Lenders Could be Held Responsible for Appraisal Selection

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Many of you have been hearing me rant for some time now in regards to the nightmare we are experiencing here in Lake Tahoe in regards to the lending/appraisal dilemma in which we keep finding ourselves in. And, we are not alone. When recently attending the California State Business Meeting in June, I heard the same sad stories across the board. It didn’t matter if it was a metropolitan area or a small country town. The number of folks missing out on the purchase or sale of a home due to a poor appraisal (usually from lack of local knowledge) is running rampant. Hopefully, relief or at least perhaps the pendulum is beginning to swing back from the extreme.

TOn June 30th, Fannie Mae took a step at improving the quality of residential appraisals, by including a requirement that lenders CANNOT use incompetent or inexperienced appraisers. This step was highly applauded by the Appraisal Institute. Fannie also provided further guidance on how comparable sales should be determined and at the same time, are requiring lenders to explain any adjustments made to a property’s appraised value.

Among the guidelines, Fannie will require appraisals to included interior photos. Sadly, a number of borrowers have intentionally vandalized their homes which lowers the value of other homes in foreclosure. They are also letting it be known that lenders are not required to use an AMC and that they are within their rights to speak with an appraiser. Furthermore, the appraiser must respond to a lenders’ request to talk. It should be noted however, that the current HVCC’s rule that loan production staff may not speak with the appraiser still holds true.

These new guidelines with the hope of correcting some of the “unintended consequences” of the Home Valuation Code of Conduct, will begin on all new loans started on or after September 1, 2010. We say hurrah and let’s start to get some of these loans funded and closed. According to Appraisal Institute Government Relations Committee Chair, Richard Maloy, “The buck now stops at the lender.” :Fannie is saying the lender is held responsible for the appraiser’s selection even if they were selected by an AMC.” Personally, I don’t feel that a lender should be held responsible but I will take any steps necessary to clean up this mess. Truly, just as Don and I would never think to represent a client in an area in which we are not fully knowledgeable, I have to believe most ethical and experienced appraisers feel the same way.