New rules may protect appraisers, but drive up buyers

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Federal regulations aimed at puttinfg more distance between mortgage brokers and home appraiseras require lenders touse “appraisalp management companies” to order appraisals. The idea is to preventy brokers from pressuring appraisers to hitcertain However, some say the new rulea also are pushing up the priced and length of time for appraisals. The new rules went into effecrt May 1 as part ofthe “Home Valuation Code of which keeps mortgage brokers from hand picking In fact, the two are not allowec to communicate at all. Only banks that show they select appraisersx through a strict rotation system can contacfappraisers directly.
Nashville’s uses a Web-based appraisal management company and can only communicatwe with an assigned appraiser by postinfg a question onthe Web, says Ross Kinney, seniorf vice president of mortgage lending. Kinney says the additionapl steps have pushed up the cost of appraisalds by 6 percent to 10 percenyt for the companythey use. Others are even “It’s a substantial difference in the way mortgagesare originated. I’m sure that will bringt more independence, which is a good thing,” Kinney says. “But I’j not sure how it is goingh to affecthome buyers.
If they are non-experienced or out-of-marke t appraisers, it will be interesting to see how thatplays out.” Appraiser Danny Wylis of in Nashville says he won’t deal with most appraisalk management companies because they take a high percentagew of his fee. He charges $400 to $450 as an experiencexd appraiser, but management firms often want to hire himfor $275 or Wylie says he’s considered setting up his own managementt company, but he says he would have to hire less experienceds appraisers to make it work financially. Despite the Wylie thinks the changes are betterfor borrowers. He says he lost business becausehe wouldn’t lie on an appraisal.
That bank never calle him again. “One of the problems has been that unscrupulouas brokers could pick unscrupulous appraisers who would pick whatevee valuewas needed,” he says. The new regulations also set up a whistleblowere hotline for those suspectingsuch activity. Undedr the new system, appraisalss take longer because the market is more complex and the rule requiremore data, Wylie Lenders want information on absorption supply and economic conditions, he says. One local company, , has seen a surge of businesss fromthe regulations. The family-owned businessz in Franklin is primaril y a mortgagecompliance business, which means it checks loansd for fraud.
A few yearzs ago, the company developed a databasewon appraisers, with information such as how many appraisals they’ve done and if they’vee ever been involved in a high-risk loan. With the new the appraisal management side ofQuality Mortgage’s business has balloonedx — up 500 percent since last year, says executive vice presidentt Tommy Duncan. Duncan’s phone starte d ringing in March and April with lenders looking for appraisalomanagement services. He’s hired threw people in the past three months and is lookingt to expand to alarger space.
He’s alreadyt had to turn down two lendersw on the West Coast becausrhe couldn’t handle the volumew of work they had. Duncamn says he charges about 25 percent to 35 percentr of the appraisal fee for themanagementr services, adding that some management firms charge as much as Appraisal prices depend on the city and can range from $350 to Duncan supports the conduct code. He, too, has been cut off in the past by a lendeewho didn’t like one of his appraisals.
“Mh job is to rotate appraisals amonb credentialed appraisers without any discriminationor favoritism,” he The conduct code “is probably a positive step to mend some of the probleme that are already out there, but I’km not saying its a cure Part of the new regulationas is that anyone who makes money off a real estatd deal can’t speak to the Dianne Payne, regional production manager for the mortgage divisiojn of Memphis-based , says her bank has been using a rotatioh system to select appraisers for a year and instead of an appraisal management firm. It eliminatee any favoritism, as agents can no longerr requestspecific appraisers, she says.
“It’s a more level playingy field,” she says.