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

[alebrewer]

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.

I don't disagree with this on it's face, but I don't think it's really the appraiser they want to get rid of - they want to get rid of the crapshoot that is an 'opinion of value'. Lenders have no problem with credit scores - they are what they area. Same with flood insurance, title insurance, rates, etc. While they don't control those things - they are, nonetheless, black and white. Unlike appraisals - which can, and do, come back literally all over the place - both values as well as repair requirements. Had one just last week in Preston Hollow area of Dallas - one appraisal at $5.2M and one at $3.5M. One - or both - was obviously wrong. That's what the lenders want to get rid of - the very likely scenario where they lose a loan over someone's 'opinion'.

 

[Mike Ault]

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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The lenders came very close to crashing the world economy with their casino gambles in 2007-2008. This will be no different. They are not to be trusted with the safety and soundness of our financial system. Giving them complete control over the inputs to the mortgage securitization process is a fools errand, and we are destined to reap the havoc they will surely sew upon us all.

 

[George Hatch]

Four things:

On the generic basis the Big-Data valuation modeling still has many or all the challenges that existed with that usage in 2005, including the usage of data that nobody has rated for quality and condition and appeal and such. Some advances but perhaps not enough to make a difference. Zillows Zestimator is often unreasonable.

The other modeling the lenders and GSEs used - which you are referring to - wasn't about individual appraisals at all. They were separating and selling off tranches of those loan bundles based on the model's risk ratings. That's not an appraisal failure as such except to the extent the actual 1004s were out of line, it's arguably an underwriting failure in not identifying the problems with what some of the appraisers are doing. Whatever they're doing in 2024 with selling off tranches of their MBS trade still has the similar potential for problems and it would still amount to an underwriting failure.

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What's a little different now​

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The technology to suss out more of the physical attributes off a pic is a far more recent development which is wholly unrelated to the problems the commercial AVMs have with using public record data; and

When it comes to the GSE AVMs they aren't limited to the same data sources that the commercial AVMs use - they have access and are using appraiser-developed data including the pics that software is analyzing. And that appraiser-fed data isn't just limited to however many appraisals they have on hand for the subject property but also includes the data the appraiser collected/qualified for most or all of the comps that they presented as comps (inclusive the appraiser-vetted data in each of THEIR respective appraisals). I daresay the appraiser-vetted data is what makes the GSEs AVM a whole different beast of its own, to which many of the other AVM criticisms might not apply. Leastwise to the same degree.

TBH, I have to cringe a little every time someone complains about the alternatives that the CU system spits out because it implies - among other possibilities - that perhaps other appraisers conveyed different ideas about the comps they were using in their own appraisals.

 

[George Hatch]

To add, I'm not sure, but I wonder if perhaps Corelogic may also have access to some of the appraiser data because they're Corelogic and they own an appraisalware package which includes appraisal report storage on their computers. Not all of the appraisals the GSEs are getting, but some of them.

 

[Mike Ault]

To add, I'm not sure, but I wonder if perhaps Corelogic may also have access to some of the appraiser data because they're Corelogic and they own an appraisalware package which includes appraisal report storage on their computers. Not all of the appraisals the GSEs are getting, but some of them.

Pretty sure you're right about that.

 

[George Hatch]

Pity. I'd rather be way wrong about that. I think anyone who is storing their appraisals on Corelogic's cloud might consider taking their data dump elsewhere. I'd never want to give them an opportunity to use my own analyses against me. Which BTW, that's what the GSEs are apparently doing, even if an AVM isn't actually an appraisal.

 

[Mike Ault]

I turned down a substandard foundation on one last week. Wooden floor joists sitting directly on the dirt. The buyer & seller, both realtors and two different lenders would gladly have completed that deal if I would've just signed off on it. After all, everyone would've gotten a commission, and it wouldn't have been there problem somewhere down the line when it came time to sell it again. I wonder how AVMs would handle that?

 

[Mike Ault]

Pity. I'd rather be way wrong about that. I think anyone who is storing their appraisals on Corelogic's cloud might consider taking their data dump elsewhere. I'd never want to give them an opportunity to use my own analyses against me. Which BTW, that's what the GSEs are apparently doing, even if an AVM isn't actually an appraisal.

I think we lost control over our data with the advent of the UAD format. Doesn't matter what software package you use, the GSE's have it all in their preferred format.

 

[CGinMN]

For reference, everyone using Alamode Titan is in violation of USPAP, IMO. Corelogic is on the TAF IAC, which is a little sus.

https://www.alamode.com/legal/eula/titan

"ALM may retain and use information collected in your use of the Service."

 

[George Hatch]

I think we lost control over our data with the advent of the UAD format. Doesn't matter what software package you use, the GSE's have it all in their preferred format.

I didn't really think of it in these terms until you bought it up, but

Regardless of the specifics, I can't envision any scenario consisting of (we have all your data + we have AI and related tech and we're not afraid to use it) which would have resulted in a different outcome. Only the pace of these evolutions might have been different.