Comment Detail

Comment

Appraisal modernization;
-Modernization is not only needed, it has to occur in order for this to remain viable in the future. The labor pool in the industry shrinks every year and there is currently not enough appraisers to complete the work right now.

The Uniform Appraisal Dataset (UAD) and the design of appraisal forms;
-The form type needs updated. The reason for this has more to do with the current process in the industry than anything else. Too much time is spent on factors that are immaterial to valuation and the majority of underwriters and review appraiser are not properly trained. We have a shortage of appraisers and an abundance of appraisal work. Part of the issue is the amount of time that it takes an appraiser to complete a report. After the appraiser completes their report we are asking them to address items that are immaterial to the valuation, or comment on items because the individuals looking at the reports are not properly trained to do so. The appraiser is being asked to complete revisions by an AMC, and then asked to complete additional revisions by the underwriter. Revisions add as much as two days to the process, and they prevent the appraiser from completing their other appraisals. The entire system is broken. The review and underwriting process consist of around 90% addressing administrative items that are immaterial, and 10% of assessing actual risk. The form needs to provide the appraiser with options, and then lead them to how to report it. This will further standardize the responses so all parties and intended users can understand the report.

Automated Valuation Models (AVMs) and appraisal waivers; and
-AVMs have a place in the industry, and on low risk/low LTV loans can be relied upon. They work well in urban and suburban areas when values are stable, there is a large number of sales, and there is a high level of conformity. The problem is that there is little understanding of their limitations and they are often relied upon in instances where they lack reliability because they are cheaper than the alternative or can be completed faster.

Waivers make sense if the data behind the decision is strong. Granting a waiver for a refinance six months after a purchase where there is substantial support for the original value is an easy decision. Granting a waiver for a rate an term refi when you already hold the loan, and you are lowering the customers monthly obligations also makes sense from a risk perspective. However, if this is being done because volume is high or due to the pandemic, it is not a sound risk based decision.

Often, decisions in our industry are based on the cheapest and fastest method and not based on risk. You have a growing segment of the industry that is under regulated and markets their cheaper and faster method. Then you have a shrinking segment (banks) that are over regulated and losing market share. The increased and added risk to the entire system is growing based on this shift in the industry so there needs to be significant research in these areas if they are to be expanded.

Valuation differences by borrower and neighborhood ethnic makeup.
-Values are determined by factual market data, not ethnic or racial makeup. Individuals in all ethnic and racial groups are frequently unhappy with their valuations, but with the hypersensitivity in this in the media right now it has become a large narrative. I have yet to see any evidence that a bias exist. I deal with irate borrowers, Realtors, and loan officers everyday who think that the appraiser has did them a disservice, and they are made up of all ethnic and racial backgrounds.