Friday, March 20, 2009

National Appraisers

Effective May 1, all lenders must submit a request to a national appraisal clearinghouse and an appraiser will be assigned to appraise the property. Currently, lenders choose their appraisers. This usually means the lender is able to get the appraisal done quickly by a competent appraiser. The perceived downside is that some lenders may pressure their appraisers to cook the appraisal and overvalue a house so a sale can close or a mortgage refinance can occur. This is the problem the national appraisal clearinghouse is supposed to fix.

I don't know if anyone has any statistics on how many bogus appraisals were the results of collusion between the lender, the real estate agent and the appraiser. It would be interesting to know whether this problem was big enough to warrant this "solution". In general, I don't think borrowers are going to benefit from this new policy. They are going to pay more for their appraisal--perhaps $150 more--and that fee will go to the clearinghouse to pay them for the appraiser referral. The appraiser will make less. The worst part is the delay caused by this added layer of bureaucracy. It can take up to three weeks to get an appraisal by this system, which some lenders have voluntarily adopted ahead of the May 1 deadline. We will no longer be able to get sales closed in 30 days. If the interest rate is favorable to the buyer on the day his contract is accepted, he won't be able to lock the interest rate for 45 days for free. He will have to pay at least 1/8 point (one-eight percent of the loan amount) for the 45 day lock. Locking for 30 days is free, but 30 days locks will be useless under this system.

I would like to know which industry lobbied for this legislation. Follow the money. I don't think this originated with a consumer group

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