Back to the Future - Housing

Does this proposal lower or increase taxpayers’ risk over the long-term?

·      Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve are proposing the use of AVMs {automated valuation models *, algorithmic opinions of value} instead of appraisers.

·      If the GSEs, e.g., Fannie Mae and Freddie Mac, follow then for two-thirds, 67%, of homes purchased are open to taxpayers dollars backing the loans.

·      The difference is the removal of the ‘local’ human elements from the valuation proportion of the sound lending process with the tradeoff to  potentially speed up the financing process and save the borrower several hundred dollars.

Follow the link found below for a good read from today's WSJ regarding the topic.

* An AVM per Investopedia.com, “AVM reports are driven by technology, including proprietary algorithms and can be obtained in seconds by lenders and agents. They usually contain both a hedonic model (a type of statistical of regression analysis) and a repeat sales index, which are both weighed and analyzed in order to generate the price estimate. AVMs usually include the tax assessor's value, all pertinent information on the property in question, such as its sales history, and an analysis of the sales of like-kind properties. For the model to work well, they need high-quality data in enough quantity to be representative. While these models are quick and cheap, they do not factor in the condition of the property to determine its value.” Read more: Automated Valuation Model (AVM) https://www.investopedia.com/terms/a/automated-valuation-model.asp#ixzz5YHGgyHyY

#housing,#mortgages,#valuations,