Big changes are being addressed to the Appraisal / Mortgage industries. Fannie Mae/Freddie Mac have agreed to adopt a Home Valuation Protection Code of Conduct which will establish requirements governing appraisal selection, solicitation, compensation, conflicts of interest, and corporate independence, among other things. These changes are to be effective by January 1, 2009.
Under these new proposed changes:
"No employee, director, officer, or agent of the lender, independent contractor, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development of and appraisal report."
"Withholding payment is considered improper influence of an appraiser."
"Requesting a pre-determined value is considered improper influence of and appraiser."
"Providing to and appraiser a desired value for a subject property or a proposed or target amount to be loaned to the borrower is considered improper."
"The lender or any third-party specifically authorized by the lender shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser."
"The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents)."
"Loan production staff of the lender are forbidden from participating in appraisal selection, review and management functions."
"Lenders shall not utilize any appraisal report prepared by and appraiser employed by:
- the lender,
- an affiliate of the lender,
- an entity that is owned by the lender,
- an entity that owns the lender,
- a real estate "settlement services" provider (as defined by RESPA), or
- an entity that is owned, in whole or in part, by a "settlement services" provider."
"The lender shall provide the borrower with a copy of the appraisal report immediately upon completion and no less than three days prior to the closing of the loan."
"The lender will establish a telephone hotline and an e-mail address to receive any complaints from appraisers or other entities concerning the improper influence or attempted improper influence of appraisers."
"The lender shall quality-control test, by use of additional appraisals, the appraisals or valuations that are used by the lender, including the results of automated valuation models, broker's price opinions or "desktop" evaluations."
For More Information
To download full copies of the agreement and the accompanying Code of Conduct, visit:
www.appraisalinstitute.org/cuomofannefreddie
These proposed changes could have a huge impact on appraisers. Several appraisers are very concerned with the proposed changes. These changes would not allow appraisers to be in contact with the loan officer, loan processor, or the mortgage company to discuss any issues regarding the valuation of the appraisal that is to be performed. We all know that the Countries "Housing Crisis" needs serious help and changes. Appraisers need to stick together and communicate with each other and not "back stab" each other. We all know that there are appraisers out there that will "get value" or "push" appraisals. If we stick together, these appraisers who "push" or "inflate" appraisal valuation, will eventually have their license revoked.
The current market is changing throughout the country and the negative press is having a huge impact on the housing market. There are few comparable sales to chose from and there are several houses on the market. Utahs economy is still very good and unemployment for the state is still above the national average by 0.40 percent. Interest rates are near all time lows which should help stimulate the housing market. This is an election year and people are scared. People are not spending money like they were last year at this time. The Government has proposed a tax credit of $1,200 to families. The Government believes that people will spend this money to help stimulate the overall market. It is my belief that most people will not spend this money and they will save it for future "rainy days."
We are definitely in uncharted waters, but if we keep positive and make correct choices, we will get through this. Patience and communication are the keys to relationships of any kind.
Utah is a great place to live and there are several major projects in the horizon.
I thank you all for your business and with a little patience and hope, these proposed changes to the lending industry will work out.
Scott Cloward
April 24, 2005