ARCC Discussion Exposes GSEs Agenda to Reduce Appraisal “Friction”

ARCC Discussion Exposes GSE Agenda to Reduce Appraisal Friction

Mark Calabria’s discussion with ARCC revealed the GSEs’ agenda to reduce “appraisal friction” by eliminating the role of professional appraisers and the appraisal process altogether. 

The recent discussion hosted by the Appraisal Regulation Compliance Council (ARCC) with Mark Calabria, the former Director of the Federal Housing Finance Agency (FHFA), offered a rare and illuminating glimpse into the inner workings and mindset of the nation’s housing finance regulators. During the engaging conversation led by ARCC Chair Josh Tucker, Dr. Calabria shared his expert perspective on FHFA’s controversial decision to significantly increase the use of appraisal waivers, which allow mortgage lenders to bypass the traditional home appraisal process. According to Calabria, this shift represents a concerning trend where the government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac are openly viewing appraisers and the appraisal process as an unnecessary “friction” that impedes their ability to gain greater market share. The former FHFA Director’s candid admission that the GSEs have explicitly stated this sentiment to him was a shocking revelation, essentially confirming what many in the appraisal industry have long suspected – that there are concerted efforts underway to systematically diminish the role of professional, independent real estate appraisers. This marks a troubling development, as appraisals serve as critical safeguards to protect consumers, lenders, and the broader housing market from the risks of inflated property values and predatory lending practices.

Lori Noble of ARCC further emphasized the dangers of this “regulatory capture”, where powerful industry interests are able to influence policymakers to prioritize their own short-term financial gains over the long-term stability and integrity of the housing system. Calabria’s parting words underscored the urgency for appraisers and concerned citizens to make their voices heard with policymakers, as the dismantling of these essential “checks and balances” could have dire consequences for the broader housing market and economy if left unchecked.

The ARCC forum provided a rare opportunity to pull back the curtain on the inner workings of housing finance regulation, laying bare the high-stakes battle over the future role of professional real estate appraisals. Importantly, the ARCC research team has compiled comprehensive data revealing staggering damages and lost consumer purchasing power – totaling $24 billion over the past two years – due to the mismanagement and lack of regulation surrounding third-party services provided for lenders and banks. While the underlying issues of appraisal control fraud persist, Calabria stressed that the ways in which these violations manifest have continued to evolve, necessitating vigilance and proactive measures to protect consumers and maintain a well-functioning mortgage industry. Overall, the discussion with Calabria provided valuable insights and a call to action for policymakers, industry stakeholders, and the public to prioritize the preservation of appraiser independence and robust collateral risk management practices, which are essential for ensuring a healthy, sustainable housing market.
 

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27 Responses

  1. Avatar Pray Hard says:

    This is nothing new and we didn’t “suspect”, we knew. We are professional observers, after all. This has been going on forever and it isn’t just us. It’s the surveyors, the inspectors, the title companies, the insurance property adjustors. I had an adjustor’s license for about ten years. The last FEMA class I went to consisted of about 400 adjustors who hadn’t had any work in two years. FEMA’s whole point of the class was to tell adjustors to do their jobs right, as if we weren’t aware of that, and don’t bother us. The duplicitous translation of “do your jobs right” was “Do your jobs right unless it made a homeowner or insurance company angry. If they got angry, just bend over and make the numbers work and comply with our guidelines and requirements.” Of course, as in appraising, many times those things are mutually exclusive. At least, that was my interpretation.

    Have any of you taken the new USPAP course? Wow, what imaginations the writers have on appraisers having “bias” against protected classes and how we “might” effect that! Have they even come up with one provable case? Regardless, I’m sure they’ll invent such in the near future.

    As for everything else, nah, never mind.

    14
  2. Avatar Joseph says:

    Mr Calabria probably didn’t say this when he was in charge, he probably approved of the current trend of eliminating appraisers, after all we are too expensive, too slow and “kill” deals that would otherwise go through unhindered, creating more profit for the GSE’s. If ONLY somebody in government would wake up and realize that eliminating appraisals is increasing the risk which will get passed on to the taxpayer again, oh wait, congressmen & women don’t pay much in taxes anyway, not their problem. The common homeowner/borrower has NO idea what is going on and they probably don’t care as long as their loan goes through. Another nail in the coffin….

    5
  3. Avatar Frustrated Appraiser says:

    Well done ARCC and Mr. Calabria. Now to only have someone as the head of FHFA that will actually do their job, and do it properly to make the necessary changes that should have taken place long ago. Isn’t it also revealing that they are failing in their current duties? Conservatorship over FNMA and FRMC is like having the well fed fox watching the hen house. No enforcement of anything, just sleeping on the job.

    5
  4. Avatar Eric says:

    In 2044, an attorney will need an appraisal for a divorce or for an estate, and a homeowner will need an appraisal for a tax reduction. But there will be no appraisers. At least in my neck of the woods, where appraisers under 60 are the babies.

    3
  5. Avatar Lou Stewell says:

    “Trump will fix it”

    4
  6. Avatar Vince Slupski says:

    “Appraisals serve as critical safeguards to protect consumers, lenders, and the broader housing market from the risks of inflated property values and predatory lending practices.” Appraisals didn’t seem to protect individuals or the market in the great boom of the 1980s and subsequent collapse of S&Ls. So we got the current regime of state licensing, mandatory continuing education, regulatory enforcement, etc. And then, the New Order didn’t prevent the boom and bust of the 2000s. So appraisers got the HVCC, insulating appraisers from pressure via AMCs (despite the fact that AMCs had been prime players in the run-up to the Great Financial Crisis). And now we have the boom of the 2020s, to be undoubtedly followed by a crash later in the decade. Face it, appraisals as a risk management tool are not capable of protecting against correlated market risks. So are they good for anything?

    1
    • Avatar Joseph says:

      Yes Vince, appraisals are good for something but only if they are used by the Client/AMC/lender to determine market value. Most of the”clients” out there don’t want appraisals because they show the true market value. The ONLY way FannieMae/FreddieMac make money is by buying/selling mortgages.

      0
  7. Avatar Frank Palatella says:

    You only have to look at the declining number of appraisers in the market to understand where things are headed. In California, we lost 620 licensees over the past year, and will drop below 8000 total licensees in the next few months (down from over 20,000 at the peak). This is a severely greying population, with less than 5% of all active licensees below 30 years old. That is the replacement generation, at this point it’s just math. PAREA won’t fix it, if you don’t learn in the field, you’ll never be as good as prior generations (assuming competent mentoring, of course). The market has spoken, this is a dying profession. It’s just a matter of when, not if, at this point.

    5
  8. Avatar Honest Appraiser says:

    In 2007 they were raising the education requirements nationwide because too many Appraisers were entering the profession. Dudd-Fwank handed the AMC’s a golden ticket to steal our business without disclosure to the client and here we are. Remind me what is the role of an AMC ?? Why are they needed ?? Hopefully DOGE will get this on their list before we all starve.

    2
  9. Avatar Pat Turner says:

    GSEs definition of Friction?
    1. Oversight
    2. Honesty
    3. Transparency

    0
  10. Avatar ohiobeasttwoonesix says:

    “Appraisal bias is an issue that has economic implications on the generational wealth of minorities at all spectrums of the socio-economic scale,” notes Brian Cox, president of the National Society of Real Estate Appraisers (NSREA), a NAREB affiliate. “In addition, the disproportionate minority participation in the appraisal profession is estimated at 3% of a total population of approximately 70,000 appraisers and valuation professionals.”

    https://seattlemedium.com/biased-home-appraisals-black-wealth/

    0
    • Avatar Honest Appraiser says:

      It would appear that minorities have better opportunities than working 70 hours a week to lose $$$ for zero benefits while making $Millions for Middle Management. Go Figure

      0
      • Avatar ohiobeasttwoonesix says:

        no worries…the mortgage broker will estimate value and the CU borg will approve using the independent appraisers data.. they call it appraisal waivers or (value) acceptance. but some borrowers are too risky.

        0
  11. Avatar ohiobeasttwoonesix says:

    December 10, 2024
    The Honorable Sandra Thompson
    Director
    Federal Housing Finance Agency
    400 7th Street, SW
    Washington, DC 20024

    Dear Director Thompson:

    On behalf of the 1.4 million members of the National Association of REALTORS® (NAR), we thank you for your efforts to advance liquidity in the housing finance system over the last four years. However, we respectfully request you halt the planned expansion of Fannie Mae’s and Freddie Mac’s (the GSEs) appraisal waiver programs to entire purchase market in lieu of further analysis and public input. This program poses serious consequences for consumers and the housing finance system and deserves analysis of the quality of valuations, the impact to the market,
    consumer protections, impact to the housing finance system, and adverse incentives for Fannie Mae and Freddie Mac and what this means for safety and soundness.

    As NAR has previously commented, the equal credit opportunity act (ECOA) requires creditors to provide consumers with any a copy of an appraisal or valuation connected to the application for a loan based on a residential property. ECOA states that the term valuation includes, “any estimate of the value of a dwelling developed in connection with a creditor’s decision to provide credit, including those values developed pursuant to a policy of a government sponsored enterprise or by an automated valuation model, a broker price opinion, or other methodology or
    mechanism.”1 Because the GSEs are providing waivers to this important consumer protection as recognized in ECOA, the GSEs should be obligated to provide any valuation they base a waiver on to the consumer since it is used in the credit decision by the originator via the originator’s choice to utilize the waiver.

    https://narfocus.com/file/7463

    1
    • Baggins Baggins says:

      What an excellent document link. Suggest everyone read the entire four page document. Saved that. In the most remarkable turn around, someone on top of the ladder finally wrote a serious piece which did not use the propagandized fictitious terms such as; appraisal bias, disparate impact, or anything of that nature. We could post at least two dozen Appraisers Blogs articles from only the past few years that are directly relevant to this letter.

      “Potential for systemic abuse”… Potential nothing. It’s happening right now. Whatever reliability the past ten years or more of CU data represented when they installed the avm and waiver systems became immediately irrelevant as market conditions changed substantially in the same period of time. Will any of the big players dare to tackle the FNMA wholesale disposition program? He highlights the amc industry relationship to PDC programs, by calling for transparent disclosure where the service was sourced from, requesting more detailed information on the program and participants alleged qualifications.

      The bright side appears to be that realty agents are questioning the legitimacy of the waiver and pdc programs as well. I remain hopeful that DOGE may be of assistance in saving the residential appraisal industry side which focuses on mortgage lending. There may only be forty thousand such appraisers whom service GSE’s, half of which boycott amc’s across the board, and another forty thousand appraisers whom would return to GSE service to the American consumer were the FHFA, GSE’s, AMC companies, and non profits leeching off this system to be reigned in. That number could easily have been two hundred thousand or more licensed appraisers if not for the havoc the low fee fastest service model imposed by the AMC industry, among other odious rules, regulations, and intimidation campaigns of late. ‘Appraisal modernization’.

      Ohio. Thank you and look forward to reading more of your posts here on the blogs.

      1
      • Avatar ohiobeasttwoonesix says:

        thanks…currently i am an outcast of the AF…they do not like or understand the truth

        1
        • Baggins Baggins says:

          The primary difference between this site and the Appraisers Forum is the absence of a login wall to access all content, and the stance on independent journalism. A substantial portion of content is held behind a login wall at the AF, it’s difficult to find relevant information. The AF is subjected to a constant stream of censorship and content take down requests, something the independent site owner here does not abide.

          This Appraisers Blogs site is where serious researchers go to learn about the appraisal industry. The AF is a place to go and ask basic questions, achieve an elementary understanding of the industry and process, spend time chatting, more like social networking than serious journalism and research. This site has a remarkable volume of subscribers, many whom hold key positions throughout several industries. Read count has increased substantially over the years.

          A great deal of content which the general public is only recently trying to make sense of, relating to housing availability, affordability, transparent disclosure, and credit access issues, is actually long since detailed to the letter on this site. The level of fraud ongoing in the housing markets and associated access systems has reached truly epic levels. Appraisal modernization!

          0
  12. Avatar Joseph says:

    Excellent; but will this fall on deaf ears? One can only hope the new administration will realize another mortgage crisis is looming if waivers and PDC reports take over. I met a realtor in a neighboring City in NY State that told me he did on average 5 PDC assignments a week this year for *lear *apital, receiving $150-$200 per assignment. He doesn’t see the sense of it all but is willing to do them, if they are willing to pay him. At least he is a NY State licensed person acting as a PDC and not some jamoke off the street.

    0
  13. Avatar ohiobeasttwoonesix says:

    What does UPD or Universal Property Data refer to?

    The two GES’s have recently standardized the submission of these two products to a unified data standard. Providers and tech companies like Jaro, need to meet this standard to submit these reports. To learn more check out our blog on the UPD standard and what it means for the industry.

    The introduction of ACE+PDR by Freddie Mac and Value Acceptance + PDC by Fannie Mae marks a significant step forward in modernizing property valuation. These products not only enhance efficiency and consistency but also help reduce biases and address the capacity issues within the appraiser community. Understanding and leveraging these innovative solutions can provide substantial benefits for both lenders and borrowers in the mortgage industry.

    https://www.tryjaro.com/blog/property-inspection-products—ace-pdr-and-value-acceptance-pdc-explained

    they have waivers but won’t use them for properties in marin city…that is the true definition of bias

    1
    • Avatar ohiobeasttwoonesix says:

      How It Works
      The lender receives an offer for property data from Desktop Underwriter (DU), along with the value acceptance.
      The lender arranges for the collection of property data.
      Either the lender or a service provider submits the results of the property data collection to Fannie Mae’s Application Programming Interface (API).

      The following service providers have aligned with Fannie Mae for Value Acceptance + Property Data:

      Asteroom
      Accurate Group, LLC
      Class Valuation
      Clear Capital
      Mueller Services, Inc
      Solidify
      Service Link
      Valuation Connect

      What The Future Holds

      Appraisals are no longer the default requirement for establishing market value through this latest offering by Fannie Mae. As part of Fannie Mae’s efforts to improve the efficiency and accuracy of the home valuation process, lenders can expect to see a reduction in turnaround times and borrower costs. The long-awaited changes to the valuation process went into effect on April 15, 2023, and are being heralded as a game-changer for the industry. Yet, others remain skeptical about the possible negative impact of relying on inspectors to do the job of trained appraisers.

      https://valuelinksoftware.com/value-acceptance-property-data-program-for-lenders

      they have already divorced appraisers…but we are still in denial

      0
      • Baggins Baggins says:

        Another Mercury systems copy cat. ‘reduce biases’. Amc networks and ensuing technology, built upon lies and deception, no need for any of that in the first place. Jaro is one of hundreds of technical software programs developed by Ascent; A british AI focused tech company. They’re exploiting every possible market segment which will allow their presence.

        https://www.housingwire.com/company-profile/ascent-software-group/

        Trading competency for speed. Trading licensed specialists for better software stats. A 300% revenue increase and 80% better ability for lenders to exercise restraint of trade practices in order to control the appraisers non-independent fee. Putting an entire nations worth of mortgage lending borrowers and home renters underwater in an overpriced over valued housing market pays, and pays very well. Appraisal modernization! All the big amc companies whom defrauded consumers of billions of dollars which caused a hundred thousand licensed professional appraisers to never materialize, and sixty thousand more existing appraisers to boycott their services entirely, they’re all in on this. The fact GSE heads embraced and promoted this. They’re all in bed together, the big con.

        https://appraisersblogs.com/lack-of-evidence-appraiser-challenges-discrimination-claims/#comment-43935

        1

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ARCC Discussion Exposes GSEs Agenda to Reduce Appraisal “Friction”

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