De Minimus Impact on the Appraisal Industry
THREE changes to the de minimus have been experienced, with very little negative impact to appraising as a whole…
Folks, anytime there is a major change proposed or activated within the appraisal profession, many appraisers go into hyperventilation mode.
The action taken on August 20, 2019, by the FDIC to raise the de minimus LOAN VALUE from $250,000 to $400,000 has had such an effect among many, but it may not be as dire as anticipated.
An appraiser sent this 2018 HousingWire article to me earlier today:
Within the body of the article, this is stated, which is taken from the original proposal as published in the Federal Register:
It’s important to note that this rule would not apply to loans wholly or partially insured or guaranteed by, or eligible for sale to, a government agency or government-sponsored agency.
That means that the appraisal exemption would not apply to loans sold to or guaranteed by the Federal Housing Administration, Department of Housing and Urban Development, Department of Veterans Affairs, Fannie Mae, or Freddie Mac.”
I am presuming the action taken on August 20, 2019, by the FDIC contains such provisions, although I have not read the actual order.
Another appraiser chatted with me today. This person has been around appraising since dirt was invented, and said that THREE changes to the de minimus have been experienced, with very little negative impact to appraising as a whole. The appraiser said that appraisers actually were busier after the changes were implemented! So, if history repeats, that could be a positive sign.
Another person more familiar with the Wash DC processes said the Effective Date of the new de minimus will be the DAY AFTER it is published in the Federal Register, which is required before any law or regulation goes into effect. So it will be a week or so before that happens.
All in all, maybe our feathers are fluffed too much, and we need to assume the lotus position and breathe deeply. Panic and hyperventilation may not suit us well.
On the other hand, I’m going to suggest, as others have done, that appraisers take steps to broaden their businesses into other types of property appraisal assignments not directly related to mortgage lending.
Real property appraising probably always will be a needed occupation. But the details of that occupation are changing. Don’t be afraid of having the cheese moved. Instead, find a way to capture it!
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While I agree with the impact of this decision may not be as a big deal as some are claiming, but when you add in the fact the GSE’s are issuing waivers and there is a push for more evaluations and hybrids it has the potential to be a much greater impact. Time will tell on how this all plays out.
Another concern, and a happy one, more amcs are going under. Any appraiser who does mostly amc work should be looking for other avenues to diversify. The impact of all the changes happening will impact each appraiser who does lender work. Factor in the depression of fees and the false claim of an appraisal shortage is being executed to its full potential as many will move to other professions. As you said, every appraiser need to diversify their business.
One thing is for sure, as long as the investors accept the mortgages without appraisals the lenders will continue to do the bare minimum. Maybe a pipe dream, but it would be nice if the lenders were required to own the loans they make without appraisals till they are paid in full.
Death by a thousand cuts, still equals death.
Seek the truth.
…it may not be as dire? So who is protecting the public trust in these situations, the lender, the amc, the government?
These lenders have nothing to lose. If it is as dire as appraisers are warning then they’ll just tap the taxpayers again and again. No worries right?!
Nobody has a ‘right’ to get a safe loan. In fact, there is no such thing as a safe loan. A loan is nothing more than a contract to pay. If consumers are willing to sign such contracts without checks and balances in place, that’s the risk they accept. Consumers and ‘the public’ will first need to protect themselves before anyone else will have have an open door to assist them.
https:// www. youtube.com/ watch?v=ywsc4JhYYxE
The above link is intentionally spaced out, so that it does not bring the oversized embedded player.
With the increased threshold approved by the FDIC a total of 72% of home mortgage transactions will be exempt from the Dodd-Frank Act’s rules protecting the integrity of appraisals.
That’s sounds pretty significant to me….
As I have always said, we appraisers are only a necessary evil to the mortgage banker, Realtor, borrower and seller. After the forclosed borrower is finished with the house, does it really matter what the value is as of the effective date, after they trashed the house to hell. Just give them their money. What distressed, beat up, shit on property is ever worth what is was when it was purchased. I think that is what they are thinking. We appraisers need to look for a new occupation……
I believe the appropriate answer to that problem would be private insurance. Stop thinking like a lender. Appraisal is an application of the check and balance to power, a fundamental inclusion in a free society, self governed with contract law. The necessary evil is that we have to abide lenders in the first place. But really, that’s always been a voluntary consumer option. If people don’t like the way companies do business, the solution is to stop doing business with them.
You can’t make me take out a superfluous loan, boy! OH billy, they really do jump for those loan products don’t they? They got exactly what they asked for. Know your history, or be condemned to repeat it. Consumers should not be surprised that if they entrust the title of their property to a lender, that the lender will have a motivation to keep it for themselves if any term of the contractual obligation is breached.
With another round of quantitative easing just around the corner, and a mountain of previous QE finally coming home to roost as negative rates are hitting various supportive markets, the raise in demins will be yesterdays news in very short order. Rampant inflation is here. The final result will be of course, higher taxes.
But, um, well… Explain why I have not seen an under $250k request in 10 years. Explain that.
They admit that over 70% of our ml workload will go away. As if losing over 90% of available full fee orders over the past decade was something so easily brushed off.
Checks and balances are a fundamental cornerstone of a sound economic system managed by We The People. If those checks and balances are absent, that is a clear indication we are no longer in control of our own financial systems. How’s ‘globalism’ working out for you personally?
Go get another loan from a lender to ease your pain. I heard they have brand new offerings!
I think you underestimate the number of small banks making small loans that are outside secondary market. They are a significant part of lending, and outside of residential they are even more impactful since most small loans for small business and small farms are made by local community banks. $400k means 100% of all but the largest industries in my community are eligible for exemption from an appraisal.
But things could change dramatically if and when FNMA decide to fully enact the the bifurcated process and the 1004-p form..
They still need licensed appraisers to work for slave wages. The bottom feeders currently doing this garbage will be run out of business from low fees, disciplinary actions against their license and increased E& O premiums. States have already seen hybrid complaints come in and they are not holding back on actions against the appraisers completing these products.