Category: Automated Valuation Models

How Synthetic Appraisals Fuel a Fraud-Filled Housing Bubble 13

How Deep Fakes Have Burrowed Into Home Finance

Fannie and Freddie have been toiling at the coalface of “synthetic appraisals” – “black box valuations.”  In the 1960s, technocrats at the Pentagon used the latest IBM mainframe computers to analyze complex data related to the Vietnam War. Planners fed punch cards into the machines and ran endless simulations, hoping to determine strategies for winning the war. In 1967, analysts finally asked the computer, “When will we win in Vietnam?” The machine’s answer: “You won in 1965.” It exposed the hubris and naiveté of those who believed computer-generated models could capture and quantify millions of complex human interactions on the...

Appraisal / Appraisal News / Appraisers News / Automated Valuation Models / AVM / Fannie Mae - Freddie Mac

County Assessors' Standards - AVM Final Rule Guidance 16

County Assessors’ Standards | AVM Final Rule Guidance

County Assessors have the advantage of being able to calibrate their models specifically for one market, allowing for a more tailored and precise approach.  The OCC, FDIC, NCUA, CFPB, and FHFA (collectively, the Agencies) are adopting a final rule to implement AVM quality control standards mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The quality control standards apply to mortgage originators and secondary market investors in determining the value of a dwelling that is the collateral for mortgage financing. Under the final rule, institutions involved in specific credit decisions or securitization activities are required to...

Appraisal / Appraisal News / Appraisers News / Automated Valuation Models / AVM / CFPB

Reforming the Appraisal Review Process: The Illogical Reality of Mortgage Appraisal Reviews 27

The Illogical Reality of Mortgage Appraisal Reviews 

Reforming the appraisal review process is essential to maintaining the integrity of the real estate market and protecting consumers and homeowners.  In mortgage financing, the appraisal process is often seen as the foundation of accurate property valuation and market stability. However, beneath this façade of reliability lies a troubling rift: while real estate appraisers must navigate stringent licensing protocols and scrutiny, the individuals reviewing the appraisals often operate with minimal oversight, instead leaning heavily on automated systems and algorithms. This stark disparity not only undermines the credibility of the review process but also revives the threat of past missteps, once...

Appraisal / Appraisal News / Appraisers News / AQB / Automated Valuation Models / AVM

Fannie Mae Census Block Grid Adjustment Raises Redlining Concerns 29

Fannie Mae ‘Census Block Grid’ Adjustment Raises Redlining Concerns

“FNMA’s collateral underwriter tool has a line item adjustment it makes on every comparable called Census Block Grid.”  In a recent discussion within the comments section of an article titled ‘The Censorship of Appraisers,’ an appraiser shared a concerning statement from an underwriter about an adjustment made by Fannie Mae’s Collateral Underwriter tool. The underwriter revealed that the tool uses a ‘Census Block Grid’ adjustment (CBG) to evaluate comparable property values. This adjustment, which modifies values based on median home values within specific census blocks, raises concerns for potentially reflecting practices akin to redlining – a discriminatory practice that is...

Appraisal / Appraisal News / Appraisers News / Automated Valuation Models / AVM / Collateral Underwriter

Fannie Mae to State of Maryland: DROP DEAD 33

Fannie Mae to Maryland: DROP DEAD

Mortgage giant Fannie Mae and her twin, Freddie Mac, have a message for the State of Maryland: Kindly disintegrate. A snubbed Maryland task force is close to filing its report to the governor. It attempted, in vain, to obtain detailed information about the government-sponsored twins’ valuation algorithms – tools that have replaced many home appraisals in the Old-Line State and resulted, some contend, in a feedback loop and run-up in home prices. The task force was formed on the reasonable premise that the state has an interest in the twins’ activities, since Marylanders will be left with the clean-up costs,...

Appraisal News / Appraisers News / Automated Valuation Models / AVM / Collateral Underwriter / CU

The One-Mile Rule: Prudent Policy or Modern Day Redlining? 8

The One-Mile Rule: Prudent Policy or Modern Day Redlining?

…whether through redlined maps or implicit “one-mile rule,” the result can be undervalued properties in historically marginalized neighborhoods.  Throughout the history of mortgage banking and lending in the United States, underwriting policies have significantly influenced the appraisal process for home purchases and refinances. Appraisers must follow underwriter appraisal review guidelines meticulously to ensure their appraisal reports are accepted by the lender. Unfortunately, in the past, these policies became the basis for redlining, wherein certain communities were systematically denied access to mortgage credit. In this article, we delve into the historical context of underwriting policies and their influence on the appraisal...

Appraisal / Appraisal News / Appraisers News / Automated Valuation Models / AVM / Collateral Underwriter

AI to Counter the Flawed Appraiser Bias Narrative 29

AI to Counter Flawed Appraiser Bias Narrative

In reality, appraisers have a great story to tell, but we have a long way to go to refocus the terribly flawed “appraiser bias” narrative onto facts and science.  Last week’s email from Cindy Chance, the CEO of the Appraisal Institute, marks an important and long overdue shift in the organization’s approach to addressing accusations of bias in the appraisal profession. For too long, appraisers have faced sweeping claims that their valuations are biased against certain groups, despite appraisers’ ethical standards, rigorous training, and lack of financial stake in transactions. As Chance acknowledges, the Institute should have done more to...

AI / Appraisal / Appraisal Institute / Appraisal News / Appraisal Organizations / Appraisers News

Is the GSEs "Appraisal Modernization" Really Just Mass Appraisal? 18

Is the GSE’s “Appraisal Modernization” Really Just Mass Appraisal?

Mass Appraisal tend to exhibit a regressive nature…  In the intricate landscape of real estate mortgage financing, the notion of appraisal waivers recently dubbed “Value Acceptance”, by the Government Sponsored Enterprises (GSEs), has stirred considerable debate. The most recent statistics show Value Acceptance accounts for up to 40% of all mortgage approvals. It is presented as part of the GSEs “Appraisal Modernization” initiative, which aims to streamline the mortgage appraisal process. However, a closer examination reveals potential drawbacks, raising questions about its efficacy and impact on the housing market. Despite its roots in a methodology designed to support appraisers, Value...

Appraisal / Appraisal News / Appraisers News / Automated Valuation Models / AVM / Collateral Underwriter

Recap of the 4th Appraisal Bias Hearing 9

Recap of the 4th ASC Appraisal Bias Hearing

On February 13th, 2024, the fourth ASC appraisal bias hearing took place. For those who were unable to attend, the video of the hearing has been included below. The hearing was a crucial event for the appraisal industry, and it is important for all appraisers to be aware of the discussions and topics addressed. The panel of witnesses included: David Bunton, President, The Appraisal Foundation E.C. Neelly IV, Executive Director, Mississippi Real Estate Appraisal Board Maureen Sweeney, Principal, Maureen Sweeney, Real Estate Appraiser Ltd. Melissa Tran, Director, Texas Appraiser Licensing and Certification Board Jillian White, Chief Executive Officer, Appraisal Insights...

AMC / Appraisal / Appraisal Management Companies / Appraisal News / Appraisal Organizations / Appraisal Subcommittee

Appraisers Destroying Goliath's Messaging 35

Appraisers Destroying Goliath’s Messaging

Goliath’s strength is in his messaging. It is appraisers who are destroying the message.  The seeming destruction of the appraisal profession by the federal government, GSEs and lending stakeholders is a collective action problem. Appraisers are responding to new GSE and lending dictates with reactions based on our own personal well-being. Not enough people speak up or stand up to change the trajectory of the narrative. Or so it seems. Appraisal waivers, hybrid appraisals, automated valuation models, all based on the last 13 years of data collection by an entity I will call Goliath has created a paradoxical inversion of...

Appraisal / Appraisal News / Appraisers News / Automated Valuation Models / AVM / HUD

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