bizarre.

There's this...
Academic literature provides strong evidence that relying on properly designed and deployed Automated Valuation Models (AVMs) results in superior collateral valuation, lower defaults, and lower credit losses.

In the next paragraph this...
The traditional appraisal has proven to be reliable and useful and should remain an important part of the valuation spectrum. In fact, the traditional appraisal is the most common valuation method used for the mortgages we purchase today.

And then this nugget...
The authors go on to establish that some 30% of all appraised values are exactly the initial contract price; and only 10%—not 50% as would be expected if appraisals were unbiased—are below the contract price.

And wth would you expect 50% of appraisal's that are opining on MARKET value to be come in below what the MARKET is saying?

Of course, the GSE's don't see the appraisals that came in low and the deal died.

 

[Terrel L. Shields]

The problem with statements like

relying on properly designed and deployed Automated Valuation Models (AVMs) results in superior collateral valuation, lower defaults, and lower credit losses.

In "Fooled by Randomness" and "The Black Swan" N N Taleb explained that when historical data indicates that defaults are low, that cannot be extrapolated to a future where defaults are high. That " fat tail" event is so many far out of the bell curve, such statements are meaningless. If you are out in the 4th or 5th standard deviation from the norm - such as in 2008, your low default rates of 2000-2005 are totally meaningless.

wth would you expect 50% of appraisal's that are opining on MARKET value to be come in below what the MARKET is saying?

Since they don't even SEE most of the appraisals that come in below market- they never make it to Fannie Mae review...so how the F could they NOT be more at or above Contract because that is the only ones they see! The rest get renegotiated or fail.

 

[Jayjay25]

Of course, the GSE's don't see the appraisals that came in low and the deal died.

Let’s not forget about the lenders (not a Fannie/Freddie requirement) that require the contract price be changed on the appraisal after they use the appraisal to renegotiate the contract price. If required to do this I always add commentary stating the contract price was renegotiated based on the appraised value. Too bad nobody reads our appraisals