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Fannie and Freddie is going to implement 'Collateral Underwriting' January 26th. It has the potential to adversely affect the lending actions and underwriting, not to mention the appraisal process.
This is a link to a video that explains it much better than I can.
I'm not convinced it's going to be quite the shake up. For years now, appraisers have been sending in their electronic data to Fannie & Freddie and we (lenders) see it come up on our "fraud reports" or fraud tools. Already, underwriters are asking why comp at such and such address was not used. I suspect it's a hint of desktop appraisals for low risk loans (and lower LTVs) we will see in the future.
I think the video exaggerates the impact, or at least I hope so.
Hey, I've actually did some more digging since reading this......and the consensus from appraisers (in general and from this forum http://appraisersforum.com/showthread.php?t=204893 ) is that the appraisers that have been doing their jobs correctly should be alright. Starting about post #21.
Actually, as appraisers, the wife and I have had to take time out to respond to 'why didn't you use' inquires that the primary UW never sees. Takes time to research, respond. And these comps are routinely either not relevant, created out of taking refi information and creating sales, etc.
Now, with CU, appraisers and lenders are going to get more and more pushbacks. I have seen this system work from the inside and think one effect is to push more appraisers (who have an average of over 50) out of the business. The fact that a pushback to the appraisers of up to 20 sales is facing the appraisers is enough to say, WE QUIT.
Actually, as appraisers, the wife and I have had to take time out to respond to 'why didn't you use' inquires that the primary UW never sees. Takes time to research, respond. And these comps are routinely either not relevant, created out of taking refi information and creating sales, etc.
Now, with CU, appraisers and lenders are going to get more and more pushbacks. I have seen this system work from the inside and think one effect is to push more appraisers (who have an average of over 50) out of the business. The fact that a pushback to the appraisers of up to 20 sales is facing the appraisers is enough to say, WE QUIT.
And I don't think anyone would blame you (the appraisers) if we started seeing engagement letters requesting the lenders to acknowledge an increased fee for the research required for each appraisal. Lenders will have to get use to disclosing a change of circumstance for an increased fee on their GFE, or possibly, increase the price across the board at application. I'm surprised it hasn't happened before now, especially with the new underwriting madness we've been exposed to for the past 2 years.
It does assure us that there will not be any years of rapid appreciation.....but what will it do with sales that normally would not be considered? I find it hard to believe this report is to be a substitute for common sense. But, I've been wrong before.
Shhhh. Under the current lending requirements, common sense went out the window.
If you are in the industry, you know the problems getting a self-employed individual through the UW process. Then there is the Appraisal Management Companies that are owned by the banks. Fee charged by the bank is $600. Appraiser gets $250-300, with the bank and AMC raking off the difference. And you can get an appraiser from100 miles away and not having access to the MLS system.
And now you add this sort of pushback from people who are clueless about a market.
Shhhh. Under the current lending requirements, common sense went out the window.
If you are in the industry, you know the problems getting a self-employed individual through the UW process. Then there is the Appraisal Management Companies that are owned by the banks. Fee charged by the bank is $600. Appraiser gets $250-300, with the bank and AMC raking off the difference. And you can get an appraiser from100 miles away and not having access to the MLS system.
And now you add this sort of pushback from people who are clueless about a market.
Sigh!
Ah, but not all AMCs are raping and pilaging their workforce. Many are, I saw it with a company based out of the Baltimore area, but I've also been fortunate to see some AMCs that take a reasonable management fee ($95) or lenders that rotate orders via appraisalport or administrative staff. The problem is there is not enough work to tell these guys that under-pay to take a hike. As for the AMCs owned by banks, their business model is to make it up on volume. So, if you are on a big box panel, you're getting more orders than the average bear.
When the clampdown came, it was made clear each individual on the loan was now held accountable (and tracked) for any loan with a problem. The UW and the processor and the closer engaged in CYA tactics. It still hasn't quite registered with some of the commissioned loan officers to not push a file that has no place purchasing. If they don't push, they don't get paid. And we need to change that to a platform where they get paid to say, no, we should wait until the following occurs, and then set forth a game plan.
You may not have noticed it yet, but there's a new breakout winner today....the portfolio lender. My 25+ year career has been associated portfolio flexibility, (but I still follow Fannie and Freddie close and VA & FHA). F & F has started to come to terms that they have over-corrected and (prediction) will continue to loosen their grips on inflexibility. Portfolio lenders didn't drink all (some)of the koolaid and have always maintained the ability to do self-employed with one year's tax return or the loans not quite in the box. The problem though, most portfolio lenders are not large nationally recognized names. But they are a valuable tool to be in an agent's arsenal. (My approach - if I can help every agent I know do one additional transaction that couldn't be done elsewhere, we are all happy). We are out there and our appraisers are happy.
Do the big bank-owned AMCs allow you to work for other AMCs? If so, I recommend you seek out portfolio lenders (ie smaller regional lenders) in your market place. I know that sounds easier said than done. Having two wage-earners dependent on this industry is hold-your-breath scary, but it does allow for one to concentrate on daily business (assuming you both can work the orders) and the other to concentrate on expansion, if that is what you want. I find it ironic that appraisers fought hard for independence from the tranasction and the AMC model is the unintended consequence. This industry continues to evolve with predictions all the paid talent is not needed, only to be proven wrong, over and over. We may not like they way things look now, but it will change when you aren't paying attention.
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