Wednesday, July 15, 2009

Appraisers applaud new federal underwriting guidelines

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Appraisers, who've been up in arms about mortgage reform, finally have a little something to crow about and housing consumers can join the chorus -- soft as it may be.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Appraisers finally have something to crow about and housing consumers can join the chorus -- soft as it may be.

For lenders, Freddie Mac's Bulletin 2009-18 on July 10, 2009, regarding
"Underwriting and Appraisals" says home sellers (consumers and banks holding repossessed homes) should hire licensed appraisers for appraisals and consider an appraiser's trade group affiliation as a criterion for choosing the appraiser.

The bulletin doesn't say trade group affiliation should be the only factor, but for appraisers, it's a key statement from a big loan money supplier.

"We applaud Freddie Mac for addressing this important requirement that will have a positive effect on millions of home buyers and sellers," said Jim Amorin, president of the Appraisal Institute.

"The recognition of the professionally designated appraiser has been a missing component in mortgage reform. These new guidelines are the right long-term solution for consumers and appraisers and will instill confidence in the safety and soundness of the mortgage lending process," he added.

Appraisers have been up in arms over the mortgage reform component known as the Home Mortgage Valuation Code of Conduct (HVCC).

The agreement between New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac, and federal regulator, the Federal Housing Finance Agency was supposed to enhance the independence and accuracy of the appraisal process, and provide added protections for homebuyers, mortgage investors and the housing market.

But appraisers say HVCC is bogus because it doesn't focus enough on appraiser competency; it undercuts professional relationships between honest appraisers and reputable mortgage professionals; it increases the influence of bottom-line oriented appraisal management companies; and encourages the use of glossed-over appraisals that don't reflect the true value of a property.

Under such conditions, housing consumers pay too much or sell for too little for a home with an incorrect valuation.

Legislation is afoot to suspend HVCC so it can be adjusted with provisions that better reflect the professional appraiser's approach to appraisals.

"In this turbulent real estate market, it's more important than ever that mortgage lenders rely on qualified appraisers with the education and experience necessary to perform the complex appraisals needed today," said Amorin.

Freddie Mac's bulletin, the latest in a series of guidelines to address persistent underwriting deficiencies, actually gives the appraisal issue a bit of a soft-shoe.

Under "Best Practices: Appraiser qualifications," it says:

"To help ensure that Seller/Servicers meet our appraisal requirements, Freddie Mac is recommending that they adopt the following best practices to assist them with determining that the appraisal is acceptable.

• Sellers should (rather than "must") review appraisers' licensing and performance at least once each licensing cycle.

• Sellers should (rather than "must) consider membership in a professional appraisal organization as a qualification criterion, but membership or lack of membership in such an organization should not be the only criterion for or against approving appraisers, or selecting appraisers for specific assignments."

Appraisers say licensing, along with additional certification and trade group affiliation should be mandatory requirements for appraisers working into today's turbulent housing market.

"To help ensure they get the most accurate appraisal possible - and to prevent problems from occurring later - it's important that lenders use only the highest caliber of appraisers. It's a good investment, and it's simply good business," said Bill Garber, the Appraisal Institute's director of government and external relations.

"Members of the Appraisal Institute holding (special) designation(s) have met extensive experience and education requirements and must comply with a strict Code of Professional Ethics and Standards of Professional Appraisal Practice," he added.

The Deadline Newsroom offers more on the ongoing real estate appraisals issue.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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