A new appraisal rule that replaces the current appraisal code is expected to increase the cost of appraisals and the risk of liability for non-compliance.
Banking regulatory agencies are required to issue an interim final rule on appraiser independence within 90 days of the enactment of financial reform legislation, a news release today from InHouse Inc. said.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21.
According to InHouse — which solicits lenders to use its appraisal management system instead of appraisal management companies — the interim final rule replaces the Home Valuation Code of Conduct and will likely be issued in late October.
“While HVCC is going away in name only, it will be replaced by more stringent appraiser independence laws in which violations are unlawful,” InHouse President Jennifer Creech warned in the statement.
Lenders who knowingly violate appraiser independence requirements will be breaking the law. Daily penalties up to $20,000 will help enforcement of the new standards, which apply to all parties of a real estate transaction. Those parties can include lenders, originators and processors as well as underwriters and borrowers.
The new law means higher appraisal costs, according to InHouse. It calls for appraisers to be paid fees that are “reasonable and customary,” such as the fees they would have received without the involvement of an AMC.
The average cost of a typical full appraisal is projected by Creech to rise to around $550.
