Appraisal Changes Face Resistance

Fannie Mae, Freddie Mac and thousands of banks and thrift institutions are federally regulated and cannot be ordered to change key loan underwriting procedures by a state government, the groups argue. "Forcing the dismissal of thousands of highly-skilled appraisal professionals because they are employed by" banks would "wipe out millions of dollars of investments," along with jobs held by competent, ethical professionals, they said.

Five national appraisal organizations agreed and said mortgage brokers should not be prohibited from hiring independent appraisers because the current system -- if strengthened by greater use of review appraisals to double-check accuracy -- works efficiently for consumers and the mortgage industry.

The National Association of Mortgage Brokers said removing its members from the appraisal equation would force buyers to pay more for appraisals and to spend more time on applications.

Under the plan, "consumers would be financially tied to the first lender [to which] they, or their mortgage or real estate professional, submits their application," according to the brokers. "Any subsequent application may require a new appraisal," doubling or tripling the cost and time involved.

Other critics charged that the plan would open the door to greater use of low-cost appraisal substitutes such as automated valuation models -- computer-driven estimates that be can far off the mark -- in place of on-site valuations by professional appraisers.

Where is all this headed, and why should you care? Fannie Mae, Freddie Mac and Cuomo say they will look at the critiques -- they only received most of them April 30 -- and make modifications if necessary. But federally regulated banks and mortgage companies are so angry that they are likely to challenge the settlement in court.

After all the smoke clears, there's a shot at consensus on an improved appraisal system: much tougher penalties for lenders who put pressure on appraisers, much tougher penalties for appraisers who give in and more accurate appraisals for the consumers who pay for them.

Kenneth R. Harney's e-mail address is KenHarney@earthlink.net.