Agents don’t tend to see that many appraisals. I saw a lot more when I was working as an attorney. That might change if there is a significant decline in prices. But in that instance, it’s apparently the job of the listing agent to make sure the appraiser is aware of a few good comps–the appraisers like things that make their jobs easier. I’ve only worried about that once, where a condo project was being undervalued by agents because of imperfect information (they didn’t know about a recent major re-siding project on the complex which held down prices). Interestingly, the buyer of the unit was an appraiser himself, who apparently saw the same thing I did. Anyway, it appraised for well over our price.

Will we see it in exactly the same form? No. Investors will want some bells and whistles on it. But if it does come back, even with those bells and whistles each loan will be high risk, but a package of them, not so much.

Kary, I agree regarding patience. In addition to waiting before negotiating on a property (the sellers need to have a few empty open houses before they accept reality) I also watch sale prices come in and see what’s selling out in the areas I’m looking at. The way I see it, even if someone *wanted* to overpay in today’s market, the appraisal situation is getting stricter, and the comps are coming in lower. Pretty soon, if it hasn’t happened already, Spring of 2007 will be a distant memory, and the comps we’ll be using for appraisal purposes will be winter of 2007.

This happened down in San Diego, where I lived before returning to WA. Comps had to be less than six months old to be valid, so once the price peak faded into the rear view mirror, financing failures become more common. Appraisers just hate to check that “prices in the area are declining” check box. For some reason it makes the bank jumpy.

Can you paint a picture for me of what the industry will be like in 20 years? I can’t see that far out.

What I do see, over the next 0 to 5 is that we’ll see some banks not make it through this mortgage crisis. They’ll go down or they’ll be purchased by bigger banks. I see a rise in the number of hard money lenders and consumer loan lenders and a decrease in the number of mortgage brokers that only existed to do subprime refi churning (okay, it doesn’t take a rocket scientist to figure that out.) I believe there is room for local mortgage brokers who are medium-to-large that have a correspondent lines of credit with banks, that are FHA approved, were already operating with adequate compliance, auditing, and training divisions, that have established, long-term client relationships with medium to top producing residential real estate agents….and I see a rise in the percentage of loans originated at banks.

If securitization slowly dies, then we go back to lending like we did in the 1970s and 80s where banks purchased the loans and held them in their portfolio, which means conservative underwriting, with full documentation on all files, which wouldn’t be a bad thing in my opinion.

If institutional investors start suing banks NOW over rising defaults, all hell is going to break loose sooner rather than later

Regarding subprime making comeback…

Your faith is very impressive. I certainly hope you have a backup plan.

SP is dead, cremated, and scattered over the ocean.
Alt-A is in hospice care
AAA just got told they have 6 months to live
Agency is complaining of chest pains.

The securitization of mortgages will be dead. 20 years from now, we will be looking back on this period and wondering what we were thinking.

I wish you well.

The biggest risk to the market is that of Freddie or Fannie failing, or even cutting back significantly. That could happen, but I wouldn’t bet on it.