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Pipeline — A roundup of credit market news and views
Thursday, June 11, 2009 American Banker
By Allison Bisbey Colter
Frank Gregoire, an appraiser in St. Petersburg, Fla., was appalled but not surprised to read in the Tampa Tribune last month that a property in Tampa was appraised by someone in Panama City — about 390 miles away.
As do many appraisers, Gregoire complains that the Home Valuation Code of Conduct is encouraging lenders to outsource the ordering of appraisals to management companies. In order to keep costs down and protect their margins, these middlemen often dole out assignments to appraisers who are inexperienced or unfamiliar with the local market, he and other appraisers say.
In picking appraisers, “the first criteri[on] is price … the second is turnaround time and, if it is considered at all, competency is the third and least” criterion, Gregoire told American Banker this week.
Appraisal management companies typically want appraisals delivered in 24 to 48 hours, he said. “I don’t believe that in today’s market you can produce a well-prepared document in that period of time.” Gregoire said he takes four days to two weeks to prepare an appraisal. “The amount of work and documentation necessary for an appraisal now is unbelievable.”
For example, short sales, in which distressed borrowers, with lenders’ consent, sell their homes for less than they owe on their mortgages have made it harder to compile data on comparable sales. “It’s very difficult … to extract from the market data an adjustment that reflects how much below market that [property] sells because those people were under the gun” to sell, Gregoire said.
He sits on the appraisal committee of the Realtor group, which is drafting a proposal to regulate appraisal management companies under the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The valuation code, which took effect last month for all home mortgages sold to or guaranteed by Fannie and Freddie, bars loan officers, mortgage brokers or real estate agents from any role in selecting appraisers.
Appraisers aren’t the only ones complaining about the code. On Tuesday the National Association of Mortgage Brokers issued a “call to action,” urging members to contact Fannie, Freddie and the Federal Housing Finance Agency to explain how it has affected their business. The NAMB estimate the code is costing consumers over $2.8 billion a year in extra fees created by long delays and higher appraisal costs.