Home >> Daily Dose >> FHFA: Potential Changes for Appraisal Process
Print This Post Print This Post

FHFA: Potential Changes for Appraisal Process

The Federal Housing Finance Agency (FHFA) has issued a Request for Input (RFI) related to its appraisal policies, practices, and processes.

The RFI follows the challenges that appraisers have faced over the past year, including issues during the COVID-19 pandemic when many appraisers were either unable or unwilling to perform on-site inspection due to the public health crisis. With the RFI, the FHFA is opening a public discussion on whether it will be necessary for the government-sponsored enterprises (GSE) to create new modifications to its appraisal procedures without introducing new risks to the process.

“Modernizing the appraisal process has the potential to create a more streamlined and accurate collateral valuation process,” said FHFA Director Mark Calabria in a press statement. “But if modernization is not properly adopted, it could have negative unintended consequences.”

Calabria added the RFI will seek to “improve FHFA’s understanding of how the Enterprises can improve the appraisal process while at the same time ensuring they don't take on unintended or inappropriate levels of risk. The comments we receive will inform how we will modernize appraisals to improve both loan quality and the origination process.”

The RFI covers four areas, starting with appraisal modernization, which the FHFA defined as the “development of valuation alternatives that could address the gap between an appraisal waiver and a traditional appraisal.” One proposed alternative offered for consideration was appraisal bifurcation, also known as a hybrid appraisal, where one entity conducts and submits a property inspection report for submission to a GSE automated underwriting system, with a desktop appraisal being conducted later if further collateral analysis is required.

Also being addressed is a potential updating of the Uniform Appraisal Dataset (UAD) and redesigning the appraisal forms, with the three-pronged goal of aligning the UAD with the industry-standard Mortgage Industry Standards Maintenance Organization (MISMO) Reference Model Version 3.X, assessing if new data would strengthen risk management, and ensuring all property types are included in an expanded dataset.

The RFI also seeks to address potential benefits and risks in the use of Automated Valuation Models (AVMs) and appraisal waivers and addressing valuation disparities in predominantly Black and Latino neighborhoods compared to predominantly White communities. The FHFA is accepting input on the RFI through February 26.

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

Check Also

Home Prices, Listings Up; Pending Sales Down

According to Dana Anderson, a Data Journalist for Redfin, median sales prices occurred in eight of the top 50 metropolitan markets, while pending sales fell in all 50 markets at an average rate of 13%.