Freddie Mac vs Appraiser Bias

[George Hatch]

AFAICT almost all of the paired examples being used to make these allegations have involved refi transactions where the subject hasn't been exposed to the market and there was no sales contract and no buyer or seller. So none of those transactions even had the capacity to strip any borrower of their generational wealth because they're all still holding the collateral.

The only example I can remember that involved a sale transaction involved the ex-mayor of Stockton losing out on a high bid when they sold due to the appraisal. And for what his home actually was, the first appraisal was right in line with the sale of 1950s homes of that size/condition. There were subsequent sales in that neighborhood which demonstrated that the first appraisal was in line with the ongoing trend, if not a little agressive.

 

[Bob Ipock]

As far as I know, no one has made such an assertion.

The comments I made were about appraisers' analysis only. The inspector does not provide the condition rating. The appraiser does that. And, when the appraisers do that based on third party data they tend to more closely follow the actual definitions of the ratings.

Who trains the third party inspector? How many hours of classroom study is required? Do they work under a supervisor for several years before they are considered to be reliable experts? I also have great respect got Danny but I don't believe Danny is the Captain of the ship.

If not for Danny I would not be a USPAP instructor. When I took the classes and exam in Atlanta back in 2002, I was the first one finished. Danny and a few others asked me why I gave up, why did I not finish the exam? I passed and many others did not.

 

[glenn walker]

Here is a "rant" from someone on another Forum. He has some good points.

The profession used to be similar to the accounting and legal professions where you had a few well seasoned and experienced appraisers that had trainees and employees doing most of the work including inspections and full reports. The partners reviewed the work and signed and were 100% responsible for the results regardless of who wrote it or inspected it. And you had personal relationships with banks and lawyers and mortgage companies the developed over time. Not saying it was perfect but the way it is now they treat appraisers like fast food cooks but still require steady adherence to a bunch of laws and regulations that add nothing but cost. Lets even stop with comp photos... there are literally 3 or 4 different sources you can use online to get 99% of any angle on a property. But they will trust Billy Bob at $5 an assignment to inspect a home and send you his findings and want you to perform a valuation on it.... messed up.

 

[George Hatch]

I suppose after all these years it's time I came clean and confessed my sins. Back when I came up (pre-licensing) my first solo inspection occurred after a grand total of 1 previous "supervised" inspection. Which was typical among SFR appraisers back then. The appraisers who signed on the right only rarely ever came with me to inspect and that was only when the values of the property were above a certain point, or by special request by the lender.

I've made some mistakes in my inspections over the years but all of them were attributable to making an error I was completely capable of avoiding. I have never once gotten any criticisms about my inspections which could be attributed to having never been formally trained or supervised at it. I highly doubt my story is unique, even among the other participants in this thread.

YMMV.

These days the individual performing the inspection doesn't even have to know how to calculate the GLA because whatever CAD software they're using does it for them. If/when these structures are even being measured.

 

[George Hatch]

None of my commentary should be construed as advocacy for the disconnect between the property inspection and the valuation. I know for a fact that my current inspection protocols and documentation are superior in content to what these lenders can expect from these 3rd party inspectors. Just as I know there are some other appraisers who are also exceeding those minimums. I also know for a fact that I'm actively looking for and considering other factors - external to the subject property itself - during my field work that an inspector isn't going to be looking for or analyzing, but which are sometimes of effect on these outcomes. So for at least THOSE assignments the use of an inspector will yield inferior quality results.

With that said, our opportunity to prevent the lenders from giving this application serious consideration as being a reasonable alternative to the conventional 1004s has come and gone. If appraisers had been doing "more" all along the muh...derinzation folks would have never had a weakness to exploit. The time for appraisers to tighten up was 5 or 10 years ago. It's a little late for us to be making claims that our personal inspections are irreplaceable. As a group we have demonstrated otherwise.

 

[glenn walker]

I think the Ship Has Sailed and no matter what we think or feel its way too late.

 

[Bobby Bucks]

Here is a "rant" from someone on another Forum. He has some good points.

The profession used to be similar to the accounting and legal professions where you had a few well seasoned and experienced appraisers that had trainees and employees doing most of the work including inspections and full reports. The partners reviewed the work and signed and were 100% responsible for the results regardless of who wrote it or inspected it. And you had personal relationships with banks and lawyers and mortgage companies the developed over time. Not saying it was perfect but the way it is now they treat appraisers like fast food cooks but still require steady adherence to a bunch of laws and regulations that add nothing but cost. Lets even stop with comp photos... there are literally 3 or 4 different sources you can use online to get 99% of any angle on a property. But they will trust Billy Bob at $5 an assignment to inspect a home and send you his findings and want you to perform a valuation on it.... messed up.

Very true. This is a Houston fee shop in the 60s, no earrings, tats or tank tops. I believe Lord William took the photo.

 

[J Grant]

None of my commentary should be construed as advocacy for the disconnect between the property inspection and the valuation. I know for a fact that my current inspection protocols and documentation are superior in content to what these lenders can expect from these 3rd party inspectors. Just as I know there are some other appraisers who are also exceeding those minimums. I also know for a fact that I'm actively looking for and considering other factors - external to the subject property itself - during my field work that an inspector isn't going to be looking for or analyzing, but which are sometimes of effect on these outcomes. So for at least THOSE assignments the use of an inspector will yield inferior quality results.

With that said, our opportunity to prevent the lenders from giving this application serious consideration as being a reasonable alternative to the conventional 1004s has come and gone. If appraisers had been doing "more" all along the muh...derinzation folks would have never had a weakness to exploit. The time for appraisers to tighten up was 5 or 10 years ago. It's a little late for us to be making claims that our personal inspections are irreplaceable. As a group we have demonstrated otherwise.

Nope. I strongly disagree. There is no "more" wrt the inspections that appraisers could have done. This has nothing to do with the quality of inspections by appraisers, which have served well for decades. It has to do with greed, speed, and convincing those in charge a third party inspect will suffice.

Unless appraisers had been trained to do a dual home repair type inspection or architectural CAD drawings, there is nothing we could have added.

I find it preposterous you believe that after decades, the lenders suddenly decided to replace the appraiser 's inspection with a non licensed and non qualified third party to inspect for certain assignments. Would be refreshing to see an admission it is just greed from AMC/agency side to see this go forward because nothing else makes sense.

 

[glenn walker]

It all about getting turn times and costs down. Nothing more and nothing less. Right now its just working th bugs out of the model.

 

[George Hatch]

So what if it is corporate greed? The principle of substitution itself is based on greed. I'm acting in what I think are my own best interests. For better or worse, whether better or not, whether more risky or not, the lenders apparently have come to the conclusion that 3rd party inspectors are a reasonable substitute for "appraiser did inspects" for some assignments. Even if only on a relatively limited basis.

Not only that, but going forward their experience with these is going to accumulate and the data is going to accrue. If it comes to pass that there is no significant increase in losses that much is going to be self-explanatory. The critics are really going to be hating it if the lenders actually turn out to be right.