Appraisal Code Under Fire by the Wall Street Journal
August 19, 2009
The Wall Street Journal is finally shedding a little light on this new appraisal code and what a nightmare it is not only for the appraisers but also for the consumer. Andrew Cuomo was the one to start this code and get Fannie Mae and Freddie Mac to adopt it. He claimed it would protect the consumer from mortgage brokers and appraisers working together to inflate values. This code does not protect the consumer and is actually costing them more money.
We are currently working with a borrower who applied for a conventional loan with one of the big banks out there who denied the loan. The borrower had to pay $450.00 for that appraisal and we got lucky enough to have that appraisal transferred to us. I happen to know the local appraiser who did the appraisal and it was very good. We submitted their loan to a lender who didn’t like it and cut the value based on an automated valuation model that doesn’t count for differences between each of the sold properties. We had to submit the loan to another lender and our borrower had to pay for another appraisal, $450 again, because this lender will not accept transferred appraisals. We are at a point that this lender accepts the value but now the mortgage insurance company is having a hard time accepting the value. (The seller of the property to our buyers bought the house on the court house steps when it was a foreclosure, did some repairs, and is now selling it for market value. This is considered a flip transaction that banks do not like.) If the mortgage insurance company won’t accept the value, we are left to now get an FHA loan. We couldn’t do this previously because FHA won’t allow borrowers to enter contract with a seller who has owned a property for less than 90 days. This would mean our borrower now has to pay for another appraisal and could be out over $1000 just for appraisals! This is not protecting the consumer.
This article brings up the other big issue that we have appraisers appraising properties in markets that they are not familiar with. This is causing value issues and delaying transactions and costs the consumer again because when we lock their loan, we have to close within a certain time period. If we don’t, the borrower could be facing costs to extend the lock or forced to taking a higher interest rate.
This code is really not protecting the consumer at all and I wonder how long it is going to take for the government and Fannie and Freddie to see this! Please sign the Home Valuation Code of Conduct Petition to get this over turned and really protect the consumer and our home values!!!
