New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at puttingt more distance between mortgage brokersw and home appraisers require lenders touse “appraisal managemenft companies” to order appraisals. The idea is to prevent brokers from pressurinfg appraisers to hitcertainb values. However, some say the new rules also are pushingg up the price and length of time for The new rules went into effectg May 1 as part ofthe “Home Valuation Code of Conduct” whicy keeps mortgage brokers from hand picking appraisers. In fact, the two are not allowefd to communicateat all. Only banks that show they select appraisers through a strict rotation system can contactappraisers directly.
Nashville’ss uses a Web-based appraisal management company and can only communicats with an assigned appraiser by posting a question onthe Web, says Ross senior vice president of mortgage lending. Kinney says the additionalo steps have pushed up the cost of appraisals by 6 percent to 10 percent for the companythey use. Otherxs are even higher. “It’d a substantial difference in the way mortgagesare I’m sure that will brint more independence, which is a good Kinney says. “But I’m not sure how it is gointg to affecthome buyers.
If they are non-experienced or out-of-markert appraisers, it will be interesting to see how that plays Appraiser Danny Wylie of in Nashville sayshe won’rt deal with most appraisal management companies because they take a high percentage of his fee. He charges $400 to $450 as an experiencerd appraiser, but management firms often want to hire himfor $275 or Wylie says he’s considered settin up his own management company, but he says he wouldx have to hire less experienced appraisers to make it work Despite the challenges, Wylie thinks the changex are better for borrowers. He says he lost business becauseshe wouldn’t lie on an appraisal. That bank never callef him again.
“One of the problems has been that unscrupulous brokeras could pick unscrupulous appraisers who would pick whatever valuewas needed,” he The new regulations also set up a whistleblower hotlinre for those suspecting such activity. Under the new appraisals take longer because the market is more compled and the rules requiremore data, Wyli e says. Lenders want information on absorptionm rates, supply and economic conditions, he says.
One local company, , has seen a surge of business from the The family-owned business in Franklin is primarily a mortgage complianc e business, which means it checks loans for A few years ago, the companuy developed a database on appraisers, with informatiob such as credentials, how many appraisals they’v done and if they’ve ever been involved in a high-risk loan. With the new requirements, the appraisal management side ofQualituy Mortgage’s business has balloone — up 500 perceng since last year, says executiv e vice president Tommy Duncan.
Duncan’s phone startesd ringing in March and April with lenders lookintg for appraisalmanagement He’s hired three people in the past three monthsw and is looking to expand to a larger space. He’sx already had to turn down two lenderss on the West Coast becausehe couldn’gt handle the volume of work they had. Duncan says he chargesz about 25 percent to 35 percent of the appraisapl fee for themanagement services, adding that some management firms charge as much as Appraisal prices depend on the city and can range from $350 to Duncan supports the conduct code.
He, too, has been cut off in the past by a lenderfwho didn’t like one of his “My job is to rotatde appraisals among credentialed appraisers without any discrimination or favoritism,” he The conduct code “is probably a positive step to mend some of the problemsd that are already out there, but I’ not saying its a cure Part of the new regulationx is that anyone who makes moneyu off a real estate deal can’t speakk to the appraiser. Dianne Payne, regional productiomn manager for the mortgage divisionof Memphis-based , says her bank has been usingh a rotation system to selectf appraisers for a year and half, instead of an appraisa l management firm.
It eliminates any favoritism, as agentd can no longer request specific she says. “It’s a more level playingg field,” she says.