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.
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