Fed Change To Home Appraisal Rules Has Been A Disaster


It makes sense that the government wants to prevent home prices from becoming over-inflated again, but tut instead of helping out the now distressed housing market, recent changes to the way homes are appraised has actually lowered the value of existing prices:

Detroit News: At issue is the Home Valuation Code of Conduct for mortgages securitized or held by Fannie Mae or Freddie Mac, which deal with about 70 per cent of U.S. mortgages.

The new rules, which took effect May 1, were intended to prevent cozy relationships between appraisers, agents and brokers that could lead to bias, fraud and inflated home values.

But a chorus of industry groups representing builders and real estate agents say the new rules have damaging, unintended consequences: Some appraisers, they say, are unfamiliar with communities and neighborhoods, so they undervalue property. And that can kill a deal when the agreed-to sales price was significantly higher than the appraisal.

Now when you hear that a group representing builders and Realtors is opposing this regulation, your knee-jerk response will be to support the rule. But they may have a case. Several credible sources, including NY appraiser Jonathan Miller, have slammed the rules, pointing out that appraisers without knowledge of the market are being used, and that they’re lowballing estimates thinking it’s what the banks want.

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