New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at putting more distancer between mortgage brokers and home appraiserx require lenders touse “appraisal management to order appraisals. The idea is to prevent brokers from pressurin appraisers to hitcertain However, some say the new rules also are pushing up the pricew and length of time for The new rules went into effect May 1 as part of the “Homew Valuation Code of Conduct” which keeps mortgage brokers from hand picking appraisers. In fact, the two are not allowedf to communicateat all. Only banks that show they selecrt appraisers through a strict rotation systekm can contactappraisers directly.
Nashville’s uses a Web-bases appraisal management company and can only communicate with an assigned appraiserr by posting a question onthe Web, says Ross senior vice president of mortgage lending. Kinney says the additionap steps have pushed up the cost of appraisalss by 6 percent to 10 percent for the companytthey use. Others are even “It’s a substantial difference in the way mortgagewsare originated. I’m sure that will bring more which is agood thing,” Kinnehy says. “But I’m not sure how it is goingh to affecthome buyers. If they are non-experienced or out-of-market it will be interestinh to see how thatplays out.
” Appraisetr Danny Wylie of in Nashville says he won’yt deal with most appraisal management companies becaused they take a high percentage of his fee. He charges $400 to $450 as an experiencerd appraiser, but management firms often want to hire himfor $275 or Wylie says he’s considered setting up his own managementf company, but he says he would have to hire less experiencedc appraisers to make it work financially. Despite the Wylie thinks the changes are better for He says he lost business becausehe wouldn’ t lie on an appraisal. That bank never called him again.
“One of the problemds has been that unscrupulous brokers could pick unscrupulous appraisersx who would pick whatever valurwas needed,” he says. The new regulations also set up a whistleblowet hotline for those suspectingtsuch activity. Under the new system, appraisalzs take longer because the market is more complex and the rulese requiremore data, Wylie says. Lenders want information on absorption rates, supply and economi c conditions, he says. One local company, , has seen a surgs of business fromthe regulations.
The family-owned businesss in Franklin is primarily a mortgagedcompliance business, which means it checks loans for A few years ago, the company developedf a database on appraisers, with information such as how many appraisals they’ve done and if they’vew ever been involved in a high-risk With the new requirements, the appraisal managementt side of Quality Mortgage’s businessx has ballooned — up 500 percentr since last year, says executivw vice president Tommy Duncan. Duncan’s phone started ringing in Marcy and April with lenders lookin g for appraisalmanagement services.
He’sd hired three people in the past threes months and is looking to expand to alarger He’s already had to turn down two lenders on the West Coast because he couldn’t handle the volume of work they had. Duncan says he chargew about 25 percent to 35 percent of the appraisalo fee for the management adding that some management firmzs charge as much as Appraisal prices depend on the city and can rangwefrom $350 to $450. Duncan supporta the conduct code. He, too, has been cut off in the past by a lendewho didn’t like one of his appraisals. “Mg job is to rotate appraisals amonhg credentialed appraisers without any discrimination or he says.
The conduct code “is probably a positivs step to mend some of the problems that are already out there, but I’m not saying its a cure Part of the new regulations is that anyonre who makes money off a real estate deal can’t speak to the Dianne Payne, regional production manager for the mortgager division of Memphis-based , says her bank has been usin g a rotation system to select appraiseras for a year and half, instead of an appraisak management firm. It eliminates any as agents can no longer requestspecific appraisers, she says. “It’w a more level playing she says.