The appraisal is key to determining how large a mortgage a home owner can get to finance their home. While you may get your mortgage through a bank, these mortgages are packaged up and ultimately purchased by Fannie Mae and Freddie Mac. The Home Valuation Code of Conduct (HVCC) has established a new set of uniform appraisal guidelines to govern all loans sold to these agencies, i.e. all conventional loans (does not apply to FHA, VA or USDA loans).
The industry is in an uproar because these guidelines will create many new problems while trying to solve existing ones. The bottom line is the bank controls the appraiser assigned to each transaction and there is to be no communication between the appraiser and other parties involved in the transaction. This is scary because you have little insight into what is happening or why.
Who Pays & Who Controls the Appraisal
My last home purchase involved a national lender who promised to close in 30 days. Three (3) days before the closing they told me this wouldn't be possible because I had five (5) outstanding conditions. It turned out 2 of these conditions were due to the bank's loan officer falsifying my application. I resolved my legitimate conditions and was able to switch to GMAC and close two (2) days later. I did receive a partial credit from Wells Fargo after sending a letter to their CEO but still don't have a copy of the appraisal I paid for and have yet to see.
People are nervous that these changes will drive prices down more. Let's hope they don't have too big an impact as the market is starting to show signs of life after a tough year. Here's a quick recap of the new rules from Harry D'Elia, a Realtor in Phoenix, AZ (shared by Harry on ActiveRain).
- All appraisals will be ordered by the Lender via their approved Appraisal Management Companies (AMC's) and will be prepared in the name of the Lender.
- Borrowers are required to provide credit card information during the application process and appraisal fee will be charged to the Borrower.
- Brokers and Loan Officers are NOT permitted to pay for the appraisal.
- Brokers and Loan Officers are NOT permitted to have any contact with the appraisers (all communications are facilitated through the Lender or AMC).
To give you some insight into the new problems that these changes will create, here's what another Realtor shared on Active Rain.
“The problem here is we are in a small rural area. We have a good group of local appraisers BUT when the banks order the appraisals, if they're not a LOCAL bank, they tend to have appraiser lists from the CITY.
This past week I had 2 appraisals ordered with appraisers that are outside our local area and don't know our market. One appraiser called and asked me to pull his comps and go to the courthouse for him, as he's 2 hours away! No way. That's his job. But this is what we're going to see more and more of. The city appraisers list us as part of their territory but they don't belong to our MLS and don't have access to the info they need.”