Pandemic Problems Adding To Appraisal Issues For Lenders Record lending may be hamstrung by appraisal delays. Virus shutdowns are just one more roadblock. BY JOHN TEDESCO, SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL
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he appraisal industry has been under a great pressure for several years now. Increasing demand, shrinking pools of aging appraisers, evolving data and technology, growing regulations, and difficult entry barriers into the profession, are just a few factors that have contributed to the current climate over the past 10 years. Now add the impact from the COVID-19 pandemic and the industry challenges expand even further. The impact is being felt by mortgage lenders and borrowers across the nation, and they will need to navigate these concerns in the new world. First let’s talk supply and demand; the key pressure on the industry. With Millennials becoming the largest generation in American history, housing demands are at an all-time high both for the Single Family and Multi-Family Rental markets as well as first homeowners. The National Association of Realtors is predicting 12 million new homeowners over the next 10 years. The second biggest generation, Baby Boomers, are starting to downsize. Both the selling and buying in these transactions typically require an appraisal; granted large portions of the selling may overlap with many of these millennial home buyers. Additionally, interest rates are at an all-time low driving a refi boom and also requiring valuations in many cases. The 2019 Fact Sheet from the
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Appraisal Institute highlights 79,000 active appraisers in America. Less than 50% of those are active residential field appraisers; meaning many other may work for an organization like an AMC full-time doing quality control or review work, serve as chief appraisers for public and private organizations, work directly on staff for a lending institution, or perform only commercial asset class appraisals. The Appraisal Institute Fact Sheet notes several other important facts. First, that number of active appraisers is down more than 10% in five years and has been on a steady decline for more than 10 years. The average age of an appraiser is now over 55. More than 50% of those have been in the industry over 20 years while less than 16% have entered the industry in the past 10 years. Nearly 41% of appraisers surveyed in 2018 by the National Association of Appraisers responded that they plan to retire in the next 10 years.
LOCATION, LOCATION, LOCATION All of this is exacerbated regionally. Rural areas have always dramatically been underserved by appraisers by nature because of lower populations, but even cities and states can deviate significantly. Clearbox, host of the annual Valuation Expo (largest for the valuation community) reported in 2017 that metro Atlanta has 60 appraisers per 100,000 people, San Francisco had 30, while Cincinnati
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had 14 for 100,000 metro residents – and shrinking. In Illinois, its state appraisal board reported nearly 1,500 new trainee licenses issued in 2005; just 53 a decade later in 2015. Followed by the housing market recession of 2008, increased regulations, added risk, and stagnant fees compounded with added education and trainee requirements to deter many from entering the industry. This supply and demand pressure has been dramatic and painful to lending across America. Initially it has added costs to appraiser fees and delayed turn-times, extended times that killed rate locks, delayed closings, and added to loan expenses. In recent years the impact forced federal agencies, lenders, and key decision makers to take measures to combat the challenge. Some measures pushed to increase supply with reduced barriers to becoming an appraiser trainee; scaling back the added education requirements and field hours. Other measures focused on reducing demand. In 2017 and 2018, Fannie Mae and Freddie Mac adopted and expanded waiver policies that allowed low-risk borrowers with previous appraisals on file and higher down payments to secure appraisal waivers. In 2018, Fannie reported 60,000 of their 1.2 million loans (5%) received a waiver. Other exemptions from the Federal Reserve and FDIC were put in for commercial properties under $250,000 and then in 2018 that was
