11.5.26 Further Midterm Takeaways; True Footage’s Jeremy Potter on Valuation Data; Oil and Inflation

Robbie ChrismanWelcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include further reaction to the midterms, just how long are oil and politics going to drive mortgage rates, and my interview with TrueFootage Jeremy Potter on how technology and structured property data are transforming home appraisals by streamlining data collection, improving valuation accuracy and lender risk assessment, and allowing licensed appraisers to focus more on expert analysis in complex properties. Here, take a listen to a little preview. When we think about data collection now versus historically or now versus where we're headed, how have the ways that we are able to collect data changed? And also how has that greased the wheels of the home origination process, if that's the right question to ask on the data collection front? Jeremy PotterWell, it is because the appraisal has long been known as the longest or hardest part for lenders to deal with because it's out of their control and it's done by an independent third party who has to be contacted, go out, view the house, come back, write their report, deliver it to the uh lender. And as you might imagine, there's four or five different systems I just described that orders and data pass through to get that report back. So historically, it was like report generation software was like the biggest deal. And appraisers collected the data and literally wrote paragraphs into freeform text boxes that the lender had to read. Now we're seeing appraisers go out there, scan a house. In the future, anyone who's part of the process will go out there and scan the house, deliver a digital representation back to the appraiser. So an appraiser's job is gonna get much more analytical. Their judgment's gonna be elevated, I think, in this new uh data format and delivery system, because we're actually gonna get to understand the data fields and compare them across appraisals. Instead of having a person read it to QC it, we can now put it in a system. We can now generate comparisons, generate QC. One of the biggest things that's gonna happen, Robbie, too, is it used to be if there was an error in the appraisal or if there was a field that didn't make sense, it had to go all the way back through the AMC to the appraiser for an explanation and all the way back through that chain of communication to the lender. And now it's gonna flag it on the spot while they're in the home. Hey, you have some data that doesn't jive within this data field or within these two data fields, then you're you're outside of a tolerance or you're outside of something that makes sense according to the public record. Can you please fix it now or explain it now while you're there in the home? So that real-time analysis is gonna vastly improve the process. And I think what it means for lenders is getting a much better product. Yes, the report gets better, but also just that real-time data, they can make decisions a whole lot faster. Robbie ChrismanThanks to this week's podcast sponsor, First Close, which helps financial institutions grow a successful home equity business with innovative solutions that minimize application drop-off, automate time-consuming processes, and reduce time to close from weeks to days. To learn more, visit firstclose.com. Is the American public a sucker for not being more concerned that no politician seems concerned about the burgeoning deficit? Will there be any fiscal conservatives in Congress or the White House? Yes, everyone's talking about the election, and yesterday stocks rallied and rates dropped, reminding us that they don't have a consistent inverse relationship. Mostly on removing the uncertainty about the election. Where do we go with reducing regulatory burdens for creditworthy borrowers? A mandate for the CFPB, FHA, VA, or banking regulators? What might happen to TRID? RESPA? Truth and Lending or ATR? Will ink signature requirements go away? Perhaps. What about credit and appraisal policies? Will we see an expanded role for federal home loan banks? Lots of questions are out there. And I've been asked recently what I've seen on the non-agency side of things. Non-agency loan production has increased as a percentage of overall production. There are other trends occurring as well. For example, adjustable rate mortgages with rates around 80 basis points lower than fixed-rate loans are now accounting for 10% of applications, the highest it's been in a year. FHA, VA, and USDA products now account for about 30% of apps per the MBA. And applications should be helped now that the tenure treasury and shorter-term yields are at their lowest levels since early September, as falling oil prices and shifting political control in Congress fueled expectations of a quicker resolution to the Iran conflict and lower energy costs. The decline in oil prices below $90 per barrel strengthened demand for government bonds, with treasury yields reaching their lowest levels in eight weeks, despite economic data pointing to continued but moderating growth. October's ISM services PMI eased slightly, signaling slower but still expansionary services activity, while ADP employment exceeded expectations with 86,000 jobs added, indicating continued resilience in the labor market ahead of tomorrow's payrolls report. The trade deficit narrowed slightly to $105 billion, driven by increases in both exports and imports, while the Treasury announced $125 billion in upcoming note and bond auctions and indicated that auction sizes would remain steady over the next several quarters. Rising mortgage rates since the US-Israel-Iran conflict began have nearly eliminated refinance incentives, with just 0.6% of 30-year borrowers able to reduce their rate by at least 50 basis points, pointing to further declines in 15 and 20-year MBS issuance, which relies heavily on refinancing. While the 30-year UMBS market has expanded 145% since 2019 to $5.35 trillion, outstanding 15 and 20-year balances have contracted 35% and 21% respectively from their May 2022 peaks. Shorter term borrowers generally have stronger credit profiles, smaller loan balances, and substantially more home equity. And their higher turnover and principal curtailments typically produce faster prepayment speeds than 30-year borrowers, making shorter duration MBS a shrinking but distinct segment of the market. For today's interview, I wanted to welcome back to the show TrueFootage's Jeremy Potter to talk about how technology and structured property data are transforming home appraisals by streamlining data collection, improving valuation accuracy and lender risk assessment, and allowing licensed appraisers to focus more on expert analysis and complex properties. He's chief business officer at TrueFootage, which is a new type of appraisal company dedicated to delivering the most accurate home valuation possible at scale. Let's talk about the valuation of homes and the way that that has evolved over the years. It was a joke. I might have made it up myself. I'm notoriously not funny. That basically, oh, what's the appraised value of the house? It's the purchase price. And subsequently, I became friends with some appraisers. I realized some of my personal friends were actually appraisers, and they basically said we're trying to protect the value here for all the different interested parties in the equation. And I just want your thoughts on what the appraisal process has historically been. You know, you someone goes to a house, knocks on the door, gets chased by the dog, hopefully not bitten, finds some comps in the neighborhood, and boom, that's the the value. And obviously I'm being very reductive there, but but we've evolved to where we have so much data, property data, and automated valuations are a lot better than they used to be. But you're the expert, not me. Just the thoughts on thoughts on the evolution of appraising homes. Jeremy PotterWhen I was at Rocket Mortgage, you know, I used to try to understand what Fannie Mae and Freddie Mac thought of the appraisal process, what ops leaders and lenders thought about the appraiser process, met with appraisal management companies to understand their role, especially post-Dodd-Frank. And then obviously to your question, met with appraisers and tried to understand what their day-to-day life is like. And I think the evolution has been what tools and technology do these licensed professionals need? We've gone through almost every licensed professional in every industry and built tools or solutions for them. And I actually think appraisers were last on the list or one of the last few to actually get the benefit of some new data science, data technology. Uh, we're going to talk data collection a little bit. And then obviously the analysis. Their judgment is still the thing you're paying for. You are paying for a licensed appraiser, professional expert to walk through the house, walk through future in a future state, walk through the data, look through a virtual house. However, they go about making their evaluation, they will apply their expertise to it. And that's actually what you're paying for. When you ask them about the evolution of their industry, they want to be taken seriously as the professional expert on property risk and property value. And so getting them there, I think in 2026 and beyond requires technology and data. Robbie ChrismanWe will get to Kelly Blue Book homes here in a minute, but you brought up the data future as it pertains to value. What does that future look like to you? Jeremy PotterI think it looks like understanding the property more deeply. So we want to know about value because that's the number one data field that is going to drive risk as it relates to lending, of course. So that's what we're going to look at. What would the value come in at? But in the future, adding contextual data, trended data, more intimate data about the house from an agent, from a homeowner, from the appraiser, or from a data collector is going to give us a much better picture. What is the overall story of this house? What is the property risk? And valuation is a huge component of that, obviously, but it's not the only component. I think we have to start looking at it more holistically. Robbie ChrismanDoes it just mean that we get more granular in the ways that we're able to value homes? What are some of the other auxiliary benefits? Absolutely. Jeremy PotterI mean, the the evolution you talk about, the appraiser was walking around with a tape measure, a digital camera, and a clipboard for a long time, up until a few years ago. And now we have apps native to the iPhone and the Android, apps native to an iPad that are collecting data much more accurately and holistically. So, first of all, you get a better picture of the house to begin with. Then you can actually put that up against real-time data in the neighborhood that you mentioned. What are those comps? Why are they comps? Let's not look 120 days ago and find three. Let's go back over thousands of transactions over a couple of years and predict where's the trend line going? What does this tell us about this neighborhood? What is the data telling us about the trend? So uh an appraiser will come in and say, uh, here's what I think the risk is on this house. Here's the value uh that that associates with. And also here's my analysis of what's going on in that area. And here's what you can expect. And I think lenders are going to really appreciate getting a much deeper look at a house than they're than they're used to. Robbie ChrismanThis is obviously a very poignant topic because UAD 3.6 went into effect earlier this week. Yes, there's a lender waiver out there that that can will extend some of this into 2027. But there's thoughts on the UAD 3.6 landscape that we are in appraisers from my perspective, a lot of grousing, but it's going to actually, once they get it down pat, it's going to make their process a lot smoother. And so I think it's a heavy left to the beginning, but it's gonna be better later on. Thoughts now that it's it's officially gone into effect. We've obviously been talking about it for seven or eight months here. Jeremy PotterYeah, this is not it's a mistake to just look at this as a new appraisal report. That what this is is actually a new way of communicating information about the house. So we've spent the last however many years figuring out how to get better primary source data, structured data on individual people's finances, right? Income, assets, employment, all of these structures were put into place. How do we get this data? How do we format it properly, get it into lenders as close to immediately as possible? And we haven't done that same thing with the house. That's what this does. It gives us a language and it gives us a structure to pull the data as quickly as possible from the visit to our systems and have the appraiser look at that story. And instead of writing it up in, as I said, you know, freeform text boxes, it's communicating it in a structured way. And so this is just the beginning, frankly, because this infrastructure now gives us a whole new view of what are we talking about with this property and what should that then communicate about value? Robbie ChrismanYou brought up such an interesting point at the beginning of this interview that the appraisal process is the last thing to kind of be disrupted or pushed into the future. Yeah, it's the thing that takes the longest of the entire origin. Like, why has it taken so long when everybody's known? And I'm not saying that we're we're at any sort of appraisal utopia or valuation utopia at this point, but why is it taken so long for people to address this problem, which is the longest time delay causing in the entire process? Jeremy PotterI think this is one of those stories where there were several overlapping things that all drove longer time and poor communication. One, lenders aren't that good at the house, lenders are good at risk analysis, like underwriting, and they're really good at sales and marketing and recruiting and referral sources, right? They weren't ever built to understand this type of risk. This was always an independent function in the community. And that's the second reason in the community. This was a highly localized, highly specialized to a geography or a market. So appraisers didn't scale because it they were typically fairly small shops and they covered a community or a state rather than being a scaled digital or national platform. And that's the last thing that's changing is you're seeing appraisal firms like TrueFootage and others scale nationwide, hire appraisers in every single market, be able to take orders across the country. And I think that's a fundamental change for lenders, and it's going to dramatically uh improve the process for them too. Robbie ChrismanWhat does the appraiser of the future look like, or the uh the appraiser appraisal as a career path look like? We're at a place where every single step of the mortgage origination process is is facing disruption or tech advancements, and and I guess the the pre-canned chatter would be well, you still need a human in the loop, and technology is going to make people that much more efficient and better. And I assume it's similar for the appraiser. What does the appraiser of the future look like? Is this still something that people should be saying? That's a that's a career path that that interests me. Jeremy PotterI think so. I think it's never been a better time to be an appraiser because a lot of the things that appraisers were annoyed by are getting taken off their plate so that they can actually do their job better. So, what we like to say at TrueFootage is let's make the experts more expert. And what we mean by that is there are certain things Fannie Mae and Freddie Mac have said, we don't need an appraiser doing that. What is that? Well, one example we think is driving in their car for two to four to eight hours a week to these different properties. And if you're gonna do eight, 10, 12, 16 appraisals a week, a lot of high-producing uh appraisers do, that is a lot of time in your car. Not every single house needs that level of care or attention. So I think the appraiser of the future actually looks like a data expert, like a data science analysis position, because they are gonna be given the look and feel of a house right to their console. They're gonna be able to feel as though they're walking through the house. And for the vast majority of properties, especially conventional financing, that's great. That's what we need. We still need the appraiser looking and seeing what is going on inside that house. Quality and condition inside a house are one of the major drivers for what the value is gonna be, but they don't have to visit every house. We can have someone visit the house and deliver them the data and the documentation of that house. So that's one thing that's gonna change. And it'll be a lot more time digging into the analysis. Second, conventional financing is pretty narrow and getting more narrow as home prices continue to go up. So one of the things we've not done well in mortgage or housing is expand to more complex things. The appraiser is the perfect profession to help us with condos, fix and flip, renovation, construction, a lot of things that we are still struggling with in the mortgage industry to get right. The appraiser can help actually create processes that cut down the risk and improve the efficiency of those more complicated property types. And as you know, Robbie, I've come on this program and talked a lot about shared equity, down payment assistance, other things that fractionalize the value or ownership of a house. Well, what do you need to be able to create those products? You need a real-time value of the house if you have investors who want to know what's my stake worth today, what's my stake worth tomorrow? Appraisers are well positioned for those types of things. So we're hoping that we get efficiency getting these everyday loans right so that we can elevate the appraiser and get them working on these really complex properties, of which we have a lot of in this industry. Robbie ChrismanSo we'll we'll transition slightly here. You mentioned TrueFootage. You also mentioned Kelly Blue Book. I know you're you're here on behalf of Kelly Blue Book, but when I email you, it goes to TrueFootage. Can you clear up the what's going on and what's what's the latest with Jeremy Potter? Jeremy PotterI'd love to. TrueFootage is an appraisal firm, so not an appraisal management company. We actually have W-2 appraisers that work for us. We have uh almost 150 nationwide, and we do traditional appraisal services for lenders. So you can order your appraisal either through an AMC or through an ordering platform right to us. That's why we had to build this 3.6 technology, and that's why we're so excited about this new data environment coming online. Our appraisers are ready to go, and our appraisal services and our technology for lenders is ready to go. That company found out that uh after doing appraisals for six and a half years, VC funded one of the VC investors was the owner of Kelley Blue Book Auto. So our CEO went to the Kelley Blue Book Auto folks and said, Have you ever thought about extending this to houses? Turns out it was the hundredth anniversary of Kelley Blue Book Auto. So it was the perfect year. There's a lot of symmetry there. It was the perfect year to bring it to houses. And so using the appraiser expertise and the appraisal platform, we're able to give homeowners and real estate agents a look at what an appraiser might think of the house. It's not an appraisal report. Obviously, that is purchased by the buyer and goes to the lender. This is an electronic valuation report that consumers can see for free at KelleyBlueBookHomes.com, but we're trying to bring that appraiser mindset more to the forefront so that homeowners and real estate agents trust that what they're getting from the TrueFootage of the world is something that they can actually rely on and transact on. So our Kelley Blue Book Home Reports aim to be within 3% of the ultimate sales price of your house. And if we're not in your state yet, coming soon, but we're in about 25 states and growing, and we'll be nationwide by February. Robbie ChrismanYeah, I was going to say you you launched August 1st and it's it's going to be nationwide within a year, which is great. We'll bring this full circle to close since we talk data collection and then data advancement. The synergies between the data and the programs and the software and everything that Kelly Blue Book has when it comes to valuations in general that can now be applied to housing. You kind of alluded to why it's a good marriage, but can you take us inside just like the nuts and bolts of what advantages Kelly Blue Book inherently has with the platform it's it's had for the last hundred plus years? Jeremy PotterSure. One of the things that consumers trust is they trust the brand and they know the brand. So if this was the Potter data company, consumers would be like, what is this? What's behind this? Who's there? But having been in the lives of generations of people, they know this brand is there to try to give me the best independent view. And as with the cars, you have private sale and dealer sale, two different prices. That gives you a range. You start to understand pricing is generally a range. There is, at the end of the day, going to be a contract price, there's going to be an appraised value. But on the way there, there's a lot of negotiating that happens. And so we've leveraged a lot of that same structure from the auto side to say, answer some questions about your house. Tell us a little bit more about this asset, this product, and then we'll give you a range. And that range looks something like do you want to sell really fast and do nothing to your house? You'll probably get this number. Do you want to work with a professional, get it ready, do the steps on the checklist to get the highest amount? Great. You'll probably get this number. And that gives homeowners an understanding of how much work do I want to put in for what return for what reward? Some people want to go fast and sell immediately, no work included. And some people want to work with a professional agent and get there, uh, get that highest number. Robbie ChrismanAnd how how does this ultimately tie in to where the industry is headed in terms of we're seeing more and more property appraisal waivers? This should allow for better ranges of valuation. Your thoughts to bring everything together before I say goodbye. Jeremy PotterYeah, we know that Wall Street and RMBS investors don't want the appraiser removed from the process. Everybody agrees certain properties get the GSE waiver, and there's a reason why. We've done a refi in this house in the last few years. It's a fairly new house. We know enough about it, there's not a risk here. Don't send an appraiser to that house for a full price appraisal. That's become pretty common knowledge in the industry. But what we see is that can only be a portion of the industry. Otherwise, the lack of data going into the system creates worse and worse output for these engines. And so we know investors and risk managers want appraisers telling us what is the value of this house and appraising both houses and communities. So I think the future is you can actually get the best of both worlds. You can have a proactive, efficient appraisal done by an expert licensed appraiser, and you can get it as quickly as you would get feedback from an engine. And Wall Street investors, our MBS investors, Fannie Mae and Freddie Mac, still get that expert sign-off uh that we need, but you get it in the speed that the modern finance system demands. Robbie ChrismanThe best of both worlds, the best of all worlds, whenever you and I get together. For people that want more of Jeremy, you can check him out every Monday on Now Next Later, a Chrisman commentary show. Jeremy, I always appreciate the time. Thank you, sir. Thanks, Robbie. Talk to you soon. Today's economic calendar kicked off with U.S. employers announcing 43,994 job cuts in October 2026 per challenger grain Christmas. The figure was up 2% from September, but down 71% year over year, marking the lowest October total since 2023, and the eighth month this year with fewer cuts than the same month in 2025. Other releases today include preliminary Q3 productivity and unit labor costs, initial claims, and Fed remarks from Richmond President Barkin and Dallas President Logan. We began the day with agency MBS prices roughly unchanged from Wednesday's close, the two-year yielding 4.60, and the 10-year yielding 4.88 after closing yesterday at 4.89%. Let's wrap up with a joke and some housekeeping. I got fired from my job at a bank yesterday. Some elderly lady asked me to check her balance. So I pushed her over. Thanks again to First Close for sponsoring this week's podcast. First Close helps financial institutions grow a successful home equity business with innovative solutions that minimize application drop-off, automate time-consuming processes, and reduce time to close from weeks to days. To learn more, please visit firstclose.com.