Pressures Grow for Good Appraisals and Bad

"There is higher scrutiny because the market is going down," says James Loizou, an appraiser in Northern Virginia. (By Leah L. Jones For The Washington Post)

Virginia just made it easier to find out about the type of appraisal that was done on your home. Last week, Gov. Tim Kaine signed into law requirements that mortgage settlement statements note any fee charged to the borrower for an automated valuation or anything else done by someone who is not a licensed appraiser.

Despite the extra scrutiny designed to reveal falling prices, there is pressure on appraisers not to kill too many deals, in part because most appraisers are paid after the deal goes to closing. Lenders also may take away business from appraisers who kill too many deals.

A new appraisal-standards plan announced last week by Fannie Mae and Freddie Mac could help insulate appraisers from such pressure. Because they account for a large part of the mortgage market, Fannie and Freddie, which buy loans that meet their standards and repackage them as securities for sale on Wall Street, influence practices across the industry. The rules would affect mortgages taken out after Jan. 1, 2009.

The proposed standards simply call for fair play. It's not fair for lenders to withhold payment for appraisals they don't like. It's not fair to kick an appraiser out of the game if he doesn't play along.

Lenders would have to set up a phone hotline and e-mail address to field complaints from appraisers, consumers and others. Consumers also would be entitled to receive a copy of the appraisal at least three days before closing, without extra charge.

Appraisers should be free from pressure to hit a preordained target value. But consumers also should make sure the pendulum doesn't swing too far toward caution, anticipating price declines that have not yet happened. You deserve credit for every penny of market value that remains in your home.

E-mail Elizabeth Razzi atrazzie@washpost.com.