Wednesday, May 20, 2009

New Appraisal Rule

On May 1st there was a big change to the appraisal requirements for a mortgage sold to Fannie Mae or Freddie Mac. No longer can appraisers be hired by mortgage brokers - now the appraisers must be hired by the lenders. This definitely will cut down on some fraud issues, but it will also put up new barriers. Making the next several months a little more difficult as the changes are adopted. We did not even know about the change until we read a WSJ article titled A Battle Plan For Refinancing Your Mortgage. Let's take a look -

On May 1, a new Home Valuation Code of Conduct took effect, which is intended to keep mortgage brokers and others from influencing appraisal values. As a result, only lenders, not mortgage salesmen, may hire and pay appraisers, often using middlemen known as appraisal management companies.

The process is too new to know what the impact will be, but some mortgage lenders and brokers fret that national appraisal management companies may not know much about their areas. "We're getting calls from Indiana about a co-op on 17th Street," says Melissa Cohn, president of Manhattan Mortgage Co. in New York, one of the nation's largest mortgage originators.

If you're worried about what your home will be valued at, see if a friendly real-estate agent will provide you with recent similar sales in your neighborhood. Otherwise, you may have to fork over an appraisal fee -- $350 to $500, depending on where you live -- to find out if you have enough equity, even if you don't qualify for the loan.

An accurate appraisal is very important in regards to home equity and refinancing issues. In order to negotiate you need to bring some equity to the table. The more the better.

But meanwhile there is a big concern that the new rule will drive up the cost of an appraisal while driving down the accuracy. Are these complaints valid? Guess we have to wait and see.

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