Comment Detail

Comment

Question B2.2: How can the Enterprises improve their collateral tools currently available to lenders?

Issue: Increased waivers will result in a reduction of submitted appraisal data, necessitating the need for secondary transaction information.

From the Federal Housing Finance Agency’s RFI AVM section, third paragraph on page 13:
“The Enterprises make an appraisal waiver offer when the Enterprises determine they have enough information on the current value of the property and do not require an appraisal from the licensed or certified appraiser. Each Enterprise approaches the waiver decision differently depending on the individual risk tolerance, collateral tools, and aggregated data.”

Increasing waivers will result in a reduction in submitted data for standardization. Page 11, the appraisal data collection tool, the Uniform Collateral Data Portal (UCDP), receives lender submitted appraisal data files. Enterprise collateral tools, such as CU and LCA, draw on standardized data within submitted appraisals to benchmark future submissions. If waivers increase, submitted appraisals will decrease, resulting in a decrease in the aggregated data source.

Standardized reports and the Uniform Appraisal Dataset (UAD) have facilitated data aggregation. The regulatory quality control has improved because of this. A future enhancement should include expanding the amount of available data. Within the current structure, increasing waivers diminishes the amount of data to aggregate.

Discussion

Most states require some type of property transfer disclosure. Leveraging this will provide the Enterprises more aggregated data. The disclosure can be standardized. States that do not comply by a specific date could be dropped from the loan waiver approval process, requiring all applications to include an appraisal. With 75% of states currently requiring some type of property transfer disclosure, the pushback to standardization should be minimal.

Itemize loan closing document is required; implemented to disclose estimated closing costs to the consumer. Property transfer disclosure is intended to inform the public of market transactions, reducing the opportunity for fraud. Not all transactions require traditional financing. By requiring the filing of this type of information at the time of recording the FHFA and the Enterprises will gain access to property transfers that may not be included in traditional appraisal submissions.

With all states disclosing property transfer data on a standardized form at the time of recording, the FHFA can increase the volume of data for aggregation that is made available to Enterprises. This can be a separate offering or combined with existing data aggregation. The benefit is more available data as appraisal waivers increase, decreasing the approval time and dependency on appraisals.

Other sources of data include California law, section 1102 of the California Civil Code, requiring every residential seller to complete a transfer disclosure statement. The purpose is to let the buyer know of major defects in a property. This shifts liability to the seller if the collateral is defective and not disclosed. If represented by a real estate agent, the buyer’s agent completes a separate section. Agents are required by law to walk the property and note everything they see, even a crack in the sidewalk (https://www.thebalance.com/what-is-a-california-transfer-disclosure-sta…).

In some states a Transfer Tax is assessed to either the sale price or fair market value. State law defines the transfer tax. In most cases the sale price must be disclosed at the time of transfer. This along with other disclosure requirements, the sale price information can be combined with county or city assessment property characteristic information records that can be used in comparable analysis. There are only 13 states that do not impose some type of transfer tax (https://www.nar.realtor/smart_growth.nsf/docfiles/transfertaxrates(8-05…).

As stated previously, settlement closing disclosure statements contains sale price, fees and other information. These forms, like HUD-1, contain standardized information. Making available this type of disclosure for all transfers, not just those with financing, will increase available data. Again, this information can be associated with county or city assessment property characteristic information records for comparable analysis.

Residential and commercial appraisers and real estate professionals constantly rely on assessment data as a source of information and provide feedback to correct errors. Currently corporations aggregate this data (like Corelogic and others) and provide the information commercially. Property owners also monitor this data for discrepancies, contacting assessment offices to correct inaccuracies.

Currently FHFA has standardized property characteristics within submitted appraisals. Requiring states to comply with disclosure standardizations will enhance available data. Requiring all property transfers disclosed, not just financed loans, will increase available data. Matching transfer data with local government property characteristic records can provide the FHFA with more data as increased waivers diminish the number of appraisal submissions.