Trillions of dollars of new originations with no appraisal requirements. WTF?

By Dawn Kopecki

March 27 (Bloomberg) -- Mortgage originations may double to $3.1 trillion this year as historically low interest rates and looser financing standards at Fannie Mae and Freddie Mac lure more borrowers, Bank of America Corp. analysts said.

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The rest of the article is located here:  http://tinyurl.com/cn68fu

If you read the article, please notice this part:

“The fact that the GSEs are taking away the appraisal requirements increases capacity inherently,” Ravi said, referring to government-sponsored enterprises Fannie and Freddie. “You don’t need to do a portion of the work that you were doing before on these mortgages.”

And, we're supposed to be happy that trillions of dollars of mortgages will be originated without anyone taking the time to see if the house is standing, sitting next to a landfill, has the walls kicked in, or even analyze the local comparable properties to give a non-commissioned opinion about the value of the collateral backing up the loan?

Automated valuation models failed during the boom. They're even worse in a bust.

Did we not learn our lesson the first time around?

Unbelievable.

I said this about AVMs in Mortgage Banking Magazine four years ago this month:

"Market penetration for AVMs hovers in the 10 percent range because they don't work in the other 90 percent of cases," says Scott Kinnaird, chief strategy officer with a la mode Inc., Oklahoma City.

Kinnaird believes real estate sales are "personal, microeconomic" transactions, and appraisers are ultimately needed for valuing collateral. "AVMs can't smell a bizarre deal. AVMs can't see a peak has been hit by looking at current listings, because Realtors won't release that data, and AVM data is at least 90 days old. Appraisers do all of those things every day," Kinnaird says.

It's like groundhog day.  We're going to rely on the government to jumpstart the housing market with cheap loans and loose underwriting.

Yeah, that makes perfect sense.

Check out what Dave Biggers, the founder of our company has to say about AVMs relative to the upcoming HVCC.  Food for thought.

http://www.youtube.com/watch?v=UNis3QG9MaY