How New Appraisal Guidelines Will Affect You

The way appraisals are done and handled is changing dramatically thanks to the new Home Valuation Code of Conduct (HVCC). Rhonda Porter wrote a good post explaining the changes over at Rain City Guide. Here’s an excerpt:

In a nutshell, mortgage originators (if paid commission) will no longer have contact with appraisers for conventional mortgages.  Appraisals will be ordered via an appraisal management company–oddly similar to what Washington Mutual used before New York  Attorney General Cuomo investigated.   Although this is effective for loans delivered to Fannie/Freddie on May 1, 2009 or later, lenders will adopt the Code well in advance in order to be able to deliver compliant loans.

The good and the bad of the new appraisal guidelines…

Good

• Appraisers and lenders have distance put between them creating less opportunities for lenders to push appraisers to “hit the number” (aka inflate the appraisal price to meet overvalued sales prices).***
• This will create decreased risk for lenders which will help keep interest rates lower (in theory)

***Fannie Mae amended their guidelines in January of this year allowing appraisal management companies to be owned by lenders. (?!)

Bad

• There’s a lot of them – just read Kenneth Harvey’s article in the Washington Post, “New Appraisal Rules Comes With Costs”
• Though many of the changes will directly and immediately affect appraisers and lenders,  things will trickle down and may start negatively affecting consumers as well.