Mortgage Brokers Cannot Order Appraisals!

Industry Observer with

In November of last year Washington Mutual and eAppraiseIT were named in a law suite by New York Attorney General Andrew Cuomo. The suite basically stated that Washington Mutual pressured eAppraiseIT to inflate appraisals in order to write more loans.

Now let's fast forward to this month. Fannie Mae and Freddie Mac agreed to only purchase mortgage loans from lenders who use independent 3rd party appraisers.  Fannie Mae and Freddie Mac will put up $24 million to create the Independent Valuation Protection Institute that will take complaints from consumers and appraisers and will report to Andrew Cuomo as wells as OFAC - Office of Federal Housing Enterprise Oversight.

Lenders will no longer be able to be affiliated with Appraisal Management Companies and select an appraiser on their own. Countrywide Home Loans, for example, will basically have to close or sell their Landsafe Appraisal Management Company. In addition, real estate agents, real estate brokers and mortgage brokers will no longer be allowed to order an appraisal.

So let me get this straight.... a direct lender gets sued for pressuring real estate appraisers to inflate appraised values and now mortgage brokers cannot order appraisals effective January 1, 2009????? As a mortgage broker I'm fully aware of our public perception and the blame placed on my industry due to the mortgage meltdown. I guess at this point it really does not matter as to whose felt it really is. It's now super clear...."IT THE MORTGAGE BROKERS FAULT."

This will certainly hamper mortgage brokers' ability to operate. When an appraisal is performed and Lender A does not like a file for one reason or another I can use the appraisal to submit the loan file to Lender B. Although it's still unclear as to how the appraisal process is going to be handled in the future, a mortgage broker not having the ability will certainly hurt our ability to operate.

For example, if the appraisal is certified to the lender with whom the broker submitted the loan to what will happen if the lender declines the loan? Will the borrower have to pay for another appraisal? I strongly feel the appraisal profession will be hurt by this as well. For example, as mortgage brokers will no longer be able to work directly with real estate appraisers, what is going to happen to those real estate appraisers who receive a majority of their work from mortgage brokers?

Once this goes into effect I can see the appraisal industry shrinking the way the lending industry has over the course of the last year. With the increased legislation and regulation placed on the mortgage brokerage industry it makes this mortgage broker fearful of what the future holds for the industry.







Comments (5)

Keith Berne
RE/MAX Equity Group, Inc. - Portland, OR
Real Estate Broker, Realtor, GRI

Big News! I wonder if all the other states will follow this lead? Shake, rattle and roll, what's next?


Mar 06, 2008 09:09 AM
Anthony Torres - Glendale, NY
All states will have to follow and Fannie and Freddie basically buy everything.
Mar 06, 2008 09:15 AM
Gail Robinson
William Raveis Real Estate - Southport, CT
CRS, GRI, e-PRO Fairfield County, CT
Anthony - Is there no good news for us in real estate?  Fewer buyers, lower prices, longer time on market, more advertising and marketing costs, higher gas prices, tighter credit, and now this?  I've been very upbeat and optimistic until now, but for some reason this latest bad news sends a real shiver up my spine.
Mar 06, 2008 03:37 PM
Christine Thierry
CrossCountry Mortgage - Sagaponack, NY
I've been in the business for 13 years and plan to survive this too!   It happened so quickly and with no feedback.  Where is our NAMB or the MBA?
Mar 09, 2008 04:44 AM
David Gebert
The Rock Appraisal Services - Minneapolis, MN

Thanks for the post.  It is good to see someone from the mortgage industry commenting on this monumental change to the way business is conducted between an mortgage broker and an appraiser.  As the owner of an appraisal management company, I do not have a problem with this legislation as I watched my Office Manager having to deal with a loan officer today who wanted an appraisal inflated so he could get his deal done.  In no way did it matter that the appraiser's license could be in jeopardy by artificially inflating a value.  This is wrong, wrong, wrong and calls into question ethics and conducting business according to the rules.  However, I do feel bad for the 1,2, 3 person appraisal shops that will either have to line up with an appraisal management company or get out of the business.  As this company's owner, I am moving ahead versus waiting for the guillotine to come down as I will ensure our business model will conform to the new Housing Valuation Code of Conduct.  Although the write-in period is still in progress, I am not going to sit by and wait.  With the industry being what it is, I think change is imminent and failure to change will signal a very quick demise.  I appreciate your post.

David Gebert


The Rock Appraisal Services

Minneapolis, MN

Mar 26, 2008 04:25 PM