Eroding Consumer Protection

Fannie Mae's Appraisal Waiver Option Is Eroding Consumer Protection. 

Waiving appraisal requirements on residential homes could erode consumer protection, stall attempts to create diversity in the profession… 

The recent announcement from Fannie Mae that they will waive the requirement for residential home appraisals has caused quite a stir in the industry. Fannie Mae’s decision to waive appraisals during this time of soon to come recession and bank liquidity issues is both surprising and concerning, and could have serious implications for both consumers and financial institutions alike. With falling values across many markets combined with rising mortgage rates putting even more pressure on borrowers’ wallets, this decision could potentially put consumers at risk of taking out loans for homes worth significantly less than what was originally estimated by an automated valuation model (AVM). With sales volume tanking, there will be even less data available for these AVMs to utilize – making them increasingly unreliable as an accurate measure of value.

While the Appraisal Institute is notably silent on this issue, the Massachusetts Board of Real Estate Appraisers (MBREA) recently wrote letters to the directors of the FHFA and the CFPB, expressing their concern over how waiving appraisal requirements on residential homes could erode consumer protection, stall attempts to create diversity in the profession, and weaken safety & soundness of financial institutions & secondary markets. We applaud MBREA’s efforts at standing up for what is right!


The Massachusetts Board of Real Estate Appraisers (MBREA) is writing you on behalf of our real property valuation members to express concerns over the evolving erosion of appraisal standards for residential mortgage transactions. Our concerns focus on two areas consistent with the missions of your agencies: consumer protection and safety and soundness as well as appraiser diversity.

Is it not important for borrowers to be aware of their appraisal options and the associated benefits and risks?

Minimally, if the GSEs’ movement to lessen consumer protection is inexorable, we urge adding a clear language consumer disclosure about the benefits obtained from a traditional appraisal and the risks associated with accepting an alternative valuation product.

Is it not important to ensure there is a both a diverse and robust appraiser population?

Efforts to diversify the appraisal profession will be profoundly impacted by the negative consequences of these policies when those contemplating appraising as a career realize their potential income from performing property inspections only, or a portion of a hybrid appraisal, will be a fraction of the income derived from performing full appraisals.

Additionally, as their incomes shrink, currently credentialed appraisers will exit the profession or move away from residential mortgage assignments to non-lender assignments or to positions in allied fields such as tax assessment.

Appraisal policies that serve to discourage new entrants and drive existing appraisers away from the profession will result in consumers paying more for an appraisal when one is required and waiting longer to close. These are consequences that the GSEs modernization policies seem to ignore.

The MBREA urges you to conduct a comprehensive review of the GSEs appraisal initiatives that are harmful to consumers, increase risk for financial markets, adversely impact appraisers and appraiser diversity, and that are for the sole benefit of lenders.


Image credit flickr - Fibonacci Blue


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18 Responses

  1. Avatar Seneca says:

    After the relentless assault on us appraisers for the last three years there is nothing else we have or can say anymore. No one is listening. Quite frankly, I just don’t care anymore. Let it all BURN.

    • Baggins Baggins says:

      ‘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.’

    • Avatar John says:

      Appraisal institute?? I do not hear them speaking on out behalf?? Typical they just want fees to the fat cats can eat lunch at the country clubs

  2. Avatar PJTMC says:

    Good people there that back up their members. The other sell-outs can take a lesson from this.

  3. Avatar Eric Kennedy says:

    Well written argument thank you. They will still need appraisals for everything not cookie cutter but it will be more expensive and take much longer to process. Also the loss of accurate data will destroy the AVM accuracy in 6 months. The unintended consequences are not being considered.

    • Baggins Baggins says:

      And guess what happens to appraisal fees, when the appraisers are no longer able to maintain a steady income and keep their skills sharp on everyday properties… A good rule for appraisers to live by; Do not provide services in communities you could never have a realistic chance of living in yourself. Add a zero to the appraisal fee.

  4. Avatar Xpert says:

    Thank you MBREA. We need to contact other coalitions and urge them to join MBREA.

  5. Avatar Chuck Minzenberger, SRA says:

    The timing of waivers couldn’t be more dangerous, I’ve been dreading this upcoming Spring market, mortgage rates have more than doubled since this time last year and values have softened, a close eye of a skilled appraiser has never been needed more, both for new sales and for owners trying to pull ‘equity’ out, more upside-down owners is a given.

    • Baggins Baggins says:

      Well that’s exactly why the timing matters Mr Minzenberger. FNMA can’t dish out all these special favors in a stable market with sound checks and balances systems in place. Without automation, there would be too many eyes on what’s actually happening with defaulted property dispositions and loan restructuring. I think they’re just as eager to get into loan restructuring, this effectively boosts the loan servicing income while also resetting the time and the rate. They’ll have no problem also just calling the note, filing the foreclosure paperwork, and selling those units at sweetheart low prices in bulk to investment firms and hedge funds (which they will also inevitably be invested in themselves.) I mean it’s not theory, they’re already doing this in daily practice right now.

      We’re already into a 2008 sort of scenario. Treasury notices at counties have jumped to levels not seen in well over a decade. People are losing homes. You just don’t see it though, because the big corps are bulk buying upstream, having been granted special privileges by the GSE’s to buy, at discounted rates not offered to the public. Even cash auction buyers are standing in line behind these big players. There is no more such thing as residential, it’s all part of the commercial speculation zone now. Programs like First Look and other limited buyer type allowance for the first few weeks or month were supposed to offset and balance some of these practices, return those discount buy opportunities to regular citizens.

      But of course, the GSE managers alongside TAF and Brookings, could not resist handing and receiving out special favors, they have silently reduced those programs systematically over the past so many years. In preparation for this event happening right now, probably only going to get worse as the economical factors continue to be more stressed. It’s ingenious really, the investors hold the discounted properties in reits in perpetuity, permanently removing available affordable housing from the market to use as rental and income instead. This allows the price and rental of housing to be artificially propped up so their investments don’t flounder and remain strong and profitable.
      Then they turn around with two tongues and participate in the fictitious slander that appraisers are racist, which is why downtrodden citizens are unable to build any wealth in the housing market. Because if the foreclosures and defaults were allowed to return to market, they would drive down the values of both rental and sale figures. People could afford homes again. Honest market forces that actually react to these negative economic conditions we’re experiencing. The public is completely dumbed down, they are actually buying into the idea that in times of economic prosperity, prices go higher, and in times of economic downturn, prices go even higher. There will be no economic relief for you unless it comes by way of a welfare handout distributed by the government. Equity!

      Those whom bought at the peak would need to just clutch their low rate and hang on, wait it out. That’s not quite as appealing as feeding those trillions of cumulative dollars into firms and funds which one may have a stake in themselves. It’s the difference between personal investment in real property, and investment instruments which the real property systems managers have a large and cumulative stake in. And they’ve been doing this for some time. We’ve reviewed commercial speculators in residential housing stories since at least 2015. Nobody knows for sure but that’s trillions of dollars in wealth and housing equity which the managers have funneled away from citizens, to corporations instead.

      Remember, it’s all the racist appraisers fault. We have a special place in our hearts to wear white pointy hats when nobody is looking. It’s just what appraisers do. We’re in on the big scam to funnel wealth away from citizens and instead feed that wealth to international corporations. Or in the case of non white people, out of pure spite, we just don’t want them to have any money. Our reward for secretly supporting this redistribution of wealth with our rampant racist tendencies, is of course, to be outsourced and replaced with automation. Who’s still buying this? I guess the cowards of the world whom go cry themselves to sleep and hide under covers in the middle of the afternoon, for fear that total strangers from corrupted positions on high, might just call them RRAACCIIIISSSTT$$$! Oh no, mommy help! I’m still a little mystified why the big corporations whom signal BLM and racial messaging are swiping all these discount buys upstream of regular citizens, then jacking up rental and resale prices. You have to give the money to the corporations first, before the equitable redistribution can happen. It’s not rocket science. They’re just saving and investing in communities. Once these corporations get those few additional trillion dollars, they’ll totally give some of that back to the people. Hang on, the GSE’s in conjunction with the PAVE task force and appraisal management (amc) industry, are working hard to funnel another few trillion in housing market wealth to the big investors, things will get better for the regular people soon. One is expected to wait out the liquidation phase, before equitable redistribution is able to occur.

      • Avatar don says:

        Back in the late 1960s, early 70s Bart Litton/Litton S&L was making ten / ten loans. He stated that you could make any loan with enough POINTS.
        I can’t remember who took Litton over after that failure?

        • Baggins Baggins says:

          I don’t understand so many of these terms, it’s just uncommon within conventional, or has been at least. A 10 /10? What’s a 2/5? Or I just can’t recall but I’m sure you know the terms.

          From what I can gather there are all sorts of zany point buy down programs, and some expire. They might as well be adjustable rates.

          Dang government is prohibiting sale of incandescent bulbs later this year. I should have bulk bought more a few years ago. I just bought some on ebay and actually am holding 50 year old made in usa light bulbs extra life durability, like from some old forgotten warehouse shelf. Remarkable. They’re prohibiting halogen too. Why don’t they try prohibition on government spending and tax increases? Last call for incandescent light bulbs, have to search them out ebay and amazon at this point. Used to buy these dang things for a quarter, even less. Now I’m paying whatever they ask and am just thankful to get anything. Going to carve out some additional storage space in the basement. I like my incandescent, the light is better. If the government is this serious about taming down energy use, the politicians should all turn the lights off and never come back to work ever again.

          The light bulb conspiracy is real!

          • Avatar don says:

            Ten points and ten % interest rate, Lyton S&L only put out $90,000 for a $100,000 loan and charged ten percent.
            Age can due Afful things to a memory, is this the first sign? my memory has feen failing since I was 25.
            Pay downs, HOA dues, etc. were common in sales price negotiations.
            Adjustable rates don’t include the buyer after he buys, only the ugly corporation and the contract.
            Those contracts (Trust deeds) were available to individual investors, opening a large opportunity for kindly R.E. people, or other kindly investors.

      • Avatar don says:

        The V.A. Always had Re-appraisals on their foreclosures, they required (3) values; As is, As repaired, and an Estimate of repairs.
        I remember being assigned Big Jacks Guard Dog Service, an SFR in a tract development still operational. The VA did not have of the original appraisal, but a friend did. I completed the assignment with the aid of qualified friend with no dog bites.
        The VA would not, or did not, supply them.
        Our office had 5+- foreclosure appraisals on the same house done just after the first of every year, whoda thunk the VA would be so accommodating, especially after Christmas, appraisals fees are less than loan fees

  6. Avatar Pat says:

    We each need to demand that our state adopts the same policy. It doesn’t cost much for a simple and direct letter.

    Don’t just moan and groan, get off your asses and scream the truth!

  7. Abby Piper Higgins on Facebook Abby Piper Higgins on Facebook says:


  8. Kathy Morton Bunting Hoey on Facebook Kathy Morton Bunting Hoey on Facebook says:

    Thanks to the Mass board. Common Sense is not totally dead!!


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Eroding Consumer Protection

by AppraisersBlogs time to read: 2 min