The days of developers, brokers--or builders--hiring a friendly appraiser to set the highest possible price for a home are ending, at least for any transaction involving a Fannie Mae or Freddie Mac mortgage.
Office of Federal Housing Enterprise Oversight president James B. Lockhart this morning (March 3) announced an agreement among OFHEO, New York State Attorney General Andrew Cuomo, Fannie and Freddie that will eliminate broker-ordered appraisals, prohibit appraiser coercion and reduce the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages for sale to Fannie or Freddie.
Lockhart said the agreements also will enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Fannie and Freddi will apply. The Code becomes effective on January 1, 2009.
"This Code is one way of ensuring that homebuyers and secondary mortgage market investors get the fair and independent property valuations that they expect and deserve," said Lockhart. He added, "I will be closely monitoring the nine-month period prior to implementation."
Regarding the new rules, he said, ""Accurate, independent appraisals are very important to ensuring the safety and soundness of Fannie Mae, Freddie Mac and the mortgage market. These agreements build upon existing federal and state laws and regulations to further strengthen the single-family home appraisal process. The agreements should help restore confidence in the mortgage market by enhancing underwriting practices, reducing mortgage fraud and making home valuations more reliable."
Lockhart also said OFHEO would work with all interested parties, including lenders and appraisers, to "assure that the roll-out of the new code builds upon best practices, recognizes constructive comments to identify further refinements, and avoids unintended consequences."