- 3 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Kenon Chen, EVP of Strategy and Growth at Clear Capital, about Trump’s executive order on appraisal modernization on top of the UAD changes.
Related to this episode:
Trump executive orders target housing supply and mortgage credit
https://www.housingwire.com/articles/trump-orders-housing-mortgage-credit/
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https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
Related to this episode:
Trump executive orders target housing supply and mortgage credit
https://www.housingwire.com/articles/trump-orders-housing-mortgage-credit/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
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NewsTranscript
00:09Welcome, everyone. My guest today is Kenan Chen, the EVP of Strategy and Growth at Clear Capital,
00:15to talk about some of the appraisal changes that were just announced by the Trump administration.
00:19Before we get started, I want to thank our sponsor, Trust in Will, for making this episode
00:23possible. Kenan, welcome back to the podcast. Thanks so much for having me. I appreciate it.
00:28Great to have you here. Of course, we're filming this at ICE Experience, which has been really fun.
00:33I'm so glad that you were like, yeah, let's do this, because we just had a lot of news about
00:39appraisal on top of the other news we had about appraisal. And I was like, let's talk through that,
00:44right? So start at the top. Last week, we had President Trump put out an executive order.
00:50And as part of that, it was housing focused. He talked about appraisal modernization,
00:56a topic that we've been talking about for 15 years, but would love to get your take on exactly
01:02what that means for someone who's in the trenches, who runs an appraisal company in tech. And how did
01:09you interpret what he said? And maybe start out with what he said. Yeah. I like what you said there,
01:13appraisal modernization on top of appraisal modernization. It's like, aren't we already
01:17doing that? Um, yeah, it was, it was interesting to see an entire section on appraisal modernization.
01:23Um, and there was kind of a laundry list of things that were, that were in there. It was, you
01:28know,
01:29talked about using, um, alternative, uh, valuation models, um, which maybe that meant automated
01:36valuation models, but it's kind of interesting to the acronyms, typically AVM alter automated, but
01:41alternative desktops, hybrids, um, the use of artificial intelligence in valuation. I thought it
01:48was interesting to call it out. Um, uh, then, and then it was like reducing appraiser regulations,
01:55you know, for, uh, low, uh, low LTV transactions, reducing the appraisal regulations for that, um,
02:03reducing qualifications for, for entering the appraisal industry as an appraiser. Um, so yeah, there was,
02:10there was quite a, like a long sort of laundry list of things, um, that were there. And I mean,
02:16generally I think that's a, that's a good thing, right? Continuing this conversation on appraisal
02:20modernization across multiple administrations tells me that like, we're not going back, like,
02:26like the trains already left the station and, and, uh, this is, this is where we're going. We have to
02:31modernize, we have to digitize. That has a great perspective. So when a president puts out an
02:36executive order like that, um, do you then wait as you know, the person who's, who's got the boots
02:41on the ground going like, okay, we need to see this come through an actual regulation or like change
02:46what's there. Like what does that process look like from your perspective? Well, this one I thought was
02:51kind of different because a lot of these concepts are ones that are already in, in policy. Um, if you
02:57remember, like when we first started talking about this, we started piloting alternative approaches to,
03:02to appraisal alternative workforces, um, the introduction of mobile technology to help with,
03:09uh, onsite data collection that all started, you know, 2017, 2018 with what Fannie and Freddie were
03:16doing. And we were in pilot for, you know, six or seven years before, uh, bringing the policy. What
03:23is now ACE plus PDR from the Freddie Mac side, uh, value acceptance, uh, property data from the Fannie Mae
03:29side and a whole risk-based spectrum of products is now in, in the guide, in the selling guide now.
03:35And a number of lenders are taking advantage of that. So to see it in here again is like,
03:41that's, that's great. Um, I think what it should send as a signal, maybe to lenders who haven't
03:46adopted it yet, that there's full commitment to this going forward. And if you're not taking advantage
03:52of it yet, um, now might be a good time to take a look at that. It is interesting that
03:57you said,
03:57you know, to see this across administrations and that's great. We talk a lot on this podcast,
04:02how it's really hard to get anything done in a two year political cycle, which is basically what
04:07you have, right? Um, cause you have Congress turning over and then the presidency. And so
04:12it's great to see that over, over time. I, I appreciate that. So when you look at this,
04:17one of the things that stood out to me, you mentioned the AI part of this, because at other
04:22parts we've seen in the last year where the government was like, you know, maybe limit AI
04:27use in, in, in different ways. And it's like, one of the questions that came up almost immediately
04:33from people in housing, when they talked about that was like, but we already use AI. I mean,
04:37we already use that kind of technology, maybe not AI, but like in what you, you know,
04:43send to Fannie and Freddie. So how does that work? So him calling that out specifically,
04:47maybe that's a good counter to that. How do you, how do you look at that? Well,
04:53you know, AI, if we want to talk about kind of machine learning as, as a discipline of AI,
04:59that's been utilized for, you know, the past getting on 10 years now within automated valuation models,
05:06within, um, uh, you know, computer vision, you know, extracting data from,
05:12from appraisal imagery is, um, really, I think already part of the fabric of what we do,
05:19you know, with, within the industry. Um, and, and those benefits I have now been seen over and over
05:26again, you can actually test how are these things performing over a long period of time against the
05:31way it used to be. And, um, I would say that there's comfort now with the level of accuracy being
05:38created by, you know, AI techniques. What's new, I think that's, that's in here is, um, of course,
05:46is use of LLMs and where are we going now with, with generative AI, where we're going with agentic AI.
05:51Um, and, you know, I, I think it's the right time to kind of push even further in, into it,
05:57but it's very well proven that machine learning has vastly changed the level of accuracy we can get
06:04from alternative models now. Was, was it specific on what kind of, we talked about how, if you have
06:10a lower LTV loan that, that you could, you could, or less risky loan, right? Basically you could use
06:16more, um, automation for that. Was there a specific level of that, that, that was outlined? I don't
06:22remember. They didn't put the exact LTV, um, in there, but I mean, today the policy for, you know,
06:28appraisal waivers and inspection based waivers, I think it's 80 LTV, uh, generally on, on, uh, on
06:36full waivers and then up to 90 LTV on inspection based waivers. So we're already kind of there for,
06:44you know, lower LTV allowing some of these alternatives. Um, what I'd love to see is,
06:50uh, you know, policies that where it's not just about what Fannie and Freddie do internally
06:55for their own decisioning, but allow, you know, a process for lenders to have, uh, you know,
07:02choice for how they, you know, but they want to look at valuations for their own book of business,
07:07you know? Um, so there's a lot in the, in the, in the executive order about smaller banks,
07:13but encouraging right community banks to get back into lending. And so for portfolio loans, you know,
07:19why wouldn't they have some of the same options to use this technology, um, based on their risk
07:25profile in the same way that the GSEs are able to use for their own decisioning? Um, that's what,
07:30what will get interesting to me is, you know, open this thing up a bit so that, uh, other types
07:35of,
07:36loans and other types of exit strategies can, can benefit from time. I remember when, um, it was at the
07:45NBA annual conference a couple of years ago. I can't remember now they made the announcement
07:49about hybrid appraisals or, um, you know, that, that you could now use those. And it was just like,
07:54Oh, I mean, it was a big deal. Right. But have what, what's been the uptake of that, right? Like
07:59how,
08:01how do people view those now? Is that, is that a very popular thing to do?
08:05Yeah. There's been, um, uh, a massive increase of the use of inspection-based waivers.
08:11Uh, so 2025 over 24, um, as a percentage of loans, we actually saw less, uh, 10% less traditional
08:21appraisals being used as a percentage of GSE loans. And, and that meant that there was an increase in
08:28the use of inspection-based waivers and an increase in the use of, um, uh, maybe not the full hybrids,
08:36but starting with the data collection, um, which is the, uh, what's needed before you can do a hybrid
08:42appraisal. Um, you know, I, I think this year the focus has been on UAD 3.6 and that's probably
08:50slowed down, you know, some of the, um, adoption of going straight to a hybrid appraisal because
08:55everyone's focused on, you know, changing the whole data structure and, and, and appraiser form.
09:00But I think we'll see more of that after we get over this hump. Um, I, I, I do think
09:05that people
09:06will be better set up to go straight to a hybrid appraisal where it makes sense.
09:09Which would be tremendous. We would all support that.
09:12Uh, you know, we've got to get other workforces involved because we are seeing less appraisers,
09:19you know, uh, being active in, in the industry. Um, and having these other workforces, we,
09:25we can put more time into, um, you know, higher fidelity data collection. We can put more time into,
09:33uh, you know, improving the, the quality of the analysis, um, by keeping appraisers,
09:38you know, focus on what they're best at, which is, which is the analysis, which is the value
09:42conclusions. Um, so yeah, I, you know, I, I feel very, very bullish, I guess about, you know,
09:51where things go after this year, uh, after we get UAD 3.6 in place. Um, and this order to
09:57me,
09:57this, this executive order is just, it's kind of like common sense, like keep up the good work.
10:04Let's keep going. We appreciate the support. We love that. Let's keep going. Yeah. Yeah. Well,
10:09especially when he, um, when he called for, um, less stringent requirements to become an appraiser.
10:15Again, I don't know that there were a lot of details on that, but you know, I know that that's,
10:19that's been an effort ongoing to, to be like, how do we get this so that we can attract more
10:24people?
10:25And there's been a lot of effort already within the industry to try to make sure there's a pipeline
10:30there. Yeah. There wasn't any timeline in, in the, in the order. Um, you know,
10:35some of the other provisions at least had like 120 days sort of bring back a report and recommendations
10:40in this case is it, it's just a mandate to the different directors of agencies to like,
10:45consider these recommendations. So we'll see, you know, what, what comes out of it. But, um,
10:51again, I'm not, I'm not too worried about it because this is all in alignment with everything
10:56that's already in motion or has already been put in place. Um, and it tells me that we're not going
11:03to get jerked around to a completely different direction. We can keep going, you know, on, on the
11:08path that we're on. Um, you know, one of the things that's kind of interesting though, is that, you know,
11:13the rise of, um, of second liens of, of home equity products and home equity securitization,
11:20as well as the rise of non-QM lending and, you know, DSCR loans and, and things that really took
11:25off last year, um, means that there is a lot of opportunity to test out innovation and valuation
11:35in other types of, uh, of, of loans. You know, um, we're seeing a massive adoption of, of AVMs for
11:43home
11:43equity, uh, and, and the use of automated property condition, um, reports as well, using again, AI to,
11:51to, uh, to look at imagery and understand property condition from that. So it's already being adopted
11:56in these other loan types, um, which gives us a lot of data to understand accuracy and performance.
12:04Uh, so one day maybe on the, on the GSC side, we'll see some more, uh, allowance for those sort
12:10of things.
12:10Yeah. Well, and you know, uh, we are not
12:13in a refi boom environment that we can see. Um, but should that-
12:18Tomorrow that could change though, Sarah.
12:20It could change. We know this.
12:22But should that change, I just feel like we were in such, you know, when you think back to like
12:2621, 22 and how the appraisal was the pain point and so many, you know, purchase, but also
12:33refi in, in everything, because there's, you know, it was just this, like, um, this roadblock. But I,
12:39I feel like if we had, will we ever have that kind of boom again? Hard to say, but if
12:43we did,
12:44I feel like we're in such a better spot for handling the volume just because we have more
12:48tools now. We're used to doing it. People, you know, they already have those systems. So it feels
12:53like we could handle something.
12:54I, I kind of want to challenge that idea though, that not being a pain point, because I think we
12:59sell ourselves short. Sometimes we're like, oh, well, appraisers are coming back in five days.
13:04Now everything's fine. I'm like, really? Like, like in, in what other aspect of your life are
13:11you okay waiting five days? Like, we don't even like waiting five days for an Amazon package,
13:15you know? And so, um, you know, I, I think that we should, regardless of whether there's a refi
13:20boom or not, or whether we're in pain, um, we should be pushing for, uh, more certainty upfront for
13:28borrowers, you know, reducing that stress they have when they, when they put together their purchase,
13:34um, you know, offer and, and, uh, and they don't know for days, whether or not the value is going
13:41to support the, you know, the loan amount that they need. Um, that's not okay. You know, like,
13:47like we have the capability to, uh, to provide, you know, certainty a lot earlier, a lot sooner.
13:55And the idea that it's like, well, it's not really broken too bad right now. So we're just
13:59going to like not invest in what it could be. It doesn't make any sense to me. Um,
14:05why wait for a refi boom where we're, we're seeing multiple week turn times for appraisals? Like, let's,
14:11we've got some extra time now to, to, to fix it right now so that, um, we change the borrower
14:17experience. You know, like I think sometimes we forget about that as an industry, that the reason why
14:22we're doing this is to help people, uh, make the largest purchase of their, of their life
14:28in a way that doesn't cause, you know, increased stress and anxiety for them.
14:33Well, I know everyone listening would be like, yay. That's a great, you know, like,
14:37thank you. That's, that's an incredible, uh, perspective. You know, you mentioned UAD 3.6,
14:42right? So we're on top of that, right? We have some other things. So tell me how that's going. Um,
14:47you know, that's a standardization, um, of the whole, what, what gets turned in to Fannie and
14:53Freddie. Talk to me about how that's going industry wide in your opinion. Yeah. Well,
14:58I mean, if, if I had the money, I would rent out the sphere, uh, and put a big, huge
15:03UAD 3.6,
15:04you know, sign on, have you gotten UAD 3.6 yet? Um, uh, cause I think, you know,
15:09I'm still hearing from some lenders that they're not really up to speed on it. They're not really,
15:15um, you know, they haven't thought about all of their end to end systems. Um,
15:19and the mandate is, has not moved. It's still in November. Um, and I'm, you know,
15:25we're still hearing the GCs are not going to push back the timeline. So, um, certainly, um,
15:31I think now is the time for lenders to really, uh, ensure that, uh, their, their providers,
15:36their systems are ready, um, to start doing some testing because it does take some cycles.
15:42Um, the first few appraisals that have gone through, um, yeah, have taken a number of
15:47different revisions to kind of get right. And, and, um, you know, we should be diving in a lot more
15:54than we are yet as an industry, but, um, I have some hope that, you know, by end of March
16:00here,
16:01we'll start seeing some of the larger lenders really jump in and start, um, testing and, and getting
16:06things into production. Um, but we got a lot of work to do as an industry. So now's the time
16:11to start.
16:12I think about, um, adopting new regulation in the mortgage industry. It's like, it's almost
16:17like we need, we need a phrase for like dog years only for like whatever time we need to adopt,
16:22like, because it seems so straightforward. If you're not in the industry, you're like,
16:25well, what, how hard could it be? Or how much time could that take? And it's like, no,
16:29you do not understand. So we had what, an a year and a half. Uh, when was it announced before
16:36the deadline?
16:37Oh, it, I mean, um, uh, it, it's been announced for multiple years now. Okay. Um, limited production,
16:43um, uh, started last September. Okay. Um, but ahead of that, there's been multiple years
16:51of communication that this was coming. Um, but I think like everyone, like you're not going to
16:58start doing stuff until you have to. And so I think that like, given that, oh, we've had all
17:03this run up, you know, oh, we have to November. It's like, that's like a, a five alarm fire at
17:08this
17:08point. If you haven't started something, you have to do it by November. Don't you think?
17:11Absolutely. Yeah, absolutely. I mean, a number of, um, I think the, the appraisal sort of,
17:18you know, technology ecosystem has done a pretty good job of being ready individually,
17:23right? So, uh, you know, we were ready last year. Um, there's a number of other organizations that are
17:29ready, uh, uh, within their own four walls, so to speak. What we haven't tested is the, the flow
17:36all the way through from the appraiser to the AMC, to the, to the order management system,
17:41to the LOS, to the lender delivery to the GSEs, right? So that whole line of interconnected systems
17:49is really what we need to do now to see that, um, flow through. And, um, you know, I, I,
17:57I, I think that,
18:00um, coming up into the summer, it's kind of, I don't want to, I wish there was more volume for
18:07all of us, but we've been given a little bit of a gift by not having a refi boom, you
18:14know,
18:14in the middle of this, that gives us time to maybe, you know, um, work on some of these things,
18:20you know, without the massive, you know, volume increase. But, um, so again, now's the time to lean
18:26in because who knows what's going to happen in a couple months, you know, things are pretty up and
18:32down. Keenan, who knows what's going to happen by the end of this podcast? I would say no one knows
18:38that. I don't, you know, we were talking earlier about, you know, writing an article for predictions
18:42for the year. And now I'm glad that I, I didn't get one because I would have been wrong like
18:48a month
18:48into it. Gosh, I'm yeah. You wouldn't be the only one. That's for sure. Well, thank you so much for
18:53sitting down with us. Always appreciate getting caught up and getting caught up on how you guys
18:58are adapting this very fast changing environment, what's going on. So thank you so much. Always a
19:03pleasure. Thanks so much, sir.
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