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Realtors, Brokers Target Home-Appraisal Rule wsj-JUNE 18, 2010
June 20th, 2010 1:02 AM

The mortgage-broker and real-estate industries are pushing to have a measure that would kill new home-appraisal rules inserted into pending legislation to overhaul financial-sector regulation.

The Home Valuation Code of Conduct, adopted in May 2009 to ensure appraiser independence, bars mortgage brokers and bank loan officers from selecting appraisers. Mortgage brokers and realtors complain that the rules have produced low-ball appraisals that have blown up deals, while appraisers argue the change has harmed appraisal quality.

Mortgage lenders, on the other hand, are trying to fend off the measure. Several big lenders own or have a stake in companies that have seen a surge in business as a result of the new rules. "We're going to try all we can to keep it out," said John A. Courson, the Mortgage Bankers Association's president and chief executive officer. Inflated appraisals were widely blamed for helping to fuel the sharp run-up in home prices during the past decade. Before adoption of the new standards, appraisals were typically ordered directly by loan officers or mortgage brokers who worked regularly with the same appraisers. Lenders contend that the new standards have ensured that appraisers aren't pressured by loan officers to make the appraisal match the contract price, increasing chances of getting the mortgage loan approved.

The Code of Conduct was adopted last spring by Fannie Mae and Freddie Mac, the government controlled mortgage giants, in settling a New York state attorney general's probe of their appraisal standards.

Realtors and mortgage brokers succeeded in inserting language in the House-passed financial-regulation bill to end the new protocols. The measure would direct federal regulators to come up with an improved set of rules.

The language, however, didn't make it into the most recent draft being used as a basis for House and Senate negotiations. Lawmakers are expected to turn their attention to the appraisal rules and other mortgage provisions next week.

The new system has been a boon to vendors that specialize in farming out appraisal requests to a network of in-house and independent appraisers. Critics say these middlemen companies have pushed appraisers to do more work in less time, forcing a cram-down in fees across the whole industry that is hurting appraisal quality.

Appraisers have seen their fees slashed by 60%, according to Bill Garber, chief federal lobbyist for the Appraisal Institute, the industry's main trade group. Mr. Garber contends that a new mortgage broker licensing law and a myriad of state laws passed in the wake of the housing bust are sufficient to discourage collusion between brokers and appraisers.

"There's now a layer of oversight that didn't exist prior to the Home Valuation Code of Conduct that I think we can build from," he said.

National Association of Mortgage Brokers CEO Roy DeLoach contends that out-of-town appraisers hired by vendors are eating away at homeowner equity through home valuations that aren't credible: "It's basically hollowing out the equity in communities whether you intend to sell or not."

Mr. DeLoach said he believes the measure to scrap the Code of Conduct was left out of the latest draft of the legislation unintentionally.

Many of the largest U.S. mortgage lenders, including J.P. Morgan & Co. and Citigroup, own or have stakes in the middleman companies, known as appraisal-management companies.

Steve O'Connor, senior vice president of government affairs at the Mortgage Bankers Association, argued that it was sound policy to have a fire wall between the appraiser and the loan underwriter. His group supports federal oversight of appraisal-management companies, but is pushing to cap any fees charged to the companies to fund the regulator at $5,000 annually. Mortgage lenders are also fighting language in the financial-overhaul bill that would require disclosure to home buyers of the share of the appraisal cost going to the appraisal-management company.

Write to Jessica Holzer at jessica.holzer@dowjones.com


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Posted by Bill Bici on June 20th, 2010 1:02 AMPost a Comment

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I am a Realtor working in Austin, Texas. I work with a vaietry of appraisers every day. You will have to take classes, pass a state exam, and apprentice for a licensed appraiser. These requirements vary by state. Check the website for the Real Estate Commission in your state. It will tell you the exact requirements, fees, etc; Real Estate Appraisal can be a very lucrative field, or, you can go broke trying. It is just like real estate sales. Not many people actually make it past the third year. It takes determination, education, networking, and organization. It isn't hard to get a job It is hard to build a business; and that's exactly what you'll be doing. Repeat business is the only way to make money, whether it is from mortgage brokers, bankers, or the government. All these entities require regular appraisals. Even individuals can request an appraisal prior to getting a home improvement loan, or when preparing to sell their home. There are different kinds of appraisals as well. The turn around time for an appraisal is typically 5 days from the time its ordered until it is delivered to the requesting party. Sometimes, it will need to be faster. Flexibility is the key. If I use an appraiser often, I expect he/she to give a faster turn-around if needed. Telling a client no will not grow your business. I've stopped using appraisers for doing that. I send you business; you accomodate my client's needs. This sort of attitude coupled with an expert knowledge of the ever changing market in your area will serve you well. A bad appraisal that under values a property and kills the deal will get you fired in a hurry Do a good job, listen to your clients ( they will give you a script of what they are trying to accomplish) and if you can find the supporting comparable properties to justify the sales price, give them the appraisal they want and need. They have to pay for the house, not you. It amazes me how many appraisers out there think they are your daddy, or that you are borrowing the money from them personally. This is not to say that if someone needs an appraisal for 200,000 and you realistically determine that the house is only worth 125,000 that you should lie or distort the appraisal just to make a sale. They put people in prison for that. Don't ever risk your license for something like that; I'd fire the client and report them to the appropriate authorities instead. I've seen people go to jail, committ suicide, etc; when caught up in these situations. My point is that if you treat people like adults, fairly, equitably, and do the requested work in a timely fashion while maintaining a good attitude, you'll do well in the field. I pick up new clients every week because someone before me did not listen to what the client's needs were. Pay attention to the information they give you; it's important to them. Try to be accomodating; even to the person who is training you. They must be doing something right after all- they are still in business. Start educating yourself about your local market. Take it seriously, go to open houses, look at the local board of Realtors multiple listing website, talk with Realtors, mortgage brokers and start networking with these people. It is amazing how much these people are willing to help newbies . Afterall, our reputations are the only real assett we have. We don't want people in our business that are not competent and ethical. You acn be both. There are a lot of resources available to you. If you have any apptitude for the business and a stick-with-it attitude, you'll do just fine. Go get em tiger. Good luck.

Posted by Saroj on September 30th, 2012 1:31 PM
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