As an avid Game of Thrones fan, having read all five volumes and watched the HBO series, I think this last season was epic. But, of all that occurred, in my opinion, there was nothing more chilling than the first flake of snow that fell on Jamie Lannister’s gauntlet. This signaled what had been stated by many, that “winter” had finally arrived. Now what in heck does this have to do with anything even remotely real estate related? Good question and the answer is this. I think “winter” has finally arrived for residential appraisers and now it is time to man or woman the wall and take up arms against the army of the dead, i.e. Fannie Mae and Freddie Mac. I’m sure many of you are aware, through various means, the policies adopted statements made by these two entities regarding “Innovative Appraisal Alternative for Home Purchases and Refinances.” If you haven’t seen or heard anything about it, check it out: http://freddiemac.mwnewsroom.com/press-releases/freddie-mac-introduces-innovative-appraisal-altern-otcqb-fmcc-1318582. The gist of the announcement is that under the veil of trying to help consumers afford homes, “consumers who are buying homes or refinancing existing mortgage loans may be eligible for an automated appraisal alternative. Borrowers may be able to realize savings in some instances of approximately $500, and closing times may be reduced by as many as seven to 10 days in cases where Freddie Mac’s innovative new capability determines a traditional appraisal isn’t needed.
Freddie Mac’s automated collateral evaluation (ACE) assesses the need for a traditional appraisal by leveraging proprietary models and using data from multiple listing services and public records as well as a wealth of historical home values to determine collateral risks.
“By leveraging big data and advanced analytics, as well as 40 years of historical data, we’re cutting costs and speeding up the closing process for borrowers,” said David Lowman, executive vice president of Freddie Mac’s Single-Family Business. “At the same time, we’re providing immediate collateral representation and warranty relief to lenders. This is just one example of how we are reimagining the mortgage process to create a better experience for consumers and lenders.”
ACE will be available for qualified home purchases beginning on Sept. 1, 2017; it has been available for qualified refinances since June 19, 2017.
Come on! Are you kidding me!! These two entities who nearly brought our country to collapse through their greed and corruption and then, who went through innumerable gyrations to combat appraisers from being corrupted (HVCC) and who are now putting appraisers through the wringers regarding the contents of appraisal reports, are basically saying the appraisal report performed by an individual, qualified, licensed or certified appraiser is not really necessary. Amazing! Just because they have amassed an enormous data base from the millions of appraisals they are now capturing and analyzing, appraisals are no longer all that important and they can cull through their data and generate acceptable values in many cases. How ridiculous and short sighted. How do they not understand the only reason they have this tremendous data base is because of all the appraisers who are going out every day, rain or shine, and completing accurate and well documented reports. Once they stop ordering reports and rely on their computer models, their data becomes old and moldy, the you know what will hit the fan. I just saw where a consumer sued Zillow, unsuccessfully I might add, for assigning an unreasonably low value to their home, resulting in irreparable harm when they attempted to sell it. Now multiply that times thousands and again we are going to the road to perdition. You would think that Freddie and Fannie would have learned after the S & L debacles in the late 80’s and definitely should have learned from this past recession/depression, but no, their institutional memory is non-existent. And really, to quote them “Borrowers may be able to realize savings in some instances of approximately $500, and closing times may be reduced by as many as seven to 10 days”. Again, are you kidding me. Of the $500 the AMCs, which they pretty much mandated get a pretty good chunk of that and the time issue is pure baloney.
Attorneys take a lot longer to do their job than appraisers, so that’s a non-issue. And while we’re on the topic, the appraisal fee is the lowest cost in the whole process, compared to brokers, attorneys, loan originators and mortgage points. So why are we getting picked on? Simple, we’re the only ones without a dog in the fight and because we are independent, impartial and objective, we get viewed as an unnecessary evil. Too bad, because we are the only ones “at the wall”. So what can be done? Well, talk to your appraisal organizations as they are looking to respond and hopefully provide a voice that will be heard and reverse this madness. Sorry for the long vent but enough is enough.
Steven Elliott, SRA, MRA, is principal at Elliott Gottschalk & Associates, Ashland, Mass.