A new program that launches later this month from Fannie Mae could lead to slower and costlier home sale closings and more disputes over prices between sellers and buyers, according to appraisers.
Worse, they worry, the Collateral Underwriter program could bust deals if appraised values from the GSE come in below what the parties agreed to in the contract.
Fannie Mae plans to offer mortgage lenders access to proprietary home valuation databases on Jan. 26 to assess the accuracy of and risks posed by the reports submitted by appraisers.
The way it works is that the Fannie program will flag potential errors in the appraiser's evaluation before the lender commits to fund the loan. It will also score the appraisal for overall risk of inaccuracy. And finally it can provide as many as 20 alternative comps.
Using this information from Fannie, mortgage lenders will be able to question the appraiser or management company that hired the appraiser, and possibly demand changes to the initial appraisal.
Appraisers say that Fannie will low-ball appraisals, but a Fannie spokesperson said that’s not the case.
"It's going to flag mistakes," the spokesperson said.
Appraisers aren’t so optimistic.
“This monster has never seen the property and has no idea if the so called ‘low risk’ comp is even in the neighborhood,” writes Gary Crabtree, SRA, in a comment on HousingWire. “With the AMCs paying ‘cram down’ fees, the end result will be more appraisers leaving the profession, lower appraisals and longer transaction times. After performing over 18,000 appraisals, I don't need a computer or an underwriter telling me how to do my job.”
Others are concerned because the information is provided to the lender but not the appraiser.
“I believe what is proposed with FNMA CU undermines appraisers and is not well thought out,” comments Johnny Osipchak, an appraiser. “Keep in mind all the data we appraisers supplied Fannie and Freddie (Mac) is now going to be used against us, yet they plan on supplying information only to the lender and NOT the appraiser.”
While excessive valuations can create the risk of future losses for lenders, appraisers worry that Fannie’s data may not take into account local information that boosts an appraisal above recent comps.
The bottom line, appraisers say, is this could lead to delays to closings and higher costs, as well as a depression of prices in markets where prices are rising.
Appraisers complain that if they have to justify every step of their comps for their valuation, rather than those coming from the one-size-fits-all evaluation from Fannie, it will delay closing, throw off buyer and seller timetables, and delay real estate broker commissions.
Further, appraisers would need to increase their fees to cover the additional cost of having their work checked by Fannie.