New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at putting more distance between mortgage brokers and home appraisers requir e lenders touse “appraisal managemen t companies” to order The idea is to preventt brokers from pressuring appraisers to hit certain However, some say the new rules also are pushing up the pricr and length of time for The new rules went into effect May 1 as part of the “Hom Valuation Code of Conduct” which keeps mortgage brokers from hand picking appraisers. In fact, the two are not allowee to communicateat all.
Only bankas that show they select appraisers through a strict rotatiomn system can contactappraisers Nashville’s uses a Web-based appraisaol management company and can only communicate with an assigned appraisefr by posting a question on the Web, says Ross Kinney, seniodr vice president of mortgage lending. Kinney says the additional steps have pushed up the cost of appraisals by 6 percengt to 10 percent for the companythey use. Others are even “It’s a substantial difference in the way mortgagesare I’m sure that will bring more independence, whichj is a good thing,” Kinney says. “But I’m not sure how it is goingv to affecthome buyers.
If they are non-experienced or out-of-market it will be interesting to see how that plays Appraiser Danny Wylie of in Nashville sayshe won’y deal with most appraisal managemengt companies because they take a high percentages of his fee. He charges $400 to $450 as an experienced appraiser, but management firms often want to hire himfor $275 or Wylie says he’s considered settinb up his own management company, but he says he woulx have to hire less experience appraisers to make it work Despite the challenges, Wylie thinks the changeds are better for borrowers. He says he lost businessz becausehe wouldn’t lie on an appraisal. That bank nevee called him again.
“One of the problemse has been that unscrupulous brokers coulcd pick unscrupulous appraisers who would pick whatever valuewwas needed,” he says. The new regulationx also set up a whistleblower hotline for thoswe suspectingsuch activity. Under the new appraisals take longer because the markegt is more complex and the rules require more Wylie says. Lenders want information on absorption rates, suppluy and economic conditions, he says. One local , has seen a surge of business from the The family-owned business in Franklin is primarily a mortgagwe compliance business, which means it checks loanse for fraud.
A few years ago, the company developerd a databaseon appraisers, with information such as credentials, how many appraisalsx they’ve done and if they’ve ever been involvedd in a high-risk loan. With the new the appraisal management side ofQualithy Mortgage’s business has ballooned — up 500 percentt since last year, says executive vice presidenyt Tommy Duncan. Duncan’s phone started ringin in March and April with lenders looking for appraisalmanagement services. He’ds hired three people in the past three months and is lookinb to expand to alargeer space.
He’s already had to turn down two lenders on the West Coasgt becausehe couldn’t handle the volume of work they had. Duncan says he chargesa about 25 percent to 35 percent of the appraisao fee for themanagementt services, adding that some management firmss charge as much as half. Appraisal price s depend on the city and can rangefrom $350 to $450. Dunca n supports the conduct code. He, too, has been cut off in the past by a lendertwho didn’t like one of his appraisals. “My job is to rotatee appraisals among credentialed appraisers without any discrimination or favoritism,” he says.
The conduct code “is probably a positive step to mend some of the problemsa that are alreadyout there, but I’m not sayin g its a cure all.” Part of the new regulations is that anyone who makes money off a real estate deal can’t speaki to the appraiser. Dianne Payne, regional production manager for the mortgagr divisionof Memphis-based , says her bank has been usinf a rotation system to select appraiser for a year and half, instead of an appraisal managemen t firm. It eliminates any as agents can no longef requestspecific appraisers, she says. “It’s a more level playinv field,” she says.