Freddie Mac is promoting the use of automated valuation models and recommending that lenders use appraisers with professional designations. Home builders and real estate agents are being blamed for hindering appraisal quality by not providing important appraisal information. Meanwhile, two pieces of federal legislation that would impact the real estate appraisal process are making their way through Congress.
Current market conditions prompted Freddie to remind approved lenders that qualified appraisers must be state-certified, familiar with the local markets and have access to necessary data sources, according to seller-servicer Bulletin Number 2009-18. Acceptable appraisals need to reflect details of the financing, contributions outside the contract and a value of the property without concessions.
The secondary lender noted that comparable sales requiring many adjustments might not be the best choice. In addition, foreclosure sales, real estate owned sales or short sales are not required to be used as comparables unless the "appraiser determines that these are representative of the properties available to typical purchasers for the market in which the property is located."
AVMs should be used to detect fraud, and Freddie recommended the use of Home Value Explorer and Home Value Calibrator.
Freddie's revised guidelines emphasizing the use of qualified and experienced real estate appraisers are a good solution, the Appraisal Institute said in a statement last month. The group hopes to boost its membership as a result of Freddie's recommendation that appraisers' affiliations should be considered by lenders.
"The recognition of the professionally designated appraiser has been a missing component in mortgage reform," the statement said.
The institute said H.R. 1728, which has already been passed by the U.S. House of Representatives, includes language similar to Freddie's stating that qualifications -- including membership in a nationally recognized professional appraisal organization -- should be considered when lenders hire an appraiser.
National Association of Home Builders Chairman Joe Robson told the House Small Business Subcommittee on Finance and Tax on July 23 that bad appraisal practices are contributing to construction declines and threatening an economic recovery, according to his prepared testimony. Robson criticized the inappropriate use of distressed and foreclosed sales as comparables and noted that the practice is contributing to a credit crisis in acquisition, development and construction lending.
But Florida real estate appraiser and MortgageDaily.com subscriber William R. Temple disagrees. He said that builders are often too unwilling to provide all the information needed by appraisers to make accurate new home valuations. The builders' salespeople are often the culprits.
"Builders must make an effort to deliver everything that an appraiser needs, regarding either the subject property's transaction, or comparable sold data," Temple said in a message. "No hiding incentives, whatever.
"It's all about transparency now."
The National Association of Realtors needs to require its members to provide sales data that is more transparent and complete, according to Temple, who says he is a member of both NAHB and NAR. Often, REO sales are poorly reported -- missing concession data, property descriptions and photos that help appraisers better identify the property condition.
DartAppraisal.com, an appraisal management company, announced last month that it has been integrated into PLATINUMdata Solutions appraisal ordering system. The move is designed to help PLATINUMdata customers comply with the Home Valuation Code of Conduct.
A San Diego appraiser has authored 2009 Appraisal Management Company Directory. The book is designed to help appraisers get listed with AMCs -- which have grown in prominence as a result of the implementation of the HVCC. The book, written by Bryan Knowlton, also discusses how to increase FHA appraisal volume. An online version goes for $79.95.
Knowlton praised the introduction of H.R. 3044 into the U.S. House of Representatives, which would enact an 18-month HVCC moratorium.
Pro-Teck Services said in a recent announcement that it has been operating as an AMC since 1977. It highlighted the benefits of AMCs, including a firewall between loan originators and appraisers, varying levels of review based on red flags and value enhancement from consistency.