The Home Valuation Code of Conduct unveiled by Freddie Mac and Fannie Mae in 2008 significantly increased regulatory compliance in the home appraisal industry and was soon incorporated into Dodd-Frank. The provision ultimately eliminates the ability of loan officers to directly interact with appraisers, thereby removing the potential for fraud, Mission Mortgage of Texas, Inc., reports.
Under the new rules, lenders and agents are required to go through a third-party company to find an appraiser. Appraisers are often hired by appraiser management companies that serve as a liaison between the buyer and lender, and those companies try to maximize profits by hiring cheaper appraisers, according to Tampa Bay Times.
Frank Gregoire, the former chairman of the Florida Real Estate Appraisal Board and the appraisal committee for the National Association of Realtors, said that the appraisers are often ill-trained and unfamiliar with the local housing market. As a result, homeowners are often forced to renegotiate or cancel a home sale price.
“Buyers don’t expect the appraiser to just rubber stamp the sale price,” Gregoire, who testified during Thursday’s House subcommittee hearing on the impact of appraisal regulations on the housing market, said, Tampa Bay Times reports. “They want a good, honest objective appraisal by somebody that has the necessary qualifications to do a credible job.”