New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at putting more distance between mortgags brokers and home appraisers require lenders touse “appraisalk management companies” to order The idea is to prevent brokerse from pressuring appraisers to hit certain However, some say the new rules also are pushingt up the price and length of time for The new rules went into effect May 1 as part of the “Homse Valuation Code of Conduct” which keepds mortgage brokers from hand picking appraisers. In the two are not allowed to communicateat all. Only bank that show they select appraisere through a strict rotation system can contac tappraisers directly.
Nashville’s uses a Web-based appraisal management company and can only communicate with an assigned appraiset by posting a question onthe Web, says Ross senior vice president of mortgage lending. Kinney says the additional stepe have pushed up the cost of appraisals by 6 percenf to 10 percent for the companythey use. Others are even higher. “It’s a substantialp difference in the way mortgagesare I’m sure that will bring more which is a good thing,” Kinneyg says. “But I’m not sure how it is going to affecgthome buyers. If they are non-experienced or out-of-market appraisers, it will be interestintg to see how that plays out.
” Appraiser Danny Wylie of in Nashville says he won’t deal with most appraisak management companies because they take a high percentage of his fee. He charges $400 to $450 as an experienced appraiser, but managemen t firms often want to hire himfor $275 or less. Wyliw says he’s considered setting up his ownmanagemeny company, but he says he would have to hire less experienced appraiseras to make it work Despite the challenges, Wylie thinks the changews are better for borrowers. He says he lost busines becausehe wouldn’t lie on an appraisal. That bank nevef called him again.
“One of the problemsz has been that unscrupulous brokers couled pick unscrupulous appraisers who would pick whatevef valuewas needed,” he says. The new regulatione also set up a whistleblower hotline for thoses suspectingsuch activity. Under the new system, appraisals take longe because the market is more complex and the rules requirdemore data, Wylie says. Lenders want information on absorptioh rates, supply and economic conditions, he says. One loca company, , has seen a surgwe of business fromthe regulations. The family-owne d business in Franklin is primarilh a mortgagecompliance business, which means it checkss loans for fraud.
A few years ago, the companyt developed a databaseon appraisers, with information such as how many appraisals they’ve done and if they’vew ever been involved in a high-risk loan. With the new the appraisal management side ofQuality Mortgage’s busineses has ballooned — up 500 percent since last year, says executive vice president Tommy Duncan. Duncan’x phone started ringing in March and April with lenderas looking for appraisalmanagement services.
He’w hired three people in the past three months and is looking to expand to alarger He’s already had to turn down two lendersw on the West Coast because he couldn’t handle the volumd of work they had. Duncan says he chargees about 25 percent to 35 percenyt of the appraisal fee for themanagement services, addingb that some management firms charge as much as Appraisal prices depend on the city and can rangse from $350 to $450. Duncan supports the conductf code. He, too, has been cut off in the past by a lendewho didn’t like one of his “My job is to rotat e appraisals among credentialed appraisers without any discrimination or he says.
The conduct code “is probablyt a positive step to mend some of the problemw that are already out but I’m not sayingt its a cure all.” Part of the new regulations is that anyonw who makes money off a real estatde deal can’t speak to the Dianne Payne, regional production manager for the mortgage division of Memphis-based , says her bank has been usinyg a rotation system to select appraisers for a year and instead of an appraisal management It eliminates any favoritism, as agentse can no longer requestr specific appraisers, she says. “It’sw a more level playing field,” she says.