Paul -

This agreement has FAR REACHING effects on how lenders and mortgage brokers will interact with real estate appraisers.

Both Fannie Mae and Freddie Mac have signed agreements to implement the Home Valuation Code of Conduct and create the Independent Valuation Property Institute as a 'condtion" for the NY AG Cuomo dropping his lawsuit against them.

There are many significant provisions in the agreements that are designed to strengthen the independence of appraisers, including:

* eliminating broker-ordered appraisals,
* prohibiting appraiser coercion, and
* reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages.

The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers.

The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.

As you might imagine these sweeping provisions are being questions by not only appraisers but mortgage brokers as well.

A special Home Valuation Code of Conduct category can be found on the Appraisal Scoop blog:

http://appraisalnewsonline.typepad.com/appraisa...

Brian, I followed that link and read the comments on Appraisal Scoop and Wow! Looks like someone stirred up a hornet's nest!

It seems to me an appraiser's livelihood is on the line with this one if the IVPI works similar to the VA roster.

Paul - You're right! Every one, including appraisers, mortgage brokers, appraisal management companies (and banks that one them), and appraisal organizations are scrambling to find their niche in these new proposals.

Agreements have been "signed" . . .Now every one trying to position themselves to either keep the business they have or to use these new agreements to reposition themselves to be in a position of power.

Appraisers are split (nothing new there) on whether this is going to be good for the profession or not?

HVCC - The NY Attorney General in his own words "BELIEVES" a private investigation of Fannie Mae has discovered wide spread inflated appraisal values. The source of the inflated values are corrupt appraisers and mortgage brokers. The last time I checked mortgage brokers don't apply their signature as the primary or review appraiser. If the investigation found fraudulent appraisals why aren't the offenders being prosecuted? If the investigation found mortgage broker bribery why aren't the offenders being prosecuted? Isn't the NY Attorney General responsible for prosecuting criminals. What every happened to the phrase "innocent until proven guilty". The new code will allow the so-called corrupt appraiser and so-called corrupt mortgage broker to continue doing "indirect" business. Sounds like the NY Attorney General is more interested in making a name for himself than carrying out the duties of his office "PROSECUTION". With every new crisis in America elected and appointed officials broad stoke the public with new feel good codes / laws. I for one say enforce existing law. If an industry has wide spread corruption what better way to rid the bad element than prosecution. The back room closed door process in which this agreement has been struck is further suspicious. Apply the smell test. STINKS! Contact congress and oversight committees. I plead congress will play a role in shutting down this one man show. The consequences will have far reaching negative consumer impact.

Chris - The problems with inflated appraisals result from lender/broker/amc "pressure" on appraisers to hit predetermined "inflated" values.

This most often starts with a broker "shopping" or "fishing" for an appriaiser using the . . "I just need a "Comp Check" to see if this loan will work"

They'll keep fishing for a "Good" appraiser until they find one that's hungry enough to do anything.

Honest appraisers are forced out of the business, broaden their services to exclude mortgage work, or . . . knucke-under.

Appraisers that don't "Play Ball" are blacklisted with no recourse.

The NY AG's Home Valuation Code of Conduct attempts to address these issues.

You can BET that Fannie and Freddie were aware of this! They signed the HVCC agreements to prevent FURTHER investigation.

NY AG Cuomo would only have to scratch the surface to find all the evidence he needed to support his case.

This is ALL ABOUT restoring faith in the financial markets and mortgage backed securities.

Mr. Davis,
Biblically I understand all activity “of man kind” are subject to corruption. However if your quote is accepted literally (“Honest appraisers are forced out of business, broaden their service to exclude mortgage work, or…knuckle-under”) the appraisers currently licensed are dishonest. I can read between the lines and don’t think this to be your true implication. If an individual will sell his/her license and integrity for a few bucks no provisions of NVCC will help. We as a society are governed by openly debated standards and laws. Let us all remember Fannie and Freddie are quasi-government institutions. The public deserve open honest discovery. Not closed door unprecedented agreement whereby those cited formulate public policy. The public deserve protection which in the simplest language means prosecution. As a republic we denounce back room closed door agreements which further legitimize conspiracy. Faith in the financial markets and mortgage backed securities aren’t best served when deep pocketed offenders are given a pass. If parties thru the process (buyers, sellers, real estate agents, appraisers, brokers, lenders, banks, government agents … ect. ) are exposed as guilty prosecute the offenders. As a society we simply cannot accept innuendo ("In my opinion, 70 percent to 80 percent of appraisals that were done during the housing boom are probably not worth the paper they're written on," Jonathan Miller, New York appraiser told The Wall Street Journal.) as fact. Mr. Cuomo has been scratching the surface for over a year and certainly should have the evidence to support his cases(s). I am suspicious however as Mr. Cuomo has elected to legislate vs. prosecute. Our system of government provides legislative action conducted in an open representative format. Not dictated by the self-appointed.

According to Bloomberg, Fannie and Freddie's tactics re: inhouse appraisers may just be illegal.

http://www.bloomberg.com/apps/news?pid=20601103...

The new Fannie Mae and Freddie Mac guidelines is another example of this country heading towards socialism and eliminating free enterprise. I think the the appraisers, brokers, agents that are dis-honest and in the business of corruption should be prosecuted to the fullest extent of the law. They're responsible for the down fall of the housing market and they should be held responsible instead of penalizing the honest appraisers, agents and brokers that have worked extremely hard to establish their businesses.

My opinion is those that are caught should be prosecuted to the fullest extent of the law if that means placing them in correctiona facilities then so be it. If an example is made of those in the business of corruption it will stop. The new guidelines are only hurting those who are trying to conduct business the honest way.

I have watched closely what changes are occurring. I have participated in forums with other appraisers in my state. Fraud was not as frequent in our market as it was in several other markets, but there are a few keypoints in your discussion of interest.
First, Brian, you are dead on. I have been appraising for 15 years, both commercial and residential properties. Influence from bankers and brokers plays a huge factor in the income of an appraiser. Bankers, in all honesty, weren't that bad, a few here and there tried to influence by stressing the importance of "making the deal work" so they could hit their numbers for bonuses. Realtors and brokers live on appraisers hitting numbers. In fact, realtors here in Birmingham have reputations similar to those in the shadiest of businesses. Realtors threaten to blacklist appraisers who do not cooperate, I have been victim of blacklisting more than once for "killing the deal". Brokers too, played the game by stressing the improtance of hitting values so they can maximize their bottom lines as well, realistically, what do they care, once the loan is approved and gone, it's someone elses' problem.
Even today, I still get pressured to "hit numbers". Fortunately for myself, I have the guts to face off with realtors and brokers. Needless to say, I have angered a few and made ALOT less money in the process.
Using AMC's is not going to solve the problem as Cuomo believes. The realtor is still involved, and a "value" is still involved. I receive calls almost daily from AMC's wanting a "comp check" and I politely respond that "We no longer provide comp checks because we found brokers shopping the highest estimate from appraisers and then assigning the work to the highest estimate." But, I should further state that the AMC is informed "If assigned the appraisal based on the customer's estimate, if the value is not or cannot be supported we will let them know so we don't waste our time, their time, or the customer's money." This last step is frowned upon and thought to be a violation of USPAP, however, we are not looking for a value, just if the customer thinks his house is worth more, we correct the owner. To this day, there have not been any issues.
Appraisers are looked upon as an unnecessary evil in the lending business, both realtors and brokers are under the impression that if someone is willing to pay a particular price, then that is the value. Appraiser's value property as if in the open market where the buyer and seller are willing participants. A property may appeal to one person, but not everyone and appraiser's try to take that into account. It bothers me personally, when the appraised value ironically is exactly the same as the selling price. In 15 years maybe 10 times, has the apprasied value and contract values matched.
As of 2006, the real estate market was booming almost everywhere, but now, things are souring. Values are in a decline in virtually every market in America. There are maybe a few markets where the values are stable, but not many. Eveyone suffers from declining values when banks and lenders stop the flow of capital. If there is no money, there are no buyers. Sellers who have to sell for one reason or another are forced to lower their prices to move the property.
Brokers, realtors, and appraisers are not entirely to blame. Nobody forced the buyer to pay a certain price for the property and programs meant to assist borrowers was heavily abused. Now it seems everyone is being punished by lenders and investors for the fraud that has occurred and the lack of cash flow is hurting everyone. Bankers and investors who received money from teh recent bailout and are not using it for the purpose it was created should be held liable.
There are flaws in the system, no doubt, but using AMC's is not the answer, the influence is still there and it always be there as long as there is "consideration" or contracts involved. Washington Mutual and Countrywide were compiling huge databases using information submitted from appraisals, which is an infringement on the appraisers and I am willing to bet, any lending instituion using the information will be subject for a lawsuit. Appraisals are intended for use in lending only. Any other use is prohibited, including the gathering of information for future use of AVM's (automated valuation models), programs used similar to Zillow and a few others, both of which have been found inaccurate by myself.
So what's the answer? Appraisers are supposed to be honest and ethical, but the only time appraisers are disciplined is usually when a deal falls through or borrower feels wronged. As long as the financing is approved, you will hardly ever hear any complaints. I have been fortunate and have never had a complaint filed. I know several other appraisers who can say the same thing, but the list is getting smaller.
The only solution is to make appraisers police themselves by using appraisers as the AMC's. The appraiser is familiar with his/her market more than anyone else. Any fraudulent attempts would be stopped before the loan went back to the lender as the appraiser would be required to review the work before sending it to the lender. The puropose would be to stop any undue influence. If there is fraud, then both parties are held accountable. Just make sure that the appraiser or AMC is not angered by the appraiser, otherwise, that appraiser may find himself starving for work....obviously another issue.
It never stops, unfortunately there is only one thing to blame with this whole mess, greed. Greed is killing the American spirit!

Joe thanks for the comment on the appraisals always good to get the insight from the other side.

The AMCs are dictating what they will pay for an appraisal. I had an AMC yesterday want me to do a a New Construction Appraisal on a $3 million home for $175. If I decline they put me at the bottom of the list and stop sending me work. It is the same with other groups as well. How is the appraisal industry supposed to grow when you can barley feed yourself. What is going to happen to the registered appraisers that have to get there hours under a supervisor. No supervisor can afford to pay an apprentice with only $175 to split per appraisal. The business will go away after awhile if something doesnt change. A minimum fee should be set in place atleast. We are professionals who have worked hard to get to where we are and now that we are on top we would be better of working a low level call center job that would pay and have benefits (just as an example).