Home appraisal "code of conduct" under fire
The code, which went into effect last month, prohibits "lenders and third parties from influencing or attempting to influence the development, result, or review of an appraisal report," at least if they want to sell to mortgage giants Fannie and Freddie. The idea is that appraisals will more likely reflect true value if lenders, brokers, agents, etc., aren't suggesting to Joe Appraiser that $504,999 is an excellent number for anyone who intends to do any business with them again.
The code bars loan officers, mortgage brokers or real-estate agents from any role in selecting appraisers. This has encouraged lenders to outsource the selection to appraisal-management companies, or AMCs, which take a sizable cut of the appraisal fee. As a result, appraisers are under pressure to "do it faster, do it cheaper," said Bill Garber, a spokesman for the Appraisal Institute, a trade group.The National Association of Realtors' Lawrence Yun says "stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment." The National Association of Mortgage Brokers proclaims, "Tens of thousands of consumers have already been robbed of their opportunity to enjoy historically low rates by Attorney General Andrew Cuomo’s rule." The appraisal management companies, critics say, don't seem to care if the appraisers they pick know anything about the neighborhoods in question.
News that U.S. Reps. Travis Childers (D-Miss.) and Gary Miller (R-Calif.) are co-sponsoring a bill to put the Home Valuation Code of Conduct on an 18-month moratorium was met with some loud cheers Friday. (You can follow some of the chatter here, at Mortgage News Daily.)
But though it doesn't think the code is "ideal," the Appraisal Institute is not amused by all the talk of faulty appraisals. It issued a press release after the NAR blamed appraisers for lower-than-expected May sales numbers:
Bill Garber, Appraisal Institute Director of Government and External Relations, said: "We take offense with the notion that the appraisal is only good if it happens to come in at the sales price. That mentality helped cause the mortgage meltdown to begin with. The fact that the appraisal does not match the sales price is not the fault of the appraisal but a fault of the market today.”
Have you had personal experience with the appraisal process since May 1 as a buyer, homeowner or industry pro? Let me know what you think of it, and of the bill to put the code on ice.