Administration Plan to Help Homeowners – The Valuation Side

Last week the Obama Administration unveiled its plan to help homeowners refinance to take advantage of historically-low interest rates. We are going to focus on the valuation side of the plan. If you want the rest of the details you can go here and here.

The program includes refinance options for GSE (government sponsored enterprises, Fannie Mae and Freddie Mac) and Federal Housing Administration (FHA) borrowers. Both programs forgo the appraisal requirements in the refinance process. According to the White House Fact Sheet, “the GSEs would be directed to use mark-to-market accounting or other alternatives to manual appraisals for any loans for which the loan-to-value cannot be determined with the GSE’s Automated Valuation Model. This will eliminate a significant barrier that will reduce cost and time for borrowers and lenders alike.”

In line with the administration’s announcement last week, the US Department of Agriculture’s (USDA) Rural Development rolled out its refinance pilot for borrowers already using the Rural Development 502 program. It allows borrowers in the hardest hit rural areas who are underwater to refinance and take advantage of today’s rates. The lender does not have to submit new credit reports, appraisals, minimum property determinations or property inspections. The pilot is available in 19 states.

  1. Dan Wilson

    who will they blame on these if they go bad?



  3. Rob Burkley

    Wow , I think a small $300-$400 appraisal fee vs. $100,000 – $750,000 home loan is an important piece of the puzzle. I would love to see the GSEs AVM ! Why not use for free. Does the taxpayer paying for all these new FHA loans care about equity risk ? Probably!
    I predict Fannie/Freddie being influenced by a company like CoreLogic ( Chase Bank ) to provide cheap AVM’s ( computer valuations ) for $100. Save $200 versus a real interior appraisal and lose 95% on a future foreclosure.

  4. Fran Hurst

    The prior comments sound very cynical, but don’t worry,none of your predicitions will come true because few people are going to be eligible for the homeowner assistant programs that this administration has developed such as HARP, so few in the scheme of things that your concerns will not materialize, (primarly because of the low valuations being done in minority neighbors). I can tell you from personal experience that the appraisals being done in those areas are being done with little regard for true value. The apprasiers get paid no matter what they value your property at, and why should the banks squawk when homeowners have to continue to pay them mortgage payments on property that is nowhere near what it was purchased at.So again main street gets the short end. As long as appraisers have no one to answer to, no real oversight regarding their appraisals they are loose cannons. I am a victim of this practice. I am a real estate agent, I know what my property is worth in this market, it was appraised at twenty thousand less. I am not the only one this is happening to. Appraisers have too much unchecked power. Apprasiers are part of the reason the market is in the shape it is in now. I know real estate agents in Illinois, especially those who work mainly in minority areas know this is going on, and they should be raising hell about it. More properties would be sold to people who could afford them and more people would be able to keep their homes through programs like HARP if the banks and Apprasiers weren’t standing in the way. This is a problem, a real one!

  5. Tim in Fla

    Sorry to inform you Fran but appraisers have little say so in a valuation assignment. The lender , through their wholly or partially owned AMC, mandate appraisers meet certain criteria that is their standard. I agree with you that appraisals, across the nation, have become more flawed and more often than not just incorrect. But the real problem is that appraisers have lost all independence. Step out of line and there won’t be any assignments come your way in the future. All the old guys have left and now there are a bunch of brand new appraisers who became certified during the boom years. The skill set is not much beyond three bedroom , two bath, garage left or right in a planned development. Thats all they were trained to do.
    As far a making any money …its just not worth it. AMC’s pay peanuts.

    When you pay peanuts …you get monkees.

    As far as the current market goes; well almost any high school or community college economics instructor will teach you; bubbles (in any commondity) are best identified by credit excess rather than individual valuations. What caused this crisis is well know. I urge you to read the report done by the Financial Crisis Investigation Committee and submitted to all the regulators and congress. You’ll find your answer there.