“Fannie Mae and Freddie Mac’s agreement to restrict banks from using in-house appraisal companies may violate federal law, U.S. Comptroller of the Currency John C. Dugan said in a letter to the companies’ supervisor.”
“The agreement and new appraisal code ‘violate or conflict with federal law in fundamental respects’ and should be withdrawn, Dugan said in a letter to Ofheo Director James Lockhart. The Office of the Comptroller of the Currency, which regulates national banks, has ‘substantial concerns about the unintended adverse consequences’ on U.S. banks, he said.
The OCC is joining mortgage and appraisal industry groups and the Office of Thrift Supervision in criticizing the deal, which was intended by Cuomo and Ofheo to improve accuracy in home valuations by separating them from the lenders making the loans.”
∙ Fannie, Freddie Appraisal Agreement May Violate Law [Bloomberg]
∙ Fannie And Freddie Forced Aim To Help Fix Appraisal Fraud [SocketSite]
In the heyday of the “unchartered territory” in 2003-2007, in-house appraisers were helping fuel the housing bubble. Banks wanted volume and volume came from swifter and easier approvals. I am sure loan producers had more weight in the hierarchy than boring number crunchers who were not “selling” anything, and that probably led to internal abuses of power. Say a top producing “wants” a price for a customer so that the customer doesn’t go to the competition.
On the other hand, with the banking industry scared by risky financing, I’m thinking that they probably understood the importance of a reliable appraisal.
Er, how does Fannie Mae/Freddie Mac’s refusal to buy mortgages originated from tame appraisers prohibit banks from selling those mortgages to *other* buyers in the “free” marketplace? There aren’t any buyers who will touch that crap? Oh.
This has been another episode of socialized risk & privatized profit, brought to you by the finest administration money can buy.
http://www.nytimes.com/2008/05/28/business/28realty.html
why isn’t anyone talking about this news about realtors and MLS competition?
Thank you Mr. Dugan!! Cuomo’s deal is another reactionary piece of legislation that will HARM and not help consumers. Ask 5 appraisers to appraise a property and you will get 5 different values. Which one is the “right” one?
This “deal” would have cut-off all communication between lender and appraiser. Ridiculous!
Consumers would be forced to blindly pay for an appraisal in the hopes of getting financing. $350-$450 down the tubes if the value doesn’t hit the mark. Just a 3% deviation in estimate on a $1mil property is $30k. If you are refinancing, that 30k difference would cost you 24k in additional downpayment or another $150/month for mortgage insurance in some cases. Or roll the dice and order another appraisal for $350-$450 and on and on.
Cuomo’s deal is a bad one and hopefully it will get imploded before it takes effect in January.