PERSON OF THE WEEK: In its ongoing push to modernize the appraisal process, government-sponsored enterprise (GSE) Fannie Mae recently communicated details to its sellers about transitioning to alternative valuation methods to determine a single-family property’s market value.
This push to standardize the appraisal process has been in works for years and the technology and tools are basically already in place, but the GSEs are looking to get a technology-driven framework in place that accelerates the appraisal process to around 2-3 days and, in some circumstances, eliminates the need for an appraisal completely. To learn more, MortgageOrb recently interviewed Dean Kelker, chief risk officer, SingleSource Property Solutions.
Q: What is the appraisal modernization report from Fannie Mae?
Kelker: In a nutshell, Fannie Mae’s report takes an analytical look at data from the millions of transactions done by the GSEs and what technological changes are needed in the appraisal process to speed up the process and make it more efficient. The agencies are also looking at transactions in which a traditional appraisal—one that involves a physical inspection—may not be necessary. One of the motivating factors behind the report has been the frequency of appraisal delays, which have increased as more appraisers aged out of the industry.
Q: Is the report from Fannie the first real attempt at appraisal modernization?
Kelker: Not really. The appraisal modernization process started around 10 years ago when the GSEs came up with the Uniform Appraisal Data Set, which standardized appraisal form reporting. Some appraisal industry leaders have been voicing support for modernizing the appraisal process as well as introducing new ways to train appraisers so more people join the profession. In addition, there have been a number of new technologies and services introduced over the years designed to help appraisers and lenders get accurate valuations while still maintaining compliance. So appraisal modernization has been going on for quite some time, although the recent push by the GSEs is certainly moving the issue to the forefront.
Q: Why were there appraisal delays during the Great Refinance Wave of 2020-2021?
Kelker: There are several reasons why we saw so many delays during the last refi boom. For one thing, the appraisal system was already overburdened prior to 2020 due to a lack of appraisers in many markets. Then the pandemic shutdown and social distancing requirements made it extremely difficult for appraisers to inspect properties in person. At the same time, fewer people were choosing real estate appraising as a career because of the considerable time and money it takes to get into the business. When rates fell and demand for refinancing soared through the roof, all of these factors made things so much worse, and there was an insufficient capacity of appraisers to meet demand on a timely basis. During this time, many appraisals were taking weeks if not months to complete.
Q: What has changed in real estate valuations over the past three decades and how has that affected what you do?
Kelker: The home lending process itself has changed substantially over the past 30 years, and changes in the appraisal process have been part of that evolution. Today’s mortgage production involves more technology, including electronic imaging and digital documents, cloud computing and even smartphones, which didn’t exist until the mid-2000s. There’s also been a tremendous increase in the volume and types of data that are used in appraising property.
Another change is that today’s consumers have much greater access to estimates of real estate values in their neighborhoods through public websites. And of course, automated valuation models have had a profound impact on the industry as well. For the most part, all of these innovations have dramatically improved the appraisal process.
It’s a huge contrast to when I started as an appraisal professional. Back then, we printed appraisal reports and oftentimes they were hand delivered to local clients.
The general velocity of the mortgage transaction process has significantly increased over the years resulting in additional time pressures on the appraisal process.
Q: What impact was there to the consumer as a result of delayed appraisals?
Kelker: In addition to having to wait one to two months to close on their house purchases, appraisal fees have increased at a pretty stiff rate due to simple supply and demand. Some homebuyers may have even lost their purchase contracts because of these delays, especially those who found themselves in bidding wars. Because the housing market has been so hot, most home sellers didn’t want to wait around for a buyer who needed an appraisal when they had cash buyers standing by ready to go.
These are all reasons why we’re seeing appraisal modernization start to gain momentum. After all, it’s the borrower who is paying for the appraisal and is most impacted when they have to wait weeks for a report to be completed. If new tools and technology can streamline appraisals and make the lending process easier for the consumer, the entire industry will benefit.
Another problem is the Appraisal creep that has occurred, doing more and more for many times less. They want these perfect USPAP/HUD compliant reports where we call on all the sales to verify them, many times waiting days to get in touch with them, and go drive around for hours taking comp photos and then explaining this and show your calculations for that. I think what they don’t realize or don’t care about is that they have put so much on appraisers as to what has to be done on an appraisal that if you did one exactly the way… Read more »
This article is so misleading to the public, who has no other line of protection between them and an industry that depends on moving money to borrowers. The turn times for appraisals have been increased exponentially by middle-men AMCs who collect a high fee from the client and take over a week to place the order because they want the fastest and cheapest appraiser in order to increase their own margins.
As an appraiser, let me cut to the chase. Lenders, loan officers, processers, agents, state and local property tax boards, federal agencies, etc., only want to churn and burn as many loans as possible without regard for public trust. Although yes appraisers do get paid for their services, unlike the parties above, the appraiser’s role and requirements are to remain independent from the pressure and push to close the loan at all costs. Meaning, we often find the bull crap (incorrect physical characteristics, non-permitted / illegal structures, lying cheating commission earning staff, etc.) that changes the perceived value of a… Read more »
There are clear reasons for the delays that Mr Kelker is not mentioning. Delayed appraisals should not be the focus any more than treating a runny nose should be the focus of the doctor with a sick patient – get to the source of the issue. Most lenders do not order the appraisal until WELL into the refinance/purchase process. They wait weeks into the process before ordering the appraisal. That’s a lender issue, not an appraiser issue. Additionally, and perhaps the most impactful, are the layers of red tape issued by USPAP and Fannie themselves. I have a trainee who… Read more »
Kelker doesn’t know what is going on behind the scenes. AMCs have treated appraisers so poorly that a good chunk of appraisers refuse to work for them. AMCs unfortunately have a very large share of secondary market loan orders. But, when the AMC is collecting $650 for a report but only paying the appraiser $200-300 and then demanding a three day turn time…..appraisers can’t afford to hire a trainee. Keep in mind the easiest report with nothing but GLA adjustments still takes 3-4 hours to do the inspection, write the report, and document information. The AMCs are pocketing the difference… Read more »
Appraisers don’t slow down the process … stop the BS
Sorry, this dog and pony show has propaganda all over it.
It assumes honesty from top to bottom regarding who profits from loans…..ANY loans!
It’s not appraisal modernization, it’s appraisal elimination. Fannie Mae is driving the only independent and UNbiased party out of business. (Read the blogs, every appraiser is trying to figure out how to get off the sinking ship). When the dust clears, either Fannie and Freddie will control housing prices, or 3rd party AVMs will make it the wild west with uncontrolled price estimates (Look how successful Zilliow is at valuations). When an appraisal is needed, qualified appraisers will be few and far between. Real appraisal modernization would encourage the use of trainees, allow innovation in the Appraisal process and make… Read more »
you already have the real problems mentioned above. The AMC shop for the lowest price and finally give the assignment out & expect the appraiser to make up the time they played around. Then there review depart tries to tell the appraiser what they need to add, explain & etc which a lot of them don’t know what they are talking about. The lenders don’t want a lot of the stuff they reject report for but the AMC wants to show how great they are. AND MY apologies the the good, knowledgeable reviewers because they are many good ones also… Read more »