How New Appraisal Waiver Policies Affect Old Homebuying Practices
“A mortgage loan is secured by real estate — the home, which allows lenders to offer low interest rates and long repayment terms. Appraisals are a confirmation to a lender that the loan is properly secured, so that’s how important an appraisal is in the process,” explained CoreLogic Chief Appraiser Shawn Telford. “The lender cannot make a loan unless they know what the home is worth. A key ratio lenders review is the ‘LTV’ (loan-to-value), and the appraisal is the ‘V’ for the ‘value’ part of that equation, which is at the core of how lenders make risk-based lending decisions.”
To be sure, appraisal waivers existed before the most recent housing boom, but when interest rates
hit rock bottom in 2021, the floodgates opened to homeowners clamoring to refinance their homes or
take out home equity lines of credit. As refinances have more eligibility for a waiver, this practice gained more traction.
Refinancing demand came in addition to buyers and sellers who sought to purchase mortgages. This resulted in an increased amount of requests on the desks of appraisers, an industry where the number of active residential appraisers has remained relatively flat for the last decade,
according to Freddie Mac data.
The mortgage industry was already experiencing increased demand and a limited number of licensed appraisers before the pandemic, but social distancing caused traditional processes to further shift. Since the majority of appraisals are not eligible for waivers,
according to documentation from Fannie Mae, desktop and other automated appraising solutions also ventured into the mainstream as alternative ways to expedite the process.
Are Appraisal Waivers and Desktop Appraising Solutions Here to Stay?
On paper, desktop appraising solutions look like a magic bullet. However, while evaluating properties from behind a desk increases speed, many experts have feared that making this practice commonplace would result in appraisers losing touch with the on-the-ground market conditions that they would typically encounter when visiting a property in person, or worse, they would miss important factors about the home that would have a negative impact on a home’s value.
But much of this fear has been quelled, especially for lenders who carefully select
desktop solutions using their own credit policies or utilize the options offered by Fannie or Freddie, which rely on hybrid appraisal data to estimate current property values and collate the results with Automated Valuation Models (AVMs).
“Ultimately, what we saw over the past couple of years was that appraising can continue when based on data and information that’s in the public record, as well as data that was collected from homeowners through various sources,” Telford explained. “And because of that, the Federal Housing Finance Agency directed Fannie and Freddie to make desktop appraisals a permanent part of how they evaluate collateral risk.”
It didn’t take long for property valuation companies and appraisers to adapt, as many industry participants had already spent years developing streamlined valuation solutions and proposing policy changes to allow these solutions.
Although this shift to touchless solutions was already in motion, it was the pandemic-related restrictions and increasing demand for appraisals seen during this period that accelerated the transition. As a result, desktop and exterior appraisals quickly became a handy tool for lenders and their contracted appraisers working to obtain credible home valuations and comply with GSE guidelines.
Integrating appraisal modernization changes will require support from technology partners with extensive, accurate, and comprehensive property data.
www.corelogic.com
oh i see 'touchless'...cheap and fast
