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

[shrubberyvaluation]

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.

As stupid as it sounds I can see the movement away from credit scores for "equity." We are seeing it more covertly with the term "appraisal bias" being used. PAVE started out complaining about appraisers using location as a factor in appraisals, claiming that it contributed to redlining and segregation. Likelihood can depend on who in government is in power.

 

[George Hatch]

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.

On the one hand I agree that the presumed bailout provides an unearned and immoral backstop in case of massive defaults. It enables the GSEs to engage in more risky conduct even if they aren't deliberately including actual bailouts are part of their operating strategies. It creates a moral hazard which has run-on effects in the other sectors of the mortgage business - if they can do this with appraisals and they can let the ARMs run wild with the underwriting then the other players are emboldened to also push their respective limits. Including the borrowers lying on loan applications and engaging in the strategic default with the understanding it will only be a few years before they can rinse/repeat.

On the other hand, "sufficient to purpose" for the valuations for at least some transactions might actually exist at some level less than what the due diligence vendors think is necessary. On my side of the house there are a lot of CGs who are only willing to sell to their clients what they want to sell, as opposed to what their clients might actually choose to buy if they had the choice. I don't think a 100pg narrative is always the right tool for the job when the subject is Billie-Joe Bob's Radiator Shack and Bait Emporium. Maybe that assignment only really needs a SC Approach and a URAR level summary of the neighborhood, site and improvements, and we can skip the regional history going back to the Pilgrims landing at Plymouth Rock and the national economic analysis and calculating distances to the nearest rail line or international port.

Appraisers selling what they want to sell because those are the fees they want is fine for the users who think that's the only legitimate form of appraisal and appraisal report that exists, but not all the users see it that way. And that's just a fact.

The question we're really discussing here is where lies the point of diminishing returns from the perspectives of these lenders and the other downstream users. Not necessarily what many appraisers want to bill for. Is that point of diminishing returns the same for all SFR appraisal assignments as we are discussing here, or will it vary by LTVs and property type (easy vs hard)? Because if that point of diminishing returns does vary then what these users are really considering is where the point of balance actually lies for this assignment vs that assignment.

There are a lot of condos and entry level dogbox SFR properties out there. A lot of appraisal problems where there are so many comparables that a monkey with a dartboard basically couldn't miss - not by enough to significantly affect the lender's mortgage position. Where even an untrained layperson can get to a reasonable value conclusion. Sorry, but not every assignment requires Richard Hagar to spend an hour fixating on bathroom adjustment factors in order to get to a usable value conclusion. What they need is a valuation (appraisal or otherwise) that is nominally sufficient to purpose WRT safe/sound, even if sometimes not completely refined to 1004 specs.

FHFA is basically issuing the proclamation: "So it has been written, so shall it be done". Maybe they're right and maybe they're wrong but either way the appraisers are just along for the ride.

 

[Carnivore]

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.

Well I know the FHA is Federal. The problem they may run into is Federalism. NC has a Licensed Home Inspector. So you can inspect a home without that license , but you can not charge any one for that inspection. So if a PDR dude reports condition of any component or condition overall rating they may have violated our state law and regulations. Another example: A Home Inspector Trainee(supervised by licensed home inspector, can inspect and indicate condition of a component or even overall condition.

 

[BRCJR]

................................................................. .................................

Appraisers selling what they want to sell because those are the fees they want is fine for the users who think that's the only legitimate form of appraisal and appraisal report that exists, but not all the users see it that way. And that's just a fact.

........................................................................................

........................or that is the way they were trained and think that is the only way to be USPAP compliant and/or meet regulatory expectations.
They may only have one template for the specific property type, or they think they are "short cutting" the process with anything less than the "whole ball of wax.".

I see so much that is actually very unnecessary to be in a report to consider it credible and something to be relied upon for a lending decision.

I have wondered if an Appraisal Report really needs to indicate a property is 1040 feet above sea level when it is hundreds of miles from the coast?

I guess, it depends........

 

[alebrewer]

Well I know the FHA is Federal. The problem they may run into is Federalism. NC has a Licensed Home Inspector. So you can inspect a home without that license , but you can not charge any one for that inspection. So if a PDR dude reports condition of any component or condition overall rating they have violated our state law and regulations. Another example: A Home Inspector Trainee(supervised by licensed home inspector, can inspect and indicate condition of a component or even overall condition.

That's really the only way to combat this in my opinion. The appraiser lobby is way too ineffective to compete at the national level, but if states could be convinced it is in their best interest to regulate the 'inspectors', it would even the playing field a bit.

 

[Dublin ohio]

have wondered if an Appraisal Report really needs to indicate a property is 1040 feet above sea level when it is hundreds of miles from the coast?

I have seen very similar "fluff" in residential reports. What does the cost of tea in China have to do with the $200K home in the midwest. Well if you can't amaze them with ability, baffle them with BS

 

[Carnivore]

That's really the only way to combat this in my opinion. The appraiser lobby is way too ineffective to compete at the national level, but if states could be convinced it is in their best interest to regulate the 'inspectors', it would even the playing field a bit.

Can Home Inspectors be Licensed in More Than One State? | AHIT

Ever wondered if you can cross state lines with your home inspection license? There are important rules to be aware of. Find out more in this blog.

www.ahit.com

Home Inspector Licensure Board (HILB) | OSFM

Resources for the North Carolina Home Inspector Licensure Board (HILB)

www.ncosfm.gov

 

[alebrewer]

Can Home Inspectors be Licensed in More Than One State? | AHIT

Ever wondered if you can cross state lines with your home inspection license? There are important rules to be aware of. Find out more in this blog.

www.ahit.com

I think most states license home inspectors. I'm just not that up to speed on how the PDC guys get around having to abide by the home inspector requirements.

 

[Non Sequitur]

That's really the only way to combat this in my opinion. The appraiser lobby is way too ineffective to compete at the national level, but if states could be convinced it is in their best interest to regulate the 'inspectors', it would even the playing field a bit.

Ineffective? How about all but non-existent. Either way the argument is at best a long shot. Other than a few appraisers and possibly a state board member or two, no one is buying the "taking photos and commenting on condition" is a home inspection.

And as far as any appraisal lobby that may or may not exist, the largest appraisal org is "secretly" bleeding members and is down from 17,000 +/- in 2021 to under 12,000 in 2024. Anything resembling a lobby is a pipe dream.

 

[Dale Floyd]

On the one hand I agree that the presumed bailout provides an unearned and immoral backstop in case of massive defaults. It enables the GSEs to engage in more risky conduct even if they aren't deliberately including actual bailouts are part of their operating strategies. It creates a moral hazard which has run-on effects in the other sectors of the mortgage business - if they can do this with appraisals and they can let the ARMs run wild with the underwriting then the other players are emboldened to also push their respective limits. Including the borrowers lying on loan applications and engaging in the strategic default with the understanding it will only be a few years before they can rinse/repeat.

On the other hand, "sufficient to purpose" for the valuations for at least some transactions might actually exist at some level less than what the due diligence vendors think is necessary. On my side of the house there are a lot of CGs who are only willing to sell to their clients what they want to sell, as opposed to what their clients might actually choose to buy if they had the choice. I don't think a 100pg narrative is always the right tool for the job when the subject is Billie-Joe Bob's Radiator Shack and Bait Emporium. Maybe that assignment only really needs a SC Approach and a URAR level summary of the neighborhood, site and improvements, and we can skip the regional history going back to the Pilgrims landing at Plymouth Rock and the national economic analysis and calculating distances to the nearest rail line or international port.

Appraisers selling what they want to sell because those are the fees they want is fine for the users who think that's the only legitimate form of appraisal and appraisal report that exists, but not all the users see it that way. And that's just a fact.

The question we're really discussing here is where lies the point of diminishing returns from the perspectives of these lenders and the other downstream users. Not necessarily what many appraisers want to bill for. Is that point of diminishing returns the same for all SFR appraisal assignments as we are discussing here, or will it vary by LTVs and property type (easy vs hard)? Because if that point of diminishing returns does vary then what these users are really considering is where the point of balance actually lies for this assignment vs that assignment.

There are a lot of condos and entry level dogbox SFR properties out there. A lot of appraisal problems where there are so many comparables that a monkey with a dartboard basically couldn't miss - not by enough to significantly affect the lender's mortgage position. Where even an untrained layperson can get to a reasonable value conclusion. Sorry, but not every assignment requires Richard Hagar to spend an hour fixating on bathroom adjustment factors in order to get to a usable value conclusion. What they need is a valuation (appraisal or otherwise) that is nominally sufficient to purpose WRT safe/sound, even if sometimes not completely refined to 1004 specs.

FHFA is basically issuing the proclamation: "So it has been written, so shall it be done". Maybe they're right and maybe they're wrong but either way the appraisers are just along for the ride.

There have always been circumstances when an appraisal was not warranted. In the massive majority of cases, those aren't even used as marketable securities because they are held at local banking institutions inhouse.

But one cannot deny there has been an intentional erosion by outside forces looking to destroy the appraisal profession since the days of the de minimis. In my view, Freddie and Fannie do not want better appraisals, nor do I recall them requesting that to happen. In our last meetings about PDC's, they specifically designed non-appraiser involvement in the value processes instead. Fannie's lead guy said as much in one of our zoom meetings. As I recall, he said "...having the appraiser to do the inspections is really not what we are looking for." Of course, the GSE's may not have a choice anymore, since they are still in the government's conservatorship which might explain why they bow to the forces of PAVE and everything else aimed at the only independence of every transaction bartered for profit.

You and I will ultimately disagree about this, which is fine. No need for us to banter back and forth about it.