Washington Report: Appraisal System
Last week saw the official kickoff of Fannie Mae's and Freddie Mac's
mandatory new system of appraisals nationwide, and some mortgage and
appraisal groups are up in arms over sharply higher costs for
consumers.
The so-called "home valuation code of conduct" imposed by Fannie and
Freddie puts most appraisal assignments in the hands of management
companies, some of whom are owned by major lenders such as Bank of
America and Wells Fargo.
The Appraisal Institute, which represents 20,000 appraisers
across the country, and the National Association of Realtors, which has
thousands of appraiser members, both have been critical of the new
code.
The Institute is particularly incensed at the expanded
management company role in appraisals because those companies pay
appraisers much less than their standard fees, and tack on thirty to
fifty percent extra charged to the consumer.
For example, an appraiser who'd normally charge $325 for a
valuation ordered though a lender or mortgage broker, now might be
required by a management company to do the same work for $175 to $200.
Meanwhile the consumer, who has no idea where the money is
going, is charged $400 or more for the appraisal, and must pay for it
up front by credit card, rather than at closing.
The $200 to $225 extra goes to the management company. If the
deal falls through and the mortgage doesn't close, that's the
consumer's problem. The appraisal fee has already been pocketed by the
management company.
Now evidence is circulating in Washington that not only are
appraisal fees significantly higher under the new Fannie-Freddie code,
but are being extended to FHA mortgages, despite the fact that FHA is
not covered by the code.
The National Association of Mortgage Brokers has begun
documenting the higher fees and other problems with the new code. In
one case the association shared with Realty Times last week, a large
lender, EverBank, circulated its list of new appraisal fees to be
charged consumers through its "automated appraisal system."
Not only does the bank require credit payment for appraisals
up front, but it now charges a flat $465 for FHA appraisals and $390
for standard single family conventional appraisals. Flat fees go up to
$700 in Hawaii.
Roy de Loach, CEO of the brokers group, cited one member's
experience -- where total appraisal fees for a routine FHA cash-out
refi ballooned to $1,068 to the consumer.
Home buyers and realty professionals need to be aware of these
sharply escalating fees -- and their controversial use on FHA loans
that are supposed to be exempt from the Fannie-Freddie code.
by Kenneth R. Harney
Realty Times