February 28, 2008
“Instant Equity” Hawkers Take Note (Along With Everybody Else)
It’s not a done deal, but as a plugged-in reader notes it’s looking like Fannie Mae (“the biggest source of financing for U.S. home loans”) will ban the use of in-house or broker arranged appraisals.
The proposed changes include banning Fannie Mae's partners from using appraisers employed by their wholly owned subsidiaries. Mortgage lenders that own appraisal companies include Countrywide Financial Corp., the nation's largest home- loan originator.
The restrictions would apply to loans acquired after Sept. 1, according to the memo. Fannie also told lenders that an independent appraisal clearinghouse likely would be established.
Will Jumbo players follow suit? And is there any chance of extending the ban to those who hawk "instant equity based on last appraisal" as well?
∙ Fannie Proposes Ban on Lenders' In-House Appraisers [Bloomberg]
First Published: February 28, 2008 10:44 AM
Comments from "Plugged In" Readers
These kind of behind the scenes deals have always made me feel uncomfortable, especially this part of the scenario (from the article):
"About three quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes." Obviously a conflict of interest. Fannie's on the right track with this. I wish Realtors also would have to at least disclose more obviously their relationships with brokers (not that I don't know, when the broker is at the open house along with the agent, that there's a relationship; but still, any shift toward more honesty in lending can't hurt at this point).
Posted by: firstname.lastname@example.org at February 28, 2008 11:26 AM
After the sheer, unmitigated pain my company is currently suffering under a federal government contracting audit ... hell yeah they should ban these types of conflicts of interest!!
I can't believe the crap some companies get away with.
Posted by: Jimmy (Bitter Renter) at February 28, 2008 12:04 PM
Closing the barn door......
I think this is called corruption by USG in many 3rd world countries.
Posted by: Britt at February 28, 2008 12:22 PM
The way appraisals have been ordered has changed dramatically in the past 5 years so that now you have a cheerleader for the deal (mortgage broker or even a loan officer at a bank) ordering the appraisal typically. Some banks still have appraisal departments, but they are so emasculated it's a joke. Anyway, the people ordering the appraisal have such a vested interest in the deal going through (like they don't get paid if it doesn't) that they will only use appraisers who are going to bend over for them, so now you've got a proliferation of crap appraisal firms and virtually no one in the entire transaction who is being objective about the collateral that the federal government is backing in these loans/banks. It wasn't always that way and it makes me wonder if the Bush Co. has been quietly de-regulating this aspect of the financial world as that type of vested interest would have never flown by bank auditors previously. Oh yeah - that's right, all these loans were placed in an off balance sheet entity and then sold to Wall Street, so the bank's have found a way that the auditors can't mess with their lending. Anyway, this legislation is a step in the right direction if you want your federally guaranteed financial institutions not to go bankrupt, but to some degree the animals are out of the barn already.
Posted by: Anon at February 28, 2008 1:05 PM
They can always get Fluj as appraiser :-)
Posted by: anon at February 28, 2008 3:00 PM
I think that fluj would be an excellent appraiser. He's not the cause of high prices here. I may occasionally differ with his outlooks, but his observations seem accurate and fact based.
Posted by: FSBO at February 28, 2008 3:32 PM