Charles West
Elite Member
- Joined
- Sep 14, 2004
- Professional Status
- Certified Residential Appraiser
- State
- California
Somebody forgot to divide by two.
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We now know the waiver numbers, etc.
- Thread starter Tom D
- Start date
Sadie
Elite Member
- Joined
- Mar 20, 2008
- Professional Status
- Certified Residential Appraiser
- State
- Oregon
That data is a little old. It is currently reported to be 16% of new mortgage loans have an appraisal waiver, down from 50% at peak times. That is still a ton of work lost to us. Is it any wonder that the short sales and REOs are starting to hit the market?
From an older Working RE:
In terms of the risk involved in appraisal waivers, Pinto explains that the AEI’s primary concern is unscrupulous parties figuring out how to game the system. “I’m cognizant of that fact that when automated methodologies are in the hands of a duopsony, (two buyers controlling the market), they set the market. We are very concerned about that and we need to do more research about how the waiver process might be gamed,” says Pinto.
In terms of what “gaming” the system might look like, Pinto draws comparisons between automated valuation waivers and automated underwriting (AU) that was first implemented back in 1997. “When the actors in a system are able to figure out what the answer is going to be, either in underwriting or in valuation, they can figure out what to input into the system to get the answer they want. For example, when AU started out in the late 1990s, its impact was somewhat benign. However, over time, gaming became rampant, including by Fannie and Freddie themselves. Underwriting standards continued to get looser and looser through 2007, which was a major contributor to the housing boom that ended in 2007 and the subsequent price collapse. AU was supposed to prevent that. They said it was going to be so much safer, but that’s not what happened,” said Pinto.
Pinto says that waivers face a similar risk. “Key industry players will be able to figure out the GSEs model, at which point they’ll know what numbers to input into the system. But it’s not just lenders who could lead this astray. Fannie and Freddie might, for competitive reasons, also decide to get more aggressive with their models, increasing their risk. This would be akin to the house changing the odds as opposed to the players,” Pinto says.
Mark Twain said that history doesn't repeat itself but it often rhymes.
https://www.workingre.com/massive-expansion-of-appraisal-waivers/
From an older Working RE:
In terms of the risk involved in appraisal waivers, Pinto explains that the AEI’s primary concern is unscrupulous parties figuring out how to game the system. “I’m cognizant of that fact that when automated methodologies are in the hands of a duopsony, (two buyers controlling the market), they set the market. We are very concerned about that and we need to do more research about how the waiver process might be gamed,” says Pinto.
In terms of what “gaming” the system might look like, Pinto draws comparisons between automated valuation waivers and automated underwriting (AU) that was first implemented back in 1997. “When the actors in a system are able to figure out what the answer is going to be, either in underwriting or in valuation, they can figure out what to input into the system to get the answer they want. For example, when AU started out in the late 1990s, its impact was somewhat benign. However, over time, gaming became rampant, including by Fannie and Freddie themselves. Underwriting standards continued to get looser and looser through 2007, which was a major contributor to the housing boom that ended in 2007 and the subsequent price collapse. AU was supposed to prevent that. They said it was going to be so much safer, but that’s not what happened,” said Pinto.
Pinto says that waivers face a similar risk. “Key industry players will be able to figure out the GSEs model, at which point they’ll know what numbers to input into the system. But it’s not just lenders who could lead this astray. Fannie and Freddie might, for competitive reasons, also decide to get more aggressive with their models, increasing their risk. This would be akin to the house changing the odds as opposed to the players,” Pinto says.
Mark Twain said that history doesn't repeat itself but it often rhymes.
https://www.workingre.com/massive-expansion-of-appraisal-waivers/