Attack on Appraisers
Remember liar loans of a decade ago? Those same people want to do away with appraisers.
There’s a proposal from the FDIC, Federal Reserve, and Treasury Department not to require appraisals for some mortgages under $400,000.
As we say in the petition, this change can impact several groups in particular: consumers, the taxpayers, the housing market and appraisers.
One group not explicitly mentioned in the petition but impacted down the road are real estate agents and brokers. Currently, 12% of mortgages that flow through the GSE (Fannie Mae and Freddie Mac account for 78% of residential mortgages right now) will have their appraisals waived. Those are “PIW” loans or have a “Property Inspection Waiver.” My good friend and appraiser colleague Phil Crawford says on his radio show “Voice of Appraisal” the acronym stands for “Pissing In Wind” which is more accurate. If the buyer realizes they overpaid for the property, the agents are now the professionals with the bullseye on their back. Liability insurers are already talking about a new target when things go south.
Years ago and again this morning, I heard a real estate agent say – what do we need you (appraisers) for? “The seller and the buyer determined the market value by agreeing on the price.” The problem with this logic is the buyer may not be fully informed (i.e., from an out of market area) and will also mortgage fraud supercharged. Ever heard of straw buyers? Agents must remember that they are perceived as biased even with the best intentions and the best ethics because they are paid only if the deal closes. When something goes wrong, they are completely exposed.
The direction that was taken by regulators relies heavily on AVMs (think Zillow’s Zestimate which is not within 4.3% of the actual value 50% of the time) and “hybrid appraisers” (which removes the appraiser from the actual inspection of properties) to develop a value opinion. The inspection of the property, when done, will rely on non-licensed individuals to fill out a checklist and give an appraiser at a desk the information without any standardization, direct contact or assurance the inspector knows what they are doing. I’ve heard of fees as low as $8 to do the inspection and $78 for the appraiser. As far as I can tell, a full appraisal (inspection and analysis) cost can represent as little as a hundredth of a percent of a purchase transaction.
This petition is for everyone to sign, not just appraisers. Please sign and help bring attention to a pattern we just lived through in the financial crisis. It’s happening again.
Please make your voice known, read about and hopefully sign the petition below:
There are lots of issues facing appraisers right now, so let’s focus on the big rocks first and sign the petition!
The FHA Attack On Appraisers Was Timed To Make Way For Getting Rid of Them
Federal Housing Administration says it expects to lose $14.4 billion in coming years, potentially raising premiums on mortgages insured by the FHA
FHA seems to be rewriting history. When the GSEs were bailed out in 2008, FHA became a “last resort” program for many home buyers that couldn’t afford a 20% downpayment and lending was rampant and reckless. Now that they are having problems, they seem to be singling out the appraiser’s role a few days before major appraisal rule changes are being proposed.
In my opinion, there are no coincidences when it comes to proposed regulations. See OFT below. Read more »