Dear WVCAP Friends and Colleagues,
Fannie and Freddie have embarked on programs that waive appraisal requirements for purchase and refinance transactions. A collaborative ACTION ALERT was set up by the Appraisal Institute for appraisers and industry colleagues to call their respective members of Congress regarding the GSE appraisal waivers. Congress is once again turning toward housing finance reform, and as they deliberate, they should hear from appraisers as to why appraisal waivers are bad for the housing market and tax payers.
Shelley Moore Capito: (202) 224-6472
Joe Manchin III: (202) 224-3954
Evan Jenkins: (202) 225-3452
Talking Points and Solutions:
THE ISSUE: As the House Financial Services/Senate Banking Committee actively debate housing finance reform, I am calling to raise concern with Freddie Mac & Fannie Mae’s new Property Inspection Waiver (PiW) program which causes unnecessary risks for property owners and taxpayers. The time and cost issues are solved by banks ordering appraisals direct, because AMCs are the inefficiency in the system, and not required by law.
BACKGROUND: Since 1994, GSEs has been exempt from appraisal requirements established by Congress on the basis they would make responsible decisions. The market place wants government to reduce instability in housing, not create it. The objective of the GSE to capitalize faster by implementing PiWs pushes the risk of instability that could spread throughout the financial system with nothing to fall back on. Better plans exist to fulfill both lender and enterprise goals.
THE CONCERN: There is a race between Freddie Mac and Fannie Mae on who performs the least amount of care to homeowners and taxpayers. According to the Federal Reserve, the Federal Government owns 40% of the 8 trillion dollars of the Enterprises’ mortgage backed securities. Competition between Freddie Mac and Fannie Mae should not result in such power plays at tax payer’s expense. The appraisal fee is minimal in comparison to other costs associated with the mortgage marketing and servicing processes which are not being identified. The independent, visual observations and analysis of property conditions by appraisers are crucial to the stability of the housing economy for purchases and refinances backed by the Enterprises.
PiW sales exposed to the market place without proper vetting or alert present added concerns. It takes one inflated sale to ruin a neighborhood housing economy. It’s dangerous to allow the GSEs to double down against the market place and appraisers so specifically in this manner, especially while they’re still in conservancy.
This is not however the first-time the Enterprises have advanced appraisal waivers. Similar actions were taken by the GSEs in the early to mid-2000s, and the results were disastrous to our financial system and consumers. The GSEs currently hold more than 5 trillion dollars in securities in the world banking system. Reducing appraisal requirements sends the wrong signal to mortgage loan sellers about the importance of fundamental risk-management practices.
ACTION REQUESTED: For these reasons, I ask you to call on the Federal Housing Finance Agency to prevent the Enterprises from using the PiW until they demonstrate consistent safe and sound operations with full disclosure and transparency to the market place. Also, as Congress develops housing finance reform legislation, I ask that any legislation ensures the Enterprises’ appraisal requirements are used to enhance their safe and sound operations.