Will hybrid appraisals become the new normal?

The FHFA requests input on GSE appraisal modernization efforts and how they could impact risk

The Federal Housing Finance Agency (FHFA) announced Monday it is requesting input on the appraisal policies, practices and processes of Fannie Mae and Freddie Mac, especially as it relates to the GSEs’ appraisal modernization efforts.

The Request for Input (RFI) – open to comment until Feb. 26, 2021 – highlights specifically the benefits and pitfalls of hybrid appraisals, updating the Uniform Appraisal Dataset (UAD) and an increased use of appraisal waivers.

According to FHFA director Mark Calabria, modernizing the appraisal process has the potential to create a more “streamlined and accurate collateral valuation process.” However, if incorrectly adopted, Calabria said it could result in unintended consequences.

“Today’s RFI will 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,” Calabria said. “The comments we receive will inform how we will modernize appraisals to improve both loan quality and the origination process.”

At the onset of the pandemic in March, the FHFA began easing standards on property appraisals that allowed drive-by and desktop valuations in certain circumstances.

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Now, the FHFA is considering implementing hybrid, or bifurcated, appraisals that enlist a third-party – typically an appraiser trainee, home inspector or real estate agent – to collect the data for a lender and certified appraiser once past the automated underwriting system.

According to the FHFA, hybrid appraisals would increase coverage for rural markets and high-volume areas where time becomes a greater issue. In August, several lenders voiced concern over the appraisal industry’s finite number of appraisers and underwriters as well as appraisal quotes taking anywhere from 10 to 27 days to hit the lender’s desk.

Though hybrid appraisals are expedited and typically cheaper, adding a layer of third-party involvement could complicate things because a uniform set of standards does not currently exist at both the state and federal levels that hold non-appraisers accountable for their appraisals, the FHFA said.

Alongside its easing of appraisal standards, the FHFA encouraged lenders to accept appraisal waivers when eligible. As a result, the Urban Institute reported a 14% increase overall in appraisal waivers, which contributed to an increase in refinance activity.

The FHFA suggests in its RFI that increased use of appraisal waivers could help lenders shave time off the loan manufacturing process, but waivers can also increase the risk of higher-than-expected prepayment speeds on mortgage securities, inaccuracies of input data and potential gaming by lenders.

The FHFA is also requesting comment on further updating the UAD, a process that began in 2018 in an effort to redesign its appraisal reports so they would be streamlined to other Enterprise data forms.

The redesign would also update the MISMO reference model that sets standards for the GSEs’ Uniform Loan Application Dataset (ULAD), and its Uniform Closing Dataset (UCD). Combined with the UAD redesign, the FHFA would establish blanketed standards for appraisals on all property types.

Racial disparities in appraisals were also on the table for the FHFA as it requested comment on the extent to which value determinations had potentially harmed minority borrowers.

A 2018 study by University of Pittsburgh professors found in appraiser interviews that some take racial and ethnic composition of the neighborhood into consideration when selecting comparable homes, though it is against Uniform Standards of Professional Appraisal Practice.

Bias in appraisal especially came to light in August after an interracial couple described their discriminatory experience in the New York Times. In October, a coalition of appraisal organizations announced a concerted effort to combat appraisal bias.

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Habitat for Humanity sees success with aging in place program

By Didier Malagies • January 22, 2025

A dedicated aging in place (AIP) program offered by the Oswego County Habitat for Humanity (OCHFH) in New York says it is seeing success by incorporating family, community and local resources to ensure older homeowners can remain where they prefer. “It’s been projected that, over the next 20 years, households led by individuals in their 80s will become the fastest growing age group , which provides stability within their communities,” said Samuel Raponi, OCHFH executive director. Through the organization’s AIP program, Habitat collaborates with families, local organizations and other community members in an effort to provide homes that prioritize living for older adults, he said. “This ultimately enhances their quality of life. We employ two different assessments in each case to ensure that the homeowners’ needs are clearly understood,” he added. An initial assessment of the client’s living situation aims to assess each person’s daily living activities, which are scrutinized by a “health or human services professional,” the organization said. This includes how they manage regular tasks like cleaning, shopping, paying bills or interacting with their community. A second evaluation specifically assesses home repair needs, and how to make a dwelling more livable for the needs of an older person. “These assessments enable OCHFH to provide modifications to their homes tailored to each homeowner’s specific lifestyle,” Raponi added. “Among the kinds of modifications we make are installing lever door handles, ramps, railings, grab bars, walk-in showers with a low threshold, and raised toilets to make homes more accessible for older adults.” Other resources, including Meals on Wheels , may be seen as necessary to deploy depending on a person’s circumstances, and all combine into a living situation that is aimed at being more generally beneficial for someone seeking to age in their own home. AIP is actively seeking more collaborative partners in the health care sector, owing to unique challenges visited upon older people who may not be able to adequately address their health needs. “Low-income older adults face a higher risk of chronic diseases and disabilities due to limited access to primary care and a greater likelihood of living in substandard, deteriorating housing,” Raponi added. A recent study from Carewell suggested that many older adults see aging in place as a financial necessity considering the costs of other kinds of living arrangements older people may choose. Nearly half of respondents (47%) characterized aging in place as both a preference and a financial necessity in tandem.

Is it time to prequalify for a mortgage now

By Didier Malagies • January 20, 2025

1. Assess Your Financial Health Credit Score: Check your credit score (usually 620 or higher is required, though higher scores get better rates). Debt-to-Income Ratio (DTI): Calculate your monthly debt payments compared to your gross monthly income (lenders typically prefer a DTI below 43%). Savings: Ensure you have enough for a down payment (typically 3-20%) and closing costs. 2. Gather Financial Information Lenders will need the following: Proof of income (pay stubs, tax returns, W-2s/1099s). List of assets (savings, investments, retirement accounts). Details of current debts (credit card balances, student loans, etc.). 3. Choose a Lender Research different lenders, including banks, credit unions, and online lenders. Compare prequalification options (many allow online applications). 4. Complete the Prequalification Process Fill out the lender’s prequalification form (online, over the phone, or in person). Provide basic details about your income, debts, and assets. 5. Review Prequalification Results The lender will give you an estimate of the loan amount and potential interest rate. Remember, prequalification is not a guarantee of approval and doesn’t involve a hard credit inquiry. 6. Follow Up with Preapproval If you’re serious about buying, consider getting preapproved, which involves a more in-depth review and is stronger than prequalification. Tips: Use online calculators to estimate affordability before reaching out to lenders. Avoid large purchases or opening new lines of credit during the prequalification and preapproval process. Would you like details on specific lenders or tools to compare mortgage options? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

USA Today: If Social Security falters, reverse mortgages could be worth a look

By Didier Malagies • January 13, 2025

Many retirees have said they rely largely — and sometimes entirely — on Social Security benefits as their primary income stream in retirement . But in instances where these payments may not be enough to make ends meet, other options should be considered — and in the right situation, a reverse mortgage could be one such option. That’s according to a column published this week by USA Today , which assessed reverse mortgages in tandem with options such as personal savings, a part-time job and other benefits programs. “A reverse mortgage is a possibility for seniors with substantial equity in their homes,” the column stated. “It essentially enables you to borrow against your equity, and you aren’t required to make any payments while you’re still alive as long as you live in the house.” The column is likely referencing the Home Equity Conversion Mortgage ( HECM ) program insured by the Federal Housing Administration (FHA). Loan proceeds are dependent on the amount of equity in the home and current interest rates, the column noted, and there are multiple disbursement options available, the column noted. The minimum age requirement of 62, a core tenet of the HECM program, was also mentioned. “There are closing costs and other fees, and you’ll still be responsible for maintaining the property and paying the property taxes and homeowners insurance,” the column noted. It characterized the loan as a “solid option” for those who have few other assets beyond their homes, adding that “it might not be the right move if you intend to pass the property on to your heirs someday. After you pass away or move out of the home, you or your estate will have to repay the loan. This will reduce how much your heirs receive.” Recent survey data from Clever Real Estate highlighted some realities of relying on Social Security benefits in retirement. Roughly one in five respondents in the 1,000-person survey said they rely exclusively on Social Security benefits as their sole income stream in retirement, with nearly 30% saying they believed they would be able to rely on them. Last year, data from Nationwide suggested that an increasing number of older investors believe that retiring at the age of 65 is no longer a realistic option . This is largely tied to higher levels of stress they’re feeling about the economy and the cost of living.