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New Appraisal Rules
New home appraisal rules: Good or bad for customers, appraisers?
At the urging of the New York State Attorney General, as of May 1, McLean, VA, based Freddie Mac and Washington, D.C., based Fannie Mae will no longer purchase mortgages from loan originators that do not adopt the Home Valuation Code of Conduct.
That's no small thing, because together the Federal National Mortgage Association, otherwise known as Fannie Mae; and the Federal Home Loan Mortgage Corp., or Freddie Mac, own or guarantee about half of the nation's home loans, or $5 trillion in mortgages.
The new code attempts to curb inflated appraisals by refusing reports from people selected, retained or compensated by mortgage brokers and real estate agents.
It applies only to conventional loans, not to Federal Housing Administration loans.
The idea is that brokers and agents have a vested interest in higher valuations because their pay hinges on a home's sale price or the size of the loan. During the housing boom, some unscrupulous people pressured some appraisers to say homes were worth more than they were. After the housing market crashed, those inflated valuations helped fuel massive foreclosures.
So now, appraisal management companies are acting as middlemen by hiring appraisers on behalf of banks and other clients, and reviewing appraisal reports.
"The idea is to build a firewall between brokers, Realtors and other third parties," said Freddie Mac spokesman Brad German.
That would seem to be a good idea, but some in the industry say it hurts consumers because adding that extra layer boosts the appraisal fee, and instead of rolling it into the mortgage with other closing costs, it may have to be paid separately...