Residential appraisal companies owned by mortgage companies are under scrutiny for over inflating U.S. home values during the refinance boom. A new reform, headed by Andrew Cuomo, Attorney General of New York, is aimed at easing the pressure on appraisers so they can do their job accurately.
Monday, Fannie Mae and Freddie Mac said that they would only buy mortgages from lenders who use an independent appraisal company. They believe that this will alleviate the pressure that is placed on appraisers by lenders who demand a specific value for a property.
The new reform which goes into effect in 2009 will force mortgage lenders such as Wells Fargo, Countrywide Financial and Washington mutual to sell off their appraisal divisions or simply close them down all together.
The Appraisal Institute is applauding the news by stating that they would “reinforce the independence of real estate appraisers and the integrity of appraisals.”
According to www.signonsandiego.com the agreement will:
• Ban mortgage brokers from selecting their own appraisers
• Prohibit lenders from using staff appraisers or appraisers working for appraisal companies they own or control.
• Institute an 11 part “Home Valuation Code of Conduct,” which all lenders selling loans to Fannie and Freddie will have to follow.
• Establish the “Independent Valuation Protection Institute,” designed to monitor appraisals
• And set up a consumer hotline to hand complaints about questionable appraisals.
The new reform puts mortgage brokers and mortgage lenders at a disadvantage compared to mortgage bankers who generally service their own loans. Appraisers end up getting the short end of the stick as many who worked for a mortgage owned appraisal companies will be looking for new jobs or switching to an appraisal company who has the capabilities to add more appraisers.
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Comments
#1 Appraisal Reform
This is the most significant reform ever for the real estate industry. It will put most brokers, agents and appraisers out of business and return housing in America to affordability.
#2 Kudos To Cuomo
This will break the back of the mortgage fraud cartel, which includes the state appraisal licensing agencies.