We need our industry experts to weigh in on this one. Fannie Mae and Freddie Mac were issued a "home valuation code of conduct" in December, but not everyone thinks that this is a good thing. [Thanks L!]
When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less — maybe just half –– of the $300 to $600 you’re charged on your settlement sheet? Should you know who pockets the rest, or that cut-rate fees are too low to attract the most experienced, highly trained appraisers?
Should you care that the appraiser might be pushed to come up with a number so fast –– almost overnight in some cases –– that he or she doesn’t have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends?
All these questions are at the core of a swirling controversy created by the release of new appraisal standards by Fannie Mae and Freddie Mac, the giant mortgage investors. The "home valuation code of conduct," issued by the companies’ federal regulator late in December, is under attack by the very industry it purports to protect –– professional real estate appraisers. It’s virtually certain to turn into a political issue in the new Congress, and may be the subject of a federal court suit.
So what’s the big deal?
The National Association of Mortgage Brokers plans to appeal to Congress to reverse the code’s ban on broker selection of appraisers, and it is considering a lawsuit challenging the code. Appraisers also are expected to seek changes, either from Fannie and Freddie’s regulator, or from Congress.
Why should this matter to you? Miller says quick, slipshod appraisals can severely undervalue properties –– forcing buyers to come up with bigger down payments –– and can scuttle refinancings. Or they can overvalue houses that should be selling for less.
So what says our industry folks? Will the new "home valuation code of conduct" help, or hurt?
This is a huge hot button issue among appraisers and lenders alike. It is the result of an agreement between AG Cuomo of New York and FNMA after WAMU and e-AppraiseIT were caught colluding to inflate appraisals.
While the spirit of the agreement is noble, to remove influence on the appraiser from anyone having a financial interest in the outcome of the appraisal, the result will likely be disasterous as seasoned appraisers (tested, skilled small business persons) seek other opportunities, leaving the industry to the junior high kids.
As an aside, I work for three large regional banks. One is on their fourt AMC in eights months. The other two are on their second. All because of serious quality issues.