Home : Blogs : Joshua Lerette St. Petersburg Florida FHA/VA Mortgage Specialist : The Tampa Bay Mortgage Pro's Mortgage Financing Guide

Fannie Mae and Freddie Mac Change the Appraisal Process

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.

One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. The down side of such a process is that lenders will have little to no communication with the appraiser, which means there won't be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house. The new code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations.

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.

Additional Resourses:

Federal Housing Finance Agency's News Release

Federal Housing Finance Agency's Home Valuation Code of Conduct

Posted by Joshua Lerette St. Petersburg Florida FHA/VA Mortgage Specialist on 01/10/2009 05:14 PM

Comments (9)

Fannie Mae and Freddie Mac Change the Appraisal Process in the Mortgage / Finance Channel

appraisal, freddie mac, fannie mae, appraisals, lenders, mortgage, mortgage loans, appraiser, home buyer, borrowers

This post has been included in Florida Information Pinellas County, FL Information
Post is included in group: Tampa Bay Real Estate
Post is included in group: Realtors Needing the services of the Lending Powers
Post is included in group: Realtors®
Post is included in group: Mortgages

9 Comments on Fannie Mae and Freddie Mac Change the Appraisal Process

JAN

Joshua, wow that is very interesting. do you thing this is directly a result of the mortgage meltdown? First the lending institutions and now the appraisers.

It's a direct result of the amount of fraud accomplished in the past 3 years to put us into this kind of trouble. Obviously along with many other factors, but fraud being a major part of it. I know here in our area of Florida along, many scams were caught where mortgage companies, appraisers, and Realtors were all involved in the sale and purchase of properties at incredibly inflated prices with two separate HUD statements. One that was given to the lender and another that was recorded were parties involved walked away with 100's of thousands of dollars per home. Do the math when they do 100's of properties in a matter of months and everyone walked away very rich individuals. Fannie Mae and Freddie Mac just want to ensure that investors in the secondary market purchasing batch's of mortgages are getting what is promised to them...good to excellent loans.

Very interesting it makes sense but I think in some ways it will hurt. We had deals that were in a pinch and need a less then 24 hr turn around and got it done because we had a relationship with the appraiser.

Heather, of course it is going to hurt. If Fannie Mae and Freddie Mac want all appraisals to go through one central clearing house...think about the appraisers that have been in the industry for years and have worked extremely hard to build up a clientele to refer business to them. They are now in line with JOE SHMOE who just started a company. Not to even mention that it is going to then cost more for appraisals to be done which unfortunately is only going to be passed on the the consumer. It's just an adage to the old cliche that a few bad apples have to ruin it for the rest of the honest hard working individuals.

Please communicate correct information about appraisal ordering after April 30, 2009.

There is NO 'central clearing house' to be established with the new appraisal ordering requirements.

Go to this link, download the revised HVCC documents, and print them (the March 2008 version is not correct):

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/

Every lender who sells loans to Fannie/Freddie will have to have an independent appraisal ordering department that is separate from loan production staff. Lenders can do this themselves, or work with an AMC (Appraisal Management Company) to place the appraisal assignment. There are many AMC's currently operating.

MB's/LO's will have to work with a specific Lender before an appraisal can be ordered, and cannot direct the choice of a specific appraiser. You will no longer be able to influence the outcome of your loan by advocating a specific value needed in advance to the appraiser. It appears to me that 'shopping' a loan around to multiple Lenders may be difficult, since getting an appraisal in advance won't be possible.

If you think you need an approximate value range for a specific property prior to having the Lender order an appraisal, try: www.eppraisal.com This will not return a specific value, but a range based on sales in the area of similar properties. It's not as accurate as an actual on-site appraisal, but can help in making a decision about proceeding. In my opinion, it's better than another site that gets more PR.

Actual pricing of appraisals is not mentioned in the HVCC. In actual fact, appraisers are paid less today then they were a decade ago, before the proliferation of AMC's who skim off part of the borrower-paid appraisal fee paid to the Lender. And nowadays, more research and documentation is required in every report. In my opinion, appraisals should cost more (just like everything else from 10 years ago), but I admit my bias in saying so.

In this you are correct: "a few bad apples have ruined the industry for the rest of the honest people." There's a lesson in your statement.

This is indeed interesting and should prove to bring some challenges along the way .

JAN

HVCC is good for the fact that mortgage originators will not be able to pressure us and try to make us agree to everything under the sun before the appraisal is ordered. But, what is bad, is that there has to be a member of the bank that is seperate from the loan process that is required to order the appraisal and that many "THINK" this means they have to use a "clearing house" or "appraisal management company". This will still have the effect of everyone utilizing appraisal managment companys (AMC's) which in affect REDUCE appraisal quality, NOT enhance at you suggest. AMC's usually assign assigments to the lowest bidder (usually anywhere from $150-250 per appraisal (normally $300-400), which means appraisers have to do twice as much work to make a living. This also means they have to do the work twice as fast. What kind of affect do you think this has? More quality or less quality? Sure the appraiser pressure is gone but..is the quality better or worse? I think it will be worse.

Back to pressure...does this new HVCC regulate these AMC's to not pressure appraisers?

-Aaron

http://www.sandiego-appraiser.com

I don't know about other brokers or originators out there but the only reason I would ever contact an appraiser prior to receiving an appraisal report would be to confirm my research of comparables. With eappraisal.com and zillow.com we should be able to do a pretty good job of researching a property to figure out a value. I, again, can not speak for others, but I have never promised or threatened an appraiser to get a value. I believe in taking care of my clients. I don't want an appraisal to be stretched just to put a home buyer or home owner in a position where they may be borrowing more than a property is worth. I don't know exactly what is going to happen with the HVCC regulations and I don't think any of us really know what is going to happen. Guidelines have been changing regularly and until the time comes when they make changes, its all speculation. I strongly feel that more changes need to happen to protect borrowers and not secondary market investors. Just my .2 cents! :-)

MAY

I read no mention of USPAP in any of these blogs. Also who is the client now? It is required to define the problem, intended use, etc. This requires direct communication with the client. Also appraisals going to the lowest bidder if that becomes the case, is an accident looking for a place to happen.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?