Appraisers Say 'Don't Blame Us'
I had a cup of coffee the other morning with someone at the heart of this summer's appraisal fuss. And he's sick of his industry getting blamed for low appraisals that kill deals.
"We are really tired of getting slammed," said Don Blanchard, chief compliance officer and deputy general counsel for Lender Processing Services, which owns LSI, one of the nation's biggest appraisal management companies. "Show me the data."
Appraisal management companies, or AMCs, are the ones most frequently blamed for the low appraisals that have killed a lot of home sales this year. Since a new Home Valuation Code of Conduct went into effect in May for all loans sold to Fannie Mae and Freddie Mac, mortgage brokers and bank loan officers have not been allowed to order appraisals directly from the folks they've been doing business with for years. There's now supposed to be a firewall between loan officer and appraiser. Many large lenders have turned to AMCs to be that firewall, parceling the work out to their network of self-employed appraisers.
Blanchard has a different explanation for low appraisals: low values. Home values really are less than people think they should be, driven down by sales of foreclosed homes, Blanchard said. And banks are being much more conservative in their lending standards.
Critics--including many mortgage brokers who no longer can send work to their favorite appraisers--complain that companies like LSI have driven up appraisal costs to consumers, shrunk the amount paid to appraisers in the field and, more troubling, killed sales with inaccurate appraisals performed by the lowest bidder who may not even be familiar with the nuances of a particular housing market.
Blanchard, naturally, rejects all that. His main points:
-- AMCs have been around more than 25 years. An LSI appraiser has been with them about 13 years, on average. "This notion that we have any Bob, Dick or Jane doing appraisals is wrong," he said.
-- Low interest rates this spring caused a spike in refinancings -- and a spike in demand for appraisals. "Appraisers had a hard time keeping up during these prime periods," he said.
-- Home valuations naturally tend to trail the market, when prices are rising or falling. That's because last month's sales are the comparables used for this month's appraisal. "It's slow; it's a lagging indicator," he said.
Continued sales of foreclosures are still dragging prices down, he said. "If I were selling a home, I would wait."
August 26, 2009; 6:00 AM ET
Categories: Buying , Foreclosure , Mortgages , Selling , The market
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