Home Appraisal Rules May Negatively Affect Consumers

Proposed home appraisal rules will drive up costs for homeowners and limit their choices

The CMPS Institute has just sent regulators a detailed commentary on how their new home appraisal rules will adversely affect consumers. “While most of the proposed rules are good and necessary, a few of them will have adverse consequences for homeowners,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

This proposal to change the home appraisal rules originated as part of a settlement agreement between the Attorney General of New York, Fannie Mae and Fannie Mae’s regulator, the Office of Federal Housing Enterprise Oversight (OFHEO). “Although the rules are not considered a federal law or regulation, they will have virtually the same affect,” said Nicholas. Over 60% of US home mortgages are securitized, meaning that they are owned by investors like Fannie Mae and Freddie Mac who issue bonds on the bond market using these mortgages as collateral. For this reason, when Fannie Mae and Freddie Mac change their policies and procedures, it has a wide-spread effect on how the rest of the industry operates.

The rules were initially proposed on March 3, and the period for public comments ends on April 30. Unless the rules are amended based on the public comments, they will go into effect on January 1, 2009. However, many lenders have already started adopted some of these changes.

Under the new rules, lenders, mortgage brokers and real estate agents are prohibited from pressuring appraisers to overvalue the homes that they appraise. “It’s about time the industry got serious about tackling this very real problem,” Nicholas said. “However, a few of the policy changes go overboard, and these should be modified to better protect homeowners.” For example, lenders and brokers won’t be able to give appraisers any old appraisals, helpful data, or any other estimate of what a home is anticipated to be worth at the time the appraisal is ordered or at any other time prior to the completion of the appraisal. “This would drive up consumer costs as appraisers would be forced to redundantly analyze data that may have already been paid for by the consumer or analyzed by another appraiser in the past,” said Nicholas.

Additionally, mortgage brokers and real estate agents would be completely prohibited from communicating with appraisers during the appraisal process. This would frustrate consumers, drive up costs and unnecessarily drag out the appraisal process, especially under the following circumstances:
· Properties with limited or no recent comparable sales data
· Properties with limited or no publicly available comparable sales data
· New construction or home improvement projects
· Unique properties where brokers or lenders may have valuable information based on prior dealings with the homeowner or subject property

Finally, consumers would be prohibited from requesting a new appraisal from their lender if they disagree with the appraiser’s opinion. “Homeowners would effectively be stuck with the results even though another appraiser may have an equally qualified, but different opinion of value,” said Nicholas.

Please review CMPS’ comments and let Fannie Mae and OFHEO know your thoughts on the matter as well by commenting here:

https://www.ric-surveys.com/se.ashx?s=7205300750A3F19F

If you agree with the comments prepared by the CMPS Institute, please include the following phrase in your comments:

'Additionally, I support and agree with the comments submitted by the CMPS Institute which can be found at:

http://www.cmpsinstitute.org/pdf/CommentOnAppraisalRules.pdf

About CMPS Institute: CMPS is a training, examination, certification and ongoing membership program for financial professionals who provide mortgage and real estate equity advice. The CMPS Institute was formed as a joint effort by leaders in the mortgage and financial planning industries to raise professional standards among mortgage professionals and integrate sound financial planning advice into the mortgage process. Recognized for its preeminence within the industry, the CMPS curriculum represents the core knowledge expected of residential mortgage advisors, regardless of the diversity of specializations within the industry. For more information or to locate a certified professional near you, please visit www.CMPSInstitute.org or call 888.608.9800.

Press Contact:
Josephine Nicholas
CMPS Institute
888-608-9800, ext. 102