Dear Representative, FNMA Has Gone Rogue!
Dear representative, waiving/eliminating property appraisal for lending purposes is wanton recklessness.
Fannie Mae’s decision to waive/eliminate property appraisal for lending purposes is nothing more than wanton recklessness that could have serious repercussions in the future.
The truth of the matter is that appraisals are an essential part of any mortgage transaction and should not be taken lightly or eliminated without due consideration. Without them, there can be no assurance as to whether a homebuyer will get what they pay for or if lenders will make bad investments with their money.
In short, waiving/eliminating property appraisal requirements puts everyone at risk – from buyers and sellers to lenders and investors alike. That’s why it’s important for all stakeholders in the industry – including real estate professionals – to speak up now by sending letters of protest directly to our representatives!
We urge everyone to take action and speak up on behalf of our industry. It won’t take long: just personalize one of these five pre-written letters below and send it out today! We must stand united against this reckless decision by Fannie Mae. So let your voice be heard now before it’s too late!
Pat Turner, VaCAP President, has prepared 4 pre-written letters.
Letter 1:
Dear Representative,
Fannie Mae has just taken a giant step that will endanger the safety and soundness of the United States Financial system.
As of April 1, 2023 they will actively encourage and promote the complete abolition for the need of appraisals for residential mortgages.
This action is irresponsible and perhaps even illegal under Dodd-Frank Act. The action will only worsen the public’s current uneasiness regarding our banking and lending systems. How can Fannie do this and still be under conservatorship?
Please look into this immediately.
Highest regards,
Letter 2:
Dear Representative,
Being a real estate appraiser for the last ___ years in Virginia, I have witnessed many, many changes in our lending practices in residential properties.
However, the latest maneuver by Fannie Mae is so dangerous that it will threaten the safety and soundness of the financial stability of the United States.
Their recent move takes effect on April 1 per their announcement just released on March 1, 2023. Fannie Mae is to do away with the requirement for appraisals for federally related residential real estate loans. This move is more than dangerous, it is reckless beyond words. It completely defies LOGIC.
Fannie Mae is still under conservatorship. Why hasn’t Congress been informed or participated in this undertaking? It has just been 15 years ago that Fannie Mae lied to the world and caused the Great Recession.
Please step in and restrain this insanity.
Respectfully,
Letter 3:
Dear Representative,
The mortgage market of the United States of America has seen many ups and downs.
Over the last several years there has been unprecedented volumes of sales and refinance activity in the residential sector. That frenzy has dissipated.
However, Fannie Mae is determined to endanger the system’s security by doing away with property appraisals. It is scheduled to do so as of April 1, 2023. This is a so-called cure for delays of the recent market frenzy. That frenzy was a once in a lifetime occurrence.
The purchase of a home is the largest investment an American citizen undertakes in his/her life. We have history that proves mortgage brokers gamed the system on numerous occasions. If we remove the appraisal, we have removed the referee from the game. All rules can and will be broken. Appraisals are also important to the financial stability of the United States.
This dangerous step puts the American economy at risk, very similar to 2006-2009. When the American public learns that this recklessness has been allowed, there will be unpleasant backlash, as they will not understand how this could happen again.
Please look into this issue as soon as possible.
Letter 4:
Dear Representative,
Being a real estate appraiser for over ___ years in Virginia has afforded me the opportunities to live through numerous business cycles, some good and some bad.
In my judgement Fannie Mae has stepped across all bounds of propriety and responsibility with the new Fannie Mae Selling Guidelines. (March 1, 2023)
As you recognize, the last three years (+/_) seen a shortage of housing. That demand fueled property prices to rise at figures near or above the run-up in 2006-2008. Demand for all services in the real estate field stretched the servicers beyond their capabilities. Prices were bid up, many times to unreasonable levels. Sheer volume choked the system.
Fannie Mae’s solution is to do away with appraisals, lower credit scores, and relax all lending criteria. This is 2005-2007 all over again. This action provides more and more opportunities for mortgage fraud. Additionally, the results will be less and less affordable housing in America.
Fannie Mae has grossly overstepped its authority because the government has been asleep during their conservatorship. Abolishing appraisals for purchase and refinance purposes?
When the everyday American learns of this the backlash will be enormous. And guess what? Who are you going to blame? It will not be the professional real estate appraisers.
Please investigate this dangerously irresponsible action.
Sincerely,
Below is another example written by Carl Schneider:
Dear Representative,
FHFA increased Fannie Mae and Freddie Mac single family loan limits up to $1,089,300 in certain high-cost areas in the United States and $726,200 in the rest of the country for 2023. Crossing the million-dollar threshold should cause Congress and all stakeholders to actively consider how our housing finance system operates today. In addition to the FHFA announcement Fannie Mae announced March 1, 2023 “Value Acceptance” raising key concerns for:
- Excessively high loan limits exacerbating the affordability crisis. House prices have grown much faster than household income, in large part due to supply constraints and low-cost financing. Taxpayer backing of ever-increasing loan sizes provides a subsidy that results in slightly lower mortgage rates which, in turn, encourages people to buy more expensive homes. Ultimately, such backing feeds the runup in house prices, exacerbating the affordability challenges we face in today’s supply-constrained marketplace.
- Over reliance on government-backing. Per data from the Urban Institute, when Fannie Mae and Freddie Mac went into conservatorship more than fourteen years ago, 45 percent of the outstanding mortgage market was funded through Ginnie Mae, Fannie Mae, and Freddie Mac. Today, the government backs 67 percent of outstanding mortgages through securitization by these three entities. This is an enormous increase in the reliance upon government-and taxpayer-backing.
- Waiving/eliminating property appraisal for lending purposes is wanton recklessness. Value Acceptance, through Desktop Underwriter® (DU®) and powered by Collateral Underwriter® (CU®). Are offers by Fannie Mae to waive the appraisal for eligible single-family transactions under $1 million. A program dismissing the most fundamental element for securing banking and mortgage real estate lending – a[n] traditional appraisal.
“The property value the lender enters in DU may be based on:
- the lender’s estimate of value, determined at the discretion of the lender, or
- the borrower’s estimate of value.
Fannie Mae does not warrant that the estimated value provided by the lender is the actual value of the subject property. The lender may not make any statements to any third party (including the borrower) that Fannie Mae performed any kind of appraisal or valuation of the property (see Fannie Mae Selling Guide, A2-2-06, Representations and Warranties on Property Value (03/01/2023)
https://selling-guide.fanniemae.com/Selling-Guide/Doing-Business-with-Fannie-Mae/Subpart-A2-Lender-Contract/Chapter-A2-2-Contractual-Representations-and-Warranties/1645976621/A2-2-06-Representations-and-Warranties-on-Property-Value-03-01
2023.htm#Representations.20and.20Warranties.20Related.20to.20Value.20Acceptance).”
- History must not be repeated. 2007 New York Attorney General, Andrew Cuomo, issued probe of the home mortgage industry. In its mortgage investigation, the New York attorney general’s office issued hundreds of subpoenas uncovering “fundamental flaws” in two areas of the market — appraisals and securitization of mortgage loans. Fannie Mae was taken over by the Federal Housing Finance Agency (FHFA) in September 2008 due to its illiquid bond market during the mortgage crisis. A time also labelled “The Great Recession” the economic downturn was the longest since World War II! The Cuomo investigation resulted in settlement with Fannie Mae and Freddie Mac creating the Home Valuation Code of Conduct (HVCC) subsequently sunset by the Dodd-Frank Act in 2011. In January 2013 the Government Accountability Office (GAO) published a study “…suggest[ing] losses associated with the recent crisis could range from a few trillion dollars to over $10 trillion.” Estimates since that time report as high as $12.3 trillion. Per Susan M. Wachter, the Albert Sussman Professor of Real Estate, and Professor of Finance at The Wharton School of the University of Pennsylvania. “…a big mistake that fueled the housing bubble was the rush to lend money to home buyers regardless of their ability to pay…”
FEDERAL NATIONAL MORTGAGE ASSOCIATION CHARTER ACT; Title III of National Housing Act, 12 U.S.C. 1716 et seq. As amended through July 25, 2019; SEC. 301. DECLARATION OF PURPOSES OF TITLE
The Congress declares that the purposes of this title are to establish secondary market facilities for residential mortgages, to provide that the operations thereof shall be financed by private capital to the maximum extent feasible, and to authorize such facilities to—
- provide stability in the secondary market for residential mortgages;
- respond appropriately the private capital market;
- provide ongoing assistance to the secondary market for residential mortgages (including activities relating to mortgages on housing for low-and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.
- promote access to mortgage credit throughout the Nation (including central cities, rural areas, and underserved area) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and
- manage and liquidate federally owned mortgage portfolios in an orderly manner, with a minimum of adverse effect upon the residential mortgage market and minimum loss to the Federal Government.
The question of appropriate governmental role in housing finance systems has gone unanswered for more than fourteen years. Amidst most recent bank failures, inflation, and increasing mortgage delinquencies. Fannie Mae in my opinion is pursuing a “rush” to fund loans. And without traditional appraisal a destabilizing step likely to bring about adverse effect in the residential mortgage market and losses to the Federal Government. Therefore; as constituent I request your Office, Esteemed Colleagues, Congressional Committees on Banking, Finance and Urban Affairs of the House of Representatives, the Committee on Banking, Housing and Urban Affairs of the Senate, and the Director of the Federal Housing Finance Agency take up these questions reviewing FHFA oversight of Fannie Mae in exceeding intent and scope of the Federal National Mortgage Association Act; Title III of National Housing Act, 12 U.S.C. 1716 et seq. And for other than streamline refinance loans (simple interest rate reduction) adding prohibition for Fannie Mae funding of any mortgage loan without a[n] traditional appraisal.
Should you have any questions or wish to discuss my concerns and request do not hesitate to contact me.
Respectfully,
- Outrage Over Connect by ValueLink’s New Monthly “Junk Fee” - November 27, 2024
- ARCC Discussion Exposes GSEs Agenda to Reduce Appraisal “Friction” - November 22, 2024
- FHFA’s Appraisal Waivers Expansion - October 29, 2024
https://www.fhfaoig.gov/contact-us
FHFA OIG contact
https://www.house.gov/representatives/find-your-representative
Find your representative.
https://singlefamily.fanniemae.com/appraiser-contact-us-form
Contact FNMA appraisal department directly.
https://financialservices.house.gov/contact/contactform.htm
Financial services committee.
https://www.consumerfinance.gov/about-us/blog/turning-complaint-into-action-cfpb-works-you/
CFPB complaints page (w/ instruction intro).
Regulatory structure, article reference;
https://appraisersblogs.com/how-u-s-home-valuations-are-being-subverted
‘Onlookers should not be optimistic about the corrective mechanisms of Freddie and Fannie’s regulator, the Federal Housing Finance Agency. This agency tends to blow with the political winds. The only actual regulator of Freddie and Fannie is the agency’s Inspector General’s Office, though the latter lacks the manpower to do the job of the regulator.’
Thanks wrote to them all!!! Everyone do this now!
Done! Thanks for the links.
Done. Thank you Pat and Carl!
Hate to say I told you so, Lyle Radke, Dir of collateral policy, is the culprit. I don’t think there is any changing his mind other than hearing from the conservator for Fannie. Trump reversed Dodd Frank, but it looks like they might be reconsidering that.
Done. It took me about 5 minutes.
Please spell-check your letters. I found several misspelled words in the letter I copied.
This change puts everyone at risk and will affect every taxpayer. Ask your friends, neighbors, family and colleagues to do the same.
Good advice!
Thanks for this!
Notice that the Appraisal Institute with it’s four staff lawyers and three staff lobbyists is once again asleep at the switch. Crickets from the Appraisal Institute. Shame on them. The Appraisal Institute has the resources to lead off a letter writing campaign to all Federal Regulatory Agencies, Congressmen and US Senators and produce YouTube videos alerting homeowners and homebuyers who are paying lenders for quality valuation services while only receiving substandard valuation services while the lenders and AMC’s pocket the difference. William Barnes, SRA
Hi Will. I just sort of tossed up links as they came to mind. Let me pull up AI, AQB, TAF. Forgot about them. Sort of because if they were doing their jobs in the first place, things would not have gotten this far. Yeah, and now FNMA is doling out special favors to amc’s to make these modernization efforts happen. They’re all behaving in such a corrupt incompetent manner, it’s unbelievable. Special favors for green builders, ansi group, brookings, amc’s, hedge funds, investment firms, book publishers. Don’t even worry about the regular people whom want affordable housing and fair access, that can be subsidized on the taxpayers dime with locally based housing programs. FNMA is in it for their partner agencies whom they give sweetheart deals ahead of regular citizens, not the people. Which is why writing the CFPB is also important.
Appraisal Institute;
https://www.appraisalinstitute.org/about/contact-us/
AQB board contact.
https://www.appraisalfoundation.org/imis/TAF/About_Us/TAF_Boards_and_Panels/Appraiser_Qualifications_Board/TAF/Appraiser_Qualifications_Board.aspx
TAF list of contacts.
https://appraisalfoundation.org/imis/TAF/About_Us/Contact_Us/TAF/Contact_Us.aspx
How to hold people accountable, when they have long since carved out a special place where they investigate themselves and are above the law, above scrutiny, with a direct mainline into taxpayer funds which flows directly into their pockets and the pockets of their special favor industry partners.
Hell write the amc trade group while you’re at it. They’re about to lose quite a few member dues themselves.
http://revaa.org/contact/
National Association of Realtors.
https://www.nar.realtor/contact-us
You, SIr, are a national treasure. Keep up the great work.
Done on my end
Done.
Seek the truth.
Their AIN’T One truth.
Say it; do it, sign it. then defend it.
Whilst writing to your congress person you may also want to ask that Fannie and Freddie be removed from conservativeship as they have been kept there for more than a dozen years whilst making money. Of course no one ever talks about this nor the fact that they were required to grant mortgages even when knowing they’d default but that’s the government at work for you.
Done!
I’ve started a petition on change.org as an added vehicle to get the attention of others in the hope we can garner enough signatures so the media and government officials will take notice. That said, it is probably too late but it’s worth the effort.
https://chng.it/gGTGP4X9
Appraisers have typically been the worst people to deal with in the process (5 years as a realtor and home buyer) there is little to no oversight of their work and they act like God’s lording over the whole industry. Far too often I have seen deals nearly free fall and buyers get burned by low appraisal. The lender doesn’t get affected the buyers lose money out of picket more often than not. It’s about time they start having to come with a better standard of practice to compete and have to work to keep their job
Candice; in every profession there are some “questionable” apples, even yours, so I understand your frustration. In my 18 years as an appraiser I have had to a handful of times “kill a deal” so to speak as the purchase price in the contract drawn up by a realtor was WAY over what an appraisal would show as the true fair market value. I believe that truth be told a seller, buyer, real estate agent and lender do not care what a home is actually worth they all just want the deal to go through. Ever since UAD appraisals came to be FannieMae & FreddieMac have been wanting to get rid of us, appraisers just get in the way of everyone making money, this action by FannieMae will just lead to more foreclosures in 5 years, which will lead to more foreclosure appraisals by appraisers, which will lead to more losses being put onto the taxpayers, including you Candice. But who cares, just kick the can down the road again, I’ll be around in 5 years to reap the benefit of this illegal and unethical act by the biggest excuse for a NGO there is.
And they helped cause the 2008 bubble, but we still do need them or an algorithm like them
Oh Dear Candice, your inexperience and lack of critical thinking skills is showing. Tisk, tisk! I’ve had a real estate sales and broker licenses in three states over the years and here’s what I’ve noticed during my 45-year appraisal career: 1) Real estate agents learn next to nothing about value or valuation principles during their 90-hour real estate licensing classes, 2) Almost all agents have absolutely no interest in learning anything regarding how to properly value real estate prior to listing, 3) Real estate agents continue to write poor listings with minimal and/or incorrect data, 4) Real estate agents have no interest in learning anything about lender minimum property condition requirements, 5) Almost all real estate agents have no idea what a “comparable sale” is and cannot substantiate the listing price when asked, 6) Real estate agents are nothing more than used car salesmen with a license, and 7) I’ve yet to meet a real estate agent who was capable of completing an appraisal assignment and I’ve fired a few agents who were my appraisal trainee’s. Why you ask? Because I got tired of arguing with real estate salesmen in my office regarding why a one story home with a basement was not a two story home, that’s why. In summation, agents are not analysts but sales people. Appraisers exist so that agents cannot rip off the buying public and crash the lending system with bad real estate deals. It’s just that simple.
Well said!!
Spot on Will. I guess I am one of the “old, white racist appraisers” having been in the industry for 38 years. Like you I have lived through every imaginable berating, indignity and excuse making by people who have never taken the time or made the effort to find out what we actually do. It is much easier to cast unsupported conjecture than actually do the responsible thing. Sure, there are bad players in any business. including realtors, however no appraiser I know blames the realtor industry as a whole for the short falls of a few; and I’ve seen plenty in my 38 years. It is ignorant to think because a property was not listed properly and giving the seller and buyer unrealistic expectations, that somehow it is the appraiser’s fault. Seems to be todays “jelly of the month club” to blame everything on everybody else. The market determines value not one particular buyer and besides, if someone wants to overpay for an overpriced property, they can do just that, just come up with the additional funding. Appraisers are not denying them the ability to purchase the property. The appraiser simply performs the analytic analysis of what the marketplace is telling him or her, nothing more. Yet it seems like some people out there think we are some evil, corrupt individuals with an evil agenda. I’m sorry to disappoint you all but, for the most part, we are just like you; regular, every day, family & vacation loving people, who get up every morning, like the rest of you, and go to work; no agenda to see who we can wreak havoc on today. Sorry to burst your bubble but we are not the narcissistic “Gods” you make us out to be……give me a break.
Perfect analysis Will!
You seem to be saying appraisers should just rubber stamp everything and there should be oversight to require them to rubber stamp. Any appraisal below contract is clearly a bad one in your eyes, and of course I can’t blame you because you have a bias in the transaction.
Well Candice, are you dealing with true independent appraisers, or appraisers whom work within the amc appraisal management circuit. Two distinctly different types of appraisers with distinctly different work ethic.
We could only wish Realtors (which is a trade name and should be capitalized), knew what they were doing in the first place, all the time without question. And if that somehow magically became true, that commission based people are never biased, the industry would not need the stabilization effect and additional meaningful check and balance of the appraiser.
Try recommending your buyers to lending institutions whom don’t work with predatory management companies. It’s not rocket science. Or do you believe you too could work for literally half rate and still have the necessary incentive to do a good job? The appraisal modernization you talk of would have appraisers working for a tenth rate. How much did you earn last year? Slash a zero off of that. If the shoe fits, you can wear it too.
Sadly, the amc appraisers whom get the most orders, also give this industry such a bad name. They’re in it for the money, not the consumer protection principals. How can an ethical professional abide secret monetary distribution arrangements, constant threat of restraint of trade if one does not play ball, to accept management principals from people and companies neither qualified nor licensed to complete the task themselves in the first place? They’re selling rainbows, consumers will pay more than ever, for less than before.
Be careful what you wish for. If the appraisal industry falls, realty is next. Realty agents are on the same boat as us and you’ll all go down with us in short order. You don’t have a clue what you are talking about. Appraisers work products get reviewed by a multitude of people, far more than a sales agent. ‘Burned by a low appraisal’. Have you considered that you provided incompetent agency? ‘Buyers lost money’. Nothing says a great deal like overpaying. The very fact an appraiser is present, keeps so much fraud at bay. The very moment the appraiser is not present, or is remote with less influence and less information, is the moment that the allure of the commission will accelerate and fuel biased behavior. Without checks, there is no balance. People whom take checks and balances systems for granted are in for quite the surprise when these systems are gone. The public at large demands checks and balances systems for everything from the cost of eggs and milk to gas and automobiles, even retirement and savings. But for the home purchase, not a big deal, no problem, skip it!
Now and then we deal with agents with attitudes, it happens. The majority of the time we deal with agents whom are actually qualified to fulfill their positions. And those agents almost always have great things to say about appraisers, respect the position, believe we are getting a raw deal, and often do help appraisers any way they can. The future recommendation for competent qualified agents is to write in full service appraisal as a contractual requirement in sales transactions. When I step back into the buyers shoes, you can sure believe I’ll be demanding that full detailed in person appraisal service, and will accept no substitutes.
FNMA has institutionalized memory. They’re doing the exact same thing again, with new labels, calling it progress.
So, I certainly can understand the worry. The outrage from the appraisal industry, as Fannie is the gold standard of the industry when it comes to cost control methods driven by data analytics and, since 2008, seriously tight and I mean TIGHT oversight of not just themselves but the servicers who partner with them. As someone on that side of the industry, all I can say to this is…yeah, this is something to worry about, but it is not for the reasons you are noting. The fact of the matter is, if they succeed, this is the final nail in the coffin of the real estate appraiser industry, which began when government oversight in their typical blanket legislation style needed to appear to be doing SOMETHING to show new levels of protection would be created outside of lender guidelines by tightening the requirements people required to obtain to become licensed appraisers, and for certified appraisers, it became even more absurd. Since then, the number of licensed and certified real estate appraisers in the US has been decreasing year over year from as much as 2-5%, and the number of appraisers currently in the workforce is now just about half of what it was in 2008 reduced in numbers from over 80k to justices 45k today and there is no sign of it getting better. Not many new candidates are interested in putting in the needed education hours. During the year of training, to end up having to sign a non-compete in their local area, pushing them out to a further distance to provide service that requires lots of dashboard time, and if not self-employed giving up 20% of their income to the companies who are subbing them out for the lenders and servicers, especially with a current median income of around 60k. Median I income for certified appraisers is roughly 15% higher. Still, it requires the same time investment in continuing education as it does to become a doctor or a lawyer who has far higher median salaries. Worse, those starting as trainees can be making as little as 15-20k during the year required to work under a certified or licensed appraiser, and sometimes also gave to split that with their training partner and before they are allowed to practice in their own got to take care of that pesky noncompete deal mentioned above.
So, we have a government-created bottlenecking of new appraisers entering the workforce, a 50% reduction in available licensed appraisers, of which the vast majority are approaching retirement age, or slowing down the volumes they accept. Median age currently of licensed appr is 39, but over 40% of the current workforce is over 50, and another 20% is over 40.
Now that was just fine for the last few years as historically low default numbers helped keep the scales balanced and appraisers working during the origination boom during covid…one of the few industries not negatively Impacted by the pandemic…however as Fannie and the rest of the GSEs are forecasting for a rise in foreclosures coming within the next year, prices for appraisals are now skyrocketing into the thousands of dollars for some hard-hit rural areas, and as the available appraiser pool has shrunk, they have also remained mainly concentrated around metro areas, and foreclosures are trending rural putting travel time as another driver of recent expense spikes, and we have entered the perfect storm. If Fannie doesn’t try to do something, it will also affect prospective buyers who miss their financing deadlines negatively, get the excessive fees passed along to them, hitting their pockets, and tightening of the financial margins that have been precarious, to begin with.
I have seen the valuation products that they are going to be using, which are built using AI learning and thousands of data points fed in to the system and the most likely people they will have doing the physical inspections will be someone that is vetted by the lenders’ real estate agents/asset management companies which have their own set of internal oversight and guidelines to protect not just their assets but their potential clients /borrowers. The resulting valuations are very accurate and lenders have been using then in combination with traditional appraisals for a year now, there have been very limited situations of the AI desk generated market value and the value given by the appraiser with average price differential under 2%..
That’s an astounding success rate and clearly is an industry disruptor that every lender will watch closely to assess if they will follow in FNMAs steps which is almost always the case, because fact of the matter is, they d
Do their homework and unquestionably after major procedure and structure overhauls created over a decade ago and consciously enhanced for efficiency, and their embrace of technology have led to
some of the best borrower protections and servicing oversights in the industry today.
.It isn’t FANNIE you should direct ire towards.
It is the congressional oversight committee people who created such tight regulation of the appraiser requiremts to begin with that created the major shortage of labor that falsely inflated the pricing until eventually this product is getting priced out of the game, erasing an entire skilled workforce and not very likely to step in now and risk exposing they created the condition Fannie is working to fix for them.. I feel truly sympathetic to the appraiser industry but there’s too many potential benefits to this project for it to fail and it has a lot of support within the industry from those who have been watching and asking questions….it has been an eye-opening experience to see how far tech has come and continues to grow. The impact this will have to help create efficiencies and standardized pricing metrics that will provide actual borrower benefits and by saving millions in costs and fees which are now staying in borrower pockets AND reducing the risk of missed deadlines due to the staggering spike in average time to complete standard appraisals which has more than doubled over the last decade.
If I was an appraiser I would not be wasting time writing letters I would be getting everything I could in place to create a group of professional peers in the industry and create a new company that offers these property valuation inspections and offer the additional level of value by having them all reviewed licensed apprasers and do pricing research to be competitive and offer what the market will be looking to fill at a high volume and get in on the ground floor of a new industry and be a flagship company in charge of creating the eventual oversight that will be needed a year from now. I bet you that’s what all the big appraisal houses ars doing some food for thought…any one still reading this diatribe….thanks for your time. Best of luck to all. Apologies for the many typos as I am on my phone typing with my thumbs
You are so misinformed Cmason, severely misinformed.
Within 2%? O.k., so next time you buy a burger, we’ll come within 2% of what you thought you’d pay. Next time you negotiate an auto purchase, tag on 2% on my side o.k. Check your savings account, it’s only 2% off. Buy a $500,000 home, what’s $10,000 dollars among friends. Your ivory tower analytics are showing. In every market, there is a price floor, a price ceiling, and various benchmarks to value which are meaningful. Sure, there is variability, but one does not accept ‘within 2%’, unless perhaps you stand to gain, and will constantly tag on an extra 2% in your favor, over and over and over again.
‘Do their homework and unquestionably after major procedure and structure overhauls created over a decade ago and consciously enhanced for efficiency, and their embrace of technology have led to some of the best borrower protections and servicing oversights in the industry today.’
Unfunded derivatives, out of control inflation, skyrocketing housing prices, hedge funds and investment firms holding reits in perpetuity, as an entire generation of American citizens cries out in pain over affordability and inability to afford even a regular home. Failing banks, institutionalized fraud like ftx which regulators are warned of repeatedly, and do not listen because the allure of political donations. The rise of internet crime and stolen escrow accounts. Sudden jumps in lending rates. You can say the central planners have it together and cheer lead for them to the end of the world. Does not make it true, blind leading the stupid and here we go again for another bubble bust cycle.
‘I feel truly sympathetic to the appraiser industry but there’s too many potential benefits to this project for it to fail and it has a lot of support within the industry from those who have been watching and asking questions.’
Your feelings are irrelevant. There are so many potential risks, don’t be an idealist and take the entire housing market with you in your lust for technical dominance and more power. Besides, without current appraiser input, and/or a starkly reduced appraiser input level, kiss your 2% good bye. Central planners are promising us an error margin of no more than 2%. Didn’t the federal reserve say that for the past 50 years since the gold window closed, prosperity through debt, inflate 2% a year, we’re in control. It was never 2% for the fed. And the error rate for automatic appraisals is at best 2%, at worst, completely 100% off and then some.
‘…it has been an eye-opening experience to see how far tech has come and continues to grow. ‘
What are you talking about? Have you slept through this non stop disclosure and abuse of tech systems for the past 10 years, most namely the disclosures and abuses coming to light in the past 2 and 3 years. You’re impressed with the censorship, back room dealings, improper monetary arrangements, conflicts of interest with government and regulators, irresponsible woke management, biased predetermined conclusions? Tech if used responsibly by people wise enough to manage it can be impressive. Yet, you’re trying to sell the people being put out of their jobs, by a program set we know is irresponsibly and inadequately developed, to trust the tech? Let’s explore why in your next sentence.
‘The impact this will have to help create efficiencies and standardized pricing metrics that will provide actual borrower benefits’
The impact will create efficiencies and standardized pricing metrics, that will provide actual borrower benefits. So are you saying lenders will finally be able to implement an appraisal cost by value of the home scale? Or perhaps you’re saying standardized pricing metrics for housing? Actual borrower benefits? As if the appraiser is devoid of any borrower benefit, that we’re a detriment to the process? Sure you can trust your lender, absolutely, they’ll prescribe the right amount for you to loan, always give you a fair rate, and criminals and scam artists are simply interested in other areas. You can trust all those commission based salesmen to have your best interests without any independent check to balance. Societal stability is at an all time high, we don’t even need well vetted licensed people to perform so many of these tasks anymore.
‘I was an appraiser I would not be wasting time’
Well that’s all I need to hear, I’m convinced. Great sales pitch; Take on an excess of liability, become a ghost writer automaton whom only signs reports, or downgrade the position to that of valuation inspections. There is a reason why the amc industry never attracted enough appraisers to fulfill their hybrid programs, and it is the same reason FNMA will not find success in their special amc favors program otherwise known as appraisal automation. What a complete betrayal of the public trust, and the vendor network trust, to remove the voluntary engagement principals and tell a nations worth of appraisers that we can choose from FNMA’s 5 partner AMC’s to complete this work. I’m having a hard time distinguishing between the government GSE, which is supposed to be in service to the taxpayers, and the predatory companies whom are getting special favors, stealing the wealth of this country. We’re not going for this. If you want an appraisal signed by a certified appraiser where the appraiser never inspects himself, takes on all liability, and works for an even more paltry rate than now, with the allure being we could turn ourselves into some big corporation, sign it yourself. Sorry, independent and you can just deal with that. Restrict the trade of the market, forcing a model which hinders viable training (amc’s), then bring in automation to increase monopolization, and give it all to the same amc’s whom devastated the vendor market in the first place. You are selling institutionalized criminal racketeering among international corporations as if it’s a good thing. The remote model may work for sales people whom rake thousands of dollars for every home they touch, it does not work for the appraisal position. We all know the truth, FNMA is instituting yet another automated program to hand out even more special favors upstream of the regular consumer.
Wow, that my friend is such an unbelievable brilliant response.
Thank you but I was upset, requested an edit of the comment. It’s just upsetting, how much blind trust there is in automation, programmed and managed by the humans. The reality is that with automated process and central planning, mistakes may have broader reaching negative implications, fewer people involved in decision making process, systemic risk races at a faster pace. The list is endless really. In their ivory towers. No more options, the government is forcing appraisers to work with amc’s or lose access to FNMA for the majority of work assignments. Guess who’s getting a pay cut.
I was a signatory on the Appraiser’s Petition before the 2008 collapse which Congress ignored. Here we go again. I sure hope they listen to us this time.
Don’t give up – try sending $10 to Elizabeth Warren . com. You’ll be amazed how she will appreciate your point of view!!!!
thanks
I must speak up – nobody is forcing you to do anything, but maybe retire!
In today society, AMC are the worst, I am a local investor and have never used real estate agent. If I call on a deal and a realtor is on it, I talk the seller to delisted the property and list as owner.
One thing never let slide is not have a proper appraiser. You may not like the outcome of the evaluation but you will be happy 2-3 years later. Realtors are not investors friendly.
Would someone please explain to me why an appraisal is necessary when a borrower has a 700+ credit score and a 2+ year of employment history and is asking for a 50% LTV in a suburban area with a 95% confidence rating on an AVM?
60%?
75%?
What if it is a premium lot (waterfront, golf course frontage, etc) where the lot is 80-85% of the value?
Don’t get me wrong, I have no idea what the DU qualifications are, but there comes a point when an appraisal is just folder fodder, its not needed.
Hey Todd, perhaps you can tell me why taxpayers have to pay for lender losses when lenders make stupid loans? Waiting for an answer.
Taxpayers shouldn’t. However, you did not answer my question. Is it your opinion that funding a 50% LTV loan with someone who has what is considered above avg, possibly even good credit with stable employment history a “stupid loan”?
Todd, you sound like a Realtor, homebuilder or a land developer. Do you remember how fast they looted the Iraqi National Bank and the Iraqi National Museum back in the early 2000’s? One day. I’d give the Realtors, homebuilders and land developers a little longer to absolutely clean out the lenders if there were no rules or standards or appraisals required. About 30-60 days at most. Even the Silicon Bank Depositors removed $42 billion in deposits in just one day which collapsed that bank requiring a tax payer bailout once again. Complain to whoever wrote these rules. I just know from experience how many liars, cheats and thieves are out there. Especially during the mid 2000’s mortgage bust. Crooks are crooks.
There are certain transactions that might not need an appraisal, in my opinion, and I am an appraiser. But, the majority of transactions need an impartial valuation, not from a Realtor or some jamoke who also does odd jobs for a living, nothing wrong at all with odd jobs. Getting rid of the appraiser by FannieMae is a disaster waiting 5 years to happen, again!!! Remember 2005-2007? I do AMC assignments as well as non lender work, I don’t allow the AMC’s to dictate anything to me, I tell them my fee, when I can have the report back and allow only a couple revisions, it’s less stressful that way.
Joseph,
Thank you for acknowledging that at least certain transactions do not need an appraisal. I am not going to get into the politics or emotion of the argument other than to say that there is a lot of hyperbole going around that this change is eliminating “all appraisals” or as you put it “getting rid of the appraiser” is a chicken little the sky is falling argument. Do I believe FNMA is attempting to limit the appraiser input to the system, yes I do. As previously stated I have no idea what criteria is used to “waive” the appraisal requirement, my argument is simply that there is a large swath of lending out there that does not need a traditional full or even drive by appraisal. It is not a great opinion for the appraisal industry, and the volume of work is going to be cut substantially, but would you as an appraiser want to pay for a full appraisal, or even a drive-by appraisal knowing full well that the loan you are getting is a 50% LTV?
For what it is worth Todd, I’d be asking a lender the same thing if it were me (provided it was not some out of the mainstream loan) and just shop it around.
Who comes up with the 50% LTV? A Realtor? The lender? Zillow? I think a homeowner should want to periodically know what their home is worth, that’s why I do a lot of GPAR appraisals, which are private, non lending assignments.
Joseph, lets use a base $100,000 valuation by an AVM and the borrower wants to take a 50K loan against the property, aka 50% LTV
Now an appraisal is required and even though the AVM has a 95% rated accuracy, lets say the appraisal comes in at $90k. Now the LTV is 55.6%
Now lets take the 2008 “crash” which had a national average of property valuations drop by 33%. If something similar were to happen the property that had been valued at $90k would be worth $60,300 which is still $10.3k over the original loan. The requirement that an appraisal be mandated and included in this scenario is at best superfluous and could be considered onerous, possibly punitive or predatory against the borrower for wanting to get a loan.
Yes certain transactions already do not require an appraisal.
Those are called “cash” transactions. 🙂
1st, thank you for editing your original post. I was worried you did not know how collateral worked. If you lend 50% of the value of something and the loan defaults, you can foreclose and get the 100% value of that something. Even the last major crash only dipped 33% in most markets, some were 50%, but only a few. I would be more concerned about Loan officers/lenders fudging credit scores to get people into loans they can’t afford in an effort to acquire property they know is going to have a high probability of being defaulted upon
2nd, IMHO cash “transactions” would be something that would be highest on my list for requiring/needing an appraisal. A cash transaction is a 100% LTV out of pocket loan for the buyer and a 100% opportunity cost for the seller. A cash transaction will not have the AVM data or analysis to show what the property is worth to either the buyer or seller. Sure, the parties can go onto redfin or zestimate to get some data, or “know” the sales in their neighborhood, but a Cash sale is different than a lender posting a 50% Loan…. way different.
Will, I never said to remove all appraisals. Once again you are changing the topic. I am not trying to be difficult or argumentative. Let me ask it a different way.
Same scenario. 50% LTV, good credit, good job history, AVM 95% accuracy in a homogeneous neighborhood of homes.
Question: How and by how much does an appraisal lower my risk quotient of making that loan?
I am just looking for a credible reason to agree with the position that in all circumstances the level of lending risk is lowered sufficiently with an appraisal such that the conclusion would be that all loans need appraisals. I think my question is a reasonable one given the specific circumstance/scenario above.
That question is better asked of a banker. That is not a call an appraiser would make. When working with lenders, the appraiser simply responds to the request and is not involved in the who and why of what the lender is requiring. Just not the appraiser’s call.
PJTMC,
You are exactly correct. However, whether the concern about the change in FNMA policy is voiced mostly by appraisers, as Will cited earlier, how many times must taxpayers bail out the GSEs and lenders for bad risk assessment loan decisions. We the public should be concerned about the situation and we the public should have some idea or at least some form of independent (non guberment) oversite of the GSEs lending matrix and assure the public that when an appraisal is being waived, there is solid rationale based on risk assessment analysis behind that decision. My opinion is that there are a lot of loan decisions being made that getting an appraisal will do statistically nothing to lower the risk of the loan. When it is that an appraisal starts lowering that risk at a level which warrants its inclusion in the risk assessment process is what my concern is, but that is something we as the public will never be made privy to.
I’m not changing the topic. Rather, you are not identifying who the lender is. Federally or State regulated lender with rules they must follow? Who made the rules? Now you’ve answered your own question.
‘A solid rationale’. Just admit the truth, if lenders were not being backed by taxpayers, most of these pilot programs would have never been dreamed up in the first place, appraisers would be in high demand, there would be no shortage of appraisers (caused by the amc industry alongside rising demins and lax lending policies), and the amc model would have never gone this far.
https://www.govexec.com/management/2020/06/viewpoint-wind-down-fannie-mae-and-freddie-macs-government-conservatorship/166224/
‘Fannie and Freddie continue to represent a giant moral hazard. It’s long past time that they retain enough capital to mitigate this moral hazard to taxpayers and the federal government. Currently inadequate GSE capital levels, combined with recent developments on potentially risky alternative credit scoring models, expansive pilot programs, and questionable oversight, create a significant prospect for a future taxpayer-funded bailout. So, to protect taxpayers, it’s not only important that mortgage rates accurately reflect the level of risk, but also that stronger capital serves to backstop the GSEs’ balance sheet.’
Here we go again, buckle up.
Will,
I asked a question
You responded with a question about taxpayer liability for lender losses
I asked the same question
You responded with comments about the Iraqi Nat Bank and how you think realtors, homebuilders and other entities will clean out the lenders
I asked the same question again, simplifying it and adding some additional context
You accuse me of changing topic, citing I did not say what lending institution….
So once again I will refer to my prior question without repeating it here and add that it does not matter whether the institution is Fed, State, Community Trust, Insurance, REIT, or out of your own wallet.
If you have all the information that I gave, how much more “confident” would any of these entities be making a loan if an actual physical appraisal was included in the loan decision package?
Changing market conditions? Systemic data irregularities in various house and feature reporting databases, which is only identified by a human appraiser? Cumulative data irregularities in avm systems?
Funny how this same logic is not applied to the mortgage brokers commission, the realty agents commission, the title fees, the myriad of other unnecessary borrower fees.
Having the appraiser fulfill a limited scope duty, and be personally on site, prevents a substantial amount of fraud.
Besides, your figures are arbitrary. A two full years of employment. Who is that mythically responsible person, I want them to give me career advice. Only borrowing half of a half million, no biggie, here is your check, in record time! A 95% confidence score! Do you think whole tech departments might just always find ways to have consistently high confidence scores in their digital work products to keep their jobs? We have investigated ourselves and determined there is nothing wrong.
If people want to change lending rules to qualify loans based on peoples income, rather than the value of the home, that is a different department than appraisal services. History repeats as appraisers cry foul, highlighting irresponsible mortgage lending practices as the market is teetering on the brink. We’re being silenced by lenders all over again.
https://www.fincen.gov/financial-fraud-enforcement-task-force-ffetf
https://www.justice.gov/archives/opa/blog/mortgage-and-financial-fraud
https://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-announces-creation-mortgage-fraud-strike-force
https://archives.fbi.gov/archives/news/pressrel/press-releases/financial-fraud-enforcement-task-force-announces-results-of-broadest-mortgage-fraud-sweep-in-history
Operation stolen dreams.
https://appraisersforum.com/forums/threads/suspensions-and-revocations.88400/
Ever wonder where the 180,000 appraisers whom were in the market 15 years ago went? It’s fair to assume a similar ratio of malfeasance or irresponsible practice in other lending and realty related professions as well.
https://ritholtz.com/2011/12/clouded-title-the-gross-illegality-of-mers/
Remember MERS and clouded title?
https://www.reuters.com/article/us-foreclosure-banks/special-report-banks-continue-robo-signing-idUSTRE76H5XX20110718
Crews of people robosigning blank pages for years until that particular lender level scandal was discovered.
https://www.justice.gov/opa/pr/deutsche-bank-agrees-pay-72-billion-misleading-investors-its-sale-residential-mortgage-backed
Which mortgage fraud briefing from the DOJ to choose, there are so many hundreds and thousands of individual bulletins to choose from. Ocwen or Deutche, JP Morgan, Wells, it’s a coin flip.
https://www.forbes.com/sites/chuckbrooks/2023/03/05/cybersecurity-trends–statistics-for-2023-more-treachery-and-risk-ahead-as-attack-surface-and-hacker-capabilities-grow/?sh=73c5762319db
Cybercrime to hit 8 trillion in 2023, every single company out there experiences a constant stream of penetration attempt attacks.
https://www.malwarebytes.com/blog
Personally I like the malwarebytes security forum for regular updates. If you can think of a digital fraud on any given centralized system, there are online criminals actively working on that.
Checks and balances are absolutely essential, and we should seek to implement more of them, not remove valid ones.
https://www.mortgagefraudblog.com/
https://stopforeclosurefraud.com/
https://www.federalregister.gov/documents/2023/03/23/2023-05978/mortgagee-review-board-administrative-actions
Baggins,
Changing market conditions?
You don’t think AVMs and other data analysis can account for changing market conditions? Curious, How do you account for changing market conditions in your appraisal report? What is your process to show increasing/decreasing markets and the rates that they are doing so?
Systemic data irregularities in various house and feature reporting databases, which is only identified by a human appraiser?
Yep, I completely agree, which is being compounded significantly with the inception of ANSI,
However, what % of the variances found would result in a 10%, 15% or even 20% variance in value? AVM says 100k, loan is 50k appraisal shows house is improperly identified by the AVM and the value is actually $80k….. is the $50k loan still acceptable?
Cumulative data irregularities in avm systems?
Yep, agree, but same question, at a 50% LTV even with the AVMs having cumulative system errors, would those errors be so egregious to result in an LTV low enough to not support making that loan?
Besides, your figures are arbitrary. A two full years of employment. Who is that mythically responsible person, I want them to give me career advice.
Most lending decisions made without getting a hit to the rate start with a 2 year employment history. That is not to say the borrower has not been in their respective industry for more than 2 years, merely at that particular place of employment.
Only borrowing half of a half million, no biggie, here is your check, in record time!
If the property is worth 1 million or more, absolutely, cant sign the check fast enough.
A 95% confidence score! Do you think whole tech departments might just always find ways to have consistently high confidence scores in their digital work products to keep their jobs? We have investigated ourselves and determined there is nothing wrong.
Again, I completely agree, which is why I have stated that the confidence levels need to be verified by an independent source. Which I am sure you will come back and say that the independent source will not be independent, I get it. However, I go back to the 50% LTV. It would be a tough sell to show an AVM is 95% accurate while actively being less than 50% accurate.
If people want to change lending rules to qualify loans based on peoples income, rather than the value of the home, that is a different department than appraisal services.
I will make the leap of faith that you really did not mean to suggest that income is not already part of the lending decision process. If you did, then let me be the first to tell you that people’s income most definitely is part of the equation.
You have gone to great lengths to supply an overwhelming amount of website and documentation which I greatly appreciate, although I am already familiar with most of them.
That said, much of what you cited has nothing to do with the question at hand. In fact, in some ways you make the point to why the public distrusts appraisers so much.
The 2010 fraud enforcement task force focused strongly on property valuation by appraisers.
The MBSE debacle had nothing to do with appraisals other than the aforementioned overvaluation by appraisers through poor appraisal practices, fraud or pressure from lenders to “meet a value” even with the AMCs involved.
MERS is a title issue, not an appraisal issue
Last, you cite all sorts of mortgage fraud issues, and you are correct, there are a ton. Most of them are applicable to pushing values to achieve a particular LTV to support a loan, but most of those are 80% or above LTV issues. If a property falls in the 50% or 60% LTV range, then the fraud is much more likely in the assets and income portion of the calculation.
I understand your appreciate your passion
I know there will always be mortgage fraud, just as there will always be appraisal fraud, but to suggest that a physical inspection by a certified or licensed appraiser is a mandatory requirement when lending money by the GSEs or other lending institution in every single case is not justifiable from a risk based analysis position. The way you are posing this is that if a borrower owns their home outright and wants to take out a HELOC that is 10% of the total value of the home, it requires an appraisal. Sorry, I don’t agree, and if that is what you think then we will just have to respectfully agree to disagree.
I account for changing market conditions with carefully applied human analysis, from realty sales records, visual inspection of properties, on site analysis and review of changing conditions which could encompass anything from a new factory, a vacant lot, eminent domain, down to seeing dudes walking around half naked drugged to their eyeballs (I had the pleasure or seeing that yesterday in lower Commerce City). There are a lot of factors. Then my carefully assimilated logically and human reconciliation of all the ‘x factors’ is turned into something more simple, by way of a complex skilled analysis; the appraisal report conclusions. Which those conclusions assimilated from an entire nations worth licensed appraisers efforts constitute the basis of the data which algorithms that these avm utilities base analysis upon. There most certainly is a substantial risk of systemic data anomalies which can shift benchmarks over time as the automated systems will rely on their conclusions over and over again, passed down the line. They won’t be able to interpret and qualify market data the same way a human appraiser does. It only seems that way on the front end, because the core analysis data from appraisers is not yet stale. When that inflow of updated qualified data is substituted with these technically reliant approaches, it’s anyone’s guess how much the lack of competence and greed will effect the unlicensed unaccountable data programmers. Don’t look behind the curtain if tech is your god.
‘in some ways you make the point to why the public distrusts appraisers so much.’ Yeah, because we work for lenders! The distrust is deserved by proxy because lenders have been taking advantage of the Addie Polks of this world for longer than any of us have been alive. I’m constantly having to explain to people I’m not an employee of the lender, am an independent contractor, and am quite literally the only person who still gets paid even if the loan does not go through, the only non advocate they deal with in the entire lending process.
fraud or pressure from lenders to “meet a value”
MERS is a title issue, not an appraisal issue
Last, you cite all sorts of mortgage fraud issues,
Oh yeah, lenders have demonstrated incontrovertible ability to be trustworthy and police themselves. So much so, they never need bail outs, there is no risk of insolvency, bank runs don’t happen, and their next bright idea to vastly diminish the appraisers participation (among the last of associated people the lenders don’t entirely control), you can trust your lender, without a doubt. You’ve provided a compelling argument for why we don’t need GSE’s any longer, and why lenders should be managing their own risk management, and do not need or deserve taxpayer backing for their new programs, as well as their existing programs.
This is so far away from the GSE’s various original charters which justified the institutions formation in the first place. Honk if I’m paying your mortgage, again. As the margins shrink, as inflation continues, as dollar devaluation continues, as commercial interests continue to exploit residential housing systems as a last safe haven, as losses mount, treasury notices jump to levels not seen in 15-20 years all over again. What a brilliant time to launch new pilot programs to put lenders in even more control of the wealth and posterity of this country.
Jackson; There are no evils inherently necessary in government. It’s evils exist only in it’s abuses.
Well versed lender advocates have entered the chat.
I’VE said before; What about seconds, thirds and fourths. Some time ago I was proposed to accept a 4th as an appraisal fee for a several properties. This 4th was after’s the attorney’s 3rd and was against the client’s latest husband’s property. I didn’t believe there was equity enough. As values increase, equity’s increase, the potential for gain or loss may be equal but for the interpretation of an APPRAISER.
In the recreational neighborhood where lenders were reluctant, sellers carried financing against their sales price as 1sts, 2nd, 3rds, 4ths and even Fifths (pun intended). Some were good investments some not so good.
How good are AVMs at assessing various waterfront and golf course frontage properties?
Ah, I’m getting that knot in my stomach that tells me there is an agenda here other than just professional banter…..I’m out..
Hope you did not get that from me. I am just asking a question that you reasonably and logically answered. I am merely trying to comprehend why so many appraisers think that every single loan should require an appraisal regardless of circumstance.
For some, the only reason is self preservation, they cannot articulate or come up with a credible argument as to why a property which essentially has zero collateral risk in the lending equation absolutely without question must always an unquestionably be visually appraised by a licensed or certified appraiser.
High LTVs and high risk scenarios should always have appraisals, I support that completely. Its just irrational to think that a 10% or even 50% LTV loan should require an appraisal IMHO.
For the appraisal industry to argue that an appraisal is needed in every instance, then the appraisal industry must come up with a logical reason why…. not just “because it has to”….. That argument is childish and will be completely ignored. I have no ulterior motive or agenda other than to understand from a logical and fact based point of view why an appraiser has to do an appraisal, even a limited scope appraisal, every time. I truly hope that someone can give me a credible response. As of now, none have. That said, if you are exiting, I wish you the best and thank you for your candor and honest response.
Would you care to apply that same argument why taxpayers should still be backing lenders through GSE programs? There are decades of articles pertaining to winding down and/or abolishing the GSE’s, as they create a moral hazard and beyond to the housing and financial systems of this country. Their actions in the singular realm of providing special favors upstream of regular consumers has already caused citizens of this country to have been withheld trillions of dollars worth of home equity, alongside having promoted policies which result in over investment of housing and the subsequent national affordability crisis. Every single time that a special deal is provided to a hedge fund, investment firm, the auction block, funneling all the potential savings and equitable gain to big corporations instead of the people. I mean if they were sending everything through first look programs, they are not though. If the mortgage lending system is so well run, why do we need taxpayer backing? Shouldn’t the same logic apply that if there is low risk, the loan does not need to run through the GSE programs?
The public trust is an important concept. Just because is good enough, because everyone is placed at risk by way of taxpayer backing of these institutions. Maximally possible checks and balances systems, and other bureaucratic redundancies are necessary to better mitigate the magnet draw of fraud which inevitably plagues government programs and ensuing subsidy allowances and special interest programs.
You know what’s really irrational? Treating your home like an atm machine and having the government incentivize that activity on the front end, only to funnel the properties to big corporations if things go south, as they hold reits in perpetuity from among the most affordable existing housing stock present, on a nationwide scale. It’s important there is a lot of red tape and bureaucracy. Leveraging your home should never be just as easy as a click of the button. If borrowers are so well off, why don’t they get signature loans instead? If their income is so great and they are so well qualified… These GSE programs are nothing more than yet another special interest give away to take leverage from one party, and hand it to another. Just having to deal with appraisers has resulted in an untold dis incentive for those whom would have gamed the system. Don’t forget to slip your unlicensed home inspector a $50 to overlook that massive foundation crack during your next ‘inspection’.
So as to not further clutter the responses I will respond in order.
You are right, as I stated before, taxpayers should not be backing the lenders/GSEs. You are right, the loan does not need to go through the GSEs, never said they did. Non GSE lenders typically follow the GSE guidelines for simplicity and audit purposes, but just because a loan is low risk does not mean it automatically has to go through a GSE just because is never good enough, especially in the eyes of public opinion and even more especially when it comes to argue a point in court or corporate policy. Without logical arguments, there is no audience.
SFR=ATM – this is a socio-economic concept that has a direct correlation to the education of our youth. Home economics is no longer even a term recognized by anyone graduating high school since the 90’s. The concepts of self reliance and taking responsibility for one’s actions are just a foreign. Owning a home is not a right, it is a privilege that comes with responsibility.
I realize that I will not change your opinion, and that is perfectly fine. I will continue to believe that at some level of investment, an appraisal is not necessary for the risk analysis of the loan decision. Difference of opinion is how this world works, so long as it is done with respect and not shouts or threats. I thank you for this exchange of ideas.
Todd, you are arguing with the wrong people here. This is an appraiser blog website and appraisers obviously are not happy with the new FNMA regulations and mostly because we are taxpayers and we saw what happened in the 2000’s. You, Sir, are obviously a mortgage broker or loan officer of some sort and also unhappy with the current system. Therefore, you really do need to take up your issues with the appropriate Federal Regulators and Lawmakers and not us. Appraisers had nothing to do with these current rules and regulations.
Will,
I hope your appraisal analysis skills exceed those shown by your extraordinary assumptions regarding my personage.
I of course refer to my post responding to your request for my qualifications.
That said, my qualifications have nothing to do with the question I asked which was a fairly simple one that you don’t seem willing or able of giving a credible response to.
The opportunity to cheat lie and steel is universal. The reason we trust, is because most people do not cheat, lie and or steel. Most are honest.
Come on, Todd, you definitely sound like an under-employed loan officer and certainly not an appraiser. Confess and introduce yourself. Otherwise you are on the wrong website. You are complaining about the rules but totally unconcerned with where all that money comes from that fund your loans. We call it the “Golden Rule” in case you did not know. Also known as “He who has the gold, makes the rules”. Time for you to go cut the grass now. I’m getting bored.
Will,
Once again you have not responded to my question, but deflected and made it about me and my qualifications. So I will respond to your question, as I have done every time.
I am a third generation residential appraiser. I have been appraising for 35 years. I have held the certified residential accreditation in CA, WA, OR, and FL. I hold the SRA and AI-RRS designations from the AI, I am an Accredited Green Appraiser, I am on the Residential Registry of the AI for Valuation of Sustainable Properties. I have been a Sr Review appraiser for a regional bank and I work for lending institutions as well as AMCs, and perform litigation work as a SME in property valuation, ANSI and USPAP. I am also personal friends with the lead appraiser in the 2010 nationwide fraud investigation report cited by Baggins.
I am as impacted as any other appraiser in the industry by this change in policy. That said, I have long wondered why I was wasting a borrower’s money paying for an appraisal that was clearly not necessary. I personally would not want to pay a full fee for an appraisal just to get a HELOC that would only bring my CLTV up to 50%, so why should I expect that of anyone else.
I hope that satisfies your concern over the relevance and experiential credibility of my commentary and overall qualifications to be included in this discussion.
Since di minimums have risen, hasn’t there been a correlation with increased lender losses and mortgage fraud? (spelling, demins?) Certainly there has been.
It is the incentive to lend which creates the incentive to do anything, say anything, to rake those commissions. It’s called investment mal incentive or poisonous protectionism. If you believe there should be far few appraisers, do you also believe there should be an equal proportion of reduction in mortgage bankers and GSE participators?
As long as the taxypayers are backing GSE programs, we get a say in the matter. End of story. We do not want to provide lenders with another inch of ability to further exploit the systems. We want more accountability, a resurgence of meaningful checks and balances systems. We’re tired of covering everyone elses losses as we stand by on the sidelines and watch those whom take the most risks, getting the most rewards. Because when they lose, it’s just charged to the treasury in the form of monetary deflation and bail outs, aka; a tax.
Sure I want to keep my position. And lenders would be bending over backwards for my quality service if they were actually loaning their own money and covering their own losses. Many people don’t understand banking, these lenders they don’t actually have any money. Your savings is not sitting there waiting for you to take it out. They’ve spent it on their projects and investments. The courts have ruled that when citizens desposit money, the citizens are merely creditors of the bank. If the bank goes under, you get paid last, if ever. You know they do this all on fractional reserve banking and the FHFA demand to increase capital reserves is not even coming close to what is out there.
Found this on the internet, thought it was interesting. Housing is floundering, inflation out of control, corporate speculators are ramping up their interest in residential housing. At that exact moment, GSE’s decide to utilize automation and remove vital important human appraisers from the process in the interests of ‘efficiencies’. Do you believe in coincidence?
Interesting that you should mention the deminimus.
To show that I am more aligned with your thinking than might be demonstrated by our discussion, let me share this with you the following….
In the state of WA it is currently against the law for a Lic or Cert appraiser to perform “evaluations”, which as you know but others reading this may not, is the minimum value for which an appraisal is technically required to be performed for a Fed Related Mtg Transaction. The way that the law is written, even if a Lic or Cert appraiser wanted to perform the new FNMA PDC report or other form of appraisal analysis, they would not be allowed to by law. So in WA this change by FNMA has a much greater impact than in other states. However, there is pending relief.
I must first state that I am not speaking on behalf of any organization that I am associated with, nor do those organizations endorse my comments or opinions.
That said, I am on the board of representatives for the Appraiser’s Coalition of WA (ACOW) and our chartered purpose as a volunteer organization is to work with the State Legislature and DOL to ensure the rights of appraisers are being upheld while meeting the requirements of public trust in the industry. As such, ACOW has written a bill which we believe will be approved and signed into law this session which ends 4/23/23 that will allow appraisers to perform evaluations, if they choose to do so.
https://app.leg.wa.gov/billsummary/?BillNumber=1797&Year=2023&Initiative=false
There is an additional situation that I have personally discovered that may have an even greater positive impact for WA appraisers but I cannot discuss that right now, just know that it is something that you have spoken very passionately about in our discussion today.
I am now way behind on 2 reports, so any additional responses will not be immediately forthcoming.
Hi Todd, I’ve been following ACOW’s page on LinkedIn. This will be great for WA appraisers
https://www.linkedin.com/feed/update/urn:li:activity:7041813799347134464/
As states fold to the will of federal entities. All the ‘stake holders’ had to do, was insist the amc industry bill separately for their services. Everything downstream of that is a result of the appraisal management industries practices of constantly shorting appraisers, creating hostile working environments, playing us against each other so they could rake variable portions of the appraisal fee, and not return cost savings to consumers. These amc companies and the GSE’s capitulation to them, are the primary cause for remarkable appraiser attrition, and the inability of appraisers to run their companies like other businesses, being subsequently limited to only being able and willing to onboard family members rather than hiring from the general populace. As appraisers are continually subjected to more and more heavy handed restriction of trade practices by amc’s. The amc industry has already pilfered billions of income off of appraisers hard work, the benefits of which has not materialized for appraisers in well over a decade. Except for the few appraisers whom had no ethical objections to concealing fees from consumers, being willing to cut corners to complete reports at half rate fees, etc.
Retool the entire industry and wipe out tens of thousands of high skilled careers. So that appraisal management companies can absolutely rule the appraisal market place, even though these companies don’t actually complete appraisals. But they can complete and manage evaluations, which is where all this retooling comes from.
You’re either on the side of the appraisal management companies, or you are the side of free market principals, fair engagement, open access, the independent appraiser. The appraisal management companies are against the consumer and against appraisers whom long since had justified sincere ethical objections to the predatory methods the amc industry has engaged in for well over the past decade.
Now FNMA tells the 50% of all appraisers whom hold licenses, we can no longer even participate in GSE work, unless we agree to amc’s terms. Such as their indemnity agreements, hold harmless agreements, treat us like employees less the benefits of employment, are willing to play ball, hit their numbers, accept their fees, basically give up all independence of our own businesses. 50% comes from the fact that half of all licensed appraisers don’t even complete GSE work on account of the unwanted harmful injections of the appraisal management industry as they have commandeered 80% or more of all GSE lending work. We believe that of the half of appraisers whom still complete GSE work, half of them refuse amc service across the board. So really FNMA has purposefully brushed off 3 out of 4 available appraisers, by attempting to force appraisers into amc service programs with their appraisal modernization efforts. Yeah, under this sort of government sanctioned restriction of trade policy, there sure is a shortage of appraisers.
All they had to do was force appraisal management companies to bill separately for their service to remove their incentives to drive down appraisers fees, while driving up consumer fees for appraisals, so amc’s could pocket the difference. The amc industry thrives on what is illegal for everyone else in mortgage lending; unearned fees and junk fee billing programs. Now they’re institutionalizing the process through unnecessary unwelcome injection of even more non qualified unnecessary third party servicers whom don’t have licenses, or insurance. The only reason they even still want appraisers at all is our insurance. Basically FNMA and these amc’s have re instituted a robosigning effort, this time limited to appraisals. It’s nice to have respectful conversations on the matter but I don’t think we’re on the same page with this one. I was all hopeful to hear about this WA rule prohibiting appraisers from completing evaluations, and have asked for such a rule in my state. Only to find out you’re excited about it’s repeal. Amc’s are sure excited about those repeals, they sure are. Amc’s never wanted and never even tried to comply with industry standards such as selecting appraisers based on competency, not fee. Since day one the financial incentive to rake unearned fees has dominated the entire appraisal management industries engagement model. They’re no longer satisfied with half the pie, they want it all.
Aren’t most MAI’s also REALTORS who can write evaluations..
Todd, don’t worry about that. Glad you stopped by.
I don’t know IMJSAYN. It reads well on paper. You realize your EO insurance will not be applicable, because you’re not providing services as an appraiser? Might as well light your appraisal license on fire and toss it in the trash can.
We need a national rule that only appraisers can complete valuation service requests, regardless of type. Avm utilities should be required to be managed and succeed valuation analysis authority to a licensed appraiser. They should also be completely transparent with methodology and approach methods, able to be subjected to scrutiny and review just like appraisals today. We need accountability increases not decreases.
The very argument of the WA bill is restraint of trade. Appraisers do indeed need relief form the imposed restraint of trade on our positions. Well, it does not take Albert Einstein rising from the grave to figure out which major player within the mortgage lending realm has imposed said restraint of trade and working limitations on appraisers. You’ve all got stockholm syndrome, now passing bills to appease your amc captors. If I’m reading it wrong let me know. What appraiser in their right mind, whom is not capitalizing from the amc industry, would want to complete evaluations instead of full appraisals? I know when I make the biggest investment of my lifetime, I’d rather have the tenth rate contractor guy from the day labor line on the corner, than engage with an accountable, licensed, insured real estate appraisal professional. Who’s actually buying this? People are so easy to sell lately, they don’t understand what they’re supporting.
quick response Baggins, “evaluations” within WA is not restricted to value opinion reports, they are studies and other appraisal type work that is not required to meet USPAP requirements. In WA the rule states:
Regardless of the intention of the client or employer, if the appraiser would be perceived by third parties or the public as acting as a disinterested third party in rendering an unbiased analysis, opinion, or conclusion, the work is classified as an appraisal assignment
and by law an “appraisal assignment” must meet USPAP guidelines in WA and does not have to have a value conclusion.
Now apply your 1st sentence of the 2nd paragraph to the above statement and you will get an idea where my research is taking me.
quick edit – add on
I concur with your E&O comment but given the change, I believe that the E&O companies are going to have to adapt also and offer that as possibly an additional form of coverage. Not positive, but I think it is a reasonable evolution for them as well.
Well, I check emails and only stay subscribed to articles for so long. When the next one comes out I’ll drop out of real time notifications. It’s all swirling the bowl. One presumes the insurers were consulted if insurance would be applicable, prior to pushing eval related legislation. And no, I don’t think it’s a good idea to extend the group umbrella policy coverage to services which do not fall under ‘appraisal practice’. Unless you want to add a zero to your yearly insurance cost, as you’ll be sharing the risk and coverage with every single independent contractor whom completes any work product which in any way integrates into evaluation services. Let’s have the appraisers shoulder a substantial portion for the avm industry, third party inspectors, 1099’s without appraiser licenses whom pretend they are qualified home inspectors, why not let the avm tech programmers buy in as well. Let’s indemnify the appraisal management companies, cover their losses, and share insurance related risk costs simultaneously. Be careful what you wish for.
I have been reading this misguided discussion and remain struck by how all these long time “very” experienced appraisers are blind to their real role in the financial services industry. I will remind us all again. Our services are required to make the paper salable in the secondary market. This goes back as far as pasting pictures on hand delivered reports. Banks try not to hold the mortgage paper they originate and for decades have been selling it to investors who like the return. Risk? Yes! With a licensed independent appraisal presumably LESS risk. Much of everything else I am reading is self serving BS.
Sure, self serving BS. That’s what the now absent nearly two hundred thousand appraisers were doing when they refused to acclimate to corrupt amc industry practices and were either forced out or quit this industry. They were being self serving. It was not the amc’s at fault, it was the misguided appraisers. It was not erroneous over regulation, it was the misguided appraisers. The appraisers goal is to place an accurate number on the collateral valuation of real property. If that is sellable on the secondary market is not our concern. We don’t control the market, or the properties, we only provide appraisal services for them. Pepsi challenge dare you to walk into a room full of lifetime career professionals or service workers, about to be laid off or replaced by some less skilled body of workers, listen to their complaints, then boldly proclaim they are acting in a self serving manner for daring to take the position their jobs and skills matter. That the quality and reliability of their working efforts is inconsequential.
Remember that question appraisers are asked fill out on the yearly EO insurance, something about has your income came from providing full time appraisal services? Appraisers whom operate outside of their license with evaluations and such, should stop answering yes to that question. Or they will be committing insurance application fraud.
I saw this article on the television news this morning, the disney house as seen on zillow gone wild. Also this particular twitter feed makes for a great highlight how technical avm programmers may not be following proper industry standards on recognizing what is real property, what isn’t real property, alongside providing unique values to unique properties, which potential reviewers are unable to recreate the valuation development methods. Because there is no appraisal grid or any clear indication of how this automated value utility derived it’s figures. There is no accountable individual tied to the value statement, just the nameless faceless Zillow corporate branding. How they got to the ‘value number’, you don’t need to worry about that. Because it’s automated it’s automatically more trust worthy. Because you’re a mere Luddite whom does not understand tech, which is why you maintain so much faith in the amazing sparkly tech systems. (as a 3d holographic imaging device beams dollar signs into peoples eyes.)
The disney house. As seen on Zillow gone wild. 7779 Spruce Ct, Thornton, CO. 2,295 agla ranch, similar full sized basement, built 2016.
https://twitter.com/zillowgonewild/status/1639066371936985088
Zillows statement for 7779 Spruce Ct – $1,100,000 (With a $20k listing price cut. What do you want to bet Zillow will be reactive to the price reduction, and it’s ‘value statement’ will change?) Oh wow, photo clip attached, look at the trending chart on the bottom. An instant hundred thousand jump, due to what? Popular demand? Fanfare? Recognition? The listing price? Does that jump in an individual property affect the aggregates and neighbors zestimate values?
Let’s check out a neighbor’s zestimate whom has a similar home.
7759 Spruce Ct. Similar sized ranch, off the golf just like subject. Wow, 2,723 agla ranch, full finished basement, same golf course location immediately next door. Wonder if it has a walk out basement too, in those ritzy developments they often do, especially when they’re off the 18th hole and such. Even if we did not, I don’t think we can attribute $150k to the walk out basement. Actually more than that because it’s got 500 more sq ft, up and down, a thousand more total usable sq ft than the above disney home.
Zestimate: $945,300.
Just for kicks, go ahead and calculate the ‘avm value’ difference between these two similar homes, which zillow now attributes well over 10% boost for personal property and unique design of ‘the disney house’ which certainly carries a more limited range of buyer appeal.
There is value in use, and there is value in market. But the avm just lumps them together. Oh it’s going to be so easy to game the lending system with avm’s, just do something nutty to get your home some recognition and voila, items which should not be recognized as contributing to real property value will suddenly boost your avm score, and subsequent loan amount. I’m going to go with a thousand pink flamingos, the kind you stick on poles in the grass of your front yard. You can go with the 50 ft burger guy statue or perhaps something nascar or perhaps get zangy with some movie theme dress up of your property.
Let’s use the nifty overhead zillow map with the price bubbles to look at home values on this same block, same golf course location, same or similar competing builders, likely all similar design and style, likely all within similar sizing ranges over all. To the left of the subject, first one I reviewed above, $945k, then $660k, $749k. That’s quite the spread. Let’s scroll to the right: $872k, $818k, $944k, $812k, $822k, $891k, $860k, $819k, $881k, $854k, $846k, $896k, $854k, $784k, $849k, $809k, etc.
Wow! Well I know if I need a lending boost or some flex cash before I walk away, which ‘valuation service’ I’ll prefer. If bankruptcy is in my future, I’m going out with style and panache, gift myself an extra 10%-20% on the way out. Themed houses, popular listings. Just one of a million different ways people can and do game Zillow.
Last year shortly after I turned in a refinance report, borrowers wanted more, rov time. This is rare for me so of course I looked into the details. Please consider this sale example, zillow reference provided by the lender, which of course, the borrower sourced. But this sales example was only mysteriously available on zillow, and nowhere else. Because someone had understood and learned how to enter fictitious high sales data, for an actual existing real property, which had not actually sold or been listed in MLS. Zillow said it did though. I actually did run across borrowers trying to game the lending system for more cash out, by manipulating one of the biggest most visible avm’s out there. One can only imagine how many tricks will come about, or perhaps are currently already in use, gaming lessor avm systems which are already in existence.
If this contractor dude whom barely spoke english knew these tricks, how widely understood is it, the ability to manipulate avm data? Certainly prospective fix and flippers, investors, and a wide range of other people understand this as well. The only people in the dark about the porous unreliable insecure nature of avm systems appear to be Dave Bunton, Andre Perry, the entire staff of REVAA, and the FNMA crew. They’re probably too busy watching made for hollywood documentary movies about fictitious boogie man appraisers whom secretly wear white pointy hats in between appraisal inspections.
I researched that up and down it was a fraud. I used the pro tools advisor deal from within zillow, to ‘request a correction’. Which is quite possibly how the fictitious entry was fabricated in the first place. All you have to do is send in the request, which you can do so anonymously or with a fake name, submit some fraudulent paperwork, and some desk guy at zillow will change the public data entry for a property. This of course, effects the aggregate avm values for the entire area. Imagine doing that consistently how much cumulative effect this could have on avm results.
I see this gaming of avm systems data routinely when I’m reviewing these various sites for rental data. You know, you think it’s the easy part of the job, check MLS, if nothing is there, check zillow or apartment dot com or whatever, find some rentals to work with. I’m so sick of having to review the same rental unit twice, each with it’s own different rental request number and slightly different geo marker, even though it’s the exact same unit. Landlords have long since learned how they can increase their market exposure by way of double listing the same unit. Sometimes they even triple list them. It’s like a hook, see if they can get someone to bite the higher rental asking price, or if they do their homework and go for the lower. I’ve seen this so many times, I stopped even caring about filling out the data correction tool. Mostly because the process is so slow, and unreliable. There is nobody to call, there is no individual person in charge of oversight or data qualification. Zillow is a nameless faceless corporation with a million employees, whom have interchangeable duties and highly variable skill levels. Data is rarely corrected and if it is, never corrected in time to matter, the damage is done. They’re all like that too. And then they turn around in the quest to have more data population, with less expense and human manpower cost, and they scrape and borrow each others systems data.
In centrally managed systems, even small errors or mistakes have much greater and much more immediate potential to cause systemic risks with the snowball effect, which accentuates both the risk and unreliability of the data system as a whole. Which is why qualified skilled human appraisers matter.
Can you imagine the tricks which will come about if realty, appraisal, and lending, were all automated? That’s where all this is heading and it’s a pipe dream by technocrats. Real people with real financial concerns still want traditional redundant checks and balances systems, because that’s in our best interest as responsible consumers. Lenders departure from sound practices represents the moral hazard and poisonous protectionism concepts which inevitably ride in when all the risk can be passed to taxpayers. They cash out when they win, and charge the losses and debt back to the public when they lose. The entire American populace is subsidizing and providing financial backing to these digital value appraisal modernization experiments, which are just but one of a long line of irresponsible practices lenders engage in, because they’re backed by the taxpayers dime. Your tax dollars, hard at work. In this case putting several more hundred thousand people out of work so that income can instead be funneled to their special interest amc buddies. Progress! Equity!
Some time ago I occasionally did appraisals supporting small corporate retirement investments. One I looked at was 4 four plex’s in a large group of varied R-3 properties . My subject was at the end of an easement with separate managements. Obviously, vacancies and management practices differed among all the different owners.
Bed Bath and beyond recently declared bankruptcy, did they have those kinds of ownerships in their portfolios?
Your clients Matter, your reports matter.
For heavens sake Baggins, can you seperate train of thought opinions from your role. How you conduct yourself outside of the financial services industry is your concern. But it is naive not to acknowledge why your are contracted to provide a compliant appraisal to a lender. A) submitted in a generally acceptable form, B) evidence of research particularly as it relates to market data that in your professional opinion BRACKETS the subject value (your adjustments are your professional opinion) and finally C) you are providing detailed collateral verification. GOAL third party written appraisal. Without a license there is not a professionally prepared document. With your licensed signature there is. For this you should be generously compensated. Beyond that – who cares!
Excellent. Ignore the data. I understand the rules of providing appraisals. And have a clear understanding of how and why these rules and format for doing so constantly change. You’re being myopic. There is a bigger picture.
Baggins – I am neither blind or short sighted. You are guilty of a fundamental attribution error – the tendency for people to over-emphasize dispositional, or personality-based explanations for behaviors observed in others while under-emphasizing situational explanations. Or as I said – who cares.
That’s a new take.
https://en.wikiversity.org/wiki/Fundamental_attribution_error
Would you call my detailed explanations under emphasis of situational examples? You might want to brush up on your clinical diagnosis. I’m only fitting a portion of that profile. lol. Nihilism sounds even more exhausting than fighting for truth, justice, accountability, and freedom. If you don’t care, why are you here? When three out of four licensed appraisers suddenly develop actor-observer bias. That explains it; our observation of what these people are doing is the actual causal factor for their behaviors.
Nietzsche has entered the chat.
Read this Baggins – PTRs a new career opportunity!
https://sf.freddiemac.com/articles/insights/how-less-risk-more-flexibility-and-a-better-borrower-experience-are-driving-the-future-of-valuation
Oh lord, no. Now “AI” will be reviewing appraisal reports? Didn’t Bagott or one of the other authors already cover this, that so many of the covid exception no inspection reports were being recalled by the GSE’s at a disproportionate rate? Now AI will mitigate undervaluation issues?
People are not very well informed when it comes to the capabilities of technical software programs. We don’t have artificial intelligence, not yet anyways. We have something which appears to be sentient, but really is just complex heavy coding alongside incredible advancements in processing capability, as Moores law is still effectively in place. (continuing rapid advancements in processing speed of hardware, which in turn effects software capabilities.) The actual truth about AI is that this is just a mechanism of control to bypass normal democratic process of human input, and human agreement. Rather some technical program, which is coded by biased humans, will provide ‘unbiased guidance’. It’s a total sham, don’t fall for it.
Chat GDP keeps on giving us real world examples of this concept that AI is nowhere near ready for implementation into such complex systems, especially ones which require high degrees of human interaction and intellectual judgment calls.
Your article is just a rehash of what FNMA stated right, via a sister government program? I counter with another Chat GDP article. Think twice, do you really think it’s a good idea to have software like that supplmenting if not replacing the human appraiser, underwriter, administrative reviewer, and so many other humans involved in the process of lending?
https://www.malwarebytes.com/blog/news/2023/03/chatgpt-happy-to-write-ransomware-just-really-bad-at-it
Let’s examine Freddies hopeful goals:
‘While we navigate the ever-changing landscape, Freddie Mac remains focused on developing valuation methods that provide the best risk mitigation while promoting consistent outcomes, simplifying the loan manufacturing process and reducing costs.’
‘promoting consistent outcomes’… Where does the realtor’s influence fit into that? How does commission based representation reconcile with an automatic AI based ‘valuation’? Think there might be the chance of biased programming in the code writing to ‘promote more consistent’ (lending & commission realization) ‘outcomes’? Simplifying the process; Like removing one of the last effective checks and balances in place (the appraiser).
‘A trained professional conducts a brief visit to the property and subsequently reports their findings; if the PDR meets our requirements, the loan may be originated without an appraisal. This is just another way technology and bifurcation can help alleviate capacity concerns when loan volume is high and allow appraisers to focus on assignments that require their knowledge and expertise.’
But the appraiser is the trained professional. The licensed home inspector is the trained professional. Just slap a software program on anyones phone and they become a trained professional with equivalent competence as these people? ‘technology and bifurcation can help alleviate capacity concerns’. You know what else would do that, stopping the amc industry from pilfering the appraisers income to the tune of billions and billions every single year, so appraisers could hire and train more actually properly trained professionals. My expertise, like many appraisers, comes with our senses, the feel of homes, the smell, the subtle details, observing shifting structure, poor finishing, moisture damage, mold indication, poor insulation, creaky floors, foundational repairs, evidence of concealed damage, the general estimate of wear and tear, deferred maintenance, effective ages. I’ll become a believer of this technology, only when the coding peramiters programmed into the software are available for review. But what would that look like? Static tables with predefined aging periods? Detailed databases which would supplement the appraisers rich experience such as having a lifetimes worth of information about individual jurisdictional zoning and coding rules, products associated with construction which have came and went in the marketplace for generations? Previous construction methodology? Down to collectability value of that old iron basin sink and clawfoot tub? What about care and use? How about the issues with value in use vs value in market? As I illustrated with the ‘zillow gone wild’ ‘disney house’, these avm systems can and will effect the aggregate, and confuse value in use vs value in market, simply via data input, such as a zany realtor tagging a value in use consideration on a listing for like, 250k and such. (image attached, observe the avm estimate of value jump!)
‘Hybrid and desktop appraisals may also mitigate the risk of unconscious bias as they remove the face-to-face interaction with an agent, buyer or seller, which could lead to unfounded assumptions.’ That tired bullshit again? As if the policy makers and software coding people are simply above it all, not susceptible to this same imaginary force now coined as unconscious bias? Only through unfounded undeserved fictitious slander campaigns against appraisers is such a statement even permissible. Yet it still fails to meet even the basic premise of a logical argument. Because automation will remove face to face interaction and that’s really good for risk management and bringing superior value to borrowers? In the sales world, when you can land a whale over the phone and seal the deal in record time, that’s referred to as a slam dunk. Mark it on the board baby, another one down. Big commission check here I come.
The very end which talks about natural language processing, computer vision inspections, and laser imaging is rich. Because when I’m a borrower, ‘value’ to me is totally privacy violating 3d scanning of my interior spaces to create 3d model images which these companies refer to as creating a detailed home fingerprint. That’s what I want when I reach out to a lender to leverage my equity, a complete 3d scan of all my interior spaces and belongings. Hide your gun, and your pipe. A virtual walk through, sorry, not good enough. I’m not admiring Wright homes in far away places, as an appraiser I’m trying to competently review the entire home as the ‘eyes on the ground’ person. So much for that concept right? Define for me; ‘Natural language’. Define for me; ‘Free form text comments’.
You want to talk subconscious bias? Let’s take a step back and talk about the mindset of the lunatics whom believe all of the rainbows and pot O gold talk related to these long since in existence, yet cleverly repackaged, software applications. Because to them, tech is god, the golden idol, and they can’t stop worshiping it. Don’t look behind the curtain. Don’t ask to review the peramiters of coding. Just trust the tech because it’s conceived by people whom know more about tech than you, therefore is superior to your human judgment. Ignore the fact that these processing capabilities have not even come close to the exponential calculation of information the human mind is capable of. Ignore the fact that each one of us carries around the equivalent of 5 full encyclopedias worth of learned information from our lifetimes. When you put two humans together, you very well could now benefit from 10 encyclopedias worth of information and insight, and so on, and so forth. That humans actually perform quantum level computations at levels still not even fully realized, as information spontaneously is recalled, assimilated, reconciled, and reformed through a complex network of cellular interactions we still do not fully understand except we do know this processes at a quantum level at the speed of light, possibly even faster. (through the wormhole tv series reference on the computation power of the human mind, the century of science behind that.)
But trust the program, the government GSE whom specializes in lending has selected the appropriate software, the appropriate applications, and appropriate peramiters to bring all of that to bear to replace you, the human appraiser. Because you’re a biased racist sob whom stands in the way of their payday and their constituent lender interests. They’re repeated all the buzzwords they’ve topically understood about this ‘technology’, so you can trust the implementation will be seamless without bias and stuff. (as people whom better understand tech roll their eyes, understanding these people don’t even really understand what they’re talking about, they were apparently an easy sell for the software developers.) So much for fair representation. They’re advocating for someone, it certainly is not the consumer.
https://twitter.com/zillowgonewild/status/1639066371936985088
Hey, the avm just jumped it a quarter million, because, data input (somebody said so). And that’s all it takes to skew the entire system and effect the aggregate for everyone else.
https://www.youtube.com/watch?v=r7cYsgB4G1s
(sorry, could not find the one on quantum nano tubes within the human brain which defy physics with advanced processing capabilities, but it’s somewhere in that series. If you’ve never taken the time to watch Through The Wormhole with Morgan Freeman, you don’t know what you’re missing. One of the best developed most thought provoking and imaginative explorations of the human condition ever placed on film. It rivals the great philosophical works of history. This one is good though because it touches on belief in systems and how our own beliefs shape the systems we develop.)
Sure, it’s possible, these systems could one day actually replace humans. Do you really believe now is that time? As these people dial it in, punch in and out, can’t even balance a budget, and leave a trail of destruction in their wake? Riots in the streets, rising crime, homeless people everywhere, rampant inflation, unaffordable housing, excess regulation. And they’ll make it all better by eliminating the unconscious bias of face to face interactions with real estate appraisers, driving a few more thousand people out of jobs? As if the guy holding the app on the cell phone or 3d scanning device will not in any way express any subconscious bias? That’s literally impossible, and they won’t be accountable to anyone other than their paycheck. Don’t forget to slip them a 50 to point that device away from known deficiencies, if you want your maximum ltv.
These people are not acting in the greater good for posterity of our society and human culture in general. They’re getting paid, proponents of, advocates of, mouthpieces for. Everyone is biased, it’s just a fact of life. It’s not necessarily a bad thing. “The world is what we make of it.” Releasing control to a software is no different than bowing to the king or accepting servitude, because a human created that software, and a human controls it. It will always be that way. There is no such thing as AI, not yet anyways. There is only advanced coding.
The closest thing to AI is something like the Dwave (although there are many different similar ones). Actual quantum computing through hardware requires something like a honeycomb processor design which requires quadrillions of gallons of cooling constantly or it would become so hot nuclear fusion and subsequent explosions could occur. Cern systems are theoretically producing strangelets which fall undetected to the center of the earth which could spontaneously transmorph all matter into a solid non organic one of these days. They found the god particle but still can’t entirely explain it as we now re examine the concept of dark matter and even entertain the notion of the electric universe providing more rational modeling than quantum mechanics which were built upon the superstring theory. They still can’t fully explain what the most advanced systems on this planet are actually doing. But now they’re going to implement ‘artificial intelligence’ to solve the inequality gap which humans created, and humans perpetuate. Because, like, science and stuff. We believe in the science, because we are followers of scientism. Deal with it or you will be labeled a racist.
These people are not morally or ethically capable of developing or implementing what they claim. They’re too busy slinging mud and disparaging others, jockeying for the position and the sale, to get what they want. These people answer to corporate interests, not borrowers. Any labeling about value to borrowers or better working conditions for vendors is just lip service. Why doesn’t their same logic apply to their own paychecks, their own inefficiencies, their own subconscious biases, or anyone elses? Only the appraiser right? That’s how these things start, with one, then the next. It’s a complete logical and intellectual fallacy for these people to state, automation for thee but not for me. As if they’re above it all and are not equally responsible for any and all faults in the systems they manage.
Being the managers and policy makers so far above the appraiser, the more logical conclusion is that if these institutions want to eliminate bias, they should eliminate their own positions first and learn to trust and treat better the people whom exist further down the ladder than them. But that’s not how power and greed actually functions. They’re talking total systems reformation for the greater good. It’s like an intelligence test if they can convince people to actually buy it, because it won’t end well. The end result is one less check and balance, one more silenced voice, one less human interaction, one contributing unit less in the grand scheme of human ingenuity and how all our actions shape and form the society around us. These considerations are similar to the free speech arguments. We don’t conquer bias by censorship, we conquer it by having more contributing voices. Central planning never works and that’s all these modernization schemes are; yet another iteration of central planning. It’s got a new sales package but is the same old thing as before, now with updated processing power! Be careful what you wish for. Because the people implementing these systems may not be smart enough to even understand what they’re putting in place, and what they are trading away without concern. Automation! Equity! Buzzwords of the day which have become peoples personal religion.
I breath in depleted uranium as I stare out over the vast ruins of a failed world. Finally, we have achieved equity.
We’ve beaten this one to death, but I want to remind you again that I warned you who was the enemy months ago – Lyle Radke, Sen Dir Collateral Risk FANNIE. Check out is thin background routed in real estate SALES! Hybrids for $100 -LOL!!