Effective September 1st, 2010 Fannie may is implementing new guidelines that will change the face of appraising. In the past appraisals have been conducted by the appraiser and then sent to the lender for approval. However, if the lender does not agree with appraisal the lender may choose to change the value of the property. This is all about to change. Fannie Mae is ordering that lenders may not change the appraised value of any property.
Why would the lender do something like this? Well, usually the lender pulls an inexpensive electronic valuation, which is based mainly on data not on the actual property itself. For instance, an appraiser can determine if a property is structurally sound, and electronics and data just cannot provide that type of information. What the lenders are doing by changing the appraisal value is simply trying to protect themselves from possible appraisal inflation even when that may not be the case.
Pat Turner, who is an appraiser in Richmond, Ca stated that “this is great news for consumers.” It means those lenders who generally have no idea what the property looks like or anything about the local property market will not “be able to change the appraiser’s valuation.”
Another plus to the new Fannie Mae guidelines, is that it will crack down on “appraisal management” companies. These companies tend to hire inexperienced appraisers who know nothing about the local market.
“Those companies, in turn, often pay appraisers deeply discounted fees—half off traditional prevailing raters in some cases—and require them to complete their assignments far faster than normal turnaround times… low-budget appraisers working for management companies frequently travel long distances to do their valuations, have minimal access to local data, and make excessive use of foreclosures and short sales as comparables—thereby depressing the values of don-distressed sales in the area.”
Fannie Mae’s new standards hope to rectify any further depression as well as set the tone for other companies to follow the same path. Freddie Mac may also be implementing similar guidelines in the near future.
Quotation from The Washington Post “To Boost Quality, Fannie Mae Calls for Experienced Appraisers” by Kenneth R. Harney
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