PIW & ACE Waivers Still a Hot Topic
A few weeks back, VaCAP asked appraisers to start a conversation with agents and brokers about the ACE & PIW Waiver Programs being used for purchases. This is an opportunity for appraisers to gain more non lender work. As it turns out, appraisers are not the only ones that are concerned about these program.
The National Association of Realtors (NAR) sent a letter Director Melvin Watts of the Federal Housing Finance Agency expressing concerns over the use of these programs. Specifically siting lack of transparency on how the use of these programs will ensure a safe and sound housing market. NAR reminds Director Watts of the housing market collapse, just a short 10 years ago. To date, the GSE’s have not made their due diligence information public, so the question now becomes: Was any due diligence done to ensure the housing market will remain stable with the use of these programs? See the letter here. Well worth the read.
The letter from NAR is not without controversy though. One appraiser has commented:
“I am offended that NAR is using an increase in appraisal fee as justification for the use of an AVM. If NAR is so concerned with the a minor increase in an appraisal fee to consumers, why are they not encouraging realtors to lower their commission percentage? This is massively hypocritical!
NAR gives no context to why there may be a trend in the increase of appraisal fees. Using the increase in appraisal fees as good reason for use of an AVM is a disservice to the appraiser members of NAR!”
What’s your take on the letter? Does NAR support their appraiser REALTOR® members? Is NAR out of touch with what is happening to the Real Estate Industry? Does NAR understand the increase of appraisal fees and the shortage of appraisals is a direct result of AMC’s? What about Zillow and other companies eliminating the sales agent? What is NAR’s position on this new development?
On the flip side of things, Freddie Mac CEO, Don Layton has made some pretty interesting comments in an interview with Politico Magazine. He talks about risk and the safety net of taxpayers. Here is one that stands out:
“We have tons of capital; it’s just off the books at Treasury.”
Is Mr. Layton stating he is not concerned about risk because he has the taxpayer’s money? Playing fast and loose with taxpayer money does not set well with most Americans.
And this one, concerning the ACE Program:
“Nobody’s unhappy except the appraisers.”
Well that is not exactly truthful. Did Mr. Layton read the letter from NAR?
Closer to home in Virginia, the Richmond Area Association of Realtors has taken a step to ensure the local housing market remains stable. The Central Virginia Regional MLS Purchase Agreement has been revised. Here is an excerpt of the new verbiage to help protect the local housing community and the buyers:
If the contract has an appraisal contingency and specifically states the appraisal must be ordered within the 15 days, does the lender or Freddie Mac have any legal right to waive the appraisal? Phil Crawford talks about this very issue on his show today. Listen to Voice of Appraisal E173 here.
Our friends and colleagues in West Virginia have come up with some talking points and solutions to discuss with your representatives: Please call, email, write, etc, your representatives on this issue. Thank you West Virginia for sharing!
Talking Points and Solutions:
THE ISSUE: As the House Financial Services/Senate Banking Committee actively debate housing finance reform, I am calling to raise concern with Freddie Mac & Fannie Mae’s new Property Inspection Waiver (PIW) program which causes unnecessary risks for property owners and taxpayers. The time and cost issues are solved by banks ordering appraisals direct, because AMCs are the inefficiency in the system, and not required by law.
BACKGROUND: Since 1994, GSEs has been exempt from appraisal requirements established by Congress on the basis they would make responsible decisions. The market place wants government to reduce instability in housing, not create it. The objective of the GSE to capitalize faster by implementing PIW pushes the risk of instability that could spread throughout the financial system with nothing to fall back on. Better plans exist to fulfill both lender and enterprise goals.
THE CONCERN: There is a race between Freddie Mac and Fannie Mae on who performs the least amount of care to homeowners and taxpayers. According to the Federal Reserve, the Federal Government owns 40% of the 8 trillion dollars of the Enterprises’ mortgage backed securities. Competition between Freddie Mac and Fannie Mae should not result in such power plays at tax payer’s expense. The appraisal fee is minimal in comparison to other costs associated with the mortgage marketing and servicing processes which are not being identified. The independent, visual observations and analysis of property conditions by appraisers are crucial to the stability of the housing economy for purchases and refinances backed by the Enterprises.
PIW sales exposed to the market place without proper vetting or alert present added concerns. It takes one inflated sale to ruin a neighborhood housing economy. It’s dangerous to allow the GSEs to double down against the market place and appraisers so specifically in this manner, especially while they’re still in conservancy.
This is not however the first-time the Enterprises have advanced appraisal waivers. Similar actions were taken by the GSEs in the early to mid-2000s, and the results were disastrous to our financial system and consumers. The GSEs currently hold more than 5 trillion dollars in securities in the world banking system. Reducing appraisal requirements sends the wrong signal to mortgage loan sellers about the importance of fundamental risk-management practices.
ACTION REQUESTED: For these reasons, I ask you to call on the Federal Housing Finance Agency to prevent the Enterprises from using the PIW until they demonstrate consistent safe and sound operations with full disclosure and transparency to the market place. Also, as Congress develops housing finance reform legislation, I ask that any legislation ensures the Enterprises’ appraisal requirements are used to enhance their safe and sound operations.
Thank you for supporting VaCAP and the Network of Coalitions throughout the country!
- AMC Engagement Letter: Appraisers Do Not Include Your Invoice - July 28, 2023
- We the People… - April 9, 2023
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022