Last week it wasn’t a done deal. This week it is.

Fannie Mae and Freddie Mac, the biggest sources of financing for U.S. home loans, agreed to overhaul the way property appraisals are conducted in a deal reached today with New York Attorney General Andrew Cuomo.

The government-chartered companies will adopt new standards to ensure independent, reliable appraisals, Cuomo said in a news release. Mortgage brokers will be prohibited from selecting appraisers and lenders won’t be able to use their own in-house appraisers for initial valuations. The agreement also bans lenders from using appraisal management firms they own or control.

As best we can tell the agreement becomes fully effective on January 1, 2009. And once again, we have to wonder if non-conforming players will follow suit.
“Instant Equity” Hawkers Take Note (Along With Everybody Else) [SocketSite]
Fannie Mae, Freddie Mac to Overhaul Appraisals in Cuomo Deal [Bloomberg]

Comments from Plugged-In Readers

  1. Posted by ex SF-er

    at least this regulation tries to clear up the rampant FRAUD that’s occured in the system the last 5 years or so.

  2. Posted by Mark D.

    The agreement becomes fully effective on January 1, 2009, nearly 10 months from today???
    Talk about closing the barn door after the horse has already been stolen….

  3. Posted by Anon

    Here’s the deal – appraisal fraud was a small part of the S&L mess in the 80’s so they enacted some pretty tough regulations on the appraisal industry known as FIRREA. That outlawed the practices such as property owners and mortgage brokers choosing the appraiser and influencing the appraised value. Well, the ABA and mortgage brokers bitched and moaned that it was too restrictive and appraisal regulation has been gradually eased since about the mid 90’s. Then in the last 5 years or so, appraisal oversight in the banking industry has been pretty much non-existant – the thought seemed to be that as long as values continues to rise, the appraisal is meaningless and doesn’t need to be accurate. Well, lo and behold values don’t rise 10-20% a year forever – what a surprise. It’s the same mistakes which were made in the S&L disaster/bailout and this legislation is a similar response AFTER all the damage was done again – it should be called FIRREA 2.

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