American Society of Appraisers Releases Comments on Fannie Mae and Freddie Mac Agreement with NY Attorney General

GHRE Note: We thought this was interesting even though it does not pertain to GA at this time.

Yesterday, the American Society of Appraisers and several other leading appraisal organizations issued a joint comment letter about the agreement that was reached in March, 2008, signed by New York Attorney General Andrew Cuomo, the Office of Federal Housing Enterprise Oversight (OFHEO), and Fannie Mae and Freddie Mac.

The American Society of Appraisers (ASA) strongly supports the intent of the agreement but urges changes to eliminate unintended negative consequences to appraisers and consumers.

“The agreement, if modified, will go a long way toward protecting appraisers from coercion to provide a pre-determined value while providing consumer protection to home buyers,” said Richard Gilmore, an Accredited Senior Appraiser and member of ASA’s Governmental Relations Committee. “It is in the home buyer’s best interest to receive an independent appraisal provided by a well educated and ethical appraiser in order to help ensure that they are making a deal based upon an accurate value.”

The comment letter outlines the following concerns about the agreement.

By banning mortgage broker ordered appraisals, the agreement will destroy well-established business relationships between honest appraisers and reputable mortgage professionals.

The agreement may unintentionally encourage the use of large companies that manage appraisals and make their profits by turning out appraisals quickly with less emphasis on quality.

It unnecessarily bans appraisals prepared by appraisers working for federally regulated financial institutions and other lenders with independent appraisal operations (those reporting to risk management vs. loan production).

It may unintentionally provide an incentive to some mortgage companies to substitute questionably reliable automated valuation models (AVM’s) for appraisals in order to bypass the requirements contained in the agreement.

The agreement devotes inadequate attention to the necessity of appraiser competency, quality and training when dealing with complex appraisals.

The chairman of ASA’s Governmental Relations Committee, Jay Fishman, a Fellow of the American Society of Appraisers stated that, “We feel that if the proposed comments are adopted, that a revised agreement will be pivotal in the protection of the independence of the appraiser and will help to ensure the reform of the mortgage industry.”