The word “modernization” has a meaning different from what I thought. It seems to depend on who is using the word. To me, it just meant “get with it!” To our GSEs (Fannie Mae and Freddie Mac), it means something special. The dictionary definitions and explanations focus on the social and even political aspects of […]
What’s missing? Appraisal reform is focused on current ‘urgent’ issues. The problem is that some fundamental, underlying issues are not in focus! The concern is that it’s the underlying foundation that may be the core of the problem. Current (urgent) issues include: Bias: real and perceived Wide range of opinions of value Appraiser diversity: age […]
Modernization means bring in modern methods. What are they? Why aren’t they here? Is it really that hard? We have big financial resources. We have motive. We have huge organizations in place. And we have regulatory clout! Appraisal is just one type of valuation, done by super-regulated, licensed appraisers. Competing valuation products, like AVMs (Automated […]
Are valuation procedures a set up for bias failure? Let’s look to see what systemic issues there may be regarding bias in valuation. This is an enigma of multiple overlapping issues. Let’s connect the “established” appraisal practice of USPAP (Uniform Standards of Professional Appraisal Practice), the established body of knowledge (EBOK), and human behavior reality. […]
We have heard a lot about “modernizing” the appraisal process, particularly from the GSE’s (Fannie Mae and Freddie Mac). What is clear, is that the path is not clear. The GSEs, pressing for an improved valuation product, are in a difficult situation. On one hand, they are supposed to cooperate. On the other hand, they […]
Postpone appraisal modernization. We can do that later. Why? Change and improvement should, normally, come from a profession. When a profession fails to bring improvement, eventually consumers/clients press for change. That’s what seems to have happened. The two largest consumers of appraisals now have pressed for change. Fannie Mae and Freddie Mac have realized the […]
Appraisers have adjustments for “market conditions” and “sale conditions.” Why not “loan conditions?” There are similarities and differences. This is Part II in this series. Read Part I here Loan Conditions. Market conditions, for any particular market, price levels – trend together. So, appraisers apply ‘time’ adjustments to compensate for this change in ‘market conditions.’ […]
How about “loan conditions”? Clients only need a value in order to quantify risk. Is this scary? Editor’s Note: This post is an intersection of Modernization and Risk. There are only three uses for knowing value: 1) collateral loss, 2) investment gain, 3) equitability. Historical value may only be relevant to #3. Loss or gain […]
Is it possible discussions about bias are biased? Oh no! Surely personal motive cannot affect my position on bias. Can it? Editor’s Note: This is another intersection of Modernization (Part IX) and Bias (Part 6). It is difficult being a word nerd right now. Particularly writing about bias. This is a topic which is much […]
For modernization, we must note how coarse are the choices available to the loan originator: AVM, appraisal, hybrid, waiver, evaluation. Each choice involves different, but pre-set steps. There is little flexibility. It is not a continuum of analytical depth. To compare valuation systems to each other, we must look at the parts of the analysis, […]
The FHFA (Federal Housing Finance Agency) wants input on modernization in the world of housing finance. A big change. Human response to change is – resistance. A natural human first reaction is anger. Change is first seen as a threat. “Who are they to disturb my nice comfy world?” That threat of loss triggers us. […]
For some people, Evidence Based Valuation (EBV)© feels like a threat to “proven” appraisal practices. Others may believe it is a pressing, needed radical change. It is neither. Modernized appraisal unifies the best of established theory and modern methods. It is that simple. Traditional appraisal practice was built on sound fundamentals of economic theory. These […]
Opinion is the required end product of appraisal, mandated by the quasi-governmental regulations. By “appraisal waiver” exception, analytic results may be allowed. (No opinion is necessary.) modernized Editor’s Note: This post is an intersection of Appraisal Modernization, Part 6 and Bias Part 5 The FHFA (Federal Housing Finance Agency) wants input on: Appraisal modernization; Data […]
What is “Appraisal modernization”? (This is part 5 in an ongoing series on Appraisal Modernization. Part 1 starts here.) The Federal Housing Finance Agency (FHFA) is seeking input to “create a more streamlined and accurate collateral valuation process.” It also wisely recognizes that new regulations “could have negative unintended consequences.” Said director Mark Calabria. While […]
In Part IV, we continue our quest for modernization of appraisal. In Part I, we clarified that an appraisal is an opinion. We figured out that opinions don’t modernize well! We also saw that market price may or may not be true value. And that clients of all types need more than a historic point […]