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.