…gaming of the system is happening not only with income, (yes automated income verification has returned) but now property valuations… Appraisers have some very strong opinions on computer driven appraisals. Others are noticing the dangers as well. It is more than just automated valuation models though. In an article written by Danielle DiMartino Booth, for Bloomberg, Fannie Mae and Freddie Mac are specifically called out on their appraisal waivers. The author compares the dangers of the automated income verification being done in the 2000’s and how the system was easily gamed to the appraisal waivers currently being done. The author...
In 2018, the GSEs began working on ‘mortgage lending appraisal forms redesign’, a process they said would take approximately 3 years to accomplish. The effort is currently underway, however they have not announced exactly when the process will be completed, or when the new forms will take effect. Attached is a PDF of their FAQs through June 2020 which you may want to peruse, just so you become more aware of “what’s coming down the track” not too long from now. From my quick read of this FAQ document, key items include: GSE forms are not to be used for...
1. Fraud is a distraction Elite fraud and predation drove the Great Financial Crisis (GFC). By 2006, about 40% of all the mortgage loans made that year were “liar’s” loans – loans that did not verify the borrower’s income. The mortgage industry’s own anti-fraud experts (MARI) warned that the fraud incidence in these loans was 90%. In response, the industry rapidly increased its liar’s loans. In 2006, the industry made over one million fraudulent liar’s loans. Thomas Herndon’s 2017 study found those loans produced 70% of the mortgage losses. Liar’s loans hyper-inflated the bubble, increasing over 800% from 2003-2006. State...
Appraisers, I had a recent discussion with a review appraiser, who discussed a ‘situation’ with me. It involved Highest and Best Use (H&BU), and the appraiser’s reluctance to re-do a report so that a loan could be made. The appraiser had checked the H&BU question box on page 1 of the 1004 form as “NO”, which immediately stops the lending process. This H&BU topic is sometimes difficult for appraisers due to many variables which need to be analyzed. The twisted part of this situation (which influenced the appraiser’s H&BU reporting) is the property is in an area where some, not all,...
Two days later the underwriter emails you ordering you to change “vacant” to “occupied” since there is clearly furniture in the house… Here’s a situation you’ll run into once or twice in your career. There is a new subdivision. Now, new subdivisions sometimes have model homes. Model homes typically have furniture, fixtures, and equipment – usually upgraded. The subdivision has completed its sales program and the developer is now selling the model(s). Your job is to appraise one of the models, since the developer has it under contract to a retail buyer. You do your inspection thing, take pictures of...
TAF president Dave Bunton has made it a point in the last two monthly newsletters to mention TAF created a “Diversity and Inclusion Subcommittee” which is great if it actually accomplishes something. The Appraisal Foundation Board of Trustees added a Diversity and Inclusion Subcommittee in April of this year, one month before the death of George Floyd, which highlighted some of the inequities experienced by Black Americans. The thing is, the Appraiser Qualifications Board (AQB) hasn’t had a minority member and only 3 women in decades of existence. I really hope that this subcommittee is more than just window-dressing. Adding...
On September 2, 2020, FNMA updated their policy allowing for Accessory Dwelling Units (ADU) on Single Family Residential (SFR) properties to be a Manufactured Home. This is in their Selling Guide Announcement SEL-2020-05, linked below. Key points: An accessory dwelling unit (ADU) is an additional living area that is independent of the primary property and has basic bathroom, cooking, and sleeping facilities. With this update, we clarified ADU property eligibility and comparable sales requirements in the appraisal as follows: expanded the current definition of an ADU to improve proper classification of ADUs; expanded property eligibility by allowing multi-width manufactured homes...
The continued reliance of unregulated aggregators and bifurcated products continues to erode the public trust at the expense of discarding the profession specifically intended to promote the public trust. How does this protect the public?… On June 14, 2005 Steve Jobs told a class of graduates, “you can’t connect the dots looking forward; you can only connect them looking backward” Around the same time, I was appointed as the sole residential member of the appraisal licensing board of my state. Little did I realize that this 2005 governor-appointed position would eventually lead me to sharing a stage in 2018 with...
The Appraisal Institute just sent a letter to The Appraisal Foundation to address things that have been floating out in the ether for nearly two years. The November 2018 Brookings Institute report blames appraisers without proof or logic for lower property values in minority communities and then the June 2019 Congressional Hearing amplified the Brookings misrepresentation of the appraisal industry. It’s taken 14 months to send this letter? Interestingly, the chairman of the Board of Trustees that Jeff is writing to is a personal property appraiser and not a real estate appraiser. Real property appraisal is the reason for TAF’s...
