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

[George Hatch]

^^^ just helps the SRA. The Institute is advocating watering down the licensing for that purpose.

I don't want to get into conspiracy theory about the AI but there have been a couple things that the org and some of their members have done over the years which struck me - as an outsider - as being aimed at undermining the licensing programs for the purpose of advancing their own interests.

Fair play, I suppose. But it seems to me that *adding* to their criteria would be a better way of creating widening the gap between the minimums in licensing and their more comprehensive criteria for earning the professional designation. Maybe requiring their candidates to take PAREA in addition to their IRL experience criteria rather than in lieu of. And more active enforcement to kick out the slackers among them, however that common is.

 

[George Hatch]

All very true. The challenge for FHFA will be: how do you maintain the integrity of the data when you reduce the 'live' data stream by 75%? IOW - they have good info on quality and condition of properties for the simple fact that they're getting that data from thousands of appraisals a day. How solid is that dataset in 2 years when the incoming appraisal data is reduced by 75%? What about 5 years?

That's a good question and it's always been at the front of these controversies. So far we take it as a matter of faith that the performance of the appraisers at rating these property attributes is superior to all other alternatives. But (hypothetically speaking) what happens if/when the gap narrows? Or, if these alternatives eventually pull ahead?

Untrained PDC vs appraiser is not hard to envision, but untrained PDC+AI-enabled device + post inspection review might provide a different basis for comparison.

 

[alebrewer]

That's a good question and it's always been at the front of these controversies. So far we take it as a matter of faith that the performance of the appraisers at rating these property attributes is superior to all other alternatives. But (hypothetically speaking) what happens if/when the gap narrows? Or, if these alternatives eventually pull ahead?

Untrained PDC vs appraiser is not hard to envision, but untrained PDC+AI-enabled device + post inspection review might provide a different basis for comparison.

Certainly as the technology continues to improve I can see a heavier reliance on the PDC as filling that gap. I can't imagine even the puppet-masters over at FHFA believing that an untrained inspector's assessment of condition and quality would be more reliable than an appraiser. OTOH - is the loss in data integrity offset by the speed and cost of the inferior data?

Remember too that, currently, they're getting data on 6-7 properties for every appraisal submitted. With the PDC, the number of properties is reduced to one.

 

[BRCJR]

Certainly as the technology continues to improve I can see a heavier reliance on the PDC as filling that gap. I can't imagine even the puppet-masters over at FHFA believing that an untrained inspector's assessment of condition and quality would be more reliable than an appraiser. OTOH - is the loss in data integrity offset by the speed and cost of the inferior data?

Remember too that, currently, they're getting data on 6-7 properties for every appraisal submitted. With the PDC, the number of properties is reduced to one.

Some of the 6-7 properties for every appraisal is already in their database because the properties were also used by other Appraisers in their reports.

 

[alebrewer]

Some of the 6-7 properties for every appraisal is already in their database because the properties were also used by other Appraisers in their reports.

Correct. If the volume of appraisal data being fed into the machine is reduced, though, their ability to bump one appraiser's condition/quality rating against others is severely hindered. I've no doubt they'll figure it out - at least within the context of their perceived risk appetite. Just seems a HUGE risk to start offering this product to first time homebuyers putting 3% down that they've probably borrowed from parents or friends.

 

[djd09]

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.

waiver explosions...

 

[George Hatch]

Certainly as the technology continues to improve I can see a heavier reliance on the PDC as filling that gap. I can't imagine even the puppet-masters over at FHFA believing that an untrained inspector's assessment of condition and quality would be more reliable than an appraiser. OTOH - is the loss in data integrity offset by the speed and cost of the inferior data?

Remember too that, currently, they're getting data on 6-7 properties for every appraisal submitted. With the PDC, the number of properties is reduced to one.

Exactly so. The PDC isn't doing any appraising. They're not picking comps or performing comparisons. OTOH, if Fannie is already otherwise banking a current appraisal or PDC for each of those comparable sales then they're getting all that enhanced data anyway - they're just not getting as many repeats.

I don't assume the usage beyond the low-LTV transactions to be a low risk decision. But I also don't have access to the different data sets and the comparisons they will have been making. I may or may not be open to changing my mind about the increased risks, subject to seeing some of that proprietary information. (I'm not holding my breath).

The other point of order is that it was the FHFA which has made this announcement as a matter of official policy at their level. By executive command authority, not as the result of a vote by the board of directors at the GSEs. The GSEs may or may not have agreed in spirit . I don't know but this might amount to a shotgun wedding and the GSEs might just be doing as instructed.

 

[Mile High Trout]

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."

View attachment 92893
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.

Idiocracy is upon us. We're throwing a comprehensive functional system away, because of statistical differences among different groups of people.

Nobody makes certain groups behave one way and not another. That's called freedom of choice and self determination. Which will also go away if we try to require everyone to conform.

 

[Dale Floyd]

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.

You and I agree on so many things George. On this, I think you fail to weigh the facts with balance. The government obviously doesn’t want blood on its hands, so there’s all kinds of things aimed at our profession and independence within their arsenal. Look at everything they’ve accused us of and then think about what the GSEs are doing.

Technological advancements are a smoke screen, because the process isn’t different nor better without our work. In the scheme of things, how is a waiver applicable for a non-appraiser inspection? Now if I were a man looking for conspiracies, I would think back to when they wanted to decouple the appraisal inspection in the first place, touting how much it would “help” the appraiser. Now they are waiving appraisals in lieu of that same inspection.

If GSEs decide to forfeit the use of independent credit scores in qualification parameters, there’s going to be great risk to the public who ultimately bails them out when they falter just as before. So what do they do? Make them less relevant. Appraisals? Let’s dilute the process and claim we are protecting the public from the racist appraiser. These semi-quasi government influenced mortgage behemoths profit from the origination and moving of mortgages, so I don’t believe it wise for them to also have power over rules extinguishing the “independent” appraisal keeping the collateral value in check. Fox / Hen house.

I came from the financial sector. I still recall those ABA meetings starting in the 1990’s when speakers would proclaim “We will not be held hostage by appraisers.” One appraiser mentor of mine a long time ago said the very ones who brought us in, will want to take us out when we are inconvenient to them, but it would be done methodically. I thought he was wrong. Perhaps he was a prophet.

 

[Essexfenwick]

The reserve fiat dollar is in a bad spot. Inflation has risen its ugly head and the manipulated CPI formula is waaaay low. The price of gold is reflecting the true inflation numbers over the last 4 years to be 40 percent. They are lowering interest rates in a so called “strong employment” economy with inflation (the manipulated low number) still over 25 percent above “target”. There is no fighting the actual inflation numbers without severe economic consequences so the FED is surrendering to inflation with

Phase 1
A) fake cpi numbers. B) misleading employment numbers. C) twisted logic … head fakes.. obfuscation

Phase 2
Removing obstacles for cash infusion from home equity to desperate public. (Appraisers are in front of the steam roller).

Nobody wants to report on, fact check or diagnose the economic precipice we are on. (Appraisers are fact checkers and totally unwelcome). At this point it’s all about using any and every method to delay and wring out every last drop of sloppy, slovenly consumption with no corresponding production other than printed dollars.
Everybody is on the same page and has an interest in keeping the hallucination going as long as possible. The US economy is hopelessly misallocated and the consequences of correction is practically unfathomable. In my opinion, if the American public had to produce in practical terms the amount they consume a very high proportion would consider suicide.