FHFA’s Appraisal Waivers Expansion
The recent announcement from the FHFA Deputy Director Naa Awaa Tagoe regarding the expansion of appraisal waiver eligibility for purchase loans is a significant development that has sparked debate and controversy within the mortgage industry. By increasing the maximum allowable loan-to-value (LTV) ratio for full appraisal waivers from 80% to 90%, and for inspection-based appraisal waivers from 80% to 97%, the FHFA is taking a risky and potentially irresponsible step that could have far-reaching consequences. As former FHFA Director Mark Calabria aptly pointed out, this decision is truly “dumb and irresponsible” and deeply disappointing.
This is truly dumb & irresponsible, deeply disappointed https://t.co/dYxcCbRYhT pic.twitter.com/9i54icLLKa
— Mark Calabria (@MarkCalabria) October 28, 2024
The core issue here is that the FHFA is essentially green-lighting mortgage loans with extremely high LTV ratios based solely on a cursory inspection by an Uber driver or unlicensed data collector, rather than a thorough, professional appraiser. This opens the door to a significant increase in subprime lending and high-risk mortgage products, reminiscent of the disastrous housing bubble and subsequent financial crisis that devastated the economy not too long ago. Appraisers, who play a crucial role in ensuring the accuracy and integrity of property valuations, are being sidelined in favor of a “quick and dirty” approach that prioritizes speed and convenience over sound risk assessment.
The potential ramifications of this policy shift are dire. When the inevitable happens and the overinflated housing market comes crashing down, the FHFA and its decision-makers will have no one to blame but themselves. Appraisers, who have long been the scapegoats for industry missteps, will not be the ones to bear the brunt of the blame this time. The responsibility will squarely fall on the FHFA’s shoulders for implementing such a reckless and short-sighted policy, one that undermines the essential role of professional appraisers and puts the entire housing market at risk of another catastrophic collapse. The FHFA’s attempt to marginalize appraisers and remove them from the equation entirely is a dangerous gamble that could have dire consequences for the entire economy, and the agency will have no one to blame but itself when the inevitable happens.
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Lisle Reike !!!!!!!
FHFA: We really want appraisal waivers to help sketchy borrowers.
Appraisers: Most markets are declining….this is a bad idea.
FHFA: We need market liquidity. We don’t like you and need to feed the loan machine for Fannie and Freddie.
Appraisers: You really need full appraisals to verify purchase prices and market data. This will protect everyone involved.
FHFA: You’re racist. We’re now upset and will implement more waivers, data collectors, and AVM’s to replace you. We’ve also given disgruntled borrowers an easy way to sue you if you don’t hit values.
Appraisers: Cool. I’ll just work the private sector. And tell the AMC’s to pound sand too. BTW, I’ve started a lawn service biz with other appraisers. Don’t call me when your Zepplin crashes.
Excellent.
Follow the money $$$
Honestly, expanding appraisal waivers feels like a slap in the face to the entire appraisal industry. It’s as if they’re actively trying to put us out of work, all to save a few days on a transaction! We’re not just filling in numbers—we’re out there, on-site, catching things that algorithms and automated valuations can’t even come close to understanding.
Pushing us aside puts lenders, homeowners, and the housing market at risk of seriously flawed valuations. This move isn’t just risky; it’s reckless. We’re risking home equity, financial stability, and the very integrity of real estate transactions. If they think waivers are a “better” way, they’re sorely mistaken. This short-sighted approach could end up costing everyone a lot more in the long run.
They ARE actively putting us out of work. The lenders aren’t at risk. Taxpayers always bail them out and they’re extremely rarely prosecuted. They don’t care. There’s a much bigger game going on here than we can imagine and we’re not part of it.
They blatantly do not care.
https://appraisersblogs.com/uncovering-flaws-in-fha-appraisal-n-loan-review-process/
They know what they are doing and are intentionally going to crash the market again. Fannie is owned by private investors, of whom probably greatly enriched themselves with the creation of the last crash. The 08 crash was a massive transfer of wealth and we are moving head first for it again and a GRANDER scale that we haven’t seen before. F the great depression because I think we are moving past that with the amount of CRE that is set to mature in 24-26, along with this is new monster that will create an echo chamber of data that will look just like a death spiral of ants that can’t find their way home.
I think that the individual States can and “should” require licensed people, ie, appraisers, realtors, agents to the data collectors, I believe that is the case her in NY State, please let me know if I am incorrect. I hope to be around for another 5 years as an appraiser, I know I’ll see the next crash, it’s inevitable.
I really wish we knew who was leading the state investigation into FNMA from Maryland with any insights to how it failed and what approaches were used to get whatever results they did or didn’t. I do agree the state levels are about the only means we have. AG’s might be a good place to start due to the horrific exposure the tax payers may face because of it, not to mention the lose of home, etc.
Here’s a new one for ya: Stating the address, city, county, state and zip code along with saying the subject is an existing house in the comments “could violate fair housing standards”. Guess I’ll just send in blank reports from now on.
We’re just barking up an empty tree in the middle of nowhere. I wish all of you guys good luck.
You are absolutely correct, as an appraiser I feel the frustrations these folks feel, but this is likely going to be the nail in the coffin. I’m not interested in chasing around the magic private work I’ve done everything over the years, the easier appraisals are gone and there’s way too many of us chasing the hard work
DUH, the hypocrisy and lack of intelligence coming out of Washington never ceases to amaze this old timer. We are on the dingo bus and the driver is stoned.
It is time we start working as buyer consultants. Especially now that NAR has had their bubble burst with buyer’s agents. Let us band together and start to advertise ourselves as buyer consultants to the industry where the skills and talents that we have matter and are appreciated.
That’s complicated. I’ve turned down this work before. You’ll function as an insurance shield for the realty agents, essentially doing their job for them for far less pay. And they’ll want immediate service for everything the buyers may be interested in offering upon. That’s before you get into the challenge of inspecting a property owned by a person whom is not your client and has not yet confirmed a negotiation with your client (the buyer). Additionally the buyers realty agent will in all probability, want to be your client as well, as they’ll approve and affirm the use of an appraiser through the purchasing effort on behalf of their buyers. Taking us back to the need of the realty industry to use appraisers more routinely for pre listing appraisal services instead. There is a substantially lower liability exposure risk for providing pre listings for sellers, as opposed to offering buyer consults and purchase appraisals outside of the lending avenues for buyers. On top of everything, if the buyer is financed through a bank, that’s another round of freelance review upon your services, as they ignore any use limitations you may have written into your report.
I’ve struggled with this exact idea many times before as listing agents were supposedly so happy with my approach and professionalism, knowledge of the markets and homes and such, they’ve asked me to work with them on the buyers side on behalf of their buyer persons. Unfortunately, not that simple and had to turn down those requests. Of course I offered to be available for amazingly affordable rates for listing services but they never want that side of the service. The reason why; The agent is using you for an insurance shield, an additional sales tool to achieve a pending commission.
Thats what i have been doing for years as a Broker/Appraiser. Appraisers can also have a Real Estate License as well and a Mortgage Loan Originator License as income streams. An Appraiser Buyer consultant that is also a licensed Real Estate Agent is the way to go to take part in a real estate commission and not just a one-time fee. Agent/Appraisers can actually discuss market conditions and say if representing a seller be able to defend the seller when low ball offers come in. Rather than an agent who shrugs their shoulders and just wants to agree with the low ball offer. Appraiser/Agents or Appraiser/Brokers can represent buyers and that is part of my marketing plan in 2025.
Per USPAP, just don’t misrepresent your roles in the transaction (s), you can not be all three at the same time because the. You would assuredly misrepresent yourself at some point and that would be a state boards field day and case study for years to come.
Disclosure is the key. It is that simple. As an appraiser I don’t use any comparables that I might have been part of a real estate sale transaction.
If I appraise a non lender estate and then the estate wants me to represent as the listing broker all I do is disclose prior services in escrow as an an appraiser.
Total disclosure and totally legal.
You can not be representing as all three at the same time, but you can have all three licenses to create separate income.
I appraise 10 or 20 properties a year and 99% are not lender estate properties. Then convert one or two estate assignments a year into listings and create a 6 figure income. Totally legit but you have to disclose to all parties.
2025 will be a great year using all three licenses.
So many buzzwords; Equitable housing finance plans, TechSprint. They’re all in with full automation. Now there are fines for faulty or fraudulent loan packages rather than forced repurchases. No appraisers, one less participant to identify fraud flowing through the system. Lenders will pay a fine for non performing loans, pushing through borrowers whom otherwise would not be qualified. Skip the refinance solicitation effort, rather through automation, write down mortgage payments 20%, predictive uad cu data modeling to structure and restructure loan packages, a form of clandestine welfare for certain affinity groups but not others. The people caught up in these processes will become debt slaves, living in a constant mortgage term reset. They’ll walk away from excess housing costs in droves as inflation and continually rising costs erode their ability to pay despite the subsidies.
Debt trap setup buzz words; to save on the cost of the appraisal service. An inflated housing market driven by a partial waiver program, pay even higher effective prices with higher quantities of future irresponsible credit and income challenged participants. This will lead to expansions of wholesale defaulted loan programs, put even more housing units into the hands of institutional investors who hold them as rentals, purchased in bulk for pennies on the dollar directly upstream ahead of regular citizens, aka first purchase opportunities. See how this works yet?
The FHFA & GSE’s are no longer operating in a fair and unbaised manner for all American citizens, but rather appear to be in the business of prioritizing special interest favors, delivered by way of radical policy and procedure restructuring towards central control and automation rather than comprehensive traditional human based checks and balances systems. Sounds like appraisers will not be the only ones losing their jobs. ‘Generative AI’. We’ve been warning of the destructive force of this technology for years. Instantly abused, as predicted.
https://www.fhfa.gov/programs/fintech/techsprint/2024
In the 1980s, inflation, interest rate swings, and disintermediation wrecked the savings and loans and the housing market. Appraisers didn’t cause that, but lots of poor appraisals were around. The result was FIRREA, with the hybrid state/federal licensing and regulation, USPAP (practically a duplicate of existing SREA/AI standards), the Appraisal Foundation, continuing ed, and enforcement. Yeah, that was supposed to make appraisal professional and prevent future crashes. Until subprime, liar loans, and 2008-2011, the Great Financial Crisis. Appraisers didn’t cause that either, but lots of poor appraisals were around, so we got the HVCC and AMCs. Now we may have another housing bubble. Appraisers didn’t cause this one either. How could they? Market value is the value on a specific date. Appraisers report the market going up, and report the market going down. Some appraisers believe they are supposed to estimate a “fair” value, but that’s not really in the definitions, and not something the appraisal users want, at least when values are going up.
So appraisal failed to interrupt the last two financial crises and structurally and theoretically is not equipped to prevent any future crisis. Now the issue of the day is discrimination, which to date is unproven, but the fact is this: state-licensed appraisers can differ widely in value opinions on the same property. So what are they measuring or predicting? What’s the point of the exercise?
And why would lenders pay $800 or more for this service? At least AVMs make testable statistical predictions, and they do it cheaply and instantly. Appraisal as a trade will continue to shrink until the only assignments are luxury/waterfront, estates, and other one-offs, with maybe 20,000 appraisers in business. Appraisals won’t be used for most home purchases and refinances.
and theoretically is not equipped to prevent any future crisis.
A consequence of the amc model. The appraisers whom do a better job are not seen in mortgage lending, as three out of four refuse to work with amc’s, and what is likely less then half and rapidly falling have long since left the mortgage lending space for the rare lender direct panels. You have no idea how much fraud never happens because of the human appraisers presence in the first place. The statistical models will incorporate skewed and fraudulent data into the data outputs, the systems reliability will diminish rapidly in direct relation to the diminished use of human appraisers. That’s already happened, more to come. The human appraisers contribution to the system is much further reaching than just coming up with a market value number. The point of the exercise is checks and balances, because when there are open doors for fraud, they will be exploited with an increasing pace over time.
Just one more bite out of the work, and with the job market so poor, trying for months to find a second, decent paying part time job to fill in.
I’m proud to say, I performed my last GSE appraisal yesterday. I will only be doing private work from here on out. The lender world has become so bogged down by AMC special interests, “race to the bottom,” “accurate-enough, not accurate,” thinking that I simply will not participate any longer. Best of luck out there.
is this issue being driven by pols on both sides ? Could the pendulum swing the other way if the powers to be change on November 5th ? I would like to think that if the changes are so consequential to the housing market, which they are, wouldn’t the changes have to be vetted and agreed upon by both parties ?
I reviewed many appraisals and found discrepancies where the appraiser did not verify the MLS data, which turned out to be incorrect. Significant concessions that affect the price are not accounted for. I seldom see an appraiser come in short on purchases, even in some slower markets. I don’t see much of a risk of dropping appraisers from the process. Many are complacent and do not fulfill their responsibilities; they merely complete the form.
And what cheap-a** lender do you work for? Our job is not to force the sale to go through to not go through. I’m starting to think you really don’t know what appraiser’s really do. Also, I have noted that you said “the” appraiser as in singular. So I’m I correct in the assumption that you are taking a single report and applying it’s findings unilaterally? How convenient of you if you are.
I was an in-house review appraiser for a large secondary lender. I witnessed and reported multiple abuses including allowing mortgage brokers access to in-house files houndogging for possible refi, creation of false documents for straw buyers and the list goes on. Perhaps with your reasoning, all mortgage brokers are corrupt and we should do away with them?
NOT TO change the subject, but can someone explain to us why a group of 4 licensed appraisers can only receive work individually and collaboration is NOT ALLOWED by any of the AMCs?
Local vs central control. An ongoing problem.
https://mises.org/mises-wire/national-elections-expose-sham-centralized-democracy
Central planning never works.