Desktop Appraisals, Panaceas for Faster Reports
Desktop Appraisals, Panaceas for Faster Reports. Or so they say.
Bankrate.com has a revealing article published on Oct. 27, 2021, titled As Appraiser Shortage Delays Closings, Mortgage Giants Try Workaround | Bankrate
FHFA (the GSE’s “manager”), after the administration change, under pressure from mortgage brokers and lenders, and after the experiment with the COVID era “flexibilities”, has decided to allow the GSE’s to accept a new type of appraisal for first mortgage (purchase) lending early in 2022: the Desktop report.
The current line of thinking is Desktop reports will take less time to turn around, from assignment date to submittal. The theory is they ‘might’ cost less than a traditional appraisal. Are either of these suppositions true? We won’t know until about mid-2022, after a number of these reports are delivered to the GSE’s by appraisers who choose to do them.
But, I’ve discovered a potential anomaly in Desktop reports (and Hybrids also) which might shock some appraisers. It might cause appraisers to take a more measured examination of, and involvement with, these newly authorized reports. My intention is to provide more info about that in another article.
In case you have not been following the news, here are the relevant items from the Bankrate.com article:
Hoping to find at least a partial solution to that problem, the overseer of mortgage giants Fannie Mae and Freddie Mac will begin accepting more “desktop appraisals” in early 2022. The Federal Housing Finance Agency said recently that these remote valuations will take the place of some traditional appraisals, which require appraisers to visit properties that serve as collateral for mortgages.
Desktop appraisals will be available for “many: purchase loans, the agency said — although details are sketchy about precisely which homes or borrowers will be eligible.
…help each appraiser complete more loans in a day…
Realtors and mortgage brokers gripe about long delays for appraisals, and they describe appraisers demanding additional fees for such items as long drives, or for evaluations of unusual homes that lack comparable properties.
You should re-read the last paragraph!
Desktop appraisal. This is the type of evaluation green-lighted by Fannie Mae and Freddie Mac. As the name implies, a desktop appraisal is conducted from the appraiser’s desk, using tax records and information loaded into the multiple listing service by the seller’s Realtor. (DT – There’s actually a bit more to this, if present plans play out.)
Michael Fratantoni, chief economist of the Mortgage Bankers Association, is among the industry leaders applauding the shift to desktop appraisals as an antidote to the shortage of appraisers. “If they’re not having to drive to the properties, they can do more work,” he says.
During the pandemic, Fannie Mae and Freddie Mac allowed desktop appraisals as a temporary measure. In the latest development, the remote valuations are a permanent part of the lenders’ underwriting process.
The regulator hasn’t shared details about how to know whether you’re eligible for a desktop appraisal, or if you’ll get a price break compared to another type of appraisal.
I am trying to keep an open-mind about this new initiative to have appraisers do their work faster, although I’m not convinced that is actually going to happen.
Technology and process changes are wonderful, until they don’t enhance productivity. The new ‘Desktop’ reports will just add new layers of responsibility onto the appraiser to manage – which some won’t want to do.
I’m not convinced that experienced appraisers, who adopt doing these new Desktop reports, will charge much less than standard fees for a regular report where the appraiser is NOT relying on someone else to assist with photos, measuring and data gathering using remote smart phone technology employed by someone else, and third-party drafting services to produce the home diagram.
The other troubling thing (to me) is third party involvement can hide, mask or conveniently not disclose elements of a subject property that the appraiser should notice if on-site. Is the floor level? Is there visible water or critter damage? Is there actually a back wall on the house? Is the community water treatment plant next door, and the home is downwind? Maybe the home is under the local airport runway takeoff zone, where the most noise is generated?
Appraisers are supposed to be the eyes and ears for the lender to protect them. That’s part of the pride I take with this work. But the initiatives to “just do it faster, damn it!” are not in concert with our responsibility under USPAP in preserving the public trust as professional appraisers.
Appraisers should start paying attention to this upcoming proposed process. It will be a major change to how ‘we’ do our work, if ‘we’ choose to do that work in the way that it is proposed.