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

[Sadie]

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.

That is a very specific situation, not really relevant to most situations today. The loan closing costs exist and are usually folded into the loan, thereby increasing the loan balance. Any equity in a mortgage that is newer is reduced. Banks like the no appraisal loans because they advertise there is no appraisal fee to a borrower. Easy math, no appraisal, no fee to pay. Your scenario assumes there has been no payment made that decreases the outstanding principal. If a loan goes south, it is better for the lender to have it go south for a lower amount then a higher amount. I think the biggest issue with some of the bifurcated/desktop appraisals is an appraiser basically guaranteeing another person's work. There are plenty of acceptable Fannie/Freddie products out there besides the 1004. What about the 2055 if you need a value conclusion or the good old 2075-Condition and Marketability report? Those are already out there and have been used and as an appraiser you are not relying on someone else. Its all you

 

[DWiley]

That is a very specific situation, not really relevant to most situations today. The loan closing costs exist and are usually folded into the loan, thereby increasing the loan balance. Any equity in a mortgage that is newer is reduced. Banks like the no appraisal loans because they advertise there is no appraisal fee to a borrower. Easy math, no appraisal, no fee to pay. Your scenario assumes there has been no payment made that decreases the outstanding principal. If a loan goes south, it is better for the lender to have it go south for a lower amount then a higher amount. I think the biggest issue with some of the bifurcated/desktop appraisals is an appraiser basically guaranteeing another person's work. There are plenty of acceptable Fannie/Freddie products out there besides the 1004. What about the 2055 if you need a value conclusion or the good old 2075-Condition and Marketability report? Those are already out there and have been used and as an appraiser you are not relying on someone else. Its all you

OK, I get it. You know the answer. You don't like the answer. So rather than admitting that, you are just going to keep dancing around other topics. Not a novel tactic here

Of course banks like no appraisals. They like closing faster and without having to wait weeks for an appraisal that has the potential to kill their deal. I don't really care about that. I am looking purely at the risk management. GSEs don't require appraisals because they have any interest in securing the future for appraisers. Appraisal reports are risk management tools, and the GSEs use them when they are the best tool available (as demonstrated by significant data)

 

[djd09]

Criticizing him for his day job is the cheap shot - you go after the individual when you don't have what it takes to go after these ideas and opinions.

So let's stick to the subject. If you think the facts he cited in support of Freddie's policies are inaccurate then what do you think those facts are?

did he hurt your feelings

 

[djd09]

so if the mortgage broker is estimating value, then the whole hvcc/ivip frank dodd was a scam

 

[djd09]

Why do you think the GSEs keep it under lock and key?

remember when they sold it as a risk review tool. the kool aid store is now open, without masks

 

[Jayjay25]

I’m not really sure or the risks involved in re-financing “underwater mortgages”. I honestly don’t know enough about the secondary mortgage market and mortgage backed securities to answer that question. Can you tell me if these new refinanced “underwater mortgages” get sold into the secondary market with no valuation indicating the loan is underwater?

 

[Sadie]

OK, I get it. You know the answer. You don't like the answer. So rather than admitting that, you are just going to keep dancing around other topics. Not a novel tactic here

Of course banks like no appraisals. They like closing faster and without having to wait weeks for an appraisal that has the potential to kill their deal. I don't really care about that. I am looking purely at the risk management. GSEs don't require appraisals because they have any interest in securing the future for appraisers. Appraisal reports are risk management tools, and the GSEs use them when they are the best tool available (as demonstrated by significant data)

I have no idea what you are talking about, you make no sense. I think you think you have all the answers when in fact you have one answer.

 

[Terrel L. Shields]

Would a new appraisal provide any risk management value in such a scenario?

In a Condo? Prolly not. I worked for a land developer who had condos, townhouses, PUDs all built into the cake on 22,000 acres. Most of those were dartboard sales anyway. Catch a sucker from Chicago and they paid more than the country folks from Iowa. Locals didn't touch the place for years. Now it is kinda morphed into a community of first homes or small families with a splattering of golf loving retirees.

 

[Terrel L. Shields]

I’m not really sure or the risks involved in re-financing “underwater mortgages”.

Forbearance is selectively administered. Poor folk need not apply. It's for the Black Rock's of the world.

 

[Jayjay25]

Still hoping for an answer to this post because it’s a bit above my pay grade.

I’m not really sure of the risks involved in re-financing “underwater mortgages”. I honestly don’t know enough about the secondary mortgage market and mortgage backed securities to answer that question. Can you tell me if these new refinanced “underwater mortgages” get sold into the secondary market. If so, is there a valuation indicating the loan is underwater?