Special request questions for DMBA Members?If any of you have questions during the month, please feel free to email me or call and I will be glad to personally respond. If the topic is of enough interest, I will be glad to expand it and include it for the next monthly update. Thanks,
Mark Bond firstname.lastname@example.org 972-733-1007
The DFW market is awake for the spring! Let’s hope the market continues for the summer and does not drop off like last fall and winter saw in many areas. We are observing issues with entry level buyers, i.e. FHA loans with minimum down, say $3,500 wanting to pay $10,000 to $15,000 above list price. First, this market is not strong enough and second, the borrower is placing all risk on the lender, lacking the funds to accept it personally.
We have discussed is the prior issues the Fannie Mae changes to the appraisal and lending process. Below is an article Fannie Mae about these changes. Spending many years as a field appraiser, personally see this as a test of computer-based decision makers trying to change the lending process. Read this article. It references four steps or reports. If you send someone out to gather data, then decide you need an appraisal, where was the savings. I am sure this will work out somehow and some way in the future. Although, based upon the 2008` real estate market crash and the strict rules and guidelines Fannie Mae wanted in their reports, this look like a swing in the opposite direction and the mid-point is still unknown.
Fannie Mae Plans Massive Changes to Appraisal Process
by Isaac Peck, Editor
In its March 21, 2019 Appraiser Update, Fannie Mae revealed that it is currently testing a concept called Property Data Collection (PDC), where a property data collector, not necessarily a licensed appraiser, would inspect a home and report back on the condition of the property.
This concept includes “mobile apps that guide a property data collector to generate a robust and accurate set of data elements, photos, and floor plan.” Fannie Mae would then decide if an appraisal is needed, or if it is willing to accept the loan without an appraisal. As part of its exploration of this concept, Fannie Mae is also testing “which elements are most important for measuring collateral risk and who does the best job of collecting accurate data.”
At the ACTS Conference in April, hosted by the National Association of Appraisers and Appraiser eLearning, Lyle Radke, Director of Collateral Policy and Strategy at Fannie Mae, expounded on this, explaining that Fannie Mae is testing appraisers, real estate agents/brokers, insurance inspectors, and home inspectors, among other professionals, to try to determine who collects data most accurately and effectively. In other words, non-appraisers are very likely to be included in the list of “approved providers” who will be allowed to serve as property data collectors.
Under Fannie Mae’s new concept, after a property data collector submits a report on the property’s characteristics and condition, Fannie Mae will decide if it wants to (A) accept the loan without any appraisal whatsoever, (B) require a desktop (hybrid) appraisal that uses the property inspection from the property data collector, or (C) order a full appraisal. Fannie also has a name for its new “hybrid” desktop appraisal, the 1004P. This would be a desktop appraisal that is performed by a licensed appraiser after a property data collector has inspected and reported on the property in question. But even the 1004P will not be required in every instance.
In a direct answer to critics of hybrids that cite USPAP or liability concerns, Fannie writes, “The important thing to keep in mind is that the property data collection happens prior to, and completely independent of, the appraisal assignment. In fact, the property data collection is finished and delivered to Fannie Mae before we determine if an appraisal is required.” Fannie also points out that appraisers rely on many other data sources and professionals in the scope of preparing a report, writing, “As we see it, surveyors, FEMA flood engineers, listing agents, architects, zoning officers, tax assessors, etc., are not disclosed as providing significant appraisal assistance in the scope of work because (1) they work completely independently of the appraiser, and (2) they do not participate in developing the appraiser’s opinion of value. Property data provided to the appraiser works exactly the same way: it is strictly observation, measurement, and fact.”
From Fannie Mae’s latest update, as well as Radke’s presentation at the ACTS conference, it is clear that Fannie is planning to adopt a model where four different approaches are available with a given property and loan. Depending on the property’s characteristics and the perceived risk, Fannie will offer the lender (and the borrower) one of four options, including (1) a full appraisal waiver, (2) a property data collection, (3) a property data collection + a desktop appraisal, or (4) a full appraisal.
The decision tree looks like this: if the property does not qualify for an appraisal waiver, Fannie might start by requiring a property data collection. Once the property data collection is complete, Fannie will then decide whether it needs to order a full appraisal or a 1004P (a hybrid appraisal that involves the appraiser), or if it will accept the loan based only on the property inspection and without a desktop appraisal.
Fannie’s risk models might mandate a hybrid or full appraisal from the start, if a particular property warrants it, but the process suggests that the work appraisers have done traditionally when preparing appraisals will be broken up into parts, with analysis being perhaps appraiser’s last stand. This is a developing story; please visitWorkingRE.com for the latest appraiser news and information.