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

[DWiley]

The rationale for these loans is the same argument that is being made by other posters, "don't need an appraisal, these borrowers are safe".

Who said that? I certainly didn't. My point was that "safe" is irrelevant to the risk decision if the loan already exists.

Let's get very specific using a property I am familiar with through some acquaintances. Consider a loan originated in 2019. Loan balance was $250,000. The lender has that loan on its books. Now, suppose the value has gone down, so the property is now only worth $225,000. The lender is "upside down." A new appraisal would not change that. But, if the lender refis that loan balance at a lower rate and cuts the payment by $200, the default risk has been lowered. Yes, the lender is upside down, but they are already upside down. Not saying it is the best loan on the books, but reducing the monthly payment does reduce the default risk. Again I ask, what value (what additional risk management) does a new appraisal add in that scenario?

The lender can just keep the current arrangement and take the bath if the borrower defaults, or they can refi and lower the risk of having to take that bath. Either way, a new appraisal does not seem to be of much value to the risk decision. Tell me what I am missing.

I am an appraiser and have been for almost 40 years. That does not mean that I am just going to default to "you always need an appraisal" If that offends anyone, sorry, not sorry.

 

[Terrel L. Shields]

A new appraisal would not change that. But, if the lender refis that loan balance at a lower rate and cuts the payment by $200, the default risk has been lowered. Yes, the lender is upside down, but they are already upside down.

Hmm. How do they know the market fell without an appraisal I guess comes to mind. OTOH, when working with a bank- now bought out- the FDIC didn't tolerate you holding such properties on the books. You either had them pony up more money or foreclose regardless that they may not have missed a payment. I saw it in poultry farms, I saw it is old houses worth very little. The bank had to shore up its loans and they didn't have enough reserves to cover those loans whose value had fell below the balance of the loan. They foreclosed and ended up selling these properties for so little it wasn't even funny. I guess it saved the FDIC from paying out anything but it destroyed a bank. But, then again, bank laws don't apply to Fannie or Freddy.

 

[DWiley]

Hmm. How do they know the market fell without an appraisal I guess comes to mind.

Not too difficult when the property is in a large condo development with plenty of sales of like units. The owner knows that he is upside down, and it would take a lender about 2 minutes to reach the same conclusion

Now, will you answer the actual question posed? Would a new appraisal provide any risk management value in such a scenario?

 

[Jayjay25]

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

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’m not arguing the loan shouldn’t be made. I’m arguing that the borrower is not put in a better position financially if they are resetting their mortgage to 30 years and paying x amount of additional interest. I will also argue that if a valuation is required to protect the public trust it shouldn’t be accomplished by running the value thought a proprietary AVM that is filled with data manipulated by the users (by appraisals waivers etc.).

 

[Mejappz]

I will also argue that if a valuation is required to protect the public trust it shouldn’t be accomplished by running the value thought a proprietary AVM that is filled with data manipulated by the users (by appraisals waivers etc.).

Not to mention with no standards or oversight to speak of.

 

[Zoe]

Given the current threats to the appraisal profession, what in your opinion would be good for appraisers? Do you just want to keep the status quo? Or, what changes would you support?

I have repeatedly told you what would be better. Let your employer, FNMA, FHFA, VA, CFPB, FDIC, FSLIC, and any other regulators you think are important set on a commission and make rules. I don't care if NAACP or whoever has a seat at the table. I just don't think it would be that many people to set at the table.

 

[Zoe]

I know who will have the most clout at the table because of their loss ratio compared to any other loan program.

 

[glenn walker]

I have repeatedly told you what would be better. Let your employer, FNMA, FHFA, VA, CFPB, FDIC, FSLIC, and any other regulators you think are important set on a commission and make rules. I don't care if NAACP or whoever has a seat at the table. I just don't think it would be that many people to set at the table.

They have a Blue Ribbon Commission and they decided the way they do is the best way and you just dont agree with their decisions BUT you need to realize and accept that you are not part of the team so why keep beating a dead horse ?

 

[DWiley]

That is the best you got? Pretty inventive.


I’m not arguing the loan shouldn’t be made. I’m arguing that the borrower is not put in a better position financially if they are resetting their mortgage to 30 years and paying x amount of additional interest. I will also argue that if a valuation is required to protect the public trust it shouldn’t be accomplished by running the value thought a proprietary AVM that is filled with data manipulated by the users (by appraisals waivers etc.).

Again, that all misses the point. I am not saying the loan should be done.

All I am saying is that IF it is done, or even considered, an appraisal report adds nothing to the risk management decision. You keep arguing other points, but you don't see to have a snappy comeback on that specific topic

 

[NC Appraising]

How's the weather?