New Home-Appraisal Rules Threaten Real-Estate Overpricing

posted on January 18th, 2010 filed under: Real Estate News

Why must real-estate professionals behave as though the right direction for property prices is always up?  Honestly, has nobody learned anything?

Beginning February 15, mortgage brokers will not be allowed to order appraisals in connection with FHA loans.  This follows the adoption of similar rules by Fannie Mae and Freddie Mac last May.  The rules are designed to mend one of the worst tears in the tattered fabric of the real-estate lending industry.  Mortgage brokers would hire appraisers they knew would come through with sufficiently high appraisals to support idiotically booming prices.  Appraisers knew if they didn’t come through, they wouldn’t get the work.

The National Association of Realtors, however, complains that the new rules have resulted in excessively low home values, supposedly because lenders have been relying on appraisal management companies that use appraisers who are less experienced and often unfamiliar with local areas.

It’s as if NAR was unaware that FHA is damn near broke from all the fraud, phony appraisals and general overpricing that it swallowed over the last few years.

The NAR’s explanation, moreover, is confused and troubling.  It’s confused because an inexperienced or otherwise unknowledgeable appraiser could just as easily make a mistake on the upside in valuing real estate in Miami, Coral Gables, or wherever.  It’s troubling because it diminishes the whole point of the appraisal profession, which is to follow standards that are objectively applicable in any locale and that minimize reliance on subjective considerations.

In the wake of the failure of Fannie Mae and Freddie Mac, the teetering condition of FHA, and the overall disastrous scam that real estate proved to be in the last few years — especially in Miami, Coral Gables and other hotspots of mortgage fraud — it is rather unseemly for salespeople to attack efforts to improve the reliability of the information on which loans are based.

Print Friendly

posted by // This entry was posted on Monday, January 18th, 2010 at 11:15 pm and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

Both comments and pings are currently closed.

Comments are closed.