It just got really weird.
I mean not just a little but a lot.
Fannie Mae is abandoning such stalwart guidance that appraisers are now scratching their heads.
Historically speaking (I can say that now) there were a few things you just didn’t do. Exceeding 15% net and 25% gross adjustments in your appraisal grid were verboten. Today Fannie announced that this cornerstone of underwriting guidance was no longer. What?
They also lead one to believe that another cornerstone of guidance – the distance parameter is also past history.
Watch the Collateral Underwriter video here.
What in the WORLD is happening?
Well, technology and the appraisal world have caught up with the lending industry. And Fannie is not only a part of this change they are implementing it. YAY!
YAY? Really? Absolutely!
For YEARS appraisers have been picking comparables and making adjustments to fit into the “guidance” box. Finally… FINALLY we have some smart people that realize this comp selection and adjustment process are a recipe for disaster.
You can’t force a professional to use pennies when they need to use dollars. You can’t dictate that a kid only grow so big otherwise they need to wear clothes three sizes too small for them. This is what the GSE guidelines have done for decades. Limit the ability of a valuation professional to use a screwdriver when a hammer was needed.
Sure, you could make anything work but is that the BEST solution? Resoundingly NO!
The underlying issues here though are that Fannie seems to be acting in a way to open up the valuation process to alternative means but they aren’t engaging some of the key players, namely the very people on the front line which are review appraisers and underwriters.
If Fannie is going to open up the world of the appraiser to use and implement all kinds of technology and techniques they certainly NEED to educate their front lines about what they expect to see. It’s incumbent upon all in the industry to understand and implement best practices, but when the VERY use of appraisal services doesn’t employ some level of disclosure we might have a few problems. These problems are occurring right now with the massive confusion going on within the valuation space.
We have some that are fomenting the doom and gloom scenario where they hold webinars to scare the daylights out of the appraiser to get them to sign onto their “solution”… even though the solution isn’t complete or ready for use. There are others that are simply trying to provide some general support for the appraiser in an effort to avoid what could potentially be a minefield of “red flags” and reviews ad nauseum.
Regardless of what we see, the appraisal “biz” isn’t what it once was nor is it anything we’ve seen before.
Let’s strap in for an interesting ride.
Because there’s no doubt… it’s going to get weird and then even “weirder."