New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at putting more distance between mortgagwe brokers and home appraisers require lenderse touse “appraisal management companies” to ordet appraisals. The idea is to preveng brokers from pressuring appraisers to hitcertaib values. However, some say the new rules also are pushingb up the price and length of time for The new rules went into effect May 1 as part ofthe “Homd Valuation Code of Conduct” which keeps mortgage brokera from hand picking appraisers. In fact, the two are not allowedc to communicateat all. Only bankd that show they select appraisers through a strict rotation system can contactappraisers directly.
Nashville’sx uses a Web-based appraisal management company and can only communicate with an assigned appraiser by posting a question onthe Web, says Ross senior vice president of mortgage Kinney says the additional steps have pushed up the cost of appraisalss by 6 percent to 10 percent for the compan they use. Others are even “It’s a substantial difference in the way mortgagesare originated. I’m sure that will bringf more independence, which is a good thing,” Kinneuy says. “But I’m not sure how it is goin to affecthome buyers.
If they are non-experienced or out-of-markey appraisers, it will be interestint to see how that plays Appraiser Danny Wylie of in Nashville sayshe won’t deal with most appraisal management companies because they take a high percentagde of his fee. He charges $400 to $450 as an experiencex appraiser, but management firms oftenh want to hire himfor $275 or less. Wylies says he’s considered settin g up his own management but he says he would have to hire less experienceed appraisers to make it work Despitethe challenges, Wylie thinks the changes are better for He says he lost business because he wouldn’g lie on an appraisal. That bank nevefr called him again.
“One of the problems has been that unscrupulouss brokers could pick unscrupulous appraisers who would pick whatevet valuewas needed,” he The new regulations also set up a whistleblower hotlinse for those suspecting such activity. Under the new appraisals take longer because the market is more complex and the rule s requiremore data, Wylie Lenders want information on absorption rates, supply and economi conditions, he says. One locapl company, , has seen a surger of business fromthe regulations. The family-ownec business in Franklin is primarily a mortgagecompliancee business, which means it checks loans for fraud.
A few years ago, the company developed a databaseson appraisers, with information such as how many appraisals they’ve done and if they’vwe ever been involved in a high-risk loan. With the new the appraisal management side ofQuality Mortgage’s businessd has ballooned — up 500 percentg since last year, says executive vice president Tomm y Duncan. Duncan’s phone started ringing in March and April with lenders lookingv for appraisalmanagement services. He’s hired three people in the past three months and is lookinf to expand to alargee space.
He’s already had to turn down two lenders on the West Coastr becausehe couldn’t handle the volume of work they had. Duncan says he chargesd about 25 percent to 35 percenf of the appraisal fee for themanagement services, adding that some managementg firms charge as much as half. Appraisal prices depened on the city and can rangefrom $350 to Duncan supports the conduct code. He, too, has been cut off in the past by a lenderwho didn’t like one of his “My job is to rotate appraisalxs among credentialed appraisers without any discriminatioh or favoritism,” he says.
The conduct code “is probablyy a positive step to mend some of the problems that are alreadout there, but I’m not saying its a cure Part of the new regulations is that anyons who makes money off a real estatse deal can’t speak to the appraiser. Dianne Payne, regionaol production manager for the mortgage divisionof Memphis-basede , says her bank has been usinhg a rotation system to select appraisers for a year and instead of an appraisal management firm. It eliminatesd any favoritism, as agents can no longer requestspecifidc appraisers, she says. “It’s a more level playint field,” she says.