Freddie Mac Oks Appraisal Alternative For Some Mortgages

[hastalavista]

Not unless the existing regs are re-written. The IAEG (and the way it is interpreted) has always exempted GSE transaction form the definition of federally related transactions that require an appraisal, going all the way back to original IAEG proulgated in 1992 (or was it 1994?), well before the GSE's were placed in conservatorship.

I hear you, but that is because they are GSEs. I'm talking about privatization, assuming that if that occurs, they evolve into a private entity rather than Government Sponsored Enterprise; they would be a private label securitizer rather than an "agency".

 

[timd354]

I hear you, but that is because they are GSEs. I'm talking about privatization, assuming that if that occurs, they evolve into a private entity rather than Government Sponsored Enterprise; they would be a private label securitizer rather than an "agency".

I suppose that depends how they do it...before conservatorship, they were actually privately owned entities although they were called GSE's.

 

[Howard Klahr]

assuming that if that occurs, they evolve into a private entity rather than Government Sponsored Enterprise; they would be a private label securitizer rather than an "agency".

And why would that impose the IAG requirements?

A recent Housing Wire article sheds some light on the overall theme of this thread

How the increasing nonbank origination share is changing the housing market

As much as things change ... they stay the same

 

[hastalavista]

And why would that impose the IAG requirements?

It would if the originating lender were an FRI.

 

[Howard Klahr]

It would if the originating lender were an FRI

Not any differently than it is now

 

[hastalavista]

Not any differently than it is now

How so?

Assume the Bank of Klahr is an FRI.
BOK originates residential loans; some it holds itself and some it packages for sale to Fannie/Freddie.
For the loans it holds on its own, it follows the IAG appraisal and evaluation guidelines.
For the loans it sells to Fannie/Freddie, it doesn't because Fannie/Freddie do not fall under those guidelines; those loans must be supported by appraisal requirements set by the GSEs.

But if the GSEs lose their exemption status, then the BOK would need to follow the IAG, no?

 

[Deleted member 130081]

What exactly do you think the point of origination decision is about?

Very, very, very few loans default before the first payment (FYI, loan defaults peak in years 3-6 after origination for 30 year loans), so the underwriting decision is all about trying to assess the long term risk of future default and the potential severity of a possible future default.

I am curious where you got the 3-6 year default peak stat from?

 

[Deleted member 130081]

What are appraisal management companies going to do with their business if waivers expand and appraisal volume decreases?

It would be ironic, if the AMC's turn out to be the ones who take a stand for appraisals -for their own self interest no doubt but still, they have a greater access to and influence regarding decision makers greater than appraisers do.

Make less money at first, then work towards increasing market share and improving efficiency. Stock holders certainly don't like when a company is forced to make less money, but it is a reality sometimes. Doesn't mean the whole thing should be thrown away because it used to take in $10 dollars in gross earnings and now it only takes in $8.50.

But it would be ironic.

 

[J Grant]

What exactly do you think the point of origination decision is about?
Very, very, very few loans default before the first payment (FYI, loan defaults peak in years 3-6 after origination for 30 year loans), so the underwriting decision is all about trying to assess the long term risk of future default and the potential severity of a possible future default.

I'll trust your 3-6 years after origination ., But, are you sure that the UW decision ( about the property as collateral ) is all about assessing the long term risk of future default/potential severity of future default? Isn't it, in part at least about evaluating the property as the property stands today, if the property should be loaned on at all ? Nobody gives those appraisals that "kill the deal" credit for their role in preventing bad decisions...not just about value, but based on property information such as too many rentals in a condo, adverse site conditions etc for a loan denial on the property.

The second aspect of the decision is how much $ LTV% to lend on ...(not what borrower qualifies for, the LTV to loan against property's value ) If a property is over valued, whether by an appraisal or alternate method, a borrower over leveraged is at greater risk of being underwater on the mortgage or losing equity, which would by extension increase potential for short sale or default in later years. It's at the point of origin then, that the "risk" occurs, in a loan that never should have been made at that LTV $ amount , if the property's value is too high relative to its market value.

Property prices were on the lower side when HVCC started in 2011-, after recovery prices were moderate up to mid 2015. Then they started shooting up, and the possibility now exists of prices accelerating ahead of value ( as in the boom ). WE'll see the results of today's prices 3-6 years out regarding defaults or short sales.

 

[Howard Klahr]

I am curious where you got the 3-6 year default peak stat from?

I won't speak for Tim, but the answer is 75+ years of residential mortgage lending history