HARP Reliance of AVMs Concerns

by AppraisersBlogs · Published October 29, 2011 · Updated February 8, 2018

NAIFA & ASA Concerned about HARP Reliance of AVMs

ASA and NAIFA Send Joint Letter to FHFA, Fannie Mae & Freddie Mac Expressing Concerns on HARP Program Reliance of AVMs and Requesting a Meeting

On October 25, the American Society of Appraisers (ASA) and the National Association of Independent Fee Appraisers (NAIFA) submitted a joint letter in response to yesterday’s announcement by the FHFA and the Government Sponsored Enterprises (GSEs) of changes to the Home Affordable Refinance Program (HARP) involving greater reliance on automated valuation models (AVMs) to value collateral property. In the letter, ASA and NAIFA expressed concerns regarding the GSEs quality control standards being used to ensure that the AVMs they utilize are reliable

On Monday, the Obama administration announced an expansion of their Home Affordable Refinance Program (HARP), which helps homeowners underwater on their mortgages to refinance into terms that lower their monthly payment. As part of this renewed effort, the Obama administration has approved reliance on “reliable” automated valuation models (AVMs) used by Fannie Mae and Freddie Mac (collectively termed the GSEs or Enterprises) to determine the value of the underlying collateral. Where a “reliable” AVM is not available, however, they must use an appraisal.

ASA’s and NAIFA’s letter says that given the fragile condition of the mortgage markets, the financial stress of many homeowners, and the temporary nature of the HARP program, the two professional appraisal organizations do not oppose the change. However, the letter expresses serious concerns over the reliability of AVMs in general and the GSEs’ AVMs in particular; and, it urges much greater transparency in the quality control systems that the Enterprises will be using to weed out unreliable automated valuation models in refinance transactions. The letter also states that the professional appraisal community, including the Appraisal Standards Board of the Appraisal Foundation, should have been, and should still be, consulted by the GSEs on their AVM quality control requirements.

ASA and NAIFA believe that safety and soundness and the interests of consumers and taxpayers in mortgage-related transactions are best served when collateral values are determined by professional, independent appraisers.

Jack Washbourn, President of ASA, stated that “while we generally support reliance on professional appraisals for determining collateral values for refinance transactions, we recognize that the scope and nature of this specific program might warrant limited use of AVMs. Still, it is imperative that quality control standards be implemented that protect homeowners, taxpayers, and the housing market from further losses when relying on an AVM, and we feel strongly that the professional appraisal community must be involved in crafting those standards.”

~ Source American Society of Appraisers, an international organization of appraisal professionals and others dedicated to the education, development and growth of the appraisal profession. More than 2,000 of its 5,000 members are business valuation appraisers. ASA is the oldest and only major organization representing ALL disciplines of appraisal specialists, originating in 1936 and incorporating in 1952. ASA’s headquarters is in the metropolitan Washington, DC area. To find an accredited appraiser near you, visit http://www.appraisers.org or call (800) 272-8258.

ASA NAIF Joint Letter FHFA GSEs RE HARP Program Oct2011