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OVER-APPRAISALS MAY BE HISTORY - NY Legal Settlement Could Set the Tone!

"TAMPERING" BY LOAN OFFICERS PROHIBITED, OTHER MEASURES OF OVERSIGHT PROPOSED!

For most of my 14-Year Real Estate Career here in Chicago and its suburbs, I rarely had a problem with my listings or sales under-appraising - in other words, appraising below the price they sold for.  Often times, appraisers felt the pressure to "appraise out" the property at the sales price, or just slightly over, to assure the transaction would go through.

It has always been illegal for loan officers, real estate brokers, or buyers and sellers, to taint or influence an appraiser's estimate of value.  Under new proposals to tighten the appraisal industry, however, many valuation safeguards will be turned up a notch -

  • Lenders will no longer be able to fund a home loan without a written guarantee that the appraiser was not influenced or pressured into a particular home value.
  • Mortgage lenders will have to fully comply with a new, more detailed ethical code for appraisals.
  • Consumers and appraisers may call a National Complaint Line if they feel coercion has been used.
  • Lenders with in-house or owned appraisal staffs or firms will not be able to use these in-house valuations if they wish to sell their loans in the secondary mortgage market, through U.S. Loan Investors Fannie Mae or Freddie Mac.
  • Independent Mortgage Brokers will be separated from the appraisal process - they will not be able to order or comment on the appraisals eventually used by end lenders.
  • A new Independent Valuation Protection Institute will monitor appraisals and other, automated home valuations, and can mediate complaints of improper valuation, or turn them over to state and federal regulators.

The new regulations are scheduled to take effect in 2009, after being open to debate by the mortgage industry and the public.  However, Fannie Mae and Freddie Mac are already beginning to implement many of the enhanced standards.

Appraisal processes and standards were more closely scrutinized after New York State Attorney General Andrew Cuomo questioned national mortgage lender Washington Mutual about irregularities in property valuations within New York.  Under an old NY securities fraud law, he began to negotiate tighter procedures with the Office of Federal Housing Enterprise Oversight (OFHEO).  Together, they developed the tightened appraisal procedures.

Many in the Mortgage Industry, including the National Association of Mortgage Brokers, question whether all of the changes can be enforced.  However, most agree tighter valuation procedures will be implemented, in light of the key role that recently-over-evaluated properties played in today's mortgage market turmoil.

Read more in Kenneth R. Harney's Article in the March 16 edition of the Chicago Tribune.

DEAN MOSS & DEAN'S TEAM CHICAGO

Posted: Tuesday, March 25, 2008 3:15 PM by Dean's Team

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