Desktop Appraisals Soon to Be the New Purchase Wrinkle
Appraisers, we learned about this late on Monday, Oct. 18, 2021:
Sandra L. Thompson, acting director of the Federal Housing Finance Agency (FHFA) appeared before the Mortgage Bankers Association annual conference on Monday. Her remarks to that group featured this:
The “flexibilities” (i.e., the desktop appraisals) put in place for appraisers after COVID-19 hit, have ended. However, FHFA has been reviewing the data gathered during their use and examined feedback from lenders and other parties. She told the MBA attendees that both GSEs will incorporate desktop appraisals into their Selling guides for many new purchase loans starting in early 2022.
This is an extension based on the ‘trial’ of “desktop” appraisals during the COVID period, which began mid-2020, extending into this past summer.
I’ve learned that the overall use of the “desktop” appraisals (termed ‘flexibilities’) cycled through the GSE’s during the COVID episode was up to about 10% maximum of the total number of mortgage loans processed. More were used in the Eastern US than in the West.
FHFA (the GSE’s conservator) was probably lobbied heavily by lenders who want appraisals to be simpler, faster and less costly to the borrower. But not necessarily more reliable, which could become an adverse issue for appraisers in the future.
The unknown at present is what will be the appraisal protocol? Will it be similar to the COVID types, or different? And secondly, and most important, how many appraisers will actually agree to do them?
The other aspect of this new process is the SFR ‘form’ itself. When ‘flexibilities’, i.e., the “desktop appraisals” were allowed, appraisers had to ADD a different Assumption and Limiting Condition and Scope of Work page into the report, which negated the existing pre-printed form instructions. So how will the GSE’s implement the new “desktop” forms beginning in early 2022? Will they issue a new ‘form’ we will have to use for a “desktop” assignment?
Secondly, will HUD allow this process also, as they did during the COVID episode? And will their inspection protocol differ from the GSE’s, as it was then?
Remember, these are NOT ‘bifurcated’ or ‘hybrid’ appraisals, where a separate third party (not the borrower) does the inspection and feeds the property condition and other details to the appraiser on a separate document.
Instead, these “desktop” appraisals rely on data provided by the MLS Listing or homeowner directly to the appraiser, who then must evaluate Quality and Condition and other factors from afar, couple that with data sources, and then render an opinion of value, without actually seeing the property in person.
Various kinds of ‘inspection’ software has been and is being designed and sold to allow the borrower (or RE agent) and appraiser to work together to capture home information. Now that the GSE’s are apparently willing to accept this process, you will begin seeing and hearing about that kind of new technology much more. So far, I’ve seen two different kinds.