According to the GSE’s no appraisal purchase loans are coming soon.
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Appraisal Issues, Housing Statistics
No Appraisal Purchase Loans Coming Soon
admin - Friday June 23, 2017
I think this is fine…remember, borrowers will have strong equity in a property so not requiring an appraisal with home values increasing should be fine.
Fannie/Freddi’s answer to HVCC, go around it.
Here is an idea, instead of getting rid of the appraiser, reduce the scope of work for a traditional appraisal. This will allow an appraiser to complete more appraisals in less time. For example, I can complete 10 one page desktop appraisals in a day versus 2 traditional appraisals in one day. “Shortage” solved! Sure the quality and accuracy does diminish with a reduced scope of work, however its a shit ton better than relying on an AVM powered by a company that’s in conservatorship. How accurate is that AVM? Are consumers buying a home and over paying because a computer told them what it was worth? What happens when the AVM doesn’t support the purchase price? Also, how long it will take for fraud to run thru that system. One programmer a Fannie or Freddie could tweak that algorithm and cause a homes value to sky rocket or plummet. Or some con artist figures out that prices from the AVM are running very high in an area and start flipping properties. Question after question.
OMG! To quote the president, who has such a rich vocabulary – sad.
On a purchase transaction, isn’t the true value of the home what someone is willing to pay for it?
Joe it’s easy to say I will buy this home for X dollars knowing you are borrowing someone else’s money. Appraisers are the unbiased party that protects the bank from over lending on a property. If a house is determined to have a market value of $300,000 and 5 people are willing to bid it up to $350,000 it’s usually because their mortgage payment will only rise a couple hundred bucks but if you asked those same people to fork over the extra $50,000 out of their own pockets they would think you’re crazy!
You know they’re right. They don’t need appraisers and currently we are a holdover from another time which is long past. Appraisers haven’t been relevant since the first day that consequences for bad lending decisions were removed from the lending process. As long as lenders stay in business and their execs make bonuses lending money to people who don’t pay and we the people are obligated to bail them out appraisers will not be a legitimate part of the process. Appraisers are not functionally suited to be rubber stamps and that is what the lending industry wants right now. What better rubber stamp is there than a computer program that lenders control?
If you thought the last meltdown was bad, just wait until the next batch of liar loans goes sideways. Where everybody in the transaction is lying.
At least you won’t be able to blame us appraisers next time………we won’t be the ones giving the 125% loans on multiple $500,000 homes to cocktail waitresses…….
Its alright though, when the next batch of Dodd/Frank type regs come through from the coming mess, we’ll be the ones in charge…….
In the meantime I guess I’ll just be doing estate and divorce work. Should be an uptick in both of those areas for appraisers from this. And repo work too!! God I loved the last meltdown, busy as heck. (We all got together and planned that one, you know…….)
Finally!! Appraisals can come out where you want them to it is all subjective. I just had multiple offers on a property at $144,000 and the appraiser came in at $127,000 appraiser cut $19,000 gor a finished basement ot was one room with drywall and carpet. Get rid of appraisers and let the market dictate price.
Builders ask for more than market value for their product, why not? It has been amazing to me during over 20 years of appraising how many buyers believe the sales pitch, want the house, and will do or say what they need to get the loan. That combined with the devious practices of loan officers (in my area almost all of them who packaged bad loans pre-2007 are still putting together loans) will result in returning to 2007-2008 era. Congratulations GSEs for potentially starting another financial meltdown with sale price based loans. When the new home first buyer needs to sell they will face a dramatic reality crises of what price they need to sell at and what buyers will offer. Foreclosures in massive numbers. That’s good for me because the mortgage holders will want an appraisal to determine how deep the financial hole is on this loan–but not so good for the public who will probably be expected to bail out the lenders again.
No appraisals! Yikes. This is exactly what the appraisal organizations predicted when UAD(Universal Appraisal Data) was inserted several years ago. Did we all (Appraisers) did our own grave by “getting in line” and feeding the beast (Government). I think so.
I would like a to be paid for every time they use the data I collected over the past 25 years that is being used. Put me out of business and get the data I collected for free. I think I better just raise my fees and get all I can until it collapses. I shouldn’t have any problem locating a dummy coming out of college with a 100k loan to come into the appraisal business. Let me train you sonny in what will be a very short lived career. I am pissed off and very tired of this crap. It might just be it takes longer to get a appraisal today because it takes longer to do one because of all the regulations and oversight.
First of all, I am an appraiser and real estate agent, so I see a couple sides of this picture. There is not an appraiser shortage. There is just a shortage of appraisers who will work for AMCs. I get several phone calls every day asking me to ‘get on their AMC panel’, which I so decline. I do not, and will not work for AMCs. For the lenders and realtors out there who don’t understand why, let me explain.
After the HVCC was first introduced (now Dodd-Frank), lenders were scrambling to AMCs because they thought that was the only way you could now order appraisals. HVCC was requiring a ‘firewall’ to prevent appraisers from being influenced by bad brokers for higher values. Yes, there were some bad appraisers that succumbed to this pressure, but most did not. This did get rid of the bad appraisers, but had some horrible side effects.
During this time, the number of AMCs in the US increased exponentially. Well, appraisers had to work for AMCs because that is where all the work was. So, what happened then? AMCs dominated the market and slashed appraiser fees. Why not, appraisers had to work for them and when you have a healthy supply of appraisers; you can ‘bid’ appraisals out and pay them a reduced fee, pocketing more for the AMC. In some cases, in our area, the borrower was being charged $600 for an appraisal on the HUD statement, while the appraiser was getting $300 and the AMC $300. Prior to Dodd-Frank, appraisers were charging $400+/-. So now, the borrower is being charged more for an appraisal and the appraiser is getting less. How is this helping the consumer? At the same time, AMCs were creating checklists when reviewing the appraisals that were so strict, it drove appraisers out of the business. If Chase had certain things they wanted reviewed, that went on the checklist. If Wells Fargo had things they wanted, it got on there as well. And so on. The checklist became so lengthy that appraisers decided it wasn’t worth it, so they left the business. Keep in mind, these were ‘lender specific’ requests, not Fannie, VA, FHA or USPAP requirements. Appraisers now had to bow down to the AMCs, just to get work. Another side effect, with the appraiser getting $300+/- from an AMC, how can they now afford to train new appraisers, paying them and making money themselves? They can’t, so they don’t. Since 2008, there has been a decline in new trainees coming into the business. If something doesn’t change, this will become a problem down the road.
Fortunately, there is an alternative in Dodd-Frank that states if you are a correspondent lender, you can set up your own appraisal ordering system; it just needs to be separate from the lending/underwriting department. Once lenders figured this out, they started setting up their own appraisal ordering because they didn’t enjoy working with AMCs either. Appraisers started going back to work for those correspondent lenders, and they no longer had to deal with the hassle of the AMCs. Now, there appears to be a shortage of appraisers who will work for AMCs. So, we are at a place now where AMCs are fighting for survival, complaining there are not enough appraisers. There are plenty, just none that will work for AMCs.
Going forward, appraisers are needed. There needs to be an unbiased party looking at the overall transaction to ensure it is a typical transaction (not a risky flip), looking at the condition (ensuring a good investment for Fannie) and that the value is in check. But, I also believe we need an alternative appraisal to the 1004. I’ve been saying this for years, appraisers should not have to be filling out a lengthy 1004 form that is providing information that everyone already knows, on every transaction. Most of its public record anyway. The appraiser should look at the property, determine its condition, quality and then do a value range for the subject property. Homes do not have one value, they have a range of value. USPAP allows ‘ranges’ for value conclusions, but Fannie wants one number, so the appraiser has to provide one number. In some cases, in a refinance market, appraisers could ‘kill’ deals for coming in $1000 less than the 80/20 requires. Crazy. Shorten the form, let the appraiser inform you of the quality and condition, give a value range, and it would give the lender solace knowing they are making a good lending decision. In a 100% LTV transaction, this wouldn’t work, but 80/20, 60/40, etc., definitely. Shorten the form, and I could do 20-25 appraisals a week compared to the 8-10 I do now, at a lesser fee.
As for the stockpile of data that Fannie has, that should be used as a ‘check’ to make sure the value is inline. If no new information is coming in, that info will become stagnant, quick. What happens in an increasing market? Old data wouldn’t allow markets to increase. What about a declining one? If you are using old data, it may support a value higher than its current market value. Now that would be a bad investment. It would only work in a flat line market and how often are we in those? Exactly.
We need appraisers, but their role needs to be modified in some cases to increase efficiency, decrease turn times, decrease cost to the consumer, and handle any belief that there is an impending shortage of appraisers.
Sorry for the lengthy comment, but felt compelled to inform the uninformed.
Heard of “the big short”, this is “the gradual short”. Realtors and lenders will do anything under the sun to make a bigger payday today, creating another bailout for tomorrow, because there is no legitimate check and balance system.
equilibrium will happen.
Careful what you wish for. When the comming bubble burst the only outsiders left to blame will be loan officers. Then they’ll need to have a doctorate degree, 10 years experience, answer to 20 year old reviewers and be limited to a flat $100 fe with closing times increasing 6 months. The new “mortgage broker management companies”, all owned by banks will a be laughing all the way home.
They never learn, do they. The ninja loans blew up in their face because it created an incentive to thieve. Now the no appraisal needed gives them another tool to cheat the borrowers, lenders, legit players and probably the US taxpayer to boot. We all know the mortgage industry is infested with thieves (and if you deny it I will call you a liar to your face because documented fact proves otherwise). Give them an inch and they will take the equator. History is about to repeat itself, just the same wolf in a different sheep’s clothing. There is a shortage of appraisers because it’s clear that the mortgage industry does NOT want accurate and reliable appraisals, they just want a number that will make their deal work. And if appraiser A won’t do it, they’ll find appraiser B who will. Appraising for lending purposes is a suck business model for people who tell the truth. Have fun with it folks, I got out of appraisal after 35 years because I could no longer tolerate the stench of mortgage people (who deliberately cling to ignorance) who lie, cheat and steal for a living. Elimination of D3P (disinterested third party) appraisals open the flood gates for fraud. Is this what you wanted? Is this what you had in mind? “Cause this is what you’re getting.