New 1004

[Fernando]

Question is will the new form makes better appraisal or just for lender's convenience.
I'm still waiting for clarifications and changes to ANSI. Many appraisers still have concerns.

 

[Zoe]

I'm sure that you will recall. At one time most SFR appraisal reports actually only consisted of the front/back of the URAR + the Assumptions/Certification addenda and the maps and exhibits (2 pages of pics for the subject/comps + location map + diagram + assessor plat). So maybe 9 pages when it's 3 comps or 11 pages when there are 4-6 comps. Aside from that the expectations of the readers was that the form itself was sufficient in detail for whatever the appraiser had to write for that assignment.

At whatever point these assignments started requiring more "reporting" than would fit on the base form then that's when the URAR's current format became inadequate to purpose. If it takes 10 pages of written report (+6 or 7 pages of exhibits) to meet the requirements of an SFR assignment then that's how many pages should have been incorporated directly into the URAR. In order as relates to the SR1 process of problem identification, HBU analysis, market segment analysis and the approaches to value and final reconciliation.

That way, an appraiser could write the entirety of their report from front to back in a structured order without having to divert to narrative addenda, and every reader could read that report in the same manner. Every comment field being sufficient in length to accommodate the appraiser's summaries without having to divert to an addenda. When a reader wants to know something about the subject site then all that info is found in the one section of the report, regardless of who is writing that report. If it's not addressed where it's designed to be addressed then its most likely not in the report at all.

The amount of writing is the same, the summaries are the same. What's different is that it's all presented in a uniform order with no real discretion on the part of the appraiser as to where to address the specifics. Appraiser Smith's format is identical to Appraiser Brown's format because there is no option or discretion or work-arounds involved with that format. Leastwise not for most appraisal problems.

You have probably done many narrative reports. That is the way they work. It can be lengthy but relative to the place it is focused on. When you get through with this section, you move to next section, next section, next section.

 

[sputnam]

i bet some old white males created the old forms...and the new ones

Oh.... you mean people who have been appraising and/or working in the lending business for decades? Right. How could they possibly know anything about either industry?

 

[Mark K]

Foreclosures are caused by economic situations, not appraised value. What has fannie done to protect itself on the underwriting lending side.

Exactly! F/F wants to make loans to anything/anybody that can fog a mirror. And then when they go bad, the want to blame it on someone and appraisers are easy fall guys. This is the main reason that, for years, I've said that mortgage appraisals are basically a waste of time and money. An appraisal show the value at one point in time, not when the market crashes 3 yrs later or when the borrowers decide to quit paying the mortgage and proceeds to trash the place. Don't get me wrong, I did about 10,000 of them before I moved to R/W work but even back then I questioned their worth.

"It was great while it lasted"... The epitaph carved into a lot of appraisal business tombstones.

 

[J Grant]

Exactly! F/F wants to make loans to anything/anybody that can fog a mirror. And then when they go bad, the want to blame it on someone and appraisers are easy fall guys. This is the main reason that, for years, I've said that mortgage appraisals are basically a waste of time and money. An appraisal show the value at one point in time, not when the market crashes 3 yrs later or when the borrowers decide to quit paying the mortgage and proceeds to trash the place. Don't get me wrong, I did about 10,000 of them before I moved to R/W work but even back then I questioned their worth.

"It was great while it lasted"... The epitaph carved into a lot of appraisal business tombstones.

The worth of an appraisal is on the front end, when they make a lending decision - not the back end, years down the road. No valuation of any type can protect against what happens years later. However, a sound valuation on the front end can prevent overleveraging the loan wrt to value and acts as an anchor for the collateral , one of the reasons mortgage rates and terms are favorable. decades..

An appraisal can be replaced, in a number of cases, with an alternate method of valuation. However, the role of the appraiser can not be replaced - the one independent party not vested in the outcome of the deal. The problem is an indidnetpnt party is a threat to the profit chain, so the stakeholders and their lapdog regulators made a series of decisions over the past decade plus to marginalize the role of the appraiser and reduce them to whenever possible, an intimidated, isolated person with no resources or means to fight off the relentless pressure that the AMC's made worse rather than better. There are still a number of ethical appraisers on the lending side, hanging on by fingernails The profiteers would love to see the last of them and using WAIVERs, which circumvents the regulations that appraisals are subject to, is one means to accomplish that.

Any appraiser who bought into the fallacy that an appraisal was supposed to offer protection years later allowed the stakeholders to then conclude that since appraisals could not fulfill a function that they were not destined to fulfill, they were replaceable.

 

[djd09]

Oh.... you mean people who have been appraising and/or working in the lending business for decades? Right. How could they possibly know anything about either industry?

do not trust pale face...

 

[Mark K]

The worth of an appraisal is on the front end, when they make a lending decision - not the back end, years down the road. No valuation of any type can protect against what happens years later. However, a sound valuation on the front end can prevent overleveraging the loan wrt to value and acts as an anchor for the collateral , one of the reasons mortgage rates and terms are favorable. decades..

You fail to see the whole picture on this issue; no surprise there since this has been your mantra for years.

A credible appraisal in the file does next to nothing when the borrower fails to make payments and the lender loses a big chunk of $$ when the property is foreclosed. A minor problem of over-leveraging up front is minuscule compared to the loss when a borrower walks away. For all the good they do in the event of default, the appraisal might as well be waived. House worth $500K. Appraisal $500K. 3 yrs. later the borrower walks and after a year or two, the house sells for $350 - $400K, +/-. What good did the appraisal do? For all the good it did, an AVM or waiver would serve the same purpose. I think the banks are waking up to this fact, even though this fact will never sink in to some people.

The appraisal checks off a box (one that is quickly disappearing) in the lending process, little more. Since the appraisal does very little in protecting the lender from future loss, why bother with it? I know, so they can make the loan. Well, they can make the loan with an AVM or Waiver also.

Making a loan is the easy part, collecting payments is often the problem. When a deadbeat quits paying the mortgage, it matters very little if the loan was made with an appraisal or AVM, or even if the initial valuation is waived.

 

[djd09]

im sure our competitors will make the forms are as simple as the mortgage brokers appraisal waiver...

 

[J Grant]

I got it; we get it; a credible appraisal does next to nothing when a borrower fails to make payments. Neither does any other form of valuation.

You fail to understand that an appraisal, or any valuation, exists for the front end of the loan. The only way it cushions against poor performance later is not to have an overvaluation on the front end or avoid a valuation with inadequate, false, or misleading information about the property and its marketability.
Some form of validation is needed to set the LTV % rate. There is no proof that the replacement products are better, and in many cases, they may be worse. The profit just goes to someone else—an AVM provider, an AMC churning out hybrids, or doing CDC collections for WAIVERS.

 

[Mark K]

I got it; we get it; a credible appraisal does next to nothing when a borrower fails to make payments. Neither does any other form of valuation.

You fail to understand that an appraisal, or any valuation, exists for the front end of the loan.

I don't fail to understand it at all. The appraisal exists to facilitate the loan but thanks for repeating that, constantly, Ms. Obvious.

But what the lenders are realizing is that making the loan is the easy part. They can do that with or without an appraisal so why bother? That is what the banks are realizing and the reason that SFR F/F lenders are moving away from appraisals. Appraisals don't prevent or mitigate losses, again, so why bother. The "over-leveraging" part is such a minor issue that its not really worth discussing....except by you. An AVM is good enough for that.

You see only the front end of the while the lenders are looking at the entire issue. They are the ones looking downstream and seriously questioning the value of an appraisal. If they thought for a minute that an appraisal added value they wouldn't be in such a hurry to essentially do away with them.

Soapbox: If the lenders would spend 1/2 as much time vetting borrowers and requiring things like good credit and a down payment as they do micro-managing the appraisal process, the default rate would plummet. But F/F is intent on lending to unqualified buyers so they may as well just rubber stamp every application that crosses their computer screen. The massive seller concessions they allow plus allowing borrowers to finance the balance of the down payment with outside lenders is a recipe for disaster, one that won't be helped by the best (or worst) appraisal in the world.

The appraisal checkbox is fading into obscurity along with the business model of the appraiser that has relied on it for a living.