Fannie Mae, Freddie Mac agree to new appraisal standards

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Submitted by andymajumder on March 4, 2008 - 10:26am

Important change, though the news did not get much coverage.

" Under the new code, mortgage brokers will be prohibited from selecting appraisers, and lenders will be prohibited from using in-house staff to conduct initial appraisals, among other things.

Lenders will also be prohibited from using appraisal management companies that they own or control."

http://www.bizjournals.com/baltimore/sto...

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From the LA Times verson of
Submitted by rocket science on March 4, 2008 - 1:48pm.

From the LA Times verson of the story:

Some appraisers, however, said the agreement, which takes effect at the start of next year, was unlikely to solve the problem.

Banks will continue to put unspoken pressure on appraisers to value homes at desired levels, said Bill King, owner of ValueOne Appraisal in Federal Way, Wash.

"It's going to be a long time before the fundamental way business gets done gets changed," King said.

And many appraisers still will do as banks and brokers ask because they want to keep getting hired, said Steve Smith, an appraiser in San Bernardino who has been critical of the industry.

"There are more ethical appraisers who have been put out of business than there are appraisers who remain in business," Smith said.

At least it's a step in the
Submitted by Andy on March 4, 2008 - 3:25pm.

At least it's a step in the right direction. I remember about a year or so ago, either on this blog or another, that someone posted a link to a site where appraisers were talking about how they were pressured to meet certain prices.

As you can imagine, this has
Submitted by Bugs on March 4, 2008 - 4:10pm.

As you can imagine, this has created quite the buzz in appraiser circles. The reason there even is an agreement is because AG Cuomo wants to sue Fannie and Freddie (and a lot of other lenders) for their lending practices. In exchange for agreeing to change the way they do business, Cuomo will agree to drop his suits.

It looks like there will be some collateral damage to some innocents, and some borrowers are certainly going to be unhappy with the results. But the general concensus among most appraisers is that any steps taken to separate the appraisers from the loan originators will be helpful over the long term.

It is no coincidence that the lenders with the cleanest loan pools are those who played by the rules, did their underwriting, and separated their appraisers from the loan officers as much as possible. Of course, these lenders were also heavily penalized during the runup by losing the competitive edge.

If the agreement does go into effect, I would anticipate many of the other lenders to sign on as well.