There is a pretty darn big change coming our way in regards to how appraisals will be ordered for conforming loans in 2009.
To help enhance the integrity of the home appraisal process in the mortgage finance industry, in March 2008, Fannie Mae/FreddieMac entered into an agreement with our regulator-the Federal Housing Finance Agency (then the Office of Federal Housing Enterprise Oversight)-and the New York Attorney General's office to adopt certain policies relating to appraisals for loans delivered to Fannie Mae. This new process is called the Valuation Code of Conduct. See the original agreement>>
So what is the Valuation Code of Conduct?
In a nut shell this new agreement requires that all appraisals for conforming loans (except for Government loans FHA/VA) must be ordered directly from the Lender instead of through the Mortgage Broker as of May 1st, 2009.
Why should you care?
I would suspect there will be increased turn-times in order to receive the appraisals.
We have an agreement with our Appraisers that requires them to provide us a complete report within 3 days of our order. As soon as we get any file, we immediately order an appraisal. This way our clients will have it back quickly in order to release their contingencies and do any further due diligence they feel is necessary. It takes a matter of 5 minutes to shoot over the order form and we are all off the the races.
This new agreement would require Lenders to order the apprailsal through one of their "in house" appraisers. So who knows how long it will take to get the order out and how long it will take to actually receive the report.
Following a public comment period, the Home Valuation Code of Conduct has been modified and will be effective for single-family mortgage loans (except government-insured loans) that are originated on or after May 1, 2009 , and delivered to Fannie Mae.
The initial concern was the Lender's would hold the appraisals "hostage" if the Borrower wanted to change Lenders in the course of their transaction. There has been modifcation made to the code released this week to address this concern. Read the changes that were made >>
We are starting to see Lenders put this new rule into effect already so don't be alarmed when this comes up!
My 2 cents...
As we all have hear a 1000 times ... it was the big bad Mortgage Brokers who caused the big mess we are in.. NOT!
I think they may have forgotten Lenders signed off the shady appraisals they are trying to avoid.
I looked at a potential investment this week that had been foreclosed in the Sacramento Area by Sacramento City College. The refi loan amount in 2006 was around 600k. It was obvious to us what happened. This particular property has twice the square footage of other homes in it's neighborhood. So what we think happened (I could think of no other method the Appraiser - Mortgage Broker and/or Lender could use to get this value), was comps were supplied from homes across the street lining William Land Park. These neighborhoods are as different as night and day.
So using this example... let's say a shady Appraiser and Mortgage Broker worked together to create this "creative" appraisal report. At some point the underwriter at the Lender is just as guilty aren't they? A quick peek at the pictures of the subject property vs the comparable properties should have told the whole story.
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Hi Team - Yep 5/1/2009 is still the deadline and so many of us are confused about the rules and outcome. There are many many blogs on the HVCC that appraisers have written like this one from Mike Lay, Michael Tarabotto and myself. The lender will actually use an 'impartial' intermediary company (appraisal management company) to order their appraisals through for government funded loans. Add another couple of days to your appraisal assignment plus a lot more confusion... Appraisers and lenders who have dealt with such companies have experienced pressure, chaos and lack of knowledge. And now the HVCC guidelines are gray and unclear as to whether a professional in the lending or appraisal sectors are even allowed to work for these companies.
"Appraisers that requires them to provide us a complete report within 3 days of our order."
Apparently these appraisers don't have any other appraisals on there desks. I think you should do a couple of appraisals and see how long it takes you.
Dave Everhart
ME cert Res
Thank for the post Dave. I am not suggesting that appraisals don't take some time! In fact our appraisers turn times have significantly increased since this post. Thanks for your opinion though!