Comment Detail

Comment

Question A1.1: Is there is a need to provide new valuation solutions that address industry identified issues of appraiser capacity, turn-times, training, and rural and high-volume market coverage? What are those potential solutions? What are the risks of these policies and the challenges in implementing them?
YES; However burning the house down just to remodel the kitchen is a bad idea. AVMs, waivers, etc. are obvious examples of extreme policy swings.
Addressing AMC mismanagement, overly high trainee licensing standards that differ by state, and lender/trainee use policy would solve a majority of the problem while mitigating risk to lenders.
Currently AMCs (as I’ve observed), will bid an order around for up to 14 days before accepting the bid that was given on day 1. They add an additional fee to the appraisal, up to 50% or more at times. This obviously delays the turn-time of a report and increases the fee, without adding value to the appraisal process or ease to the lender/appraiser relationship.
Trainee licensing differs by state, with the licensing bar being so high that it is no wonder there is a decline in appraisers. When the only person in a real estate transaction required to have a Bachelor’s degree is the appraiser, you can see the obvious issue. I believe that training under an appraiser is still a necessary and adequate way of training. When the state can pump out 100s of real estate agents in a matter of weeks, many lacking basic statistics, math, or real estate knowledge it is clear that the real issue is not that the appraisal process is broken or needs to be fixed. The system simply wants high prices, and high commissions, without any roadblocks or consumer protections.
Lenders all have their own specific requirements involving the use of trainees. Training new appraisers does not make financial sense if those trainees are not allowed to complete any work per lender requirements. As an appraiser, adding a trainee then doesn’t make financial sense when they cannot complete inspections after a certain period, or help complete reports.
Reform of the basic trainee requirements, use of trainees, and a review of the AMC model is required.

Question A1.2: Are there opportunities for process improvements that allow non-traditional valuation services (inspection-only, desktop, exterior-only) to augment traditional appraisals? Please elaborate on the risks, challenges and benefits. Separately, are there opportunities to improve traditional appraisals to mitigate problems and concerns that have been observed to date?
Burning down the house so you can remodel the kitchen is extreme. There are opportunities for improvements, but attempting to eliminate the traditional appraisal for riskier, less adequate inspections/appraisal methods is ill advised due to the risks, and inability to regulate those parts of the system. I have seem the non-traditional valuations presented with photos that neither adequately show the home and features, or contradict what all other data sources say about the home without any context or commentary. This is a wildly extreme decision that will lead to high levels of risk in the future. No appraiser should be willing to take that liability with their license on the line.
The traditional appraisal forms are functional, and with some updating to the requirements they could be streamlined for efficiency.
The number of buttons, line items, 1004MC, and other data within the appraisal report that is either unusable or outdated is high. Additionally things like requiring the appraiser to physically inspect comparables from the street and take a photo is an outdated practice when MLS photos are available. When considering that non-traditional appraisals are allowing real estate agents to perform the inspections themselves anyway, eliminating the comparable photo requirement would be highly effective.
Desktop & Exterior-Only appraisals have their place. However anything with the word “appraisal” in the title should legally only be allowed to be performed by an appraiser. Non-traditional valuations are probably not going anywhere, but should not involve appraisers, and should not be referenced as appraisals in any way.

Question A1.3: Do appraisal waivers have a place in Enterprise appraisal policy and process, and if so, for what segment of loans? What are the current risks to Enterprise safety and soundness in how appraisal waivers are offered? Would caps or other limits on their usage be appropriate?
Appraisal waivers can have a place. I am not educated or trained in the specifics of the lender requirements for appraisal waivers, but only the most reliable loans, with the highest degree of credit worthiness should be allowed a waiver. Waivers should be only for select areas, with local data that is sufficient to estimate a market value (i.e. large, urban markets with tract housing).
Even then, homes can suffer significant changes or damage within a short time even from the best borrowers. I have been in a number of new houses that appear standard, new, and in good condition from the outside, but are damaged, destroyed, or have significant physical deficiencies on the inside leading to a much lower value that what would have been estimated. This presents risks to the system as a waiver with only a minimal amount of equity required could lead to a surprise to the lender in the future.

Question A1.4: Would utilizing alternative inspection workforces, such as insurance adjusters, real estate agents, and appraisal trainees assist with addressing appraiser capacity concerns? Are there risks of using third-party non-appraisers? If yes, How?
Using these third parties would not address capacity concerns, as most knowledgeable appraisers will not rely on an untrained, unlicensed third party to complete a very important part of a traditional appraisal. On non-traditional appraisals I have seen the photos and inspection so inadequately performed that it was impossible to make any reasonable determinations. Additionally these “inspectors” have no regulating body, no state board, and do not have to adhere to any known appraisal guidelines or best practice. Using appraiser trainees is the only potential alternative use that I would reliably get behind because they are required to adhere to the same standards and policies that any appraiser would need.
A real estate agent can get a license in two weeks, with no degree, training, or federal oversight. If we allow third parties to complete appraisals, we should additionally allow third-parties including real estate agents, to perform the underwriting of loans for the lender to speed up the process. Sounds stupid right? Again this idea is like burning the house down just to remodel the kitchen. It is an extreme change that is not advised as it will not work and no knowledgeable appraiser will take on the assignment due to liability.

Question A1.5: Is there a need for additional policies and controls to balance potential risks with efficiency benefit from appraisal modernization? If yes, please provide your recommendations.
NO. This question of efficiency and modernization is only a problem because of the over regulation of the current appraisal process. The appraiser is likely on of the most educated and trained persons involved in the real estate transaction. Making changes to this process based on the opinion of real estate agents, underwriters, etc. to speed profits is like having Facebook dictate national privacy laws to Congress. Changes to the traditional appraisal form and current licensing standards can be made, if lead by certified appraisers, which would solve 90% of these problems.
AMCs for example add up to 100% in additional fees for the borrower, slow down the appraisal process, and are run by unlicensed, and mostly unregulated people who have no training or education in the appraisal process. Just this alone would save the borrower, lender, and appraiser time and money, likely enough to stop having conversations like these every three months.

Question A1.6: Do the objectives as outlined for the UAD update and forms redesign meet the current and future needs of the mortgage industry? Are there opportunities for refinements or additions?
Since it began in 2018 and there are still no concrete forms and only vague references to changes it is unclear if the UAD update will do anything specific. If it eliminates the useless information in the traditional appraisal and allows appraisers to input data that actually makes sense instead of simply checking required boxes, then yes, it’ll probably help. But since its a government agency working on this I have my doubts that it’ll be workable or efficient for the next five years.

Question B2.1; How could the Enterprises make additional data available to appraisers while promoting appraiser independence without crowding out other data providers? What additional challenges arise if the enterprises provide data to appraisers?
Any and all data must be independently verified. More data is always helpful, however the worry is that it will become required to consider data points that cannot be independently verified when that data is provided by the enterprises. Additionally if an enterprise presents a large amount of data, most of which is likely irrelevant to the current assignment it become burdensome, especially when they require a comment on why data was excluded. It will likely slow down the process if the enterprises begin to present data, and make additional requirements on the use and reporting of that data. This could defeat the purpose of becoming more efficient.

Question B2.2: How can the Enterprises improve their collateral tools currently available to lenders?
Not educated enough on this topic to comment.
Question B2.3: How do Enterprise appraisal waiver offers differ between Freddie Mac and Fannie Mae? Are both Enterprises equally likely to offer a waiver on a given property? Please elaborate.
Not educated enough on this topic to comment

Question B2.4: How can lenders manipulate automated underwriting systems when seeking an appraisal wavier? For example, lenders changing the loan amount, submitting data changes multiple times, or submitting to both Enterprises and delivering to the one who offers the waiver? How do the Enterprises minimize this manipulation?
Not educated enough on this topic to comment

Question B2.5: What are the challenges associated with quality of service, enforcement and consumer protections related to non-appraiser entities providing property inspection data?
These non-appraiser entities are not regulated under a single, uniform standard. What if the inspection provided false information, missed or skipped important data, presented misleading photos or information, or delayed the inspection? Who does one complain to about the service or ask to enforce the policy or requirements? No one. The one that will take the blame for all of this will be the appraiser. Will a real estate agent lose their license for providing poor quality photos that lead to a misleading appraisal report? Probably not. Will an insurance agent be censured for delaying the inspection and holding up the appraisal report? No.
Essentially the only one with their career and livelihood on the line is the appraiser, who can be sued and lose their license for a misleading appraisal report. There is also an easy and common way to report appraisers to their state regulatory body. When some third-party is acting outside the scope of their license, or job, they aren’t at risk. If my barber completes and inspection and it’s misleading, he likely won’t lose his job as a barber. There is no benefit to using third parties and no reason an appraiser would accept the liability for these kinds of inspections and reports.

Question B2.6: Is there any data or evidence you could share regarding the performance of alternative appraisal solutions versus traditional appraisals?
No. As I am not privy to if the lender later forecloses on the property, or if the borrower finds themselves underwater when they try to sell their home later. A majority of the appraisals I do are traditional, with some COVID related changes to a few inspections. However it is not common in my rural area due to the significant differences in every home and the risk involved.
However just because there is little data, or not enough time has passed for the issues to arise does not validate the idea that non-traditional appraisals are low risk.

Question B2.7: Should Enterprise type COVID-19 appraisal flexibilities be part of an updated appraisal process to address disasters and other events to lessen market impacts?
Questionable. These appraisal flexibilities have no doubt been taken advantage of. I have seen quite a few appraisals of vacant homes that have been asked to be drive-by or desktop appraisals, in the hopes to save a dollar. These flexibilities should be removed as soon as possible, and kept within the resources of the Enterprise for a future disaster. But they should not be available at the whim of any lender at any time. They should have a mandated time frame of use with a hard stop deadline once a disaster subsides, with use only when the situation dictates.