Timothy Baron, licensed loan originatorrnwith NOVA Home Loans based in Tucson said that he couldn’t recall receiving arnsingle low appraisal last year but had received three within the past week; twornpurchases and one refi, all conventional loans. rnHe was awaiting an appraisal for a VA purchase loan the day we spoke butrnemailed me later to say it had come higher than needed.</p

Nathan Miller, Mortgage Loan Originator for eRates Mortgagernis licensed in 15 states and said he has been seeing problems scattered acrossrnthose states, specifically mentioning Indiana, Michigan, Oregon andrnCalifornia.  Most of his problems werernoriginally with refis but he thinks the problem may be growing withrnpurchases.  He said that the loan typesrnare varied, some VA loans, a few FHA but most have been conventional orrnconforming – people who had bought within the last few years and were hoping tornget rid of private mortgage insurance or FHA premiums.  He hasn’t had many reviewed because of thernexpense involved with his appraisal management company but in the past hasrnfound that nine out of 10 reviews come back unchanged. </p

We also asked the Mortgage BankersrnAssociation if they were aware of an uptick in low appraisals.  A spokesman said, “The Association ha(s) not heard from its members about thisrnspecific issue.”</p

If we assume that arnpattern of low appraisals has emerged in recent weeks then we have to askrnwhy.  There were several ideas about possible contributoryrnfactors.  Valins, for instance, said thernheavy recent volume loan applications may be leading to some sloppiness on thernpart of appraisers.    A surprisingrnsuggestion and one that we heard several times was the influence of therninternet.  Hodges said that ownersrnconsidering refinancing often make sites such as Zillow their starting pointrnand he suspects that sellers do so as well. rnThe comps on these sites, Miller said, are not scrubbed or selected asrncarefully as a real estate agent would. rnBaron also thought this might provide a partial explanation saying thatrnwhile these sites provide ballpark figures that are useful to determiningrntrends they aren’t intended to give absolute values.  Still homeowners take them to heart and usernthem as a basis for expectations about what they can expect to realize throughrna refinance or a sale. </p

Baron also noted thatrnunderwritersrnand real estate agents sometimes see comps one way while appraisers view themrnin an entirely different light.  Theyrndon’t always accept a comp we think is a good one as even relevant to the subjectrnproperty, he said.</p

A spokesman for the Appraisal Instituterndiscounted any recent unusual appraisal trends. rnA formal statement to MND reads: rn”Bottom line is that this is an age-old issue that real estate agents,rnlenders and consumers have complained about for years, but it has no morernbearing in fact today than it ever has. Appraisers are independent, third-partyrnexperts paid a flat fee to develop a credible, reliable opinion of value. Theyrnhave no reason to provide a value that is “too high” or “too low” … although,rnof course, those involved in a transaction may see it as such from theirrnperspective.”</p

The fact that counterparties don’t always see eye-to-eye on valuations is not lost on us, nor on the mortgage professionals we interviewed.  That said, there is no denying that the topic is coming up significantly more often in the origination community during the first quarter of 2015.  Certainly, some of it could be based on the factors discussed above, but what we found most interesting and curious is that there was one new explanation that can’t be chalked up as an “age-old issue.”</p

While it’s possible that it’s simply a new justification for an age-old issue, almost everyone we spoke tornmentioned Fannie Mae’s new Collateral Underwriter (CU).  It was also the least divisive issue among those who mentioned it.  They agreed that–while not being a direct cause of the low appraisals–it was, as Valins put it, at least correlated with the phenomenon.  CU is a new tool which came on line onrnJanuary 26 and will soon provide lenders with a foundation for future waiversrnof representations and warranties as to property value for loans backed byrnFannie Mae.  CU provides a risk score onrnindividual appraisals which will allow segmentation of appraisals by riskrnprofile, allowing lenders to identify appraisals with heightened risk ofrnquality issues, overvaluation, and compliance violations.  </p

Millerrnsaid he thinks appraisers are being ultra conservative as CU is rolled out,rnafraid of backlash from appraisal management companies.  This was echoed by Baron.  “Myrnpersonal opinion,” he said, “is that appraisers are being overly conservativernin choosing comps because of CU.  If CU questions the comps, adjustments,rnetc., the appraiser would have to do a lot of extra work to justify them. rnI had anticipated that CU would cause delays because of this extra work, but itrnseems that appraisers are one step ahead and are being ultra conservative, thusrnavoiding the extra work in the first place.  I haven’t spoken to anrnappraiser about it, this is just my interpretation of what I am seeing.”</p

If it is CU that causing the lowrnappraisals or even magnifying the impact of other factors it will hopefully berna short-lived phenomenon.  Onernlender told its employees “Where we do not anticipate any problems with the CUrninterface, we are anticipating a heightened array of misunderstanding andrnappraisal revision requests.  We believe the understanding of the CUrnprocesses and findings should evolve rather fast.”  </p

In our view, the fact that it’s new limits anyone’s ability to accurately comment on its effects.  It also means we can’t simply chalk recent perceived changes up to the “age-old issue” mentioned by the Appraisal Institute until more time has passed.  One thing’s for sure: there’s enough consensus here to merit further examination and consideration.  What are you seeing?

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