No Appraisals Required. The End of Appraisers?

No Appraisals Required in the Future! The End of Appraisers?No appraisal may be required in the future!

Fannie Mae took a direct shot at appraisers with the announcement of changes in their Selling Guide.

Two options for the future, both of which do great harm to the appraisal industry. First, “third party” inspections. Appraisal trainees aren’t good enough, so now we will have unlicensed inspectors going through the homes of unsuspecting homeowners. And, with this inspection a traditional appraisal is no longer a requirement for the mortgage loan. Secondly, the 3rd party inspection is sent to a licensed appraiser. Fannie Mae wants an appraiser’s signature so the appraiser can be held responsible if there’s any problem in the future. Both options say they are good for consumers and both options are filled with fabrications and misinformation.

At the end of it all, it’s about control and profits. Why trainees can’t provide the data is simply because big banking and AMC’s don’t make profit from the inspection part of the process. If appraisers don’t stand up and say no, right now, the running joke of the appraisal industry could be gone in five years; well, it just very well may come true.

Ok appraisers, it’s time to speak out and stand together. The only reason for these changes are about a piece of the 11 TRILLION dollar mortgage market. And that’s the way it is.

Hamp Thomas
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Hamp Thomas

Hamp Thomas

Hamp Thomas, founder and president of the Institute of Housing Technologies. He is also the president of Carolina Appraisers & Real Estate. Leading expert on residential square footage and its influence on the home valuation process. Instructor, Appraiser, Realtor and Author. He is the author of “How to Measure a House” based on the ANSI® Guideline; the American Measurement Standard, Death of an Industry-Real Estate Appraisal, etc. & offers continuing education courses (for agents and appraisers), and numerous other real estate courses, webinars, and YouTube videos.

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43 Responses

  1. Avatar John Hamilton says:

    Going longer out I question the sustainability of the appraisal delivery support function, will it be cost effective for an appraisal software company to develop the forms and provide a platform for the delivery of the report? Will the AMC appraisers compensation be adequate to cover overhead and earn a living? To be honest I have no issue in relying on a third party inspection, my guess is that in a short period of time these inspectors will become pretty good at this part of the appraisal process, some I have seen are quite thorough. Appraisers have benefited from their testimony being exempt from hearsay when they rely upon 3rd party information in the development of FMV in Court, and most appraisers totally rely upon MLS data when preparing residential appraisal reports and we all have stories about that information. So here we have arrived, a bit sooner than expected at the point of the next evolution of the appraisal industry, or at least the residential mortgage lending part, the dogs will bark but the caravan will move on, some will leave, others stay. Despite years of watching this develop the national appraisal groups never put together a meaningful coordinated defense, a house divided did not stand, and NAR just flat out abandoned to cause, their prioritie$ are more aligned with the mortgage bankers anyway. So continue to gnash your teeth, bemoan the loss of this piece of the residential mortgage loan business and prepare for the future. Me, I will stick to the real estate business that has served me well for the past 40 years or so, I even continue to encourage people to enter the field, it will be different but I think as challenging & interesting as ever. Remember Forms & Worms, double sided tape & whiteout, the list goes on …..

  2. Avatar Seneca says:

    Is this a recycled article from a couple of years ago? Waivers and third party inspections are already here.

    • No it’s not. It’s about FNMA’s Selling Guide updates which was announced on March 1. They are moving away from implying that an appraisal is a default requirement for valuing a property.

      The valuation modernization includes introducing the following:

      Value acceptance: This will be used in place of the term “appraisal waiver.” Fannie Mae said the term better reflects “the actual process of using data and technology to accept the lender-provided value.” The GSE added that it will use the term ”for a period of time and will eventually move to ‘value acceptance’ after the market absorbs this change.”

      Value acceptance + property data: This is a new option that “utilizes property data collection by a third party, who conducts interior and exterior data collection on the subject property,” Fannie Mae said. It added that, to ensure consumers are protected, a lender must verify and be able to demonstrate that data collectors are vetted through an annual background check; professionally trained; and possess the essential knowledge to competently perform the property data collection. Fannie Mae said property data collection is used by the lender to confirm property eligibility, and an appraisal is not required. This option does require submission of the data to Fannie Mae’s Property Data API, based on a new data standard and delivery of Special Feature Code 774.

      Hybrid appraisals: These are based on interior and exterior property data collection by a vetted and trained third-party that is provided to an appraiser to inform the appraisal. They are permitted for certain one-unit transactions where value acceptance + property data was initially started, but changes in loan characteristics results in the transaction not being eligible for that option.

      Alternative methods for the Appraisal Update and/or Completion Report (Form 1004D): These include a borrower/builder attestation letter to verify completion of construction, and a borrower attestation letter to confirm completion of repairs for existing construction in lieu of Form 1004D. The policy further describes required exhibits and controls.

  3. Avatar Johnny Q says:

    To quote the late Mrs. Nancy Reagan -“Just Say No”

  4. Avatar Chuck Minzenberger, SRA says:

    While FNMA is the giant gorilla in the room, they aren’t the only entity that buys and securitize loans. Let’s see how far they go without a net. I do wonder if FNMA will let investors know which loans had an appraisal and which ones just got a sniff test, I doubt any disclosures will be made. We know from 2008-09 transparency is not in FNMA’s wheelhouse. Sure, underwriting standards have gotten tighter, but do they really know what the asset actually looks like? smells like? leaks/floods like?

  5. Avatar Spencer Pauls says:

    Talk to whom exactly, of which isn’t being bought out by the AMC’s, NAR and Banking industry. That only leave fellow appraiser’s….so whom exactly should/could one speak to?

  6. Avatar PJTMC says:

    Yippe-ki-yay *^^*+%# (Die Hard 1988) … Back To The Future 2013 and any other nonsensical movie mantra. The country is doomed to repeat past mistakes at the hands of a privileged, select few. I’ve’ always taught my “children” to learn from their mistakes. Now we have unpatriotic, selfish, grown children, mixed with a whole lot of greed and Half Baked who are ignoring that lesson at the expense of the Golden Goose taxpayers just to line their pockets with ill-gotten gains. Bon appetit.

  7. Avatar David says:

    Don’t sweat the small stuff! The secondary market is not going to allow collateral verification by an unlicensed party. Really the only way there might be a significant reduction in appraisals is when the risk associated with the loan is so low that a 2055 provides sufficient documentation to sell the paper to a third-party. This is already going on and lenders are finding that the collateral verification of just a picture from the street may not be what the secondary market wants; particularly if there’s been significant changes in the property contrary to MLS or public documents. I guess what I’m trying to say is: If there is the slightest amount of risk associated with the loan 80% or more the secondary market is not going to allow what we’re seeing in the desktop world. Hang in there, present appraisal volume is going to be extremely low for the next 18 months but I doubt that the churning lending market is going to go to a no appraisal situation.

  8. Avatar Garth says:

    Far too late. After the Dodd Frank debacle should have Stood Strong for our profession way back then. It’s over unless your are in a Unique Position.

  9. Avatar David says:

    The cry babies will not fight back – they will retire and fade into the horizon!

    • Avatar CJK says:

      I will check back in 2 years to see how that worked out for you. We should have started the fight 40 years ago. But hardheads did not want to unite.

  10. Avatar Pat says:

    This whole idea is bull$&!?!!!!

    The California Fair Housing announcement / review is a flat out LIE!

    Our appraisal organizations failed us miserably. It’s now time for the State Coalitions to regroup and make noise through our old National Coalitions group!!

    Did I read something somewhere that the head honcho in charge of appraisals is 43 years old?? That means he was about 25 when we had the runup to The Great Recession! He has plenty of historical evidence doesn’t he? I hate to admit I have been doing this for 51 years. Not learning from history is ignorance plain and simple. I don’t know about y’all’s business but the mortgage volume is down around 80%. Still, inflation is not under control! Did we print too much money?

    Now to diversity. How does Fannie preach diversity and then YANK the rug out from under them. How does Fannie promote generational wealth when they sell thousands of single family dwellings to HUGE financial corporations. In my opinion, this is corporate collusion.

    I promise when I win the lottery I’ll sue them all!’

    • Avatar Joseph A Fassari says:

      You have not noticed but corporations have become larger than some governments and are represented on both sides of the aisle. Try inventing something. You will be stepped on like an ant. We are just “vassals”.

  11. Baggins Baggins says:

    I’m about to whip out the gifs and post the boss glasses on Hamp! Thank you, good article, good video.

  12. Avatar Joseph A Fassari says:

    Everything is broken. They took away the opinion of value. Home measurements to be performed to Ansi standards. Regression analysis, HA HA, show us good credible data. In the end it comes down to having the stars aligned. That will never happen. I have stopped doing bank appraisals. Taking my SSI and performing limited appraisals for clients that appreciate my services. You cannot take away my 30 years of experience. I learned from the good, the bad and the ugly. I even made a college professor look like a fool when I was apprenticing. I proved to him public records can be changed from bad information. The fact is everything is wrong. I recently performed an appraisal in a divorce case. The other appraiser valued the property before she could walk onto to it. Not noting the issues with the site and the home. The judge knew after he saw my report. I have a happy client for a well-documented and supported appraisal. Which took considerable time. Not all appraisals are cookie cutters. So, for that appraiser who thinks they can get it done in two hours I wish you guys, gals a lot of luck.

    Will these new inspectors learn how to do this. Do they require a college degree with accounting background? Heck that far just let them fill in the forms. Today another large bank is biting the dust with stock its going down 60% +/-. Maybe more. The whole banking sector is under scrutiny again. They forgot one thing most Fannie forms state comparable sales photos need to be taken in the assignment even when they taken 6 months prior. USPAP here we go. Maybe they will reinvent USPAP.

  13. Avatar Seneca says:

    All the news today is about all banks collapsing with more to come. Can’t blame this on us anymore.

    • Avatar Chuck Minzenberger, SRA says:

      you know the best and easiest way to steal money from the bank, is buy one

    • Baggins Baggins says:

      That’s what they’re saying on the internet, and I believe them.

      Financial news you won’t hear on the mainstream. PTG ytb.

    • Avatar Coach says:

      Silicon Valley Bank (SIVB) Collapses, Enters FDIC Receivership – U.S. bank regulators seize Silicon Valley Bank in largest bank failure since the Great Recession

      Silicon Valley Bank CEO, CFO and CMO sold +$4.4MM in stock over the last 2 weeks.

      But they didn’t know anything right?

      • Baggins Baggins says:

        03/10/2023 , PTG I linked just above your post has a two part show on this. Wow, it really happened. Depositors are unsecured, they will be paid last. The federal reserve strikes again, that easy money is coming back at everyone soon. Joe and Jason with PTG are speculating this will be blamed on FTX and used to usher in the digital dollar to really crush the independent economy. This kind of thing would have never gone this far to be this severe if we respected the rules set forth in Article 1 Section X. Trust the government to have your best interests in mind though. They’ll tell you exaclty how much your assets are worth, to then prescribe the right loan at just the right frequency you should be taking the loans. Who’s still buying this? Like moths to a flame, they went back. This cycle came sooner than the ones before the last. That’s because the plunge protection team is running out of tricks, there are too many inside players they dole out favors too, so the bubble popped much sooner this time around. 501c’s hey, your money might be running out soon, one can only hope they all go flat broke so we can start over.

        Wow, so when do home prices finally come down so we can get some upward mobility again?

  14. Avatar William Turner says:

    SVB just went down, who will they blame? Wait a year, with the rising interest rates, the 1, 2 and 3 year arms will be strong again, and next time FNMA may not be able to blame the appraisers, but they will anyway. The question for Appraisers is how do we inform buyers that they should have an appraisal by an appraiser. I cannot think of one reason that a Realtor, or mortgage lender would want an appraisal, except to convince a seller to lower their asking price. Agents only get a fee if they go to settlement, and the higher the property price, the higher the fee. With interest rates rising, values are falling and more deals are collapsing. Its the appraiser who kills the deal, get rid of appraisers. The lender, and FNMA sell the loans, we have been through this before. The investors in the houses (home buyers) and the investors in the loans, and the mortgage insurance companies (Remember AIG in 2009?) need to know they have no security if they do not have an appraisal by a qualified appraiser. If you are accepting an inspection by anyone else, unless you have trained them well, can you safely sign an appraisal as the appraiser? When you sign the report you accept everything in the report.

    The seller wants x, if the buyer accepts and pays it without an appraisal, then realtor and lender get the fees. So of course that is why FNMA and the Realtors Association have no problem with getting rid of Appraisers or limiting their significance in the transaction. Ask why the American Institute of Real Estate Appraisers (a wing of the Realtors Association) broke off their relationship and became the Appraisal Institute many years ago. It was all about who we appraisers are working for. We are the unbiased 3rd party, using our skills to advise what the property is worth as of the effective date. We get paid for being unbiased, and not paid enough. We need to have our local State Appraisal Organizations, and the National Organizations telling why a real full appraisal is needed, and telling what FNMA is willing to give them. We need to join our State Appraisal organizations who have a voice in local State politics.

    I was thinking of a nice add for having an appraisal: a fellow on the beach not even in the us, getting a call from a kid who looked at the house, it was big, and pretty and has a pool, and the guy on the beach sends in the report, right on the dot at the sale price, (because if the value is high or low someone…) and then the Realtor and lender are sharing the profits and laughing about the poor buyers who have no idea how much they overpaid and the loan being sent along through FNMA to some trusting investor. Kind of reminds you of 2007.

  15. Avatar David says:

    You all have heard me say this before, but I’m going to say it again, it’s not about value it’s about collateral verification. And that is outside of our hands.

  16. Avatar Honest Appraiser says:

    It’s been easy to loan money on rising collateral. The next few years will be much more interesting and they will need boots on the ground. This entire shell game is just another $$ grab by the AMC’s and They are spending $Millions in DC lobbying these efforts and Independent Appraiser have $0 so here we go.

    • Avatar Chuck Minzenberger, SRA says:

      The timing of FHFA’s push to not actually look at the assets is pretty obvious. Thing is Fannie is still in conservatorship, they don’t actually have much money. “FHFA went on to finalize this capital planning rule June 2022. The first plan submissions under this new rule are due May 20, 2023. Execution of the GSE capital plans gets them out of conservatorship. Execution of the GSE capital plans gets them out of conservatorship.”

  17. Avatar David says:

    Fannie Mae is not yet out of recievership and wants to further dilute the financial services industry. Essentially they are lowering the standard to BPO and niavely believe a background check protects investors from Fraud. Ha Ha! SVC and Signature are the result of Trump era deregulation not unlike the watering down of Dodd Frank and the so called waiver program to 2nd layer poorly regulated lenders like First Republic – they are next. INVESTORS need confidence in mortgage paper and it is NOT going to come from the 6 AMC venders. Stay tuned!

  18. Avatar David says:

    Soooooo, can Fannie absorb the soon to emerge losses for all those loans where appraisals were wavered. If history and current secondary bank regulations is something we remember, the answer is a resoudning NO and hang on. Our profession never dumbed down under extraordinary pressure. I don’t know about my peers, but my appraisals over the last two years are solid! Ignore those that crossed over and were complacent with our license to take us out.

  19. Avatar Dan says:

    We are screwed! Fannie Mae said for decades that they would not buy loans unless they had an appraisal. Now they are saying they don’t need them and will move to computerized models. It is their call. Unless they change their stance because of banking crisis or new regulations, we are in deep trouble!

  20. Avatar Chuck Minzenberger, SRA says:

    Well its official, I guess all banks are now GSEs. With the failure of two large banks over the past week due to mismanagement and the rollback of regulation [for those who blame Trump for this, wake up, the rollbacks were bi-partisan], will FNMA back off a little and ‘rethink’ the push to get rid of the appraisal? Some of this greed needs to be put in-check, appraisers are really the only group that can at least put in the speed bump. Regulations need to be put back in place. Glass-Steagall should have been brought back in Obama’s first term. I’m really not trying to get political, the whole system is a joke, actually a travesty

  21. Avatar David says:

    Can you say mortgage back securities? And can you say waivers? SVC bank and several more to follow by weekend! Looks like appraisers are gonna be back in the game!

  22. David Samnick on Facebook David Samnick on Facebook says:

    When you remove the Referees (Appraisers) the players can act as inappropriately as they wish with no flags or penalties thrown. So far, The Gov’t (GSE’s) & Lenders are up 98-0 over the appraisers. Now appraisers are walking away from the professions and the Big Boys are screaming “Appraiser Shortage we have to automate”…..There is a shortage. They just pulled the trigger on the temple of every independent appraiser left in the profession…..MASS EXTINCTION EVENT.

  23. Avatar David says:

    Time to speak up my fellow appraisers and stop behaving like sheep with one word posts. Wake up and smell the roses unless you are all Tucker Carlson fans. Eliz. Warren had it right, has it right and please don’t go over to the other side – those retired review appraisers already have!

    • Avatar Honest Appraiser says:

      What does Liz have right?

    • Avatar John Hamilton says:

      OK I’m in, but who is going to organize raising the funds and hiring the lobbyist? We are woefully behind the curve here, myself and many others were organized in the early 1990’s and managed to protect the appraisers interests for the most part at that time. Here in 2023 there does not appear to be any meaningful response other than the same old anecdotal war stories we pass along among ourselves. Yes past markets crashed due to really bad mortgage products/underwriting and banks failed due to really bad management decisions to go along with those mortgage schemes, but if Uncle Sam is going to reimburse them for their losses (bail them out), well they have just found a way back to the gambling table. As I recall someone once said that whoever complains about something without offering a solution is just whining. So my fellow appraisers who has the plan?

      How about put together a coalition of the appraisal trade associations to fund & organize this campaign into an informative counter-offensive to the powers that be? Lets say we get 20,000 appraisers to contribute to a $5,000,000 campaign that will pay for the lobbyist who can identify the key politicians to whom to direct the political contributions and educate on the issues. Fortunately at this point the No Appraisal Necessary movement is only in the regulatory rule state, not law. The regulatory process is easier to fix. Do any of the trade associations have a legislative liaison?, if so wake them up. Politicians drive the regulators and $$$ drives the politicians, we are analysts so lets figure it out. The Mortgage Bankers Assoc PAC (MORPAC) spent approximately $3,000,000 in 2021-2022 to influence federal politicians and the mortgage bankers got what they paid for, lets do better.

  24. Avatar David says:

    Mortgage back securities REQUIRE collateral verification by a licensed professional who can be trusted! As in, appraiser, appraisal!

  25. Avatar Divedude says:

    I can’t believe bifurcated appraisals have gone this far. Concocted by a corrupt organization in conservatorship using an unlicensed 3rd party where property disclosures can easily be influenced or strongarmed? Who in their right mind would trust this model over a real appraisal? They cannot produce credible results and I have no respect for any appraiser who performs them. And if you can’t drive by your comparables, go work for Zillo. By the way, does anyone else find the ANSI standard rounded to 1/10 of a foot stupid?

  26. Avatar Seneca says:

    CPFB Holding lenders responsible for appraisal discrimination.

    Another reason for lenders not to use appraisers. Hamp asked, Is this the end of appraisers? Pretty close. So, what is your next career going to be?


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No Appraisals Required. The End of Appraisers?

by Hamp Thomas time to read: 1 min