FHFA to allow alternative appraisal methods on purchases up to 97% LTV

[George Hatch]

HUD Sec. Carson already communicated they will, “Immediately end the Biden Administration's Property Appraisal and Valuation Equity (PAVE) policies and reverse any Biden Administration actions that threaten to undermine the integrity of real estate appraisals.” When the future FHFA director calls 97% LTV waivers dumb and irresponsible, I don’t think it’s an off the cuff remark. I doubt Trump has any interest in the issue, really. It is possible it wouldn’t get reversed just because of inertia.

Hopefully so. I'd much rather be 100% wrong about it than right.

 

[Surf Cat]

Let's see what happens when things ramp up.

This has been a real estate cycle that no one's ever seen before. The real estate appraising profession has changed immensely in the last two years. We are definitely down, but are we out? This low activity is not going to stay this way forever. It'll be really interesting to see if the waive-o-rama, Property Data collector option persists, or if new PAREA grads thrown into the deep end of the pool can swim when market activity gets going. This is where the rubber meets the road.

 

[Tom D]

Being one of the walking dead group i have gone back to one of my previous lives, rehab and flip. So with this thread i have bad news and good news, depending either on being appraiser or flipper.
I hope that many of you who have been in this business a long time have figured this out. Appraising is will be a part time job, find something else to make your profit. Like me, to not be bored, at my great age.

 

[Dale Floyd]

I'm waiting to hear from somebody who will insist that Freddie or Fannie are NOT trying to get rid of appraisers.

 

[CGinMN]

Per FHFA "This policy builds on the long-running success of appraisal waivers by allowing more borrowers, particularly first-time and low- to moderate-income borrowers, to benefit from cost savings and reduced closing times." They are expanding to include high-LTVs so that their waiver programs are less racist. Otherwise, the program would violate Fair Housing and/or Equal Credit.

Per AEI "Analysis of HMDA data for 2019 reveals that across all loan purposes a larger share of Black borrowers have CLTVs that are beyond the LTV limit of appraisal waivers when compared to White borrowers. A similar pattern emerges for Hispanic borrowers with the exception of cash out refinances. This suggests that on average minority borrowers, who tend to have higher CLTVs, are less likely to have access to appraisal waivers than White borrowers."


Under the FHA and ECOA, facially neutral policies that disproportionately affect protected groups are unlawful unless the policy:
1. Serves a legitimate business necessity, and
2. No less discriminatory alternative can achieve the same outcome.

Appraisals are a less discriminatory alternative than waivers, so it was important for them to build an argument that appraisers are racist.

 

[Mejappz]

I'm waiting to hear from somebody who will insist that Freddie or Fannie are NOT trying to get rid of appraisers.

If it were to happen you would have the same bootlickers on the forum nod in agreement and say something like “See I told you, why would the GSEs get rid of appraisers if their spending so much money building the new forms and UAD” or some other idiotic statement.

 

[George Hatch]

I'm waiting to hear from somebody who will insist that Freddie or Fannie are NOT trying to get rid of appraisers.

When you transitioned from using 35mm film to digital images did you do that in order to hurt the photo developers on the basis of hating them? Or did you do it because the inferior-quality of the digital images was still nominally sufficient to purpose but at the much lower cost and effort? Was your decision to take your business elsewhere an act of malice toward your vendors or were you simply proceeding based on your own interests, apathetic to its affect on the interests of those "valued partners"?

It's apparent that the long term demand for conventional 1004s will decline as a result of the users transitioning to the alternatives whenever possible. It's apparent that the supply of appraiser hours will continue to exceed the user demand for those hours for the foreseeable future. It's also apparent that the combination of the two factors will continue to result in substandard fees and that more appraisers will get starved out of the business due to the reduction in the number of the simplest and most profitable 1004 assignments.

 

[George Hatch]

Some of these developments are obviously being imposed on the GSEs by the federal govt as per the terms of the agreements and concessions which are part of the GSE status. The GSEs made a deal with the feds from the outset and one of the conditions of that deal was the requirement to submit to whichever goals that the politicians are trying to achieve. Some of THOSE govt-imposed changes are politically motivated by politicians who are pandering to the activist set.

Most of these more recent developments would not be possible if not for the technology advancements.

We complain about the weakness of the modeling the AVMs use as if we aren't using a model ourselves - we do. The 1004 SC grid is a valuation model, and it's primary strength is the data qualification that the appraisers add to their process, as opposed to the much reduced amount of data qualification that the commercial AVMs use due to the limitations in their data.

Putting the issue of the reduced quality of the public record data aside, other aspects of the tech are emerging that nobody even considered 5 years ago.

Supposedly there is tech available that can REVIEW an appraisers work and agree/disagree with the factual accuracy of the ratings the individuals use against the pics they took onsite. Tech which is allegedly capable of identifying the models of the specific fixtures and appliances in the kitchen pic, or identifying floor coverings and moldings and trim and even rating the condition. Enough so as to be capable (if/when) of coming up with different ratings than the individual onsite made. On the more singular, uniform and consistent basis. One AI app using one benchmark, not 50,000 individuals each of whom considers themselves to be a rogue warrier.

Even if that tech doesn't work as well right now, it's just a matter of not-that-much-time before it gets to that point. Look at how quickly and extensively the AI apps have ramped up their animations and deep fake vids. That the lenders and GSEs are adapting to the evolutions in the technology is both obvious and inevitable. If you think the GSEs haven't been comparing all along the accuracy of the PDRs with the appraisers and haven't already come to their own conclusions as to their respective utility then by golly, bless your heart. I don't have to like that outcome or agree with it on order to notice it.

Politics or no politics from their respective govt leash holders, the GSEs in particular are *demonstrating* the conclusions they have apparently come to WRT comparing these various alternatives to what appraisers have actually been doing. If the spread between the two doesn't justify to the user the hassle of dealing with the appraisals then the appraisers' conduct and performance is contributing something to that outcome, even if it's only by a little.

 

[Mike Ault]

Some of these developments are obviously being imposed on the GSEs by the federal govt as per the terms of the agreements and concessions which are part of the GSE status. The GSEs made a deal with the feds from the outset and one of the conditions of that deal was the requirement to submit to the goals that the politicians are trying to achieve. Some of THOSE govt-imposed changes are politically motivated by politicians who are pandering to the activist set.

Most of these more recent developments would not be possible if not for the technology advancements.

We complain about the weakness of the modeling the AVMs use as if we aren't using a model ourselves - we do. The 1004 SC grid is a valuation model, and it's primary strength is the data qualification that the appraisers add to their process, as opposed to the much reduced amount of data qualification .

What I think might not be getting enough attention is the rate at which certain aspects of the tech are advancing. Supposedly there is tech available that can *review* the factual accuracy of the ratings the individuals use against the pics they took onsite. Tech which is allegedly capable of identifying the models of the specific fixtures and appliances in the kitchen pic, or identifying floor coverings and moldings and trim and even rating the condition. Enough so as to come up with different ratings than the individual onsite made.

Even if that tech doesn't work as well right now, it's just a matter of not-that-much-time before it gets to that point. That the lenders and GSEs are adapting to these evolutions is both obvious and inevitable. If you think the GSEs haven't been comparing all along the accuracy of the PDRs with the appraisers and haven't already come to their own conclusions as to their respective utility then by golly, bless your heart.

Politics or no politics, the GSEs in particular are *demonstrating* the conclusions they have come to WRT comparing these various alternatives to what appraisers have actually been doing. If the spread between the two doesn't justify to the user the hassle of dealing with the appraisals then the appraisers' conduct is contributing something to that outcome, even if it's only by a little.

The goal has always been to get rid of the only dis-interested third-party to the transaction and replace them with "someone or something" under the lender's complete control. Be it PDR + cubicle dweller or AVM, there will be no one left to look out for the safety and soundness of the mortgage market. The consumer (or straw buyer) will always seek out some sort of double contracting situation where they can get the maximum amount of money back under the table. And there will always plenty of people willing to facilitate those. All that's needed is a compliant loan officer/realtor "lending team" running AVMs to see what the computer "thinks the value is", and the sales prices and kickbacks to everyone involved will be adjusted accordingly, with a repossession soon to follow. Buckle up, because as Trump said of his January 6 rally, "it will be wild!".

 

[George Hatch]

Maybe. That (loan originator controls the valuation ) isn't how the banking regs were actually written, though.

I think it's safe to say that if the lenders had the technology it takes to do this 30 years ago then they would probably have done it 30 years ago and none of us would be appraisers today. Market ineffiencies giveth, market efficiencies taketh away.


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