I have seen the future

[Non Sequitur]

The appraisal pie is getting smaller:

 

[Terrel L. Shields]

(e.g. low LTV ratio, significant assets, 800+ credit scores, etc).

Wasn't that the same mindset that said credit default swaps and lending tranches were interlocking security and we didn't have to worry about value because 'REAL ESTATE NEVER DECREASES IN PRICE"? And then the S & L crisis hit (oh, that's a fluke) and then Dot.com whacked commercial only to be followed up by the Great Recession. Reality is stuff happens. It will happen again and the government solution will not work. It is fighting last year's war. Has Dodd-Frank really made a difference? Heck no.

 

[Surf Cat]

The quality of work that I'm seeing is pathetic. It seems that these newer appraisers are just pumping them out, complex and all. Trying to make it up in volume.

This circles right back to the lender as..... they're accepting them.

 

[Terrel L. Shields]

The regulators are happy with any warm body producing "evaluations" and the banks like them because they cost half the price of a real appraisal. Evaluators like them because the liability insurance and risk, and licensing costs are not as expensive. Meanwhile, an "evaluaton" performed by a regulated appraiser affords no shield from liability. Catch 22.

While I don't see many appraisals like I did years ago, I don't see that they are badly flawed although some were somewhat devoid of verbiage supporting the value, and some have, at least, followed a logic I did not, but I also recognize that 2 appraisers doing the same property without an "anchor" (like the contract) are rarely going to arrive at the same adjustments. Your $69/SF adjustment might be my $85/SF adjustment without being an "error". It is your opinion in any case. Hard to disprove an "opinion". You can only argue facts with much success.

 

[J Grant]

It all circles back to greed and profit. Does the GSE have a public trust mission statement? The GSE-backed loans allow lenders to take advantage of lower interest rates and longer repayment terms made possible by taxpayer backing, yet the taxpayers' interests are ignored.- part of which is protecting markets from extreme volatility or fraud, or seeing home ownership not become out of reach for owner-occupants.

The WAIVER program, the GSE claims, they do not have a higher risk default rate. Their standards for the borrower and property for a waiver were more stringent, so that might be true. Maybe in the future, as the eligibility standards loosen, the default rate will rise. idk But appraisal purpose is not intended for long-term risk or borrower default projection. Appraisal purpose is MV (says it right there on the form). MV sets a standard of property for lending. Is it a coincidence that in my market area, since the % of waivers used has grown, more and more LLCs, corporations, and investors are buying instead of homeowners, and over half the properties I look up, including a subject, show delinquent taxes?

The elephant in the room about lender appraisals is the AMC fee predation. The GSE's ignore or enable it with their silence on the topic or inane retorts, such as they have seen high-fee appraisals that were bad. Yes, that can be true in a few cases. What is also true is that AMC fees have almost eliminated the ability of a res appraiser to train a newbie and have turned many competent, experienced appraisers away from lender work, and a less competent appraiser may be selected for an order because an AMC makes $25 bucks more in a flea market bid for the lowest fee. On what planet does that serve the public trust?

 

[Terrel L. Shields]

The WAIVER program, the GSE claims, they do not have a higher risk default rate. Their standards for the borrower and property for a waiver were more stringent, so that might be true.

The interlocking MBS, CDS, and other financial instruments, given AAA status by the risk rating agencies did not have a higher risk rate either....until they all collapsed under the weight of each other. As I said, Catch 22.

 

[chad hampton]

The GSE‘s tune will change very fast the day they’re privatized and not able to socialize losses.

 

[J Grant]

The interlocking MBS, CDS, and other financial instruments, given AAA status by the risk rating agencies did not have a higher risk rate either....until they all collapsed under the weight of each other. As I said, Catch 22.

It was a spin job, and I pointed it out numerous times, to present appraisals as a risk tool, then declare that appraisals were no better than AVM or other value estimates wrt default risk.

What a snow job- it even convinced the regulators and thus they allowed waivers!

The reality is that an appraisal, or other form of valuation, can not impact in any significant way future risk of default ( though overvaluation or false property condition might increase the risk The fact that some lenders might use valuations or appraisals as a risk tool, or that they say they do, does not change that. The lenders might mean risk about an overvalued or poor condition property - but the GSE's and other entities talk about risk of default, and how in the world does an appraisal done on X eff date supposed to predict or prevent default, whether it be 2, 5, or 10 years later????


That said, the purpose of an appraisal, as it says right there on the UARAR form, is to provide a market value opinion about the property. The property is the collateral for the loan and what enables these loans to have such preferred interest rates, low down payments, and long loan periods of 150 to 30 years. That should be enough to justify the use of appraisals - it is not just a data-driven valuation, it is the role of the appraiser as the one party with no vested interest in the deal. Taht role should have been protected and standards maintained for it - isntead the standards were systemaiclly lowered and dismantled and the protections shredded with the AMC being a firewall a joke as all the AMC does is pass value pressure on the back end, and making appraisals grovel in a begging bidding war to "win" an assignment by lowest fee from an AMC is hardly the way to ensure a profession's share of those willing to do lendint work will be able to maintain a role of indpendece or strive for competence.

 

[Sadie]

It all circles back to greed and profit. Does the GSE have a public trust mission statement? The GSE-backed loans allow lenders to take advantage of lower interest rates and longer repayment terms made possible by taxpayer backing, yet the taxpayers' interests are ignored.- part of which is protecting markets from extreme volatility or fraud, or seeing home ownership not become out of reach for owner-occupants.

The WAIVER program, the GSE claims, they do not have a higher risk default rate. Their standards for the borrower and property for a waiver were more stringent, so that might be true. Maybe in the future, as the eligibility standards loosen, the default rate will rise. idk But appraisal purpose is not intended for long-term risk or borrower default projection. Appraisal purpose is MV (says it right there on the form). MV sets a standard of property for lending. Is it a coincidence that in my market area, since the % of waivers used has grown, more and more LLCs, corporations, and investors are buying instead of homeowners, and over half the properties I look up, including a subject, show delinquent taxes?

The elephant in the room about lender appraisals is the AMC fee predation. The GSE's ignore or enable it with their silence on the topic or inane retorts, such as they have seen high-fee appraisals that were bad. Yes, that can be true in a few cases. What is also true is that AMC fees have almost eliminated the ability of a res appraiser to train a newbie and have turned many competent, experienced appraisers away from lender work, and a less competent appraiser may be selected for an order because an AMC makes $25 bucks more in a flea market bid for the lowest fee. On what planet does that serve the public trust?

I still say this is just the first step to another mortgage meltdown. The reason for the last relaxing of borrower criteria was that people with good credit scores would be forthright in their stated income applications. And now we have stated collateral. This is mind blowing to spin this out to rural properties. How big is too big to fail?

 

[Terrel L. Shields]

The GSE‘s tune will change very fast the day they’re privatized and not able to socialize losses.

Nah, they will bail them out anyway...too much 'risk' to the market not to do so. That's the problem