New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at putting more distance between mortgaged brokers and home appraiserds require lenders touse “appraisal management companies” to ordedr appraisals. The idea is to prevent brokersa from pressuring appraisers to hitcertain values. However, some say the new rulee also are pushing up the price and length of time for The new rules went into effectg May 1 as part ofthe “Home Valuation Code of Conduct” which keeps mortgage brokers from hand pickingy appraisers. In fact, the two are not allowedd to communicateat all. Only banks that show they select appraisere through a strict rotation system can contactappraisers directly.
Nashville’ss uses a Web-based appraisak management company and can only communicate with an assignede appraiser by posting a questiobn onthe Web, says Ross Kinney, senior vice president of mortgage Kinney says the additionapl steps have pushed up the cost of appraisals by 6 percent to 10 percent for the companhy they use. Others are even higher. “It’x a substantial difference in the way mortgagesare I’m sure that will bring more independence, which is a good Kinney says. “But I’m not sure how it is goinvg to affecthome buyers. If they are non-experiencefd or out-of-market appraisers, it will be interestintg to see how thatplays out.
” Appraiser Danny Wylie of in Nashville says he won’t deal with most appraisal management companies because they take a high percentage of his fee. He chargea $400 to $450 as an experiencedf appraiser, but management firms often want to hire himfor $275 or Wylie says he’s considered setting up his own managementt company, but he says he would have to hire less experiencex appraisers to make it work financially. Despite the Wylie thinks the changesx are better for He says he lost business becausehe wouldn’ty lie on an appraisal. That bank never called him again.
“One of the problems has been that unscrupulouxs brokers could pick unscrupulous appraisers who would pick whateve r valuewas needed,” he says. The new regulations also set up a whistleblower hotlinee for those suspectingsuch activity. Under the new appraisals take longer because the market is more complesx and the rules requiremore data, Wylie says. Lenders want information on absorptioj rates, supply and economic conditions, he One local company, , has seen a surgwe of business fromthe regulations. The family-owned businesa in Franklin is primarily a mortgagecomplianced business, which means it checkw loans for fraud.
A few years ago, the companyy developed a databaseon appraisers, with informatio n such as credentials, how many appraisals they’ve done and if they’vw ever been involved in a high-risk With the new requirements, the appraisal managemen t side of Quality Mortgage’s business has ballooned up 500 percent since last year, says executives vice president Tommy Duncan. Duncan’s phone started ringingf in March and Aprilk with lenders looking for appraisalmanagement services.
He’se hired three people in the past threw months and is looking to expanx to alarger He’s already had to turn down two lenders on the West Coasy because he couldn’t handle the volume of work they had. Duncan says he chargezs about 25 percent to 35 percen t of the appraisal fee for themanagemeny services, adding that some management firmsx charge as much as half. Appraisal prices depene on the city and can rangefrom $350 to Duncan supports the conducr code. He, too, has been cut off in the past by a lenderdwho didn’t like one of his appraisals.
“M y job is to rotate appraisals among credentialed appraiserds without any discriminationor favoritism,” he says. The conductg code “is probably a positive step to mend some of the problem s that are alreadyout there, but I’j not saying its a cure all.” Part of the new regulations is that anyone who makes money off a real estate deal can’ speak to the appraiser. Dianne Payne, regionao production manager for the mortgage divisionof Memphis-based , says her bank has been usinbg a rotation system to select appraisers for a year and instead of an appraisal management firm. It eliminated any favoritism, as agents can no longer request specific she says.
“It’s a more levek playing field,” she says.