Ken Harney has an interesting article on the increase in fees that are being proscribed to home-buyers. He includes this section on appraisals:
On top of these extra fees, borrowers are now starting to get hit with two sets of cost-raising appraisal rule changes. Fannie and Freddie have begun requiring all appraisers to complete an extra “market condition” report that includes detailed statistical analyses of local sales and pricing trends — above and beyond the regular appraisal data. Many appraisers are charging an extra $45 to $50 for the time required to complete the form. Home buyers and refinancers can expect to pay the higher fees.
On top of that, beginning May 1, Fannie and Freddie are refusing to fund loans with appraisals that do not follow a set of new rules known as the Home Valuation Code of Conduct. Among the procedural changes: Mortgage brokers no longer can order appraisals directly, but instead must allow lenders or investors to use third-party “appraisal management companies” to assign the job to appraisers in their networks.
How does that affect the consumer? Consider the notification one Connecticut brokerage firm recently received from a major lending partner: Starting April 15, all good faith estimates provided to applicants must indicate a flat $455 charge for appraisals arranged through the appraisal management company. The broker previously charged $325. Consumers will now have to pay the appraisal fee upfront — before any inspection or valuation is completed — using a credit card, debit card or electronic fund transfer.
What happens if the appraisal comes in low and the applicants can’t qualify for the refi or purchase program they sought? Tough luck: They’ll have just two choices: Pay another $455 for a second appraisal — with no assurance that it will solve the problem — or cancel the application.
The extra market report that is referred to in this article, is the 1004MC form, that Fannie and Freddie are requiring appraisers to fill out. Anecdotally, I’m hearing that if you’re in a major market, it’s not that difficult to fill out the form. However, if you’re in a smaller market with fewer comps, the form can become quite burdensome.
(H/T – Calculated Risk)