I have to admit that the whole mess on the residential side has been interesting to me, but has not impacted our firm because we no longer do residential appraisals. The problem with appraiser independence is still a problem on our side too.
Our best mortgage clients are ones where we have NO contact with the loan officer. If your entire income was based upon closing loans, could you really 100% not try to influence appraisers to help you close loans? Human nature wins out every time. Also, what happens when the appraiser receives a significant amount of work from a client only to be told that income will be taken away if a loan does not close.
Creating a “Chinese Wall” is the best way to protect the process. Cuomo’s proposal tries to do this, but since law makers are not appraisers, he missed the mark. Creating a bunch of management companies is not the answer. The secondary market has the power to tell lenders they will not purchase loans without a separation between sales and appraisers. Laws won’t do it, but controlling the purse-strings will. Investors for mortgage backed instruments need to demand that their money is protected by creating a wall between commissioned employees and appraisers. The secondary market is now crying fowl, but they knew what was going on and turned a blind eye. Everyone thought values would go up forever. They never do!
Here is the link to the orginial article: Cuomo’s Appraisal Rules Irk Lenders
Eileen
1 response so far ↓
1 John Simpson // Jul 2, 2008 at 3:35 pm
Having read the article, it just seems like politics all over again. Just look at the players.
Cuomo didn’t provide any definition for “independent” appraisers, internal bank appraisal divisions aren’t banned and just putting another layer in the mix, the appraisal management company, without any laws of conduct simply creates another way to cheat.
The appraisal management company then gains a degree of monopolistic influence. They don’t like your appraisal. Go sue an out-of-state company for your tiny appraisal fees. Yeah, right.
The lender doesn’t want it for obvious reasons. As of today, Countrywide is a wholly-owned “subsidiary” of Bank America thanks to the “old” rules, which from the article it seems will still be the “current” rules.
The bottom line is that passing a law that is not clear on the key issues simply creates loopholes. You need laws, consequences for in appropriate action, enforcement and monitoring. You also need someone to pay for it. Well, it’s back to business as usual…
John Simpson, MAI
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