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

[Terrel L. Shields]

I am still trying to figure out who is making the least sense here...don't hear me, I can shout.

 

[Jayjay25]

What difference does any of that make? None.

You have a loan. Your payment is $1500 per month. If a refi can lower the payment to $1,250, the default risk is lowered, because your financial obligation is lessened.

The monthly payment may be lowered but that 60 year old who refinanced their existing loan with 10 years left on it to a brand new 30 year loan (plus closing costs rolled in) just added a huge amount of interest to their loan. That actually increases their financial obligation/burden and puts them in a worse place in the long term. Not only will they not be around to pay off the loan but they will no longer be working or able to maintain that asset (which was not re-inspected for the appraisal). What does it matter anyway when the note is actually held by the taxpayer with no accountability to the “investors”.

 

[djd09]

open the waiver books, show them what racism really looks like

 

[DWiley]

The monthly payment may be lowered but that 60 year old who refinanced their existing loan with 10 years left on it to a brand new 30 year loan (plus closing costs rolled in) just added a huge amount of interest to their loan. That actually increases their financial obligation/burden and puts them in a worse place in the long term. Not only will they not be around to pay off the loan but they will no longer be working or able to maintain that asset (which was not re-inspected for the appraisal). What does it matter anyway when the note is actually held by the taxpayer with no accountability to the “investors”.

That is the best you got? Pretty inventive.

But, none of that explains how an appraisal would contribute to risk management in such a case. You are arguing that such a loan should not be made. That is not the topic - the topic is, if such a loan were made, what would an appraisal add? Want to try again to explain why we would need an appraisal in such a case? Thanks

 

[J Grant]

Actually, they usually do see them. Most lenders submit reports (or have the AMC submit) as soon as they get it. As a result, the UCDP data often includes several versions - the original, the revised, etc

How do you know if lenders actually do this...if they get an appraisal that comes in "low", what is to stop a lender from putting it aside, and ordering another appraisal without submitting the first one to fannie or freddie ?

 

[TerryRohrer]

That is the best you got? Pretty inventive.

But, none of that explains how an appraisal would contribute to risk management in such a case. You are arguing that such a loan should not be made. That is not the topic - the topic is, if such a loan were made, what would an appraisal add? Want to try again to explain why we would need an appraisal in such a case? Thanks

I expect that if you changed your stance 180 degrees and cited the vapid and illogical examples made in reply to yours, you would get a flood of your own words back as examples of how your new position couldn't possibly be!

 

[J Grant]

What difference does any of that make? None.

You have a loan. Your payment is $1500 per month. If a refi can lower the payment to $1,250, the default risk is lowered, because your financial obligation is lessened.

But, wait, you say - the house value has declined and it is no longer worth the loan balance!! So?? The the loan balance is already on the books. If you default on the current loan (which is more likely with the higher payment) , the lender is upside down anyway

But wait, the house has degenerated into C5 condition!! So?? There is already a loan on the house in that condition. If you default on the current loan (which is more likely with the higher payment) lender gets it back in that C5 condition.

The bottom line is that an appraisal offers no additional risk management in this scenario. Investors are in the risk management business, not the appraiser employment business.

I agree, in a case like this an appraisal is not needed.

I also think using the data from AVM transactions on refinances such as the above to claim AVM's "perform better with less defaults than appraisals" is disingenuous.

 

[Jim Scholl]

I am all ears. Please explain how the logic is flawed. Should be easy if it is so far off base

You invent an artificial construct then declare it applicable to resolve shortfalls through one size fits all refinancing. You also said earlier that the VAST majority of loans would require appraisals when you already knew the number of waivers rose to 49%. Do you work for Freddie Mac? Are you trying to convince appraisers to drink the Koolaid that waivers and bifurcated appraisals are good for appraising?

 

[DWiley]

You invent an artificial construct then declare it applicable to resolve shortfalls through one size fits all refinancing. You also said earlier that the VAST majority of loans would require appraisals when you already knew the number of waivers rose to 49%. Do you work for Freddie Mac? Are you trying to convince appraisers to drink the Koolaid that waivers and bifurcated appraisals are good for appraising?

Actually, I said aside from the rate/term refis that appraisals were ordered the vast majority of the time.

Yes, the number of waivers has greatly increased, and that is primarily because the grate majority (like over 75%) of loans made recently have been for refis. For purchase loans the percentage of waivers is still very low. Because of crazy market conditions, some buyers are waiving the appraisal as a contingency in the purchase contract, but that has nothing to do with GSE policies.

Oh, and by the way, the actual number of appraisals being processed is still at record levels. Nationally, appraisers have more work than they can do, but some seem fixated still on the appraisals they are not getting.

 

[DWiley]

You invent an artificial construct then declare it applicable to resolve shortfalls through one size fits all refinancing.

What is "artificial" about a lender doing a rate/term refi on an existing loan? That actually reflects a huge percentage of loans being made right now.