Investment propertyWashington Report: Home Valuation Code of Conduct
Critics of Fannie Mae"s and Freddie Mac"s controversial new appraisal rules ratcheted up the pressure before the July 4 congressional recess with the introduction of bipartisan legislation that would mandate an 18-month moratorium on the “Home Valuation Code of Conduct.”
Reps. Gary G. Miller, a Republican from California, and Travis Childers, a Mississippi Democrat, are co-sponsoring the moratorium bill - H.R. 3044.
In a statement to Realty Times, Congressman Miller said that although he is “supportive of the intent” of the code, he has increasingly heard from Realtors and mortgage brokers in his district near Los Angeles who complain that “the cost of appraisals has increased and their quality” has dropped.
Criticism of the code -- from appraisers, realty brokers, and mortgage companies, has risen to a fever pitch in recent weeks. Online petitions are circulating with tens of thousands of signatures from people who want the rules withdrawn immediately.
The code was essentially written by the office of New York Attorney General Andrew Cuomo last year. Cuomo had threatened Fannie and Freddie with subpoenas and an investigation of alleged widespread appraisal inaccuracies in the companies" portfolios.
Rather than be burdened with an investigation, according to officials involved in the negotiations, Fannie and Freddie agreed to adopt the appraisal code for all loans the purchase, starting May first.
Though the rules seek to ensure independent, unbiased property valuations, they also radically changed the traditional system: They prohibit mortgage brokers from ordering or discussing valuation assignments with appraisers, and send most of the business to appraisal management companies - some of them subsidiaries of major banks.
The management companies, in turn, offer appraisers low fees - 50 percent less than previously standard fees in some cases - and have raised total charges to consumers. Many appraisers with extensive experience have refused to accept the low payments, leaving the business increasingly in the hands of appraisers with little experience who are willing to work for less money.
Some management companies reportedly have ordered appraisers to conduct valuations on properties far beyond their local areas - leading to lowball valuations that delay or kill home sales, according to realty agents and mortgage brokers.
The outlook for the moratorium bill? That"s unclear at the moment.
But if Fannie Mae, Freddie Mac and Cuomo agree to re-think the code or make key changes - and there"s a chance of that happening given industry trade group pressure -- there might be no need for Congress to step in.