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HARP 2.0: Rise of the Appraisal Machines

by Chicago Agent

Computerized appraisals, or AVMs, could become a new fixture in housing with HARP 2.0.

The federal government’s long-awaited revisions to the Home Affordable Refinance Program, or HARP 2.0 as it’s been called by the press, primarily work through offering underwater homeowners a chance to refinance their loans, but recent agreements between the government and two leading appraisal organizations has opened the door for new innovations in the appraisal process via computerized appraisals, according to RisMedia.

The technology that is utilized for the appraisals is nothing new; Automatic Valuation Models (AVMs), as the computerized appraisals are called, are available on numerous housing websites for fast, easy estimations of a home’s value. Zillow, for instance, even has its own term for them – “Zestimates.”

“Under the HARP Phase II changes, it appears that AVMs will now become a primary tool – rather than a backup or limited use one — to value collateral for mortgages eligible for refinancing under the program,” said Jack Washbourn, the president of the American Society of Appraisers, in RisMedia’s piece.

The standardized model of AVMs, though, has continually landed the appraisal method in hot water with some industry experts, and some are none too pleased that the AVM method could now be a standard model for professional appraisers.

Jonathan Miller, for instance, the president/CEO of the Miller-Samuel appraisal firm, said in the RisMedia piece that AVMs’ unreliability, and the appraisal management companies (AMCs) that use them, has come to negatively define the appraisal landscape.

“There are no reliable AVMs I am aware of,” Miller said. “The quality of appraisers working for AMCs is very poor, most AMCs have AVMs and AMCs dominate the mortgage appraiser space.”

And as RisMedia points out, even Fannie Mae, one of the earliest supporters of AVMs, states on its website, “At present, we believe AVMs have generally not evolved sufficiently to fully replace traditional appraisals and human judgment for the origination of first lien mortgages. In addition, Fannie Mae does not approve or endorse third party AVMs or insured or warranted property valuation products.”

Washburn said that given AVMs’ reputation, it will be imperative that appraisers approach the new method with integrity and caution.

“We believe it is essential that effective quality control standards are in place at the GSEs so as to reduce the possibility that unreliable AVMs are utilized in significant numbers of refinance transactions, with the inevitable accompanying risk of a further weakening of the Enterprises financial viability,” Washburn said.

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