"REVIEW Appraisals" are back-in favor during these Slow-Times > USPAP Violations > State Boards

[alebrewer]

It is not just the loan volume, it is the types of loans being made. The majority of waivers granted during the boom was for the no cash out refi, and that segment of loans has decreased significantly.
At one point we had a ~70% refi market, and now we have a ~75% purchase market.

But has that had a significant impact on the ratio of waivers to appraisals?

 

[J Grant]

Perhaps it is because the data shows that in the cases where they offer waivers they are no more risky than an appraisal?

AEI assembles and publishes data on waivers. It is not official GSE data, but it is publicly available
https://www.aei.org/research-products/report/prevalence-of-gse-appraisal-waivers/

But aren't waivers, even if the same default risk as loans made with an appraisal, Dose;'t the WAIVER present more risk to the taxpayer because they are the ones and only ones stuck with the loan loss in case of a default or short sale/other non performance?

For example, let's assume loans using an appraisal have a .07% default rate, while loans using a WAIVER have .07% default rate. One can say the WAIVER is no higher risk than the appraisal. However, if an appraisal is used and the value turns out part of the problem in a default, the lender can be responsible for the loss as well as an appraiser if the appraisal was faulty.

But with a WAIVER, the lender bears no responsibly (reps and warranties,) and there was no appraisal done. So that .07% loss now accrues to the tax payers-

 

[Sadie]

I am not sure why you would think that. Waivers existed long before the market spike and the dramatic increase in demand. Waivers did help during the big spike in 2020-2021, but the spike was not the reason for the existence of the waiver programs.

I am pretty sure its a small percentage of loans that receive waivers.

 

[Sadie]

But aren't waivers, even if the same default risk as loans made with an appraisal, Dose;'t the WAIVER present more risk to the taxpayer because they are the ones and only ones stuck with the loan loss in case of a default or short sale/other non performance?

For example, let's assume loans using an appraisal have a .07% default rate, while loans using a WAIVER have .07% default rate. One can say the WAIVER is no higher risk than the appraisal. However, if an appraisal is used and the value turns out part of the problem in a default, the lender can be responsible for the loss as well as an appraiser if the appraisal was faulty.

But with a WAIVER, the lender bears no responsibly (reps and warranties,) and there was no appraisal done. So that .07% loss now accrues to the tax payers-

Example of a waiver. You have a home equity line for $50k and want to increase it to $75k. Your current mortgage is $100k and Zillow (yest I know wildly accurate) values your home at $750k. Good credit. You refinanced that first mortgage 2 years ago and had an appraisal done. Do you really need an appraisal for that credit line increase?

 

[DWiley]

But aren't waivers, even if the same default risk as loans made with an appraisal, Dose;'t the WAIVER present more risk to the taxpayer because they are the ones and only ones stuck with the loan loss in case of a default or short sale/other non performance?

For example, let's assume loans using an appraisal have a .07% default rate, while loans using a WAIVER have .07% default rate. One can say the WAIVER is no higher risk than the appraisal. However, if an appraisal is used and the value turns out part of the problem in a default, the lender can be responsible for the loss as well as an appraiser if the appraisal was faulty.

But with a WAIVER, the lender bears no responsibly (reps and warranties,) and there was no appraisal done. So that .07% loss now accrues to the tax payers-

As with many things appraisal related, it depends

If the appraisal report is evaluated as presenting low risk for over valuation, then the lender is granted rep and warrant relief for value anyway. And, after three years, they are clear regardless.

 

[chad hampton]

As an appraiser, I would recommend that a minor $125 desktop product be ordered. Small price to pay.

 

[J Grant]

Example of a waiver. You have a home equity line for $50k and want to increase it to $75k. Your current mortgage is $100k and Zillow (yest I know wildly accurate) values your home at $750k. Good credit. You refinanced that first mortgage 2 years ago and had an appraisal done. Do you really need an appraisal for that credit line increase?

We all know that situation does not need an appraisal

But WAIVERS are now used for origination purchases and refinances -

 

[djd09]

in 2008 they whined and cried about the scum bag mortgage appraiser relationship, so it is better now, the scum bags will make up the value themselves and then you will use the sale as a comparable based on an inflated number suckers

 

[glenn walker]

Unless its changed a Waiver had to be on a Property where a CU Score was very good like a 2.5. Also a high credit borrower and limited cash out on refinances. The Property's that when defaulted loans cost lenders the most are Rural-Odd Balls and properties that are harder to market in both good or bad markets. Those Properties will almost never Score a 2.5 on CU and require full 1004 Interior exteriors.

The Point is my argument has always been a Real Estate Appraisal is only good the days it signed and almost does nothing to mitigate lender risk of a loan default. 90% is on Underwriting and what Guidelines are being Promoted at that particular time. The BIGGEST RISK NOW is in High Cost Areas like where I live and where 2.5% to 3% Loans had doubled and in some cases even tripled Prices of Properties. In my area no appraisalwill save a lender in a default and a "Waiver- is Safer because it was created based on a 2.5 CU Score meaning not a Rural or Oddball Property and Borrower had better employment and financials.

 

[DWiley]

Unless its changed a Waiver had to be on a Property where a CU Score was very good like a 2.5. Also a high credit borrower and limited cash out on refinances. The Property's that when defaulted loans cost lenders the most are Rural-Odd Balls and properties that are harder to market in both good or bad markets. Those Properties will almost never Score a 2.5 on CU and require full 1004 Interior exteriors.

The Point is my argument has always been a Real Estate Appraisal is only good the days it signed and almost does nothing to mitigate lender risk of a loan default. 90% is on Underwriting and what Guidelines are being Promoted at that particular time. The BIGGEST RISK NOW is in High Cost Areas like where I live and where 2.5% to 3% Loans had doubled and in some cases even tripled Prices of Properties. In my area no appraisalwill save a lender in a default and a "Waiver- is Safer because it was created based on a 2.5 CU Score meaning not a Rural or Oddball Property and Borrower had better employment and financials.

Waivers cannot be based on CU scores. CU scores reflect the over valuation risk of an appraisal report. In the case of a waiver, there is no appraisal report, so there is no CU score.