Due to the unique characteristics of loans from the U.S. Department of Veterans Affairs, the Mortgage Bankers Association wrote a letter to the department to explain how a shortage of VA-approved appraisals can severely impact borrowers.
While highly contested, the appraiser shortage in the market comes down to there not being enough appraisers available to meet the demand of appraisals. The details on why there are not enough available appraisals are hashed out here.
A shortage in VA-approved appraisals, however, creates a different story. The most notable factor about VA loans is that they require no money down.
Here’s how the MBA explains that can be an issue when mixed with a VA-approved appraiser shortage.
Because of the lack of VA appraisers, a seller may opt for a non-VA contract when multiple offers exist. If the seller does accept the contract with VA loan terms, the postponement could result in an extension of the contract, penalty fees or loss of earnest money deposit by the Veteran.
Should the sellers persuade the Veteran to not opt for a VA loan with 100% financing, the veteran then would have to come up with additional cash to close, sometimes upwards of 20% of the sales price. Both for purchase transactions and refinance transactions, these delays could result in loss of rate lock, which could then require additional fees or higher rates. Also, the higher rates could end up costing the Veteran tens of thousands of dollars of interest payments over the life of the loan.
In order to address the problem, the MBA suggested five things to the VA:
- Create a virtual desktop appraiser to supplement the traditional appraiser process
- Allow a Property Inspection Waiver (PIW) for VA appraisals
- Find ways to attract new appraisers and increase interest in the appraisal industry
- Allow VA to utilize appraisal management companies when appointing appraisers via the VA portal
- Support the Appraisal Qualifications Board proposal to eliminate all college coursework for both licensed and residential credentials
“The damaging impact to the veteran community is clear and the VA should act quickly. MBA strongly encourages the VA to review the appraisal process to remedy this shortage of VA appraisers,” the MBA stated.