Once Considered Inferior, Automated Appraisals Are Helping Stem Default Risk


Posted To: MND NewsWire

Although lacking in popularity, it appears that automated appraisals have obtained the their intended results. Urban Institute (UI) researchers Laurie Goodman and Jun Zhu found the changes have helped to lower default rates. They suggest that, in turn, some lender processes and potentially pricing should be changed as well. The two looked at the characteristics of three broad categories of mortgages: Purchase mortgages, used to buy a home. Rate and term refinance mortgages, used to reduce the interest rate or extend the length of an existing mortgage. Cash-out refinance mortgages, which are obtained when a homeowner wants to tap the equity that has accrued in their home. It has been assumed, based on loan characteristics like loan to value (LTV) ratios, debt-to-income (DTI) ratios and FICO…(read more)

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