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FHFA’s Policy Delays and the Future of Fannie and Freddie
The Federal Housing Finance Agency (FHFA) has recently announced a delay in the release of its Reconsideration of Value (ROV) policies. Originally scheduled for implementation tomorrow, the new policies will now be rolled out in mid-August. For those unfamiliar with this development, let’s break down what it means and why it matters.
What is Reconsideration of Value?
The FHFA, in collaboration with Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), has been working on new ROV policies. These policies allow homeowners, buyers, or lenders to request a reassessment of a property’s appraised value if they believe there are issues with the initial appraisal.
Reasons for requesting an ROV may include:
- Potential appraisal reporting deficiencies
- Inappropriate selection of comparable properties
- Additional information that the appraiser should consider
The Impact on the Appraisal Industry
While this policy aims to ensure fair and accurate property valuations, it’s worth noting that the appraisal industry has historically been resistant to external questioning. Appraisers, particularly in the residential sector, often bristle at challenges from lenders or realtors.
To illustrate the potential discrepancies in appraisals, I recently encountered a property with two vastly different appraisals. The difference in valuation was in the hundreds of thousands of dollars, with a staggering $800 difference in rent surveys – nearly a 30% disparity. Such situations highlight the need for a reconsideration process, even if it may ruffle some feathers in the industry.
Project 2025: A Looming Concern
While we’re discussing changes in housing finance policies, it’s crucial to mention Project 2025. Though it’s unclear which aspects are policy and which are speculation, some proposed changes could significantly impact the housing market.
Key points from Project 2025 include:
- Ending the conservatorship of Fannie Mae and Freddie Mac
- Moving towards privatization of these housing finance agencies
- Winding down Fannie Mae and Freddie Mac in an orderly manner
- Privatizing the common securitization platform
- Removing barriers to private investment
- Rightsizing the mission of FHFA and Ginnie Mae
These proposals raise concerns, particularly given the current economic climate. The suggestion to privatize Fannie and Freddie and reduce Ginnie Mae’s footprint could lead to more expensive FHA deals and higher rates – a move that seems at odds with the original purpose of FHA and VA loans.
While there’s merit in discussing these changes, the timing is questionable. With potential economic challenges on the horizon, now may not be the ideal time to implement such sweeping reforms in the housing finance sector.
In conclusion, while the delay in ROV policies provides a brief respite, the broader changes proposed in Project 2025 warrant careful consideration. As we navigate these potential shifts in housing finance, it’s crucial to balance the need for reform with the stability of the housing market.
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