Waiving Appraisals & Lowering Appraisal Standards
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Freddie getting aggressive in waiving appraisals & promoting appraisal free mortgages…
Yes, I have a ‘dog in the fight’ with this article, as I have been an Appraisal Institute member since 2003 (along with other association memberships since). But this article provides explanations about changes to the appraisal process I have not seen elsewhere.
Excerpt from “Dodd-Frank rollback weakens appraisal standards“
They started to evaluate whether they wanted to raise that appraisal threshold level from $250,000 to some figure… They left it untouched at $250,000 for residential, but they have increased the commercial real estate appraisal threshold level just in the last month in a half to $500,000…
You are seeing Freddie get very aggressive in waiving appraisals. I have seen ads where they are promoting the appraisal free mortgages. It is kind of a market-share play that they are undertaking. Of course Fannie is the larger player, but they are not going to just let Freddie do that. They are not going to just let Freddie step in there and take market share from them, and so they are going to race to the bottom. Our view is, haven’t we learned the lesson from the last 15 years? That is the last thing we should be doing with groups in conservatorship is allowing them to take risks, particularly on risk management when it comes to safety and soundness issues.
Could Congress have made changes that would help ease the shortage of appraisers in rural areas?
We need to make it an attractive proposition for appraisers to work in those markets. That comes down to issues like the regulatory environment for appraisers, the profitability of being an appraiser, the fees that are being paid in the market. This [the regulatory environment] is putting added pressure on the appraiser-service providers… How are we going to get new people into the industry or the next generation if we are waiving ourselves out of the process?
FNMA’s Appraisers’ Page
Buried within the vast FannieMae (FNMA) web site is an “Appraisers’ Page” filled with lots of info and links to various topics you should be aware of. You can sign up to receive notices from FNMA. You may want to ‘bookmark’ this link in your browser search function.
Keep in mind what you find and see here applies directly to FNMA, but investors, lenders, AMC’s, underwriters, FHA, VA, reviewers, etc., use this info in their work. Much of this this transfers to other users, however it is not 100% de-facto standard across the industry.
But, for the most part, following FNMA recommendations and appraisal policies is a good way to produce credible and well-documented residential reports.
Updated FNMA Selling Guide
FNMA updated their Selling Guide as of June 5, 2018. Part B applies to appraisals. FNMA now securitizes MFH loans, and this Selling Guide has info about that.